I think that this housing issue is due less directly to monetary issues and more due to other issues.
Existing house sales were driven by people (some institutional, some individuals) wanting higher returns than they could get with the returns of other traditional investments. With interest rates so artificially low, they jumped into real estate as a means to preserve wealth and generate income. Instead of being purchased by what would have normally been first time home buyers, they were bought up by people who were not going to live in them. Some were purchased by people intending to flip them. A huge number were bought by people that were going to rent them out to generate income both as monthly and air-bnb type short term rentals. Instead of getting $2000 a year on each $100000 deposited at 2% interest, you could generate much more in rental income and still have the property itself appreciating. If you didn't want to deal with it on a daily basis, just pay a management company to handle it and you were still way ahead.
Additional pressure was coming from the other direction as well. New house sales were overbuilt to generate higher returns for the builders. Add a few square feet and a few higher end finishes and you can build a $400K house instead of a $200K for a marginally higher cost on the same piece of property. Why on earth would they build a cheaper house?
There has also been a big increase in cost brought about by environmental issues in both the flips and the new construction, they are putting in more efficient and expensive appliances, better insulation, better windows and doors, tighter construction, higher load capacity electrical services to accommodate charging electric cars, and not inconsequentially, higher planning costs for environmental impact studies and the like.
Additionally, in a lot of areas, the whole idea of a young couple buying a fixer-upper and putting in sweat equity is dead. City planning has made it all but impossible to get permits to DIY construction and repair.
Thanks for your insightful comments @davidkirtley. Turning housing into an investment was entirely underpinned by poor monetary policy -- from punishing savers with no interest, to money-for-nothing interest rate levels for 20+ years that encouraged speculation and excess. You pretty accurately describe this. Add technology like AirBnB into the mix and you have risk-taking gamblers, with easy access to money, (falsely or otherwise) believing they were investment geniuses and could become J.W. Marriott mini-mes. But, what goes up, must come down and we are on the cusp of a grounding in reality. Those 'overbuilt' houses to which you're referring have been, quite frankly, the consequence of poor monetary policies and rampant consumer psychosis that bigger is better and that gobs of Carrera marble and premium appliances somehow gave you the modern equivalent of a Roman kitchen worthy of the gods. When money flows easily, you can spend more, carry the mortgage easier and indulge in excess like huge RVs and a new Tesla in the drive. We suspect those days are over and all we can say here at Collapse Life, with zero schadenfreude is: good luck heating and cooling that house, filling that RV for anything more than a driveway escape, and paying the insurance on that Tesla. The piper must always be paid -- our only caveat to that is, Central Bank Digital Currencies. If we get CBDCs quickly, then all bets are off. Monetary enslavement will be replaced with complete enslavement.
I think that this housing issue is due less directly to monetary issues and more due to other issues.
Existing house sales were driven by people (some institutional, some individuals) wanting higher returns than they could get with the returns of other traditional investments. With interest rates so artificially low, they jumped into real estate as a means to preserve wealth and generate income. Instead of being purchased by what would have normally been first time home buyers, they were bought up by people who were not going to live in them. Some were purchased by people intending to flip them. A huge number were bought by people that were going to rent them out to generate income both as monthly and air-bnb type short term rentals. Instead of getting $2000 a year on each $100000 deposited at 2% interest, you could generate much more in rental income and still have the property itself appreciating. If you didn't want to deal with it on a daily basis, just pay a management company to handle it and you were still way ahead.
Additional pressure was coming from the other direction as well. New house sales were overbuilt to generate higher returns for the builders. Add a few square feet and a few higher end finishes and you can build a $400K house instead of a $200K for a marginally higher cost on the same piece of property. Why on earth would they build a cheaper house?
There has also been a big increase in cost brought about by environmental issues in both the flips and the new construction, they are putting in more efficient and expensive appliances, better insulation, better windows and doors, tighter construction, higher load capacity electrical services to accommodate charging electric cars, and not inconsequentially, higher planning costs for environmental impact studies and the like.
Additionally, in a lot of areas, the whole idea of a young couple buying a fixer-upper and putting in sweat equity is dead. City planning has made it all but impossible to get permits to DIY construction and repair.
Thanks for your insightful comments @davidkirtley. Turning housing into an investment was entirely underpinned by poor monetary policy -- from punishing savers with no interest, to money-for-nothing interest rate levels for 20+ years that encouraged speculation and excess. You pretty accurately describe this. Add technology like AirBnB into the mix and you have risk-taking gamblers, with easy access to money, (falsely or otherwise) believing they were investment geniuses and could become J.W. Marriott mini-mes. But, what goes up, must come down and we are on the cusp of a grounding in reality. Those 'overbuilt' houses to which you're referring have been, quite frankly, the consequence of poor monetary policies and rampant consumer psychosis that bigger is better and that gobs of Carrera marble and premium appliances somehow gave you the modern equivalent of a Roman kitchen worthy of the gods. When money flows easily, you can spend more, carry the mortgage easier and indulge in excess like huge RVs and a new Tesla in the drive. We suspect those days are over and all we can say here at Collapse Life, with zero schadenfreude is: good luck heating and cooling that house, filling that RV for anything more than a driveway escape, and paying the insurance on that Tesla. The piper must always be paid -- our only caveat to that is, Central Bank Digital Currencies. If we get CBDCs quickly, then all bets are off. Monetary enslavement will be replaced with complete enslavement.