Sounds like bullshit to me.
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If everyone knows that home prices will rise, they will rise right now instead of later. After all, why sell a house at $300k if “everyone knows” its going to be worth $350k in a few months?
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Mortgage rates continue to increase. We’re at 7.23% mortgages, the highest in multiple decades, and this high level of mortgages leads to a very very much higher rate in monthly payments. That is to say: even without houses going up in prices, people are already paying a $thousand+ extra dollars per month compared to a few years ago when 3% mortgages were the norm.
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The cited reason, dearth of inventory of homes for sale. People aren’t selling because they can’t afford to move (!!!). That’s the problem. Naturally, the people moving right now are just the rich people who can afford to move, and therefore they’re willing to spend a bit more $$ to buy lower-quality homes (and simultaneously, pay a higher % interest rate or even entirely-cash to avoid the monthly bills).
IMO, its more likely that we run out of buyers (people who can afford such high valued, overpriced homes) rather than we run out of sellers.
Not sure how it is in the states, but keeping an eye on this side of the pond, and yeah interest rates are through the litteral roof and i look at house prices in an area, they are either going down from time to time or permanently staying on the market. Some get sold but very few.
In my Canadian market, they are building lots of homes. Many are big, brand new, and listed for 1.2+. Entire streets are just sitting with rows of for sale signs out front. The reason? Only the top 2-3% of income earners qualify for mortgages on these.
Until they drop prices, or interest rates, they won’t going anywhere
But all of those things contribute to inflation of home values. Not sure if I’m just agreeing with your point or not, but a reduction in buyers doesn’t mean nobody is trying to buy right now, but if conditions are such that sellers aren’t incentivized to make moves, those who are can charge a premium when they do.
It’s bullshit, not because it’s factually incorrect, but because it’s a completely made-up scarcity given how much vacant property exists in the US and worldwide. In the US, we’ve regulated property development to protect existing homeowners and limit high occupancy housing to “less desirable” neighborhoods. Until those areas become desirable - at which point we evict all the low income families, turn entire floors of apartments into single condos, and charge millions of dollars for them.
Further, evidence that the inflation rates are indeed slowing as the Fed makes borrowing more expensive signals real estate investors to just weather the storm, because the return of rock bottom rates is, in the scheme of things, just around the corner.
I don’t think we’ll ever see coastal real estate markets truly bottom out or even meaningfully correct without a complete economic collapse of the US, which would really be a complete global economic collapse.
But all of those things contribute to inflation of home values.
#1 is bullshit, because prices change near instantly upon expectations. Any information that’s publicly known immediately comes up to debate / discussion. That is, if any “agreement” has been made on higher prices, its already factored into the price.
#2: Higher Mortgages have always caused home values to fall in the past. In practice, the US consumer is monthly $$ bound: they buy what they can afford. US Buyers don’t think “$500,000 house”. Everyone converts that into $2700/month (current 7.3% rates), or $1700/month (3% rates).
A $1700/month house at 7.3% is a $250,000 house, literally half the cost of a $500k house at 3%. That means everyone who “can afford a $1700 house” has now been priced into $250k in today’s market, instead of $500k homes like 3 or 4 years ago.
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+1 for the “zoning is the cause of essentially all problems” people.
Increasing supply would massively help all of this mess. But then the neighborhood character might change!
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Agreed
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I’d argue that people can only pay what they can pay. They won’t pay extra, they’ll buy smaller homes with smaller valuations to keep their payments reasonable. If you can’t afford to put up another 1k/month then you won’t.
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Again, people can afford to move just not for their established QoL. If you own a 4bd house in a good school district are you going to downgrade to a 3bdrm in an ok district? Maybe? Probably not unless the money is good.
Also rich people aren’t buying homes with mortgages. They are just buying them with cash… Or putting so much down that their mortgage is reasonable.
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Values WILL increase! Says people who profit from increased values.
