I anticipate that mortgages will continue to push past 30 years into a strange 45-year+ territory, and we'll begin to see Japan-like multi-generational mortgages. Actually, in reality this is already happening, because people buying homes past the age of 37 (think retirement at 67, but these people are still working and trying to figure out estate handling late in the game) are passing on their mortgage to their children. I am personally seeing this with my friends. No headroom for paid off inheritances!
Alternatively, if the federal government does not prevent it from happening, residential REITs will buy them all up and force people to rent.
Residential REITs need to profit when they buy a house. An individiual homeowner doesn't, they can pay more if they want to. And individual homeowners get subsidized loans, and in many states subsidized property taxes, they can have a much lower monthly payment, and afford to offer a higher sale price. So for move in ready homes, the seller will almost always go with an owner occupant.
The real problem is with investors buying homes that aren't move in ready. Rehab loans are expensive and risky, individual buyers can't compete with investors, and the sellers are the ones with the short end of the stick.
From an article in September: "Blackstone Group, which blazed a trail for Wall Street in 2012 when it formed Invitation Homes and became the largest owner of single-family rental homes in America, has returned to a familiar watering hole." [1]
It's another way to milk the middle class.
[1] https://www.housingwire.com/articles/blackstone-gets-back-in...
The issue is part land scarcity driving up the cost of land and part the transition of our economy out of production and into consumerism.
Building has never been cheaper, and even quality has improved, including working through some pretty bad materials changes (like PEX plumbing, or chinese drywall).
We no longer really do nearly as much blue collar work as we used to, and many of the unskilled blue collar jobs have seen ridiculous wage stagnation. Companies have offloaded that to China, Mexico, Vietnam, etc, where they havent automated it.
Heck our population doesnt WANT those jobs. Theres a TON of demand for trades work and more are retiring than filling those gaps, but our society has pushed hard to posit that college is the only path to success and trades work is to be looked down upon.
Add to that our population has never been higher. In fact its growth has stagnated the worst since the Great Depression based on the intials of the 2020 Census, which is not a good omen.[1]
https://www.pbs.org/newshour/nation/census-texas-gains-congr...
Do you mean it was a significant change?
The federal government wouldn't really be able to prevent REITs from buying up homes.
Why wouldn't it? If this was bad enough the government could just pass limitations on it. Hell, the government could probably ban REITs overnight if that was wildly popular.
That's a bunch of horse hooey, as the customers in all housing markets (outside of a few global cities) are all local. Median income + credit conditions = how much buyers can afford.
> The federal government wouldn't really be able to prevent REITs from buying up homes.
Of course not, but no matter what kind of black magic Blackstone is weaving, they cannot get a more than a trivial number of people to rent a 3BR apt for $10K / month (approx price for nice 3BR in Manhattan). Once again, the population's median income is the driver.
If you do, you put average people at REITs out of work. This isn't a terrible thing if you ask me, because not much of it is real estate specific. REIT HR people can find work at other companies, developers and salespeople, too. But it's not a good look, I suppose?
Real estate is a real problem that no one seems to want to touch. "The rent is too d*mn high!"
Correct. The national median income is insufficient to purchase a home in the most expensive cities in the country. That seems reasonable?
The national median household income is about $65,000. That’s enough to afford a mortgage of somewhere in the $300,000 to $350,000 range.
Is that enough for San Francisco? Absolutely not. But that will buy you a nice house in the vast majority of the country.
California has garbage housing policies. San Francisco is even worse. You can buy a lovely place in Dallas, Kansas City, Atlanta, etc on national median income.
I do agree with you regarding location, though.
It's not clear if the GP was referring to national median income. My interpretation was that they may have been referring to local median income. Is the median family income of SF ($136k, I think) enough to buy a home there?
Basically if you have a home loan from 2+ years ago & still have the same level of steady income, it probably makes sense to refinance.
At the risk of veering into financial advice, paying extra principle early is almost never a good idea. Instead, put that money aside into an investment account and use it to pay off the mortgage once the sum is greater than the balance.
Assuming markets beat your interest rate, you'll have a higher return and you have the emergency fund in case something catastrophic happens. If you pay that to the bank you can't get it back in an emergency, and you will only cut down on the front-loaded interest--which will likely be under market returns.
High net worth individuals it would hurt less as they usually have way more in assets such as stocks. But in the middle class, their stock exposure is often limited to their 401k or retirement plan.
I know quite a few people who had a downpayment in cash waiting to buy a house before this all started and are still looking. That value of cash went down quite a lot over the past year. Houses are up 40-50% YOY in some cases here (Arizona).
If wages don't go up though, this will also hurt the poor significantly.
For the next several months we'll be in a period of base effects. That means that year over year comparisons are going to look alarming.
Think back to what was happening one year ago. The economy almost completely shut down. Return to "normal" is going to give a lot of weird readings.
Articles like this should point this out, but don't. They should note, for example, the % drop in single-family housing starts YoY for 2020 for comparison.
The article hints at the phenomenon, but fails to actually quantify it. This leads to a more sensationalistic article that might attract eyeballs, but does a poor job of informing.
1) Lumber mills shutting down because of weak demand and tariffs.
https://www.woodworkingnetwork.com/news/woodworking-industry...
2) Curtailment of remaining production because of coronavirus
https://www.woodworkingnetwork.com/news/canadian-news/corona...
3) The housing market going a little nutty
https://www.vox.com/22264268/covid-19-housing-insecurity-hou...
4) I imagine record low interest rates also contributed
- WFH people fleeing high COL cities, buying fixer-uppers, and paying whatever to renovate
- Rolling covid shut-downs of companies that make wood products like OSB glue or treated wood chemicals
- Freight costs
- Trailing effects from a bad fire season and the Texas ice storm repairs
- Tariff repercussions
- Russia is planning to stop exporting raw logs next year. They are about 12% of the worlds supply.
- Speculators profiting off the volatility
Why would they do this? Is this a way of getting back at the US for sanctions? Seems like they're shooting themselves in the foot.
How can this be the case when lumber prices are surging in Canada as well? You'd expect that if the price was in response to tariffs then the origin country would be flooded with supply?
checks the futures market
And indeed it is. May trades 40% above Nov on CME.
So if you want to buy a rural house, you can just....wait until a couple of years after the pandemic?
I don't know why you would rush to build a house right now, unless you want to live in technocrat-favored places like Austin and Denver that are seeing demand creation due to permanent WFH among Big Tech companies.
There are places where home prices are just getting back to where they were in 2006, though. You can certainly end up underwater on a mortgage and stuck. Property taxes, insurance, and maintenance are high fixed costs with a home.
That's a funny way to spell government appointed central bankers who fix the price of money.
Darwinian forces always win.
"When baby boomers hit a median age of 35 in 1990, they owned nearly one-third of American real estate by value. In 2019, the millennial generation, with a median age of 31, owned just 4 percent... that gap will probably narrow by the time they see 35. But they’re not likely to reach 30 percent of the housing market — or even the 20 percent attained by the smaller Generation X at the same point in their lives."
> Millennials are less likely to be homeowners than baby boomers and Gen Xers. The homeownership rate among millennials ages 25 to 34 is 8 percentage points lower than baby boomers and 8.4 percentage points lower than Gen Xers in the same age group.
https://www.urban.org/sites/default/files/publication/98729/...
In my area in particular, I live outside of a city hit hard by COVID, and that had lots of workers who could transition to WFH. The combination means that city dwellers have flocked to the local suburbs in massive quantities, often buying up the cheapest houses & either immediately expanding them or simply knocking them down completely to rebuild from scratch. As a result, not only is it difficult to find local contractors available for even minor home improvements, local property values have spiked as much as 30% over the last 14 months. This has been greatly assisted by mortgage interest rates that as incredibly low-- I just refinanced and saved about 20%/month on my mortgage and an overall $50,000 saving over the life of the loan.
And steel makes a much better frame. Fire resistant, termite free, mold free, holds up better in earthquakes and floods, stronger, doesn't rot, doesn't warp. The problem with the construction industry takes way too long to adapt new patterns, even long after shifting technology and economics makes it compelling.
Even last year, when I was buying lumber from Home Depot, they cancelled parts of my order, raised the price on certain items by almost 20% and never added them back.
I had to fight them for a week and it took over a month just to get a fairly modest amount of lumber delivered.
At least in this area, the price has a lot more to do with NIMBYism than the cost of materials.
This is just people being taking advantage of their housing...investment/tax shelter/savings plan that is bidding the price up.
Look at something like this zero red flags that I can see for $219k that is much cheaper than in most other large cities, housing doesn't have to be this expensive. https://www.redfin.com/IL/Chicago/1706-W-Huron-St-60622/unit...
If other large cities change to be more like Chicago, then you might change your opinion of them.
As such builders will try, but once lumber prices go down a bit they will probably lower prices to attract customers. Plumbers and the like might get a little more many as they are harder to train up, but for the most parts there is enough competition that passing savings on to customers is going to happen.
Since Oct. of last year, the base price of our model has gone up $215,000 and every lot in this phase (phase 1) has now sold. I suspect at least half of that increase is materials, and the rest is due to market demand.
The market is just crazy and in talking to my builder he has said supply shortages could last through EOY and into next.
Even if it’s cheaper, is it worth to have a cheaper but obviously less durable building when compared to brick and mortar?
It’s always been baffling for my southern European mind.
That said the US historically had a lot of wood. Most everywhere. So it was cheap and light[1] easy to transport. And wood if it's kept dry is durable. My house is 70 years old. The wood framing is totally solid. Previous house is 115 years old. The framing is also solid.
[1] House built of wood is probably 1/4 the weight of a house built of masonry.
There are new developments in the states where they produce the frames for the various housing 'templates' off-site, and then ship it to the plots and build the house there, almost like a lego kit.
Boomer: "Well, the 401-K is up a ton. Can't seem to spend the cash pouring out. Let's upgrade the house and buy a second home somewhere nice."
Millenial: "We still have no savings because rent is insane and incomes have not kept up with inflation for decades as capital has played a larger role in growth than labour. We continue to have no long term security from a pension. I guess we'll just keep slaving away..."
I do understand that it isn't a representative picture, but among my friends, none of us have ever done so well financially in our entire lives.
Been great for me as well but outside of people in tech, I don't know too many in crypto as they didn't have the funds to risk in the first place. Nor do they have much stock exposure outside of their 401k.
