[atlantas]

Ditto housing. I just can't believe that people are able to afford the prices of the past 1-2 years and many must be paying beyond their means? I know Blackrock and other parasites are scooping up housing too, but that's not the majority of buying.

[nostrademons]

The FTHBs of today got into the hot growing fields in 2011-2015 (tech, finance, solar, renewables, payments, artificial food, etc.) and have been saving large portions of their paycheck over the last 5-10 years. 5 years ago you'd hear about Millennials that all live the same lifestyle, but some were making $50-70K/year in "old line" professions and others were making $200K/year in tech. That adds up over time, but you generally won't hear about it if your friend is sitting on a million in index funds or cryptocurrency. They now get to trade inflated financial assets for inflated home prices.

In my experience people aren't paying beyond their means, but their means are high, and have been for a while. Where I live, in a small suburb of Silicon Valley, new FTHBs have been 100% tech for about the last 10 years.

[jazzyjackson]

"First Time Home Buyers", to save others from looking it up

[bradknowles]

Techies as FTHBs, because no one else can afford to buy a home. Or they already have one -- like the lawyers and doctors, or they already have several -- like the CEOs.

[closeparen]

To what extent are prices driven by first-time buyers? I would expect it's mostly people who experienced the extreme home-price appreciation of the last 10 years, trading with each other.

[nostrademons]

It's mostly FTHBs, investors, and purchasers of second (+ more) homes. Existing homeowners who are trading one home for another net out of the supply and demand calculations - for every house they take off the market, they add one back in. They also tend to net out financially as well: if home prices are high, they receive a lot for their home but have to spend a lot to get a new one, while if prices are low, they won't get a lot for their home but can buy a new one cheap.

Existing homeowners have a pretty critical role in spreading high prices throughout the country, though. If nobody traded out of their existing homes prices would be sky-high in the Bay Area and Seattle, like they were in 2018, but this pool of buyers would have little effect on Boise and Charlotte. But because someone in the Bay Area can get $2M for their home and now has it available to retire to Boise, prices in the Bay Area end up marginally lower and prices in Boise go through the roof.

[closeparen]

San Francisco has about 400,000 homes. Suppose they are each worth $100k.

Only about 5,000 of them sell in a given year. Suppose Facebook shows up all at once, with >5,000 new millionaires from the Midwest. They run an auction with each other for those 5,000 homes. The price they settle on is $1.5 million. This becomes the comparable for every existing home.

So the system started with $40bn in home equity value. We injected $7.5bn worth of tech money. And we wound up with $600 billion in home equity value. 395,000 people got $1.4 million in home equity out of thin air. And they can use it to trade with each other, generating many more than 5,000 transactions at the "Facebook millionaire" price.

[chiefalchemist]

Perhaps. But that still has an influence on prices. With housing, the real estate agent will price based on other similar sales in the area. So one sale can, at least in theory, influence the price of multiple other homes in an area. And so on.

Along the same lines, in theory, Blackrock could purchase strategically such that it drives up the value of other inventory it owns in the same area. Not quite a pyramid scheme but you get the idea.

[atlantas]

Probably, but what I'm getting at is that Blackrock can afford it. What I don't understand is how so many individuals and families have been affording (or at least committing to) these prices.

[chiefalchemist]

Agreed. But let's not be naive. Little has changed since circa 2007 / 08. The Fed is still goosing the market with low cost money. The stock market is erratic so perhaps real estate for some is safer?

Most people are foolish and greedy and blind.

[bpodgursky]

Unless Blackrock is buying and leaving the houses empty it doesn't significantly affect the price of housing stock, because rentals do offset a huge portion of the purchase market.

[chiefalchemist]

Actually, it does. Value is based on perception in the market - empty or not. This is how the bubble works. Sure, leave a unit empty and it'll effect supply and thus price. But no one is knocking on doors checking occupancy. What is looked at is recent sales in the area.

The seller prices off that. The buyer gleams value the same way. Housing prices are subjective. Very much so. And this is why sale prices are so effective.

[almost_usual]

> Ditto housing. I just can't believe that people are able to afford the prices of the past 1-2 years and must be paying beyond their means?

As someone who bought a house in the Bay Area last year, no. I think I could have spent 2x what I paid but I hate spending money and settled for something more reasonable.

Now I have a large safety net and more money to put into retirement. This is on top of having kids and paying for daycare.

I can’t imagine I’m that unique. I think there is a disconnect with people who don’t work at these companies and understanding how much you can be paid.

[l30n4da5]

> I think there is a disconnect with people who don’t work at these companies and understanding how much you can be paid.

"Poor people just don't understand how rich I actually am."

[almost_usual]

I’m speaking to people who think they earn a lot and actually don’t.

[uejfiweun]

At what level did you feel OK to take the plunge? I work at a top bay area company but only have 3 YOE and <1M NW. I have no idea when I would be able to afford all these multi-million dollar bay area houses, all I know is that it would require a lot more promotions.

[almost_usual]

When we had a kid. We planned on staying for the long term since we have family in the Peninsula, it was just a matter of time.

If I were single and didn’t have kids I’d keep renting in SF and probably not own much.

[BeFlatXIII]

I'm hoping for a big crash so I can afford the fire sale prices.

[onion2k]

There are three problems with that.

Firstly, if prices crash people stop selling unless they absolutely have to. The supply of houses greatly diminishes which limits your choice. You might be able to afford a cheaper house, but it might not be where you want it.

Secondly, unless you're buying in cash you might find it hard to get a mortgage. Lenders tend to be reluctant to lend when the market is crashing.

Thirdly, (and this is me speculating), if the market crashes the investment companies who are buying houses will buy a lot more houses, very fast, in cash. You'll be competing with the ideal buyer.

I don't believe a housing market crash would be good for consumer buyers at all.

[BeFlatXIII]

There isn’t any hope for consumer home purchasers, is there?

[dmm]

A lot of people talk as if a correction is inevitable but, for example, Canada hasn't had a housing correction since the early 1990s. How long are you willing to wait?

[0] https://en.wikipedia.org/wiki/Canadian_property_bubble#Histo...

[propogandist]

there's a reason the world economic forum calls it the "Great Reset" and why Justin Trudeau was one of their young global leaders, one of many that have penetrated governments.

https://www.weforum.org/focus/the-great-reset

[shmde]

I will tell you about housing price situation in Noida and NCR (of India). There are shitton number of newly built houses. They cost a fortune. There is literally no demand but the prices never ever drop. People thought that no demand would drive prices down but the construction mafias have a mutual agreement that no one would sell those houses at a discounted price. Same thing with diamonds and their artificially inflated prices. So I don't think there ever will be a big crash that you are hoping for.

[tonyedgecombe]

You might be out of work after a big crash.

[bradlys]

Housing prices are unlikely to come down. Too many Americans have almost their entire NW locked up in the house and are very adamant on it not losing any value.

The best thing that could happen is that apartments become cheaper because no one gives a shit about those getting cheaper besides developers. Homeowners are generally SFH owners - not condo or apartment or townhouse owners.

Thus, I think the decrease in cost will only ever come for apartments, townhomes, and condos. SFH prices are here to stay.

[Bostonian]

"Blackrock and other parasites"

A large landlord is not a "parasite". He makes money by fulfilling a vital need for housing. Blame housing regulation, not landlords, for high rents and home prices.

[tonyedgecombe]

Landlords leverage their easy access to capital to extract rent from those without. It looks parasitic to me.

[HeyLaughingBoy]

Or you could view it as performing a service for those who don't have that easy access to capital.

[swagasaurus-rex]

You could also view it hoarding supply for a limited resource, driving up rent and transferring wealth from the poor to themselves for no additional value.

[MisterBastahrd]

Capturing the supply to raise rates is about as parasitic as you can get when talking about something that people absolutely need to have. The town I live in didn't get substantially larger population-wise, but home prices have risen almost 45% in the past 2 years because Zillow and other large corporations have been plucking up homes for sale left and right to squeeze the market.

[potta_coffee]

In some areas they're buying up entire subdivisions, raising market prices by buying up all of the supply and out-competing individuals who are looking to buy. That sounds more parasitic to me than filling any "vital need".

[blueprint]

A Federal Reserve is not a "parasite". He makes toilet paper by fulfilling a vital need for QE. Blame foreign policy, not the Federal Reserve, for high inflation and home prices.

[LesZedCB]

housing regulation is a dog whistle for tenants actually having rights.

[jgwil2]

Could be referring to onerous zoning laws that keep density down.

[LesZedCB]

true, and Boston (GPs username) is certainly one of those places where historical districts and small multi-family housing units prevent affordable high-density housing.

[lp0_on_fire]

IMO there is a big difference between the landlord that owns a few buildings and _lives in the community_ vs a faceless corporation that's buying up whatever they can find wherever they can find it without regard to what it's going to the local economies.

[atlantas]

Oh I do blame that too. Housing regulation by NIMBYs have long been pushing up their own home values by making it onerous to increase supply.

[nojito]

The car industry is far worse. The vast majority of Americans are driving cars they can't afford.

> I know Blackrock and other parasites are scooping up housing too, but that's not the majority of buying.

This is generally a good thing because it drives prices down

[mpmpmpmp]

How does it drive prices down when speculators are buying up residential houses and outbidding regular people?

[nojito]

Because many more people can afford rent as opposed to taking on a mortage.

[88]

> The vast majority of Americans are driving cars they can't afford.

How do you define whether someone can “afford” a car? Surely by definition the people can afford the cars, otherwise they would be repossessed?

If you mean they cannot afford to buy the cars outright, why is that an issue?

[nojito]

Just because you don't lose your house doesn't necessarily mean you can afford to keep it.

At a certain % of income, owning an asset doesn't make much sense due to how it affects your financial security.

[bonestamp2]

How does reducing the already limited supply even further, drive prices down? I always thought that when demand is high and supply is low, prices go up?

[nojito]

There are way more renters than there are home buyers.