r/videos • u/CircumspectCapybara • 22h ago
The New American Housing Crisis Has Landed
https://www.youtube.com/watch?v=Uumnx2Fo6cE192
u/Victins5450 22h ago
why are new builds not keeping up with demand here
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u/woah_man 22h ago
Population growth has slowed to 1.8 million people per year (lower international migration in), but new housing is something like 1.1 to 1.3 million units per year.
It's a multifaceted supply and demand problem, we aren't building significantly more housing than people need.
We also aren't building all of that housing exactly where people want to live (you can't build enough housing in popular neighborhoods which makes them expensive).
Part of it is also that tons of people don't want to give up 3% mortgage rates, so they don't want to move somewhere else. That shrinks the number of homes on the market making demand for existing homes more expensive.
Then on top of this all, interest rates are rising, and this is the real killer of affordability. Compare your monthly payment for a 7% mortgage and a 3% mortgage, and you have the answer for why people don't want to move and can't afford a house. Higher interest rates should drive the sticker price of your house downwards, and we just haven't seen it happen.
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u/pexx421 21h ago
Seriously this is under comprehended. At 3% a mortgage is about $600/$100k. So a $300k home is about $1800 piti. At 7%, we’re looking at $1000 dollars per $100k. So that same $300k home is around $3000 a month piti. That’s a massive difference that very few can afford. At the traditional “housing should be 25%” lines that means you should be taking home $12k a month to afford a $300k home, or making almost $200k a year gross. That’s a pretty big ask in a land where the median per capita income is around $45k a year. A family with two workers making that is taking home about $6k a month. They need a mortgage or rent of $1500. Good luck. In my rural town with a population of 6000 people, the cheapest rental is $1200 for a studio efficiency.
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u/Eve_newbie 21h ago
And what the hell is with apartment prices? I rent a very nice house, and I pay only a few hundred more than my friends who are in 2 bedroom apartments. They're luxury apartments, sure, but I would argue my home is still nicer and more luxurious. (This sounds so pompous, I feel very lucky to be in the position I'm in.)
Plus the crappy apartment down the street isn't much cheaper than the others.
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u/NotTooShahby 21h ago
Also SFH are being built in the suburbs, far from places where people are working. By limiting density, we’re pushing prices higher and higher up for cities.
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u/gortlank 20h ago
Would be much less of a problem if the companies driving housing demand didn’t all do hard RTO/hybrid work arrangements. Net migration would slow enormously if there wasn’t induced demand from companies requiring office presence.
Most people know the area is both HCOL and has gradually been denuded of the character that made it what it was in the past. The majority of the migration at this point is from industry people who have to be in the area.
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u/NotTooShahby 17h ago
I love WFH but governments are strapped for cash if their highest earners move to the burbs. It seems almost bipartisan that remote work end due to cities begging for the cash flow.
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u/gortlank 1h ago
The local governments were doing fine (or at least the same) before the massive migration.
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u/spyguy318 37m ago
Governments are strapped for cash because for 60 years they’ve refused to raise taxes and have instead cut taxes and made a bunch of loopholes.
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u/Solnx 21h ago
Higher interest rates should drive the sticker price of your house downwards, and we just haven't seen it happen.
Yeah, sellers will do everything else before selling at a loss and having to pay the difference they may not be able to afford. I can't think of any event that will drive housing prices significantly downwards unless mortgage defaults skyrocket and individuals are forced to sell.
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u/Shot-Possibility-399 21h ago
Honestly might happen in the next few years as people just refuse to buy at these rates and prices. It's absurd and financial suicide to take current prices at current rates.
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u/yikes_itsme 14h ago edited 14h ago
I have been trying to tell people about this since 2022, but nobody would listen. Everybody told me back then that higher interest rates would make home prices come down. They all said to wait until the interest rates forced sellers to sell below the price they bought for. It’s been almost 5 years now, and they’re still saying the same thing….
I lived through 2003-2012 so I told them that home prices are different than TVs or hamburgers, they are sticky and nobody would willingly come to the table with money just so that you can get market pricing when you need to buy a house.
Supply and demand, they told me. Supply and demand. Sure, but people in a stable financial situation don’t need to sell their house to you. Yes, some people have to move for work, but that’s not the majority of sales. The supply will be throttled by the unwillingness of anybody to lose money on this transaction, and people will go to their grave waiting for somebody to “pay me what it’s worth”. House inventory can even go completely to zero in a situation where no buyer will pay what the sellers think it’s worth, then everybody just keeps living where they’re living now.
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u/Shot-Possibility-399 21h ago
Or how about just cost of the loan? You're paying 3x what the house value is over the course of the loan. $500k house costs 1,500,000. That is just not affordable for anyone. People are buying at this rate expecting it o go back down to 2-3% sometime and likely won't. That is a ton of money you could have spent on anything else, just going to house payments
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u/iprocrastina 21h ago
They already have: https://fred.stlouisfed.org/series/MSPUS
That's Fed data showing home prices have already fallen 8% since their peak in 2022 without accounting for inflation. If you do account for inflation then the $442,600 median sale price in 2022 would be $506,610 in 2026 dollars, meaning home prices have actually plummeted 19% in real dollars.
People don't want to give up their 3% mortgages but every year some of them are forced to due to life events like divorce. The idea that home prices won't fall because owners won't sell rests entirely on the assumption that mortgage rates will go back below 5% before the slow trickle of inventory from "motivated sellers" piles up enough to force prices down. But we're already seeing exactly that and the bond market is signaling that low mortgage rates aren't coming back anytime in the foreseeable future, so that pressure will only grow more intense as time goes on.
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u/Free_Mousse2076 12h ago
You’d have to have everyone forced to sell at once to see housing prices plummet. We are in a steady state like it or not.. these forced sales are already part of the picture
Home prices don’t come down meaningfully unless there’s economic collapse. In the meantime or in lieu of, people will continue indefinitely buying or renting what they can afford even if it’s not what they want or what they would have been able to have for the same money 10 years ago…. The age of buying, particularly buying “nice” will just keep going up until that age reaches retirement age or wages rise… but prices are not coming down. Slower appreciation yes, but significant dips that matter, no
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u/iprocrastina 5h ago
I literally linked data and showed math that shows home values already have declined in both nominal and especially real value...
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u/Free_Mousse2076 4h ago
Yes I hear you but Not in a way that makes nice homes affordable.
I do not believe home prices will meet budgets the way they did before the pandemic unless enough time passes (decades) or there’s a economic crash hard enough that people with tons of equity are forced to sell because they can no longer make those mortage payments… and the longer time goes by without that crash the harder it’ll be for a crash to make people sell.
People are sitting on homes with mortgages less than what rent would cost. So we are really talking about a mass HOMELESSNESS scenario because no o e can be forced to sell if the mortgage is less than they can pay in rent
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u/MiaowaraShiro 5h ago
What's the point of driving down prices with higher interest? I end up paying more to the bank instead of the homeowner but I'm still paying the same as the market will bear.
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u/iprocrastina 5h ago
10Y bond rates are set by market auction, not by fiscal policy. Mortgages are based off the 10Y bond rate.
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u/ImAShaaaark 21h ago
The problem is that thanks to speculation, cheap credit and predatory corporate behavior home prices have gone so wild relative to incomes and the actual going rate (on a per month basis) it's going to take either a traumatic market retraction or a decade plus of inflation adjusted price decline.
Right now if you put 20% down a mortgage will cost somewhere between 50-100% more on a monthly basis than the house is worth on the rental market. That's an enormous gap, and it creates a ton of risk for buyers. What happens if the market is slow and you can't sell, and you'd take a massive loss on renting it out? You are screwed, that's what.
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u/SeaOfFireflies 21h ago
We are currently renting a new ebuild house for about 2200/month. To get the same house from the same builder a few streets over, would be at least 3200/month with down payment at these interest rates. Might as well keep renting for now.
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u/ImAShaaaark 20h ago
Yeah it's crazy , it's so much more expensive while also being higher risk and with a limited upside and significant downside. With the volatility of the job market it seems insane to buy today unless you make so much that the extra cost doesn't meaningfully impact you.
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u/redwood520 8h ago
Mortgage rates were above 7% for almost the entirety of 1970-2000. It's a huge factor but houses are also just way too expensive. In my area the new houses are all $500k+. No one is building cheaper options.
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u/woah_man 8h ago
Well right, the rate multiplied by the amount gives you your payment. The same house in 1990 may have cost $100k then and $500k now. 7% on $500k is just a much bigger number.
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u/heath05 22h ago
The opening 10 second actually shows seller listings outstripping buyer demand, so it's less about a supply shortage and more about a lack of active buyers.
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u/Darklord_Of_Bacon 22h ago
Lack of active buyers because the prices that people are listing their houses for are absurdly high
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u/ChronWeasely 22h ago
And high interest rates, which should bring down housing prices, just locked people into their cheap mortgages. Prices to borrow money were so cheap, possibly too cheap, and now that it's at normal prices nobody can afford to sell and buy a different house.
Not to mention retirements tied up in housing, creating incentives for politicians to avoid policies that build "too many" (enough) houses and lower prices back to sanity
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u/SanchoPandas 21h ago
You just described the situation I'm in. Bought in 2019 and refinanced to an even lower rate a couple years later. I reaaally want to move across town for normal life reasons but it's very hard to stomach the increased mortgage for what will almost certainly a significantly smaller place. I've got some golden handcuffs on.
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u/schaef_me 21h ago
Your house value has undoubtedly increased a ton though right? I bought in 2020 at $157k and can sell it now for $300k. I just bought a new house for $485k and plan on dropping $180k in equity from my first house when I sell it onto the new mortgage. Total monthly payment all in (ins/taxes) will go from $950/month to $2,450. So I’m going from an old starter home on tiny lot to my dream house and huge yard for $1500 more a month. Basically just using my good fortune (equity) from the first house to bite the high interest on the new house. And I am not renting out the first house for a number of reasons even though it would mathematically make more sense. Mostly just don’t want to deal with it and don’t want to lose the tax free capital gain from renting it.
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u/geomaster 9h ago
the prices to borrow were not "possibly too cheap", they were certainly way too inexpensive.
there was no where else on the planet you could get a loan for THIRTY Years less than 3%.
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u/SexyChernyshevsky 22h ago
To buy a decent house right now is going to cost about $3,000 a month while rent is $1800. It’s a math problem
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u/whoeve 21h ago
This is exactly my situation in central MA. Rent is $2400 (for a 2 bed 2 bath apartment), a house would be $3800+. A house that doesn't require extensive renovations is a minimum of $500k, and even that isn't enough sometimes.
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u/ItGradAws 18h ago
I was gonna say this is far the dollar amounts we’re seeing in Denver/Atlanta. That’s starter homes too.
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u/woah_man 20h ago
Part of the reason the rent is that cheap is because the landlords (in general) were able to lock in those cheaper housing prices and loan rates years ago. So the increase in rent is only driven by a combination of what they think they can charge and property tax increases.
They don't have to rent at what a current mortgage costs, only more than what it costs them to own it.
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u/plutonasa 22h ago
Not to mention the absurd rates on top of that.
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u/General_Disaray_1974 21h ago
There is nothing absurd about the current rates when looked at over time, it just seems that way because we slashed them after the 2008 housing crisis/recession, kept them low for a decade for recovery and then the Pandemic hit, and they were slashed again to all time lows.
7% is a totally normal rate, not low, not high. "historically" The problem is, 7% stacked on to inflated home prices is a double whammy that prices waaaaayy to many people out of being able to purchase. 7% loan on a $150,000 is fine, but not for $300,000.
I paid almost 10% for my 1st home in 1994, but it was a town house in the crappy part of town and only $27,000, and I went in on it with my brother.
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u/exor15 21h ago
Like during COVID when it was simultaneously the case that everyone was unemployed, but also employers "for some reason" could not find anybody to fill essential jobs. Never considering that maybe the problem was that jobs which were considered "essential for society" made about minimum wage.
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u/Q-bey 21h ago
Zoning laws are a big part of it. Existing homeowners lobby the government to make building supply prohibitively expensive (if not outright illegal), which lets them increase the price of their house.
Local control of these laws, while well intentioned, has led to a prisoner dilemma of everyone voting to increase the housing prices of their own neighbourhood.
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u/D1rtyH1ppy 16h ago
There isn't really any room to build because the Bay is surrounded by mountains and ocean. It's not like a city like Dallas where you can build out in any direction.
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u/Schmancer 7h ago
My landlord owns 5 houses. They’re less concerned with the cash value of the home than the rent spread vs PITI and upkeep. This is where the current excess supply of housing is, in the hands of landlords. I currently rent a house my parents would have bought because a bank thinks I’m qualified to pay $2k a month for rent but not $1200 a month for a mortgage
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u/WeldAE 1h ago
This is where the current excess supply of housing is
If he is renting them then they are not some excess of supply. If you converted all of them to owner occupied, rents would go up and there would still be 10m missing homes compared to latent demand. A home is a home no matter how you pay for it. The problem right now is we don't have enough homes to the point if we doubled 2006 building rates for 10 years we wouldn't be building enough to meet demand.
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u/Lock-out 21h ago
The top 50% of American households own 97.5% of the nation’s wealth, top 1% own 30%.
Everything will be priced towards the demographic that can afford everything more and more as the wealth disparity increases. Bc why would they price things for the 50% that only own 2.5% of the nations wealth? Or 1%, or .5%… what happens when we own nothing?
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u/n8bitgaming 20h ago
A couple years ago the top 400 wealthiest people had more wealth than the bottom 50 percent of US households combined
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u/ImAShaaaark 20h ago
IIRC top 12 households control wealth that makes up 14% (or 19%?) of the US GDP. The amount of wealth concentrated in a handful of billionaires is disgusting.
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u/PopsGG 19h ago
Is that the problem though? Lets say everyone had an equal amount of money... there are still more people who want homes than homes exist.
Building more homes is the only answer. High density apartments/condos is the best use of land and resources. That isnt a money problem, that is a "Not in my backyard" problem.
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u/phriot 18h ago
It's almost two separate problems:
We 100% need to build more housing. Letting areas thicken up solves that problem. In a lot of places, this means "missing middle" housing, not necessarily high rises.
But many people still ultimately want to end up in detached, single family houses. In some areas, you just can't build more of that kind of housing. Even if you're somewhere with the space for a bunch of SFHs, that's ultimately unsustainable. Suburban sprawl can't generate enough in property tax to pay for infrastructure upkeep over the long term. (For examples, see Strong Towns.)
I don't know how you solve the second problem.
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u/MN_10849 14h ago
Not enough people acknowledge the second problem. Lots of people want SFH so simply building multiplexes, condos, and apartments isn't the answer.
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u/WeldAE 1h ago
But why do they want them? It's because taxes and higher HOA fees on other housing types make those properties less desired. I can get a condo right now for 50% less than my house but even assuming I get the same 4% interest rate, my monthly payment would double once you factor in HOA on most units. Worse, HOA fees are just lost money. So 10 years in a condo vs 10 years in a house, even if both are the same price and appreciate the same, you're WAY ahead in a house at the end money wise. You don't make money with either, you lose less in the house.
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u/WeldAE 1h ago
Letting areas thicken up solves that problem.
This in no way solves the problem. While I'm all for improving where we build, if anything it slows building down. A builder can put up MANY more homes by building a new subdivision than doing infill building in a tight complex inner city location. I get you are probably thinking dense multi-family, but we actually have plenty of those to the point that Atlanta has basically not built a condo in 20 years for example. If you are thinking multi-family rental, Atlanta and many metros built enough supply of those in the past few years to the point that rents actually fell.
What is missing is what's in demand and what people want which is SFH. You can dislike them, but you can't make an economic argument that just building them will "fix" the housing problem. What you can do is make a political argument that we shouldn't tax homes completely on property value but on land use and the cost to the city. This would cause dense housing taxes to drop a lot and large lot SFH taxes to go up a lot. This would probably convince people that large lot SFH isn't the best idea.
Suburban sprawl can't generate enough in property tax to pay for infrastructure upkeep over the long term.
Eh. Suburban sprawl isn't generating enough in property tax in lots of places to pay for infrastructure upkeep over the long term. That is VERY different from it can't. The problem is governments like to tax the people that can't easily see they are being over taxed. Property value tax puts the load on dense housing which are either renters or a small portion of home owners like those in condos. This cohort doesn't have enough of a voice or understanding how high their tax is to put up resistance.
It's the same way no one local is complaining that hotel taxes are too high. The people paying those taxes have no standing to complain. I recently took a trip to NY and Boston where I had to rent two hotel rooms each night. I paid 2x more in hotel taxes for 5 nights than I paid to fly 5 people to Boston. I'm complaining about it right now but I doubt NYC or Boston is going to lower the tax. Renters never see their tax bill. Condo owners do but the value of the Condo is usually less so their tax looks lower but they use almost no city services and combined they are paying massive amounts of tax.
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u/Lock-out 3h ago
Well now that half the population who previously couldn’t afford homes no matter how many they built can afford it they will build more homes bc there is now a market for it. But that’s not what I’m saying bc in my eyes redistributing wealth is just kicking the can down the road for our grandchildren to deal with the new concentration of wealth.
The problem is in the nature of unregulated capitalism. Administrative bloat at every level of the supply chain coupled with a refusal to raise wages to the same degree for the lowest level of worker just isn’t sustainable.
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u/palwilliams 3h ago
There's also never been a larger percentage of people in US history they have owned their own home. So while wealth distribution is a massive problem and the rich need heavy heavy taxing , the reasons for the housing problem is one of volume and they.rhere needs to be a lot of relocation that happens for first time buyers
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u/TICKLE_PANTS 2h ago
The is definitively false. see the Fed Numbers here. Home ownership was significantly higher before the housing crash.
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u/palwilliams 1h ago
My bad, it's at 65% and peak was 69.2%. But to be fair that is also due to banks lending money to people who couldn't afford the loans
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u/Lock-out 3h ago
So from what I can tell you’re pulling from a misleading statistic that’s tracking how many of the homes that exist are occupied by the people that own them not how many individuals own homes. Feel free to post your source if I’m mistaken though.
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u/palwilliams 1h ago
Look I want to tax the rich to oblivion. But it doesn't help us to play pretend. Investment firms own up to 3% of home. Around 53% of people own the property in which they live. The rest are likely kids, grandparents etc. it's a very difficult time to buy a house because of price and interest. Because we don't have enough properties and because people need to relocate.
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u/WeldAE 1h ago
You buy a house with income so I'm not sure why we're measuring wealth. 65% of households are owners, so at least 15% bought a home while being in the 2.5% of wealth bottom 50%. Are you suggesting more people should own than rent than the current 65%/35% split? This is the most common way to increase wealth, by not spending it and owning a home forces you to allocate a large amount of money to an asset that isn't dropping in value like a rock.
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u/Lock-out 1h ago
65% of homes are occupied by their owners not individuals who own homes. Individuals who own homes is around 52% so yeah more like 2%; and even then the numbers are heavily skewed towards the boomer population that was able to buy their homes when the economy was better.
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u/jaykrown 21h ago
This is the crash, your typical crash isn't how we're seeing it happen this time. Inflation is rampant, the affordability crisis IS the crash. The market is becoming dry, and the economy is falling because people can't afford things. Housing prices are probably going to keep going up, people still won't be able to afford them.
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u/iExhile 19h ago
Exactly this. Home values have effectively dropped because of inflation. Everything else is getting more expensive faster than housing, so even if home prices aren’t actually falling, their real value is.
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u/BitterMojo 16h ago
https://fred.stlouisfed.org/series/QUSR628BIS
Here is the data for that as well. It's not dropped much but inflation adjusted housing prices have been flat for years.
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u/filmfan2 21h ago
Despite a record number of sellers outnumbering buyers, US home prices continue to rise due to a severe structural supply shortage.
Most existing homeowners are trapped in a "rate lock," unwilling to sell because they would have to trade their low mortgage rates for significantly higher current ones.
Home builders, who cannot afford to wait, are the primary source of new supply and have been forced to lower prices or offer financial incentives to close deals.
Government policies aimed at assisting homebuyers by lowering costs often backfire by increasing buyer demand, which ultimately inflates home prices further and benefits sellers.
With high home prices making traditional savings insufficient, many young buyers now rely on parental financial support, further excluding those without wealthy family connections from the market.
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u/That-Living5913 16h ago
Rate trapped is a thing. We bought in 2021 and had some issues that normally would have led to downsizing and/or refinancing. But by then rates had gone up like 4% and house prices were up 30%.
Downsizing would have cost us more. So we pretty much cut all the corners to scrape by.
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u/SpiritFingersKitty 7h ago
On the flip side of this, my wife and I were looking to sell our starter home and move into a bigger/nicer home. Basically, because of the rates and the price increases we decided to take a HELOC and do a major addition/reno instead. Even though the HElOC rate is higher, because it's a lower amount the average rate is still significantly better. And we can prioritize paying down the high rate loan first to minimize the impact further.
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u/cheeriodust 4h ago
That's what we're seeing too...except builders charge a fortune where I live (southern coastal MA). HELOC + existing low rate mortgage is about the same monthly payment as a new mortgage on a slightly larger home in a less ideal location. Both options suck, though, from a financial perspective (i.e., going from comfortable to house-poor in an unstable economy with no real ROI).
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u/Blackdragon1400 21h ago
To comfortably buy a “modest” single family home in northern Virginia, I needed about $200k liquid to cover all the costs. With that I’m looking at paying around $6k/m for that property. Nearly triple my current mortgage from 2021 on a condo in the same area.
I can’t imagine most other millennials are able to do this. Gen-Z have it far worse. It’s wild.
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u/Dirt_Bike_Zero 20h ago
Northern VA is one of the craziest markets in the country try. Easily top 5. Houses go for about double compared to the rest of the East Coast.
My only point is that its a very desirable area to live in and there's a ton of wealth in that area.
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u/That-Living5913 16h ago
I worked in IT and lived in a low cost of living area. I CONSTANTLY had head hunters trying to get me to move to VA or Dallas. I can't imagine how many people they tricked into moving for 30% pay increase.
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u/Sasquatchjc45 20h ago
Let me introduce you to my NJ shore town, where house prices have 5x'd in the past 15 years, and commonly sell in bidding wars to hasidic jews for an extra 50-100% on top of that. The whole state is practically unavailable for under 250k
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u/Dirt_Bike_Zero 19h ago
Yea, I hear ya. I'm not talking shoreline or any otherwise premium property. Fairfax county in VA is double pretty much anywhere else.
a 2000 sq ft house with nothing special but an updated kitchen will go for a million. No where near the water. If you're within 45 minutes of DC, it's WILD.1
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u/Hybrid_Johnny 19h ago
Quintupled, you say
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u/cultoftheclave 18h ago
yeah, this would have made headlines if true. 4x in 15 years is pushing credibility in the most hyper growth SoCal communities
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u/Sour_Vin_Diesel 20h ago
That number doesn’t sound right. How did you arrive at the 200k liquid AND 6k monthly figure?
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u/Thisisaterriblename 20h ago
20% down on a $1M single family home. That is the basic STARTING price for most single family homes in Northern Virginia.
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u/Sour_Vin_Diesel 19h ago edited 19h ago
I’m doubting that 1 million is the starting price for an average single family home in Northern Virginia, and you definitely don’t need to put 20% down.
Edit: median sale price 812k this year, and that’s all homes, not just starter homes.
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u/mandrewsf 7h ago
This is true. $1 million starter homes are those located within walking distance of the metro in places like Arlington. The vast majority of NoVa isn't that expensive. And it is also one of the richest regions in the country so home prices relative to income isn't that crazy.
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u/AndIDrankAllTheBeer 2h ago
That’s exactly it. He said it went up to 10% in October (or Sept?) so we’re trying to get a waiver since my HOA is very close to that. But that depends on the lender and if they submit it.
We were literally in the middle of the escrow until this happened. Shit sucks
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u/themadpants 1h ago
If your representatives gave a shit about the people, this could be fixed pretty quickly. But they don't. They only care about their investors (lobbyists) returns.
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u/hotel_air_freshener 18h ago
Older owners will have to sell to cover monthly expenses for nursing homes, which are increasingly owned by private equity. Private equity will buy up the houses and rent them to younger people. Fewer and fewer people will be able to afford homes so renting becomes the defacto way for most to afford housing.
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u/Coltand 12h ago
Large institutional investors own 3-4% of US single-family rental homes.
And renting is a perfectly financially viable route for housing. Buying a home is a lifestyle choice, not a financial necessity.
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u/Zoolot 5h ago
Owning a home shouldn't be investment. It should be a home.
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u/WeldAE 2h ago
It's not. Sure, a few lucky people that time the market might make some money but it's rare. It's more that you don't loose as much as renting than you actually produce profit. My house has doubled in value, but between improvements I've made, property tax and interest payments, I've still "lost" money. Of course compared to paying rent I'm ahead but it's also a lot more effort and work. The real problem is you can't rent an equivalent home as almost all rentals are lower-end housing.
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u/stankypants 4h ago
It isn't a lifestyle choice when the actual owner can push you out at any given time. Rentals do not create welcoming environments for things like children or modest entrepreneurial ventures. Renting is the opposite of stability, and reflects back into our national identity.
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u/Coltand 4h ago
I know it goes against our deeply ingrained cultural narrative, but plenty of reasonable people make the choice to rent even though they're perfectly capable of buying.
Stability, space for children, and room for a business are very much lifestyle choices. And a lease provides legal protection against being arbitrarily pushed out.
Renting and investing your down payment and the difference in monthly costs into index funds is a sound financial strategy. And renting like this is even advantageous in many housing markets today.
Homeownership is a cultural preference, not a strict financial mandate.
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u/palwilliams 15h ago
It will never ever come down until there is a pretty significant migration of young folks and first time buyers to LCOL areas. This has been talked about and known for a long time but it's unpopular so gets buried
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u/Coltand 12h ago
Abolish zoning and let the contractors cook!
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u/WeldAE 2h ago
This just improves where housing is built. It certainly won't solve the number of houses that are built problem we have.
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u/Coltand 2h ago
Zoning explicitly limits density. If you remove single-family zoning, a contractor can build a fourplex on a lot that previously only allowed one house. That directly increases the total housing supply.
And it's not just theory, we've seen the affects in places that have addressed the housing supply through zoning:
And I even if you're personally only interested in living in a single-family home, any increase in housing supply, weather apartments or duplexes, impacts the housing market more broadly.
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u/palwilliams 7h ago
While this will help build capacity in some areas, it won't do nearly enough and not for a long time. There is going to be relocation before anything changes.
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u/Eggsor 4h ago edited 3h ago
Living in New England, what are these LCOL areas you speak of?
Edit: I guess nobody thought my joke was funny
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u/cheeriodust 4h ago
I think their point is folks need to migrate out of places like New England to less expensive parts of the country. Hence the unpopularity.
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u/YasharF 15h ago
Another reason why long term owners are not selling and reducing the supply:
> Capital gains tax exemption for primary residence sales is $250K regardless of ownership length with no opportunity to defer it if buying another home. (500k for joint owners) - The $250K/$500K was set in 1997 and not raised with inflation or home price increases in 30 years.
So a long term owner can't sell and use the proceeds to buy a home of the same value elsewhere. They are better off holding to the home and renting it if they have to move. If they hold on and it gets passed down to family at their death it is pretty much tax free because the tax free exemption for inheritance is $15M.
Interestingly, if the home wasn't a primary residence and was an "investment property" then the owner can use a 1031 exchange to defer the capital gains tax giving them the ability to use all the proceeds for buying the replacement home.
This mess was created with "Taxpayer Relief Act of 1997". Before then if you sold your principal residence and bought another principal residence of equal or greater value within a 2-year period, you could defer paying capital gains tax. The 250K/500K exemption was probably pretty good for 1997 home prices, but not these days.
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u/msuvagabond 5h ago
Selling of a primary residence basically never has capital gains tax come to mind for people.
"Oh no, I was totally going to sell my $800k house, but since I'll be taxed $15k on the $600k profit of it, I guess I'll just continue to live here."
Said basically no one ever.
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u/carthaginian84 5h ago
Might want to check that math.
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u/msuvagabond 4h ago
$600k-$500k exemption equals $100k. $100k taxed at 15% long term capital gains is....
$15k.
Nope, I'm good.
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u/carthaginian84 4h ago
One cup of coffee short on the married ownership here. Take that W.
It’s def a consideration for boomers with $1M+ in gains in CA trying to transfer wealth with minimal taxes as basis resets for inheritee.
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u/tenth 8h ago
1031 exchange can't be used to buy a home you'll live in. Both the property you sell and the property you buy must be held for investment or business use. If the goal is to roll rental proceeds into your own residence, a 1031 doesn't do that.
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u/TheBirdmann 4h ago
Yeah you’ve got to have it held in an LLC but can the paying tenant just be the LLC holder? And it’s what, 2 years before it can be released from the LLC?
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u/chortogrower 12h ago
They are going to sustain this somehow until they get elected out and give the bomb to the next ones, right now it's a money making machine for them.
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u/pollo316 5h ago
Accurate, this is what America has become. Sorting of the have and have not is a GOP top priority.
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u/Ok_Nectarine1801 1h ago
A major problem is big corporations bought these houses to rent. They don't need to sell them. They bought them low with low interest rates. There is not a lack of homes, between 14 and 15 million homes in the US are unoccupied.
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u/matthewbobsagit 21h ago
Ai generated unfortunately
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u/kettal 21h ago
i don't think it is. the guy just has a monotone narration style
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u/Barjack521 21h ago
I think he means our economic collapse
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u/kettal 21h ago
AI home buying algorithms?
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u/Barjack521 21h ago
No it was a joke about the American economic collapse as a whole
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u/kettal 21h ago
oh, my bad, i thought it was relevant to the video we were commenting on.
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u/Barjack521 21h ago
Kind of. It’s a language ambiguity joke. You see a video about part of the American economy collapsing and the response is. “It’s AI generated” which is an ambiguous statement. It is true or false depending on how you interpret it. If you assume they mean the video it’s false because it is not AI generated, if you assume they mean the economic collapse it’s a true statement because ai is one reason for the economic collapse. I realize explaining a joke makes it unfunny but the ‘tism isn’t letting me let this go.
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u/kettal 21h ago
did you ai generate that retcon explanation?
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u/Barjack521 21h ago
I wish I did, no this is pure mental illness on my part. It’s not a retcon either it’s just an explanation of my crappy joke from the beginning
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u/shoe465 21h ago
I definitely think it's rate driven first because prices are so high. People can sit and wait but if/when rates come down and people are active again prices have already gone up more.
I do think rates will come back down but it probably will take 5-6 years at least. We were on a good track there getting to a sub 6% and then you know screw it, let's spend a ton of $$, drive but def. and Iran. Bonds prices move, inflation hits and rates follow to try to rein it in. This is why I don't think we see 5.8-6.3 range for a few years yet.
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u/zer1223 21h ago
We don't need rates to come down. Rates should be high, borrowing money shouldn't be free. Low rates is why we have companies wasting hundreds of billions of dollars on unlikely gambles
Boomers need to understand that to sell their house in a high rate environment, they need to charge less
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u/jonfitt 20h ago
For people who aren’t planning on dying soon what are they supposed to do if the rates are much higher than what those people have already? If they want to move up to a more expensive home to free up the cheaper ones how are they going to afford that?
It’s a far far better situation to be stuck in a home unable to afford another one, than to be stuck without one. But those people are just as stuck.
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u/duderguy91 19h ago
The years of near zero rates were the issue in the first place. QE measures were being used irresponsibly during COVID and now most consumer markets are absolutely trashed because of it.
If you look through history, the rates between 2015-2022 were abnormally low and there was no good reason for it.
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u/WeldAE 2h ago
Here is the data and it's more complex than you are making it out. Interest rates have been all over the board over the years. The important thing to remember is that people refinance when rates drop. So even if you got a loan for 9% from 1990 to 2000, you certainly refinanced near 4% by 2003. The spike in 2006-2007 was also when no one was buying houses because the entire market crashed.
That 2006 crash is the real reason for the mess we're in, not interest rates. We quit building housing and other than a boom in rentals from 2020-2023, we haven't really built much since. 20 years of no supply and the demand for housing doubling with population changes means we're hurting for housing and that results in high house prices. We think housing is high, but high interest rates are suppressing prices. Expect housing prices to double as rates come down. Killing the industry in 2006 set the trap and there isn't really any way out without a lot of pain.
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u/duderguy91 2h ago
I agree that supply/demand is the main driver of housing prices, like anything else, but I don’t agree with the notion that abnormally low interest rates are assuredly coming back. Outside of the post recession era I discussed, average 30 year fixed interest rates over the last 50 years hardly went below 6% with peaks well above 10%.
As to the data provided, you are looking at the prime rate which is generally associated with variable forms of debt like credit cards, HELOCs, etc. The vast majority of mortgages are fixed rate and the data does differ. Fixed Mortgages
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u/jonfitt 20h ago
For people who aren’t planning on dying soon what are they supposed to do if the rates are much higher than what those people have already? If they want to move up to a more expensive home to free up the cheaper ones how are they going to afford that?
It’s a far far better situation to be stuck in a home unable to afford another one, than to be stuck without one. But those people are just as stuck.
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u/WeldAE 3h ago
This is them charging less. That house that was $400k in 2019 and is on the market today for $700k should and would be $1.4m if interest rates were 4%. You can't stop supply for 20 years and expect prices not to go way up. That is what we've done with housing. Unlike say an iPhone, you can't just crank the factory up by adding shifts and make up for the low supply. We probably can't build more than 2m houses/year even with extreme efforts and we're at least 10m houses in the hole and that hole keeps getting bigger each year that interest rates stay high.
Understand that if I sell my house and buy another house at the exact same price, my monthly costs double. Why would I do that? I don't even have a particularly low interest rate on my home like some do and some people would see nearly a trippling of their monthly costs.
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u/WeldAE 3h ago
People can sit and wait but if/when rates come down and people are active again prices have already gone up more.
If say in spring of 2028 interest rates have droped to say 4.5%, house prices will have doubled at that point. Despite the current situation looking like lots of supply, the actual real supply is simply not there. We have failed to build about 10m homes since 2008 that we need to support population increases. That is going to come home once the market unfreezes. That home that was $400k in 2019 and is $700k today will be $1.3m when rates dip below 5%.
The only solution to housing is to build in roughly the places where the demand is. That doesn't mean it has to be in the hottest neighborhoods in each metro. It can be out in the suburbs, but building is a must. The problem is to build a house equivalent to today's $700k house costs $1.5m and that is with builders just trying to break even. Everything has gone up on building. Timber, appliances, finishes and labor.
The better way to look at it is that interest rates are suppressing the price of housing, it's just hard to see it because prices are still going up.
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u/geomaster 9h ago
that's all every real estate agent said in 2022-2023. oh you get the high rate now and you can just refi to a better rate in a year...
the idiots still had expectations that 'higher' interest rates were temporary. when these low information sellers actually comprehend that high interest rates are here because of the out of control spending by Congressional representatives that they voted for, well, they will have to reduce asking prices to sell
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u/ColdYellowGatorade 19h ago
Any NJ town within a sniff on NYC is competitive. Over asking, waving inspections, all cash. You name it. Houses sometimes sit on the market for hours.
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u/mvw2 17h ago
One thing needs to happen. People need to be willing to sell cheap. I don't mean home builders. For them cheap has more to do with politically driven material cost problems and market instability. I mean owners of homes, even including property institutions use drive the rental market. They bought cheap, and their only task requires it to not sell expensive. They can still make money, just not record levels of money.
Until that happens, the housing market is sort of dead.
A good example near me. There's probably a dozen homes for sale around me within just a 2 mile circle. Up until early last spring, any home that went on the market pretty much was already in the process of selling the day it came on or sold within the first day or two. This happened over the last several years pretty religiously. Home buying was WILD, and it was wild at crazy prices.
Then came summer and now fall. Well, a whole bunch of houses went up for sale. Cool! None sold. None sold for a day. None sold for a week. None sold for a month or 3 months, or 4 months. In all over the last maybe 4 or so months, out of every house that I drive by that's for sale, I have seen exactly 1, one single home, sell. Everything else has been on the market for months and not moving at all. These are at a variety of sell prices too, decently priced ones to pretty silly pricing. The neighborhood I'm in has houses scattered and mixed together between $250k and $1.5m. The houses for sale are mixed. None are moving. No one is buying.
So how to actually fix the housing problem?
Make people wealthy.
How to do that?
Raise minimum wage.
Right now the minimum wage should be a little north of $25/hr.
Get cash flow into the populous. Get money in pockets. Get savings started. Have an excess of wealth. Then and only then can anyone begin to consider home ownership again.
It's the same problem with child birth and any other high cost element of life. These options are deferred or never happen. More people will grow old childless. More people will grow old never owning a home. This is the natural correction to tough times and economic struggles. You design out the expensive parts in order to survive.
And...you can't get them back until you create wealth. Aka...you need to pay people enough. Bottom up.
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u/toqer 22h ago
Location still matters. Case in point, most of the SF Bay area, and especially San Jose. (I live here) Houses stay on the market a week before getting sold. A lot of houses are just bought for the zip code, tore down, rebuilt. In my 50 years of living here, never seen anything like it, and the Ai boom is just fueling it.