But the effective, on-the-ground housing shortage is going to continue to keep demand for housing extremely high in almost all areas with reasonable economic options or amenity migration destinations.
The only reason there is a housing shortage is because there is an excess of jobs and money in that place.
Which is changing. Houses in sunnyvale went from 750k-1m and impossible to find one for sale to 350k (yes really!) and on the market for years around ‘08.
Nope. For one thing, there's the largest generation of the 20th century at peak retirement, cashing out of family houses that have gained huge amounts of value, and looking to move to amenity-rich locations.
For another thing, the investment industry, short of other options, has started buying houses to rent them (short or long term), squeezing supply and driving up prices in many markets.
For another thing, short term rentals (AirBnb, VRBO etc.) have had profound impacts on the availability of property in heavily visited areas (in fact, it's not so much absolute visitation rates, but vists-per-resident that characterizes this).
Other factors too. That doesn't mean the market can't crash, but it will be something very different from what happened in 2008.
> cashing out of family houses that have gained huge amounts of value, and looking to move to amenity-rich locations.
They can only cash out if people are willing to buy. And fewer people will be willing to buy (at least at the prices the retirees want) with interest rates going up.
So the retirees will either put off their plans for a while in the hopes that things will recover, or will accept lower prices for their homes.
> For another thing, short term rentals (AirBnb, VRBO etc.) have had profound impacts on the availability of property in heavily visited areas
Is this true? Last I was reading about this (a few months ago), the number of housing units in San Francisco listed on Airbnb was around 8k, which is around 2%. Meanwhile, a report from this February estimated that over 40,000 residential units (10% of total) in SF were sitting empty in 2019 (and that number has likely been growing over the past 3 years, as it has been since 2013). Why are we all upset about short-term rentals when so many real estate speculators are sitting on more than 4x as many vacant properties?
> Why are we all upset about short-term rentals when so many real estate speculators are sitting on more than 4x as many vacant properties?
I would guess partly because almost all of the short-term rentals represent either (a) previously long term rentals that are no longer available to people who live and work in that location or (b) new construction that doesn't address housing shortages.
The boomers heading into retirement situation is a reflection of 40-50 years of economic policy and has no connection with recent "cheap money".
Actual investment in single family and apartment housing is almost entirely tied to its low risk/return ratio compared with (the perception of a lack of) other options for investment at this time. The money sloshing around for investment is as much as function of the effective privatization of retirement funding as anything else.
The short term rental market is in part the perfect expression of how a relativel small number of wealthy individuals can totally distort a market to follow their own preferences, and reflects income/wealth inequality and lack of regulatory enforcement (they're freakin' B&B's people!) as much as anything else.
Cheap money has almost nothing to do with any of them.
The ‘cheap money’ issue isn’t a short term one. It’s been steadily dropping with only minor hiccups since the mid 80’s - about 40 years ago. The last time the US had a inflation hit, at that time due to the Oil crisis.
Mostly to keep juicing the economy, which has steadily been needing it more and more to grow/less responsive to stimulus.
Folks I know who have done the AirBnB route were often getting mortgages and buying properties to let out, using the short term cash flows to pay the (low interest rate) mortgage.
Which makes sense as an investment, because the mortgage was cheap (cheap money) compared to current cash flows.
It has become more and more
pervasive, until it stopped being able to make money due to saturation. Younger folks traveling around during Covid using AirBNBs helped (they were trying to avoid lockdowns and ‘dirtier’ hotels), but not sure how it is going to play out now.
Anyone who had a 30 year mortgage they got then is going to do pretty fine though as long as they have cash flow.
Bay Area has the highest price to rent ratios in the US. Rent really hasn't changed that much since 2020 and if the betting stops it'd make sense to go back to 2020 prices (which is like a 50% "crash" in parts of the Bay)
I would so much welcome a 50% crash but I’m afraid we’ll never ever see it in the Bay Area. There are just too many people, job or not, in a very strong financial position.
I’m sitting on $600k+ cash for a down payment and if I see townhouses correcting I’ll snatch one up immediately. And I am a very small fish compared to the wealth that’s around.
My personal bet is that the Bay Area will just stay at 0% growth until the market recovers.
A lot of speculators also bought assuming increasing property values, so if it’s flat for 5 years or whatever, then that’s going to nuke their gains. Meanwhile they’re paying out real cash every month.
The rental market in many previously hot areas (SF, South Bay) has taken a hit, but not sure where it will land long term.
Medium term there is a LOT less pressure with a lot of techies having relocated and remote work being accepted.
Don’t forget though that anyone who is a ‘bigger fish’ (looking to invest many millions or half a billion or so) in a high inflation environment is going to be looking for as sure a bet they can with as high a return they can.
And since money isn’t as cheap anymore, those are easier to find and get.
So while it may not be bad returns, it may be bad returns compared to something else (a new business, for instance).
