Home prices and financing costs are still high, but several indicators suggest the market has moved past peak distortion.
Whether US home prices are “the most expensive ever” depends critically on how the current moment is interpreted — a point underscored by the conflicting signals emerging from recent housing data. In March, the median price of an existing home rose for the thiry-third consecutive month to a record level for that month, even as transaction volumes weakened and the spring buying season began on a notably soft footing. At the same time, economists at the National Association of Realtors report that home prices are at their highest levels on record even as sales have stalled, reflecting a market constrained by limited inventory, elevated mortgage rates, and weakening buyer confidence. Compounding this tension, affordability metrics have deteriorated to the point that buying is now more expensive than renting in most US markets, highlighting the extent to which financing costs and price levels have jointly eroded access to homeownership.
...read more at thedailyeconomy.org
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Rent < Owning doesn't seem very sustainable
Why? I'd expect owning > renting as the default state of affairs
Someone owns the rental unit and charges a markup, right?
hmm good point
the willingness to pay to own the unit you live in should be higher than the willingness to pay to rent the unit you live in, is the logic i was operating off of
Renters are also paying for the service of the landlord handling all the financial and maintenance BS, plus the flexibility of a shorter term deal.
I think you're actually right. Landlords and owner-occupiers both compete as buyers in the purchase market for homes. So even though owner-occupiers are willing to pay more to own than to rent, they set the marginal price of the home in the purchase market, so they set the price landlords have to pay. Landlords then have to charge a premium on top of their cost of ownership to cover their opportunity cost, financial management, taking on the depreciation risk, etc.
Feels like we’re in that weird phase where prices stopped going vertical but affordability is still wrecked because financing costs refuse to chill.
Yes, it's rather obnoxious for those of us with old cheap mortgages who would be interested in moving.
We accumulated some nice equity but can't afford to even make lateral moves.
Yeah, it’s weird — on paper people gained equity, but in reality higher financing costs killed mobility. Cheap mortgages became golden handcuffs.
There really should be a second-hand mortgage matching market, so those of us in these situations can just swap mortgages with each other.
@SimpleStacker, do you know why that doesn't exist?
Good question, I'd have to think about that some more. A mortgage's terms and pricing are tied to the underlying quality of the collateral and the borrower, so I'm not sure how easy it would be to build some kind of swap market.
There's already a secondary market for mortgages in the sense of investors buying the loans from each other. But i've never heard of or thought about a market where borrowers can exchange their loan terms with each other.
Yeah, the problem is that the deal is with a particular borrower and there's a good chance one of the banks would prefer their current borrower to the new one.
Obviously, we could just move into each others' homes and do an informal swap, but that creates the same kind of incentive problem as renting.
Hmm, I got curious and asked AI about this. I actually started with something simpler than what you proposed:
"Are there mortgages where I can keep the terms of the loan while moving to a new house? There seem to be gains from trade to be had with the existing investor (I pay a slightly higher rate, though still not market rate; they let me switch the underlying collateral)."
Claude told me that what I'm describing is a portable mortgage, which does not exist in the US but does in Canada and the UK.
Claude told me that some mortgages in the US are assumable mortgages, which means that a new buyer can assume the terms of your loan when you sell it to them.
Neither is quite what you described, but have a similar flavor of reducing mortgage lock-in.
It sounds like two people with assumable mortgages could basically execute a swap.
That actually sounds like a brilliant idea. A second-hand mortgage market could solve a lot of the “golden handcuffs” problem and help people move without resetting to brutal current rates.