Reply to Wall Street thinks US homes are overvalued by as much as 30+%

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Reply to "Wall Street thinks US homes are overvalued by as much as 30+%"

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]It is true that homes are grossly overvalued in much of the US and Canada. Income doesn't support these prices, particularly with higher interest rates. Average income and average home prices are completely out of whack by historical standards. But how it unravels is anyone's guess. Home prices continued to go ever up in 2007, and then collapsed in 2008. The difference this time is that the banks are in good shape. So I'm not sure how we get to a more balanced real estate market this time. But invariably, home prices and income will revert to an equilibrium. But how and when is unclear. [/quote]

I think it depends on what you mean by balanced. Gradual slowing of price increases and some decreases seems very probable. A crash does not. SFHs in desirable areas aren't going to lose much value. One reason is that we haven't built enough homes to keep up with demand since the crash. And now that we have higher interest rates the building that has been happening will start to slow.[/quote]
You are right. But the reason is not that we haven't built enough homes. There is no more land to build more houses in DC and its close-in neighborhoods. Enough houses are being built in the exurb but people want to live close to DC. The supply of houses in DC can never increase to keep up with the demand. That's why prices in DC will never drop. 
[/quote]

Exactly. And look at California. Why their real estate is so expensive is because they have run out of land to build on. You have to go deep into the hinterlands to find cheaper land on a large scale to build the subdivisions of old. Most of the open lands you see outside SF or LA are in conservations and off limits.

Zoning restrictions in existing suburbs also make it difficult to build more affordable housing as it would require demolishing SFH on a large scale to build multifamily or attached housing and that is a political battle no municipality is going to take on. [/quote]

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