What Happens If Housing Prices Fall 20%? | Hacker News Reader

What Happens If Housing Prices Fall 20%?

awealthofcommonsense.com

27 pointspaulpauper35 comments

House prices in my area have quintupled since I moved here 13 years ago. A 20% drop would move house prices back to where they were perhaps 4 years ago. And now that interest rates are double what they were, housing affordability is as bad as its ever been.

As someone who has spent the last decade watching home ownership get farther and farther out of reach, it's really depressing. It really will never get any better than it was, and I'm fairly confident I've missed my chance at home ownership.

same boat, unless I buy land use half for glamping and build earth bag or use tiny homes.

diy is about the only path. personally I'm rooting for the biggest home collapse ever, go big or go home. Daddy wants a new house..

Americans need to come to terms with the eventuality that home prices won't "fall". There may be some local minimas, but in general, housing costs will only go up, and will likely continue to beat inflation.

I live in the Pacific Northwest area and the new house production is below demand, and the median housing price (King County, and others) rose 0.9% compared to one year ago (November). This includes the large price reductions due to interest rates.

https://www.nwmls.com/real-estate-news/monthly-market-snapsh...

Prices still rising with the interest rates doubling is bonkers. The total price (P&I) is still increasing, which is maddening.

I think this dystopian prediction is correct. Voters will ensure it.

Eventually reality will kick in however and decades from now the enriched landowners will have to deal with all the people who don’t have stable housing of their own … not sure why, but this seems familiar for some reason.

The fall in house prices will probably not affect the prices of rental units. The cost of acquiring a home should be roughly the same, considering an increase in interest rates.

Rental prices might fall if people are forced to sell their houses at lower prices. In my area, people buy houses on 30-year mortgages with variable rates and require an in-law suite to finance it partially. The margins are so thin that I encountered people who had to sell their homes because of increased property taxes.

> Rental prices might fall if people are forced to sell their houses at lower prices.

How? I think the bank will just sell the house, possibly for a lower price then the market value. Then, the previous owners need to rent somewhere. As there are less people able to pay a mortgage, the more people need to rent.

Good point. If someone is forced to sell their house and stays in the same area, rental prices should stay the same because demand remains the same. What would happen if an investor living elsewhere is forced to sell?

If someone is forced to sell their house and stays in the same area, rental prices should go up I would say.

As seemingly everywhere around the globe interest rates have gone up, the influx of new home buyers have gone down. Those people have to compete with each other at the rental market. Unless your country is able to create a new big supply of rental homes to somewhat balance the market, the rental price is definitely not stable, but trending upwards.

In the Netherlands we are getting stricter rental controls to keep the rental price to not increase that much. Some people are sitting between a rock and a hard place now: not able to buy, not able to save due to high rents.

i would like to see the "mortgage origination by credit score" chart show number of homes in the y axis instead of billions of dollars. of course that chart will be more drastic in the past two years with inflated home prices. in it's current state, that chart doesn't convincingly make the argument he's trying to make with it.

link: https://awealthofcommonsense.com/wp-content/uploads/2022/12/...

We'd be half way to correcting the price inflation created by the rapid monetary inflation from the looting of 2020.

It's so strange. If it was food or clothes or medicine, cheaper prices would be obviously good. Who can we thank that shelter getting more affordable has become a bad thing?

I'm guessing here, but probably the same people reaping the most profit from it.

It's not that surprising. Homes are considerably more expensive than food , clothes, or medicine, so prices falling is a bigger deal, especially if someone recently bought a home and is underwater. The problem is that homes are seen as investments instead of merely dwellings.

Yeah, I don't like the investment aspect of it. I own a home but many of my friends and family members do not. I'd love to see prices go down.

What do I care? I can afford my monthly payment and plan to die in this house.

Even if they're not seen as investment, a drop greater than equity means someone may not be able to move, and that's a problem that just doesn't happen if food gets cheaper.

This comes up in every thread about housing... If you think you may have to move soon then just rent, that's the whole point. How many people actually move after they buy a house?

I don't believe the main issue is knowing whether you are going to have to move soon. The main issue is buying a house and then shortly thereafter being laid off/fired/company went under/etc" but with jobs available from somewhere not close enough for the current house location to be viable. If its a couple years or so and house prices go up, its not too harsh of a financial impact to sell and move. If houses are falling, moving for job opportunities are that much less amenable.

But the new house that you will have to buy will also be cheaper. On average, you are no worse off.

What new house are you going to buy if you don't have the cash to pay off the underwater mortgage to sell your current house?

In the UK people have historically (within recent decades) moved liberally and often even if they've just purchased because house prices have just gone up and up and rates down and down

Maybe it comes up in every thread because it's an actual issue. A lot of people move after they buy a house.

Absolutely! Just imagine the benefit, if the cost of shelter had as much progress as say clothing which is so cheap now, relative to 200 years ago.

Also, i think people are so levered up on their homes, they have ever more incentive to keep the ponsi scheme going. Where i live people sometimes but down payments as little as 20% or sometimes even 10%!

So, to answer the original question. if you have a down payment of 10%, say your entire networth, and the market drop 20%, it means you have 200% of networth lost!

The big difference is you can only build so many houses in a desirable location. Housing and the land they reside on are non-fungible. Medicine, food, clothing, etc. are essentially fungible since you can pump out more medicine, clothes, etc. and they're able to replace what was used/lost/damaged/etc.

There is a lot of undeveloped land throughout the USA. Why are we so focused on the prices of existing homes?

on most undeveloped land, you're not allowed to build. In CA, you can go to the exurbs and there will be a tiny plot of land with maybe a couple hundred houses scrunched together like some kind of nazi concentration camp for houses, fenced in like a chicken coup. Meanwhile, there's nothing but open land in every direction you look. it's totally disfunctional and yet voters seem to love it.

Do you realize how much undeveloped land even California has that you are free to build on? Many many times the size of all the cities combined.

There are more acres than people, even in CA. But, you're certainly not free to build on it.

By all means, where is it?

Almost nobody wants to live in the middle of nowhere. That's why nobody's there.

Conversely, if too many people want to live in the same place, of course it's going to get expensive.

which is why you upzone

Like New York, which is still too expensive.

doesn't have to be. Houston is one of the fastest growing cities in the US, and grew at a population increase rate x5 faster than SF, and yet it remains cost effective with far fewer homeless than SF.

New York isn't as upzoned as it could be. Not a lot of 20-30 story mediums priced apartment buildings being built like you'd see in Chinese cities.

Reply on news.ycombinator.com