They are rising because of low interest rates, unprecedented government stimulus / record high household incomes, record high credit scores giving people access to loans they would not ordinarily get, inflation caused by this ocean of money, institutional investors getting more adept at buying and managing single family homes, and covid preventing people from considering selling their existing homes.

It is probably temporary…. Or if not (and incomes return to prior normal), then we just have to get used to more homelessness, poverty and despair caused by the above policy choices.

Supply < Demand.
Inflation.

The interest rates are at rock bottom, and rents are insane. People are moving into housing as a covid induced supply issue has hit the market.
People are not able to be foreclosed on
People are getting extra cash to help fund down payments
People realize they want space of their own after Covid hit.

Some of the current issues will sort out as Foreclosures are allowed and interest rates rise, but it could still take months for apartments and housing to catch up.

The supply shortage is exacerbated also as some people that could have sell (and "take advantage" of the record-high price) aren't selling b/c they can't find a replacement.

Throw in large investment groups (both domestic and foreign) buying things up left and right...and it created the current skyrocketing price.

PHLspecial wrote:

According to this article the urban house prices are still rising except for SF. I don't understand the media pushing that suburbs is red hot and cities are dying. If cities are dying and undesirable why are the prices continuing to rise? I make close to 6 figures but I feel like city houses are hard to get let alone suburb houses. I can't afford the 20% down payment.

Urban house prices for in-demand neighborhood has always been high. The true "dying" area for many metro areas had not been central neighborhood, but rather, inner suburbs (including areas on the edge of city limits for many large American cities). There are exceptions, of course, for instance, central Philly or Baltimore or Detroit are still "dead".

BTW, isn't housing price also coming down for NYC (the city) also? As the rich decided to buy up everything in the Hamptons during the peak of the virus outbreak.

Rents are also rebounding quickly, according to ApartmentList:



The conservative ventosphere would have one believe cities are Hades and nobody will return to them, but data says otherwise.

Prices are high in high tech desirable cities - even Austin Texas is being hit by this. Contributing in most high tech cities is lack of room to expand the inner ring of suburbs. Building codes favoring single family lots also contributes. As does low interest rates. The problem is somewhat intractable given current policies and political realities - from both the left and the right.

And really the crunch problem is that booming central cities need lower paid workers in a variety of areas, restaurants, cleaning, hospitals, senior services. But they need a place to live and raise their children.

frmrCapCadet wrote:

Prices are high in high tech desirable cities - even Austin Texas is being hit by this. Contributing in most high tech cities is lack of room to expand the inner ring of suburbs. Building codes favoring single family lots also contributes. As does low interest rates. The problem is somewhat intractable given current policies and political realities - from both the left and the right.

And really the crunch problem is that booming central cities need lower paid workers in a variety of areas, restaurants, cleaning, hospitals, senior services. But they need a place to live and raise their children.

This brings up the fact that many city dwellers, myself included, would not be completely opposed to price hikes in order to pay said lower paid workers a bit more.

LCDFlight wrote:

They are rising because of low interest rates, unprecedented government stimulus / record high household incomes, record high credit scores giving people access to loans they would not ordinarily get, inflation caused by this ocean of money, institutional investors getting more adept at buying and managing single family homes, and covid preventing people from considering selling their existing homes.

It is probably temporary…. Or if not (and incomes return to prior normal), then we just have to get used to more homelessness, poverty and despair caused by the above policy choices.

It's not temporary, and it's not policy. As a whole, Millennials had delayed home purchases, but it was inevitable that would ultimately change. In recent years, we've seen strong migration among Millennials who grew up in the interior (e.g. the Rust Belt) but moved to a high-rent markets upon college graduation... move back to the interior to purchase more affordable homes. COVID and historically low interest rates may have been a catalyst in home purchases, but again, it was inevitable.

More people want to live in places like NYC, LA, SF, etc. than there is housing, so housing will continue to rise there as well. But we'll probably continue to see see strong migration toward the Midwest and Southeast in the coming years, as more Millennials choose large single-family homes over sharing an apartment with four people in Manhattan.

The rising cost of lumber is also a factor...

"According to previous reports by NAHB (National Association of Home Builders) the cost of lumber has tripled since this time last year, causing the average new home price to rise by nearly $36,000. The issue is also affecting renters, adding $119 per month for those renting a new apartment.

NAHB Chairman Chuck Fowke has now issued criticism of Biden's U.S. Commerce Department which is looking to potentially double the tariffs on Canadian lumber from 9% to 18.32%. NAHB has previously stated home affordability is weakening in part due to material costs and supply shortages.

Below is the full statement from Fowke:

“At a time when soaring lumber prices have added nearly $36,000 to the price of a new home and priced millions of middle class households out of the housing market, the Biden administration’s preliminary finding on Friday to double the tariffs on Canadian lumber shipments into the U.S. shows the White House does not care about the plight of American home buyers and renters who have been forced to pay much higher costs for housing.

“This action clearly shows the White House is disingenuous when it claims the nation’s housing affordability crisis must be an important priority. This move certainly demonstrates a lack of courage to stand up to the U.S. lumber lobby that is already reaping record profits off the backs of hardworking American families.

“The administration should be ashamed for casting its lot with special interest groups and abandoning the interests of the American people. It knows that the lumber tariffs are nothing less than a tax on American home buyers, renters and businesses that rely on lumber products and they could not have come at a worse time. Lumber prices are already up more than 300 percent from a year ago. If the administration’s decision to double tariffs is allowed to go into effect, it will further exacerbate the nation’s housing affordability crisis, put even more upward pressure on the price of lumber and force millions of U.S. home buyers and lumber consumers to foot the bill for this ill-conceived protectionist action.

“A failure to act decisively will show that the White House has lost all credibility in its claims of fighting for housing affordability and the interests of working-class families.”

https://fox17.com/news/local/national-a ... n-politics

Unless wages increase this market will hit a ceiling. I don't know when, but it will happen. People still have to be able to pay the mortgage and interest rates can't go much lower.

Nobody has really talked about it, but interest rates and their effect on home appreciation is yet another way in which millennial are getting screwed by boomers. Take a look at a chart of mortgage rates since the sharp drop in rates during the first two years of the Reagan administration. There are little peaks and valleys, but its a shockingly smooth trend from the 14% range to the roughly 3% rate we're at now. The boomers juiced the stock and real estate markets by lowering rates for decades. Now it's millennials turn and there's very little juice left to squeeze.

https://fred.stlouisfed.org/graph/?g=NUh

Baby Boomers had a giant tailwind their entire working careers for home appreciation, not to mention population growth driving demand. No wonder they're so adamant about it being the path to wealth. Millennials will be lucky if rates stay this low, and it looks unlikely population growth in the next few decades will be anywhere close to the last few. I fear going forward that a significant chunk of that generation is going nuts right now to get into a housing market that's going to stagnate for decades. They'll build equity as they pay their mortgage and if rates stay low see appreciation in line with inflation, but it won't be the windfall their parents generation received. Of course if I had any real ability to predict interest rate movements I'd make paychecks with at least two commas on Wall Street, so maybe I will be wrong.

afcjets wrote:

The rising cost of lumber is also a factor...

"According to previous reports by NAHB (National Association of Home Builders) the cost of lumber has tripled since this time last year, causing the average new home price to rise by nearly $36,000. The issue is also affecting renters, adding $119 per month for those renting a new apartment.

NAHB Chairman Chuck Fowke has now issued criticism of Biden's U.S. Commerce Department which is looking to potentially double the tariffs on Canadian lumber from 9% to 18.32%. NAHB has previously stated home affordability is weakening in part due to material costs and supply shortages.

Below is the full statement from Fowke:

“At a time when soaring lumber prices have added nearly $36,000 to the price of a new home and priced millions of middle class households out of the housing market, the Biden administration’s preliminary finding on Friday to double the tariffs on Canadian lumber shipments into the U.S. shows the White House does not care about the plight of American home buyers and renters who have been forced to pay much higher costs for housing.

“This action clearly shows the White House is disingenuous when it claims the nation’s housing affordability crisis must be an important priority. This move certainly demonstrates a lack of courage to stand up to the U.S. lumber lobby that is already reaping record profits off the backs of hardworking American families.

“The administration should be ashamed for casting its lot with special interest groups and abandoning the interests of the American people. It knows that the lumber tariffs are nothing less than a tax on American home buyers, renters and businesses that rely on lumber products and they could not have come at a worse time. Lumber prices are already up more than 300 percent from a year ago. If the administration’s decision to double tariffs is allowed to go into effect, it will further exacerbate the nation’s housing affordability crisis, put even more upward pressure on the price of lumber and force millions of U.S. home buyers and lumber consumers to foot the bill for this ill-conceived protectionist action.

“A failure to act decisively will show that the White House has lost all credibility in its claims of fighting for housing affordability and the interests of working-class families.”

https://fox17.com/news/local/national-a ... n-politics

While the point is correct that lumber prices are increasing the cost of new build housing right now, it's more than a little disingenuous when the head of a special interest group (NAHB) says the administration should be ashamed for "casting its lot with special interest groups."

Alias1024 wrote:

...
Nobody has really talked about it, but interest rates and their effect on home appreciation is yet another way in which millennial are getting screwed by boomers.
...

That's an interesting point. I join from a German perspective. Since the US population pyramid is very different it isn't applicable to the US.

In Germany the retirement system is not fully funded by saving, but pay as you go. I like it. Any bubble, any war, the system continues.
But there is one generation (baby boomers) which had comparatively few elders they had to pay for. However that generation had few children of their own. So while they had to pay comparatively little, their children and grandchildren will have to pay comparatively high.
Little to pay for elders, little to pay for children: what a party. In the US baby boomers have few elders. But their descendants are roughly the same number.
In Germany the baby boomers are people born 1955-1970, in the US people born 1946-1965.

Population pyramid Germany:

https://www.destatis.de/EN/Themes/Socie ... _node.html

More detailed:
https://service.destatis.de/bevoelkerun ... index.html

The peak on this graph are the 58 years old. Baby boomers in Germany are 50-65 years old.
The minimum is with people born 1945, 75 years old. It shows how useful wars are when people can't control their reproductive possibilities. Not only because people get killed, but because people stop getting children.

From the graph one can see how few people will die, how many enter retirement and how relatively fewer enter the labour market to finance the retirement.

Moreover this generation has lots of votes. People below 18 have no vote, people above 45 start thinking of retirement. So one should expect that the young will have to pay a lot.

Is a fully funded retirement scheme better? I doubt that. Interest now is extreme low. One can get a few % if one invests in developing countries. And if they don't pay back? Also funded schemes may have a good reputation as Roosevelt's Glass Steagall act kept gambling in financial markets under control. Let's see for how much longer there are no bursting bubbles. And then?

In 15 years the boomer generation will start dying in quantity. In 30 years most of them are gone. And that's Germany. I believe the US had their boomer generation from 1946. 5 years from now these people will die in quantity. However the US has young people replacing them

Coming back to property markets:
With interests close to zero and demographics as it is I can't imagine the increase in prizes will go on forever.

The big unknown is China. When are they going to demand proper salaries? Do their salaries increase as fast as their productivity? I am puzzled why we have so little inflation compared to money growth. There must be some places in the world with incredible productivity increases, like the 1920s in the US. Otherwise how to explain it? Once the Chinese economy matures this should cause inflation which in turn should end the zero interest policy.

Some interesting long term factor for housing in the US:
Birth rates falling to the current 1.6 per woman
Falling immigration
Working from home, even part of the time

Note, the so-called Japanese Disease, seems to have moved to the rest of developed economies. Slowed growth, budget deficits, historically low inflation, declining population. I think the US will grow rapidly out of the Covid Depression, but return to JD within a few years. Japan's countryside cities are experiencing drastic depopulation, as young people (the few who are born) flock to larger cities. It is hitting even China. If anyone is really interested I can provide links.

Here in France most houses are made of cinder blocks so lumber prices aren't an issue. But there is also a shortage of cinder blocks ! There is a shortage of everything, partly because people working from home have time to do home improvements, partly because of the disruptions in shipping.

I still think the main thing is free money. My sister tried to buy a 2 bedrooms flat in Paris' suburbs last week, she took the offer of the seller without negotiating the price, showed she had the means to pay the mortgage, had a 6 figures downpayment. She was beaten by someone who paid cash ! And that's in one of the seediest suburbs of Paris.

Aesma wrote:

I still think the main thing is free money. My sister tried to buy a 2 bedrooms flat in Paris' suburbs last week, she took the offer of the seller without negotiating the price, showed she had the means to pay the mortgage, had a 6 figures downpayment. She was beaten by someone who paid cash ! And that's in one of the seediest suburbs of Paris.

That’s what’s happening all over the US right now. It’s not uncommon in competitive markets like Denver, Austin, San Francisco Bay Area, Seattle, etc... to see 10-15 offers on houses for sale. The majority are above asking price just to try and be competitive. Buyers that will finance are often agreeing to cover the gap if the home doesn’t meet appraisal for the loan. Some buyers are even waiving the inspection and figuring they’ll deal with whatever they didn’t see when walking through. It’s totally bonkers.

Even in my slower growing Albuquerque market it’s typical to have 3-5 offers right now, mostly above asking, and all cash isn’t uncommon. The number of homes listed for sale in our area is about 1/4 of the average over the last decade.