This is to be expected. Sellers are always reluctant to be reasonable when they are on the wrong side of a peak. The raising of interest rates means prices have to adjust. But after so many years of increasing prices sellers are not yet rational.
And yes, some more inventory would help. That said, as the population ages, who is going to buy all the McMansions? Price not only need to adjust to interest rate but demographics.
Prices actually have adjusted and have fallen somewhat.
What life event would cause someone who currently owns a home at a <3% rate to sell?
It’s a once in a generation type of rate. You’d have to be a complete fool or have some kind of crazy life circumstance to sell.
Over 30% of employers in the US exclusively hire remote employees. Post-pandemic it’s hard for me to imagine someone in the home ownership socioeconomic class giving up that kind of leverage advantage to move for a job.
This seems a bit extreme. If you can afford to move, does interest rate really factor in? If rates get worse you’ve still locked a better rate, if rates get better you refinance. Besides, there’s plenty of reasons to move besides for a job (and not everyone can work remotely or get a remote job with comparable compensation).
Yeah, you’re going to pay some more interest if you get a new mortgage, but don’t you just adjust your monthly finances and eat it? As long as you can hit your long-term financial goals, the “once in a generation” rate doesn’t seem so important.
Yeah I think the HN crowd is vastly overestimating how much people care about rates. Most people are not perfect financial optimizers - they’ll just pay whatever they can maximally afford per month for a house that most closely matches what they need for their present life. Few people are coldly rate rational.
You only have to look at what people pay for car loans to confirm this.
They care about what they can afford each month. They indirectly care about the rate. The sign on the starter home neighborhood near me was $719/mo when I moved here in 2020. It crept up to 850, 970, 1100, and then they changed the sign to not have that information. Same houses.
Hopefully only sane mortgage products continue to be used so it doesn’t end up like automobile loans. Aren’t most car loans 72 months now? That’s what is required to get the monthly note affordable for most buyers.
It’s not about optimizing it’s about cash flow. If you get a 500k mortgage today at the current rate of ~7% your monthly payment is about 3500/mo. That same mortgage financed 2 years ago around ~2% is a monthly payment of 1800. For the SAME house you are paying basically double the amount per month.
This isn’t optimizing a few bucks per month it’s about not being able to afford the same house.
Every homeowner knows this and if they’ve ever had the incling to move int rh last year theyve done the math and realize it simply doesn’t make sense. People won’t move right now unless life forces them to.
And I think this type of opinion goes too far in the other direction and essentially accuses the common person of being a complete ignoramus.
> they’ll just pay whatever they can maximally afford per month for a house that most closely matches what they need for their present life
Right, and if you ditch a 3% mortgage in favor of a 6% mortgage your monthly spend goes way less far. You're looking at a loan payment that increases by about 40%.
Right, and further not being perfectly financially rational is quite fine! Finances aren’t the only factor in any decision, nor do they need to be the primary factor.
Divorces, deaths in the family, growth in the family, people move to be close to certain hospitals / schools etc. Maybe one half of a marriage gets a remote role but the other doesn’t.
With remote roles you no longer need two income households. Raise your kids yourself. That statement will get me downvoted, but if even one person is inspired to think that through it’s plenty worthwhile.
Funny thing about that, COVID has removed a lot of people from the workforce and will continue to do so for the next few years. The billionaires at the top of all the tech companies will live to regret allowing the activist investors to spur them into laying off people.
This is what people said about Levittown (https://en.wikipedia.org/wiki/Levittown), the archetype for postwar suburban housing developments in the USA. They did wear out, but the owners fixed them. If the housing is still needed, it will be maintained and repaired and improved.
> Despite the US's deficit in housing ever since, many millions of houses houses have in fact been abandoned. Please explain.
Sure. No one wants to live in those areas where the houses are being abandoned, or government regulation makes bringing them up to code financially non-viable.
Not based on the one I’m living in. It’s the definition of lipstick on a pig. Serious fundamental problems with a nice looking exterior. It’s been nothing but problems for the last 8 years.
Every bathroom was finished with normal drywall instead of the water resistant stuff. The vents in the upstairs bathrooms just vented into the attic space leading to moisture issues in up there. There must also be an issue with either the framing or the foundation because we have the ceiling separating from the drywall in almost every room in the house in addition to cracks developing in the drywall. I know some amount of settling over time and cracks are sometimes normal, but I’ve never seen them this frequently. Our floors are also uneven and you can feel them moving as you walk across them.
In the bathrooms they also picked the cheapest bathroom fixtures imaginable. They looked decent at first, but it was also quickly corroded and the lights literally fell apart. We have one of those fancy three head shower setups and we discovered that the main shower head corroded and broke off inside the wall when our youngest innocently asked us why it was raining in the dining room. We also have water hammering issues when running the washing machine because they didn’t bother to put in a flow arrester.
On the exterior, our driveway and sidewalks were all laid with insufficiently packed base material. These gaps and buckles are reaching the point where we have to fix them or risk liability when the mailman trips over them. Our gutters were incorrectly installed and they have been slowly leaking down one corner of our house and we’ve found water damage in the basement due to this. The foundation in the garage also has done some settling because the stone work at the base has large cracks developed in it. In addition, our windows and doors are really just polite suggestions for the wind to stay outside because they picked such cheap options. You can literally feel a breeze through most of our windows.
I’m sure there were other minor things which I’m not thinking of, but the quality between our first house which cost 1/3rd of this house is night and day. The only thing the inspector found was the the cracks in the garage brick walls but those are a facade and the inspector told us it was cosmetic damage and the sidewalk was easily fixable via mud jacking. Those were issues we were willing to take on. There’s no way we would have bought the house if we’d known that there were so many issues. As we’ve been trying to address the issues we’ve been finding, we always seem to uncover another problem that needs to be fixed. Feels like a race we are losing.
Thanks for sharing, I'm sorry to hear about all the problems you're having.
I think a major issue is just water being the root of all evil for house problems and the bigger your house is, the more recent it was built, the more corners were cut. It's all compounded by contractors wanting to overcharge you if you're in an expensive neighborhood and not give you the time of day otherwise.
It's like you could just say, "let's just get rid of all this extra furniture and stuff and live within our means. The kids don't need that many toys." But then the argument falls on deaf ears and you wind up with the neverending complexities of redecorating, contractors, insurance claims and stress.
Agreed. But I'd like to perhaps interpret it a slightly different way. What if house construction was "branded". That is, aside from (possibly uninforced) local standards a company built homes AND committed to their quality.
Given how sloppy new home construction has become, perhaps buyers would trade less home for say 10 years of peace of mind? I realize long term guarantees are tough. Obviously. Nonetheless, the current shit-show seems to be begging for alternatives.
Home warranties were fairly common when purchasing. They are meant to cover things you don't find right away during the inspection. Unfortunately market forces, especially lately, have made these less available for purchasers as competition for houses is too high.
Sounds like it's a race to the bottom. No one can differentiate with better quality goods and work because no one is willing and able to do it.
The lower the price the better. Regardless how it'll cost you later, affect long term value, etc.
If anything it makes the argument to not buy new. Instead go for something in the 10 to 15 yr range that's had the structural bugs worked out but might need updated appliances.
While I understand social expectations run in cycles, families are smaller, costs higher, etc. McMansions had a moment. Unless there are reasonable ways to divide them (e.g., family w/ an apartment for older parent(s)) to me it seems unlikely that moment will happen again soon.
ENTIRE vinyl villages of McMansions will be unlivable. They aren't even built to last the standard 30y mortgage because the builders know the initial buyers will sell and move on. Cheapest possible 2x4's with worst insulation ever known, all covered up in plastic siding. But hey, it's 10k sq ft right?
That's a bit hyperbolic. Inspections are a thing, and modern houses are generally built just fine. And nobody uses plastic siding on a brand new house (well, almost nobody, you can probably find rare examples). A modern house uses hardieplank fibercement siding probably 99% of the time. These days vinyl siding is mostly a retrofit choice, not new construction.
The cheap 2x4s are the most significant point of failure. The houses will twist and warp to many extremes during their lifetimes. The first symptom of doors that won't open/shut properly usually shows in the first 10 years of these houses. In a 1920s home built with domestic timber, that process would take a lifetime. After 30 years, this contributes to all sorts of creaks and leaks. Repairs are questionable and don't last as long because the frame of the structure is unstable.
I had a suspicion you would be downvoted for telling the truth here :-). It's an unfortunate choice between being truthful and being popular..
As I understand it, part of the difference between US and Europe is that US has massive access to cheap lumber, which makes it very cost-effective to build with balloon framing, which is not much used in Europe. US saves a lot on construction this way, but it has consequences for durability.
Lots of "luxury" housing is made with crap materials by unskilled freelancers. There is a ton of skimping on hidden details like missing flashing around doors and windows. You can't trust any home built within the last 25 years.
In my case, the insulation was mostly just air. There is zero insulation at all in my garage in a place with harsh winters and there is no insulation between my garage and the house. My attic also did not have insulation, but that one was cheaper and easier to resolve than all the wall cavities.
Unfortunately we aren’t the first owners. I know some of the issues we are seeing is from shitty diy or contracting from the previous owner, but most of them are from the original construction. One example of shitty DIY is the hardwood floor on the main level that we are currently replacing. The newly installed floors were a bit lower than the original floors so they just covered all the gaps with corner round all around the baseboards. Looks super tacky. But is a fairly minor issue all things considered. We are replacing that with another layer of sub flooring and engineered wood floors to try to reduce the amount of movement you can feel in the floors.
Also, with the american quality level of construction for houses, by then those houses will require major investments and renovations to continue to stand.
And yes, some more inventory would help. That said, as the population ages, who is going to buy all the McMansions? Price not only need to adjust to interest rate but demographics.