
The U.S. Housing Boom Is Coming to an End, Starting in Dallas - spking
https://www.wsj.com/articles/the-u-s-housing-boom-is-coming-to-an-end-starting-in-dallas-1543248073
======
bradleyjg
The post housing crash housing boom was almost entirely the result of the
federal government--which has made, guaranteed, or bought significantly more
than half the residential mortgages since 2008--deciding there should be a
housing boom. If it is indeed coming to an end it is because the federal
government collectively has decided not to double down and keep the party
going.

This isn't the weather or even the price of gold. This is policy choices by
government officials and should reported that way.

I'm not saying (in this post) that it is a good thing or bad thing, but it's
what is actually going on and that's what newspapers ought to report.

~~~
toomuchtodo
The Federal Reserve (which orchestrates interest rates to manage inflation and
achieve full employment [two of its mandates]) is not (edit: a branch) of the
US government, and does not set government policy.

Edit: This is incorrect. The Board Of Governors who set interest rates is a
part of the federal govrnment as an agency (accountable to Congress), the
individual Federal Reserve Banks are not.

~~~
freedomben
While it is technically true that the Fed is privately owned, it's not how it
runs in actuality. The Fed chairman meets with presidents regularly, and many
other politicians. The president also nominates the Chair of the Fed. So
hardly independent [1].

[1] [https://mises.org/library/myth-fed-
independence](https://mises.org/library/myth-fed-independence)

~~~
pfarnsworth
Based on how pissed off Trump is that Powell is raising rates, I would say the
Fed Chairman is pretty independent.

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JumpCrisscross
Housing prices go up: “it’s becoming unaffordable!” Housing prices go down:
“it’s crashing!” Housing prices stay stable: “our leaders need to revitalise
downtown!”

~~~
SomewhatLikely
Housing prices go down: with these interest rates it's becoming even more
unaffordable!

------
jameslk
Fed lowers interest rates with QE and home buying goes up. Fed raises interest
rates and home buying goes down. Imagine that.

Almost as if this could have all been predicted[0].

0\.
[https://en.wikipedia.org/wiki/Austrian_business_cycle_theory](https://en.wikipedia.org/wiki/Austrian_business_cycle_theory)

~~~
gowld
Of course it's been predicted. Economists have predicted 9 of the last 7
recessions.

But besides that, the Fed doing exactly what is was chartered to do and
constantly issues press releases about is not a shocking revelation of
hetereodox economics.

~~~
jameslk
The Fed isn't doing exactly what it was chartered to do--it has had a dual
mandate since 1977 that complicates its purpose. Regardless, the problem in
this system seems more attributable to fractional reserve banking, which is
force multiplier on the effects of central banks.

~~~
NTDF9
I believe the Fed's mandate is wrongly placed. The Fed should only be
responsible for money supply, not for full employment.

Full employment should be a burden taken on by elected representatives in
congress or the executive.

The dual mandate asks a fish to make sure the boat flies.

------
Cyclone_
Doesn't surprise me, younger millenials won't have a home to sell and will
thus have a hard time affording a home in an inflated market. Compounded with
the fact that median wages haven't increased that much the last 30 years.
Prices have to fall for that group to afford a home.

~~~
iscrewyou
I really feel like this is it. Debt was introduced to parents of millennials.
But it took some time to become institutionalized. Now millennials are in debt
right as they get out of college. No matter what college you leave, you can
have debt if your parents didn’t pay for your tuition. On top of that, wages
have been stagnant. Then there is the credit card debt that is very easy to
accumulate is you aren’t careful with the money that you do have. This younger
generation is too busy paying off their debt. Then they are expected to save 5
years worth of salary to pay for house down payment so they can get a mortgage
for 30 years. It’s possible to make it happen but it requires a lot more
effort than it did for our parents or grandparents.

~~~
allthecybers
Even as a DINK millennial couple with a combined low six figure income a home
purchase feels like a poor investment. Not only the down-payment of $100k+ but
the property tax increases and then having to pay that mortgage for 30 years.
Since we expect mobility and a certain level of future uncertainty it just
doesn’t make sense for us and many more of our generation to tie ourselves to
such and expensive geographic anchor.

~~~
gowld
You can rent out that investment if you move. Paying rent is also expensive
where home prices are expensive.

~~~
Latteland
If you are lucky you can get money from renting. If you were unlucky and had a
house in the rust belt and jobs disappeared then few people could buy or rent
your house. So people can get trapped. At least you can expunge your mortgage
debt with bankruptcy. Not being able to expunge education debt is what's
holding our economy down.

~~~
sokoloff
Not being able to expunge education debt is what makes education lending
possible.

Otherwise, there’d be a line to file strategic bankruptcy after the last
tuition payment was due...

~~~
EADGBE
Revocation of a degree with the dissolving of student loan debt in bankruptcy
certainly could work for some.

~~~
sokoloff
That doesn't make the lender whole, though; there's nothing they can repossess
or foreclose on.

It's a mild deterrent for some cases, but for a lot of situations, having the
degree isn't anywhere near as valuable as having the education.

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neokantian
I am quite convinced it would be possible to build a pleasantly-looking
development of $25,000 sale-value housing at 50 or 70 miles away from the
urbanized area and connect it with a fast transit rail to the main
urbanization. Empty land should be cheap. Buyers should be plentiful. The
reason why this does not happen, is because the bureaucracy prevents it. There
seems to be a strong political necessity to make accommodation unaffordable.
It is a deliberate policy, of which homelessness is just an unimportant
byproduct. It is your risk and fear of becoming homeless that keeps the system
afloat. These dangers enslave you to your employer and to the banksters. Be a
good slave!

~~~
walrus01
$25,000 can EASILY be spent, and triple that, just on getting well water,
septic and electrical services to a rural property. I could buy 20 acres in
Okanogan county WA right now for $18,000 but it'll be at the end of a dirt
road, with no sewer, no water, and looking at $30k to extend grid electrical
to it (or build a $20k off-grid photovoltaic system).

I'm guessing from your comment that you've never actually done the budget on
what it costs to turn "cheap" land into somewhere you can build a nice
residence.

~~~
aftbit
How do you find cheap land like this? I would love to own 20 unimproved acres
in rural Washington.

~~~
mikestew
Umm, Zillow with the right filters. All the 20 acre plots you want for $20K.
You better have a vehicle with some ground clearance.

~~~
walrus01
And in many places consider that a road which is passable by a light duty 4x4
or pickup in summer, due to snow, may be snowmobile or snow cat access only in
winter. Unless you pave the access road and have it plowed.

------
gwbas1c
I just built a home. One thing I noticed: Some builders are really stupid
about reading the market and knowing what people are willing to pay. They load
homes up with luxury features and then wonder why their homes sit vacant.

My builder has a vacant home in my neighborhood. He ran Ethernet to all rooms,
and put in other silly features, and just couldn't comprehend why his price
was too high.

~~~
CivBase
> He ran Ethernet to all rooms, and put in other silly features

Isn't this normal by now?

My house is only a few years old but wasn't particularly expensive. When I
bought it, it was already wired up with ethernet - I just had to replace the
wall plates (they were RJ11 outlets instead of RJ45) and hook up an ethernet
switch.

From what I've seen of other homes, it appears to be common for electricians
to use ethernet for phone lines. Why wouldn't you? The difference in material
costs is neglegable.

Why should this significantly increase the cost of a new home? Re-wiring an
old home is annoying, but I don't see any reason why it should cost much for a
new home.

~~~
ams6110
Because 90% of non-tech people don't like wires. Nobody runs ethernet cables
to all their devices. They don't want to have to worry about an Ethernet
switch in the basement or a closet. Having a Wi-Fi router/cable modem in the
bedroom is the most they want to worry about. With wireless networking they
can have their devices wherever they want, without extra wires.

~~~
thrower123
The number of people that don't even have a real Wifi router and just use the
POS combination modem/router that Comcast provides (and charges a frankly
usurious rental fee for) them bears this out.

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systematical
Older Millenial here. Bought my house while prices were still low in late
2013. Cashed out in March of this year.

Thought it was crazy it was bubbling like this again. Time will tell if that
was dumb or smart but I did pay off all my debt including student loans...

I personally think a crash is coming soonish. But that's just my gut.

~~~
pfarnsworth
Almost everyone thinks a crash is coming. There has never been a crash where
almost everyone has seen it coming. Therefore there will not be a crash at
least in the near future. Prices might pullback but it won't be a crash.

~~~
mattdeboard
Isn’t there some logical fallacy about believing that since something has
never happened, it will never happen?

~~~
thousandautumns
It's called the Black Swan fallacy. Ironically, it's what happened with the
recession and housing crisis in 2008, except back then it was "the housing
market isn't a bubble, people will never default on their mortgages en masse".

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xienze
> As mortgage rates rise, buyers increasingly look for less-expensive homes.

File that under “duh”. Home buyers want to get the best house they can afford
based on a given monthly payment amount, and as interest rates rise, the home
price that you can afford for the same monthly payment decreases. Which gives
rise to high interest rates actually being a good thing for prospective home
buyers: you end up with lower home prices across the board and eventually
you’ll be able to refinance into a lower rate.

------
hyperrail
Funnily enough, Bloomberg BusinessWeek reported almost the same story - even
the same example region! - last week:
[https://www.bloomberg.com/news/articles/2018-11-20/free-
vaca...](https://www.bloomberg.com/news/articles/2018-11-20/free-
vacations-100-000-discounts-homebuilders-get-desperate)

I wonder if WSJ was chasing Bloomberg? Or if this phenomenon isn't really as
strong nationwide as is being implied, but is mostly only in certain parts of
Texas?

------
howlingfantods
"Some home builders are so desperate to attract interest they are offering
agents the chance to win Louis Vuitton handbags or Super Bowl tickets with
round-trip airfare, if their clients buy a home."

That seems like a serious conflict of interests.

~~~
dvtrn
If you'll humor the anecdote for what it is: I worked as a consultant business
partner to real estate agencies and property management groups for a few years
out of college (friend and I started a handyman company, grew it, sold it,
became consultants), the phrase 'serious conflicts of interests' could
unironically be adopted, publicly as an industry wide motto for the real
estate profession and I don't think a soul would blink.

------
neonate
[https://outline.com/ZCPPvZ](https://outline.com/ZCPPvZ)

~~~
briandear
Why does HN allow intentional bypass of paywalls? It’s no different than
providing links to pirated software. On the one hand, we complain about
aggressive advertising while simultaneously doing everything possible to
ensure publications don’t earn any money.

~~~
untog
It isn't _quite_ the same, because these publications _do_ offer their content
for free... to the Google indexer. So they're kind of trying to have it both
ways.

That said, I agree with the broader point: if you value something that has a
price on it then you really ought to pay for it at some point. You can object
to anything you want ("there are still ads!", "why can't I pay per article?"),
but it's all besides the point. There is a price attached and you can pay it
or not pay it, but refusing to pay while still consuming it isn't really
defensible, beyond "I can do it and you can't stop me".

~~~
ttty
I'm not sure, but some paid software is provided for free to some reviews or
other people... By the same line of thought... Is fine to pirate them?

~~~
untog
Fair point. I'm not really sure it's a comparison worth exploring too deeply
as there are just too many differences. For instance, what's the pirated
program equivalent of viewing just one article?

I think (hope?) most people here would agree that a hack providing you with a
full WSJ subscription would be inappropriate. But many are fine with a single
article. Perhaps that's hypocritical, I dunno.

------
gnicholas
Things have also cooled off in the Palo Alto area. I've seen houses dropped by
$400k in the last few months, typically from nearly $2.5M to a bit under $2M.
At first I thought it was just to get a bidding war started, but the homes
then sold for not much over the lowered price.

This is still a far cry from "affordable", but it's a change of pace from the
last six years.

~~~
modeless
I've toured a couple of houses in Palo Alto in the past month. The agents were
practically begging us to make an offer below asking price. I thought it was
really weird. Of course, even then the prices would still be about double what
I would consider reasonable.

~~~
gnicholas
I'm curious to see how much things soften after people do their 2018 taxes
next year and realize the magnitude of the impact of not being able to deduct
property taxes anymore. (In CA, the $10k cap is eaten up by state income
taxes, at least for anyone who has enough money to purchase a home.)

~~~
tehlike
It is a mix. Housing prices have been going up by about 20% for a while except
for this year. 1% interest rate increase is more or less equal to price going
up 20% in terms of monthly payment. Add lack of salt, and it falls behind.

------
RoadieRoller
A wild thought - How much of this is caused by H1B visa restrictions and
higher visa rejection rates? Dallas, and Texas in general, is home to the
fourth largest Indian population in US. I reckon that these high paid tech
people are abstaining from purchasing any real estate owing to the
uncertainity in their existence here.

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davidw
IDK, looks kind of like supply and demand starting to balance out in an area
where that's allowed to happen. Mostly through sprawl, rather than other,
denser types of development, but it is allowed.

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purplezooey
The recent tax bill badly hurts the blue states with high local taxes, and
limits housing-related deductions for them. Vote next time, please.

------
lbacaj
I believe we are seeing normal corrections in the housing market which has
been overheated due to low interest rates. It is not some big conspiracy by
the government and it is not a big collapse as some are making it out to be.

1/8th of a percent on a 30 year mortgage equals 80 dollars more per month on a
500k home, over 30 years, that is 28 grand more you are paying. The mortgage
rates went from low 3% to high 5%, now even at 6%, in a matter of a few years.
Of course this will cool the market a bit, people can do the math that much
more in interest is hundreds of thousands.

This is very different from the 2008 crisis where people that had no business
owning homes were defaulting on their loans. This is just supply and demand,
standard capitalism. Home prices will come down a bit and they will start
selling more homes.

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shmerl
There was a boom? All I've observed is a crazy growth of prices, making buying
anything very prohibitive.

~~~
EpicEng
>All I've observed is a crazy growth of prices, making buying anything very
prohibitive.

If only there were a good word for that...

~~~
shmerl
Renting times :)

