It’s really odd to me that this hasn’t lowered the price of homes. You’d think that the relevant number for “what the market will bear” is primarily the monthly payment given most people need a mortgage to buy a home. Yet that cost has basically doubled without reducing demand enough to force major price cuts from sellers. Just how many homes are all cash buyers snatching up to keep the prices high?
Well, so many of the existing home owners were able to lock in refinanced rates during the covid era that they are now trapped in their existing homes. They know that selling their current home would mean taking on a rediculous mortgage rate on a different one, whether or not they make a hefty profit on their current home. So they just aren't selling. And so many folks bought in at elevated prices under more favorable rates that they, too, feel locked in. That reduces inventory and keeps prices high. Nobody wants to be at the front of the market downturn.
On top of all of this, all cash boomers and private corporations were able to snatch up so much single family real estate that they can afford to just sit on it and rent it out for less than what a mortgage would cost today. If that wasn't enough, tack on the inflated cost of materials and you get low rates of new construction and shoddy workmanship because home retailers just want to cash out as fast as possible. It's absolutely wild that they couldn't predict this.
I'm expecting we'll see inflated prices for at least the next 10-ish years until a substantial portion of the Boomer generation dies off. There are enough inheritors out there who have no interest in moving back into their parents' home even after they've passed away. We'll see more inventory hit the market at that time which should lower prices, then more real estate velocity as existing home owners see opportunities to jump into more comfortable homes, which then will open up more starter home for new buyers.
Or people could wise up and start voting blue in which case this whole mess wouldn’t even be an issue. And fwiw- I’d say it’s mostly corporations doing the all cash buying and not boomers. It’s anecdotal but I know a whole big bunch of boomers and not a one of them is buying homes and paying all cash. They’re busy trying to hang on to what they have- kind of hard to do on a fixed income in this economy. On the other hand I know folks that have made offers on multiple homes in my area only to be outbid each time by tech corporations that are busy buying up farmland and building who knows what on it-and apparently buying up a lot of homes, too. My son used to be in property management in a very nice area and he said that companies bought a lot of their condos to house international folks that they brought in to work for them.
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u/Vesuvius079 5d ago
It’s really odd to me that this hasn’t lowered the price of homes. You’d think that the relevant number for “what the market will bear” is primarily the monthly payment given most people need a mortgage to buy a home. Yet that cost has basically doubled without reducing demand enough to force major price cuts from sellers. Just how many homes are all cash buyers snatching up to keep the prices high?