Certainly prices may come down in some locations as interest rates go up if there aren't enough cash buyers, but will it be enough to counteract the imbalance of demand and supply? I think it's an open question.
Certainly prices may come down in some locations as interest rates go up if there aren't enough cash buyers, but will it be enough to counteract the imbalance of demand and supply? I think it's an open question.
On one hand, this means that prices need to come down to get houses into peoples' price ranges. On the other hand, if the market is down, there's no way in hell that I'm selling my house. A loan at 2.875% is almost like having free money, so even if I need to move, I'd prefer to rent out my house than sell it.
It's unclear if we will see low prices, but fewer sellers, or high prices, but fewer buyers. What's clear though is that this is going to be a low liquidity housing market without a lot of transactions.
As long as you are occupying a residence, it would not effect nationwide or region-wide supply and demand, right? You selling would be offset by you buying.
Deaths, divorces, immigration, births, and of course, new construction is what would shift supply and demand curves, on average.
Also, if lots of people are buying and selling, even if aggregate demand is the same, it's a more liquid market. If I'm a first-time homebuyer, I'd rather play in a market of musical chairs then try to buy in a theater where only the dead and divorced get up from their seats.
If a family that would normally have sold their older two bedroom and moved to a four bedroom instead chooses to remain in the two bedroom longer, that two bedroom doesn't appear on the market, a four bedroom languishes.
And if nobody is building two bedroom houses, that can have ripple effects.
I've watched a lot of friends go through this thought process recently. Locally, the thought process grinds to a halt when they see the exorbitant prices that property management firms are charging for new customers these days. Apparently there's a huge spike in the number of people trying to become landlords because they don't want to give up their low mortgage rates, like you. Property management firms are taking advantage of this.
I also see a lot of people changing their minds when they do the math on the size of down payment they'd need and the monthly cost of a 7% mortgage on the types of houses they want to move to. There's a reason people talk about starter homes and trading up as opposed to accumulating additional properties every time they move to a nicer house.
OTOH, I know a number of well compensated software engineers who were trying to pour their money into real estate investments. All of them are very firmly paused on buying new properties at the moment.
All of that goes away for a percentage.
Some people get lucky with golden tenants who never cause trouble, pay on time, and even fix little things on their own.
Others get unlucky and have to deal with a neverending stream of issues, from dealing with payment issues to having to leave work in the middle of the day to handle the issue of the week.
The laws around being a landlord are also more complex than you'd expect. In many locations, you can't show up and fix things on a rental by yourself unless you're a licensed contractor. A lot of landlords ignore that and do it anyway, but if anything goes wrong then you have a target on your back as soon as the tenant engages with a lawyer. Hiring a property management company is a way to pay someone else to handle all of that and take a significant legal liability off of your shoulders.
I remember early in my career I worked with a guy who thought he was going to manage a couple rentals on the side while doing his SWE job. He ended up getting PIPed because he was missing so many meetings and had to disappear all the time to deal with the latest issues at one of his locations, or even just to try to find new tenants after the constant turnover.
On the other hand I watched my wife tell a male owner that she would not accept a rent increase and he backed down.
Overall if you only have one property, have the right skill set and personality I would say you are better off doing it yourself. If you cannot say no to a young woman then you had better let someone else take care of it for you.
You’re probably better off finding a good tenant and paying the tenant to manage themselves, paradoxically.
Rental management for the most perfect possible tenants (parents) is still a moderate annoyance and more expensive than expected. Without appreciation I’d be below zero, and even with it I’d have to do some serious work to figure out how much I’ve “made”.
i made the shift because i was tired of having to deal with every minor crisis myself, take time away from work to (for example) meet prospective tenants, get a new AC installed, handle the make-ready process, etc. i had a good long stretch with one tenant that was low-maintenance but they moved out suddenly with very little notice (add managing the lease agreement to the list of stuff i don’t like doing as a landlord) and a lot of work i had to do to clean up after them.
all things considered, i’m happy to fork over 5% each month to someone else to deal with those headaches.
Insurance can only do so much to protect against that, but the worst case scenarios are thankfully relatively rare.
I do so for a few reasons: first, I have no idea what my obligations are as a landlord and they do; second, they have a list of local tradespeople whereas I live in a different country; and thirdly, the property is an apartment and the common areas and exterior were already being managed by them.
If it doesn’t happen, it goes into a maintenance backlog that will make your head spin later, and possibly your wallet implode.
If you live there, it’s usually straightforward enough to fit it in with everything else, but can be exhausting on it’s own.
Through something major in (roof leak? AC breakage?), add it being in an area you don’t live in anymore, and gets harder.
Then, you can have tenants that aren’t absolutely perfect, and it gets even harder and more tiring. Late payments? Property damage? Neighbor complaints?
If you pick good tenants each time and nothing goes wrong, it can be great. It only takes one case of it not for things to get really unpleasant and overwhelming however.
Also, add in the Covid eviction moratoriums, which opened a whole additional can of worms for landlords - if something happens like that again, which precedent has now been set - you could spend years paying a mortgage and upkeep on a place with zero income from it.
Personally, I never rent out a place unless I know how to do an eviction in the local jurisdiction. I hope I never would have to, but not knowing how is a good recipe to lose your shirt and possibly any future gains you could ever hope to have.
I’ve known folks that had renters who seemed perfectly fine (solid full time professional jobs, etc), but left a complete trash house (literally, multiple dumpsters worth - trash to chest high), and disappeared suddenly without paying last months rent.
The underlying truth is that it takes work and management expertise + energy to maintain a house in livable condition, let alone want-to-live-in-it-condition, and that has value. Also, not everyone can, or wants to do that.
I know how to do an eviction in my local market and did one in my former life as a landlord. That is precisely why I will never be a landlord again.
Paperwork grind and cost? Nastiness/emotional side? Something else?
The eviction process in my state
- first you have to give them your own personal notice.
- if they don’t pay in 7 days. Then you go to court and file paperwork with the court
- then once the tenant gets served they have a certain amount of time to reply to the notice
- then they can make up any reason to dispute it
- then you have to wait on a court date after you win. They still have a certain amount of time to pay. If they don’t…
- then the Marshall again serves a notice
- then you have to schedule a time for the marshal to oversee the eviction.
- then you have two hours to remove everything from the house on the street while the marshal is supervising. You must have a crew of 5.
- while all this is going on, you can’t enter the house or harass the tenants in any way.
- then you have to clean the place up and fix any damage.
- then you have to find and screen new tenants.
There is a reason standard underwriting only gives you credit for 75% occupancy. The effort is not worth the money. I spent years grinding out rental property between 2002-2010 and even if the housing market hadn’t crashed, I would have been better off focusing on my career.
From 2010-2020, by concentrating on my career I tripled my compensation without having to relocate. Not bragging, it’s about that of a mid level software engineer at any BigTech company in the US (I work remotely at BigTech in the cloud consulting department). Even now if I cared to, I could put in 6 months to a year worth of practicing coding interviews and probably increase it by another $100K.
Residential real estate is not “passive income” by any stretch. I am better off just investing my income from my 9-5 in REITS if I wanted exposure to real estate.
Personally I take advantage of it and think it's not necessarily a bad thing, but wish it was more direct about what it's trying to do.
The long term fixed rate mortgage is where no wealth gets redistributed today, but rather from future taxpayers or users of the currency.
Secondary step would be to make landlord-ing less attractive by giving tenants a lot of rights, naking them hard to evict, thank kind of thing.
This would make houses less atractive as an investment asset.
Lastly you could increase property taxes, again driving down atteactivenes of hiuses to investment.
Beinging down price of houses is easy. The question is what do you do with all the people who bought a house for 500k and now its worth 250k and they are stuck
For example,
https://www.mortgagenewsdaily.com/
Reports 30 year fixed is about 7.32% and 5 year ARM is about 6.75%. A 10 year would be somewhere between that, but if I was choosing with less than a 52 basis point difference, I would go with 30 year fixed due to less downside risk of my mortgage blowing up.
At 30 year mortgages of 2% to 4%, no brainer to just go with 30 year even though you might pay a $1k more in interest every year. But you might not, and you definitely will not pay more than a $1k extra in interest since it is locked in.
If the 10/1 ARM was 5% and 30 year was 7%+, I would think about the 10/1 ARM.
Part of the problem for communities starts when not all participants live in the community - if the grocers and workers and police are “imports” from the suburbs or other areas you start to get divergent goals and WGASA starts to take hold.
Years ago my dad took an ARM at 18% because the anti-usury laws limited the maximum it could go to 20% and it turned out to drop each adjustment period after that (80s wheeee)
What does this mean? Are there usually early repayment penalties for home mortgages in Germany, or is it simply not allowed?
In the US, I have never read about not being able to pay or a penalty for paying the entire mortgage at anytime.
And yes, the prepay penalty is generally based on the interest they would lose or a few month's interest, whichever is better for the bank at the time of payment.
But also note that if you paid the extra for a 10-year, Canadian federal law says you can prepay 100% at any time after 5 years with no penalty (or virtually no penalty?). Which is part of why longer-term mortgages are markedly more expensive.
https://www.loan.com/home-loans/how-non-recourse-loan-laws-v...
My parents (we're all American) were always very careful to check that early repayment didn't come with a penalty, on mortgages and all other loans, so I assume it used to be a thing. I've always asked (following their example) and not once had the answer be "yes, there's an early-repayment fee" so maybe it's a whole lot less common than it used to be.
https://www.ecb.europa.eu/pub/financial-stability/fsr/focus/...
"The prevalence and handling of prepayment risk differs in two respects between Europe and the US. First, while in the US prepayment costs may be priced into the interest rate, in many European countries lump-sum prepayment penalties are induced by statutory requirements. Often banks impose charges on homeowners for early repayment. These fees force households to bear part of the prepayment risk and, if the fees are sufficiently high, may deter homeowners from prepayment, thereby nullifying the prepayment risk faced by banks. An exception to this is the Danish mortgage market, where long-term fixed-rate mortgage loans with an embedded option of a penalty-free prepayment are typically offered, as in the US."
Our 80/20 loan back in the countrywide heyday had a prepayment penalty on the 20 which also had a balloon. We structured our refinance to avoid the penalty.
1) raising rates and otherwise making money more expensive encourages capital to do something else with their money than speculate on real estate cheaply, which was a pretty appealing option over the last 5-6 years (let alone the last 2).
2) it's a mistake to rely on interest rates alone to address issues here. There's a whole raft of policy issues that should be brought into play here: progressive taxation by ownership volume and vacation-rental usage, better interest breaks for first-time homebuyers, encourage owner restoration and discourage investor-flippers. BUT every other way of addressing the policy is actually harder politically, since one party sees inequality as feature-not-bug and will actively fight attempts to address it (especially if it represents a win for their opposition), and the other has both a tenuous hold on power and a coalition that may not be all on board.
This means your mortgage repayments aren't the only thing that has increased, so has absolutely everything else in your life. Look at Australia for example, they're predicting the already ridiculously high food prices to go even higher, up to 7-10% due to major flooding events this year.
So your analysis kind of works, but it's not factoring in whether people feel ok about paying > $200k (AUD) or more for a house which isn't worth that much anymore (prices are going down already, many many people bought at the height of a bubble, due to FOMO), then having absolutely no money to do anything with their house to improve it (building costs are astronomical) and having no money for leisure or holidays, then you have high energy and school fees to add to all of that.
In my opinion, this is what will start to drive more people to sell. It's not just the house prices, but it's the burden of being tied to such huge debt.
Also money isn't so cheap right now, so it will slow down property speculation. Many people also bought houses thinking that if they don't like being so heavily leveraged they will just sell their property at a net gain. Not at a loss, this I think is starting to scare people.
I'd say we'll see a lot of people at least consider downsizing in the near future.
Australian here, $200k would be a dream! You're off by a factor of ~4.6: https://www.abs.gov.au/statistics/economy/price-indexes-and-....
Over the past few years the appreciation on housing has meant that for many people their shelter, and entirely non-productive asset, has outpaced their own earnings. For anyone not on that rocket ship, good luck.
So the majority of recent buyers are servicing loans much larger than their current house is worth, and paying more interest on top of that.
I’m sure it will “go back up again”, but it doesn’t seem like there are any events in the near future which are likely to kick off another massive boom, all signals are pointing towards a property slump.
Says someone who probably has never been a landlord. I would rather poke both of my eyes out while getting a rectal exam than ever be a landlord again.
- it's not clear that pandemic-era is over, whether that be new Covid strains or other mutant viruses (not to mention global thermonuclear war)
- work from home requires much more space to do well + i'm home more often to enjoy the rest of the house
- most of my close friends work from home which means they can come and visit much more often
- due to Covid, parents are afraid of nursing homes + kids taking longer to leave the nest = intergenerational living is back on the radar
- life is short, a little bit of post-Covid YOLO
I'm not sure how widespread the sentiment is but if enough people feel this way it could make an impact.
There seems to be an implicit assumption that WFH is somehow less productive. I've not seen much evidence of this personally. It certainly makes management harder but it's a small price to pay when it's saving a bunch of travel costs for the employee and office costs for the employer
If I am understanding the parent, the point being made is this may be less of an option for many if companies revert. If there aren't many opportunities to work remotely, this will become more of a perk, like free lunches, and not something other organizations will compensate you for. Not everyone may have a choice to demand more money if the number of WFH options are very limited.
Apple and Google might be able to pull it off but run of the mill non-unicorn companies? Not convinced.
Whereas Facebook made a big announcement that they were renaming the company Meta. They asked to be called Meta.
Hiring a CFO from the banking industry did make it more difficult to get the free food, though. The cause and effect there was immediately noticeable.
With labor having less power, it's likely that the members of senior management who don't like WFH (for a multitude of reasons right and wrong) will have more sway in the conversation.
It's entirely possible that on the scale of like 30-40 years, this period will be considered a "slump" in how bad covid is, or a time when we were just not considering its effects enough. I don't think this scenario is extremely likely, but I do think our collective uncertainty about long term covid effects on society is still very very high and we should be factoring that into long-term decisions like where to live, housing ownership, etc.
The high confidence people are comfortable displaying about where we are with it is not warranted, imo. It may not be a critical day-to-day concern for most people anymore. But there's no guarantee it can't go back to that state, or with the hindsight view of covid disabilities we'll have wished we kept it as a daily concern during this time.
Plus nursing homes are probably going to remain more lethal than they have been during most of our lives. I think expecting a social change around elderly care based partially on that is astute.
And in the past 18 months, the changes to interest rates mean that your budget on a standard 30 year fixed has shrunk by 40%. That is, the same payments will get you 40% less house at 20% down. To make up for that, you would have to increase both your down payment and monthly rates by 66% to afford the same dollar value as a year ago.
Yup I've made this plan a couple times now.
But sadly many were thinking "one more year and I can afford a multimillion mansion with an infinity pool"
All good apart from this, its clear you don't actually have kids - interest in kindergartens didn't drop a zilch (given, where I live - Geneva, Switzerland and around, plus at home country in EU). We properly don't care about covid anymore, had it at least 4 times, last 3 times even mild flu would be much worse experience.
Sure if you are a proper germ freak or some qanon-like paranoid nut you would base your decisions on this... but if you are just another sane parent, you just drop your kids there and hope for the best. Same as with any other sickness that kids do catch often that's looming out there.
The interest rates make a huge difference here...a hypothetical buyer who could afford $5000/month in payments would qualify for a $1.22 million mortgage at 2.75% interest, whereas that same payment at 7% would only cover a $750k mortgage.
Cash buyers are generally about 25% of the market, which is a good chunk, but not enough to prop up prices if the other 75% of buyers they're competing with have had their purchasing power drop by 40% in the past 6 months.
It’s hard to compare this stuff apples to apples, but the one constant regardless of locality is that higher rates significantly reduce buying power for people relying on mortgages.
https://www.state.nj.us/treasury/taxation/pdf/lpt/gtr/2021ta...
It also isn’t uncommon to see a big difference between the sale price and assessed value. One datapoint would be a $4M purchase that is only taxed at $2.2M the first year after the deal closed. At least in King County, the valuations do seem to “catch up more quickly” after a sale, so at +1y it might be $2.8M, at +2y it might be $3.3M, but to be paying >$30k here in taxes you’d need a >$3M assessed value home.
[1]: https://www.tax-rates.org/washington/king_county_property_ta...
In Seattle, where the housing market is considered expensive, a 1.2m house only pays $7k in property taxes
Only if it has (a) an exemption or (b) an assessment well below market value. A typical house with a $1.2 million assessment will have paid over $10k in property taxes in 2022.
[1]: https://apps.leg.wa.gov/WAC/default.aspx?cite=458-07-030
Are cash buyers really 25% of the market in the US?
My local anecdote - a few of my realtor friends said roughly 70% of all transactions in the last two years in Santa Barbara area have been cash deals. They also said currently those deals are all dried up. From what little research I've put into it, from the county assessors office it looks like 2.5k homes were sold last year in the area. Now think about this, we had an overwhelming number of people from LA and SF flee to Santa Barbara during the pandemic. How many of those people had temporarily won the stock option start-up lottery, ie. any tech bubble employee - zoom, pelaton, doordash, etc, or had a house that had spiked in value willing and was willing to swap homes. It doesn't take much when housing supply is at historic low and temporary bubble demand skyrocketed to throw the market all out of whack. Personally, I know at least 10 people that traded their zoom stock for all cash housing deals here in SB at the right time. Now that stock is worth 1/8 of what is was. I imagine that this scenario played out a few hundred times just in our little town. Extrapolate that nationwide, you can see what might have contributed to massive asset valuations that quite literally, don't make sense. In the long run, it shouldn't matter, however it will be fun to watch it all play out.
Cash buying is one of those terms people don't understand. You're almost never getting a suitcase of 100's.
And if you are, you may want to follow your escrow agent as they run out the door.
Not in the sense that they didn't finance part of the purchase, as I understand it. It just means the cash is already there from the point of view of the buyer.
People sitting on 2% mortgages are not going to move. There's a lot of housing inventory that's locked away now [1].
We're going to enter a lower supply, lower demand market. The prices might not move much.
[1] Maybe downsizing Boomers will balance this. I'm not aware of any measures of this trend, though. And a lot of Boomers just sold/downsized to take advantage of the high prices.
The flip side of that is when I bought this hose from (looking it up) silent generation owner who was moving to a nursing home, there wasn't any other housing inventory in the price range and area and cost. Buying an old house and fixing it up over the years was much cheaper than buying a new house another half an hour out of town that costs 2x-3x more.
The buying a small house new house is still 2x-3x more than this old house would sell for.
Other than that this is a big house, there is no reason to sell it at this time. Additionally, the new development that is being built is targeting the most money that can be packed into a single lot... and... well, I don't want or need that.
If people want me to move out, build a nice 1-2 br 1.5 bath with a room for a home office on the quiet end of a street. I don't need a fancy kitchen. I don't need a place for fancy plates to show off in the dining room. I don't need a man cave with a bar or a three car garage... just something nice and sensible.
And yes, it is certainly a problem. Housing supply has been woefully under built for a decade or more, and that which is there is not targeting what remains of the middle aged middle class that sees a 30 year mortgage when they're 40 as absurd. The less expensive supply is often getting bought up by people speculating, as a rental property (either by a landlord or by a company).
Which brings us to "I've got a house, its paid off, going anywhere else reduces my net worth and gives me some debt that I'm unlikely going to be pay off before I retire - there is no reason to move at all."
Not to mention waiting in lines everywhere to go, and being forced to rub shoulders with lunatics when you need to commute for work or shopping.
At this stage of the game I'm ready for the 2500 sf house.
Where is this? I'd love a place where single people can afford a 3500sqft house?
Here in silicon valley it takes two tech salaries to afford a 1300sqft box.
Texas, Georgia, North Carolina, ...
Cash buyers often finance the property they buy. All a "cash buyer" means is that the deal is not contingent on financing, either contractually or as a practical matter. That is, they can guarantee the sale goes through with cash.
It's a tricky question that can really only be answered by looking at how leveraged assets in general are.
So it's a double whammy of high interest rates with the pricing from 2021. It's wild out there folks.
In aggregate in the U.S., but this and much other commentary in this thread doesn't consider enough the vast variation in local markets. There are spots where there's a higher percentage of cash buyers due to wealthier people living there, a larger contingent of foreign buyers, or people who sold homes in very expensive areas to buy in slightly-less-expensive areas. I'm seeing this where I am, where people are moving from the city (where a 1 BR apartment is easily over 1M, a 2 is 1.5-2M, etc.) to the suburbs, where an 800K house is considered pocket change.
Not to mention some people have access to "cash" without having it. Some mortgage brokers, even from large banks, can arrange to let you use collateral to help guarantee a closing within a short time (eg. 30 days) letting you waive the finance contingency.
In a given real estate transaction, someone waiving financing contingency is going to fall in to the category of "cash buyer", and it might not be obvious that the cash shown in the holdings (if it is even shown to the seller as proof of funds) came from a loan.
I don't know if it's enough or not, I was making the point that that 25 percent number is in aggregate for the entire large country and there are some insane skews in local markets where the number is much higher.
But to directly answer you, if inventory is dried up, no one is listing, and the stuff that comes online is still priced like mortgage rates are 3 percent, that might kill off a large pool of buyer demand but those cash buyers are still the marginal buyers and bidding wars will ensue just the same. I'm seeing this at present.
Crashes often happen in slow motion, as this one is. It’ll take years to play out.
That's why - unfortunately - there could be no crash this time. Just a long period of stagnation and low turnover.
I think what we can say is that the boom is over, and this will impact stocks, real estate and jobs for at least a couple of years till assets become more affordable again.
What can change this is a fed pivot on interest rates, which will happen at some point when things really break (bond market, stock market) or inflation comes down a bit, but not until then, so unlike previous downturns the fed doesn't have much ammunition here as they need to look serious on inflation.
Quite a few major countries are going to struggle though. The US may have a bigger Millennial cohort, but if we say Gen Xers are 42-55 and Millennials are 26-41, the population pyramids for many large economies make for grim reading. Consider Italy (adjust ages for being 4 years ago): https://commons.wikimedia.org/wiki/File:Italy_population_pyr... .. or, to a lesser extent, China: https://commons.wikimedia.org/wiki/File:China_population_pyr...
I was house shopping this year but had to wait as I moved for a new job. In January I was quoted $>1M of buying power (without my partner). Now I’m quoted <$700k. I’m not buying anything soon.
My father is looking at moving to a new condo for retirement but was hesitant about HOA fees. This year he spent $50k to replace all the windows in his current home to prep for sale. That $50k in maintenance would cover $300mo in equivalent hoa fees, and that’s not considering every other maintenance cost he’s spent. The math just doesn’t justify home ownership from a financial perspective - if your home value isn’t skyrocketing.
I’ll be a renter for a while it seems. Maybe that’s ok.
The $50k you spend on windows would often only recoup $45k or even less, people vastly underestimate the costs of many things (but not all, foundation problems people always overestimate).
The saddest story I read about was someone who was told that putting $20k of new windows would let them sell for $40k more; and they did, and the buyer bulldozed the house to build a new one.
At the same time, real prices (what is paid to existing homeowners, adjusted for inflation) will decrease due to higher interest rates.
As corrolaries: Real mortgage payments will increase, and property tax revenue will decrease.
So, the banks win, schools, local governments and individuals lose--nothing new there.
Basically, your mortgage says you have to maintain N% down. So, if the house price drops enough, you make a balloon payment or the bank forecloses, and sells the house at auction.
Once margin calls start triggering, there's an automatic sell off of whatever asset is impacted, causing more margin calls and a feedback loop.
90% of Britain's pension funds were hours away from being zeroed out by margin calls a few weeks ago. The Bank of England intervened.
It made for some great reading. This is why the UK gov't keeps walking back the mini-budget, and the IMF is making noises usually reserved for failing dictatorships.
The US is below replacement rate on 3rd generation+ families, and would experience an aging crisis like Japan if it were not for immigration. You're 'wide open borders' statement is just a dog whistle.
I get when some small country like switzerland complains.
But what the fuck is going on with the US - you people have a giant country, all of mexico could move in and it wouldn't make a dent!
They have less earnings and savings than the previous generation as compared to the price of homes at the same time in their lives. While government intervention in the USA has adjusted the requirements to get a loan approved, it will not be enough to keep up with rising interest rates. Prices have to come down for millennials to make purchases. This will cause a "house-price" slump.
In the case of home ownership, the benefits depend quite a lot on the number of years the property will be owned. I'm not sure what the numbers are now, but when I bought and later sold my house, I determined that 6-7 years was the minimum duration that made home ownership better than just renting.
People change jobs more frequently now than in the past, and consequently they tend to move around more often. That makes investing in a home more risky, as it's really unclear if one will still want to be in that home/location in 5 years. Renting, by comparison, is less risky. It may be less economical over the long run, but not if you would find yourself moving every small few years.
Also, the remote work thing is not going to decrease; if anything, it will increase, reducing location pressure (and consequently reducing the value (or rate of increase in value) of homes in certain areas). That implies even more risk for homeowners in those areas, as they cannot rely on ever-increasing values.
Pretty sure that’s wrong. Tenure in job is near an all time high in America. Boomers were the job hoppers.
Anecdotally, most of my older relatives spent 20+ years working at the same place. Meanwhile I’ve had 4 different employers in the last decade and don’t know many young folks in tech who have stayed with a company for 5+ years. (Why would you if you can only move up in position or salary by job hopping?)
The boomers lived through 11% unemployment. It may not have been job hopping by choice.
That would be astonishing, unless you are in some really unique industry.
Perhaps if it's one of the big consulting firms, maybe. They start right out of university and then follow a career track which can easily go 15 years to partner level. And for those willing and able to live that life, I imagine they don't change jobs as often as others.
The numbers go down as the year goes.
Additionally, the median length of the tenure goes up with age. For men...
.... 2012 : 2014 : 2016 : 2018 : 2020 : 2022
25-34 3.2 3.1 2.9 2.9 2.9 2.9
35-44 5.4 5.0 5.0 5.0 5.1 5.0
45-54 8.5 8.2 8.4 8.1 8.2 7.5
55-64 10.7 10.7 10.2 10.2 10.0 10.0
From the pdf, if we go to Computer and mathematical occupations (which software developers are classified under) .... 2012 : 2014 : 2016 : 2018 : 2020 : 2022
4.8 5.0 4.4 4.3 3.9 4.2
Table 2 pdf will also be of interest - Table 2. Percent of employed wage and salary workers 25 years and over who had 10 years or more of tenure with their current employer by age and sex, selected years, 2012-2022Not only does the recent trend show tenures declining, but it also shows home ownership declining since the peak in 2004.
So more job turnover and less home ownership does mean more likelihood of moving, whether to find new jobs or to work remotely.
.... 1982 : 2012 : 2014 : 2016 : 2018 : 2020 : 2022
25-34 2.5 3.2 3.1 2.9 2.9 2.9 2.9
35-44 4.9 5.4 5.0 5.0 5.0 5.1 5.0
45-54 8.4 8.5 8.2 8.4 8.1 8.2 7.5
55-64 11.9 10.7 10.7 10.2 10.2 10.0 10.0
Though the report that you're most likely interested in is https://www.bls.gov/opub/mlr/1984/10/art2full.pdf> In 1983, more than 1 worker in 3 aged 35 to 44 had been with the same employer 10 years or longer and almost the same ratio of workers 45 and older had worked for the same employer 20 years or more
> Among the principal findings:
> One worker in 6 has been with his or her employer for at least 15 years. Among workers aged 45 and over, nearly one-third have been with their current employer for 20 years or more.
Comparing that with the current one https://www.bls.gov/news.release/pdf/tenure.pdf table 3
.... <12m : 13-23m : 2y : 3-4y : 5-9y : 10-14y : 15-19y : 20+y
20+ 22.3% : 5.6% : 5.1% : 18.4% : 20.6% : 10.1% : 6.7% : 11.2%
35-44 19.2% : 5.3% : 4.7% : 18.8% : 25.4% : 14.0% : 9.2% : 3.4%
45-54 12.9% : 4.0% : 3.9% : 15.4% : 21.2% : 13.2% : 10.4% : 18.9%
55-64 11.6% : 2.5% : 2.5% : 12.6% : 19.3% : 12.6% : 10.1% : 28.9%
(the 20+ row is everyone aged 20 and older)The corresponding for 2022 would be:
> 2022, about 1 worker in 4 aged 35 to 44 has been with the same employer or longer, which is almost the same ratio as workers 45 to 54 working for the same employer for 20 years or more.
> Amount the principal findings:
> One worker in 18 has been with his or her employer for at least 15 years. Amount workers aged 45 to 45, less than one fifth has been with their current employer 20 years or more. This climbs to slightly more than one quarter for workers aged 55 or older.
Yes, this is all anecdotal, but I can't help suspect that you're doing a bit of "this is how I feel, so surely it's the way everyone else feels". :)
I think you might be reversing cause and effect. Millennials are less wealthy, and thus less able to purchase homes, get married. Traditional religious affiliation is declining, but it's debatable to what degree religious impulses have declined and to what degree they have simply found new forms of expression (e.g. into astrology, QAnon-style "theories", "General Artificial Intelligence", spiritualized ecology, etc.)
"People change jobs more frequently now than in the past, and consequently they tend to move around more often."
This is a false statement. The decline of residential mobility and its impact on labor market dynamism is a hot topic in U.S. economics research today.
https://www.npr.org/2017/08/04/541675186/fewer-americans-are... https://workofthefuture.mit.edu/wp-content/uploads/2020/09/2...
Most of all: College. Not only does it share a lot of the practical value that the church historically provided (community, fellowship, teaching), but notably it carries a similar fear-based belief system whereby there is a lot of social pressure to attend and it is accepted that if you don't attend you will face the scorn of the economic deity; the modern day version of "you will go to hell".
The specific "higher power" may have changed with time, but the human behaviour certainly hasn't.
A bright light I'm seeing is that material costs have largely fallen back to pre-covid levels. There are a few bits that are expensive or hard to obtain (windows), and the labor market is still aging. But still, the cost to build in many areas has fallen dramatically.
Reality is people can't afford the pre-recession prices, so they will rent and ride it out for a while longer which will put downward pressure on people trying to sell and the market will meet the demand that way.
Many factors to supply imbalance. Look at the increase in the amount of Airbnbs since 2010.
People might be reluctant to sell, but they might need to when they can't rent, Airbnb, or lose their job.
Notably due to the Great Recession aligning with record high (at the time) food commodity prices, which saw farmers outcompeting home buyers for development lands.
Food commodities have completely smashed those records over the past year or two and if that continues we will no doubt have farmers willing to bet big, which again will constrain housing development.
What will be interesting is if we are able to get our food supply issues under control. Food prices have been known to drop like a rock before.
But perhaps what I’ve read is just wrong or biased towards the kind of wealthier youngish people who want to live near the centres of these big cities and can already afford to rent there.
Maybe you prefer the city centre, but if you could build a new home in the suburbs for pennies on the dollar, it would be hard to pass up. But when building that suburban home costs just as much then there is little reason to compromise.
There is still a lot of sprawl happening, to be sure. But when competing for use, you're going to pay a lot more, which in turn drives up the cost in the city centre. Prior to 2007 when food commodities first started going nuts farmland was significantly less valuable.
Cities don't stand as islands. They exist within a much larger world.
Around here we have something like 500+ new dwelling units in the last few years, and we're pretty small. Other areas all over the country have been building like mad.
See: https://fred.stlouisfed.org/series/HOUST
The sudden drop due to covid caused a shock throughout the housing market that hasn't been absorbed even now.
Prices will be pushed downwards by rising interest rates.
Prices will be pushed upwards by a genuine housing shortage in the US.
Which force will prevail? No one knows. We will find out.
Volume is going to dry up significantly, and prices will go down a little bit - but there won't be a deluge of forced sellers like there were in 2008 because most people are on long-term fixed-rate loans. The majority of sellers will be divorcees and estates, as individuals chill in their 2.625% APR 30y fixed's - or own their homes outright.
Unlike 2008 we're not coming off a deluge of building, quite the opposite - and unlike 2008, most people don't have 5 houses on variable rate debt.
tl;dr: Prices will go down a bit, but the market is so short housing, it won't really matter.
Longer term anyone who buys at 7% APR will just refi down when rates drop - and probably cash-out refi at that.
Assisted living does not come cheap.
Also, the grim reality is that you have to live long enough to need assisted living. A life expectancy of 78 sounds good on paper, but by the time you get to your late 60s and early 70s people in your age bracket are dropping pretty quickly.
They may try to put it off as long as possible, but it will catch up to them. And then it does not take long for the costs to consume their would-be estate.
And the irony is that it's the system their generation built for their parents.
For example in the US a male has a life expectancy of 76.22 (https://www.ssa.gov/oact/STATS/table4c6.html), but a 70 year old male has a life expectancy of 84.59 years.
But that doesn't take away from your main point about people wanting to avoid that situation.
Are you from California?
This one's older (from 2020) but digs into details by area of the country: https://eyeonhousing.org/2020/01/a-decade-of-home-building-t...