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It's really a global problem and I do think it's an inevitable problem of capital saturation.
After decades of economic growth and peace, the developed world has an overabundance of wealth.
Some of that wealth chases the stock and bond markets and private equity and things like art and crypto and that's fine. Those are proper channels to act as a sponge to absorb wealth.
But some of this wealth is chasing real estate and commodities, which makes the basic necessities of life unaffordable.
We're reaching a point of having multiple "everything" problems. Housing is one of them. An everything problem is when several different socioeconomic crises result in it's own specific crisis, and can likely only be solved if the solution also addresses the other issues too. Capitalism plays a huge part in the housing crisis, but so does climate change, wealth inequality, systemic discrimination, the opioid crisis, and so much more. All that to say, shit's complex and addressing any of these other problems will give some amount of relief for the housing crisis, and vice versa.
Absolutely. The only way to fix this issue once and for all is to decommodify basic human needs (housing, food, water, utilities, healthcare) and have a guaranteed necessities government program.
When basic human needs are treated as commodities, it is inevitable that people will be priced out of survival in order for a wealthy group of people to make more short term profits.
Don't tell Nestle!
Pst. Nestle. Over here.
I have some info for you for the low, low price of 1 billion USD.
My area is red in income required and home prices. Yay!
My area, which is historically a V-LCOL area, isn’t the worst, persey, but wages definitely aren’t keeping up, which exacerbates the issue. We used to have a really good market for average people to own.
Area now requires annual salary of roughly 75-99k.. your average person around here (even if they have a degree) is super lucky to make 40-50k (this is on the rise, but not very quickly at all). Only people in the top of their field, or in highly lucrative fields, are making 75-99 (other parts of the state are different ofc; pay in the cities is a lot better for example, but this specific area is still quite depressed). Back a decade ago, there were dozens and dozens of house options for under 100k, so 40k wages were fine. If you are handy, you could pick one up that needed substantial work for 25k.
Needless to say, anyone around here who bought before the market went crazy.. is absolutely stuck, even if they currently owe very little or own outright. There is literally nowhere most of them can go because if they sell, where do they turn around and buy? Everything else went up right alongside their place, including interest rates and closing costs. But the big thing is a price difference that used to be about $2,000 is now $15,000-30,000 different (due to interest, absolute cost, closing costs, etc. all being inflated together)
FWIW, it's "per se" not "persey" - it's Latin for "by itself"
Thanks. I knew it was wrong; autocorrect underlined it. But I didn’t care enough to look it up since it didn’t suggest the right thing.
Idk who downvoted you for that, but they suck.
I'm not quite following you here. For most buyers I would agree with your point, but you call out those that have paid off their current house (or owe very little).
Needless to say, anyone around here who bought before the market went crazy… is absolutely stuck, even if they currently owe very little or own outright.
Doesn't this mean that their owned property has also increased in value? And since they own outright, if they are buying a house of the same value, then they don't need to get a mortgage, so interest rates aren't a factor, right?
Are you making an argument that these buyers would have difficulty if they are buying a bigger house than they currently own? If so, I can see that.
Yes their home value has gone up also, but because everything else has risen by the same margins, something that used to be just a bit out of their price range is now much much further outside of it.
Even equivalent properties are more expensive because they often need work on top of the price, and even if they don’t, the closing costs and cut to realtors are proportionally higher and that doesn’t count toward equity. And folks in V-LCOL areas can’t really move to areas that aren’t equally depressed, because houses in other areas are even more wildly expensive, so we are scraping the lowest cost of the bottom of the low cost barrel already. There’s nowhere to really go like people from HCOL areas can.
So say someone wants to move to the next town over for whatever reason. They have to pay to have their house sold, which is a percentage of sale for whatever dumbass reason (8-10% on average), then the closing costs, inspections, etc. for the place they are buying (2-5%), and that eats right into the equity of the existing house, meaning they have to find something 10-15% lower in absolute terms if they want to come out unencumbered, which used to be a pretty small actual difference but now is pretty substantial (for example, 10% of my purchase price is about 6k, with the current state of things I’d be looking at about 20k) The alternative option is to take out a mortgage for the price difference, at a huge interest rate. But the price increases over the last few years could easily make that mortgage the same as their original mortgage on the place from a decade ago.
So on paper the house is worth more, but because everything else also is, and wages aren’t up, it’s a much larger difference for the buyer than it used to be.