Hey real estate moguls - what’s going on in the housing market?

[tbone_ 14123]

Actually we know what going on, the bigger question is what are the broader implications for our society and culture?
 
Rising equity is great for current homeowners, but is it good for large swaths of the population to be priced out of their own neighborhoods?
 
Will your kids ever be able to buy a house anywhere near your neighborhood? Alternatively, I bet most of you who are living in good spots currently grew up in much different circumstances. Will our kids see the same improvement?
 
There is a massive consolidation of ownership of the housing stock going on in this country. 50 years ago all houses and most apartment buildings we’re individually owned. Today more and more people every day live in dwellings owned by fewer and fewer groups. As an apartment developer by trade, my job is to deliver vehicles that reach further and further into peoples pockets to facilitate this consolidation of ownership capital. This is how capitalism works but is this a good thing?
 
What does the future hold for construction materials and labor markets? Do we ever return to a scenario where available land, relaxed approvals, and reasonable costs create affordable suburban lifestyles again? Did we just experience a one time set of circumstances that can’t be duplicated and we shouldn’t expect it to?
 
Are prices currently a bubble? Houses and apartments are being purchased with real equity these days Vs the run up in 05/06/07. But how far can the appreciation go? Can Incomes keep pace?
 
Where is the demand coming from? We know supply is short because of lack of listed inventory on resales and lack of ability for builders to build enough new supply due to geography, approvals, and costs. But isn’t one house bought equal to one house sold? Is this a zero sum game or are the demographics of increasing rate of household formation really driving demand for new housing units?
 
These are things I wonder about as our housing situation in the country seems to be in unprecedented times. Interested in what you all think as well.

[SubliminalHorn 6787]

What’s happening? NLAA

[Incredulity 11671]

subscribed.

 

a couple of my thoughts.

 

13 minutes ago, tbone_ said:

There is a massive consolidation of ownership of the housing stock going on in this country. 50 years ago all houses and most apartment buildings we’re individually owned. Today more and more people every day live in dwellings owned by fewer and fewer groups. As an apartment developer by trade, my job is to deliver vehicles that reach further and further into peoples pockets to facilitate this consolidation of ownership capital. This is how capitalism works but is this a good thing?

Disagree, its what central bank underwritten modern crony capitalism looks like.

 

13 minutes ago, tbone_ said:

What does the future hold for construction materials and labor markets? Do we ever return to a scenario where available land, relaxed approvals, and reasonable costs create affordable suburban lifestyles again? Did we just experience a one time set of circumstances that can’t be duplicated and we shouldn’t expect it to?

approvals and bureaucratic morass is an issue.  IMPO more significant to the issue of "affordability" is consumer expectations.  Both my parents grew up in the peak of middle class American Suburbia of the 50's and 60's.  They lived in 2bd, 1bath 1000sqft SFH as families of 4.  Both fathers worked Union jobs in manufacturing and they were one income households.

Edited October 26, 2021 by Incredulity

[Deej 76791]

925 square foot 3/1, two blocks north of Rundberg just listed for $449k. Whatever is going on is all fucked up. 

[crash_davis 23113]

my house has way more than doubled in 5 years. it's priced well in the the million range. i'm happy but i feel for my kids and their kids. how the fuck are they going to afford a house when they want to buy. i agree with OP, the pricing is driven by demand but much of that demand are investment firms or rich individuals looking to lease/airbnb the house. yea, that does nothing for the community or common good.

canada is proposing some changes. some/many in the US will cry socialism but our country's desire by some to blindly defend millionaires and billionaires at the expense of hard working people is mind boggling. 

 

https://www.blogto.com/real-estate-toronto/2021/08/trudeau-housing-ban-foreign-home-buyers-canada/

[Da Fino 2783]

10 minutes ago, Deej said:

925 square foot 3/1, two blocks north of Rundberg just listed for $449k. Whatever is going on is all fucked up. 

What size lot?

[Deej 76791]

I need to check. Front yard is a postage stamp. Back yard doesn't seem much bigger. Zero space between it and the houses on either side.

[gmr548 16580]

1.) The fundamental issue in the housing market is simple supply and demand. Development of new housing took a long time to recover after the great recession, and did not recover in many places. The result is we are millions of housing units short of demand as the largest generational bloc in the population is squarely into homebuying age, even after delays due to student loan debt burden, low early career wages due to the recession, and social factors like delaying marriage and children. Demand > supply.

2.) Affordable suburban lifestyle is an illusion. Beyond America being in a historically unique macroeconomic situation in the second half of the 20th century, postwar suburban/car-centric development is the most resource and capital intensive development model out there. The health and environmental impacts are enormous. It took massive policy intervention and subsidy to create what we think of as normal. An energy hogging single-family home with an irrigated landscape in a car based development that requires you to drive everywhere should be expensive relative to more efficient options, which is difficult to deal with because the entire population has lived their life within this model at this point, and human beings do not do well with big paradigm shifts like that.

3.) Long term, as in decades long, the population of this country will be declining (I believe it already is excluding immigration), and the supply imbalance will self correct in a sense with boomers long gong, millennials aging, and fewer generation Z's, alphas, and betas to replace those two huge blocs.

[Loch Ness Monster 3533]

More young people are being turned into renters. The greed among investors / rich people buying out neighborhoods or rows of houses seems icky. Maybe their greed is good for society in some way? 

[52-80 19158]

housing demand is up and i dont think it will subside anytime soon:

1. people getting more numerous, not less

2. borrowing is cheap cheap cheap.  both individuals and corporates have apetite for borrowing to fund mortgages.

3. short term spike in materials inflate house prices. simultaneously, real estate is seen as inflation protection. both work in feedback loop to further drive housing demand.

4. durability of prices post-2010 "proved" recession proofing.  even in places in SF Bay Area. 

 

short of drastic change in tax codes (wealth taxation, eliminate 1031, change to rental income) basically, i see no compelling cases that things will get cheaper for homeowners.

Edited October 26, 2021 by 52-80

[UT_OB1 2223]

17 minutes ago, crash_davis said:

my house has way more than doubled in 5 years. it's priced well in the the million range. i'm happy but i feel for my kids and their kids. how the fuck are they going to afford a house when they want to buy. i agree with OP, the pricing is driven by demand but much of that demand are investment firms or rich individuals looking to lease/airbnb the house. yea, that does nothing for the community or common good.

canada is proposing some changes. some/many in the US will cry socialism but our country's desire by some to blindly defend millionaires and billionaires at the expense of hard working people is mind boggling. 

 

https://www.blogto.com/real-estate-toronto/2021/08/trudeau-housing-ban-foreign-home-buyers-canada/

Thats a broad brush on the Airbnbs. I own 2, and know many others in a similar situation. Both houses were abandoned and in serious need of repair (one the owner had passed a while back and unlivable by the time we got to it).  We are not rich, and in fact we had to borrow the money for the repairs in addition to the house. We busted our asses and did quite a bit of the “unskilled” work. When we were done we’d added enough value to the houses to ReFi all the repair costs in to our new loan.  We do cash flow, but not enough to come close to quitting my day job (these are long term investments). Yes, I do think we helped out the community / common good by getting rid of an eye sore (we also pay a ton in taxes to Texas and the county). There are definitely some that are rich that buy up houses for Airbnbs, but a lot of those houses arent what your kids are buying for their first house (think multimillion dollar beach house). There are more that are improving the area and/or busting their ass for income running a bed and breakfast. 

[Jkwellborn 6702]

I know I’m pissed that my damn property taxes keep going up.

[Hefeweizen 5321]

I am trying to figure out how to take advantage of the imbalance.   I’ll report back once I do that.

[DCA_HORN 725]

1 hour ago, tbone_ said:

Are prices currently a bubble? Houses and apartments are being purchased with real equity these days Vs the run up in 05/06/07. 

Riiight.

[elfenix 34240]

housing is scare and the government wants it that way because it makes owners (who vote) wealthy. 

 

5 minutes ago, Hefeweizen said:

I am trying to figure out how to take advantage of the imbalance.   I’ll report back once I do that.

if you think we're headed for big inflation then take out as many low % rate mortgages as you can beg/cheat/steal your way into. 

Edited October 26, 2021 by elfenix

[fattyflattie 4639]

8 minutes ago, Hefeweizen said:

I am trying to figure out how to take advantage of the imbalance.   I’ll report back once I do that.

I was just thinking about this today.  If I figure it out, I’ll let you know. 

[Satoshi 129]

Far and away the #1 cause of all this is the easy money policies of the Federal Reserve. 
 

 

[Deej 76791]

Seems like it will drive those that can work remotely to buy homes in shitty Midwestern towns.

I looked up home prices in the podunk town in Minnesota my people come from. 5/3 with 3000 square feet, built 100 years ago with hand carved wood staircases and built in cabinets for $125k. 

[crash_davis 23113]

1 hour ago, UT_OB1 said:

Thats a broad brush on the Airbnbs. I own 2, and know many others in a similar situation. Both houses were abandoned and in serious need of repair (one the owner had passed a while back and unlivable by the time we got to it).  We are not rich, and in fact we had to borrow the money for the repairs in addition to the house. We busted our asses and did quite a bit of the “unskilled” work. When we were done we’d added enough value to the houses to ReFi all the repair costs in to our new loan.  We do cash flow, but not enough to come close to quitting my day job (these are long term investments). Yes, I do think we helped out the community / common good by getting rid of an eye sore (we also pay a ton in taxes to Texas and the county). There are definitely some that are rich that buy up houses for Airbnbs, but a lot of those houses arent what your kids are buying for their first house (think multimillion dollar beach house). There are more that are improving the area and/or busting their ass for income running a bed and breakfast. 

congrats to you. you kicked ass and are making money on your investment. seriously, awesome for you.

but that's exactly what it is, an investment. it's not buying a home with the intent of living in it. the more people who buy homes as investment, the fewer actual home owners. yes they may not be homes that first time home owners buy but they may homes that first time home owners upgrade to. if/when they move, they free up inventory for first time homeowners. i'd sell my house if i knew i had many choices where i wasn't one of 20 bids on the home. and those people who are actually looking for homes are getting outbid by people/companies buying homes as investments. 

again you sound like you did good but investment homes are a large part of the issue of supply vs demand and why homes are getting so fucking expensive.

[Deej 76791]

13 minutes ago, crash_davis said:

investment homes are a large part of the issue of supply vs demand and why homes are getting so fucking expensive.

This.

[atomheartbevo 89668]

23 minutes ago, Deej said:

Seems like it will drive those that can work remotely to buy homes in shitty Midwestern towns.

Not just the Midwest - plenty of places around the US with affordable housing compared to places like Austin.

If the wife and I were still in our 20s and just starting out in 2021, no way in hell we'd stick around Austin - too many affordable places around the US have decent internet access these days, so one of us would always be able to work.

Hell, we are still considering moving, even though we'd take a hit on retirement, because the next 15 or so years in Austin are not something that we are all that invested in, outside of our kids being in school (which admittedly is a huge reason why we would stay in Austin).  

We have a shitload of friends who went remote for their jobs (or started their own businesses) or changed jobs and moved to where they wanted to be, and they have bigger homes in scenic areas, without the shitty summers.  And I'm not just talking about Colorado (although if I were Colorado, I'd be building a fucking wall to keep Texans out over the next 5 years).

 

[crash_davis 23113]

2 minutes ago, atomheartbevo said:

 And I'm not just talking about Colorado (although if I were Colorado, I'd be building a fucking wall to keep Texans out over the next 5 years).

Can you please wait 5-8 years until I retire? Thanks!!!!!!!

 

Plus I'm not from Texas, I'm from Austin. 

[atomheartbevo 89668]

Just now, crash_davis said:

Plus I'm not from Texas, I'm from Austin. 

[Guest]

1 hour ago, gmr548 said:

1.) The fundamental issue in the housing market is simple supply and demand. Development of new housing took a long time to recover after the great recession, and did not recover in many places. The result is we are millions of housing units short of demand as the largest generational bloc in the population is squarely into homebuying age, even after delays due to student loan debt burden, low early career wages due to the recession, and social factors like delaying marriage and children. Demand > supply.

Agree completely with this, but leaves out the impact of extremely low interest rates, which add a big premium to the price of the house. But yes, demographics are highly in favor of price increases. 

Short of interest rates rising sharply, I don't see much of a drop. As a homeowner, I come down 70/30 that this is bad. On the good side, I'm wealthier on paper... but so what? Can't really spend the equity. Want to sell? I still have to go buy something else that's expensive.

On the downside, I think it further puts the American dream out of reach. "Why aren't we putting more people into the trades instead of pricey college?! Be a plumber of HVAC repair! You can make $80K a year!"  Yeah, making $80K isn't going to cut it if you want to own a modest home and live comfortably. My taxes have also soared while my kid's school uses portable buildings everywhere.

I also don't think that AirBnB/investors are the issue. I don't have hard data, but my impression has been that the amount of units taken by this is a drop in the bucket. And to me, density is a buzzword that people think will solve everything. It won't. Name one dense place that's affordable. 

[Schulz2.0 28951]

15 minutes ago, atomheartbevo said:

And I'm not just talking about Colorado (although if I were Colorado, I'd be building a fucking wall to keep Texans out over the next 5 years).

 

Way more Californians moving into Colorado than Texans.

[Js1 85337]

19 minutes ago, FirstTimeCaller said:

Agree completely with this, but leaves out the impact of extremely low interest rates, which add a big premium to the price of the house. But yes, demographics are highly in favor of price increases. 

Short of interest rates rising sharply, I don't see much of a drop. As a homeowner, I come down 70/30 that this is bad. On the good side, I'm wealthier on paper... but so what? Can't really spend the equity. Want to sell? I still have to go buy something else that's expensive.

On the downside, I think it further puts the American dream out of reach. "Why aren't we putting more people into the trades instead of pricey college?! Be a plumber of HVAC repair! You can make $80K a year!"  Yeah, making $80K isn't going to cut it if you want to own a modest home and live comfortably. My taxes have also soared while my kid's school uses portable buildings everywhere.

I also don't think that AirBnB/investors are the issue. I don't have hard data, but my impression has been that the amount of units taken by this is a drop in the bucket. And to me, density is a buzzword that people think will solve everything. It won't. Name one dense place that's affordable. 

It’s not the issue. It’s an issue. There’s many 

[XYZ 2154]

So California steals Colorado’s water and then sends shitty Californians to Colorado to ruin the place.

[hayden_horn 11362]

1 hour ago, Hefeweizen said:

I am trying to figure out how to take advantage of the imbalance.   I’ll report back once I do that.

 

1 hour ago, fattyflattie said:

I was just thinking about this today.  If I figure it out, I’ll let you know. 

we bought in april of last year (on an fha with pmi), and the house has appreciated 50% already, and it's still headed up i reckon. 

we just refi'd and paid off my wife's grad student tuition and all credit card debt and the solar panel loan, and are now on a 15 year fixed, and did not even come close to maximizing the new valuation.

now the tax man...he can get fucked. but compared to the appraisal, i think we're still on the fair part of the spectrum, and i plan to protest whatever next year.

[freyguy 4272]

get ready for 40 & 50 yr mortgages.  Younger generations will have hardly any equity....

[workswithseed 2106]

4 minutes ago, freyguy said:

get ready for 40 & 50 yr mortgages.  Younger generations will have hardly any equity....

 

[Guest Lobo]

Full disclosure, I do not live in Rollingwood.  Too rich for my blood.  It's not uncommon to see a teardown, then a high, high-end rebuild there on a half-acre or more.  And then it'll fetch $1000/foot.  But I just saw a 1972 with laminate flooring, 1/3rd acre, 1800 square feet, with a backyard and living spaces out of "Deliverance" going for $1.8mm or $1000/foot.  To tear it down obviously.  I mean teardowns used to have the courtesy of either dressing themselves up cosmetically, or going for $700-$800/foot.  We are entering yet another brave new world.  

[Paper_jam 831]

2 hours ago, Satoshi said:

Far and away the #1 cause of all this is the easy money policies of the Federal Reserve. 
 

 

 

I don't know much about economics (I took Micro as an elective 30 years ago) but can you explain to me, in the simplest terms, how Fed policies make housing more expensive? When people buy homes, it seems to me that money is coming primarily from their wages, and in some cases inherited wealth. Have wages increased that much, and if so, is that really driven by the FR?  Or do you mean the real estate market reacts to low interest rates by jacking up prices, because people buy based on monthly payment and not total cost?

[gmr548 16580]

1 hour ago, FirstTimeCaller said:

Agree completely with this, but leaves out the impact of extremely low interest rates, which add a big premium to the price of the house. But yes, demographics are highly in favor of price increases. 

Short of interest rates rising sharply, I don't see much of a drop. As a homeowner, I come down 70/30 that this is bad. On the good side, I'm wealthier on paper... but so what? Can't really spend the equity. Want to sell? I still have to go buy something else that's expensive.

On the downside, I think it further puts the American dream out of reach. "Why aren't we putting more people into the trades instead of pricey college?! Be a plumber of HVAC repair! You can make $80K a year!"  Yeah, making $80K isn't going to cut it if you want to own a modest home and live comfortably. My taxes have also soared while my kid's school uses portable buildings everywhere.

I also don't think that AirBnB/investors are the issue. I don't have hard data, but my impression has been that the amount of units taken by this is a drop in the bucket. And to me, density is a buzzword that people think will solve everything. It won't. Name one dense place that's affordable. 

Interest rates absolutely matter. Most people are buying on monthly payment, not a sticker price. Definitely agree that absent some non-housing economic calamity that significantly reduces buying power across the board, a meaningful rise in interest rates is about the only thing that is going to derail home prices in the near term. Skeptical that is coming as my whole adult life has been filled with "Interest rates are at historic lows!"

Your impression re: investors is correct, so far. Investors and individuals are often looking at different product entirely. A young couple looking for their relatively turnkey starter home or a family looking to move up, only to lose out to an investor, has been a rare occurrence because investors often go buy the kind of product that requires the capital individuals often don't have to make it worthwhile, but they can do it at scale and it's profitable if they're good at it (lol at Zillow from the 6th Street thread, definitely not good at it). While it's on the high end, the number of homes that end up purchased by investors has been within historical norms as recently as this summer. But there is a ton of institutional money flowing into SFR. The impact of that won't be fully realized for a couple years, but it's very possible COVID accelerated that trend as it did so many others.

I don't think anyone makes the argument that density makes a place inherently affordable. The argument is simply that artificially restraining supply, as the vast majority of jurisdictions in this country do through zoning and other means, keeps home values inflated by preventing new units from coning to market.  The densest places in this country are also world class cities that are highly desirable for a lot of people and host huge concentrations of jobs. San Francisco, for example, is expensive because it's San Francisco. The Bay Area is expensive because a lid has been kept on housing development for decades. 

 

[Snake Diggity 4624]

4 hours ago, gmr548 said:

1.) The fundamental issue in the housing market is simple supply and demand. Development of new housing took a long time to recover after the great recession, and did not recover in many places. The result is we are millions of housing units short of demand as the largest generational bloc in the population is squarely into homebuying age, even after delays due to student loan debt burden, low early career wages due to the recession, and social factors like delaying marriage and children. Demand > supply.

2.) Affordable suburban lifestyle is an illusion. Beyond America being in a historically unique macroeconomic situation in the second half of the 20th century, postwar suburban/car-centric development is the most resource and capital intensive development model out there. The health and environmental impacts are enormous. It took massive policy intervention and subsidy to create what we think of as normal. An energy hogging single-family home with an irrigated landscape in a car based development that requires you to drive everywhere should be expensive relative to more efficient options, which is difficult to deal with because the entire population has lived their life within this model at this point, and human beings do not do well with big paradigm shifts like that.

3.) Long term, as in decades long, the population of this country will be declining (I believe it already is excluding immigration), and the supply imbalance will self correct in a sense with boomers long gong, millennials aging, and fewer generation Z's, alphas, and betas to replace those two huge blocs.

I agree with all your points but would add that migration to cities has meant real estate in those cities has risen in value disproportionately.  And the net is reduced available housing because at the end of the line is the dying extremely small town.  This trend will continue but as you said it will be offset some by population decline, although countries that address worker shortages by increasing immigration will still have the issue.

[staboner 4969]

its fucked. i can't see prices ever coming down. if they do the boomer government will rescue the boomer overborrowers. rinse and repeat in any country you care about.

that dream has sailed and isn't returning anytime soon. kicking myself for selling my house some years back but whatever. its good to also be flexible and not have much shit at all.

the average price in australia i think will rise $600k in 2021. the average. its at $50k per fucking month right now. maybe stagflation, maybe not. australia is heading for being nothing but a country for old men. 

inflation elsewhere 

tl:dr if you rent you are a second class citizen in the new way the world will look over the next 10 to 20 years. 

the message brought to you by boomers, for boomers. 

[Neonmoon 38129]

3 hours ago, freyguy said:

get ready for 40 & 50 yr mortgages.  Younger generations will have hardly any equity....

[Ted Dantzler 149]

It's the low interest rates... adjusted for inflation the monthly payments are actually lower than in the past.

[Updawg 2266]

It's the low interest rates... adjusted for inflation the monthly payments are actually lower than in the past.

That’s interesting. 80’s interest was a bitch

[Bevo 13577]

6 hours ago, crash_davis said:

my house has way more than doubled in 5 years. it's priced well in the the million range. i'm happy but i feel for my kids and their kids. how the fuck are they going to afford a house when they want to buy. i agree with OP, the pricing is driven by demand but much of that demand are investment firms or rich individuals looking to lease/airbnb the house. yea, that does nothing for the community or common good.

canada is proposing some changes. some/many in the US will cry socialism but our country's desire by some to blindly defend millionaires and billionaires at the expense of hard working people is mind boggling. 

 

https://www.blogto.com/real-estate-toronto/2021/08/trudeau-housing-ban-foreign-home-buyers-canada/

Low interest rates coupled with inflation and a growing high tech economy in Austin.

And as far as blaming the handful of billionaires in the US for high housing prices in Austin, that makes little sense as does placing the blame on the other end of the spectrum - raising low income pay causing an increase in pay for everyone which leads to higher prices for goods rather than increased buying power.

Edited October 27, 2021 by Bevo

[DCA_HORN 725]

Did you guys realize interest only loans were still a thing? Found that out recently. 

[fattyflattie 4639]

4 hours ago, freyguy said:

get ready for 40 & 50 yr mortgages.  Younger generations will have hardly any equity....

Same thing that’s got trucks and bay boats at 100k.  9 year auto and 15+ year boat lending.  People just looking at the payment. 

[Chewbacca 7779]

Not just the Midwest - plenty of places around the US with affordable housing compared to places like Austin.
If the wife and I were still in our 20s and just starting out in 2021, no way in hell we'd stick around Austin - too many affordable places around the US have decent internet access these days, so one of us would always be able to work.
Hell, we are still considering moving, even though we'd take a hit on retirement, because the next 15 or so years in Austin are not something that we are all that invested in, outside of our kids being in school (which admittedly is a huge reason why we would stay in Austin).  
We have a shitload of friends who went remote for their jobs (or started their own businesses) or changed jobs and moved to where they wanted to be, and they have bigger homes in scenic areas, without the shitty summers.  And I'm not just talking about Colorado (although if I were Colorado, I'd be building a fucking wall to keep Texans out over the next 5 years).
 

You fuckers are all already here. Saw lots of Texas plates in Winter Park this weekend. It's fucking mud season, you can go home now.

[Dbeasy 15051]

Many reasons have already been posted as to why real estate has become so unaffordable but by far the most concerning issue is the incredibly concentrated wealth in a small number of people.

The wealthiest people in this country can buy almost all of the desirable real estate, and are now doing so via much more aggressive investment vehicles. 

We are hurtling towards being serfs on the lands of the ultra rich.  Wait until all of the newly minted ultra rich Chinese come back in and buy it all over the next twenty years. 

Edited October 27, 2021 by Dbeasy

[Wally Fairway 5550]

52 minutes ago, Updawg said:

That’s interesting. 80’s interest was a bitch

yes it was - bought my first house in 1987.
Also, look what happens to housing pricing if/when interest rates go back to say 4%; because IMO pricing/appraised values is driven by what people can afford in payments. So when payments go up then people will have to sell for less, or the "banks/mortgage holders" will get them back in defaults and foreclosures.
Then again I have no idea how much of the market is made up of investors vs. owner occupied
 

[Upgrayedd 5812]

2 hours ago, Ted Dantzler said:

It's the low interest rates... adjusted for inflation the monthly payments are actually lower than in the past.

Interesting.

Using median income P&I in 1975 was 24.5% of income.

P&I is 22.2% of 2020 median.

[Texas Jeff 1945]

Zero tax on $500k of household capital gain tempts folks to buy all the house they can afford.  Low interest rates means they can afford a lot of house.

Why be the sucker that buys the $250k house?  If it doubles you've only made $250k tax free.  Better to buy the $500k house.  When the market doubles, you can say you live in a million dollar house, plus you've made another $250k tax free.

This all works great until rates rise and values dip.  If that happens, we'll have people that can afford to pay the mortgage on their million dollar purchase at a 2% interest rate, but can't afford to move and buy a $500k home at 6% interest and eat the $500k capital loss.

[BabaYaga 15298]

15 hours ago, freyguy said:

get ready for 40 & 50 yr mortgages.  Younger generations will have hardly any equity....

The average like of a note today is roughly 5-7 years.  

[Incredulity 11671]

There are way worse financial decisions to be made than locking in $500K in financing at  2% for 50 years

[BabaYaga 15298]

As mentioned, the two largest drivers are artificially low interest rates and scarcity.  Begging the obvious questions about attribution.  Why are rates so low?  Why so much scarcity?

This paradigm shift in work from home (WFH) labor options also fueled more demand.  But the market is cooling slightly (depending upon the region obviously).  Median home price appreciation is slowing down somewhat.  

The Federal Reserve’s continued monetary easing, and especially the bank’s monthly purchases of mortgage-backed securities, is keeping a strong downward pressure on rates.  If this changes, hold on...

 

[BabaYaga 15298]

Not sure if anyone addressed the looming foreclosures as well - between 250k-500k are looming 

Then there are concerns about contagion with the Chinese RE market.  They have hundreds of massive firms that are propped up ala Lehman's on unicorn farts and pixie dust.  Evergrande is only one.  They're in the middle of a mother fucker of a bubble right now and China can't bail out them all.  Many domestic firms have serious contagion issues (Black Rock, etc).

They have too little demand in areas that were/are overbuilt.  Forced urbanization never works as intended.