Will houses ever become affordable again?

[Anonymous]

Anonymous wrote:I have to admit that I did not predict prices would continue to increase even with the sharp increase in mortgage rates. It makes sense that people don’t want to sell and take on a higher rate now, but I am curious if others honestly saw that coming? Unfortunately, I didn’t!

I actually know quite a few people - mostly DINK couples - who sold their homes in 2022 with the intention of rebuying once interest rates went up and expecting prices to soften. They realized good gains on their homes, so they are sitting on a fat stack of cash and renting.

But they are also really anxious - they don't own and prices keep unexpectedly going up. Boomers - with their all-cash purchases - are actually crowding out younger buyers.

My big regret is that we didn't buy a vacation home during COVID at sub-3% interest. We should've picked up a pied-a-terre in NYC when the condo market declined there, or bought something up in New England for summer/winter use.

[Anonymous]

The feds also are not going to cut rates any time soon. People keep dreaming and are in denial.

You cannot time the market. All you can do is choose your time when you enter or leave the market. Speculating that “prices will correct” is just dumb. Prices are correct, the market determines the price and the market keeps paying because people KEEP BUYING.

I don’t make the rules. But lying to yourself won’t get you any closer to being a home owner (if that’s your goal).

[Anonymous]

I’ll be the naysayer who believes prices will become more affordable. See the WSJ article today on the cost of homeownership. Taxes and insurance keep rising at a rate that will push many homeowners to sell. This, coupled with the Boomers moving out, will result in a softening of the market. I have no idea if prices will actually decrease or just stop increasing nor do I predict when this will happen.

[Anonymous]

As soon as interest rates start to come down a little, prices will shoot up even more.

PP who mentioned boomer will leave a lot of money for their offspring has a point...with the huge reduction in estate taxes an increasing portion of today's first time home buyers, especially in the DMV, have an inflated first time home buyer budget...which also keeps prices high.

[Anonymous]

Boomers are responsible for most of the home purchases since COVID. They are the ones with the cash, they are a big generation. Some are downsizing. But many of them are just adding to their RE portfolio without shedding properties - adding a vacation home, building their new construction "dream home," or simply up-sizing to something nicer. They also are severely tax adverse and don't want to sell if it incurs a big tax bill.

In short, lots of housing is effectively locked up by high rates, rich Boomers who loathe taxes, or professional investors crowding out owner-occupants.

The only way to "unlock" housing is through policy change or a major recession.

[Anonymous]

NO




How do you not understand this? Every capital city or assimilated has real estate prices that don't go down. Everywhere in the world.

[Anonymous]

Anonymous wrote:Boomers are responsible for most of the home purchases since COVID. They are the ones with the cash, they are a big generation. Some are downsizing. But many of them are just adding to their RE portfolio without shedding properties - adding a vacation home, building their new construction "dream home," or simply up-sizing to something nicer. They also are severely tax adverse and don't want to sell if it incurs a big tax bill.

In short, lots of housing is effectively locked up by high rates, rich Boomers who loathe taxes, or professional investors crowding out owner-occupants.

The only way to "unlock" housing is through policy change or a major recession.

I hear this a lot but I would love to see a deep dive, with supporting numbers, on who owns what in America. I've also heard the problem is foreign investors.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Boomers are responsible for most of the home purchases since COVID. They are the ones with the cash, they are a big generation. Some are downsizing. But many of them are just adding to their RE portfolio without shedding properties - adding a vacation home, building their new construction "dream home," or simply up-sizing to something nicer. They also are severely tax adverse and don't want to sell if it incurs a big tax bill.

In short, lots of housing is effectively locked up by high rates, rich Boomers who loathe taxes, or professional investors crowding out owner-occupants.

The only way to "unlock" housing is through policy change or a major recession.

I hear this a lot but I would love to see a deep dive, with supporting numbers, on who owns what in America. I've also heard the problem is foreign investors.

Here's the latest generational stats from NAR:
https://www.nar.realtor/research-and-statistics/research-reports/home-buyer-and-seller-generational-trends

In 2020-2022 Boomers were buying the most. In 2023, Millennials finally became the largest buying cohort - at record high prices + interest rates not seen in 25 years.

[Anonymous]

Anonymous wrote:The only way is to buy further out (loudon county) and then move closer and closer into dc by upgrading as you build wealth. There’s no way to get an expensive house without a high income.

Sorry but Loudoun county has become pretty unaffordable. “Further out” now means Berryville, Winchester, West Virginia.

[Anonymous]

Anonymous wrote:


NO




How do you not understand this? Every capital city or assimilated has real estate prices that don't go down. Everywhere in the world.

Well I have certainly seen threads on this board of people sharing how much of a loss they have taken on real estate previously. Seems to show that it does sometimes go down

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Our only true hope is if Biden is reelected. And even then it would require an enormous number of stimulus check sent to undo the rapid increase in prices. I have serious doubts that Congress has the fortitude to pass this.

Although I also do hope Biden gets reelected, honestly I don't think stimulus checks and pumping more money into the economy will solve the problem, hell I would argue that caused the problem in the first place.

During the pandemic, not only did the government pumped a lot of money into the economy. First of all the COVID stimulus checks, which rather than targeting those who lost their job, just gave everyone $$. Then they paused student loan payments (for far too long, I would argue the pause was unnecessary for most people). Last the foreclosure (and eviction I guess) moratoriums also ensured that supply stayed low. And last (granted this is out of the executive office's control), FED rates were kept low for far too long (making mortgages much cheaper than they should be, causing house prices to increase, and also causing the inflation in other sectors).

We don't need to government artificially pumping more money in, this will only make the problem worse.

If you look at the underlying components contributing the most to inflation today, it's housing and insurance. And the insurance portion is driven by the fact that natural disasters are becoming more frequent/severe and the cost to rebuild is so high (due to the high cost of real estate).

We are going to be stuck in this cycle for a while, until either more supply is quickly added (would require something like a Manhattan Project for housing) or we get a real recession with lots of widespread pain that forces the hand of investors to dump supply on the market.

Agreed either some increase in supply (through a government intervention providing incentives to build) or some form of a moderate recession that forces people to sell.

I guess another possibility is (and I do not know how realistic this is) is if Trump wins the next election (god I really hope he wont) and then moves certain federal agencies outside the DMV area. If those jobs move/leave the area, I could see it having a dent in the DMV market as well (increased supply and reduced demand). There are around 374k federal government employees in the DMV area (https://fred.stlouisfed.org/series/SMU11479009091000001SA) which is a significant number. A reduction in that could have some serious (negative imo) ripple effects for the area.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Our only true hope is if Biden is reelected. And even then it would require an enormous number of stimulus check sent to undo the rapid increase in prices. I have serious doubts that Congress has the fortitude to pass this.

I'm curious because if you look at the Trump years, housing was more affordable and inflation was extremely low, so why would you pick Biden if you want more affordability because it's under Biden that housing became extremely unaffordable. I'm not excusing Trump as I don't like the man, but it's denial to pretend the economy wasn't great for his tenure and real wages were outpacing inflation, until COVID hit and distorted everything but he wasn't responsible for COVID.

Our current situation is 100% related to how we reacted to COVID with massive stimulus infusion and sending interest rates to record lows that lasted through 2022. Most people with mortgages have extremely low interest rates by now, meaning they have golden handcuffs and can't sell to trade up as people normally do, restricting the supply of housing. Then sharply higher interest rates in a short period has made housing even more unaffordable. On top of this is enduring inflation that is turning out not to be transitionary.

Agreed, the current issue we have 100% has to do with how we responded to COVID. Both administrations pumped money f into the economy. The PPP Loans, the COVID stimulus checks (irrelevant of if you did or did not lose your job, and frankly for many people even absent the COVID checks, COVID improved their finances since no more need to commute and etc), the ridiculously long length of time for which student loan payments were put on pause (sure 2020 made sense, but by 2021 there was no need to keep loan payments frozen) and etc. And of course the low interest rates for too long (granted theoretically the president does not have control of that at all).

That being said, a vote for Trump would still be a terrible, terrible idea. I am no fan of Biden (and extremely left leaning policies), but the alternative (Trump) is far far far worse.

[Anonymous]

Not in the DMV. Not inside the beltway, anyway.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:If we build more housing. Basically the great recession killed housing starts and they have never gotten back to where they were.

That won't affect the prices because if you build it, they will come. So many people want to live here, they just keep packing them in. Increasing supply from an economic principle should lower price but in reality for real estate in the DMV that won't happen and hasn't happened because more and more people just keep moving here. So more demand with more supply.

That was part of the missing middle argument, that home ownership is like a property ladder and in order to make those apartments and homes more affordable at the bottom of the ladder, we needed to increase supply in the middle and people move up the ladder, freeing cheaper housing, stabilizing prices. But that assumes a limited demand. In reality, there is just too much demand and it keeps increasing. Hence you can keep building gigantic $2 million duplexes and THs and people will STILL buy them. Prices will never go down here.

Prices will stabilize with more supply IF you sharply tax investment properties/2nd homes. The issue is that people retain their cheap condo/starter home on the bottom of the ladder and rent it out. You need to force that supply back into the ownership market for the virtuous cycle to continue. Also need to ban LLC's from owning SFHs, townhouses, and individual condo units. If big money corporates like Blackrock want to own RE, they need to build or purchase large multifamily developments to rent out.

None of those things are going to happen in government. Stop with the fairytales.

Not PP but i agree it's unlikely to occur. I also agree it would actually be a big and very beneficial step if it did.

+2.

[Anonymous]

Anonymous wrote:Boomers are responsible for most of the home purchases since COVID. They are the ones with the cash, they are a big generation. Some are downsizing. But many of them are just adding to their RE portfolio without shedding properties - adding a vacation home, building their new construction "dream home," or simply up-sizing to something nicer. They also are severely tax adverse and don't want to sell if it incurs a big tax bill.

In short, lots of housing is effectively locked up by high rates, rich Boomers who loathe taxes, or professional investors crowding out owner-occupants.

The only way to "unlock" housing is through policy change or a major recession.

This is my parents. They own multiple homes. There's one they really should sell but they won't because they don't want to pay taxes on the gains, even though those taxes would not be particularly large relative to the sale or their worth. They just hate the idea.

Another factor in their thinking is that for their generation, real estate has been THE way to get wealthy. My parents didn't go to college, they don't own stock, etc but property values have absolutely skyrocketed during their lifetime. It's difficult for them to let go of what they see as a source of wealth and security. I won't see that kind of gain and so my attitude toward real estate is different.