Moral imperative for a housing crash... and permanent devaluation

[SensEye]

^ That article has some truth to it, but it's an obvious exaggeration.

Still, it’s not hard to see the ultimate outcome of this geographic sorting: Eventually, only high-paid, high-powered managers will be able to live in expensive cities.

 

[ygolo]

^ That article has some truth to it, but it's an obvious exaggeration.

Still, it’s not hard to see the ultimate outcome of this geographic sorting: Eventually, only high-paid, high-powered managers will be able to live in expensive cities.

Yeah--a very Hunger Games future.

 

[ygolo]

Obviously, the political class is aware of it:

Americans are frustrated by housing prices ahead of the 2024 election

The shortage is dampening President Joe Biden's assurances that the U.S. economy is strong. And it underscores the degree to which Republican Donald Trump has largely overlooked the shortages.

www.pbs.org

But their million dollar plus home keep going up in price while everyone else can't afford a home (because affordable homes don't exist).

If Biden loses the election it is because of this. I was at an Easter party and the usual group that would always be Trump bashing was Biden bashing instead. I really couldn't sway them.

CPI is a fraud. Housing costs are the only inflation related thing that matters right now. Don't say it is under control and when people clearly are struggling. Wage to housing is the only measure of how good the economy is. The rest feels like dress-up. etc, etc.

 

[SensEye]

If you ask me, the key to the 'housing' crisis is not more houses, it's more apartments. A sufficient quantity of rental units would keep rent prices down, and eventually this would lead to lower demand for detached houses. That would give the housing supply time to catch up to demand.

Why building apartments is not profitable is a mystery to me. It seems like a can't fail business to me. And interest rates have been much higher in the past, so the current modest interest rates have nothing to do with it.

I'm no expert in the real estate business, but the government should mostly stay out of it. If any other consumer product is in short supply, the government certainly wouldn't pay to get the product produced (they might tinker with regulations around the industry, but that is about it).

I doubt Trump or Biden will make any difference to the housing market. Although reducing immigration would provide some relief on the demand side. Trump would probably be better on that front.

 

[JocktheMotie]

Obviously, the political class is aware of it:

Americans are frustrated by housing prices ahead of the 2024 election

The shortage is dampening President Joe Biden's assurances that the U.S. economy is strong. And it underscores the degree to which Republican Donald Trump has largely overlooked the shortages.

www.pbs.org

But their million dollar plus home keep going up in price while everyone else can't afford a home (because affordable homes don't exist).

If Biden loses the election it is because of this. I was at an Easter party and the usual group that would always be Trump bashing was Biden bashing instead. I really couldn't sway them.

CPI is a fraud. Housing costs are the only inflation related thing that matters right now. Don't say it is under control and when people clearly are struggling. Wage to housing is the only measure of how good the economy is. The rest feels like dress-up. etc, etc.

While I obviously think there's more to a good economy than wage to housing, I think it's super salient to the average voter/person and their general sentiment as to how things are going. The 21st century has seen a strong push towards urbanization and urban/suburban housing stock hasn't kept up with demand. High housing and food costs hit sentiment so much more than other costs and definitely contribute to the sense of doomerism.

If you ask me, the key to the 'housing' crisis is not more houses, it's more apartments. A sufficient quantity of rental units would keep rent prices down, and eventually this would lead to lower demand for detached houses. That would give the housing supply time to catch up to demand.

Why building apartments is not profitable is a mystery to me. It seems like a can't fail business to me. And interest rates have been much higher in the past, so the current modest interest rates have nothing to do with it.

I'm no expert in the real estate business, but the government should mostly stay out of it. If any other consumer product is in short supply, the government certainly wouldn't pay to get the product produced (they might tinker with regulations around the industry, but that is about it).

I doubt Trump or Biden will make any difference to the housing market. Although reducing immigration would provide some relief on the demand side. Trump would probably be better on that front.

It can be profitable but it's also very slow due to zoning and planning amendment timelines, coupled with NIMBY behavior that we really should find a way to counteract. In my area, a developer bought a golf course in the middle of a detached house neighbourhood and they've been fighting the community to build a mixed use apartment/townhome/detached house neighbourhood for 7 years.

 

[SensEye]

It can be profitable but it's also very slow due to zoning and planning amendment timelines, coupled with NIMBY behavior that we really should find a way to counteract. In my area, a developer bought a golf course in the middle of a detached house neighbourhood and they've been fighting the community to build a mixed use apartment/townhome/detached house neighbourhood for 7 years.

The NIMBY thing is a sticky wicket. It potentially threatens me in my current house. What has been happening in my 'hood is that developers buy the old houses, tear them down and build two houses on the same lot. In order to squeeze two houses in, they have to be very narrow and long and 3 stories high. So basically there is no back yard after they are done as all the space is used for the building.

So if both my neighbors were to sell, and this was to happen, my current back yard would turn into a shadowy "box canyon" sandwiched between these long 3 story houses. Plants/grass would not thrive and I would hate it. And it would depress the resale value of my property.

Still, what is one to do? This approach is one way to increase housing supply (and density) but it sure sucks. I just have to cross my fingers it doesn't happen to me before I ever want to sell. And if I did sell, my neighbors would face the same threat.

 

[ygolo]

The NIMBY thing is a sticky wicket. It potentially threatens me in my current house. What has been happening in my 'hood is that developers buy the old houses, tear them down and build two houses on the same lot. In order to squeeze two houses in, they have to be very narrow and long and 3 stories high. So basically there is no back yard after they are done as all the space is used for the building.

So if both my neighbors were to sell, and this was to happen, my current back yard would turn into a shadowy "box canyon" sandwiched between these long 3 story houses. Plants/grass would not thrive and I would hate it. And it would depress the resale value of my property.

Still, what is one to do? This approach is one way to increase housing supply (and density) but it sure sucks. I just have to cross my fingers it doesn't happen to me before I ever want to sell. And if I did sell, my neighbors would face the same threat.

Losing housing value is a common belief, but can you determine if it is true? The data often shows that the opposite happens when things get denser. The lot frequently gains in value.

My wife likes to use Zillow to see what things sold for around our area.

 

[SensEye]

Losing housing value is a common belief, but can you determine if it is true? The data often shows that the opposite happens when things get denser. The lot frequently gains in value.

My wife likes to use Zillow to see what things sold for around our area.

Fair point. Upon further reflection, I guess I would be less satisfied with the new situation, so the value declines in my eyes. I would be motivated to sell and move. But perhaps I would profit (or at least not lose) on the transaction.

I suppose it is just managing expectations. When I bought my house the whole area was detached single family houses (more or less, there are apartment blocks scattered around here and there) so that's what I was buying into. If the whole neighborhood was to change to higher density in-fill housing, I would be unhappy (since that is not where I want to live and not what I bought into). But new buyers, who would be fully aware of what they are buying into, would likely have no issue with the situation.

At least I am not blind to my own NIMBY interests (most people are). More housing is needed, if my ox happens to get gored in the process, I'll just have to adapt if/when the time comes.

 

[ygolo]

Different places have different needs. As a state, California is pretty bad:

Newsom's 'California Dream' Faces $26K 'Cost-of-living Penalty,' Homelessness Director Flees High-Cost State After Another Eviction

California's state website highlights what it describes as the "California Dream," defined as "the idea that every person can achieve a better life, regardless of where they start out." But it's becoming increasingly hard for California residents to afford the state's high costs. According to a...

finance.yahoo.com

 

[ygolo]

I've always been suspicious something like this is going on.

We'll see how it shakes out:

 

[ygolo]

Homelessness is a Housing Problem

Gregg Colburn and Clayton Page Aldern (UC Press, early 2022)

homelessnesshousingproblem.com

Seems obvious, but so many people attribute it to something different.

 

[The Cat]

Homelessness is a Housing Problem

Gregg Colburn and Clayton Page Aldern (UC Press, early 2022)

homelessnesshousingproblem.com

Seems obvious, but so many people attribute it to something different.

It's one of those key threads in their mind, that if pulled starts their whole world unraveling.

 

[ygolo]

Homebuyers Are Starting to Revolt Over Steep Prices Across US

The US housing market — long crippled by an inventory drought — is finally starting to see listings rise. But now, in many places, the buyers just aren’t showing up.

www.bloomberg.com

 

[ygolo]

An affordability crisis is making some young Americans give up on ever owning a home

Washington, DC (CNN) — Americans are living through the toughest housing market in a generation and, for some young people, the quintessential dream of owning a home is slipping away.

www.wsiltv.com

 

[ygolo]

Where housing affordability is worst and costs are highest in the U.S.

The gap between what buyers make and what they can afford is near a 10-year high, as experts say the housing market is inaccessible to many.

www.nbcnews.com

 

[ygolo]

Silicon Valley Pain Index highlights wealth inequality

Many Silicon Valley residents feel the gap between those doing pretty well and those doing really well are getting bigger.

www.nbcbayarea.com

 

[ygolo]

Affordability is a large driver in migration in the USA.

For context, here's a finance expert actually walking you through the buy vs. rent decision:

 

[ygolo]

Real-estate crash: Steep property correction coming as investors flee sector

Real estate is teetering at the edge of a correction as conditions weaken amid higher interest rates and souring investor sentiment, Chris Vermeulen said.

www.businessinsider.com

 

[ygolo]

A new study claims that there's actually a surplus of housing:

Believe it or not, there’s a housing surplus—but not for people who can’t afford a home, study finds

McMansions from the real estate bubble mean the housing market has more than enough homes for people. They are just too expensive.

fortune.com

But admits, "the physical condition of the vacant homes isn’t fully known. Some apartments may be sitting empty because a stubborn landlord refuses to lower the rent; others because they serve as a vacation home for an affluent family, while some may be entirely dilapidated and therefore uninhabitable—doing little to solve the housing crisis. "

 

[ygolo]

A market failure, for sure:

Why don’t homebuilders build more homes?

A persistent market failure

www.ft.com