Yea and outside of just absolutely ultraviolet kind of hot markets this will mitigate downward pressure on prices now and in the future because home builders (though that's another problem) won't be building homes. Coupled with people who have locked in interest rates, the market seems to me to be poised to grind to a halt and prices to remain quite high.

The problem, though, is that home building needs to continue in order to improve the housing supply problem (caused at least in part by the dearth of home-building during the '08-'12 period) and thus help with affordability. I tend to think that the government needs to step in here and do something to either incentivize home-building and/or at the very least do something to streamline permitting/zoning. Building codes need to be examined to see if there might be innovations that could lead to lower building costs which are currently being precluded. But keeping mortgage rates artificially low isn't the answer, that led to prices getting out of hand.

> But keeping mortgage rates artificially low isn't the answer

I don't know what the solution is for the housing issue, on one hand you have people (like myself) who bought at high prices(and at low interest rates). My house will be a money loser if I try to sell, and this includes the thousands/millions? of people also in my boat(we are essentially trapped in our house and unable to move). On the other hand houses that will need to be built and houses on the market now are not selling, the cost to build a house and interest rates are too high in terms of affordability given current prices of houses. This leads to less mobility for Americans, and for those that are locked in their low rates right now(and bought in the past 7 years or so, and at lower levels pre-pandemic) would be crazy to sell which is another factor driving down supply.

To the extent that there is are "solutions", they all exist in the past now. The best solution is to stop trying to "fix" the market and take the pain now, because the efforts to avoid pain now involve lots of pain later. Unfortunately, it's already "later", and quite a bit later at that, after several previous rounds of "oh crap, we can't have rich people being slightly less rich, better goose the market again!"

Without all of that immigration we could incredibly easily get the supply and demand ratio back under control. It’s by far the easiest solution and could be done instantly. It’s just unpalatable to one side of the political aisle and to some businesses that want cheap labor.

And if people aren't building because it makes more sense to buy a "used" house material prices would also drop.

Permitting, engineering, etc are also expensive.

Finally, construction costs are difficult to estimate up front, so it is difficult to be a rational actor when deciding to build or not.

After all, if you hit a 33% cost overrun half way through building, your best option is to pay the 33%. At that point the house costs 83% of the expected price of starting over. If you stop now, then you are out 50% of the initial budget.

If you think facing such a tradeoff is rare, look around for lots that are for sale with pre-approved plans or partially constructed houses. They're usually pretty easy to find.

I came to the US and found that, not only were the streets not paved with gold, they weren't paved at all. Furthermore, I was the one that was expected to pave them!

I don't think much has changed on that front.

I'm not saying there wouldn't be other issues with clamping down on immigration, but if you're trying to tackle the supply and demand issue it's the easiest way to handle it.

[0]: https://cis.org/Report/Estimating-Illegal-Immigrant-Populati...

Note that's just "enforcement actions," which nowadays largely means giving them a court date and letting them go. It doesn't count anyone who snuck in successfully.

Here's another link: https://www.nbcnews.com/politics/immigration/migrant-border-...

"Inadmissibles refers to individuals encountered at ports of entry who are seeking lawful admission into the United States but are determined to be inadmissible, individuals presenting themselves to seek humanitarian protection under our laws, and individuals who withdraw an application for admission and return to their countries of origin within a short timeframe."

It's not totally clear, but it seems that it also includes other "border enforcement" actions that are not necessarily related to immigration at all, e.g. intellectual property and drug seizures.

So it has nothing to do with what you were claiming.

What is the connection here? And why is there a qualification of "illegal"? If these were legal immigrants, what would that change?

You're implying that demand is greater than supply, which has been quite overtly mentioned by many.

You're right that the type of immigrants don't matter, but the reason I mentioned illegal immigrants is because the amount is completely uncontrolled. Legal immigration we could easily ramp up or down.

I disagree: if Jane first home buyer has an income of $50000, and can only just afford $30000 per year on their mortgage, Jane will bid on a house the maximum she can afford. I agree that over the long term, with everybody acting the same as Jane, then the price of homes is mostly controlled by the interest rates. However interest rates, per se, do not affect the affordability of homes very much.

There are secondary effects that do change things. However the primary market dynamic of bidding as-much-as-you-can-afford means that affordability doesn’t change much. (It also means your population is playing a zero-sum bidding game of how-much-can-we-pay-the-banks, which is bad, especially in New Zealand which doesn’t own most of its banks).

Secondly, the usual answer is to increase housing supply. That would work only if there can be a super-abundance of new supply in a suburb. Think of a desirable locarion, and let’s magically create 20% more homes there. Would that fix supply? No, because the latent demand is far bigger than 20%. Why? Firstly, in my circles in Christchurch NZ, relatively well-off people own multiple homes: their primary home in the suburbs, sometimes a second home or an investment property (rented or Airbnb), ideally a holiday home somewhere which is often empty, perhaps even a town-house in a city. Secondly, in my other circles there are a lot of people sharing a home (one home split into several flats, flatting, still living with parents), so there is a huge latent demand for people that want their own home.

I think that in many desirable suburbs, you could double the number of homes and prices would not shift down in the slightest. For people to own their own homes needs something new to happen.

We have had a housing boom going on in Christchurch for say 5 years now, and house prices went up and up, because people bid what they can afford. Projections are for housing to increase faster than population in Christchurch, but that is not fixing affordability. Statistics: “Christchurch City's most recent population estimate was 392,000 (June 2021). The 2010/2011 earthquakes resulted in a net loss of around 21,000 people, but by 2017 the city's population had recovered to pre-earthquake levels. Projections suggest that by 2028 the population is likely to be around 417,000 under a medium growth scenario.” “In 2018, there were an estimated 148,000 households in Christchurch city. Projections suggest that this will likely increase to around 161,000 households by 2028 (medium series).” https://ccc.govt.nz/culture-and-community/statistics-and-fac... I don’t understand their projections, because on the same page they show a graph with more than 10000 new homes already. Also we have massive housing growth outside of Christchurch - I have seen recent large subdivisions in: Rolleston, Lincoln, West Melton, Amberley, Methvyn, etcetera.

Society would be healthier if the housing market wasn't managed to be a retirement fund. Would likely end homelessness.

Are reverse mortgages a common part of people’s retirement?

https://www.urban.org/urban-wire/reverse-mortgage-use-differ...

> At a time when seniors are sitting on a mountain of housing wealth and have anxiety about their finances, this should be a well-used program. Instead, despite rising senior population, participation decreased between 2011 and 2018, from 73,112 to 33,000 mortgages.

Does not seem like a popular part of peoples’ retirement plans. Even downsizing a house does not seem like it would yield enough of a profit to be a major component of retirement, unless you go from super popular area to middle of nowhere. But I doubt that is people’s retirement plan either.

https://fred.stlouisfed.org/series/MSPUS

https://www.medicaidlongtermcare.org/basics/home-ownership-i...

However, I think you're on the nose with the long term care facilities. Medicaid will only pay 100% of any nursing home care (high end or low end) if your countable assets are $2500 or less. Additionally, Medicaid considers your income going back 5 years in order to determine eligibility, so selling (or putting into a trust) sooner rather than later can make sense for a lot of people. https://www.webmd.com/health-insurance/features/when-how-muc...

Construction should be an industry that people care about and policymakers watch out for. But making housing purchases dependent on cheap credit may have been a poor decision, and it's possible that as a result large swathes of real estate as a sector are based on problematic incentives. The housing market needs several resets, and much as it pains me to say it as someone who'd like my own mortgages to be cheap as much as anyone else, it might need years of high interest rates to start getting things back in line -- on top of aggressive vacancy taxes, property taxes scaling on single-family rental volume + inventory scarcity, and anything else that nudges capital towards construction vs operation on existing inventory.

> Basically the fed will do anything in its power to stop inflation

I'm not sure what the limits of the fed's will here are, but what worries me is that monetary policy is not the sole or even primary cause of inflation: big supply shocks and demand shifts in the last 2-3 years are the bigger issue. Monetary policy can only go so far in addressing it.

The Fed failed to follow its own policy, of taking the punch bowl away when the party gets going. It allowed the economy to heat up for too long, and thus the inevitable reversals. Averaged over a few decades it will be the same 3-4% GDP growth that we would have gotten if they'd taken a stronger hand in taming the business cycle.

Their goal is to contain the booms so that the busts aren't so bad. Having let the boom go on, there is no choice but for a bad bust to happen. It would be nice if they'd learn their own lesson for next time, a decade or so away... but unfortunately, everybody loves low interest rates and a roaring economy.

We are also reaching a point where consumers drive the price of residential land less and less. How much difference does the mortgage rate make when the market is increasingly driven by commercial buyers, who don't use mortgages?

"Taming the business cycle" is an empty phrase.

You can increase the rates a small amount by borrowing money, but not indefinitely. Eventually, that borrowed money causes inflation, because it increases the money supply. And eventually, people get antsy, and try to cement their gains.

That's not karma, it's psychology. It's how people have behaved, and it's as predictable as anything ever gets in economics. It doesn't take a deity to invoke a bust; it just takes humans.