Housing prices and rents are soaring up

The latest news right now (as of late June 2021) is that housing prices are soaring.
Both single family homes, and apartments in big cities.

With the government-imposed moratorium on rents from the pandemic coming to an end, this could soon mean many people may be evicted from their homes, and likely the homelessness rate will increase.

Some of the reasons this might be happening have already been discussed in this thread:
Soaring Lumber Prices Add $36,000 to Cost of a New Home

Could this be a sign of inflation?
inflation from the Biden Administration and Democrats policies of massive spending programs with a big budget deficit

Part of the reason apartment rents especially in big city areas are up is because during the pandemic and shutdowns many professionals left the big cities, which led to rents going down. Now that may be about to be over.

Another part of the reason is that during the pandemic, many families put their homebuying on hold. Now there may be pent up demand, stretching current capacity. This should be temporary, only lasting a couple of years.

But I also wonder why more homes have to be built. Is population increasing? Is this from more immigration, or are the immigrants that already moved to this country years ago now in a position to start buying homes to live in less crowded conditions?

This is going to exacerbate the housing crisis that has been going on for quite some time, and result in more people becoming homeless.
New homes can be built, of course, but it is more expensive for people to build new homes than to use the ones that are already in existence. I mean for the overall economy. Prices are necessarily going to have to go up if there's a home boom.

I think many people are going to argue about the causes of this.
But I think at least some of it reflects some long-term trends that were just temporarily obscured during the 2-year-long coronavirus pandemic shutdown.

And at least some part of it (we might disagree how much) is a sign of inflation. Government can't print that much money without seeing inflation.

 

Another possible cause that someone identified in another thread is worries about inflation making big institutional investors choose to park their money into real estate. Indirectly owning the homes. That would end up making more people renters, and there are some economic reasons that might even exacerbate the affordability crisis and increase the costs for people to have a home to live in.

see this thread: large investment companies buying up homes, turning people into renters

 

No problemo, Daddy Warbucks will just fire up the money mill and crank out a few billion or trillion more, it's the go-to solution to all the nation's ills.

 

Who ever wrote that piece has no idea how economics works, especially when it involves a president who shut down society with a national health emergency declaration that idled production and shut down industries.

 

Some very bright people did some serious thinking over the past five years related to the TWO factors needed to induce a period of hyper-inflation.

Those TWO factors are;
1. print a lot of extra money
2. DECREASE PRODUCTIVITY......

both criteria have been met from April of 2020 to June of 2021!

 

First of all, it's not "Who ever wrote that piece".
Unlike a lot of other members here, I'm not so lazy that I can't write an opinion of my own in the first post of a discussion I start.
Maybe you are just so accustomed to seeing other members just copy and paste from other news articles all the time, that you just automatically assumed it was copied from some other professional news site because it was longer than two paragraphs.

I actually didn't quote, or even make any links, to any outside news site.
I thought I didn't need to. There are plenty of professional news articles you can find right now about home prices soaring. I assumed we could all agree that it was happening, and then focus on the "why" and what it means, and will mean.

Second of all, exactly what part of that opinion I wrote do you disagree with?
How do you claim the "economics" actually work?

Are you just getting defensive because I stated something that was not flattering about the Biden Administration's budget policies?

 

Older homes are less desirable to many buyers who want move-in ready brand new everything houses except as to that tiny sliver of the market that wants ancient homes with historical charm. Homes with land are also becoming less desirable as people do not want to have to mow grass or deal with trees and the like. Purchasers are very fickle ( and entitled). My house was on the market 8 months and I was the only person to actually make an offer on it per my Realtor. It helped me get it at way below assessed value. It was built in the 80's and was too "dated" for all the other prospective buyers. My brother and his wife stick-built a new house that is only slightly larger than mine and ended up paying twice as much as my assessed value for theirs.

 

In Biden's America, inflation adjusted wages deteriorating as currency value erodes.

Restaurants Have No Choice But To Raise Menu Prices Amid Inflationary Pressures

"Could it go up more? It's scary. I'm hoping that it levels."

Weird Whispering Biden bragged about funding a labor strike against the US Economy.

Get ready for "Transitory Inflation" to morph into "Transitory HyperInflation"
And "Transitory" to morph from meaning "months" to "years".

 

It will and home prices will moderate as a result.

Oh, please--blaming Biden for all the inflation is propaganda.

 

Okay, you want to go down that rabbit hole? Let's quickly take a look at that, trying not to let the topic of this discussion get derailed too far in another direction. Please, let's try to make this quick, okay?

There are two components to this. #1 - Blaming printing more money for causing inflation; and #2 - Blaming Biden for more money being printed.
Now, which of those is it you have a problem with?

Now I personally don't think this was all Biden's idea himself. There's a little bit of a difference between referring to Biden himself, and the Biden Administration.
No doubt the advisors that Biden has surrounded himself with are telling him what to do and what to sign.
This isn't all the job of the President, but the President does have a huge amount of leadership, can veto bills. So Congress really does have to take a great level of input from the President when drafting their spending bills, to avoid the threat of a veto. That power gives the President a lot of influence in Congress. The Biden Administration has just been going along with all this and totally giving it their approval. Biden has been leading the way with these bills, with his publicly announced spending proposals.
When more money is spent, when there's a budget deficit, that of course leads to more money having to be printed. That's almost automatic, with how the Treasury and the Federal Reserve handle these things. (Not only that but the Chairman of the Federal Reserve is pretty much appointed by the President)

Now, why do you call this "propaganda" ?
I could waste more time and effort going into all the details of how this works and why it is so, but before I do that I would like to know exactly what part of this you disagree with. What part do think is the propaganda?

 

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How many here who own homes also have HOA fees? Are they going up?

Fortunately, I live in a nice older neighborhood without an HOA.

.

 

"A study by Trulia shows that HOA fees nationwide have risen sharply over the past decade, outpacing both inflation and the growth of housing prices.
Fees rose 32.4 percent between 2005 and 2015, from $250 to $331 - outpacing the rate of inflation by 5.9 percent."

HOA Fees Rise Almost 50 Percent in the DC Area in Last Decade (urbanturf.com)

 

Thanks for the info

From my perspective... houses/neighborhoods [not all of them are older] that have no HOAs should be more desirable.

Btw... what might happen to HOA's if cultural marxists get rid of city zoning ??

.

 

The trouble is, when a neighborhood is starting to go bad, or is right next to another bad area, HOAs can start to be more desirable.
HOAs are there to deal with certain types of problems in the neighborhood, but of course it comes with big trade-offs. Fortunately not all neighborhoods have these types of problems. The problems are usually caused by "cultural differences" and some owners changing the look of their homes in ways that other neighbors do not like (fencing in front yards with chain-link fence or filling entire yards with concrete), when they feel it alters the appearance of their neighborhood; and by homes turning into rentals and not being properly maintained; and by people keeping animals that start causing issues with neighbors. This can also be closely connected to socioeconomics and cultural differences.

 

I've encountered "cultural" differences when I inherited my father's house where I grew up. I had several nice decorative stones in my side flower bed and my new neighbor next door took some of them without asking [ie, he stole them] to prop up his window air conditioner. Then that same neighbor slaughtered a goat in his back yard in full view of my child who was nearby playing in my back yard. I heard the goat make an awful noise, saw what was happening and called the police who told me there was nothing they could do... even if it were a dog... as long as they ate it. That and crime increasing in that area was my warning shot that it was time to move.

.

 

From an economics point of view, HOA fees do decrease the price of the home, overall have no net effect on rent prices, but they may end up making the neighborhood more desirable, so could have an indirect effect on increasing home prices. They could also be making it more difficult for large numbers of poorer people to pack together into a single living space, which could in some situations have an effect of decreasing rent prices.
It is a little bit complicated. I think in summary it can be said that HOAs often make the neighborhood more desirable one group of people, but can make that neighborhood less desirable for a different group of people. This type of thing will not necessarily get reflected in prices, since overall demand (in quantity) is not really being changed.

I'm aware of one situation where there was a couple who owned their home but had to pay $400 a month in fees because their home was in a neighborhood that had a golf course. I think that type of thing overall decreases home prices, because while there are certainly some people who would be happy with that arrangement, for the majority of potential homebuyers that would be a negative. When the majority of potential buyers who are bidding on your house don't like something, that generally pushes the price down.
That couple later decided to move (at great expense) because they did not think they could afford to keep paying $400 a month in their retirement. That and the real estate price of their home had also increased a lot because it was in a desirable city, where prices had gone up a lot, so they decided they could sell it and move somewhere else where prices were cheaper.

 

The government starting loading up folks' pockets with money more than a year ago. Biden pushed Congress to keep it going. You can argue for or against the strategy, but don't blame Biden. Besides, if we had not acted as we did when we did we would have had a very nasty downturn.

What we have now is too much money chasing too few goods and services. Some potential production is unwanted by consumers because of covid, thus some workers are still surplus. Decreased demand for some services is in part reflected in strong demand for manufactured products.

Friedman made the point rather emphatically that prices are impacted by quantity of money in circulation.

What do we do about too much money in folks' pockets because the government handed them money? We could tax it back. The most effective way of doing that is a surtax. After WW2, Americans had money to spend. Rationing went on for another two years and there were several more years of shortages.

If we tax away some of the wealth, we can blunt inflation. Prices are all about how many dollars are chasing goods and services.

If we can convince people to individually and collectively deal with the virus, we can have our old lives back.

Both. We were unwilling to apply other measures that could have prevented a downturn, so the Fed increased the money supply. Clearly, the Fed did the right thing. Biden isn't to blame, nor is Trump.

If he pushes spending on infrastructure--real infrastructure, not social spending called "infrastructure"--and he pulls back on covid support spending, he won't be adding as much as his hair-raising $6t opening shot suggested.

I said blaming Biden for all the inflation is propaganda.

We have a problem created by the virus and folks' changed behavior to avoid catching it. When public transit use has been cut in half, we have a clear indication that dining out, travel, and other consumption that risks infection is unlikely to return to normal until the virus is largely gone.

 

So you're not arguing that Biden has not caused inflation, you're just saying Biden was not wrong to do that.

Oh, so what part of that inflation is Biden not responsible for?

You seem to be saying that some of it is propaganda but not all of it.

But that's purely a hypothetical, isn't it, because that's not what's happening.

 

You mean if we actually start paying for some of that spending with taxes, instead of continuing to borrow it. That would require taxing people to pay for the money that has already been spent, wouldn't it?

Something tells me that's not going to happen.

 

Biden has only been President for 5+ months. Trump was President for a year.

Far less than Trump.

Nothing is happening yet beyond extending a few more months of freebies. If we stop stuff like measures temporarily halting evictions, we'll cut off some of consumer spending as paying rent becomes a priority, increase the supply of rental housing, and so on. Republicans won't raise taxes on rich people, so as usual the pain will be born by the wage-earning class.



Y = C + I + G + (X - M)

If we cut "C" by slowing the handouts, we can tolerate some additional government spending on infrastructure. Will we focus on infrastructure that boosts economic growth--roads, bridges, ports, pipelines, the electrical grid, airports, internet to rural areas...? Probably not. Joe's braintrust keeps talking about making government work. Okay, let's see you guys do it. How about telling us about your priorities?

Cut back on the freebies, put some strings on rent assistance, get to work on infrastructure that aids economic growth. The Rx.

We need to beat the virus down significantly to get some sectors back in play. Let's get fence-sitters to get vaccinated.

In British Columbia, they show up with vaccines at any flare up. The provincial health authority is like a dog with a bone. They go to community leaders and get them involved. They make getting vaccinated as easy as calling an 800-number.

Good to see improved rural internet is a priority. Some communities could support people working from home. Retirees. Small communities are dying while people are homeless.

 

I'm talking about this specific situation. If we have a surtax on high incomes, we can get it back from the people who did well during the pandemic. Is that something people would buy as a one-and-done? Probably not.

Rich people want to keep whatever they can get their hands on.

 

Umm, you do realize the rate of price increases has been shooting up the most over the last 3 months?

And the rate of deficit spending also shot up.

 

I disagree with the premise here.

1) The types of people/families bidding up the prices of

I don't think you know what hyperinflation means. Hint: it doesn't mean 5%, 10% or even 15% inflation. It's literally never happened in the US.

 

Because the amount of virus is going down and people are out buying.

Anyway, I notice you ignored the rest of my post. Over your head?

 

In common usage galloping inflation is described as hyperinflation. All describe currency devaluation, which is is the constant devaluation of your store of labor.