Reply to Spring Market=More Houses?

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[quote=Anonymous][quote=Anonymous]The jobs comment is spot on. People generally "move" for 4 reasons: (1) to adjust housing consumption, (2) to get a new job, (3) to retire or (4) they die (the final move). When there are no jobs elsewhere, (2) dries up. When seniors aren't comfortable with their 401k balances, (3) dries up. Because there are fewer type-(2) and type-(3) moves, there is less inventory, so moving to getting a bigger/smaller home becomes less prevalent. We then end up with a housing market that is entirely driven by the death of the elderly. Virtually every home in our neighborhood that has gone up for sale in the past two years has been an estate sale. QE arguably made things even worse in places like DC because of the interest rate lock-in that could jam up the housing market for the next decade. I suspect that in terms of volume, things are not going to be back to normal for a very long time.

[quote=Anonymous][quote=Anonymous][quote=Anonymous]Besides people not wanting to give up their low interest rates, they also can't sell even if they wanted to because there is no house to move to unless they are moving out of the area or way out to the burbs.  The entire market is just locked up.

[/quote]

I think this is accurate in a lot of cases. Every house we've seriously pursued since we've been looking has been owned by an older couple with grown children who is retiring out of the area. However, we've looked at a lot of houses owned by younger families, too, so it's not universally true. I don't know where those families planned to go, though.

What's going to break this self-reinforcing cycle?[/quote]

Job mobility and growth in the rest of the country outside the bubble areas of DC/SF/LA/NYC...

There used to be booming economies in the sunbelt, but now they have nothing. Rust belt is barely hanging on. Texas is not doing too bad but can't absorb everyone.

It's really a jobs problem, which is why Yellen will fix it.

Also, people can't retired and move to Florida b/c their 'conservative' investments are earning 0%; retirees are freaked out by stock market roller coaster, so can't (and shouldn't) take on riskier assets, so they really can't retire fully either.  Yellen will fix this too: QE winds down 2015, 6 months later rates rise. Boom retirees now have a little cash flow and can buy that condo in Boca AND have money for food/med.[/quote][/quote]

Think about, buyers will have to see massive price drops to make up for losing their low rates, and if prices drop, they cant sell.

So basically the only recourse will come when Baby Boomers are forced to move to retirement homes.  The oldest boomers are now 68; retirement homes come into picture in your 80s.  So we have a good 15 yrs before market kind of normal again,[/quote]

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