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Comment by alexb_ | Hacker News Reader

>Housing investment, though, plunged at a 26% annual pace, hammered by surging mortgage rates as the Federal Reserve aggressively raises borrowing costs to combat chronic inflation. It was the sixth straight quarterly drop in residential investment.

Thank christ. Please bring on a housing crash ASAP.

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We took a hard look at the economy before buying our house. Ultimately, we bought when interest rates were high, but prices had not yet come down.

There's no crystal ball, but it sure looks like our investment will go down in value in the next few years, perhaps precipitously.

I think of it this way: We bought the house we want for the price we can afford, and will happily enjoy it for two decades without price inflation, even though our salaries will likely go up. So, it's a win, even though we bought at what looks like peak market.

Yup, a house is housing first and an investment second.

I've been waiting for the real estate market to crash for 20 years... On the other, my savings are worth less and less.

Don't worry, population collapse will fix this in another ~20-30 years. You'll get there.

Depending on where you live, population collapse is either a myth, meme, overblown but remote possibility, or absolute certainty.

In most western nations, it's not going to be that big of a deal, I wager. In areas with net emigration, especially those that are not good at sharing true demographics with their leaders, it'll be devastating.

I would say population declines within certain tribes leading to changes in political power, and hence distribution of resources, is the central issue in many societies, especially those with very low birth rates.

And the tribes are not necessarily delineated along skin color/region of origin/religion, but even age/education/immigration.

You cannot plug and play 50M young people from Latin America into the US or Africa/Middle East/Eastern Europe into Europe, and expect society to not change in ways that the existing population might not like.

In the US and the Americas it won't have a severe impact. Most countries in America should hold up, and Canada has relatively high immigration levels, so there's that.

Much of Europe and large parts of Asia (China! Japan. Korea.) will face jaw dropping population collapses, happening now and in the near future.

The US might just ease up on immigration.

There is no shortage of people willing to start a new life in the wealthiest economy on the planet.

The end of population growth is certainly going to shake things up -- but who is to say how policies won't change to accommodate the new reality.

Yeah, my wife is an immigrant and the US government makes its best efforts to make immigration as nightmareish as possible. I'll be the first to say the immigration system is broken and needs to be fixed.

In the US? Prices from 2011-2016 or so were not that bad, and were lower than 2006 in many cities.

Paris

Steady growth since 1998 https://parispropertygroup.com/blog/2017/how-paris-real-esta...

Ah, not surprising, considering it's one of the most desirable places to live in, and you are competing with a growing global rich class to live there.

Well it crashed ~10 years ago, so there was your chance.

But lucky for you there’ll be another opportunity soon

Glad you’re content. If you’re in the US, As a bonus, just remember that the US gov always does everything it can to keep housing prices stable or up. Of course it’s not an easy problem for them, but you’re in the same boat as millions of other ppl and the govt won’t let you crash out that hard.

> As a bonus, just remember that the US gov always does everything it can to keep housing prices stable or up

What country doesn't do this? China surely does that even more aggressively than the USA; Australia, yep; so...Japan? That's the only country I can think of that doesn't mind some long term lowering of housing prices.

There are 195 countries in the world. A dart thrown at a map would probably not hit a spot that is likely to prop up the general home-owning public.

Japan is the only notable exception I can think of.

Home prices, not adjusted for inflation, are fairly sticky. You may lose some money due to the loan.

Not every decision we make needs to be pragmatic. Your last comments capture this. Don't worry about it.

Look at it this way: you are missing out on 25% rent hikes.

https://thehustle.co/why-is-rent-skyrocketing/

This was one of the things that convinced me to buy back in 2013 - stable monthly payments for the whole mortgage duration. Just had to get over the down-payment hump.

That's a good outlook.

If it's any consolation, we invested in the market in a big way for the first time in October 2021. We just got the "Congratulations on your first year of investing!" e-mail from the service with a link to our account, which happily displays a big red 25% loss on our solidly six-figure investment.

(I do think the stock market losses may be driving a lot of the recession talk. Those losses have happened, for sure)

Supposedly the car market is about to crash as well. There was supposedly 2008 like shenanigans in the auto lending segment and the crows are coming home to root.

Speculation is that people were buying cars they couldn't afford using the stimulus checks as the downpayment and then immediately asking for a halt on payments due to COVID. With both factors no longer in play people can't afford their cars and are defaulting. This should cause a massive wave of repos and a flood in the used car market.

That said, the market can stay irrational longer than you can stay solvent. Car lot managers will be in denial for some time before they actually lower prices to where they should be.

I suspect there is some chunk of the economic doomsaying that is literally political propaganda. A recession is bad for the party in power and a lot of the economic catastrophe drumbeat started around the time early polls opened up.

Stimulus checks were what $2000 total. That's less than 10% on a new car and most competent banks look at your monthly payment and DTI to determine how much to loan.

> A recession is bad for the party in power and a lot of the economic catastrophe drumbeat started around the time early polls opened up.

They've moved from economy to gas and the polls are now on crime. Really anything to stir up FUD.

Apparently there was a lot of 2008 style "ignoring the fundamentals" going on in the auto lending industry because the banks had tightened up the home lending market and the stupid money needed a new place to go. There is the further instability from the government loan crisis in China combined with continuing zero-COVID lockdowns hurting production. However, I think the China problems are being hugely overblown in the west. China is still a net exporter and has a trade surplus to throw at problems. Unbelievably credulous predictions that the Chinese government is going to topple on its own in the next few months are just plain out of touch.

> Unbelievably credulous predictions that the Chinese government is going to topple on its own in the next few months are just plain out of touch.

Isn't that just a straw man? Most serious reporting on China are just predicting a substantial slow down in growth (or even recession), which is what is playing out right now. Chinese emigration rates, which were dropping for many years before, are actually growing again (mostly due to zero COVID and lagging economic growth).

You would think so, but the stories are being repeated a lot in the news:

https://news.google.com/search?q=china%20government%20collap...

https://www.youtube.com/results?search_query=china+collapse

A slowdown is inevitable. The "china miracle" was loads of debt fueled spending to pump the books, but they still have 1.4 billion people who are still near the bottom of the S curve for domestic consumption. Even the dubious official figures showed a slowdown in growth.

You can always cherry pick sources (especially with google search!). But it is a logical fallacy to discount a serious WSJ or NYT report by quoting some unrelated Gorden Chang or EpochTimes article on the web (for example). That is effectively how the strawman logical fallacy works.

China has gone through stealth recessions before when I was living there (GDP growth on paper, but job growth and other indicators clearly in trouble on the ground). They might be going through one now, I'm not sure, but an official recession and housing bubble burst is really due (the latter being necessary for long term health, and even the former useful for getting rid of a lot of unproductive activities).

Not a single link on that search, the first page at least, says the Chinese government is going to topple on its own.

I have never read a mainstream article that says China will collapse. They are a juggernaut that will continue to achieve impressive goals. What seem to be agreed is that they will face significant challenges, and overtaking the US is not a foregone conclusion.

There was over 6T in aid, not even fully counting mortgage or debt pauses/deferrals. Or eviction moratorium

Maybe look at the numbers. What’s obvious today will be even more obvious to historians. You can look it up in 5-10 years if you prefer

> Stimulus checks were what $2000 total.

My family of 3 got something like 7k. Over that with child tax credit prepayments.

That would then be $8k for a family of 4.

> Speculation is that people were buying cars they couldn't afford using the stimulus checks as the downpayment and then immediately asking for a halt on payments due to COVID.

I wouldn't be surprised if that happened a few times, but I find it hard to believe that it was widespread enough to significantly impact car prices. I certainly haven't heard of anyone doing this.

That said, I'd welcome a reduction in used car prices. Someone ran into our car and totaled it earlier this year. We replaced it with the exact same make model and year, and it cost us several thousand dollars more than buying it the first time, despite it now being several years older.

Housing investment would be 'housing starts' as in new houses being built. I doubt that prices will be going down if there are more people and the same number of houses. Part of the market for existing houses is sensitive to mortgages. All this means is housing will actually cost more in the future on a total cost of ownership basis. If you're a renter with a ton of cash, this is good, but for literally all other stakeholders in the market is it ultimately not good.

Could you explain why this is good for the renter with a ton of cash?

Sticker price for houses will fall, so if you're a cash buyer you get a discount. Monthly prices won't, so if you're a mortgage buyer you're paying more to the bank and less to yourself.

My understanding is as interest rates go up prices need to come down as people only have $X/month to allocate towards housing. EX: If you have $100 to put towards housing per month you can put $90 towards the house itself and $10 towards interest on the loan in low interest environments, but only $80 towards the house and $20 in high interest environments. If people can only put $80 per month towards the house you're selling that ultimately means the house price can't be as high as when people are able to put $90 per month towards the house.

For the renter with a lot of cash this means you can come out ahead if you're able to minimize the loan or outright purchase in cash a house. The renter with a lot of cash gets to benefit from the lower prices from higher interest rates while minimizing the downsides of higher interest rates.

>Federal Reserve aggressively raises borrowing costs to combat chronic inflation. [emphasis added]

Not sure why you used that word. I don't think it applies in this circumstance. Not trying to be pedantic/snarky, I just wonder why you characterize only 18 months or so of higher than has been seen in quite some time inflation as "chronic."

Chronic (adj.):[0]

   1a : continuing or occurring again and again for a long 
        time
   2a : always present or encountered 
    b : being such habitually

[0] https://www.merriam-webster.com/dictionary/chronic

Edit: I note (after the fact) that the parent poster was quoting TFA and not making that statement themselves. My apologies for attributing that to alexb and not the AP article. That said, I still think it's odd that they'd use the term "chronic."

There is (was, really) an argument in the public sphere as to whether the inflation we're experiencing is merely "transitory," and this plays into the larger debate about how it ought to be dealt with by the Fed and the US government. Use of the word "chronic" is merely someone noting their position on the question of whether our inflation is "transitory."

edit: looking at it in context, it's someone noting the Fed's decision on the matter (of course it's not transitory), which also makes sense

A fair point.

Although I'd posit that there are a bunch of terms that (at least IMHO) would be more appropriate than "chronic":

   Ongoing

   Sustained over the past 18 months

   Recent and continuing

I'm sure I could come up with a bunch more, but since my comment should really be directed at the Associated Press (AP) and not GP, and I'm sure the AP doesn't care what I think about their choice of adjectives, I guess it's not really relevant.

In fact, when I realized that I was commenting on a quote from TFA, I almost deleted my comment altogether but decided against it.

"Ongoing" serves as a poor rebuttal to "transitory" (something can be transitory and nevertheless ongoing, and the whole point is that we know it's no longer considered transitory) and the others are obviously clunky when you're just trying to imply a minor point. I think you're on your own with this one and the AP did okay, even if I might have phrased it differently.

In my opinion, housing is mostly inelastic unless people have to sell due to external circumstances (like being unable to pay mortgage). I don't expect the housing market to decline more than 15-20%, as the more people are "underwater" from their purchase price, the more likely they're to just "wait out the slump". And with low interest rates locked in, many probably don't want to roll their mortgages now. Since we've had such a crazy runup [1] ([2]) in the past few years, a 20% decline still puts many sellers ahead, but I don't think they'd sell at a loss if prices dropped further. SF Case-Schiller is up 25-30% from 2020, and ~50% from 2017, for example.

My personal opinion is that once you've bought in you're locked in and along for the ride. If your house is down 20%, so is most likely the house you consider moving to. Unfortunately housing is often seen as an "investment".

[1] https://wolfstreet.com/wp-content/uploads/2022/10/US-Housing... [2]

>Please bring on a housing crash ASAP.

The best outcome is probably just nominal value stays relatively steady while real value declines after factoring in inflation.

You don't want people massively underwater on their mortgages.

It would be hard for housing to crash unless the current supply and demand situation changed dramatically.

An increase in supply so large that it would cause prices to crash would take years to build. In fact, inventory is lower than normal in some areas because people who might otherwise sell are holding out for better times, sometimes by renting out their properties and capturing today's unusually high rent prices instead.

A drastic decrease in demand is not going to happen because of mortgage rates. High mortgage rates have already taken a chunk out of demand yet housing has not crashed. The only way I can see demand dropping so much that prices crash is a major recession with mass unemployment, which knocks a large number of potential buyers out of the market entirely because they lost their incomes.

We bought our home last month, past the peak but prices will probably drop below what we bought it for. We did buy all cash and are in this place for the long term so I don’t feel too bad besides the fact that we could have probably afforded more house for the amount we paid if we waited six more months.

> Please bring on a housing crash ASAP.

IMO, there’s too many people making this bet for it to actually manifest. Not sure exactly how it’ll happen, but I can’t help but think banks are eyeballing those war chests people have saved up for crash. They’d much rather those as rent payments than interest payments.

If housing prices go down, but mortgage rates go up, are we still screwed?

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