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Comment by pagthem | Hacker News Reader

I know many who are just hoping for a recession for prices (especially real estate) to come down.

Few issues w.r.t real estate:

  Prices come down because of interest rates which potentially make the mortgage even more expensive than before
  Prices coming down means prices on your current house also go down, so less money available if you wanted to move or "upgrade"
  Prices coming down will correspond with job losses so you might not even be able to buy a place because you are looking for a job
  Unrealistic expectations that a recession will just lower prices while ignoring the structural problems in the housing market such as the effect of higher interest rates on new home construction or the lack of homes for sale as owners locked up lower interest rates in the past

With that being said, this is overly broad and different markets will operate differently. Home prices may crash in Boise (just making something up here) while remaining flat or increasing in a location like Columbus where I live and housing prices haven't skyrocketed in a similar fashion (yet).

I'm often very unfavorable at government market intervention but this may be a time where the government can step in and build "starter homes" at cost. I guess we could see some startups emerge here but for new entrants it appears that regulation and law are the barriers. Different from established home builders where you build a house that costs X and you sell for Y, but if you make the house larger with "nicer" finishes you can build it for x+10% and sell for y+40% and that's the "barrier" moreso than navigating regulatory frameworks.

You're effectively arguing that we need price stability in housing, something that should be a given. Unfortunately we've adopted a policy of price growth in housing which has made it untenable for new buyers. If we could ensure that housing was a stable asset in both directions then we'd generally be in better shape.

I'd suspect that many Nimby issues would go away if people didn't view their house as their retirement. To your point, interest rates are not the only mechanism for this - and direct government construction might be more efficient.

It's a sad story when in many countries the only way people can dream of owning a home is to hope for an economic meltdown.

I’ve seen a really good summary for this situation and for people hoping that the recession will bring prices down:

- house in 2021: 500k €, monthly mortgage 1500€

- same house in 2022: 450k €, monthly mortgage 2000€

It’s not seeing the forest for the trees.

The fed’s plan is to “lower demand” which is just another way of saying it will make things more unaffordable on net, not less. So this makes sense.

But there's lots of other stuff going on here.

Inflation is high. That €2000 payment will only be equivalent to €1900 next year. And long term, house prices grow at least with inflation so if you can afford it, now is a better time.

So I'm playing my Uno reverse card and proposing that you aren't seeing the forest for the trees.

It might be equivalent to 1900€ but if you didn't get a raise to match inflation it doesn't really matter...

And the majority of workers in the world don't get even inflation-adjusted raises every single year.

No, but wages do tend to rise with inflation, which is admittedly a double edged sword.

We saw this in the 70s. Where inflation eroded the costs of buying a house quickly, even though the interest rates were also high.

Yes but that is almost universally true. Buying now is better than buying in 10 years and buying in 10 years is better than buying in 20 years.

I meant the people licking their lips because the prices may drop now, or who specifically waited to buy because the prices will drop

Not necessarily. If you're expecting house prices to fall in the short term and interest rates to rise, it's better to wait.

I for example wouldn't be jumping in just yet into the UK housing market. Plus renting can be cheaper than buying, in that case it isn't worth jumping into the market either.

All of this depends a lot on your equity. So for people with a lot of equity the raising interest and declining price is good.

Yes, as it's traditional in recessions the common people struggle and lose jobs, homes, while the rich go shopping for assets on a fire-sale.

How are you defining equity? Equity in the house?

If so your asset is going down and your mortgage payments are going up.

Equity is an asset with debt attached so if the debt is getting more expensive while the asset is declining in value, that isn't good.

This is good for people with lots of cash, as they don't need to borrow to buy, and they can now buy at a lower price. I would also say it's possibly good for people that can afford to take on the debt in the short term, as prices would be expected to rise, and interest rates fall in the long term.

I have a fixed rate mortgage so my asset is going down in value. But it depends whether o am going to be a net buyer or seller in the short term, whether this is good or bad. If I move up to a more expensive property then lower prices are good because that would tend to compress price differentials, but that would also work against me if I wanted to down size. So more generally we could say this is good for younger people who are generally net buyers of houses, and bad for older people who are generally net sellers.

Probably a translation problem but I mean equity as in cash you own.

Ok. In that case falling prices would be good.

I just don't see it happening, The UK housing market has all the coming issues which have been spoken about but no single politician came out and said the truth. One of the biggest issues people are going to suffer with their mortgages is house prices are insanely high. During the pandemic they went up nationally around 17% thats a bubble you're going to lose when the bubble bursts. If no one is willing to tell people the truth then I don't see how they can stabilise properly.

That's the exact reason why the housing bubble will never pop: the government will prop up the entire industry before having its voters lose money in their housing gambles.

The BoE spent billions to support pension funds that made risky and ridiculous bets on bond markets, so there's no reason to not be as leveraged as you can in those areas.

I lived through this a decade ago. What I saw was that the people who couldn't afford the price before the meltdown were the ones most affected by pay cuts and job losses.

in paris prices are not going down that much, they just stay the same. However if you adjust for the 2% inflation a month we're going through, then you can consider real estate prices are crashing.

Skimpflation brings not the prices down, but quality.

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