Home prices skyrocketed last year. Two regions saw the biggest increases

[Chomsky]

I did a lot of studying of this last year while I was looking for a new house (which I got under the local market rate due to a paperwork issue, but that's another story for another day).

I would say up until October of 20, most of it was driven by migratory patterns of well paid white collar works who wanted to work from home. After Oct, its turning into FOMO and speculation. My dates are not exact of course, but this is based more on my observation.

Three things are going on right now though -
1. Interest rates have gone up but it does not appear to be lowering demand, but this increase JUST happened, so it may take some time to see that decreased demand in the stats
2. Rental costs are way up
2a. Rental costs being up might be what's driving people towards houses, at least according to the pundits
3. Its hard to get the parts needed to build a house

I fear we might see a homelessness crisis soon as rents and mortgages are outpacing people's ability to afford them, now that the flood of work from home people is starting to subside. So my best guess is that the bubble is just now starting for form.

My immediate concern is a 'bubble pop', as we aggressively raise interest rates to try to tame the near runaway inflation we're experiencing.

The economic uncertainty due to the Russia-Ukraine-Europe-NATO situation is also of concern.

 

[reflechissez]

Okay, so I have a stupid question about this. I'm a brand new homeowner so these things aren't so obvious to me. Let's say you've got a home and want to live in a comparable-valued neighborhood. Or maybe you want to upscale a bit. Point is, you're making a move which is relatively not too radical.

So you sell your home at your extraordinary profit, and you buy somebody else's home at their extraordinary profit. Isn't it a wash at that point? It seems to me that if you're already a home owner, your access to the housing market is about what it normally would have been. The people who are screwed are those who want to be first time home owners.

You are correct.

 

[Cardinal]

What I do know is that you have homes that are designed for the lower class >1200 Sq ft being sold at a price that only people in the top 5% of earners can afford. If that is the correct market state then we are even more ****ed than we thought.

Heh. A 1200 sq/ft home in the right place can hit 1M+ without a bubble just fine.

 

[Slartibartfast]

What I do know is that you have homes that are designed for the lower class >1200 Sq ft being sold at a price that only people in the top 5% of earners can afford. If that is the correct market state then we are even more ****ed than we thought.

Yup. I fear we may have a situation where we have an explosion of homelessness while a bunch of houses sit empty for their investment value.

That quickly becomes an eat the rich scenario.

 

[Ikari]

This is a really disturbing trend. I don't know if it's a bubble or not, but we're really getting into a place where people can't afford to live where they work.

 

[Chomsky]

A large part of new home ownership is speculation a long with the COVID foreclosures still yet to hit. Not to mention we have slammed the interest rates to the ground so there is no wiggle room to help any crash recover. Along with stangnat wages and high inflation. We're going to have a situation where no one under 40 can afford a house and that's a powder keg politically speaking.

Wages are not stagnant. They've increased with COL, slightly surpassing it.

 

[Chomsky]

What I do know is that you have homes that are designed for the lower class >1200 Sq ft being sold at a price that only people in the top 5% of earners can afford. If that is the correct market state then we are even more ****ed than we thought.

That's only in certain areas.

 

[Chomsky]

If you're going to use real wages, you have to subtract inflation from everything else as well.

Bingo!

 

[Gimmesometruth]

Yup. I fear we may have a situation where we have an explosion of homelessness while a bunch of houses sit empty for their investment value.

That quickly becomes an eat the rich scenario.

But like I said, here in Phx, the investors are renting out the houses. I think once the new rentals that are going up like CRAZY start to impact the rental market, the house market is going to re-adjust.

 

[Crovax]

Heh. A 1200 sq/ft home in the right place can hit 1M+ without a bubble just fine.

And I'm talking about rural texas not downtown SF

 

[reflechissez]

Yup. I fear we may have a situation where we have an explosion of homelessness while a bunch of houses sit empty for their investment value.

That quickly becomes an eat the rich scenario.

Why would that be the case?

 

[Chomsky]

This is a really disturbing trend. I don't know if it's a bubble or not, but we're really getting into a place where people can't afford to live where they work.

Well, there is a silver lining with that I suppose. The internet is allowing many to work wherever they want, and some are moving to cheaper more spacious areas.

If I was a small town mayor or semi-rural presider in a flyover state, I'd be marketing my area to the telecommute crowd - big time!

 

[venice_ca]

Yes and no, the problem is that if you sell, then you just have to buy another really expensive house, its causing people to hesitate on whether selling is a good idea or not.

The California solution is to buy a home in another state.

My area is still seeing increases — there’s only so many beach areas and we’re definitely a better buy than Malibu. But still, $1M+ for a tear down on a small lot? I can’t see this lasting, but there’s still Silicon Beach happening.

I have no plans to move.

The lack of affordable housing continues, and BnB units continue to take rentals off the market. Homelessness seems constant/growing no matter how many are placed in housing.

 

[Gimmesometruth]

And I'm talking about rural texas not downtown SF

Um, review the op.

PS....no one cares about rural TX.

 

[Crovax]

Wages are not stagnant. They've increased with COL, slightly surpassing it.

They have not, they have barely kept up with dollar inflation. A home used to cost 1.5 times the average salary now its 6 times. So that fact that wages have only gain 11% while housing costs 400% more is a big ****ing issue

 

[Slartibartfast]

But like I said, here in Phx, the investors are renting out the houses. I think once the new rentals that are going up like CRAZY start to impact the rental market, the house market is going to re-adjust.

I hope so, but, at least in my area, all new apartments are deemed luxury apartments and have stupidly high rents. This is pulling up rental prices for lower grade apartments as well.

 

[Chomsky]

And I'm talking about rural texas not downtown SF

So you're telling me 1200 sqft houses in rural America require 95% income level to purchase or get a mortgage?

You must be cherry-picking areas, because I simply do not believe this is the general rule. I live in one of the higher priced markets in the country, but can go several dozen miles out and find reasonable value-oriented housing. So, I have no idea what you're talking about?

 

[Cardinal]

And I'm talking about rural texas not downtown SF

Hey, we talk about what we know. But sure, if a small town in the middle of nowhere has a 1200 going for 500k+, yeah, that's not sustainable. Not that I'm seeing anything remotely like that around me.

 

[roguenuke]

For most U.S. workers, real wages have barely budged in decades

Adjusted for inflation, today's average hourly wage has about as much purchasing power as it did in 1978. Most wage increases have gone to the highest earners.

www.pewresearch.org

That's from 2018. Wages went up during the pandemic, far higher than they have normally been moving because of the pandemic.

 

[Slartibartfast]

Why would that be the case?

As to why, I am not sure, but this is the phenomenon being seen in places like the trendier parts of California and Vancouver.

 

[Chomsky]

If enough people can't afford them, the properties will be vacant. The prices have to decline.

Unfortunately, we saw this effect a decade ago; it was not pretty.

 

[BlueTex]

I did a lot of studying of this last year while I was looking for a new house (which I got under the local market rate due to a paperwork issue, but that's another story for another day).

I would say up until October of 2021, most of it was driven by migratory patterns of well paid white collar works who wanted to work from home. After Oct, its turning into FOMO and speculation. My dates are not exact of course, but this is based more on my observation.

Three things are going on right now though -
1. Interest rates have gone up but it does not appear to be lowering demand, but this increase JUST happened, so it may take some time to see that decreased demand in the stats
2. Rental costs are way up
2a. Rental costs being up might be what's driving people towards houses, at least according to the pundits
3. Its hard to get the parts needed to build a house

I fear we might see a homelessness crisis soon as rents and mortgages are outpacing people's ability to afford them, now that the flood of work from home people is starting to subside. So my best guess is that the bubble is just now starting for form.

At least in North Texas that is the case... In about Oct/Nov buyers shifted to investors with deep pockets, all cash offers, etc.

 

[Cardinal]

So you're telling me 1200 sqft houses in rural America require 95% income level to purchase or get a mortgage?

You must be cherry-picking areas, because I simply do not believe this is the general rule. I live in one of the higher priced markets in the country, but can go several dozen miles out and find reasonable value-oriented housing. So, I have no idea what you're talking about?

I'd definitely like to see this town for myself.

 

[reflechissez]

As to why, I am not sure, but this is the phenomenon being seen in places like the trendier parts of California and Vancouver.

Properties are sitting vacant?

 

[Gimmesometruth]

I hope so, but, at least in my area, all new apartments are deemed luxury apartments and have stupidly high rents. This is pulling up rental prices for lower grade apartments as well.

Increased rental prices will cause new construction in areas where it can happen.....and Phx has a lot of space for that. Further, it is going to be interesting to see what happens with the office and retail space downtown, if it will get re-occupied or get converted to housing.