Hacker News Reader

Comment by garren | Hacker News Reader

Rising interest rates are starting to slow the housing craziness, at least where I’m at. I was regularly seeing 20-27% over asking with limited to no inspections, new listings going in hours. Nuts.

All-cash is basically the new norm. Two years ago that was an issue for regular buyers, but it’s workable now since lenders have jumped into the mix, more and more offer an all-cash option - they make the purchase and transfer it to you under a traditional mortgage. You still have an appraisal gap to contend with, sine they’ll only pay what the place appraises for, but anyone who qualifies for a loan can probably qualify for the all-cash option.

View on HN

Where I'm from (EU) experts say that prices will stagnate amd the market will slow down.

On one hand the high inflation pushes out lots of buyers -- they can't or don't want to pay the high interest rates. This lowers demand and prices.

On the other hand global supply chain issues (which got much worse with the war) lead to material shortages and rising material costs. This pushes up housing prices.

The net result is likely stagnation -- few houses are built and few exchange owners. But prices stay high.

Except if there will be a large recession causing people to loose their jobs and unable to pay their mortgages. This will crash the housing market, but looks unlikely now.

Definitely looks that way in the UK - I've been watching my local housing market like a hawk because I'm looking to buy soon. Houses are staying listed a lot longer, a fair few getting reduced, and newer listings are coming in at more reasonable prices (as much as over £100k is reasonable for a 1 bed flat miles into poverty stricken suburbia).

I think people are feeling more risk adverse cost of living etc and want to hold onto money and stay put where they are.

> I was regularly seeing 20-27% over asking with limited to no inspections, new listings going in hours.

Another way say "20-27% over asking" is "an agent underpriced it by 20-27%". Surely good for their marketing materials, but it comes at the cost of withdrawn information from the seller.

> All-cash is basically the new norm.

It’s paradoxical that all-cash became the norm in a period where mortgage rates were at all time lows…

Well, only if you ignore how we got there. Housing output took far too long to recover after 2008, and on top of that, many homeowners felt entitled to the gains they lost during the recession because that is what the American Dream promised.

We could also pull on the demographic weirdness of the moment as Baby Boomers only finally cede political power, skipping a generation. What have all are priorities concerned since they came of voting age? Should we be surprised our recent policies continued to favor older people who owned homes over young people deciding the shape of our next generation? And to be clear, I'm not blaming any motives. I'm saying much of this can be explained by an "accident" (or maybe "conclusion") of demographics.

The worst is if our incentives are for lazy capital returns (like rapidly rising residential real estate) for retirees the people who benefit in the younger generations are not going to be the people taking risks like starting businesses.

In the long term, housing should always return to the cost of building it plus the cost of land, that's the long term trend line. Now, why this trend line is increasing so fast is the real reason why housing is so expensive (something no one ever talks about), everything else is just incidental and or temporary effects.

> It’s paradoxical that all-cash became the norm in a period where mortgage rates were at all time lows…

Cash transactions have less friction and chance of falling through, so it makes sense that sellers prefer cash purchases. Consequently, you see cash offers because buyers know that sellers prefer - you essentially jump to the front of the line.

And just to make the connection explicit: if lots of buyers are making competitive offers because rates are low and money is cheap, then that's going to encourage the people who can afford to pay cash to make an all-cash offer where otherwise they might not have.

I guess my core question is: do they keep the cash in the house, or do they use cash just as a vehicle for the purchase, and then finance the cash out of it?

Because there was a concurrent trend to refinance houses at 2% loans and put the cash in the stock market, which is assumed to beat that 2% over the duration of the loan.

Reply on news.ycombinator.com