But they were encouraged to save up before buying the house, avoiding some of that interest surcharge and making the home much more affordable. Today, there’s little to be gained from first sacrificing and saving up, because the unaffordable cost is all ‘principle’ anyways.
My first condo in 1992 was cheap (48k) but the mortgage was something like 9%. Seems crazy now.
If you account for inflation and increased size of homes now vs. back then, certain regions like the midwest have actually seen lower price per sq. ft. for homes. Inflation-adjusted prices across the whole US per sq. ft. are only 4% high than 40 years ago. It’s really only the West coast and the Northeast Coast that have crazy housing markets. If you look at the home affordability index (% of local population that can afford a median price home), yes California is at 26% but rest of the US is over 53%.
This is where a transition to WFH could help rebalance things a bit. Some parts of the country away from the coasts have not seen that crazy gap between inflation and home prices. That may make them more attractive to people who cannot afford housing in more expensive cities.
But with the Fed current policy, there’s not much incentive for people to save up for an increasingly unachievable downpayment. Not when you’re getting interest at a level below inflation on your money.
I was dead wrong about the prices dropping (in most areas). I still was able to get a single family home (SFH) for a reasonable price, in a desirable area, near public transit. However, it took quite a bit of looking.
On the other side of things, my townhome was in a very desirable area and sold for full listing price. The lack of inventory for townhomes and SFH is really driving up prices. Then you tack on the super low interest rates, and people not spending money on trips, dining out, and other recreational activities. Well you have quite a bubble forming for sure.
That being said condos are backed up with multiple years of supplies, even in some of the most desirable areas. Not wanting to share too much common area seems to override everything else.
Prices definitely would have dropped without all the bailouts. Most Americans have no savings so missing one or two paychecks means foreclosure. There would have been a massive amount of inventory on the market especially once housing prices started falling and leveraged speculators get wiped out.
Between the stimulus checks, $600 unemployment bonus (some people were earning double not working than when they actually had a job), and mortgage deferrals they were able to extend and pretend everything is okay.
Long term this just compounds the problems. Americans still have no savings and too much debt, so there will just be another crisis in the not too distant future. In fact, they’ve been encouraged to not save even more now because they think Uncle Sam running the printing press is their savings account.
We’re still WFH at my company and we are going to do so until the summer. THey did say they’re going to adopt more WFH and mixed onsite/WFH in the future. But they haven’t been specific on how much we’ll do. I expect I’ll be mixed myself.
We would have plummeted into a depression without all the bailouts.
But yeah you’re probably right that real estate would have been hit too. THe world goes to shit in a depression.
I am curious to see what will happen as well. My company hasn’t had us come back or given any indictation when we may need to come back.
I am wondering if urban living is going to collapse. If people can work remotely it doesn’t seem to make any sense to pay sky high rents, deal with crime, be packed in a space like sardines, deal with homeless people, traffic, sky high taxes, etc.
you’re talking like there aren’t vaccines
Not sure vaccines have much affect on the revaluation of priorities by businesses and individuals that has already happened over the past 10 months. I think urban areas of going to take a while to recover at best. But, then again things stopped making sense to me a few months ago.
If employers allow people to work remotely going forward then that will change people’s preferences. If they force people back into the office, then perhaps it will maintain the status quo.
I can see it having a big effect on commercial office space rent prices if we see 25% or more of workers no longer needed in the office. But when places that people actually do want to congregate in cities (not office buildings) reopen because of the vaccine, the positives to living in the city will once again outweigh the negatives for most folks that chose to live in a city pre-covid.
I say this as someone who doesn’t think the positives outweigh the negatives personally, so I am speaking with no bias toward city life whatsoever.
I think it’s not going to be either one or the other but a mix of those. There are some types of activities that lends themselves well to a remote environment and some that are getting a bit hindered by it at my employer so although there are no plans in the near future to come back to the office (maybe towards the end of the year), the longer-term picture management painted is that return to the office will be in tiers depending on business units and opportunities to work remotely will be preserved where it is efficient for the business to keep them.
Statistically, I cannot see a scenario in which there is no downward pressure on location-based valuations. There’s bound to be less in office jobs in the future. It was a trend before COVID and COVID forced businesses to adopt it, find out what worked and what did not and optimize operations for that environment. They’ll keep the gains where they identified some even after COVID is over. So some people won’t care about location as long as it does not affect internet connection speed. But many will still be in the office day in day out.