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Thread: Why is There a Housing Crisis?

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    Cyborg with a Tiara
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    Why is There a Housing Crisis?

    There’s talk of bidding wars and price hikes and building material shortages all over the place. I’ve read a bunch of repting on it, but curious what folks here think

    What’s causing the housing crunch? What causes it in your region versus other people’s regions?

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    I'm not certain, but Covid-19 did mess things up. Not too much of a leap to ponder that the pandemic also stopped people from moving for careers and whatnot. And now people are ready to move again, but due to the pause, there aren't as many homes on the market. Add low interest rates and we revisit a modified 2002-2007 housing market bubble.

    It has to suck for people that have to move to a region. Others, I'd let this simmer down before paying 1.5x what a property is actually worth.

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    What do you mean by crisis?

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    Cyborg with a Tiara
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    Quote Originally Posted by TSwizzle View Post
    What do you mean by crisis?
    I mean this

    There’s talk of bidding wars and price hikes and building material shortages all over the place.
    People who are trying to buy houses are facing multiple tries of making an offer and losing out because of multiple other bidders. Houses being under contract in hours. People having to wait to get their house built.

    https://www.google.com/search?q=housing+crisis

    But if you are not aware of a housing crisis, then maybe you won’t have anything to say about what is causing it.

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    I’m not sure that constitutes a crisis. Desirable properties always draw multiple offers. Is that a bidding “war” ? Building materials are unusually high just now but that’s due to all sorts of supply chain issues.

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    Quote Originally Posted by Rhea View Post
    Quote Originally Posted by TSwizzle View Post
    What do you mean by crisis?
    I mean this

    There’s talk of bidding wars and price hikes and building material shortages all over the place.
    People who are trying to buy houses are facing multiple tries of making an offer and losing out because of multiple other bidders. Houses being under contract in hours. People having to wait to get their house built.

    https://www.google.com/search?q=housing+crisis

    But if you are not aware of a housing crisis, then maybe you won’t have anything to say about what is causing it.
    This has been happening for at least a year in the city where my kids reside. In fact, when they purchased their first home 3 years ago, they put offers on several properties before their bid won. They paid more for their home which is about 1/3 the size of the house we own in the small town where we live. Of course, there are better job opportunities, better access to the things young people value: good restaurants and bars and music venues, etc. This past year has been worse. Inventory is very low even where I live.

    We had renovations scheduled prior to the pandemic and carried them out during the pandemic. Some things (mostly plumbing supplies) took much longer than usual because so much was coming--or rather, manufactured in China but not coming to the US because of the pandemic. I ordered some bathroom accessories such as towel bars, etc. from a major home decore company that usually ships within days that took months. I am glad that I didn't need to have new kitchen appliances because my understanding is that these are coming at a high premium and involve months long delays after ordering. In fact, I am crossing my fingers that my washer and dryer hold out for another year or two, until things settle down. I am not certain why, except that I am guessing that much is manufactured in China or elsewhere overseas.

    There has been an ongoing shortage of building materials for a couple of years, particularly in terms of wood of all kinds/grades. Part of this is because old growth wood has long since been harvested and replanting not only lags, but is of lesser quality as tree farms are treated with chemicals that encourage rapid growth at the expense of quality, hardness, density of wood produced. So, if you wish to buy a dining room table, for instance, from say, Ethan Allen, you will note that most of their pieces are made of woods you likely have never heard of---grown in far away places, probably with less stringent environmental laws in place.

    A few other things have come into play, I think:
    1. Mortgage rates are extremely low. This has the net effect of increasing prices for houses, as mortgage lenders qualify buyers based on what total monthly mortgage payment a buyer can afford. If they think that you can afford $1000/.month, then when mortgage rates are lower, you can qualify for a more expensive house. If rates are higher, you will qualify for a lower priced home. Since this applies across the market, it has the net affect of either driving prices up or lowering prices.

    2. All of those home improvement shows are great and addicting and yes, indeed, they do spur home renovations and redecorating which increases demand for all things home related.

    3. The pandemic forced most people to spend more time in their homes...where they began to notice the things they didn't like or wanted to change or improve. Paint stores were running out of paint nationwide because everyone was home painting their house which suddenly looked dingy. Home improvements/renovations boomed, as did the building of new businesses and homes. My projects were competing for plumbers, electricians, carpenters, tile people, drywall people, etc. with not only other home improvers but also with large building projects going on in my area. It was wild. And interesting. I got the inside scoop about when a much anticipated restaurant was likely to actually open rather than what it was saying in public because my plumber and my tile guy were both working on that project as well. I don't think that my town is that different than any other town, as I hear from friends how difficult it is to find a plumber or electrician, etc. Partially, this is because not enough young people go into the trades but this shortage has been made much more apparent by the current building/reno boom.

    Also because people have been spending more time in their homes and more people are planning to work from home, they are contemplating whether their current home still meets their needs--so they are going shopping for a home that does. And because mortgage rates are lower, that nicer, larger home in a better neighborhood may have become attainable....

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    Quote Originally Posted by TSwizzle View Post
    I’m not sure that constitutes a crisis. Desirable properties always draw multiple offers. Is that a bidding “war” ? Building materials are unusually high just now but that’s due to all sorts of supply chain issues.
    Yes, a bidding war, in real estate parlance is a situation where multiple prospective buyers are bidding on the same property, often offering tens of thousands or more over asking price, waving home inspections, and writing the most heart rending personal letters possible to go with their offers.

    The fact is that there is a housing crisis, period. Too many families cannot afford to purchase appropriate housing for themselves or to rent decent housing. Bidding wars make it worse because it drives up the prices.

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    Quote Originally Posted by Toni View Post
    A few other things have come into play, I think:
    1. Mortgage rates are extremely low. This has the net effect of increasing prices for houses, as mortgage lenders qualify buyers based on what total monthly mortgage payment a buyer can afford. If they think that you can afford $1000/.month, then when mortgage rates are lower, you can qualify for a more expensive house. If rates are higher, you will qualify for a lower priced home. Since this applies across the market, it has the net affect of either driving prices up or lowering prices.
    You make excellent points but I think this is probably the most important one. People are overpaying on properties because the monthly payment is what they look at rather than the value of the property.

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    Quote Originally Posted by Toni View Post
    The fact is that there is a housing crisis, period. Too many families cannot afford to purchase appropriate housing for themselves or to rent decent housing. Bidding wars make it worse because it drives up the prices.
    House prices in parts of California are pretty insane but I’m not buying in to the housing “crisis”.

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    Quote Originally Posted by Toni View Post
    and writing the most heart rending personal letters possible to go with their offers.
    What about? Surviving Andrea Doria?

    I agree with Jimmy for once. If you don't have to buy right now, hold off for the time being. Or, as Shaun said ...


    Same goes for cars, which also have a supply crunch due to a chip shortage.

    The fact is that there is a housing crisis, period. Too many families cannot afford to purchase appropriate housing for themselves or to rent decent housing. Bidding wars make it worse because it drives up the prices.
    It's an indication of a market imbalance. Eventually the market will settle. But for real estate, the supply side of the market has a lot of inertia. You decide to build a new subdivision or condo building due to a hot market and it takes a while to actually build it.

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