Adjusted for inflation, a Single Family Home costs 75% more than it did in 1987

Re:Adjusted for inflation, a Single Family Home costs 75% mo... by fallingfrog on Monday April 18, 2022 @10:48PM (#31079322)

I’m thinking out loud here but: Lets game this out. Let’s say that interest rates go up significantly- say, to 12% or something. Ok, so then naively you would probably expect house prices to fall, because people won’t be able to make payments otherwise.

But what if you’re someone who bought a house in the low rates/high price era. Are you going to sell? No, because your mortgage is underwater- you can’t afford to sell. Or let’s say you’re one of those investment firms buying up everything. Can they sell? Not really, because again, they’d be technically insolvent as their debts would be much more than their assets. They paid cash for an asset and they won’t sell that asset at a loss.

So, if nobody is selling, do prices actually fall? Maybe not! In that case, financing a house for a first time homebuyer becomes truly impossible- high prices and high rates. The only buying that will get done is for cash, by the investment firms which own a lot of their housing stock outright, and have rental income to supply cash to buy even more of them. Interest rates don’t matter when you can pay cash.

So my prediction is that in a high rate/high price market, the era when a family could own their own home is coming to a swift close.

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Re:Adjusted for inflation, a Single Family Home costs 75% mo... by frumper on Tuesday April 19, 2022 @12:44AM (#31079823)

Life forces home sales. Change of jobs, loss of job, retirement, marriage, divorce, and death are all common reasons people move. If you’re underwater in these situations it forces either a short sale or foreclosure and eventual bank sale. You are correct that people won’t want to sell, but circumstances will force enough hands that it happens. Then you might start getting in a situation where if it drops enough people will walk away instead of being so underwater causing more foreclosures.

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Re:Adjusted for inflation, a Single Family Home costs 75% mo... by Armisael16 on Tuesday April 19, 2022 @04:59AM (#31080967)

You generally don’t actually have to pay your mortgage - you just lose the house if you don’t (well, and take a hit to your credit score).

People can and do walk away from a place when they’re underwater.

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Re:Adjusted for inflation, a Single Family Home costs 75% mo... by BirdieNZ on Tuesday April 19, 2022 @07:22AM (#31081715)

This is country-dependent. In New Zealand, you cannot walk away from the mortgage. You might be able to if you declare bankruptcy, perhaps.

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Re:Adjusted for inflation, a Single Family Home costs 75% mo... by aaomidi on Tuesday April 19, 2022 @09:39AM (#31082921)

The whole point of the mortgage is that it's backed by the property.

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Re:Adjusted for inflation, a Single Family Home costs 75% mo... by llampx on Tuesday April 19, 2022 @07:31AM (#31081761)

Doesn't your credit take a major hit though? Then you'd have a harder time buying a new place for some years.

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Re:Adjusted for inflation, a Single Family Home costs 75% mo... by imtringued on Tuesday April 19, 2022 @02:07AM (#31080118)

High interest rates turning into bankruptcy and people selling their land to the rich is as old as time itself.

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Re:Adjusted for inflation, a Single Family Home costs 75% mo... by fallingfrog on Tuesday April 19, 2022 @08:17AM (#31082105)

It’s how the Roman republic became the empire as small farmers were bought out by huge landowners, financed by the spoils of war which went mostly to the 1% at the time. Then family farms became replaced by slave labor. History doesn’t repeat but it often rhymes.

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