I don't think the prices are gonna correct as much as people think it would, considering my entire generation is waiting on the sidelines to buy, the demand will always be there until it's satisfied.

12% of US detached housing is vacant. Property is being held by speculators who are betting that interest rates will fall and increase the value of property. No amount of supply will meet the demand of an asset class that increases in value by 6% a month.

Interest rates are at historic lows. The Fed rate going negative has been discussed in months gone by. Lender money to borrow is a little tougher as with rates so low they may keep it in equities, or buy GME or Bitcoin where they have higher upside potential.

Buying GME to offset losses in real estate is the most 2021 thing I've heard. I don't know if I should laugh or cry.

The only thing I have to say is that I would expect the government to push more federally backed mortgage loans at their preferred interest rates if they sense a slowdown in private lending. Heaven forbid markets correct themselves.

Ah, Sorry, I come from the perspective of Canadians, you should see how insane the Canadian Market is right now.

Do you have a source for this? Trying to dig through census data but can't find this specific metric.

Total Housing Estimate - https://fred.stlouisfed.org/series/ETOTALUSQ176N

Vacant Housing Estimate - https://fred.stlouisfed.org/series/EVACANTUSQ176N

So, looks like closer to ~11% as of that data.

I think you may've missed some subtext from the parent post. It sounded to me like people are not showing up to interviews not just because of higher wages offered elsewhere. It sounded like, at least partly, those interviewees currently do not need to show up to job interviews in order to make ends meet. This has the added effect of lowering the labor supply, which to me explains the struggle parent poster is facing.

Everybody's gotta wet their beak every step of the way down. Landowner, restaurant owner, manager.

By the time it reaches ground level nothing left but crumbs

Is the solution to this inflation?

Inflation is the result of rising wages. However, we're in a place now where wages haven't even matched inflation for decades. Suddenly things start catching up and everyone loses their mind, claiming it's the fault of unemployment insurance.

Can you elaborate the types and causes of inflation being mentioned?

Asset inflation, I assume?

Inflation benefits people with debts. People with assets are quite untouched, you'd even think that real estate is viewed as a safe investment (the "concrete gold" meme). Better unemployment benefits would help, but under Delaware Biden they are a political impossibility.

Unemployment benefits are currently the best they’ve ever been by a wide margin.

The word is "currently", isn't it? They'll be rolled back soon enough, same as in 2008, to get the plebs back to work.

One assumes, though it's expected the child tax credit will be introduced in a permanent bill eventually, so I think there's a chance we'll see a more permanent UI benefit too. At least I hope.

Pfft. Biden rolled back immigration restrictions in a period of record unemployment, and you expect improvement in unemployment benefits? Labour must be squeezed, and the child tax credit does that, too. Can't have a reduction in births, that would mean less workers fighting for a job twenty years down the line.

That would require interest rates to rise - which would pop the current asset prices and lead us into a decadal global recession.

There is no way out. Get out of debt and hoard as much as you can. Bad times are coming.

Does it require changes in rates? Interest rates determine absolute property prices, by way of per month payment prices, but it’s the latter that should have primacy, right? What people can afford to pay each month.

Right. Property values are highly correlated with incomes, because that determines what purchasers or renters can afford. Interest rates determine how much of a loan a purchaser can service. So, low rates allow purchasers to bid up the price of assets, which effectively transfers money from borrowers to current asset owners.

Since property prices are highly correlated with incomes, and income changes are correlated with inflation and productivity gains, the only lever that can be pulled to change real estate prices is the interest rate.

For property to become more affordable, the interest rate has to rise. Since that would cause property values to drop, many people who recently purchased property would find themselves owing more to a mortgage lender than their property is now worth, and it would likely remain that way for a decade. Many of those people were stretching to afford their purchase before, with 3% down programs and half their monthly income or more going to service a loan. We are already at a record high level of mortgages in forbearance.

So, the interest rate cannot be allowed to rise. The only people that would benefit are people with a decent income, no debt, and substantial savings, who do not yet own an asset class. Almost no-one, and mostly young people. But low interest rates push money to seek higher returns, which causes investment to become speculative instead of seeking lower-risk capital improvements. This reduces future productivity gains, which lowers growth long-term.

In other words, the future is Japanification. Society will gladly sacrifice its children and future for a few more years of fun bucks. A decade long recession is, I believe, inevitable, and will happen after the next asset crash.

Everything you’re talking about only relates to the list price. I don’t know the right name for it. The value of the property. What you’d see on the for sale sign. You’re right about different levers on that.

The problem is that that’s not the price that matters in this particular setting. What matters are the monthly payments. If you change rates, the list price will change but monthly payments won’t.

> If you change rates, the list price will change but monthly payments won’t.

Exactly

If the buyer can only afford $1,000 a month with a 30 yr mortgage - that sets the upper bound of the list price of the asset

If rates rise the monthly payment stays the same, but the buyer can only afford a lower priced house.

If rates go down those $1,000 can now pay for a higher list price

If everyone keeps saying this long enough, eventually they’ll be correct. How many economists is everyone aware of who are themselves millionaires?

You know, you're not wrong. Inflated asset prices can last a long time. Fundamentals win in the end, but the end can take longer than a person's career.

"The market can stay irrational longer than you can stay solvent".

"When the music plays, you have to dance."

I'm just suggesting not to speculate with borrowed money.