No, for the simple reason that (most) people buy homes with mortgages. Take a look at the 30 year mortgage interest rate over the past few months.
The total cost to own a newly purchased home is what matters, not the actual sale price. That's mostly paid by the bank.
Even if buyers are prepared to absorb the massive increase in total cost of ownership necessary to keep prices moving upward, it probably doesn't matter because many prospective buyers will no longer even satisfy the mortgage DTI qualification at current prices.
You may object that some are buying with cash. While that's true, it's not enough of the market to sustain prices.
Second, the big issues is with houses supply. The high rate basically lock most current sellers which have very low mortgage rate (compared to 5%), hence reducing the supply more.
Too many people seem to think 'cash deals' in real estate equate to a guy showing up with a louis vutton bag full of 100s that's been collecting dust in their shoe closet
It's just an indication of a lack of nuance in the deal-making, lack of contingencies (i.e. I'll give you $XYZ for your house as soon as I get $ABC for my house - agreed?!)
People with large sums of spare money always look for ways to park their money. Interest based products (term deposits, bonds etc.) will now become more attractive, diverting some cash flows away from housing.
Not necessarily. For anyone who's been working at FAANG and amassed certain amount of financial independence, the advice generally ran along the following scenario:
1) Secure a pledged-asset loan against your stock portfolio. That reduces the need to sell anything and trigger capital gains.
2) Shop around for real estate and submit a cash based offer to signal that you can close quickly.
3) Finalize the transaction.
4) Shop around cashout refi loans with fixed rates. Refi. Cashout. Repay the asset-backed loan.
If those 30% who are cash buyers kept their cash locked up in their houses, you wouldn't see household mortgage debt (that includes refi) skyrocket https://www.emarketer.com/newsroom/index.php/us-mortgage-deb...
I am not saying this will be the case, but rather that we're at what is likely the largest inflection point in modern history, and trying to predict where the world will be at in 10 years has become effectively impossible.
[1] - https://www.macrotrends.net/2593/nikkei-225-index-historical...
That's a long way away from predicting a crash or even a significant decline in prices, though. That would require a lot more inventory, and all those folks with 3% mortgages are going to be in no hurry to sell, and the stats on their mortgage amounts vs incomes looks WAY better than it did in 2007.
So my question is, if there is twice as much money in the system, but the same number of assets, why would it be shocking that housing continues to inflate?
People regularly sell stocks, bonds, and other homes in order to produce the down payment for a mortgage and have done so since long before 2020. M1 does not measure any of these.
Crypto, on the other hand, is something I know was sold for a downpayment by several of my acquaintances, which is acting as its own form of "money supply increase" since they spent orders of magnitude less to acquire it. The anti-inflation tool creates its own inflation by turning into "new money." :)
In situations like this, where demand is for a vital good and supply constrained, the government should be carful about managing the market. From what I can see, US politicians do care about the housing problem but their solutions thus far just exacerbate it by injecting guaranteed loan money and driving up prices.
They’re not though. Thats the whole problem.
Asset bubbles can inflate the paper value and there might still be some trading activity. But if nobody can actually buy the asset, it’s pretty much useless.
But to your point — things change, you aren’t rich enough, it sucks, get over it.
A lot of people buying houses unfortunately don't really look at aggregate home ownership cost and focus (incorrectly) on monthly payments. So, because they can afford the monthly payment, they think they can afford the house. This of course works works until the music stops.
That makes price discovery harder and means that the market price can lag what is a sustainable long-term price.
It is not a prediction on future prices.
If someone buys an asset for $100B that yields one penny per year with no growth - it is safe to say it's overvalued / a speculative investment. It does not mean that someone won't buy it for $200B tomorrow.