The shortage has its roots in the financial crisis, and was exacerbated by the pandemic.
We’re also seeing a rapid increase in commercial vacancies with WFH. But there are big challenges and costs to turning commercial properties into residential.
I’ve heard a lot about the problems. Surely there’s some good ideas for a solution out there?
A lot of people here in the US have bought into this as their retirement strategy. The value needs to go up, so they can downsize and ride the leftover cash for the rest of their life. If the number doesn’t go up, they can’t retire. This forces otherwise normal people to become very, very, invested in ensuring real estate is an asset with value that outpaces what people can afford. It’s a ponzi scheme.
Why do you think opportunity cost isn’t coming into play? If you’ve got a house only as an appreciating asset that’s not generating income, you’re losing money compared to just throwing it in the stock market. If they’re just holding it because the value always goes up, that sounds exactly like 08, and the price would have to come down once the bubble pops.
Historically, I think, housing is less volatile than the stock market. So there’s a risk mitigation strategy there that may partly be in play with companies that are purchasing single-family homes and just squatting on them.
This may also be exacerbated by rising interest rates. So companies/individuals that purchased a historically low rates are/may be reticent to sell because they can’t secure a loan with the same rates they currently have. Even IF the housing isn’t actively generating income, it could be losing LESS just due to the rates.
This is all entirely speculation on my part. I’ll freely admit I don’t know.
I see the narrative a lot that it’s caused by people holding onto housing as an investment, and that might be true, but I’m unconvinced it’s anything more than a supply problem. No doubt what you described about people reluctant to sell in the current market is happening, but if a house is truly only worth $150k, it should sell for $150k, and the person trying to sell it for $400k will keep dropping the price until it reaches what it’s worth as the owner gets impatient and has to pay upkeep on it in the meantime. There are stats for how many homes are sitting vacant, but often times I understand that they capture a snapshot in time of when those homes are between owners or tenants, and what was vacant at snapshot 1 may be a totally different sample than what’s vacant at snapshot 2, even though the number of vacant homes remains similar.
Here’s another thing that may be having an impact, but I have no idea how large: a lot of baby boomers are still living in their “forever homes” that they bought decades ago for families that were much larger before their children moved out. So you have a lot of people with proportionally too much house for what they actually need that, to make this topic a bit more morbid, will start dying off in greater numbers as the years go on and freeing up that housing inventory for families that would need that much space.
So companies/individuals that purchased a historically low rates are/may be reticent to sell because they can’t secure a loan with the same rates they currently have.
Can confirm, the interest rates have been a huge deterrent to me for selling my home and moving. My current interest rate is 2.75%, back when I was looking around I was being quoted around 7%, which would have had a significant effect on my monthly payments.
It’s easier to wait out the storm and move when the interest rates (hopefully) recover. They seem to be improved since I last was looking at places, but I don’t think I’ll be abke to get a rate close to what I have anytime soon :(
You are not logged in. However you can subscribe from another Fediverse account, for example Lemmy or Mastodon. To do this, paste the following into the search field of your instance: !news@beehaw.org
Breaking news from around the world.
News that is American but has an international facet may also be posted here.
Guidelines for submissions:
Where possible, post the original source of information.
If there is a paywall, you can use alternative sources or provide an archive.today, 12ft.io, etc. link in the body.
Do not editorialize titles. Preserve the original title when possible; edits for clarity are fine.
Do not post ragebait or shock stories. These will be removed.
Do not post tabloid or blogspam stories. These will be removed.
Social media should be a source of last resort.
These guidelines will be enforced on a know-it-when-I-see-it basis.
A lot of this comes from the mindset of real estate as an appreciating asset. That drives the desire to buy and hold, because it only ever goes up.
A lot of people here in the US have bought into this as their retirement strategy. The value needs to go up, so they can downsize and ride the leftover cash for the rest of their life. If the number doesn’t go up, they can’t retire. This forces otherwise normal people to become very, very, invested in ensuring real estate is an asset with value that outpaces what people can afford. It’s a ponzi scheme.
Why do you think opportunity cost isn’t coming into play? If you’ve got a house only as an appreciating asset that’s not generating income, you’re losing money compared to just throwing it in the stock market. If they’re just holding it because the value always goes up, that sounds exactly like 08, and the price would have to come down once the bubble pops.
Historically, I think, housing is less volatile than the stock market. So there’s a risk mitigation strategy there that may partly be in play with companies that are purchasing single-family homes and just squatting on them.
This may also be exacerbated by rising interest rates. So companies/individuals that purchased a historically low rates are/may be reticent to sell because they can’t secure a loan with the same rates they currently have. Even IF the housing isn’t actively generating income, it could be losing LESS just due to the rates.
This is all entirely speculation on my part. I’ll freely admit I don’t know.
I see the narrative a lot that it’s caused by people holding onto housing as an investment, and that might be true, but I’m unconvinced it’s anything more than a supply problem. No doubt what you described about people reluctant to sell in the current market is happening, but if a house is truly only worth $150k, it should sell for $150k, and the person trying to sell it for $400k will keep dropping the price until it reaches what it’s worth as the owner gets impatient and has to pay upkeep on it in the meantime. There are stats for how many homes are sitting vacant, but often times I understand that they capture a snapshot in time of when those homes are between owners or tenants, and what was vacant at snapshot 1 may be a totally different sample than what’s vacant at snapshot 2, even though the number of vacant homes remains similar.
Here’s another thing that may be having an impact, but I have no idea how large: a lot of baby boomers are still living in their “forever homes” that they bought decades ago for families that were much larger before their children moved out. So you have a lot of people with proportionally too much house for what they actually need that, to make this topic a bit more morbid, will start dying off in greater numbers as the years go on and freeing up that housing inventory for families that would need that much space.
Can confirm, the interest rates have been a huge deterrent to me for selling my home and moving. My current interest rate is 2.75%, back when I was looking around I was being quoted around 7%, which would have had a significant effect on my monthly payments.
It’s easier to wait out the storm and move when the interest rates (hopefully) recover. They seem to be improved since I last was looking at places, but I don’t think I’ll be abke to get a rate close to what I have anytime soon :(