There are a million morons online who claim that increasing the supply of housing somehow never moderates or lowers prices. Then it clearly happens.
From the article:
> Home prices have dropped 18% from the pandemic highs seen in May 2022, the most among the 50 largest US metro areas
If I lived in Austin, I would wait another year before buying a house even if I wanted to buy one soon. To the parent's point - it might get even cheaper.
Watching the "value" of your home drop 18% is emotionally hard for people, even people who don't intend to sell. It's risky if you just bought the house because it could put your loan underwater.
Obviously, this isn't ideal and buying a home today at 7% interest rates (with no plans to increase rates further) would be a tough to pill to swallow if your value will drop further.
If you don't have a mortgage, it is money you could spend. What, sadly, a lot of people consider "free money".
Just because someone doesn't have a mortgage doesn't mean they magically have free money. More than likely, they paying rent. Unless you're a zillenial that's moved back in with the parental units, but that's a tangential conversation.
I'm talking about people who have paid off their mortgage. They can re-mortgage their house, which would make a large sum available to them right then and there. I've even heard of people doing this when a house gains value: "extend" the mortgage, which gets you the gain of the house value in spendable cash ...
(and I definitely agree that's a horrible, terrible, no-good, even potentially financial-system-destroying idea, but people will, 100% certainly, do this)
Not sure what this means?
Once you have the mortgage, if you can keep paying it you're fine. Whether the house value on paper is higher or lower doesn't make any difference.
My house has twice gone down in paper value below what the mortgage balance was at the time. As long as I want to keep living there, that doesn't mean anything.
2 years ago: “Wow, I can’t believe that house went for 20% above asking!”
Now: “Wow, I can’t believe that house went for 20% above asking and has appreciated since 2020.”
If you want a house now and can afford it, you will buy it now.
2. Home builders obviously care about the price of houses they may build and sell. If the estimated prices of their future construction drop a lot from previous plans, they may abandon plans to build additional homes. Like all businesses, they buy in bulk, they deal with debt markets, they have multi-year forecasting, etc, and dramatic changes in the market may cause them to reevaluate profitability of future construction.
Point 1 may cause further drop in prices, and point 2 may restrict supply from growing.
We need to rip this bandaid off and get it over with. There will be a temporary economic dip due to the wealth effect, but that painful transition only has to happen once.
probably because those who bought at that time were rich, and didnt need a mortgage, or their mortgage was small.
It's bad because it directly eats into the purpose of housing you stated.
That feels like a reach from me simply answering a market dynamics question you asked. Chill maybe?
You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness. However, higher limitations ($1 million ($500,000 if married filing separately)) apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.”
It used to matter more, before the Trump tax plan significantly increased the standard deduction. The mortgage deduction is bad tax policy but it's hard to get rid of.