What's going on with the housing market, why does it never stop going up?

[ansible]

I really wish I could own a house, even a small tiny one but the cost of real estate is just absolutely insane. I can't even dream of moving to another state outside of CA either now since it isn't that much better anymore in other states. Will the insane housing market just keep going up and up ever end? It just doesn't seem like it'll stop anytime soon, if ever.

[LonePirate]

1. We have a fixed amount of land on this planet but the number of humans continues increasing.

Thus housing prices will continue to increase.

[unblock]

4. true in the aggregate (although we can build vertically), but all real estate is local.

just ask homeowners in detroit.

[ansible]

5. I honestly thought about moving to Detroit once, but property taxes...

...are what screws you over there, apparently lots of property there owes crazy amounts of back taxes that will really screw you over.

[WHITT]

6. That's What They Said In 2006

then homeowners lost $30 trillion of equity.

[multigraincracker]

9. I bought a house in early 2008 for $142K

A few years earlier it was listed for over $300K. Timed it right. We

[SharonAnn]

52. I sold my house in fall of 2017. It's gone up $250,000. Darn it. But it could've gone down that much

[multigraincracker]

53. The usual problem is if

you make big money on a sale is if you have to replace it. Those higher cost to replace cancel those gains.

[LonePirate]

10. Equity losses may occur over the short term but long term they are always higher in general.

[WHITT]

12. Takes A Very Long Time

to make back $30 trillion, plus where it would have been otherwise. A whole lot of folks are STILL in the hole, a decade and a half later. If it happens again, even partially, the compounding will take decades to recover from.

[FBaggins]

14. Not really

The average home recovered over the next 5-6 years and is now worth about 1/3 more than at that 2006 peak.

Yes, there are still some markets recovering... but there are also some markets that never took a serious dive.

[WHITT]

25. Averages Are Meaningless

If you and Bill Gates are in a room, the average net worth of everyone in the room is $65 billion, which obviously doesn't accurately reflect either one of you.

Furthermore, those stats are warped by the fact that the $850k and up segment of the market held-up better than the below $850k segment, and recovered better.

[FBaggins]

31. The data that I was using was actually the median price

Which removes your spin about 850k homes.

The FHFA's home price index shows a full recovery in 99 of the largest 100 markets around the country (with Bakersfield, CA lagging very slightly). The top ten markets are roughly double their previous peak. Over half of those markets fit my earlier description of being 1/3 over their previous peak.

The recovery index that I look at most frequently is just for homes purchased with a conforming mortgage - so it wouldn't include much of anything in that $850k+ range.

[WHITT]

38. Nope

1) Moody's states the 'FHFA's Home Price Index' is:

a weighted repeat sales index, meaning that it measures average price changes in repeat sales or refinancing's on single-family properties.

They also note that:

One of its drawbacks is that it does not fully differentiate between pure house price appreciation and price changes due to depreciation or home improvement.

https://www.economy.com/united-states/house-price-index


2) The 'FHFA's home price index' is not presented in inflation-adjusted dollars.

[FBaggins]

39. I gave three different measures. You're treating them as the same claim

The graph I was looking at was for median home values. The FHFA index shows complete recovery in 99/100 largest markets. And the HPI is based on conforming mortgage purchases.

It simply isn't true that huge numbers of people are "still in the hole". The ones who are - are mostly in limited markets and purchased their homes at the peak and either had interest-only mortgages or for some other reason haven't paid down their mortgage balance over 15 years. They are the exception - not the rule.

Three years ago, those who owed more on their mortgages than their home was worth had fallen to 4.5 million... and the last three years have seen strong growth.

[WHITT]

42. OK

Believe whatever you like.

[fescuerescue]

15. That's true

But all those losses have been made up.

I sold my house just a few months before the crash. It took about 12 before the lady who bought got back to even.

She still owns that house and now it's worth FAR more than it was in 2006.

[MineralMan]

22. Yes. We bought a home in Minnesota in 2004 for $175K.

It dropped in value. Now, we're selling it, and even without making major renovations, we'll get $220K for it, easy. Oddly, the townhome we just bought is larger and sold for $240K. Not much of a difference, but we won't have a mortgage any longer. We had to refi the other house a few years ago for about half its value.

[WHITT]

27. No, They Haven't

Plus, your example is not representative of the aggregate, not to mention doesn't factor in a decade and a half of inflation-adjusted valuation.

[fescuerescue]

45. There are exceptions

Especially in depressed areas. Depressed areas remain depressed. But they weren't doing so hot in 2006 either!

But the market as a whole as recovered. Even accounting for inflation.

Right now real estate is hotter than it EVER has been.

I do fear there will be another bubble pop.

[WhiteTara]

20. for the first timem, they are giving value

for the land acreage we have. In the past, they have appraised only the house and something like a half acre. When we decide to sell for what ever reason, our little piece of paradise will be enough to pay for our lives until we die.

[msongs]

2. there will be a decline and/or crash eventually. florida condos may be cheaper soon nt

[Strelnikov_]

17. "If something cannot go on forever, it will stop." n/t

[unblock]

3. personally i only wish it were so here in connecticut. california is very different

it's really mass migration within the country. the long flow of people out of the northeast and midwest into the south and west. it really started with the invention of air conditioning and never really stopped.

a few places, like florida, texas, california, and nevada are just bonkers.

personally, i bought my house in 2007 and am only just above water thanks to the recent covid-related boom as people are leaving nyc to avoid crowds and especially now that working from home is more acceptable.


there are some indications that silicon valley may be reaching a peak of sorts as now even crazy tech firm money doesn't get you good housing. that said, there's no shortage of other people who will drool over the big dollar signs without thinking of the cost of living....

[Binkie The Clown]

7. Wait for prices to drop like a rock once climate change really kicks in. nt

[Towlie]

24. You mean prices in places that climate change has rendered unliveable?

Last edited Tue Jul 13, 2021, 10:47 AM - Edit history (1)

 
?

Obviously price will drop as value drops.

[Binkie The Clown]

41. Coastal areas, deserts, places too close to the equator. etc... nt

[Paper Roses]

8. I wish I knew what to do. The market is crazy.

I live in a small Mass. town. There is no more land to build. Buyers of houses are wrecking the houses they buy and build bigger houses. I never will understand that.

I've lived in my house for over 50 years and would love to move to an apartment. No more ownership. Have no idea what my old house would bring on the market but rents on any apartments are over $3000.00 a month. Maybe including utilities or parking. I need first floor, of course, that means more money. Have a pet? No chance.

I have done the math and since I live alone and on SS, cannot afford to stay here but cannot find an affordable place to live that is fit to live in. Even the dirty, dated dumps cost a fortune.
Never would I believe this situation if I wasn't living within it. So discouraging.

There are many whose situation is worse than mine and I am very sympathetic toward them. I think it is hopeless for all of us who have limited funds.

[Mosby]

49. Check zillow and redfin.

Your house is probably worth a lot more than you think.

[jmbar2]

11. A lot of older housing stock needs to be replaced

In Oregon, the weather is rough on older houses. Modest houses built in the 1940s and 50s have limited lifespans. Old manufactured homes here are selling in the $200-300s, on rented lots.

At some point, there is a decreasing return on older houses due to decrepitude. The replacements are totally unaffordable, and probably less well-built. Not sure the solution, but it's a bad situation.

I wouldn't buy anything "affordable" here because of the continuous repair costs of trying to keep it from falling down.

[alwaysinasnit]

13. Corporations buying up residential real estate.

https://www.wsj.com/articles/investors-are-buying-more-of-the-u-s-housing-market-than-ever-before-11561023120

The share of investor purchases of U.S. homes have climbed to an all-time high, a sign that rising home prices have done little to dampen demand for flipping homes or turning them into single-family rentals.

Big private-equity firms, real-estate speculators and others that buy properties comprised more than 11% of U.S. home purchasers in 2018, according to data released on Thursday by CoreLogic Inc.

The investor purchases are the highest on record and nearly twice the levels before the 2008 housing crash. The investor interest poses a challenge for millennials and other first-time buyers who are increasingly looking to buy starter homes and are forced to compete with deep-pocketed cash buyers.

snip...

[gypsy11]

21. Investors bought the house next to me.

Paid cash for it. Turned it into a full time Airbnb hotel. Effectually removing it as any kind long term housing stock for a family to live in. Not to mention, they don’t really upkeep the property. They don’t live here, it’s a cash cow to them. So they do the bare minimum.

My city has a an affordable housing shortage and this kind of crap exasperates that in a HUGE way. The “host” next door to me has aims to make herself a little mini hotel empire out of buying up property in single family residential zoned areas and listing them on short term rental sites like Airbnb. I had no idea this type of thing was a real “thing” until this happened next door.

To make a long story short, I did some research and was shocked to find out that in a small section of the city I live in, there are 100 short term rentals listed on Airbnb. For perspective, that covers an area of about 5 square miles.

I’ve filed zoning complaints (yes plural) with the city, contacted state legislature, the mayor, etc as this type of “business” isn’t allowed in single family zoned residential areas, but it falls on def ears. They won’t enforce the zoning laws because they want the tourist money.

[alwaysinasnit]

29. Thanks for sharing. I live north of San Francisco and the City did pass a law specifically aimed at

the short-term rental market. SF is rent-controlled so the Airbnb business model conflicted with SF's tenant ordinance. We have been inundated with investor, all-cash buyers which have driven the already hot real estate market in the SF Bay Area into astronomical territory.

https://www.mashvisor.com/blog/airbnb-san-francisco-laws-2018/

[gypsy11]

30. I've read that San Francisco passed a law

Good! They need to regulate the hell out of this type of investing. It makes people homeless. It’s a shitty business model built on destroying neighborhoods and it drives up housing costs for everyone.

I’m in Connecticut, pretty close to NYC. NYC also passed a law. So many of the people who were doing short term rentals in NYC got shut down, or they decided it was too risky. Either way, they came here to Connecticut to set up shop. The state collects taxes on STRs but otherwise have pretty much left it unregulated at a state level, and local cities and towns won’t enforce existing zoning laws because they want the tourist money. The investors that bought next door to me are originally from Brooklyn. They had “investment” properties in both Brooklyn and Manhattan.

[alwaysinasnit]

32. Maybe we should institute something like what Toronto did.

https://www.theguardian.com/world/2017/apr/20/toronto-foreign-tax-homes-housing-market-canada

Foreigners who buy homes in Toronto and its surrounding area now face an additional 15% tax – echoing a recent measure adopted in Vancouver – as part of a slew of measures aimed at tempering a heated housing market that ranks as one of Canada’s most expensive.

The tax – part of proposed legislation unveiled on Thursday by the Ontario provincial government – will be levied on houses purchased in the Golden Horseshoe, an area that stretches from the Niagara region and the Greater Toronto Area to Peterborough.

It will apply to all residential purchases made by those who are not citizens or permanent residents of Canada, as well as foreign corporations. Once the legislation passes, the tax would be applied retroactively to purchases made as of 21 April.

“When young people can’t afford their own apartment or can’t imagine ever owning their own home, we know we have a problem,” said Kathleen Wynne, the Ontario premier. “And when the rising cost of housing is making more and more people insecure about their future, and about their quality of life in Ontario, we know we have to act.”

snip...

[Midnight Writer]

16. Home improvement outfits are also swamped.

I was looking to buy a new home, but concluded I would be better off to stay where I am and have my house updated and remodeled.

I called around and I can't even get anyone to show up to give me an estimate.

A roofing company did put me on their "waiting list", but they told me they are booked solid for at least six months.

[meadowlander]

47. I'm trying to get my bathroom renovated

and haven't been able to get anyone to call me back even for a quote for months.

[marie999]

48. Our son is a building contractor with only 2 employees. He wants to keep it small.

They have to work 10 hours a day 6 days a week to keep up with the work. He subcontracts work like electrical and plumbing. He has always had a good business but starting about 2 years ago it just got crazy.

[MineralMan]

18. There are many places where home prices are far lower than

in California. Many. My wife and I just bought a 2-bedroom, 2-bath townhome with 1440 sq. ft. of living space in a western suburb of Minneapolis for $240,000. You can find places at lower prices, but they will need work.

Unless you are tied to California for other reasons, look outside of that state on real estate sites. You'll see that not everywhere is insane.

[GoodRaisin]

19. I'm worried about real estate taxes from all this.

My home value has soared nearly $64K during this inflated market rise. I wasn't planning on moving. If I sell now I will just have to pay an inflated value for another house. I'm hoping our city will lower the tax rates to compensate for the inflated rise that has taken place.

I think this is a bubble that is going to have to burst soon. It's killing housing sales where I live. Who would want to buy in this market with the potential their investment will pop with the bubble?

[Vinca]

23. The prices will eventually come down. It's happened before and it will happen again. During the

last bubble - right before the GWB economy blew up - people were paying top dollar and then some as they are today. Then the party ended and when they went to sell their homes they lost lots of money. Some wanted to refinance, but couldn't because there was minus equity in their homes. Then the foreclosures began. This bubble seems worse than the one in 2007-2008, but it will blow up, too.

[CrackityJones75]

26. 2008 says wait a second....

[FBaggins]

40. The challenge is that 2006 says the same thing.

And then was followed by 2007.

Things seem overheated and due for a correction... but that doesn't mean that they can't get even more overheated first (or that it might not take years).

We sold our home in 2003 for about twice what we paid for it just three years earlier... only to watch that family sell it two or three years after that for an additional multiple. Then came the crash. Now 13ish years later it's about 10% above that peak (according to Zillow anyway)

[CrackityJones75]

50. I think we are due for another bubble burst

I worked in secondary mortgage market for 22 years (on the IT side) and I think we are ripe for another bubble burst.

[helpisontheway]

28. Homeowner here..Our house has been underwater since the 2008

crash. It increased a bit over the years. Our home is now above what we paid for it in 2008. So we are happy to finally be paying a mortgage for a house that is more than our purchase price.

[Tracer]

33. Some areas seem to have affordable homes.

I enjoy the TV show "Home Town" (based in Laurel Mississippi). They remodel old houses and do a fine job. I can hardly believe how inexpensive those homes are. Yes they need a lot of fixing up, but even after the remodeling, the money spent is sooo far below anything you could find elsewhere.
They bought on tiny house and fixed it up for a total of $80,000. And it had land and a view!

[brooklynite]

34. Part of the problem is people who say they're willing to move...

...but really only want to move to an area other people want to move to as well. Increased demand means higher prices.

[brooklynite]

35. Right now there are houses in Laurel for $48k and $69K

[brooklynite]

36. Where do you want to live?

I quick check of ZILLOW found sub $100K homes in a number of communities.

[womanofthehills]

37. I live in a rural area of NM where many (mostly women) in my neighborhood

Have built their own homes - straw bale, earth ships, rammed earth. I had a house in Albuquerque but always wanted to live in the country. Lucky for me, my longtime significant other was a contractor in his old life plus he worked in the solar industry. He told me he would only help if I did an off grid frame house - so I have one of the few frame houses out here. So - he helped me build a country wood frame solar home over 5 yrs. One yr, I had the cement poured, next year, he and I framed it - then someone gave him free trusses so we made an upstairs etc. Just working a few weekends a month over the yrs I now have a nice country house. When it was getting close to done, I sold my Albuquerque house to finish off my country house and paid some friends to add a room, custom stairs, tile floors, put pine on the walls and make 2 upstairs decks. There are quite a few communities in NM like this. Many of my neighbors temporarily lived in trailers on their land while building. Here is an old article about my friend & neighbor Kathy’s earth ship. https://www.abqjournal.com/homes/1894650homes01-18-09.htm.

Suddenly our land and houses in this area are also rising in value and new people are moving in after yrs of us being a small community. We are all on 40 acre lots that cannot be divided - conservation district.

[Demovictory9]

43. Remote workers.can now.live anywhere

[Sympthsical]

44. I know why mine is

Tech and remote workers are scattering out of the city. They keep saying there's no available land. I mean, has anyone been to North Bay? There's plenty. Although, where I live is doing a lot of building the past few years.

Covid is actually driving out of city prices up.

If you need a laugh about the situation:

[meadowlander]

46. Real estate is the vehicle of choice for money launderers.

I suspect half the national wealth of Russia and China is tied up in the real estate market of various Western countries.

[MerryBlooms]

51. We're near 100% occupancy in many areas in Oregon, that's the reason for our outrageous prices.