When I read this article I laughed to myself. It took a long time for people to realize what was happening in the mortgage market - I thought to myself. I started talking about this at least in 2014 because I realized that mortgage rates would become low enough that eventually it would incentivize people to not move creating a very large distortion in the housing market. Also Read: A new housing crisis looms. A shortage. I wrote it in 2014.
It is completely not normal to need to reply so much on new housing inventory. New housing is more expensive than existing housing. But everyone and their Uncle are locked into crazy low rates. So why would they move? So, - if people don't want to move - and new housing is your only option - what do you think happens? Shortages, and extremely expensive real estate. Finding cheap land to build on only gets worse. Not better.
It is completely not normal to need to reply so much on new housing inventory. New housing is more expensive than existing housing. But everyone and their Uncle are locked into crazy low rates. So why would they move? So, - if people don't want to move - and new housing is your only option - what do you think happens? Shortages, and extremely expensive real estate. Finding cheap land to build on only gets worse. Not better.
"In a market with tight inventory, the decision to sell depends on whether homeowners want to risk selling and then not being able to find a new home.
"The existing homeowner is trapped in this prisoner's dilemma of the cooperative outcome," Fleming said. "If we all acted simultaneously, it would solve the problem. But we can't take the risk of being the one that acts when everyone else doesn't."
I'm sort of curious what "problem" this writer thinks can be solved by everyone "acting simultaneously" to sell their houses. That is one of the stupidest things I've ever read. If there is no inventory - there is no inventory! I must have written a hundred times about new housing starts not keeping up with population growth for more than twice/three times the average recession. You can see in this chart that it took four years to even get back to the low end trend line. The median trend line is about 1.4 million units a year. Right now we are only creating maybe 1.2 million units. That's almost seven years.! Something that has never happened in history. Going all the way back to 1960 we were still creating about 1.6 million units a year. And all the downturns look like V's, not sideways squiggly lines.
These "prisoners" have gotten the best gift of their lifetimes. The best way to get ahead in life is to pay as little interest as you can possibly manage. Interest is a tax on everything you buy. Being a "prisoner" is paying over 6% interest when rates are actually down in the 3% range because banks won't finance you and you can't move. Which is what I did for at least 4 years. Everyone who was eventually able to refi is sitting in the loveliest prison on earth. I used to turn a house about every six years, but even I think if I had to get stuck "somewhere" my place isn't the worst.
It's just so frustrating to see people write about real estate when it seems clear they don't completely understand it. These prisoners are creating a very solid economic bedrock. What comes next though is hard to predict. Other than it's going to be very costly for the "non prisoners". I'd like to see that guy write an article about that. We will see who feels more like a prisoner then.
"The existing homeowner is trapped in this prisoner's dilemma of the cooperative outcome," Fleming said. "If we all acted simultaneously, it would solve the problem. But we can't take the risk of being the one that acts when everyone else doesn't."
I'm sort of curious what "problem" this writer thinks can be solved by everyone "acting simultaneously" to sell their houses. That is one of the stupidest things I've ever read. If there is no inventory - there is no inventory! I must have written a hundred times about new housing starts not keeping up with population growth for more than twice/three times the average recession. You can see in this chart that it took four years to even get back to the low end trend line. The median trend line is about 1.4 million units a year. Right now we are only creating maybe 1.2 million units. That's almost seven years.! Something that has never happened in history. Going all the way back to 1960 we were still creating about 1.6 million units a year. And all the downturns look like V's, not sideways squiggly lines.
These "prisoners" have gotten the best gift of their lifetimes. The best way to get ahead in life is to pay as little interest as you can possibly manage. Interest is a tax on everything you buy. Being a "prisoner" is paying over 6% interest when rates are actually down in the 3% range because banks won't finance you and you can't move. Which is what I did for at least 4 years. Everyone who was eventually able to refi is sitting in the loveliest prison on earth. I used to turn a house about every six years, but even I think if I had to get stuck "somewhere" my place isn't the worst.
It's just so frustrating to see people write about real estate when it seems clear they don't completely understand it. These prisoners are creating a very solid economic bedrock. What comes next though is hard to predict. Other than it's going to be very costly for the "non prisoners". I'd like to see that guy write an article about that. We will see who feels more like a prisoner then.
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