I’m a young(ish?) father with young children. I never really knew much about what seemed to be the esoteric magic of the housing market before I began reading your work. I’m learning slowly, but learning I am. Would you be willing to check my summary points below to see if I have the timeline / order of events correct?
If I have this right, then:
- Existing were too cheap immediately post-2008 because new regulations suddenly disallowed poorer potential-buyers from qualifying for mortgages.
- Low prices meant less new-home construction at those price points, so the only new homes being built were more expensive ($300k+) because construction companies couldn’t afford to build at a loss. Even as home prices rose, construction companies, due to competition, still couldn’t afford to build lower-cost homes.
- Rents have been rising in response ever since, as those who would be buying starter homes couldn’t but still needed somewhere to live, driving up demand.
- Wall Street (which mostly means housing-related stock prices and investment firms, yes?), which had always invested in real estate, has been buying homes at the too-low prices, which has driven parties to invest in new-home construction (I’m very shaky on this part), which is a bad thing (but why?).
- Recently, the home-price:available stock ratio hit a point of reversal where we could see home prices come down in the coming years. We still haven’t fixed the stifling mortgaging regulations, however, so we might see some drastic, short-sighted move by Sledgehammer Gang that would reverse the reversal.
Sorry this comment is overly long. I hope it wouldn’t be too much effort on your part to respond to one or two Qs I have.
All best—thanks for sharing other places where we can find your work.
Yes. A pretty good summary. A couple points of clarification:
1) real estate has traditionally not been a very concentrated industry, and corporate landlords were limited to apartments. The large institutional landlords in single family homes is a post-2008 phenomenon. It only exists because we cut back mortgage access so sharply from previous norms and apartments are blocked locally.
2) I don’t know how much prices will come down, but at least it might stop the unprecedented rent inflation of the past decade and get the number of new units to a sustainable minimum and maybe stop the accumulation of homelessness.
3) the backlash is dumb but it’s just based on the notion that when “Wall Street” buys a house, it somehow takes it away from a family. There are bills being introduced to ban this market. And if they pass, the. Rents will keep rising and homelessness will continue to rise.
Kevin,
I’m a young(ish?) father with young children. I never really knew much about what seemed to be the esoteric magic of the housing market before I began reading your work. I’m learning slowly, but learning I am. Would you be willing to check my summary points below to see if I have the timeline / order of events correct?
If I have this right, then:
- Existing were too cheap immediately post-2008 because new regulations suddenly disallowed poorer potential-buyers from qualifying for mortgages.
- Low prices meant less new-home construction at those price points, so the only new homes being built were more expensive ($300k+) because construction companies couldn’t afford to build at a loss. Even as home prices rose, construction companies, due to competition, still couldn’t afford to build lower-cost homes.
- Rents have been rising in response ever since, as those who would be buying starter homes couldn’t but still needed somewhere to live, driving up demand.
- Wall Street (which mostly means housing-related stock prices and investment firms, yes?), which had always invested in real estate, has been buying homes at the too-low prices, which has driven parties to invest in new-home construction (I’m very shaky on this part), which is a bad thing (but why?).
- Recently, the home-price:available stock ratio hit a point of reversal where we could see home prices come down in the coming years. We still haven’t fixed the stifling mortgaging regulations, however, so we might see some drastic, short-sighted move by Sledgehammer Gang that would reverse the reversal.
Sorry this comment is overly long. I hope it wouldn’t be too much effort on your part to respond to one or two Qs I have.
All best—thanks for sharing other places where we can find your work.
Yes. A pretty good summary. A couple points of clarification:
1) real estate has traditionally not been a very concentrated industry, and corporate landlords were limited to apartments. The large institutional landlords in single family homes is a post-2008 phenomenon. It only exists because we cut back mortgage access so sharply from previous norms and apartments are blocked locally.
2) I don’t know how much prices will come down, but at least it might stop the unprecedented rent inflation of the past decade and get the number of new units to a sustainable minimum and maybe stop the accumulation of homelessness.
3) the backlash is dumb but it’s just based on the notion that when “Wall Street” buys a house, it somehow takes it away from a family. There are bills being introduced to ban this market. And if they pass, the. Rents will keep rising and homelessness will continue to rise.