New homes are expensive. Older homes are expensive, too. Home prices have now reached the point a few percentage points in interest can lead to not having the ability to purchase a home. So, who will blink first? Lenders, those selling homes, or those buying homes? If the product is beyond what people can, or will, pay, either the price goes down, or the seller has to sit on their merchandise.
Even rental prices are going beyond what people can pay. That, in my opinion, will break the stalemate. Large apartment complexes are money pits without renters. They're building them as fast as they can, hoping the market will support the endeavor. I don't think it will, and either the prices go down, or the properties are sold at a reduced price (future lower rents). Bankruptcy for the investors is always an option, but leads to problems with future investment opportunities. In the end, all that invested in the bloated market will suffer. It's now only how much money will be lost.
Owning a home has always been such a big part of the American Dream. Terrible shame to put it out of reach of so many and horribly high rent that used to be an affordable alternative is now another sin of the economy.
ReplyDeleteThe homes I'm seeing built are the smaller homes built by young families. That, and since I'm in a rural area, I'm seeing people purchasing property partially cleared, drilling a well, placing a new septic system, having a manufactured home delivered, and insuring everything possible is above the flood plain. It's less expensive than building, and that option is available in the future. Considering the prices for property in the city, and the high taxes, it's the best choice for those wanting their own home. Still, it's much more expensive than even ten years ago.
DeleteHere in my area it is crazy. I bought my home in dec. 2008. Since that time, according to zillow, my home has increased in value about 150%. 5 miles east of here, somebody is building about 6000 homes. About 10 feet apart, postage stamp size yard, barely a street in front. $300 to $700K. Who the hell can afford to pay that for such crappy homes.
ReplyDeleteThe taxing authorities are enjoying this windfall. They increase taxes as much as the law allows, add the inflated cost of housing, and laugh all the way to the bank, after everyone involved gets a raise they don't deserve, unless the taxpayers have just as much of an increase in their income to match inflation.
DeleteIn my opinion, there are many that need to be reminded of the persuasive powers of tar and feathers.
Lenders are at the mercy of the market: if they lower rates, they have to eat the paper when rates go up (bond, etc.) if they have to mark-to-market. They then become insolvent.
ReplyDeleteAlways sellers.
Lenders will recognize inflated prices, be hesitant to loan to that market, not want to exposed to an almost certain loss, and those that bought the inflated real estate will find they either accept their position, or face the fact they will never recover their entire investment.
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