Ultimately, there is no solution in which the core groups will all be appeased:
* If prices keep going up, then home ownership remains a luxury of the wealthy and an exploitation of the poor. Asset holders will be thrilled with returns, but the majority struggling to get or stay on the proverbial property ladder will grow increasingly angry at sky-high rents and prices with stagnant wages
* On the other hand, if prices come down then the broader economic engine will grow ornery and stagnate. Large home builders will cut back on builds, purchases, and labor, in an effort to push margins back up. Existing asset owners will be angry at losing (illusory/on-paper-only) money, and cut back on spending, purchases, or renovations until they see their valuations rise again. Only a small subset of prepared buyers will be able to take advantage of these lower prices before investors snatch most of them up and raise prices again anyway.
Housing is not a standalone crisis, but a symptom of a larger dysfunctional economic engine that simply does not work for the majority. Higher prices on core necessities should be met with a mixture of rising wages and price controls to reflect broader economic growth or support, but neither happens because of monied interests: if wages rise, companies will outsource and the problem perpetuates, while price controls prevent asset holders from maximizing their return on investment, a sin equivalent to murder in the eyes of the propertied class.
And so we have a group who benefits from nothing changing (asset holders, mega-builders, financiers), and a group that benefits from an all new engine design built for modern problems (the working classes, smaller employers, and - increasingly - insurance companies), fighting for the next century of housing policy.
I’m hoping the latter wins, despite the pain it would cause the former. Housing is a necessity first, and an asset class last.
>Existing asset owners will be angry at losing (illusory/on-paper-only) money
I wouldn't be. I bought my house to live in it, not as a financial vehicle. I would be thrilled if prices came down and others in my generation could afford a house because I had the dumb luck of purchasing one in 2018 before the shit hit the fan. I couldn't even afford my own house now.
You and I are in a growing minority on this, I find. When I started my homebuying journey four years ago, I did so expecting to eat an on-paper devaluation of up to 50% during my lifetime - and was fine with that, because I wanted stability, not profit.
We bought a house 17 years ago. We could barely afford it and struggled to keep it for years.
The house more than doubled in value in that time. Great right?
Well the kids grew up, and we sold it and bought a smaller place.
Just the tax (GST on a new build) and the realtors commission amounted to two years worth of my gross pay.
We sold our old place that had a $400,000 balance on the mortgage for $1.7 million, bought the new place for $1.2 million and now have a 175,000 mortgage.
Just the costs of the transaction are greater than what my parents paid for the last home they bought.
These sky high prices are not good for the middle class. I would be much better off if my mortgage payments for all those years were small enough to allow for retirement saving. I'm basically fucked if I want to live indoors in my town after I can't work anymore.
Largely the same boat here, I refinanced in early 2020 near the lowest interest rates and eliminating the mortgage insurance payment. Of course since then, property taxes have gone up significantly. All said, I'm living here at a cost that I can sustain. I'd have trouble paying close to 2x the amount for a new loan of even the same total.
Way too many people got sold on the idea you could just flip a property every other year and move on/up... that kind of growth/inflation has never been sustainable in any industry ever for more than a couple years.
The closest, recent example I can think of is the cost of junk food. I no longer have it much at all, but even for calorie free soda options, the pricing seems to have more than doubled the past few years. More so than most food in general. They've maximized their profit margins and I don't think they'll be able to sustain it. People are cutting back on spending as a result.
I think the amount of mortgage defaults are as much about credit use in general as it is about the housing market. I've been unemployed 11 of the past 24 months, and currently working for about 60% of what I used to make. During that unpaid time, I built up a lot of credit card debt. Right now, it's not my mortgage that's killing me, it's the credit cart interest combined with a job that doesn't quite cover it all. I was working two jobs for a while and just couldn't keep it up. A LOT of people are in a similar boat.
Right now, I could sell my house, and just about start and 0 debt all over... but then I'm paying 2x as much for rent and not getting ahead without moving... and even with remote work, places try to pay "market" for where you live. The options are kind of crappy.
I think the same. I have a house, but the mortgage is not massive. If I can just live in it with no appreciation, that's fine with me. I even want to encourage building in the area, since we have a train station that seems underutilized.
There's a more selfish reason for wanting prices to not rise. I have kids. In a few years, they will be adults. If prices keep rising, how will they launch their own lives? I'll get asked to buy another house again.
On the surface, I feel the same as you but as someone that bought a house three years ago at 5.5% interest and has only lost money on the property due to significant home repairs it really doesn’t feel great that my capital is just evaporating.
I spent $50,000 replacing the pipes and removing asbestos 1 year after I bought the house. While I don’t expect the down payment and regular mortgage payments to grow and value, it’s very painful when there’s an unexpected repair that requires additional capital that isn’t recaptured in the home value growth.
It’s like driving a new car off the dealership parking lot and immediately getting your doors dinged. I’d feel a lot less about it if the car went up in value…
But even if your house was worth more in value, you would still have to make those repairs and it would still come out of pocket. It only matters if you bought your house to sell it at a profit. Of course, if you hadn't bought it, you'd be paying someone else's mortgage.
> On the other hand, if prices come down then the broader economic engine will grow ornery and stagnate
A rather small part of the economy relies on high long term returns on housing. You can build homes and sell them for rather small margins and that's good business. Many types of businesses happily run on profit margins that are single digit percentages.
> Only a small subset of prepared buyers will be able to take advantage of these lower prices before investors snatch most of them up and raise prices again anyway.
In 2024 87% of homes in the US were bought by people who intended to live in them or use them as a second home. If you only want to count primary homes the number is still close to 80%.
> but a symptom of a larger dysfunctional economic engine that simply does not work for the majority.
Factually the majority of US families live in homes they own, about [65% of US families own their homes])https://fred.stlouisfed.org/series/RSAHORUSQ156S) that is not only a majority but nearly 2/3.
You’re cherry-picking stats without offering a counter-argument, as if they alone dismantle the whole of the argument.
> A rather small part of the economy relies on high long term returns on housing.
Directly, yes, but don’t forget the wider array of businesses dependent upon this minority to survive: hardware stores, contractors, many tradespersons, mortgage companies, real estate agents, brokers, closers, lawyers, and more, all of whom get paid/earn less if housing prices come down in the short term (until theoretical volume makes up for the drop of individual transaction values).
It’s a wider web that shores up a market valued at ~$50tn. That’s hardly a minority.
> In 2024 87% of homes in the US were bought by people who intended to live in them or use them as a second home. If you only want to count primary homes the number is still close to 80%.
Taking those numbers at face value means a full 13% to 20% aren’t purchasing a home to live in them, which is problematic in a housing crisis. The fact you included second homes paints an even more distressing picture, because to have a second home means you not only have a primary home, but also the excess capital for a secondary domicile in the middle of a housing crisis.
Furthermore, those numbers - if true - are almost certainly national figures. Local ones can vary substantially, and the statistics show that affordable housing is predominantly being bought by investors for rent, not homebuyers to build equity.
> Factually the majority of US families live in homes they own, about [65% of US families own their homes])
That’s a grossly misleading statistic on its face, because it ignores demographic data to make the case that somehow a full third of the country simply doesn’t want to own a home. It does so by hiding the average age of homebuyers (which only goes up, indicating only those on the property ladder already are buying homes in large enough numbers to drive the average upward), the types of homes being bought (what about mobile homes/trailers? Or people who live entirely on the road in RVs? Why is it “ownership” if they’re still paying a mortgage to someone? Etc, etc), and regional or local policies that affect these demographics. FRED data is awesome, don’t get me wrong, but that figure is like pulling the U-1 for unemployment and saying everything is rosy.
Don’t come in here to blindly spout numbers without a competing or complimenting narrative of your own.
The counter argument is that your assessment is wrong and the real need here is to simply build more.
> Directly, yes, but don’t forget the wider array of businesses dependent upon this minority to survive: hardware stores, contractors, many tradespersons, mortgage companies, real estate agents, brokers, closers, lawyers, and more, all of whom get paid/earn less if housing prices come down in the short term (until theoretical volume makes up for the drop of individual transaction values).
These parties mainly reply on home construction, renovation, or just home sales. None of those things require housing as an investment to have returns near equities. Home builders will build homes even at lower levels of price growth, as they did in earlier decades. In fact we'd see more construction but for regulation. Really only lenders and agents/brokers are taking a big hit if home prices drop. Builders would probably net out just fine because home prices and land value are so closely linked.
> It’s a wider web that shores up a market valued at ~$50tn. That’s hardly a minority.
You're mistakenly quoting the total asset value of all US housing, the US has a GDP of $30tn. Home building accounted for ~$0.8tn last year. Home building, sales, and associated industries account for about 15% of GDP. Higher supply and therefor lower prices could easily net out to a similar amount while freeing up more money for other uses by consumers. The economy isn't zero-sum and high housing costs are drags on productivity in other areas. This is pretty well established.
> Taking those numbers at face value means a full 13% to 20% aren’t purchasing a home to live in them, which is problematic in a housing crisis.
You should take those numbers at face value because they come from FRED, and you can verify them. Most of the 13% who are investors are buy a single building to then rent out. Some people prefer to rent rather than buy, and some prefer to rent a house rather than an apartment. The solution to a housing crisis remains more supply.
> Local ones can vary substantially,
No one argued otherwise, but it's useful that have a macro figure as a benchmark. It also may surprise you to learn the Texas has about the 5th highest share of institutional purchasers[1] while seeing prices fall in Austin, Dallas, San Antonio, and Houston all at once. So the data doesn't align with your expectations.
> it ignores demographic data to make the case that somehow a full third of the country simply doesn’t want to own a home.
I said no such thing. It's just roughly the norm for many years[2] and has never fallen below 62% or gone above 69%[3] for as long as stats have been kept. It's a useful stat for framing the discussion. IMHO we should be more concerned about the rent burden for the other ~30% and should build more to alleviate that problem.
>Don’t come in here to blindly spout numbers without a competing or complimenting narrative of your own.
Here's the competing narrative, you're spouting populist crap about a subject where you had literally 0 grasp of the actual fact, so I gave you some of them as a start.
They’re just blindly quoting what they’ve heard instead of actually studying the data and environment to form a conclusion.
Anyone under fifty in the US who has tried to buy a home since 2019 knows first-hand what the situation is right now, at least in their area. Those of us who have been “in the game” longer see these same patterns repeating elsewhere, suggesting the issue isn’t local regulations so much as a fundamentally systemic problem with how housing is treated in America.
It accounts for about 15% of GDP, and like other sectors you can sell more units for fewer dollars and still make the same amount of money while providing more value to your consumer. High housing costs drag on the economy.
Price controls are a terrible policy. The nice things about rising housing prices is that they can be addressed in a way that also creates a nice tax base for local communities: Raise property taxes on the ground-rent portion of real estate values. For those living in California, this means you need to put an initiative on the ballot to get rid of the infamous Prop 13.
Flooding the market with new construction (at any price level, though ideally at all sizes and quality of housing) will do more to sustainably lower prices while leaving a functioning market.
a dreary part of this conversation is, nobody wants to play the game, what does random HN user sokoloff mean by the words "functioning market," "sustainably," "flooding", "ideally", "quality", and even "scarcity"? I don't know what you are saying, because you are leaning so deeply on an internal glossary known only to you, made worse by hijacking real words that everyone can look up in a dictionary.
Funny that GP whas one of the comments that made immediate intuitive sense to me. By the simple principle of demand / supply ~ price, price controls (in a time of high prices, which is because of scarcity), should inhibit creation of more supply. Leaving prices to their natural forces should allow creation of more supply, which, regardless of the price level, should relax the market and lead to lower prices.
While price controls might keep the supply affordable to a larger share of the population, that doesn't help the fact that there isn't enough supply, so instead of money, other mechanisms influence who gets to buy the goods. This could be: Who is most willing to invest an unhealthy amount of time and energy, who is eligible to maybe acquire state funding, or simply who is the lucky one. Is any of this better than letting money decide? I tend to think no and think it would be better to have a functioning market with reasonable prices.
I'm using those six quoted terms to have a meaning the same as what Google returns as the first definition for five and the second for one (which I think is obvious to all readers from context):
"functioning market" - A functioning market, in economic terms, is a system where buyers and sellers can freely interact to exchange goods and services, with prices determined by the forces of supply and demand, and where information is readily available. A well-functioning market is characterized by competition, efficient resource allocation, and the absence of significant barriers to entry and exit.
"sustainably" - 1. in a way that can be maintained at a certain rate or level.
"flooding" - 2. arrive in overwhelming amounts or quantities. I posit that no one was confused and thought I meant "1. the covering or submerging of normally dry land with a large amount of water."
"ideally" - 1. preferably; in an ideal world.
"quality" - 1. the standard of something as measured against other things of a similar kind; the degree of excellence of something.
"scarcity" - 1. the state of being scarce or in short supply; shortage.
>Housing is not a standalone crisis, but a symptom of a larger dysfunctional economic engine that simply does not work for the majority.
Great point. Healthcare, debt, and housing affordability are interlinked issues that stem from one root: a financialized economy that benefits a tiny minority of rent-seekers at the expense of productive activity and the public at large.
Three potential outcomes of this trajectory:
1. Permanent extreme inequality enforced by a "post-liberal" surveillance state.
2. A moderating force, an FDR-like reformer, who represses capital for its own good.
3. Political instability and violence a la Luigi Mangione or worse.
Here in Czechia housing costs are absolutely terrible, which is at least partly caused by an insane, Byzantine permitting process under which a basic block of flats in Prague can spend a decade in bureaucratic limbo before the construction can begin.
Yet this is not really a problem of financialized economy, the roots are elsewhere:
a. lots of NIMBYs, mostly curmudgeonly old people who want to block any change around them and, being in pension, have a lot of time to throw at thwarting anything. My personal experience is that they aren't really looking for money or profit, they just Simply Hate Anything New, Period,
b. the ease of weaponizing environmental and planning regulations against any building project, by the means of lawsuits,
c. local mayors have de facto (though not de iure) influence on the permitting process and they don't want to lose this tool of power over their constituents. It is an efficient way how to bash your enemies and reward your friends.
From what I know about the US, at least a. and b. apply in many places, too.
Normally people deal with this naturally by having fewer children when supplies for basic goods like this are constrained so the population and prices would servo around an equilibrium.
High rates of migration upset this equilibrium. In the past it would normally cause wars and genocide because of that. I'm not convinced the current world is any different but a number of other people seem to be.
It’s not that simple, although taxation is a lever I see more governments willing to tug cautiously on in this crisis. I do think multipliers on low-density housing that’s not owner-occupied year-round is an excellent starting point, though, one that would really only harm a smaller subset of landlords while loosening supply in the short-term (1-5yrs).
Still, tax policy alone won’t solve such a complex issue. We need deregulation in matters of zoning, and increased regulation in terms of rent-setting (both amounts and lengths). We also need higher-density housing near transit stops, regulations on sales of existing homes with fossil fuel heat (gas and oil) that promote their proactive replacement prior to sale, stripping HOAs of authority to police familial genetics or relationships in household makeup (to promote more shared housing in existing developments), and so much more.
It’s a complex crisis that requires a complex solution.
Still doesn't solve the problem of having enough houses.
Rented houses are still housing people. The problem isn't renting, the problem isn't loans, the problem is there's not enough houses where people want them.
That’s not entirely true, for a number of reasons.
* Low-density housing that’s rented instead of sold drives up rent for the tenant and property values for neighbors, resulting in increased costs for everyone but the landlord (who offsets costs by raising rent)
* Investors are predominantly buying affordable homes, not luxury ones. Cheaper prices (even when paying cash to outbuy other bidders) means higher margins.
* Construction has fundamentally changed as a result. No longer are structures being built for sustainable operations, but simply to exploit valuation growth before being shoved off to the next buyer. The goal from everyone involved is maximum margin/profit, not quality and sustainable shelter.
* There’s a glut of “luxury” apartments in higher-density units that sit vacant as a result of gaming the local marketplace for higher rent instead of maximum occupancy.
We have enough houses at present. Really, we do! The problem is that because we treat them as assets and not shelter, the goal is maximum revenue, profit, and/or valuation instead of maximum utilization.
> Low-density housing that’s rented instead of sold drives up rent for the tenant and property values for neighbors, resulting in increased costs for everyone but the landlord (who offsets costs by raising rent)
It's not the renting that drives up prices, it's the lack of supply in an area. The renting was always possible, it's a symptom that shows that people want access to the neighborhood but can't afford to purchase.
> * Investors are predominantly buying affordable homes, not luxury ones. Cheaper prices (even when paying cash to outbuy other bidders) means higher margins.
I have not seen evidence of investors buying affordable homes for renting them out. Cheaper prices don't mean higher margins, unless the sale price is higher.
> * Construction has fundamentally changed as a result. No longer are structures being built for sustainable operations, but simply to exploit valuation growth before being shoved off to the next buyer. The goal from everyone involved is maximum margin/profit, not quality and sustainable shelter.
This is not a change, construction was never for sustainable operations, it was always about profit. There's not some magical time in the past when builders and developers didn't care first and foremost about profit.
> * There’s a glut of “luxury” apartments in higher-density units that sit vacant as a result of gaming the local marketplace for higher rent instead of maximum occupancy.
I'm not sure where that's true, except in the places where prices are falling like in Austin. I know that in my severely undersupplied town, the "luxury" apartments that are only slightly higher in price than in other areas are filling up faster than was expected when the financial model was put forward at the time of designing the building. And this was a model built before interest rates got jacked up by the fed! Yet local people complain that they are vacant and not getting rented out and are vacant when they are not in fact vacant.
I see evidence of false complaints of vacancy all around the country too. One group in LA that spends a lot of their time trying to stop apartments had to retract their vacancy report:
Nobody has ever tried to maximize occupancy rather than profit. Maximizing occupancy is not a good metric to even optimize, we need vacancies so that there's room for people to move around. An area with less than 5% vacancy is severely undersupplied and severely restricts where people can live.
The housing crisis is all about regulatory restraints that small-holders of land use to create the crisis. It's artificial crisis, not from landlords maintaining 5% vacancy rather than 3% vacancy, but from landowners, especially homeowners stopping their local governments from legalizing housing.
* If prices keep going up, then home ownership remains a luxury of the wealthy and an exploitation of the poor. Asset holders will be thrilled with returns, but the majority struggling to get or stay on the proverbial property ladder will grow increasingly angry at sky-high rents and prices with stagnant wages
* On the other hand, if prices come down then the broader economic engine will grow ornery and stagnate. Large home builders will cut back on builds, purchases, and labor, in an effort to push margins back up. Existing asset owners will be angry at losing (illusory/on-paper-only) money, and cut back on spending, purchases, or renovations until they see their valuations rise again. Only a small subset of prepared buyers will be able to take advantage of these lower prices before investors snatch most of them up and raise prices again anyway.
Housing is not a standalone crisis, but a symptom of a larger dysfunctional economic engine that simply does not work for the majority. Higher prices on core necessities should be met with a mixture of rising wages and price controls to reflect broader economic growth or support, but neither happens because of monied interests: if wages rise, companies will outsource and the problem perpetuates, while price controls prevent asset holders from maximizing their return on investment, a sin equivalent to murder in the eyes of the propertied class.
And so we have a group who benefits from nothing changing (asset holders, mega-builders, financiers), and a group that benefits from an all new engine design built for modern problems (the working classes, smaller employers, and - increasingly - insurance companies), fighting for the next century of housing policy.
I’m hoping the latter wins, despite the pain it would cause the former. Housing is a necessity first, and an asset class last.