U.S. Housing Market Is Nearly 4M Homes Short of Buyer Demand(wsj.com)
wsj.com
U.S. Housing Market Is Nearly 4M Homes Short of Buyer Demand
https://www.wsj.com/articles/u-s-housing-market-is-nearly-4-million-homes-short-of-buyer-demand-11618484400
111 comments
I have neither the capital nor the skillset required to do this, but if I heard of something like this actually taking place in a way that looked like it had a reasonable chance of success, I'd sweep the floors just to be part of it.
Same here. I think it’s time for a new model city, oriented to pedestrians plus micro mobility, running on green power, and with some pandemic firebreaks designed in. More affordable and entrepreneurial. In the same way that Levittown set the template for the following 50+ years, I think we’re hungry for a new model for the next few generations of human habitat. Building that is my life dream, but I have yet to figure out a way to do it without quantities of capital that I don’t have access to, so instead I post on HN :)
Why go to that extreme? Just go buy 200 acres of land somewhere, subdivide it, put some houses on it and turn it into a little neighborhood. You could make a buck and reduce the housing shortage. Except I wouldn't know where to start, being neither a home builder nor real estate developer. Are there "real estate development" bootcamps?
Many folks don’t realize everything required just to build one house on one buildable lot. There’s setbacks to consider, engineering the septic system, getting a curb cut, utilities (which have their own building constraints), not blocking easements in doing all this, and actually putting a liveable house in all that.
Putting in a street is that magnified multiple times over plus dealing with additional demands from the town, making sure lots adhere to minimal zoning acreage, drainage, street lights, sidewalks, fire hydrants, on and on. Plus political maneuvering with the planning board to make all that happen. There’s also the financial part of being on the hook for the land and the construction loans while you deal with schedules for everything.
Putting in streets is an intensely multi-discipline skill.
Putting in a street is that magnified multiple times over plus dealing with additional demands from the town, making sure lots adhere to minimal zoning acreage, drainage, street lights, sidewalks, fire hydrants, on and on. Plus political maneuvering with the planning board to make all that happen. There’s also the financial part of being on the hook for the land and the construction loans while you deal with schedules for everything.
Putting in streets is an intensely multi-discipline skill.
For me the answer is because that’s not the kind of place I want to live so it’s not the kind of place I want to build. We don’t really have a shortage of conventional suburban housing. We have a critical shortage of walkable urban housing, the so-called “missing middle” which is denser than conventional suburbia but still single family.
A great example of that is the older parts of San Francisco, where I lived for years. There are lots of old Victorian homes that are comfortable single family residences with nice back yards, but at about twice the density of typical suburbia because they don’t have side yards (aka they are townhomes). Mixed in there are lots of 2-3 story buildings with shops and offices on the ground floor and apartments above.
That was a wonderful place to live! So wonderful, and also so scarce, that every place like that around the country is skyrocketing in price over the last 10-20 years.
What I would love to do is build a new town of middle density, “European style,” if you will. But that is so scarce because it’s illegal to build in the vast majority of US land area.
Hence, to do it, you need to be building somewhere outside the jurisdiction of cities and counties with conventional zoning, which really limits your options.
And finally, 200 homes isn’t enough to form the critical mass of a European small city. You probably need more like 10k homes (for a population around 25k) for it to work.
A great example of that is the older parts of San Francisco, where I lived for years. There are lots of old Victorian homes that are comfortable single family residences with nice back yards, but at about twice the density of typical suburbia because they don’t have side yards (aka they are townhomes). Mixed in there are lots of 2-3 story buildings with shops and offices on the ground floor and apartments above.
That was a wonderful place to live! So wonderful, and also so scarce, that every place like that around the country is skyrocketing in price over the last 10-20 years.
What I would love to do is build a new town of middle density, “European style,” if you will. But that is so scarce because it’s illegal to build in the vast majority of US land area.
Hence, to do it, you need to be building somewhere outside the jurisdiction of cities and counties with conventional zoning, which really limits your options.
And finally, 200 homes isn’t enough to form the critical mass of a European small city. You probably need more like 10k homes (for a population around 25k) for it to work.
Isn't that sort of housing essentially illegal to build?
(I'm describing the current situation there, not saying it is a good thing)
One issue is that the best place to build it is where there are already enough people to justify things like usable public transit, so that people living there can access a larger job market and so on.
(I'm describing the current situation there, not saying it is a good thing)
One issue is that the best place to build it is where there are already enough people to justify things like usable public transit, so that people living there can access a larger job market and so on.
Based around what economy though? Towns need an industry. Many are just remnants of old mining towns. A lot where the hospital is the largest employer are surviving on elderly health care. I think that's the biggest challenge to spawning a city out in nowhere.
Well, construction and everything that goes along with that for one - electricians, carpenters, plumbers, roadwork, and painters need restaurants and grocery stores, who can appreciate theaters and parks, with require maintenance,all of whom need hospitals, fire and rescue, police, and so on.
The hard part, IMO, is getting the whole thing started.
The hard part, IMO, is getting the whole thing started.
> Anybody have a billion dollars and want to go build some new cities from scratch? Seems like now would be a good time.
Something I found out. In the ten years after WWII the Federal government used it's WWII command economy powers to force builders to create new housing.
I think I've come down on the side that the current fad of monetarism plus the free market doesn't provide enough house stock. And reliably creates price bubbles.
Something I found out. In the ten years after WWII the Federal government used it's WWII command economy powers to force builders to create new housing.
I think I've come down on the side that the current fad of monetarism plus the free market doesn't provide enough house stock. And reliably creates price bubbles.
Why build a new city when you can build a new neighbourhood in an existing city? Building a new city is risky. Building a neighbourhood allows you to piggyback on the success of the host city. People already want to live there. Employers already want to open up shop there. If you have a billion dollars, use some of it to grease whatever wheels necessary to skirt the zoning ordinances.
Where can you find greenfield or brownfield land to build a new neighborhood? My county is already converting the last two large parcels into residential.
You don't need undeveloped land. You could increase density on land that is already developed. In the US, even urban areas have a lot of spots where land is used inefficiently: surface parking lots, wide streets, large setbacks, single-family detached homes. Consider that residential streets in American cities may be 25m wide, whereas a residential street in a traditional city is more like 3m wide.
Detroit. Which is only a half joking answer.
In other places there are probably a lot of things that could be done at the planning level to make densification more likely. That's not the same as a cohesive project, but it might have a similar effect.
In other places there are probably a lot of things that could be done at the planning level to make densification more likely. That's not the same as a cohesive project, but it might have a similar effect.
"Demand" is a bit misleading right now. A friend of mine put her place up for sale in Houston and 80% of the offers she got were investors. I suspect that it's not so much about actual housing demand, but the same huge appetite for investment that is driving the stock market boom.
And that's going to further mess up the housing supply for people who want to buy instead of rent.
I wonder if property tax could be stratified so people who actually live in their property pay less than outside investors? If something doesn't change, we may be careening towards a dark deepening of economic inequality.
It exists, it's called the Homestead exemption.
I looked that up. It seems to apply to shielding part of the equity in your house during bankruptcy, which seems to be unrelated to brundolf's comment about property taxes.
Are there states that have different tax rates for lived-in and rented property? If so, can you supply some specifics?
Are there states that have different tax rates for lived-in and rented property? If so, can you supply some specifics?
This is exactly the issue. Individuals cannot compete with a cash offer that often ends up much higher than the asking price. Almost nobody has that kind of cash on hand.
There is a ton of money exiting the bond market looking for yield, this is driving up stocks reducing earnings. Probably a lot of people exiting their previous investments looking for places to park their cash. I'm in this boat.
This is frustrating. After realizing I can only afford a small condo in Metro Vancouver area, I moved to a low COL city (relatively) 3 years ago. While the prices are still somewhat affordable from the West Coast standard, prices have gone up significantly in the past year alone.
> This is frustrating.
Understatement of the century. People started very bloody revolutions for much less.
Understatement of the century. People started very bloody revolutions for much less.
We have made it extremely expensive to build new housing in much of the United States.
Between Byzantine development regulations, density and growth caps, local zoning boards that allow any development to be dragged through years of negotiation as long as neighbors show up for meetings, the actual “building” part is very hard to get to. Beyond the cost of lawyers, years of property taxes paid while negotiations stall, etc., the years-long timescale of these developments also makes financing hard to come by, limiting the number of projects in progress at any given time.
No surprise that the result is not enough housing, and a huge increase in price: demand is growing and relatively inelastic — the population keeps going up and everyone needs housing!
Between Byzantine development regulations, density and growth caps, local zoning boards that allow any development to be dragged through years of negotiation as long as neighbors show up for meetings, the actual “building” part is very hard to get to. Beyond the cost of lawyers, years of property taxes paid while negotiations stall, etc., the years-long timescale of these developments also makes financing hard to come by, limiting the number of projects in progress at any given time.
No surprise that the result is not enough housing, and a huge increase in price: demand is growing and relatively inelastic — the population keeps going up and everyone needs housing!
Housing can't be simultaneously an investment and affordable.
For current homeowners, one good way to preserve and grow the value of your home is to support policies that reduce new supply from coming on the market.
New supply is prevented from coming on the market through high costs and ever expanding rules and regulations.
Persistent low housing supply is the expected outcome when housing is treated as an investment.
For current homeowners, one good way to preserve and grow the value of your home is to support policies that reduce new supply from coming on the market.
New supply is prevented from coming on the market through high costs and ever expanding rules and regulations.
Persistent low housing supply is the expected outcome when housing is treated as an investment.
> Housing can’t be simultaneously an investment and affordable.
This just isn’t true, it is only a contradiction if the type of housing remains constant, which it does in zero-development, extreme-construction-cost markets like San Francisco where public policy forbids the modification of (almost) any housing to increase density.
Here’s how it would work otherwise: family buys single family home in year A for $100k. Lives there for a while, then sells in year B for $200k. The buyer is a developer, who then constructs a larger building on that same lot consisting of 4 apartments that now each sell for $100k again. Original family gains in wealth, developer makes tidy profit, new families can still buy a place to live for $100k. All numbers inflation-adjusted, you pick A and B to make whatever return you think is reasonable.
This is how densification happened almost everywhere until zoning laws went crazy mid-century.
Note what you don’t get out of this arrangement: a neighborhood that doesn’t change for 40 years; the ability to live in the same type of house your parents did, in the same neighborhood, for the same price. But you could have the same amount of (indoor) space they did, and outdoor space through public parks and the like.
What’s not sustainable is everyone having a suburban style detached single family home without increasing density in perpetuity. That is what leads to this contradiction.
The non-density alternative is sprawl, where prices rise in long-established neighborhoods, and outlying new developments are where you can buy new houses for less—which is what you observe all over California.
This just isn’t true, it is only a contradiction if the type of housing remains constant, which it does in zero-development, extreme-construction-cost markets like San Francisco where public policy forbids the modification of (almost) any housing to increase density.
Here’s how it would work otherwise: family buys single family home in year A for $100k. Lives there for a while, then sells in year B for $200k. The buyer is a developer, who then constructs a larger building on that same lot consisting of 4 apartments that now each sell for $100k again. Original family gains in wealth, developer makes tidy profit, new families can still buy a place to live for $100k. All numbers inflation-adjusted, you pick A and B to make whatever return you think is reasonable.
This is how densification happened almost everywhere until zoning laws went crazy mid-century.
Note what you don’t get out of this arrangement: a neighborhood that doesn’t change for 40 years; the ability to live in the same type of house your parents did, in the same neighborhood, for the same price. But you could have the same amount of (indoor) space they did, and outdoor space through public parks and the like.
What’s not sustainable is everyone having a suburban style detached single family home without increasing density in perpetuity. That is what leads to this contradiction.
The non-density alternative is sprawl, where prices rise in long-established neighborhoods, and outlying new developments are where you can buy new houses for less—which is what you observe all over California.
Isn't it true by definition? If an asset stays affordable in the long run, then by definition it cannot be a good investment, as the definition of a good investment is an asset that increases in value faster than most other assets.
In my argument, one view of the asset (“a unit of housing suitable for a family”) remains affordable, while another view of the asset (“this particular detached 1200 sqft house on this 5000 sqft lot”) outpaces inflation in value growth.
The example I gave above is meant to illustrate this. “Housing” remains affordable — a family can still purchase a 1200 sqft unit in a desirable neighborhood for a reasonable amount of money.
But the value of a particular house or apartment grows our[acing inflation because (of course, assuming more people want to live in that area—which all housing price growth is predicated on anyway) the demand on land is high, and a developer can come in and increase density on any particular lot.
In other words, the cost of housing remains affordable while the cost of any particular house or apartment grows above inflation, because each particular unit reflects a claim on land, the comparatively scarce resource.
Everyone needs housing, but not everyone needs a detached single family home on a half-acre lot.
In other words, The piece that is missing from your assessment is that a house is two things: land and a structure on top; the value of the land can go up, ensuring a high return for the owner of the land+structure, even as new structures can offer fractional claims on that same land at a more affordable price.
I’m happy to dig in further here if I’m still not being clear!
The example I gave above is meant to illustrate this. “Housing” remains affordable — a family can still purchase a 1200 sqft unit in a desirable neighborhood for a reasonable amount of money.
But the value of a particular house or apartment grows our[acing inflation because (of course, assuming more people want to live in that area—which all housing price growth is predicated on anyway) the demand on land is high, and a developer can come in and increase density on any particular lot.
In other words, the cost of housing remains affordable while the cost of any particular house or apartment grows above inflation, because each particular unit reflects a claim on land, the comparatively scarce resource.
Everyone needs housing, but not everyone needs a detached single family home on a half-acre lot.
In other words, The piece that is missing from your assessment is that a house is two things: land and a structure on top; the value of the land can go up, ensuring a high return for the owner of the land+structure, even as new structures can offer fractional claims on that same land at a more affordable price.
I’m happy to dig in further here if I’m still not being clear!
Your examples still prove my point. In your first example, the house is a good investment but no longer affordable, and the high-density apartment is affordable but not a good investment. If the apartment becomes a good investment, then at some point even it becomes no longer affordable, i.e. an condominium/apartment in an expensive city like New York or SF. If it stays affordable forever then by definition it is not a great investment.
What is your point exactly? Yes, the same house is no longer affordable, but “housing” is affordable because you can now buy an apartment at a reasonable price.
The areas where housing is no longer affordable are the areas where you can’t buy any housing with the median income, not where the fanciest housing is inaccessible to the median income.
What form that housing takes (detached house, apartment in a duplex, then 4-pled, then larger apt building) will change over time as density increases.
The areas where housing is no longer affordable are the areas where you can’t buy any housing with the median income, not where the fanciest housing is inaccessible to the median income.
What form that housing takes (detached house, apartment in a duplex, then 4-pled, then larger apt building) will change over time as density increases.
My point is that real estate cannot be a good investment and affordable at the same time in the long run. In your example, if the affordable apartment stays affordable the next 20 years then it’s not a good investment. In many cities that small apartment was good investment because now even those small apartments are no longer affordable (i.e downtown Denver, downtown Austin).
No, because a house is a hedge on inflation. Once the house is paid for it is rent free, so your retirement investments can be smaller for the same standard of living.
Your example is incomplete - let’s say the lot can support up to 100 apartments, but it’s expensive to do so and profitable only in the long run.
Now comes prospective buyer C who can’t afford to live there unless new developer D buys and builds. However B is ok with their profit and doesn’t sell.
Unless you tax in a way such that the maximum capacity must be used (and that can be gamed easily) you’ll always run into this. This is the ideal situation but then incumbents will fight to change what maximum means.
The problem is that there’s no standard. If it were said that a living space must be 300sqft + 300 soft per person things would converge, but without that you get sprawl or comfortable density. A decent compromise is locale adjusted limits but then you run into the same original issue. Rinse and repeat.
Now comes prospective buyer C who can’t afford to live there unless new developer D buys and builds. However B is ok with their profit and doesn’t sell.
Unless you tax in a way such that the maximum capacity must be used (and that can be gamed easily) you’ll always run into this. This is the ideal situation but then incumbents will fight to change what maximum means.
The problem is that there’s no standard. If it were said that a living space must be 300sqft + 300 soft per person things would converge, but without that you get sprawl or comfortable density. A decent compromise is locale adjusted limits but then you run into the same original issue. Rinse and repeat.
> Unless you tax in a way such that the maximum capacity must be used
Indeed, there have been proposals to address this!
Indeed, there have been proposals to address this!
If you draw out your argument inductively, I think you'll find you proved the opposite of your claim. You get smaller and smaller houses until they cannot go smaller. Side note: smaller also translates into not affordable.
Not smaller houses — apartments that can be equally large.
Do it a few times, and you'll reach caged houses and kowloon of Hong Kong. Not a desirable vision.
I mean, you could also reach something like Tokyo as well, which is pretty desirable for a lot of people.
Fun fact: SF has a higher population density (18k/sqmi) than either HK (17.5k/sqmi) or Tokyo (16.5k/sqmi). Mind blown?
Truth is, density is super nonuniform — when people fear “Tokyo” they just don’t want to live in Shibuya or Ginza, not the leafy outer suburbs that are still part of Tokyo metropolis, and are quite nice.
With the exception of Manhattan (70k/sqmi), probably all the USA could double in density — enough to support another 70 years of population growth — with minimal effect on neighborhoods. This is one story-houses in inner suburbs becoming duplexes, two-stories going to 4, etc. over the span of 70 years. You’d barely notice the change.
Instead, we’ve decided to engage in the largest-ever wealth transfer from younger, poorer Americans to older, wealthier Americans the country has ever seen.
Truth is, density is super nonuniform — when people fear “Tokyo” they just don’t want to live in Shibuya or Ginza, not the leafy outer suburbs that are still part of Tokyo metropolis, and are quite nice.
With the exception of Manhattan (70k/sqmi), probably all the USA could double in density — enough to support another 70 years of population growth — with minimal effect on neighborhoods. This is one story-houses in inner suburbs becoming duplexes, two-stories going to 4, etc. over the span of 70 years. You’d barely notice the change.
Instead, we’ve decided to engage in the largest-ever wealth transfer from younger, poorer Americans to older, wealthier Americans the country has ever seen.
Developers many times in higher density areas don't often "sell" apartments. Rather, it is many times a lease. This doesn't necessarily help new families that want to purchase something for 100k, as their rent would keep them from making this into any investment.
In addition, to making something split into quarters each time it's "sold and redeveloped" isn't possible, as you'll run into a lack of space at some point. You could potentially do this one time.
In addition, to making something split into quarters each time it's "sold and redeveloped" isn't possible, as you'll run into a lack of space at some point. You could potentially do this one time.
>But you could have the same amount of (indoor) space they did, and outdoor space through public parks and the like.
Ahh, the future is bright.
Ahh, the future is bright.
I think it depends on what level of return you expect in an investment.
Since the industrial revolution (at least?) people have got richer, so incomes have grown faster than inflation in the long term.
So it is sustainable for the value of property to increase faster than inflation, in that sense property can indeed a valid and sustainable long term investment.
But overall, in the long term the value of property cannot increase faster than incomes. Where it does this can only be temporary and a slowdown is unavoidable.
Since the industrial revolution (at least?) people have got richer, so incomes have grown faster than inflation in the long term.
So it is sustainable for the value of property to increase faster than inflation, in that sense property can indeed a valid and sustainable long term investment.
But overall, in the long term the value of property cannot increase faster than incomes. Where it does this can only be temporary and a slowdown is unavoidable.
>
This just isn’t true, it is only a contradiction if the type of housing remains constant, which it does in zero-development, extreme-construction-cost markets like San Francisco where public policy forbids the modification of (almost) any housing to increase density.
If the housing supply rises, this puts downward pressure on home prices, which means they stop being a good investment.
Consider a hypothetical where no new housing was built for a decade, and existing housing is wildly overpriced. If your thesis is correct, then someone buying on the last day of the building moratorium is not making a good investment, because prices will either drop, or stagnate right after they bought.
If the housing supply rises, this puts downward pressure on home prices, which means they stop being a good investment.
Consider a hypothetical where no new housing was built for a decade, and existing housing is wildly overpriced. If your thesis is correct, then someone buying on the last day of the building moratorium is not making a good investment, because prices will either drop, or stagnate right after they bought.
Only true if the house was over valued. Otherwise the house should more or less pace inflation, but you get to live there.
The house is obviously overvalued in dollars, compared to that same house to a world where construction was happening.
Unless you mean to tell me that the cost of housing is the same regardless of whether or not construction is happening... (Which would be a truly odd claim.)
Unless you mean to tell me that the cost of housing is the same regardless of whether or not construction is happening... (Which would be a truly odd claim.)
Err, yes, compared to a world where construction was happening.
So what you're saying is that housing can only be one of 'available to people', or 'a good investment'.
The thing with good investments in that in a world of low interest rates, prices for them get inflated, as mountains of cash are trying to find some place to go.
The thing with good investments in that in a world of low interest rates, prices for them get inflated, as mountains of cash are trying to find some place to go.
No, because a house as an investment is a hedge on inflation and a place to live rent free once it is paid for. As such the return on investment calculation is different than other investments.
Precisely. I'd love for someone to "disrupt" this sector with radically better quality at lower prices, but entrenched interests have foiled every attempt so far. I watching to see what effect a higher percentage of remote workers and ubiquity of Amazon delivery will have in the coming years (e.g. increased movement to exa-burbs and rural areas. conversion of office and retail space to apartments/condos). There's plenty of land for housing, just not affordable in the short list of most desirable spots.
I wish housing was more like the market for cars. People generally don't buy cars and sit on them as an investment for years waiting for them to gain value to flip.
The difference is we don't demand that automobile manufacturers only make "affordable" cars and people with cars can't stop new cars from being made
But it has been treated like an investment, so that’s where we have to start from with solutions. How do we put the genie back in the bottle without bankrupting everyone?
> Housing can't be simultaneously an investment and affordable.
I see this cliche often but it's simply wrong. Housing prices don't need to increase over time for housing to be a good investment, as long as the rental yield is sufficiently high relative to cost of capital.
I see this cliche often but it's simply wrong. Housing prices don't need to increase over time for housing to be a good investment, as long as the rental yield is sufficiently high relative to cost of capital.
Why does someone's primary home need to be an investment vehicle at all?
Doesn’t need to be, but it can
Society wants stability and homeownership provides that.
So owning a home is valuable - add capitalism, land, time and you get an investment whether you want it or not
Society wants stability and homeownership provides that.
So owning a home is valuable - add capitalism, land, time and you get an investment whether you want it or not
It doesn't need to be. But people look at what has happened to house prices over the last 30-50 years, and see that it has been a good investment. So people are buying houses thinking "investment plus place to live" instead of "place to live".
what a boring civilization we built
nothing make sense, and nothing is fair
nothing make sense, and nothing is fair
I am at the tail end of a 4 year journey of building my own house. It started with 3.5 years of research. Because of the pandemic and wildfires impacting lumber prices, this might be the worst time in a hundred years to build anything that’s made of wood.
I love the 4 years with 3.5 of research! Apart from the terrible timing with cost of materials and such, do you think it'd still be easier to build and to buy?
Looking at the article it seems like on of the issues for the housing crisis is lack of development.
Looking at the article it seems like on of the issues for the housing crisis is lack of development.
Build or buy? It has no answer. There are too many different factors. Are you hiring a general contractor, subbing out or truly building yourself? Does your city/county process permits and variances in a timely manner? Do they charge you tons of money for those services? Do they make you carry out extensive environmental surveys and impact reports? Are you paying in cash or borrowing? Do you want every detail to be perfect? Do you want high performance thermal envelopes and low air leakage? Do you want to have special certifications like passive house? How long are you willing to dedicate to the process of completing the project?
There is no correct way to build. There are many different methods, standards and philosophies and none of it is backed up with very much evidence because of the culture of the building trade and how old it is. Your own personal judgement and research will determine how everything is done down to the type and placement of fasteners. The only way for you to understand if it’s worth it is for you to learn everything about it, put it in the context of your situation and have your own opinion.
What I will say is that almost every house in the United States is built poorly. The common standard practices are very backwards and prone to failure. I would never buy an expensive house unless most of the value was in the land.
There is no correct way to build. There are many different methods, standards and philosophies and none of it is backed up with very much evidence because of the culture of the building trade and how old it is. Your own personal judgement and research will determine how everything is done down to the type and placement of fasteners. The only way for you to understand if it’s worth it is for you to learn everything about it, put it in the context of your situation and have your own opinion.
What I will say is that almost every house in the United States is built poorly. The common standard practices are very backwards and prone to failure. I would never buy an expensive house unless most of the value was in the land.
>What I will say is that almost every house in the United States is built poorly
I would love more details on why this is (certainly I'd expect poor build quality in certain housing boom areas in Florida, but not everywhere).
Also I've always thought reinforced concrete was the way to go, over wood, if I lived anywhere near hurricanes. I also thought this might mitigate against high wood prices recently. Apparently it doesn't though - still need molds made of wood to hold the concrete in place while it dries and those are generally thrown away after.
I would love more details on why this is (certainly I'd expect poor build quality in certain housing boom areas in Florida, but not everywhere).
Also I've always thought reinforced concrete was the way to go, over wood, if I lived anywhere near hurricanes. I also thought this might mitigate against high wood prices recently. Apparently it doesn't though - still need molds made of wood to hold the concrete in place while it dries and those are generally thrown away after.
I wonder if this will kickstart other technologies.
For example, with PG&E electricity in CA costing up to 40¢/kwh solar becomes practical.
I don't know what other technologies, maybe modular/prefab or 3d-printed concrete or ...?
For example, with PG&E electricity in CA costing up to 40¢/kwh solar becomes practical.
I don't know what other technologies, maybe modular/prefab or 3d-printed concrete or ...?
Most of those don't save anything and you often have to make poor comproises as well. Conventional houses already come with most parts cut to size. I've never seen someone bring a sawmill to a construction site to make 2x4s for example.
There is some interesting work being done in ICF, which is better than 3d concrete. Prefab houses are limited to what goes on a truck (meaning weird walls), and often done to mobile home quality.
There is some interesting work being done in ICF, which is better than 3d concrete. Prefab houses are limited to what goes on a truck (meaning weird walls), and often done to mobile home quality.
Is it bad enough to consider alternative materials? Concrete? Metal? Or are those solely for high-fashion, super-high-costs houses one would see on Grand Designs?
for the US Market, how does price inflation, local govt collusion and rent-seeking by boomers fit in, in your opinion?
The problem with the US market isn't really any of that.. it's the extreme shortage of raw materials due to construction booms throughout the world, but particularly in the US because money is "free" (low interest rates). Lumber is at least twice the price it was a year ago, if not more. Cement is up (so concrete is up). Rumor is that China just cut off fiberglass shipments to the US so now a lot of other tangential goods are going to go up (showers, bath tubs, hot tubs, insulation, etc).
Great time to be a builder, bad time to need a building.
Great time to be a builder, bad time to need a building.
OP did mention price inflation as one of the factors.
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The market is quite insane right now. We have a second property we're likely to sell this year, and the market estimate is up over $70k from last year. When we talked to a realtor we were informed that it would probably move inside of 2 days with multiple competing offers. This is over 50km from the nearest major city.
Buyers are waiving nearly every contingency, they know sellers basically have all the marbles right now.
It's a 180 degree turnaround from 3-4 years ago when the same property would have lost us over $100k on the market. A nearly $200k markup over less than 4 years is crazy.
Buyers are waiving nearly every contingency, they know sellers basically have all the marbles right now.
It's a 180 degree turnaround from 3-4 years ago when the same property would have lost us over $100k on the market. A nearly $200k markup over less than 4 years is crazy.
> A nearly $200k markup over less than 4 years is crazy
I'd wager that 75-90% of that gain came in the last 12 months alone.
In the Santa Cruz Mountains, houses are going within days well over asking to buyers with all cash offers.
Our realtor friend listed a house for $1.5M, and within 48 hours had 7 bids, topping out at $1.85M. The people who bid $1.6M didn't even get a counter offer.
They said it's a mix of Silicon Valley millionaires and billionaires buying 2nd+ homes outside of the city.
I'd wager that 75-90% of that gain came in the last 12 months alone.
In the Santa Cruz Mountains, houses are going within days well over asking to buyers with all cash offers.
Our realtor friend listed a house for $1.5M, and within 48 hours had 7 bids, topping out at $1.85M. The people who bid $1.6M didn't even get a counter offer.
They said it's a mix of Silicon Valley millionaires and billionaires buying 2nd+ homes outside of the city.
Santa Cruz mountains aren’t like middle of nowhere though... They’re very desirable (outside of being on fire all the time). They’re no different than the rest of SV when it comes to the general market...
> In the Santa Cruz Mountains, houses are going within days well over asking to buyers with all cash offers.
Where I live in south Orange County, as well. Listings are in the market for 1-2 days tops in my neighborhood. It's ... insane.
Where I live in south Orange County, as well. Listings are in the market for 1-2 days tops in my neighborhood. It's ... insane.
> We have a second property we're likely to sell this year, and the market estimate is up over $70k from last year. When we talked to a realtor we were informed that it would probably move inside of 2 days with multiple competing offers
so, if it'll go so fast, couldn't you sell for even more?
i keep hearing these second hand tales of houses going under contract in <24 hours, and that seems to imply at least a few more dollars could be squeezed out of the sale.
so, if it'll go so fast, couldn't you sell for even more?
i keep hearing these second hand tales of houses going under contract in <24 hours, and that seems to imply at least a few more dollars could be squeezed out of the sale.
If you have 30 offers within 2 days, but then reject them all waiting for another buyer, the buyer you wait for has to outbid the 30 previous buyers to make it worthwhile. The likelihood of that is slim.
Most serious buyers are ready to go in this market and will come in strong with their best offer days after it hits the market.
Plus, realtors put a lot of pressure on sellers to accept an offer especially when it's over asking price. They'd rather have 2 sales a week at 98% of max price than 1 sale a week at 100% of max price.
Most serious buyers are ready to go in this market and will come in strong with their best offer days after it hits the market.
Plus, realtors put a lot of pressure on sellers to accept an offer especially when it's over asking price. They'd rather have 2 sales a week at 98% of max price than 1 sale a week at 100% of max price.
> If you have 30 offers within 2 days, but then reject them all waiting for another buyer, the buyer you wait for has to outbid the 30 previous buyers to make it worthwhile.
my recollection from buying a house (even in the buyer's market of 2008? or 2009? eh), was that the seller had 7? days to accept/reject. so sellers now should be able to just accumulate a pile of offers, i'd think, before having to reject any?
> They'd rather have 2 sales a week at 98% of max price than 1 sale a week at 100% of max price.
well, that certainly makes sense. that extra 2% times their 7% probably isn't worth any risk, let alone screwing around further on your house when they could be moved on to the next one.
in the end i expect a bunch of factors are contributing, and i'm expecting the explanation to be more satisfying than whatever reality is going to provide.
my recollection from buying a house (even in the buyer's market of 2008? or 2009? eh), was that the seller had 7? days to accept/reject. so sellers now should be able to just accumulate a pile of offers, i'd think, before having to reject any?
> They'd rather have 2 sales a week at 98% of max price than 1 sale a week at 100% of max price.
well, that certainly makes sense. that extra 2% times their 7% probably isn't worth any risk, let alone screwing around further on your house when they could be moved on to the next one.
in the end i expect a bunch of factors are contributing, and i'm expecting the explanation to be more satisfying than whatever reality is going to provide.
> my recollection from buying a house (even in the buyer's market of 2008? or 2009? eh), was that the seller had 7? days to accept/reject
The expiration of the offer is determined by the prospective buyer. You can write an offer that expires in 1 hour if you wanted to. But most people do say 1 week.
> so sellers now should be able to just accumulate a pile of offers, i'd think, before having to reject any?
Yes, most sellers here collect sealed offers for 1 week and then review them all at once. It's rare to have a house with no issues not accept an offer after 1 week. Some sellers even choose to just list for a weekend though. It's insane.
The expiration of the offer is determined by the prospective buyer. You can write an offer that expires in 1 hour if you wanted to. But most people do say 1 week.
> so sellers now should be able to just accumulate a pile of offers, i'd think, before having to reject any?
Yes, most sellers here collect sealed offers for 1 week and then review them all at once. It's rare to have a house with no issues not accept an offer after 1 week. Some sellers even choose to just list for a weekend though. It's insane.
Realtors would rather have a sale in two days at 70% of market value than a sale at 110% in ninety days.
With the quick sale they have vastly reduced expenses. No brochures, web-site pictures, open houses, etc. Fewer showings also save time.
An extra $10,000 in the purchase price puts about $200 in the agent's pocket. And $9300 in the seller's.
With the quick sale they have vastly reduced expenses. No brochures, web-site pictures, open houses, etc. Fewer showings also save time.
An extra $10,000 in the purchase price puts about $200 in the agent's pocket. And $9300 in the seller's.
That’s just market value, not 70% or 110%.
Reference, https://www.nber.org/digest/mar05/do-real-estate-agents-expl...
With a realtor in the middle of a transaction, it's not solely between a willing buyer and seller.
The realtor has interests orthogonal to both parties. These interests are driven by their overhead, access to working capital and the time value of money. As well as their personal timelines...try to close a real-estate deal the Friday before a long weekend or the Monday after.
With a realtor in the middle of a transaction, it's not solely between a willing buyer and seller.
The realtor has interests orthogonal to both parties. These interests are driven by their overhead, access to working capital and the time value of money. As well as their personal timelines...try to close a real-estate deal the Friday before a long weekend or the Monday after.
Funny but our house supposedly also has gone up in 70K value in last 12 months and about 40K of that in last 3 months. It's crazy.
Ask $140k more.
The realtor wants a low price for a quick sale. Their commission is on the total purchase price.
If you have a mortgage, your profits are all on the back end. If you get $10,000 more the realtor only makes some fraction of $700...about $200 assuming 50/50 agency split and 40/60 broker-agent split.
You make $9300.
The incentives are grossly misaligned when it comes to getting full market value. The agent has almost no incentive. You have high incentive.
If the price is too high, someone can always low ball.
The realtor wants a low price for a quick sale. Their commission is on the total purchase price.
If you have a mortgage, your profits are all on the back end. If you get $10,000 more the realtor only makes some fraction of $700...about $200 assuming 50/50 agency split and 40/60 broker-agent split.
You make $9300.
The incentives are grossly misaligned when it comes to getting full market value. The agent has almost no incentive. You have high incentive.
If the price is too high, someone can always low ball.
I'd be curious what the breakdown of buyers is between categories of people intending to use it as a primary residence, secondary residence, or corporations (or people), buying rentals.
Post 2008 there were reit corps formed to buy up rental properties, and there was a visible shift from personal ownership towards own to rent.
Post 2008 there were reit corps formed to buy up rental properties, and there was a visible shift from personal ownership towards own to rent.
What are analysts saying about where this will end? Housing prices can't go up forever like this. And when the demand drops will the prices crash? I guess what I'm asking is, is it a bubble?
EDIT: just a month ago there were all the stories about how San Francisco's property prices were plummeting. It seems like a wild ride.
EDIT: just a month ago there were all the stories about how San Francisco's property prices were plummeting. It seems like a wild ride.
What if the dollar is about to take a dip that it's never been seen before and people are locking out wealth into these homes, would that be a bad thing? I'm not talking about very expensive homes in very desired places, recently the mid covid trend to buy homes outside large cities due to not having to be in close proximity to offices made prices go up significantly. It may sound like a bad deal but if one takes a mortgage now for x amount (which seems high), that amount would mean a lot less in the not so distant future so even if prices come down a bit it might still be a potential good achievement.
> What if the dollar is about to take a dip that it's never been seen before and people are locking out wealth into these homes, would that be a bad thing?
The US dollar will still be worth a dollar in the US (hello tautology). It's "value" relative to other currencies and most other goods doesn't matter if you make US wages and buy a US house.
The US dollar will still be worth a dollar in the US (hello tautology). It's "value" relative to other currencies and most other goods doesn't matter if you make US wages and buy a US house.
The rising prices could be a sign of a dip already happened (assuming other prices are climbing)
This is my guess. We’re busy monetizing our national debt, and real estate is the first sector that is calibrating to the new (much lower) value of the dollar. I would love to be wrong about that, btw. I think it’s going to be brutally painful for anyone who rents, and will effectively be like giving the entire country a pay cut and lowering the minimum wage.
It depends on your situation. When inflation hits, is your income also going to go up? Is it going to go up as the inflation hits, or after the inflation hits? Do you have enough financial slack to survive until inflation makes the mortgage cheap?
And in fact, one could argue that the inflation is already here, it's just not evenly distributed. It's in financial assets - stocks and real estate, and maybe Bitcoin, but not so much in everything else.
And in fact, one could argue that the inflation is already here, it's just not evenly distributed. It's in financial assets - stocks and real estate, and maybe Bitcoin, but not so much in everything else.
>I guess what I'm asking is, is it a bubble?
Yes, but there is a catch. You have no way of knowing when it will pop. Could be in a few years, could be in 5, could be in 10, could be in 15, could be in 20-30.
With this in mind, at some point, it just starts making sense to join the bubble on the ride up, instead of just sitting with no property and be proud of how "right" I was in my belief that it was a bubble all along.
Yes, but there is a catch. You have no way of knowing when it will pop. Could be in a few years, could be in 5, could be in 10, could be in 15, could be in 20-30.
With this in mind, at some point, it just starts making sense to join the bubble on the ride up, instead of just sitting with no property and be proud of how "right" I was in my belief that it was a bubble all along.
It's not a bubble, though. After the last bubble, wall street swooped in and started buying foreclosed properties. Corporations are _still_ outbidding individuals for properties.
This isn't a bubble and it will continue and eventually, even us who make really good money will not have enough and we'll just be renters.
This isn't a bubble and it will continue and eventually, even us who make really good money will not have enough and we'll just be renters.
> I guess what I'm asking is, is it a bubble?
In most places it is not a bubble:
* https://awealthofcommonsense.com/2021/04/why-this-is-not-ano...
Millennials are now the largest demographic and are in the start-family / buy-house phase of life: the oldest ones are 40.
Low interest rates (to help with economic recovery) make borrowing cheap so there's extra money sloshing around on the demand side of things. Inflation-adjusted monthly mortgage payments are lowest they've ever been since 1989:
* https://awealthofcommonsense.com/2021/03/what-if-housing-pri...
The pandemic has more people scrambling for more square footage.
Perfect storm.
Rising prices are mostly a detriment when saving for a downpayment.
In most places it is not a bubble:
* https://awealthofcommonsense.com/2021/04/why-this-is-not-ano...
Millennials are now the largest demographic and are in the start-family / buy-house phase of life: the oldest ones are 40.
Low interest rates (to help with economic recovery) make borrowing cheap so there's extra money sloshing around on the demand side of things. Inflation-adjusted monthly mortgage payments are lowest they've ever been since 1989:
* https://awealthofcommonsense.com/2021/03/what-if-housing-pri...
The pandemic has more people scrambling for more square footage.
Perfect storm.
Rising prices are mostly a detriment when saving for a downpayment.
Agreed. This growth cannot continue. But I feel like I've said that before over the last 30+ years.
Houses are so expensive, and rising so quickly for shite buildings, that it is unnerving. I recently looked up my first house I bought in 1991 for $100K in Emeryville and it is going for $900K now. There's no effing way I could afford to live in my old house, my salary/net-work didn't increase 10x in 30 years. This is scary as hell.
Houses are so expensive, and rising so quickly for shite buildings, that it is unnerving. I recently looked up my first house I bought in 1991 for $100K in Emeryville and it is going for $900K now. There's no effing way I could afford to live in my old house, my salary/net-work didn't increase 10x in 30 years. This is scary as hell.
To address your edit, it is possible and perfectly reasonable for prices to be dropping in San Francisco, while still having a massive shortfall of housing units and prices to be skyrocketing elsewhere.
Prices will continue to go up significantly in places that are deemed desirable to live in until the prices are so high as to deter enough demand, then price growth should stabilize somewhat or recede if the market overshot.
When will this end? When there are enough houses to house people in the places they want to be housed.
Prices will continue to go up significantly in places that are deemed desirable to live in until the prices are so high as to deter enough demand, then price growth should stabilize somewhat or recede if the market overshot.
When will this end? When there are enough houses to house people in the places they want to be housed.
The problem is that the people that make those places desirable to live in can no longer live in them.
ask prices never went down. rental took a dump. sale prices just increased because of the supply shock, way too many buyers and nobody was selling.
> And when the demand drops will the prices crash?
Unlikely. More likely it will just flatten out for a while.
Unlikely. More likely it will just flatten out for a while.
the market is all over the place.
in SF, the price of single family homes have gone to the moon, while the price of condos are down 10-33%. (yes, 33%)
in SF, the price of single family homes have gone to the moon, while the price of condos are down 10-33%. (yes, 33%)
I wonder too how much of the housing demand is for legit dwellers and how much is for money launderers looking for a safe place to park money. I've always suspected that condos in big cities are semi-fungible places to put money you want to hide from people.
Big foreign investment firms that buy office buildings, hotels and shopping centers around the world have a new favorite real-estate play: single-family homes in American suburbs.
These institutions are partnering with U.S. housing companies to buy or build rental homes by the thousands. In suburban neighborhoods near cities such as Atlanta, Las Vegas and Phoenix, blocks of families are sending monthly rent checks to ventures backed by Canadian pension funds, European insurers, and Asian or Middle Eastern government-run funds.
https://www.wsj.com/articles/that-suburban-home-buyer-could-...
These institutions are partnering with U.S. housing companies to buy or build rental homes by the thousands. In suburban neighborhoods near cities such as Atlanta, Las Vegas and Phoenix, blocks of families are sending monthly rent checks to ventures backed by Canadian pension funds, European insurers, and Asian or Middle Eastern government-run funds.
https://www.wsj.com/articles/that-suburban-home-buyer-could-...
According to the U.S. census the US is building houses at the fastest pace since 2006. About 1.74 million housing units per year.
https://eyeonhousing.org/2021/04/housing-starts-spring-forwa...
https://eyeonhousing.org/2021/04/housing-starts-spring-forwa...
Only 10 years short? This has been happening for far longer than just the last economic downturn / recession(?). Even then there both weren't the right type of houses being built nor enough housing.
I know virtually nothing about real estate and this question might seem dumb. I hear people are paying in the excess of $100K over asking prices on homes in some areas. Are these exuberantly high prices offsetting low interest rates for buyers?
I was speaking to a friend who works in the real estate side of banking and he informed me that the shortage was partly due to the foreclosure protection currently in place. He said that once that's lifted, a LOT of resident real estate will be entering the market. In short, if you own now and are thinking about selling in the next 6 to 12 months, sell sooner rather than later.
The labor and material shortages are definitely complicating factors, but historically the biggest problem is that places with a lot of jobs tend to not permit much housing to be built in the first place, thus the recent labor and material problems are merely compounding a regulatory created deficit.
Edit: to riff on this more, in most of the world you can make decent bricks by baking the dirt underneath your feet (not quite that easy, but close). A lot of places also have ample quarryable stone. So if you had sufficient capital and a bit of know how to get it started, you could set up a new city with a largely local material supply. You’d have to import some labor, but labor shortages are more a function of regional wages than of there literally being no one around willing to work. The hardest part is the location, as you’d need to find a place that was close enough to vibrant economic centers to pull in jobs, but not within the regulatory ice bath of those same places. That’s a tough one, but there are some places that could work.