Ask HN: When will car prices normalize?
What’s causing demand to be so high, and when might that go down, and what’s causing supply to be low, and when might that go up?
When some people wants one, and there aren't enough, suddenly everyone wants one. Herd mentality.
>and when might that go down.
When there is enough for everybody, price will fall, and all of a sudden people will just decide to wait a little longer. ( So Called Demand disappeared )
>what’s causing supply to be low
Chips, COVID, Shipping, Containers Shortage, Gas Price, GeoPolitics and War. It is quite literally the perfect storm on Supply Chain.
>when might that go up?
When we over estimate the so called demand and over invest into the supply capacity.
Rational behavior: better get one before the prices go up more.
* https://en.wikipedia.org/wiki/Deflation#Deflationary_spiral
Along the same lines, in theory, Blackrock could purchase strategically such that it drives up the value of other inventory it owns in the same area. Not quite a pyramid scheme but you get the idea.
Most people are foolish and greedy and blind.
The seller prices off that. The buyer gleams value the same way. Housing prices are subjective. Very much so. And this is why sale prices are so effective.
Firstly, if prices crash people stop selling unless they absolutely have to. The supply of houses greatly diminishes which limits your choice. You might be able to afford a cheaper house, but it might not be where you want it.
Secondly, unless you're buying in cash you might find it hard to get a mortgage. Lenders tend to be reluctant to lend when the market is crashing.
Thirdly, (and this is me speculating), if the market crashes the investment companies who are buying houses will buy a lot more houses, very fast, in cash. You'll be competing with the ideal buyer.
I don't believe a housing market crash would be good for consumer buyers at all.
[0] https://en.wikipedia.org/wiki/Canadian_property_bubble#Histo...
As someone who bought a house in the Bay Area last year, no. I think I could have spent 2x what I paid but I hate spending money and settled for something more reasonable.
Now I have a large safety net and more money to put into retirement. This is on top of having kids and paying for daycare.
I can’t imagine I’m that unique. I think there is a disconnect with people who don’t work at these companies and understanding how much you can be paid.
"Poor people just don't understand how rich I actually am."
If I were single and didn’t have kids I’d keep renting in SF and probably not own much.
> I know Blackrock and other parasites are scooping up housing too, but that's not the majority of buying.
This is generally a good thing because it drives prices down
How do you define whether someone can “afford” a car? Surely by definition the people can afford the cars, otherwise they would be repossessed?
If you mean they cannot afford to buy the cars outright, why is that an issue?
At a certain % of income, owning an asset doesn't make much sense due to how it affects your financial security.
A large landlord is not a "parasite". He makes money by fulfilling a vital need for housing. Blame housing regulation, not landlords, for high rents and home prices.
In my experience people aren't paying beyond their means, but their means are high, and have been for a while. Where I live, in a small suburb of Silicon Valley, new FTHBs have been 100% tech for about the last 10 years.
Existing homeowners have a pretty critical role in spreading high prices throughout the country, though. If nobody traded out of their existing homes prices would be sky-high in the Bay Area and Seattle, like they were in 2018, but this pool of buyers would have little effect on Boise and Charlotte. But because someone in the Bay Area can get $2M for their home and now has it available to retire to Boise, prices in the Bay Area end up marginally lower and prices in Boise go through the roof.
Only about 5,000 of them sell in a given year. Suppose Facebook shows up all at once, with >5,000 new millionaires from the Midwest. They run an auction with each other for those 5,000 homes. The price they settle on is $1.5 million. This becomes the comparable for every existing home.
So the system started with $40bn in home equity value. We injected $7.5bn worth of tech money. And we wound up with $600 billion in home equity value. 395,000 people got $1.4 million in home equity out of thin air. And they can use it to trade with each other, generating many more than 5,000 transactions at the "Facebook millionaire" price.
The best thing that could happen is that apartments become cheaper because no one gives a shit about those getting cheaper besides developers. Homeowners are generally SFH owners - not condo or apartment or townhouse owners.
Thus, I think the decrease in cost will only ever come for apartments, townhomes, and condos. SFH prices are here to stay.
I think many people are living at or beyond their means. There are a lot of people (still a small minority though) that have a lot of money and are willing to use it. Who bothers saving suffiently for retirement? Many people don't make enough to adequately save for retirement. Most of the people who do have the income would rather have a bigger or fancier house and a brand new Tesla/BMW/etc, possibly because they think they will always be making that level of money or are out of touch with reality.
For example, I had a manager who had a big house in a nice area, Tesla, another EV, 3 kids with college funds, etc. He said something like everyone (at the company) should be contributing the max ($20k) to their 401k every year. WTF? Most of us make under $100k and can't afford to save that much, especially with a family to support and a mortgage. We aren't all managers with a physician for a wife. Completely out of touch.
"Many people don't make enough to adequately save for retirement. Most of the people who do have the income would rather have a bigger or fancier house and a brand new Tesla/BMW/etc, possibly because they think they will always be making that level of money or are out of touch with reality."
Many people don't make enough to adequately save for retirement. You could probably say that this could in fact be most people when you look at things like Fidelity or Vanguard stats on the state of retirement accounts and savings in the US.
Then there are still many people, but not a majority, who do make enough money to adequately save. Of these, a majority of them seem to live beyond their means with respect to purchasing houses significantly above the rule of thumb (2.6x yearly income) or historical average (5x yearly income), or buying fancy cars/vacations/etc.
The other part of the group that does make enough money are making so much that they can actually save the max (like the example I gave), but are out of touch with the reality that most people don't have enough income to save that much. The example I gave fits in this group. I suppose the most pertinent part of the example was left out - the looks we employees gave each other about how he's crazy to expect us to be able to save $20k per year. So it's not just an example of that rich individual, but also of the group's affirmation that the savings level is unattainable.
https://www.jpmorgan.com/insights/research/supply-chain-chip...
I feel like we keep hearing this every time something big happens in the world and within a year or so, it's back to normal. Not that I believe either statement.
Location very much takes a role in being able to do this, I think.
I dream of a no car life. Hate driving but it’s really tough in the US. Was in heaven for a week when I visited Switzerland
Solar power doesn't do much to reduce petroleum demand.
The new 9/11 NYC footage that was recently making the rounds captured a gas station with its prices in view, they were all $1.XX/gal.
> "...captured a gas station with its prices in view ..."
Where was this footage taken from, NY or NJ? Back then NJ always had stupidly cheap gasoline compared to NY. I always waited until NJ to fill up on road trips.
https://www.youtube.com/watch?v=1gBJvGMZIYA&t=332s
Which if what you say is true about the relative local prices, suggests these are above average prices for the era and still sub $2.
The Russia supply shock this month is unusual, but the mid-$3 pricing plateau over the preceding year was quite normal by historical standards.
"Inflation" is a nebulous word, if you're referring to CPI, isn't oil price (via transportation, fertilizer costs) a major contributor to that increasing?
I'd expect a historic fuel price chart corrected for CPI to be roughly a horizontal line, because fuel prices majorly contribute to it.
I'm pretty sure people are going to switch to EVs rather than give up driving.
The median income in Switzerland is about $125k USD. That's more than twice the median in the US. It sounds like the affordability of $9/gal gas is greatly different. US politicians are actually suggesting things like a stipend or stimulus payment to help people pay for gas. Ridiculous, but that's how it is.
I don't believe this for a second and sure enough the first few sources produced by a google search show a far different situations. The Swiss office of Federal Statistics says the median income is 50,120 CHF per year which is $53,880 USD at current exchange rates. Even the top 10% of the country's earners are only in the mid $90k, nowhere near $125k.
https://www.bfs.admin.ch/bfs/en/home/statistics/economic-soc...
So it sounds like this isn't gross income.
Here is the explaination.
"It is measured by the median equivalised disposable income, after adjustment for differences in price levels between countries. This means that despite the high price levels in Switzerland, the population's financial situation, after deduction of obligatory expenditure, was in 2020 more comfortable than that of its neighbouring countries and countries in the European Union."
So the disposable median in Switzerland is about the same as the gross median in the US. It looks like the equivalised disposable income for the US is not calculated, so we can't compare that. Having a median disposable income that is about the same as the gross median of another country still seems to support my implication that the Swiss are more wealthy and can better afford the cost of gas as compared to the US.
It seems it's hard to get "good" sources for Swiss median income. They do list the median monthly wage as being around 6500. This doesn't include other income sources, and is still about double the US median income.
https://www.bfs.admin.ch/bfs/en/home/statistics/work-income/...
(tdlr: US ~800, Central european countries ~500, some big countries much less eg Ukraine ~250)
Also, EVs still have such big CO2 footprints that they don't really solve the problem, to make a dent we'll need to curtil the growth of cars globally - considering the developing countries catching up and getting more cars there, this means radical changes. The emissions from EVs also pile on top of the emissions from burning all the oil we pump up, so in a way they're increasing emissions if we consider the oil supply to be limited.
In many comparable countries, mandatory inspections/maintenance force older cars off the road and into scrap heaps at a much higher rate - certainly at a higher rate than necessary.
[1] https://www.bts.gov/content/average-age-automobiles-and-truc...
I don’t imagine the situation returning to “normal” until the supply chain issues are resolved. Even then, it will take a while for used car inventory to get replenished. This is anecdotal, but in my experience price inflation tends to stick; unless there is a glut of cars, I don’t expect used car prices to drop to pre-pandemic levels.
Info:
- ~25 new cars on the lot compared to 200+ before shortages. He said they have a good amount of used cars. Funny enough 15 minutes after they took my car they call me and ask if I want to sell my car to them!
- Lease prices are double what they were 2 years ago when I looked. Specifically Civic sedans were ~$250/month with $3k down but now are closer to $600!
- $5k over MSRP on everything which they say "can be worked on" but that seems to be the current standard. I went to Subaru few months back and it was the same.
- For financing, manager said around 3.9% interest is around the lowest they do in-house (assuming max perfect credit). Not sure what auto loans are like with big banks at the moment.
So until shortages normalize buying a new car is just not a wise financial decision (at least for me). $30k+ for a Honda is just pretty bad. With $700/month to finance I'd rather get a Model 3. With gas prices and the $800 maintenance I'm paying just for today it's looking like a good option.
If anyone is interested in current maintenance cost breakdown on my car I will update this post when i get my bill in an hour or so ballpark $800 total.
Curious what scheduled $800 maintenance would be on a civic, I've had several hondas and they haven't needed much more than gas, fluid, tire and brake changes.
I definitely waited a bit too long so all this stacks up but their prices are actually pretty comparable with independent mechanics (would love to be corrected if anyone gets better in LA :). I should probably replace the air filters myself next time though.
If you drive 12,000 miles / year and get 15 mpg, $3/gallon is $2400, and $5/gallon is $4000.
What is an additional $1600 / year for a car you're already paying $12,000 / year for (assuming $60k, 60 months)?
So while demand might decrease (particularly if EV pickup truck production capacity grows rapidly), I would not expect $60k vehicles to quickly become "cheap."
Fortunately we have the market mechanism to fluidly adjust to this, weirdness can just flow through the system and cause trouble minorly and incrementally.
To address the question as asked:
Normalize? Welcome to weirding.
> What’s causing demand to be so high, and when might that go down, and what’s causing supply to be low, and when might that go up?
Geopolitical instability, from cutting back of American power projection, covid-19 slowdowns & supply-shock echoes, at least, all have a place. Hopefully global warming response movements, and walkable cities make the question less relevant. When demand grows more, or inputs (including shipping) get cheaper (including more predictable, forecastable)
I'd expect this aspect of the problem to stabilize in a few years at most, because if the components continue to be a problem, the car companies will either start making cars without them again (I wish but unlikely) or secure their own components' supply.
But don't worry, you won't have enough for car then, either.
I always loved cars, but what's the point of them now?