I think in part the controversy is that most people alive have only seen housing prices fall during the recession, and thus assume that only large, catastrophic events can force housing prices down.
From a general commodities perspective though, this is strange because for centuries the price of housing has fallen relative to the time value of money, which is why people can afford to live in insulated, stand alone, structurally sound houses on their own without needing to always buddy up with two or three other families. If anything it’s housing value growth that is unusual.
well, there's a lot going on there, but generally interest rates are inversely related to asset prices. the 30-year mortgage insulates homeowners from that shift, which is why the declines in owner-occupied aren't realized, as opposed to say CRE, where values have come down substantially. But, the real shortage is in places that people want to live--not putting more houses in those places (cities notwithstanding).
I think this gets to a fair point which is that measuring housing according to price is probably not a good method of understanding the housing market, or at least is an incomplete KPI. To understand housing “cost” for average people, we should really be measuring monthly payment on 30 year and/or net annual maintenance and improvement expenses.
Rising interest rates lead to price falls—that is what they do, every economist and most lay people know this. That absolutely does not mean there isn’t a supply glut or that housing is somehow becoming more affordable, because a price equilibrium will be reached at the same monthly cost burden consumers could support as before—which was unaffordable. The overall asset is more affordable, the loan most Americans require to purchase the asset is more unaffordable. There is no effect on supply that would lead to structural affordability, and these shifts in asset prices and financing have little to no effect on renters.
Very interesting data! It seems likely to me that as fear about AI’s impact on the job market mainstreams, first-time home buying will also crater (I rent, have a white collar job, and really can’t imagine underwriting a mortgage)
I think in part the controversy is that most people alive have only seen housing prices fall during the recession, and thus assume that only large, catastrophic events can force housing prices down.
From a general commodities perspective though, this is strange because for centuries the price of housing has fallen relative to the time value of money, which is why people can afford to live in insulated, stand alone, structurally sound houses on their own without needing to always buddy up with two or three other families. If anything it’s housing value growth that is unusual.
well, there's a lot going on there, but generally interest rates are inversely related to asset prices. the 30-year mortgage insulates homeowners from that shift, which is why the declines in owner-occupied aren't realized, as opposed to say CRE, where values have come down substantially. But, the real shortage is in places that people want to live--not putting more houses in those places (cities notwithstanding).
I think this gets to a fair point which is that measuring housing according to price is probably not a good method of understanding the housing market, or at least is an incomplete KPI. To understand housing “cost” for average people, we should really be measuring monthly payment on 30 year and/or net annual maintenance and improvement expenses.
Monthly payment per square ft. of material prices (!)
That would be expensive to measure accurately across regions but we already do things like try to measure “rent/sq ft” for apartments.
Rising interest rates lead to price falls—that is what they do, every economist and most lay people know this. That absolutely does not mean there isn’t a supply glut or that housing is somehow becoming more affordable, because a price equilibrium will be reached at the same monthly cost burden consumers could support as before—which was unaffordable. The overall asset is more affordable, the loan most Americans require to purchase the asset is more unaffordable. There is no effect on supply that would lead to structural affordability, and these shifts in asset prices and financing have little to no effect on renters.
What is this article even trying to do?
Very interesting data! It seems likely to me that as fear about AI’s impact on the job market mainstreams, first-time home buying will also crater (I rent, have a white collar job, and really can’t imagine underwriting a mortgage)