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Why is There a Housing Crisis?

Rhea

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There’s talk of bidding wars and price hikes and building material shortages all over the place. I’ve read a bunch of repting on it, but curious what folks here think

What’s causing the housing crunch? What causes it in your region versus other people’s regions?
 

Jimmy Higgins

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I'm not certain, but Covid-19 did mess things up. Not too much of a leap to ponder that the pandemic also stopped people from moving for careers and whatnot. And now people are ready to move again, but due to the pause, there aren't as many homes on the market. Add low interest rates and we revisit a modified 2002-2007 housing market bubble.

It has to suck for people that have to move to a region. Others, I'd let this simmer down before paying 1.5x what a property is actually worth.
 

Rhea

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What do you mean by crisis?

I mean this

There’s talk of bidding wars and price hikes and building material shortages all over the place.

People who are trying to buy houses are facing multiple tries of making an offer and losing out because of multiple other bidders. Houses being under contract in hours. People having to wait to get their house built.

https://www.google.com/search?q=housing+crisis

But if you are not aware of a housing crisis, then maybe you won’t have anything to say about what is causing it.
 

TSwizzle

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I’m not sure that constitutes a crisis. Desirable properties always draw multiple offers. Is that a bidding “war” ? Building materials are unusually high just now but that’s due to all sorts of supply chain issues.
 

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What do you mean by crisis?

I mean this

There’s talk of bidding wars and price hikes and building material shortages all over the place.

People who are trying to buy houses are facing multiple tries of making an offer and losing out because of multiple other bidders. Houses being under contract in hours. People having to wait to get their house built.

https://www.google.com/search?q=housing+crisis

But if you are not aware of a housing crisis, then maybe you won’t have anything to say about what is causing it.

This has been happening for at least a year in the city where my kids reside. In fact, when they purchased their first home 3 years ago, they put offers on several properties before their bid won. They paid more for their home which is about 1/3 the size of the house we own in the small town where we live. Of course, there are better job opportunities, better access to the things young people value: good restaurants and bars and music venues, etc. This past year has been worse. Inventory is very low even where I live.

We had renovations scheduled prior to the pandemic and carried them out during the pandemic. Some things (mostly plumbing supplies) took much longer than usual because so much was coming--or rather, manufactured in China but not coming to the US because of the pandemic. I ordered some bathroom accessories such as towel bars, etc. from a major home decore company that usually ships within days that took months. I am glad that I didn't need to have new kitchen appliances because my understanding is that these are coming at a high premium and involve months long delays after ordering. In fact, I am crossing my fingers that my washer and dryer hold out for another year or two, until things settle down. I am not certain why, except that I am guessing that much is manufactured in China or elsewhere overseas.

There has been an ongoing shortage of building materials for a couple of years, particularly in terms of wood of all kinds/grades. Part of this is because old growth wood has long since been harvested and replanting not only lags, but is of lesser quality as tree farms are treated with chemicals that encourage rapid growth at the expense of quality, hardness, density of wood produced. So, if you wish to buy a dining room table, for instance, from say, Ethan Allen, you will note that most of their pieces are made of woods you likely have never heard of---grown in far away places, probably with less stringent environmental laws in place.

A few other things have come into play, I think:
1. Mortgage rates are extremely low. This has the net effect of increasing prices for houses, as mortgage lenders qualify buyers based on what total monthly mortgage payment a buyer can afford. If they think that you can afford $1000/.month, then when mortgage rates are lower, you can qualify for a more expensive house. If rates are higher, you will qualify for a lower priced home. Since this applies across the market, it has the net affect of either driving prices up or lowering prices.

2. All of those home improvement shows are great and addicting and yes, indeed, they do spur home renovations and redecorating which increases demand for all things home related.

3. The pandemic forced most people to spend more time in their homes...where they began to notice the things they didn't like or wanted to change or improve. Paint stores were running out of paint nationwide because everyone was home painting their house which suddenly looked dingy. Home improvements/renovations boomed, as did the building of new businesses and homes. My projects were competing for plumbers, electricians, carpenters, tile people, drywall people, etc. with not only other home improvers but also with large building projects going on in my area. It was wild. And interesting. I got the inside scoop about when a much anticipated restaurant was likely to actually open rather than what it was saying in public because my plumber and my tile guy were both working on that project as well. I don't think that my town is that different than any other town, as I hear from friends how difficult it is to find a plumber or electrician, etc. Partially, this is because not enough young people go into the trades but this shortage has been made much more apparent by the current building/reno boom.

Also because people have been spending more time in their homes and more people are planning to work from home, they are contemplating whether their current home still meets their needs--so they are going shopping for a home that does. And because mortgage rates are lower, that nicer, larger home in a better neighborhood may have become attainable....
 

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I’m not sure that constitutes a crisis. Desirable properties always draw multiple offers. Is that a bidding “war” ? Building materials are unusually high just now but that’s due to all sorts of supply chain issues.

Yes, a bidding war, in real estate parlance is a situation where multiple prospective buyers are bidding on the same property, often offering tens of thousands or more over asking price, waving home inspections, and writing the most heart rending personal letters possible to go with their offers.

The fact is that there is a housing crisis, period. Too many families cannot afford to purchase appropriate housing for themselves or to rent decent housing. Bidding wars make it worse because it drives up the prices.
 

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A few other things have come into play, I think:
1. Mortgage rates are extremely low. This has the net effect of increasing prices for houses, as mortgage lenders qualify buyers based on what total monthly mortgage payment a buyer can afford. If they think that you can afford $1000/.month, then when mortgage rates are lower, you can qualify for a more expensive house. If rates are higher, you will qualify for a lower priced home. Since this applies across the market, it has the net affect of either driving prices up or lowering prices.

You make excellent points but I think this is probably the most important one. People are overpaying on properties because the monthly payment is what they look at rather than the value of the property.
 

TSwizzle

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The fact is that there is a housing crisis, period. Too many families cannot afford to purchase appropriate housing for themselves or to rent decent housing. Bidding wars make it worse because it drives up the prices.

House prices in parts of California are pretty insane but I’m not buying in to the housing “crisis”.
 

Derec

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and writing the most heart rending personal letters possible to go with their offers.
What about? Surviving Andrea Doria?

I agree with Jimmy for once. If you don't have to buy right now, hold off for the time being. Or, as Shaun said ...
0a3fda84f76c601bdbc81de892af3746--pints-winchester.jpg

Same goes for cars, which also have a supply crunch due to a chip shortage.

The fact is that there is a housing crisis, period. Too many families cannot afford to purchase appropriate housing for themselves or to rent decent housing. Bidding wars make it worse because it drives up the prices.
It's an indication of a market imbalance. Eventually the market will settle. But for real estate, the supply side of the market has a lot of inertia. You decide to build a new subdivision or condo building due to a hot market and it takes a while to actually build it.
 

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Here's my two cents. After the bubble in the Housing market that collapsed just prior to the recession in 2006 or so, builders stopped building for many years, leaving a shortage of housing once things started to ramp up very quickly over the past few years. Interest rates are at an all time or almost all time low, which imo, makes them artificially low at this point. That has caused a lot of first time home owners the opportunity to buy homes which they previously couldn't afford, which has quickly led to a shortage of housing. My small city never had this problem in the 22 years that I've lived here. While homes once sat the market for many months or years, they are now selling in days, often with bidding wars in place.

Now that this has happened, developers are going nuts building new subdivisions in areas that were never developed before, which is causing all kinds of new problems unrelated to the OP, so I won't go there. How long will interest rates stay at these extremely low rates? How long will it take before builders once again over develop? How long will it take until the next recession? All of those things have an impact on the housing market.

Luckily, we live in what has been perceived as the more desirable part of town and we are happy to see it now being racially integrated like never before, making it even more desirable since according to surveys, most Americans now want to live in mixed race neighborhoods. But, gentrification is also creeping into areas not considered desirable in the past and I think we may also be suffering from Atlanta sprawl, since ATL is quickly becoming unaffordable to most middle class folks. it's complicated. :D
 

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I ordered our new washer/dryer on May 1st. Still no word on when it will be delivered.
 

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In Ontario there just aren't enough homes to support our population. In the past 5 years immigration has out-stripped new builds by a (very) wide margin.
 

Rhea

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From this article:

https://www.millionacres.com/real-e...using-shortage-and-why-should-investors-care/


The current situation

With a 4.8-month supply of homes as recently as May 2020, inventory was fairly normal, but it's been steadily dropping ever since. In December 2020, there was only a 1.9-month supply of homes, the lowest ever recorded. This means we are most definitely in a housing shortage situation. Freddie Mac (OTCMKTS: FMCC) estimates 2.5 million houses need to come on the market to combat the shortage.

[…]

This latest housing shortage

In this latest housing shortage, the coronavirus pandemic played a role. When the country first locked down in March 2020, people feared another housing crisis similar to what happened in 2008. And for about a month or two, demand for housing was low.

After a couple of months, however, there was pent-up demand for housing, partly to escape an urban apartment, and partly due to record-low mortgage rates. But there was less building happening during this time of increased demand.

Slowed building

Building was slow for several reasons. It was harder to do business during lockdowns, which led to supply-chain issues. But there were supply shortages as well. A lumber shortage, for example, which occurred largely from wildfires in the Western United States, drove up the price of lumber, making it even tougher for affordable homes to enter the market. There are also limited lots on which to build and a deficit of skilled labor.

TSwizzle may not have noticed the significant national change to housing shrtage because it was an ongoing problem in CA for a while. But for the rest of the country, things have changed dramatically.


One of my ponderings was when I started reading about housing shortages in suburban and rural areas. I had previously assumed housing shortages and bidding wars were an urban thing because so many people were leaving the countryside and moving urban. But when I started seeing it here, too, I began to ponder why. Hence the thread: an interest in what others think based on their different perspectives than mine.
 

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From this article:

https://www.millionacres.com/real-e...using-shortage-and-why-should-investors-care/


The current situation

With a 4.8-month supply of homes as recently as May 2020, inventory was fairly normal, but it's been steadily dropping ever since. In December 2020, there was only a 1.9-month supply of homes, the lowest ever recorded. This means we are most definitely in a housing shortage situation. Freddie Mac (OTCMKTS: FMCC) estimates 2.5 million houses need to come on the market to combat the shortage.

[…]

This latest housing shortage

In this latest housing shortage, the coronavirus pandemic played a role. When the country first locked down in March 2020, people feared another housing crisis similar to what happened in 2008. And for about a month or two, demand for housing was low.

After a couple of months, however, there was pent-up demand for housing, partly to escape an urban apartment, and partly due to record-low mortgage rates. But there was less building happening during this time of increased demand.

Slowed building

Building was slow for several reasons. It was harder to do business during lockdowns, which led to supply-chain issues. But there were supply shortages as well. A lumber shortage, for example, which occurred largely from wildfires in the Western United States, drove up the price of lumber, making it even tougher for affordable homes to enter the market. There are also limited lots on which to build and a deficit of skilled labor.

TSwizzle may not have noticed the significant national change to housing shrtage because it was an ongoing problem in CA for a while. But for the rest of the country, things have changed dramatically.


One of my ponderings was when I started reading about housing shortages in suburban and rural areas. I had previously assumed housing shortages and bidding wars were an urban thing because so many people were leaving the countryside and moving urban. But when I started seeing it here, too, I began to ponder why. Hence the thread: an interest in what others think based on their different perspectives than mine.

My husband and I have been in our house for a number of years now and it's "that time again", where we are ready, like hermit crabs, to seek a new shell.

While I realize I could make much more than asking on my home, and it's a really old home, I realize that to sell now would mean to also buy into bubbled costs as well. I doubt that the margin would cover the spread when things contract, and all my savings over years putting into my mortgage would evaporate.

So, I'm stuck in this house, and am being forced to actually deal with the problems with it, lest I find myself fucked hard when things normalize.

Or, I could risk renting a few years, and just put the money in a high interest account of some kind.

Either way, there's no way to get out of my current home without risking going upside down. This is what the housing shortage means to me: being trapped where I am. Still, it's a better position than most.
 

Rhea

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My husband and I have been in our house for a number of years now and it's "that time again", where we are ready, like hermit crabs, to seek a new shell.

Interesting perspective - because moving for a change of pace is totally outside of my thought process. My husband bought our home (before we were together) more than 30 years ago, and I’ve lived here for 25 years.

We have pondered that in early retirement we might rent our home out and do a “city year” where we rent a place in an actual city to see what that’s like, then do a couple of years on the road. So we’ve had to always think of upkeep (and updating) this 100+ year old house. But to sell? It would need to overcome much inertia and waiting out a housing shortage is not stressful for us.
 

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A few other things have come into play, I think:
1. Mortgage rates are extremely low. This has the net effect of increasing prices for houses, as mortgage lenders qualify buyers based on what total monthly mortgage payment a buyer can afford. If they think that you can afford $1000/.month, then when mortgage rates are lower, you can qualify for a more expensive house. If rates are higher, you will qualify for a lower priced home. Since this applies across the market, it has the net affect of either driving prices up or lowering prices.

You make excellent points but I think this is probably the most important one. People are overpaying on properties because the monthly payment is what they look at rather than the value of the property.

The value of a property is what someone will pay for it. Many buyers are guided and almost all buyers are limited by what the bank will approve. That amount is generally based on the buyers income, other debt and credit worthiness. What portion of that is amortized purchase price and what part is interest varies by interest rate.

People are ‘over paying’ because of the lack of availability of less expensive housing. I am stunned by what first time home buyers are paying for housing ( rent or own) and it is causing me to re-think the practicality/affordability of relocating to be nearer our children who live/work in a major metropolitan area (vs staying in our small town.)
 

Toni

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My husband and I have been in our house for a number of years now and it's "that time again", where we are ready, like hermit crabs, to seek a new shell.

Interesting perspective - because moving for a change of pace is totally outside of my thought process. My husband bought our home (before we were together) more than 30 years ago, and I’ve lived here for 25 years.

We have pondered that in early retirement we might rent our home out and do a “city year” where we rent a place in an actual city to see what that’s like, then do a couple of years on the road. So we’ve had to always think of upkeep (and updating) this 100+ year old house. But to sell? It would need to overcome much inertia and waiting out a housing shortage is not stressful for us.

I love the idea of doing a ‘city year’ to see if we’d like it, as well as some years of traveling. I’d also looove to do a lake house year as well, but that lies in the realm of fantasy as we do not now and are very unlikely to ever own a lake house. My husband is less keen and is also still working while I retired early. Money is of course a huge factor. We’ll have to see how it is in a couple of years.
 

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and writing the most heart rending personal letters possible to go with their offers.
What about? Surviving Andrea Doria?

I agree with Jimmy for once. If you don't have to buy right now, hold off for the time being. Or, as Shaun said ...
View attachment 34042

Same goes for cars, which also have a supply crunch due to a chip shortage.

The fact is that there is a housing crisis, period. Too many families cannot afford to purchase appropriate housing for themselves or to rent decent housing. Bidding wars make it worse because it drives up the prices.
It's an indication of a market imbalance. Eventually the market will settle. But for real estate, the supply side of the market has a lot of inertia. You decide to build a new subdivision or condo building due to a hot market and it takes a while to actually build it.

Heart rending was a bit of hyperbole but: letters that pain as warm a portrait if the prospective buyer as possible, highlighting qualities and characteristics designed to appeal to the sellers, how much you love and appreciate the unique characteristics of the home you wish to buy. In fact I believe we wrote a similar letter when we purchased our home more than 30 years ago. The sellers had raised their family here and we wrote about how much we wanted to raise our children in such a home. Times were different then but we had a very short time frame to buy as we were moving hundreds of miles and several states away.
 

Rhea

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I love the idea of doing a ‘city year’ to see if we’d like it, as well as some years of traveling. I’d also looove to do a lake house year as well, but that lies in the realm of fantasy as we do not now and are very unlikely to ever own a lake house.

You can rent lake houses for a year. PM me if you’re ever seriously looking.
 

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There’s talk of bidding wars and price hikes and building material shortages all over the place. I’ve read a bunch of repting on it, but curious what folks here think

What’s causing the housing crunch? What causes it in your region versus other people’s regions?
Its inflation and as prices continue to rise more people will be willing to sell their homes. It is hard to believe but their price still hasn't reached a high enough value yet. When it does, there will be more homes on the market and more builders putting up homes even with expensive lumber.

I have been a landlord over 40 years and until now have never seen a market where home prices AND rents rise at the same time. What usually happens is the interest rate gets low enough, then the renters start buying homes and that causes rents to become lower due to them not wanting to rent. But with today's inflation, we are seeing both home prices and rents on the rise at least in my region (St. Louis).
 

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The combination of covid and just-in-time manufacturing techniques left a huge hole in stockpile reserves. Until we climb out of that hole, things are going to be a good bit more expensive. At least such things being expensive is incentive to get the raw materials processed.
 

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The combination of covid and just-in-time manufacturing techniques left a huge hole in stockpile reserves. Until we climb out of that hole, things are going to be a good bit more expensive. At least such things being expensive is incentive to get the raw materials processed.
Steel is going to be stuck in the doldrums for some time. There are older US plants that are not being brought back on line due to the high cost of doing so, emissions concerns, and new plants being built but are many months away from being operational. I read US manufacturers have stopped taking orders until the end of summer just to get caught up. Biden is said to be considering dropping the Trump tariffs but the cost of importing steel would still be high as it is expensive everywhere and shipping costs have gone through the roof.
Meanwhile, new homes can’t be certified and sold until fixtures builders are waiting on come in.
Around here, folks should look to the older suburbs built in the fifties and sixties. There’s good value in these smaller bungalows and ranch homes and pretty good inventory. Everyone wants new, I guess. No one wants a home with one bathroom. Three bedrooms and one bath worked for we family of five. Now everyone wants these monstrosities. Your friendly estate agent tells folks to buy all the house they can afford when they should be buying all the house they need. Yeah, listen to your real estate agent. She’s an expert.
 

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There’s talk of bidding wars and price hikes and building material shortages all over the place. I’ve read a bunch of repting on it, but curious what folks here think

What’s causing the housing crunch? What causes it in your region versus other people’s regions?

I was in Lowes this afternoon. A 2x4 construction stud which would have cost me about $4 a year ago, is now $13.82. There didn't seem to be a shortage of them and at that price, I'm was surprised to see four pallets in stock.

I have been working with Habitat for Humanity for 29 years. I worked on the last house they rehabbed in Baton Rouge. At that point, there was a shortage of suitable older houses and remodeling costs started to approach the cost of new construction. Since then, it's been all new houses, from the slab up. A Habitat House is generally built for sixty to seventy percent of the cost of a standard house. This is done through volume buying of material(all houses are the same), donated material(surplus from commercial builders and discontinued stock from manufacturers) and lots of volunteer labor. Our project always starts in September and I'm not sure if we will be working this fall. There's no point to building a low cost house at a premium price.

"New housing starts" dropped like a hammer off a ladder in 2020 and started to recover in 2021. The same effect was felt in all the industries which supply the housing industry, so materials are expensive. There aren't enough houses for the people who want to buy(can afford a house) and this drives up the price. To compound this problem, when builders cannot meet demand, they will concentrate on the most profitable demand. This means the newest homes will be high end and middle to low income people are not going to find anything in their price range.
 

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There’s talk of bidding wars and price hikes and building material shortages all over the place. I’ve read a bunch of repting on it, but curious what folks here think

What’s causing the housing crunch? What causes it in your region versus other people’s regions?

From what I understand, the housing market is different in the US than it is down here in Australia, but I believe the housing market suffers from similar problems in both countries. The main difference is that US houses prices took a brief nosedive for a few years following the subprime lending crisis of 2007-08, whereas Australia's houses prices remained stable.

The problem plaguing housing in Australia, and certainly many other countries, is that some people are buying houses because they need somewhere to live, and other people are buying houses because they want to collect rent and profit from increases in the value of those properties.

These investors create problems for wannabe homeowners in a number of ways: firstly, they compete for housing stock, which pushes up the prices of houses. This makes modest houses entirely unaffordable in many suburbs, even for dual-income families. Secondly, investors do not put their houses up for sale unless they expect to make a profit. So instead of a housing market driven by homeowners who regularly buying and sell as their needs change, we have a market where many of the property owners withhold keep their properties off of the market until prices increases enough to bring them an satisfactory profit. This artificial scarcity both reduces the number of houses that homeowners can buy and increases the prices that they must pay for the limited stock that's available.

Some analysts, such as the Grattan Institute, have suggested that the housing market suffers from a lack of supply, which could be alleviated by building more urban sprawl or increasing housing density. This makes sense - more supply should bring prices down - but it ignores the fact that capitalists are deliberately restricting supply in existing residential areas in order to increase their profits. In Australia the government also gives generous tax concessions to investors (negative gearing, discounts on capital gains tax), which gives them further incentives to buy and hold onto housing stock.

This crisis, or crunch, or whatever you want to call it, has been in the making for decades, long before the pandemic. And things can only continue one way: investors will own an increasing share of the housing stock, putting home ownership out of reach for most people in the suburbs. A few people are going to get really fucking rich at everyone else's expense.

As far as I'm concerned, these investors are nothing more than a class of blood-sucking parasites who collect rent money and offer nothing of value in return.
 

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As far as I'm concerned, these investors are nothing more than a class of blood-sucking parasites who collect rent money and offer nothing of value in return.

Thats about where I see it. "Leveraging that which you have against people so as to have more" is one of the primary, most fundamental acts of evil in this world, if there is anything that can be considered "evil". It is twisting people for the love of things. I love things, don't get me wrong. It's just that I don't believe in leveraging people except to remove leverage. "Wide is the mouth of Mammon, and rarely do you know you are in it until he swallows."
 

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There’s talk of bidding wars and price hikes and building material shortages all over the place. I’ve read a bunch of repting on it, but curious what folks here think

What’s causing the housing crunch? What causes it in your region versus other people’s regions?

From what I understand, the housing market is different in the US than it is down here in Australia, but I believe the housing market suffers from similar problems in both countries. The main difference is that US houses prices took a brief nosedive for a few years following the subprime lending crisis of 2007-08, whereas Australia's houses prices remained stable.

The problem plaguing housing in Australia, and certainly many other countries, is that some people are buying houses because they need somewhere to live, and other people are buying houses because they want to collect rent and profit from increases in the value of those properties.

These investors create problems for wannabe homeowners in a number of ways: firstly, they compete for housing stock, which pushes up the prices of houses. This makes modest houses entirely unaffordable in many suburbs, even for dual-income families. Secondly, investors do not put their houses up for sale unless they expect to make a profit. So instead of a housing market driven by homeowners who regularly buying and sell as their needs change, we have a market where many of the property owners withhold keep their properties off of the market until prices increases enough to bring them an satisfactory profit. This artificial scarcity both reduces the number of houses that homeowners can buy and increases the prices that they must pay for the limited stock that's available.

Some analysts, such as the Grattan Institute, have suggested that the housing market suffers from a lack of supply, which could be alleviated by building more urban sprawl or increasing housing density. This makes sense - more supply should bring prices down - but it ignores the fact that capitalists are deliberately restricting supply in existing residential areas in order to increase their profits. In Australia the government also gives generous tax concessions to investors (negative gearing, discounts on capital gains tax), which gives them further incentives to buy and hold onto housing stock.

This crisis, or crunch, or whatever you want to call it, has been in the making for decades, long before the pandemic. And things can only continue one way: investors will own an increasing share of the housing stock, putting home ownership out of reach for most people in the suburbs. A few people are going to get really fucking rich at everyone else's expense.

As far as I'm concerned, these investors are nothing more than a class of blood-sucking parasites who collect rent money and offer nothing of value in return.

Well, discounting or lowering capital gains taxes increases the incentive to sell properties, not hold them. IOW, when capital gains taxes goes up, there is an incentive to buy and hold in order to avoid the taxes. Secondly, RE investors offer a valued service by offering housing to people who either can't afford the monthly D/S (which is usually significantly higher than rent) or they don't have the credit history to buy a home. Often times people also need to rent because they don't intend to stay in a location for very long. They move around due to their job. You shouldn't buy a home unless you plan to live there 5 years or more (as a rule of thumb).
 

bigfield

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Well, discounting or lowering capital gains taxes increases the incentive to sell properties, not hold them. IOW, when capital gains taxes goes up, there is an incentive to buy and hold in order to avoid the taxes.

Discounting capital gains taxes increases the incentive for investors to sell properties...and then buy even more properties because there's more profit to be made.

Secondly, RE investors offer a valued service by offering housing to people who either can't afford the monthly D/S (which is usually significantly higher than rent) or they don't have the credit history to buy a home. Often times people also need to rent because they don't intend to stay in a location for very long. They move around due to their job. You shouldn't buy a home unless you plan to live there 5 years or more (as a rule of thumb).

You make a good point, and I'll have to moderate my view of investors.

Slightly.

The problem I'm seeing, and have lived, is that there are vast numbers of people stuck in rentals for long periods because they cannot get finance to buy a house. The average rental price in the outer suburbs is significantly higher than what I'm currently paying on my mortgage, even though I only bought my house last year. There are very few properties available to rent to people who can't afford a home loan. A lot of people are simply stuck in a rent trap where they are pouring huge amounts of money into rent because they can't afford to save up for their own home. The houses with cheapish rent are also tiny houses too small for a family, and/or decrepit shitholes, because investors around here spend as little as possible on maintaining their properties.

The people moving around due to their job are a tiny group compared to the tenants who have been priced out of the housing market. And I would venture that many of those people moving around for work are in careers that pay more than the median income. Investors aren't providing a valued service to these workers, or to anyone for that matter, by jacking up the rents on closet-sized apartments and suburban two-bedders that haven't been renovated since they were built in the 70's.

I could see an argument being made for a tiny fraction of housing being rented out to transient workers, but that isn't what's happening in the housing market. Instead, we've got greedy fucks buying up housing that should be in the hands of people, both middle class and working class, who are trying to put down roots.
 

Canard DuJour

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The current spike is down to Covid-related supply problems.

The chronic affordability problem is down to neoliberal monetary policy plus finite supply of land:

[YOUTUBE]https://www.youtube.com/watch?v=Y4WmDoYJhnk[/YOUTUBE]

[YOUTUBE]https://www.youtube.com/watch?v=alDg4sPxiD8[/YOUTUBE]
 

RVonse

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Well, discounting or lowering capital gains taxes increases the incentive to sell properties, not hold them. IOW, when capital gains taxes goes up, there is an incentive to buy and hold in order to avoid the taxes.

Discounting capital gains taxes increases the incentive for investors to sell properties...and then buy even more properties because there's more profit to be made.

Secondly, RE investors offer a valued service by offering housing to people who either can't afford the monthly D/S (which is usually significantly higher than rent) or they don't have the credit history to buy a home. Often times people also need to rent because they don't intend to stay in a location for very long. They move around due to their job. You shouldn't buy a home unless you plan to live there 5 years or more (as a rule of thumb).

You make a good point, and I'll have to moderate my view of investors.

Slightly.

The problem I'm seeing, and have lived, is that there are vast numbers of people stuck in rentals for long periods because they cannot get finance to buy a house. The average rental price in the outer suburbs is significantly higher than what I'm currently paying on my mortgage, even though I only bought my house last year. There are very few properties available to rent to people who can't afford a home loan. A lot of people are simply stuck in a rent trap where they are pouring huge amounts of money into rent because they can't afford to save up for their own home. The houses with cheapish rent are also tiny houses too small for a family, and/or decrepit shitholes, because investors around here spend as little as possible on maintaining their properties.

The people moving around due to their job are a tiny group compared to the tenants who have been priced out of the housing market. And I would venture that many of those people moving around for work are in careers that pay more than the median income. Investors aren't providing a valued service to these workers, or to anyone for that matter, by jacking up the rents on closet-sized apartments and suburban two-bedders that haven't been renovated since they were built in the 70's.

I could see an argument being made for a tiny fraction of housing being rented out to transient workers, but that isn't what's happening in the housing market. Instead, we've got greedy fucks buying up housing that should be in the hands of people, both middle class and working class, who are trying to put down roots.

It is monetary policy causing the problem more than bad landlords or tax laws. Because if the price of property stays constant then all of your bad issues go away.
 

RVonse

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The current spike is down to Covid-related supply problems.

The chronic affordability problem is down to neoliberal monetary policy plus finite supply of land:

[YOUTUBE]https://www.youtube.com/watch?v=Y4WmDoYJhnk[/YOUTUBE]

[YOUTUBE]https://www.youtube.com/watch?v=alDg4sPxiD8[/YOUTUBE]

+1 Agree. Neoliberal monetary policy sucks.
 

RVonse

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[YOUTUBE]https://www.youtube.com/watch?v=zxdx1buMRqk[/YOUTUBE]
 

Playball40

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Part of the housing boom is due to the pandemic/quarantine as people/companies realize they can work remotely. 1) they want to work remote in a house with space as opposed to a cramped apt/loft. 2) People from NY, Chicago, LA can now move to affordable homes without changing their salary. It will make price people that live in these areas out of the market unfortunately.
 

Loren Pechtel

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The combination of covid and just-in-time manufacturing techniques left a huge hole in stockpile reserves. Until we climb out of that hole, things are going to be a good bit more expensive. At least such things being expensive is incentive to get the raw materials processed.

This. The more just-in-time your processes are the more they will be disrupted by the same size disruption. Unfortunately, this favors the cheaper supplier whose processes are actually more unstable but the customer does not know that.
 

Loren Pechtel

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The combination of covid and just-in-time manufacturing techniques left a huge hole in stockpile reserves. Until we climb out of that hole, things are going to be a good bit more expensive. At least such things being expensive is incentive to get the raw materials processed.
Steel is going to be stuck in the doldrums for some time. There are older US plants that are not being brought back on line due to the high cost of doing so, emissions concerns, and new plants being built but are many months away from being operational. I read US manufacturers have stopped taking orders until the end of summer just to get caught up. Biden is said to be considering dropping the Trump tariffs but the cost of importing steel would still be high as it is expensive everywhere and shipping costs have gone through the roof.
Meanwhile, new homes can’t be certified and sold until fixtures builders are waiting on come in.
Around here, folks should look to the older suburbs built in the fifties and sixties. There’s good value in these smaller bungalows and ranch homes and pretty good inventory. Everyone wants new, I guess. No one wants a home with one bathroom. Three bedrooms and one bath worked for we family of five. Now everyone wants these monstrosities. Your friendly estate agent tells folks to buy all the house they can afford when they should be buying all the house they need. Yeah, listen to your real estate agent. She’s an expert.

That smaller home built in the 50s or 60s is going to cost more to run.

I'm thinking of the house I grew up in. We live in a slightly cooler climate. We have more than twice as much house (we both need home office space, and there is a room her parents used to use. It's a bit of overkill for us but not worth downsizing.) Our electric bill is lower than the house I grew up in. To refit that old house to modern insulation would be very difficult.
 

Loren Pechtel

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These investors create problems for wannabe homeowners in a number of ways: firstly, they compete for housing stock, which pushes up the prices of houses. This makes modest houses entirely unaffordable in many suburbs, even for dual-income families. Secondly, investors do not put their houses up for sale unless they expect to make a profit. So instead of a housing market driven by homeowners who regularly buying and sell as their needs change, we have a market where many of the property owners withhold keep their properties off of the market until prices increases enough to bring them an satisfactory profit. This artificial scarcity both reduces the number of houses that homeowners can buy and increases the prices that they must pay for the limited stock that's available.

Except for the little detail that such homes are still available, just as rentals. And if they aren't renting them out you have a big problem with laws that favor tenants over landlords too much.
 

Harry Bosch

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Well, discounting or lowering capital gains taxes increases the incentive to sell properties, not hold them. IOW, when capital gains taxes goes up, there is an incentive to buy and hold in order to avoid the taxes.

Discounting capital gains taxes increases the incentive for investors to sell properties...and then buy even more properties because there's more profit to be made.

Secondly, RE investors offer a valued service by offering housing to people who either can't afford the monthly D/S (which is usually significantly higher than rent) or they don't have the credit history to buy a home. Often times people also need to rent because they don't intend to stay in a location for very long. They move around due to their job. You shouldn't buy a home unless you plan to live there 5 years or more (as a rule of thumb).

You make a good point, and I'll have to moderate my view of investors.

Slightly.

The problem I'm seeing, and have lived, is that there are vast numbers of people stuck in rentals for long periods because they cannot get finance to buy a house. The average rental price in the outer suburbs is significantly higher than what I'm currently paying on my mortgage, even though I only bought my house last year. There are very few properties available to rent to people who can't afford a home loan. A lot of people are simply stuck in a rent trap where they are pouring huge amounts of money into rent because they can't afford to save up for their own home. The houses with cheapish rent are also tiny houses too small for a family, and/or decrepit shitholes, because investors around here spend as little as possible on maintaining their properties.

The people moving around due to their job are a tiny group compared to the tenants who have been priced out of the housing market. And I would venture that many of those people moving around for work are in careers that pay more than the median income. Investors aren't providing a valued service to these workers, or to anyone for that matter, by jacking up the rents on closet-sized apartments and suburban two-bedders that haven't been renovated since they were built in the 70's.

I could see an argument being made for a tiny fraction of housing being rented out to transient workers, but that isn't what's happening in the housing market. Instead, we've got greedy fucks buying up housing that should be in the hands of people, both middle class and working class, who are trying to put down roots.

In the US, lender standards were reduced a little to allow more renters the ability to buy, and it really bit the housing industry hard when the markets crashed. To get a mortgage today in the US, you need to demonstrate a good credit history and have some down so that you have "skin in the game". Lenders just want to make loans, they don't want borrowers who run from a mortgage if the value drops. Contrary to popular belief, banks don't like to take assets back. If someone has skin in the game or equity, they will be less likely to abandon their responsibilities if the economy turns or their personal situation changes.
 
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