Governments printed so much money, everyone knows houses are a hedge against inflation. Its not that they're worth more, its like money is worth less.
[1] https://www.housingwire.com/articles/49443-the-average-down-...
And there are still neighborhoods that are in decline. Opportunity to get in before they gentrify? Maybe, but it's a gamble.
That said, it's probably not a driving sentiment, rather, just the basic overall impetus of inflation and low rates.
It could be that there are whispers of increasing rates and everyone is looking to lock in.
That said, in around 2006, this was the feeling as well. The major crash. And as soon as things were getting frothy again - COVID and major turmoil.
Finally, it should be noted, that there are external factors driving inflation, if even some of it is temporary, which is cost of transport, and supply chain issues in China, and of course, tarriffs.
That said, Fed probably needs to raise rates.
Of course the loan itself is worth less to the bank during inflationary times. You make more money, your payment stays the same, and real estate prices will rise somewhat, but it's not as simple as you make it seem. I'd be worried if I were planning to sell within the next few years.
BlackRock owns around $60 billion in real estate assets. The value of the housing market in the United States is more like $36 trillion.
They're only a good hedge against inflation if there aren't enough of them.
All the other stuff, like low interest rates in mortgages, just accelerates the underlying cause of the price jumps.
It's an interesting premise, I'd love to see more data on this. It's a very common claim but at least on a macro level there's a lot of indicators that would make me assume otherwise.
Typically if there isn't enough, you'd expect that the general trend has been that the availability per person is decreasing over time.
Availability can be measured in a few ways:
- Number of persons per home - Number of square feet per home
Ceteris paribus, if either are going respectively down and up, you'd see increasing availability and would assume decreasing scarcity.
The number of persons per home has been decreasing for 150 years, and dropped from 3.4 to 2.5 (-30%) in the past 60 years.
The number of square feet per home has more than doubled in that time. In other words, we have 30% fewer people and 100% more space. The square foot per person has increased by 270% in the past 60 years.
Of course you can still not have enough if demand has grown much faster. But instead I think there's good indications (and plenty of studies) that price increases are mostly being driven by low interest rates and a culture around seeing homes as a speculative asset instead of just a home that happens to have some of your capital locked up in it.
[0] https://fee.org/media/15199/housing1.png?width=600&height=38...
1) Real-estate is a long-term positive return investment
2) The USG will do anything in it's power to keep that premise #1 valid (QE, low/negative interest rates, etc)
3) You can use real-estate equity as part of leverage to buy more real-estate.
4) Foreign investment is allowed, so the system isn't a closed loop
It's a bubble and will keep inflating until it pops.
There is not infinite demand even when housing is a guaranteed positive investment, because there's limited money and capital.
We have let people think that housing is always a positive return investment, instead of a bank account. And to do that, we have limited home building in the in-demand areas.
The actual way this is enforced is by home owners restricting development in their neighborhoods, a trend that is likely to continue.
Read the prospectus' of the private equity investments in residential housing and you'll see they are saying the same thing.
The downturn in home building is decades long. And the 2008 cycle reduces the construction workforce even more, and it never recovered.