General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsAll those years of economics courses and I am still dumbfounded...
Maybe I should have gone for the PhD.
Anyway, here we are dumping trillions into the economy to help small businesses and people rubbing their last dimes together. I see the poverty and the lines at food banks.
But, somehow there's a whole bunch of people bidding housing prices sky high. Just saw a listing where in one day there were a dozen or so cash bids and went to contract as soon as the lawyers could get off their asses. There's a huge building boom around here, and the builders are so busy they won't answer the phone. Start thinking of a half million to get a bungalow.
This does not add up.
Captain Zero
(6,802 posts)New flooring, paint, 10k in updates and repairs and all of a sudden a 30K house is listed for 210k.
Moostache
(9,895 posts)The housing market is currently inflated beyond all reason, but I fear that the inflated prices cannot last much longer. I think the peak is either right now, or just past us...but either way the OP is right - this does not add up.
ProfessorGAC
(64,995 posts)I don't have good answers about why, but here prices continue to rise on, more or less, a steady year over year rate.
At a constant rate of 3.6% per annum, the house my wife & I live in calculates to $230k based upon what we paid.
We just changed insurance companies and they appraised it at $228k, insured it for $285.
Out of curiosity I looked at house prices in a couple of the affluent bedroom communities in our county (around 700,000 people here in a Chicago collar county). I know roughly what houses cost 30-40 years ago because I have friends who bought there back then.
Pretty much the same finding.
So, for some reason there's rapid price inflation in some places, but it's not universal.
cinematicdiversions
(1,969 posts)That has been losing population for a while. Basically, the same issue you have with similar cities like Akron or Cleveland. More housing stock than people depresses prices.
The severe price rises are in cities that are seeing population increases without the corresponding increase in housing availability.
Moostache
(9,895 posts)I currently am in the St. Louis region and have a 23 year old daughter trying to find a home...she has been looking for 8 months and been outbid with cash offers no fewer than 6 times since Christmas. These are not $1M over asking or anything extreme like that, but she is seeing people outbid her by 10-15% over asking price.
Limited sample size obviously, but not exactly a growing population down here either...
know many people like your daughter priced out here in St. Louis.
ProfessorGAC
(64,995 posts)Sometimes, simple supply & demand actually works.
Hugh_Lebowski
(33,643 posts)And foreign investors buying US properties cause it's a safe investment.
And the perception that prices will keep going up.
Which they will as long as those conditions hold.
For however long that is.
KPN
(15,642 posts)Current home prices in the rural town I live in have increased up to 100% with minor upgrades over the past 2-3 years. It's crazy! I wonder whether most of the buyers realize that future property taxes on those inflated houses they are buying will increase significantly over current rate based on the updated market value (sale price)? That's a big ticket item in the budget. How many foreclosures will we see in a few years and will the cycle just repeat itself -- investors snap up houses up at depressed prices, rent them at high monthlies, and then sell them out from under renters again when market values go back up?
Am I just being cynical here? Or should I adopt the outlook "if you can't beat 'em, join 'em" and become a landlord the next big housing market drop.
Hugh_Lebowski
(33,643 posts)Though I'm not sure the fundamentals are quite the same as 2008. Don't think there's as many ARM's and bad loans being made. The uber-low interest rates are driving a lot of this as with interest rates this low people can 'afford more house' at the same $ level or only a little more. Or afford one period, as it's not really any more $$$ to buy one vs rent one.
At the end of the day though wages aren't rising nearly as fast, and eventually that's going to put the brakes on things. May not be a collapse but things will level off and probably even go down in some cases/places.
BigmanPigman
(51,584 posts)are not sustainable and he expects them to come down soon.
KPN
(15,642 posts)personal conversation? Realtors here where I am are all saying the housing market and houses always increase in value. But this market seems irrational, just like the stock market. Or, the dollar is already worth that much less which means consumer staples, goods and services are going to see similarly inflated costs as well?
Will wages keep up?
Are we condemning entire generations of working class people to a life of relative poverty?
These are the questions that run through my mind.
BigmanPigman
(51,584 posts)This was about two months ago.
KPN
(15,642 posts)values never go down, they always rise. Which is a crock. Yeah, over the long haul, they go up, but in intermediate and short time-frames they do go down, sometimes deeply. And in some of those cases, they never fully come back. Look at all the executive mansions in fancy Detroit neighborhoods that have been outright abandoned for almost a couple decades now.
Houses in my small rural community have skyrocketed 100% in less than 3 years, some in less than 2 years. We are going to have a lot of house poor people around here when property taxes go up next year to reflect the actual market, i.e., the sale price of their homes.
BigmanPigman
(51,584 posts)"With every up, there's a down...
And with every down, there's an up. Things will correct themselves at some point in the future, but with that downturn, values will go back up beyond the last high. It's just the nature of "coastal" properties in CA."
https://www.democraticunderground.com/?com=view_post&forum=1002&pid=15290944
stopdiggin
(11,296 posts)has been awfully darned good -- for a percentage of people. True, it hasn't been spread around very evenly -- but that was never really the point.
(having said that .. would I be buying a house, or condo, in certain parts of the country today? Not hardly!)
KPN
(15,642 posts)here in coastal Oregon at twice the price they were sold for just two years ago -/ and 25-30% of that increase had occurred in the past couple months alone. Renters who are already paying exorbitant and often barely affordable rates are having their shelter pulled out from under them in an already tight rental market. They cant afford to buy a home at these inflated prices, and if they do will be paying a higher monthly and property taxes that reflect the new market (sale) value!
I dont see how this is not going to end up a catastrophe in one form or another.
Its discouraging. America seems to have become totally overwhelmed with greed especially in this past year, the year of the pandemic.
cinematicdiversions
(1,969 posts)Part of it is simple economics, but there have been some recent pro-tenant laws (Seattle) that simply make it almost impossible to do anything but sell your house rather than rent.
Law of unintended consequences, I am afraid. The harder you make it to be a landlord, the fewer landlords and rental properties you will have and much higher prices for renters.
Response to cinematicdiversions (Reply #11)
KPN This message was self-deleted by its author.
KPN
(15,642 posts)have from family members, friends and acquaintances. If its simple economics, fine. That doesnt make it any less serious.
I have based on what Ive heard researched home sale and rental prices in my county. Rental prices have not declined here. Where are these large parts of Oregon and WA where rents are dropping?
38.9% of the pop in my rural county live in rentals. The economics are not working for them. Maybe when the buying boom becomes a bubble and bursts.
cinematicdiversions
(1,969 posts)If you make it harder to be a landlord, you will have fewer landlords and fewer rental properties, which will increase rents.
KPN
(15,642 posts)I chatted with a local businessman whom Ive known for many years. In the course of our conversation he related to me that he had to raise the rent on condos he had purchased in Portland during the 2008 crash. I was surprised that he said he had to and asked him why? He said the market went up, everyone was raising their rents.
Ive been perplexed by that statement ever since. Not wanting to sound antagonistic, I never asked a follow up like how does that make you have to raise your rents? His condos were in the Pearl District a very desirable and upscale area of downtown and hed purchased them in the price range of $135-145k in 2009 as I recall him telling me in an earlier conversation. They must now be worth $400k each and lord knows how much he gets for them monthly.
The best solution for all of this is higher wages for the lower and middle class and higher taxes on the higher income levels. A truly progressive tax system. We are consigning the younger and next generations of working class people to a life of living in relatively shabby apartments otherwise. If rent control doesnt work, thats the only viable solution that I can think of.
Its a very troubling dynamic right now. Theres no question the demise of the middle class has fueled the expansion of populists in our society. Where will we end up if this cycle continues?
hunter
(38,310 posts)The central government should create money for the benefit of all, especially those who will spend it solely on necessities and then prevent inflation by collecting taxes from those who have benefited the most from an orderly society.
The books don't have to "balance" in the short term. The purpose of taxation is to minimize inflation and disperse dangerous concentrations of wealth.
One problem with housing is outside "investment." People of great wealth will buy homes they don't intend to live in to keep their money "safe." Someone who accumulates great wealth in a nation or state they regard as unstable (even when they are part of the problem that makes the place unstable...) will purchase homes in a places they believe are stable, like San Francisco or Vancouver.
This outside investment may create more housing if there is room to create or increase the density of housing, but if there is too much money coming in it simply drives up the price of housing, which is just another aspect of inflation that could be solved with progressive taxation.
DrToast
(6,414 posts)Too many people chasing too few houses = rising prices.
KPN
(15,642 posts)so many houses have been purchased by investors since the 2008 crash. I saw a piece of local housing data a week or so ago for the rural County I live in: about 39% of the countys population were renters (I think it was 3rd or last quarter of 2020). If houses were affordable, the shortage would not exist. Its a labor (wage/income) issue in the end.
Kaleva
(36,294 posts)I'm not that far above the poverty line and don't need the stimulus money to pay bills or debts as that's covered by what I get. So I'll be spending the money on stimulating the local economy.
VickiSmith
(32 posts)Real estate and new construction is booming here.
Rentals are hard to find and at prices unaffordable to many.
jonstl08
(412 posts)Heading for another housing crisis when people are priced out of homes and no buyers left
FakeNoose
(32,633 posts)... for less than the cost of one CA or NY house.
Mr.Bill
(24,282 posts)there are always the very rich and the very poor. They sold plenty of Packards, Lincolns, Auburns and Cords during the depression. What fluctuates is the middle class.
Xolodno
(6,390 posts)1. A lot of builders went under and they haven't been replaced. So new homes aren't being built fast enough.
2. Banks are cautious to lend to new builders after getting burned.
3. House flippers are driving up demand and destroying supply. They know how this works, buy 10 homes, then sell one or two at a time to reduce inventory and increase the price. And of course, any unsold inventory during a crash, they just rent out. And buy more homes at bargain prices. These guys need to be hit and beaten with the large TAX stick to curb their behavior.
4. Low interest rates. The home price may be insane, but low interest rates increases the "affordability". A lot of people are going to find themselves upside down in their mortgage in the near future I think.
5. Banks probably think they will get bailed out again. That's what happens when you reward bad behavior.
6. It seems to be localized to strong job markets. I was looking at land prices in another state, one property I saw went down 15k.
It will come crashing down eventually, when, however, is anyone's guess.
applegrove
(118,622 posts)said to themselves "F this we need a backyard and a neighbourhood for our kids". Especially NY City. They were buying up New Jersey. Same happened in Toronto. People suddenly wanted acreage. And some who could afford a second home bought outside the core too. Maybe it was universal for those who could afford it.