How can housing prices be at such unsustainable levels? How can housing prices be so far out of line, with the incomes of the people who would buy those houses?
People folks in India and China are buying up US houses.
To much demand, too little supply.
They talk about interest being too high but they don’t mention the most feared reality of all. That housing prices will have to drop to levels that make having higher rate mortgages even feasible in terms of affordable monthly payments. Builders have priced themselves out of the markets and will need to reconfigure their offerings at lower prices to ever match with the high interest rates in a way that most would find affordable monthly. The existing housing market is another matter. People are holding onto their homes and cheaper mortgages right now because they couldn’t sell their homes at a price right now that would allow them to purchase another home without a high interest morgage on any remaining debt on that new home. The housing market is locked up tight!
Low inventory. Homeowners with 3% mortgages aren't selling.
Inflationary money ("generated" on ledgers, only) has created an entire class of wealthy hobbyist financiers who make more money by just having money than any earner could generate in terms of real value. There are just enough of them, with just enough bogus money, to bid-up and buy-up nearly all developed properties entering the market. In a properly working economy occasional money scarcity will cause asset-holders to liquidate for cash, but as long as our system keeps printing money to supply the scheme, the earners and value-creators of our economy are forever doomed to chase the financial horizon.
Supply and demand explain pricing. There is just not enough supply for the demand. The new supply is much more expensive to build compared to just 4-5 years ago. And of course in most cities there isn’t room to add new units, money had been going to replace old homes with new ones - no new net housing units, except that some older apartments are being redone and some old industrial areas are rehabbed into multi unit luxury units. You have to go a far out of town to find new developments of single family residents.
If you are in a state like California and owned your home for many years you have almost no incentive to sell. You have low (or zero if paid off) mortgage and interest payments, high equity, and your property tax is capped by law and tied to your cost basis. If your home value has doubled or quadrupled why would you sell it when it costs you so little to keep it? Why move? You could have have your property tax reset and your mortgage rate will be 8% instead of under 4%. The only people selling are those forced to by work, by financial considerations, or who are elderly or widowed and want to downsize. Everyone else could rent the home for much more than their cost of ownership, over which is income they could use to cover living costs in a smaller apartment or in another state.
So bottom line, lower inventory and steady demand means higher prices. High interest rates makes the higher prices unaffordable to many buyers. And as someone mentioned upthread, if the banks want you to allocate 30% max of income to mortgage and property taxes then it’s that much harder to get a loan in a high inflation high cost of living high income tax environment.
Taxes. Ever-higher taxes, as a percentage of income. Used to be that a wage-earner could support a family of 6 or more, and buy a home. Lower local, county, state and federal taxes and fees. Only way to preserve your money in inflation times is to invest in property, which elevated housing prices.
Inflation is unsustainable, because of overspending by government and passing paying back debt to future generations. Very out of control.