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What is causing these insane housing costs?

Arnox

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It seems every time I hear about people talking about their current financial situation, it doesn't seem to be the price of food or the price of gas or etc. that is the problem, but the cost of housing, and it only seems to be getting worse. Is there really starting to be too much demand for housing? Or is this an unchecked rise in prices based mostly on greed and/or obliviousness to the current wages of Americans?

I looked at 4 different articles on this and the consensus seems to be that the root of the problem is construction costs. Basically, developers have to spend a lot of money to build these homes, and if they can't get a certain rent level, then they're not going to build it. So building new housing only seems to enforce the high prices, which only wealthy clientele can afford. And the wealthy clientele can obviously afford more expensive things, so the businesses of the area naturally begin to orient around those customers, driving up those prices. And all this serving to drive away the middle and lower classes who can't or refuse to pay such prices.

So why are construction costs so high then? Well that all has to do with the fact that we're still reeling from the burst of the housing bubble in '08. Labor for construction is still shorthanded and contractors got burned when the businesses of builders started to decline and they began to stop paying their contractors or paid them less than promised. There's also issues with just getting the land to build on. Zoning and permits and infrastructure. It all takes longer to do than ever before and it's more expensive. On top of that, the burst also burned local lenders like banks and credit unions, which caused them to be much more stingy with who they give loans out to. And then on top of THAT, people no longer able to afford their houses had to of course move into an apartment, which drove national demand for apartments WAY up. Alright then. I think that's all the issu- Oh wait, no it's not. Homeowners these days are also actively campaigning against development due to wanting to keep the value high on their shiny house they already own or simply due to confusion, thinking that development will actually raise prices somehow.

All in all, the TL;DR of this is that the demand is huge and the supply is low. And it looks like it's not gonna get any better any time soon.
 

tippy2k2

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Rates are expect to go up too! So....yay!


I literally just purchased a home (closing in nine days! Woooo!) so I know all about how shit this market is right now for buyers. I bid on multiple homes (one at List Price, one $3G over list, and one that was $13,000 over the List Price; that is not a typo, there should be 3 zeroes behind that 13) and lost on each of them.


The only reason I think I managed to get the house I bought was the guy needed to move it fast and I offered List (though with max paid seller closing costs so taking that into consideration, I technically would call it about $4G under List) and I didn't fight him on any of the repairs that needed to be done (basically all the repairs are going to be my problem). Ultimately, luck was a much bigger factor in me getting my house than anything as I saw it and bid on it the day it came on market and the seller decided to pull the trigger on what I offered rather than waiting to see if others jumped in.


But yeah, I started this search in January. There's just not a ton of inventory right now so anything on the market will be gone very quickly and likely higher than list. Interest rates are expected to rise multiple times this year so there's a lot of people trying to buy before that happens and not enough inventory to satisfy it.
 
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I live in like the one part of Canada where this isn't true, which is somewhat terrible for me as I'm about to sell a second house. The first one went quickly due to location and the type of house it is (perfect to house multiple university students literally across the street from the university).

The upstairs apartment that I'm renting out took several months for me to find anyone that I would consider renting to, though I'm glad I found an amazing tenant for it.

This was all due to an expected population boom that was expected to happen and never did due to Newfoundland oil getting rekt by the economy. All these brand new houses built for new residents that never appeared. I would say it is a great time to move to Newfoundland except we are also suffering from a lack of available jobs (take a guess of why that happened).
 

Signa

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I thought one of the biggest contributing factors was the Chinese. There's some loophole in China where if you're super rich, you have to give your money back to the government, unless it gets spent on "recreation" property. I don't have the details right, but it meant that a lot of wealthy Chinese business men were just buying up all the land they could in US and CA, causing massive inflation.

I'm sure that immigration is also a factor too.
 

Arnox

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Signa said:
I thought one of the biggest contributing factors was the Chinese. There's some loophole in China where if you're super rich, you have to give your money back to the government, unless it gets spent on "recreation" property. I don't have the details right, but it meant that a lot of wealthy Chinese business men were just buying up all the land they could in US and CA, causing massive inflation.

I'm sure that immigration is also a factor too.
I'm surprised the Chinese government has allowed that loophole for so long. Probably getting paid off to look the other way.

PointlessKnowledge said:
I live in like the one part of Canada where this isn't true, which is somewhat terrible for me as I'm about to sell a second house. The first one went quickly due to location and the type of house it is (perfect to house multiple university students literally across the street from the university).

The upstairs apartment that I'm renting out took several months for me to find anyone that I would consider renting to, though I'm glad I found an amazing tenant for it.

This was all due to an expected population boom that was expected to happen and never did due to Newfoundland oil getting rekt by the economy. All these brand new houses built for new residents that never appeared. I would say it is a great time to move to Newfoundland except we are also suffering from a lack of available jobs (take a guess of why that happened).
So you're way out in a rural area I imagine?
 
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Arnox said:
PointlessKnowledge said:
I live in like the one part of Canada where this isn't true, which is somewhat terrible for me as I'm about to sell a second house. The first one went quickly due to location and the type of house it is (perfect to house multiple university students literally across the street from the university).

The upstairs apartment that I'm renting out took several months for me to find anyone that I would consider renting to, though I'm glad I found an amazing tenant for it.

This was all due to an expected population boom that was expected to happen and never did due to Newfoundland oil getting rekt by the economy. All these brand new houses built for new residents that never appeared. I would say it is a great time to move to Newfoundland except we are also suffering from a lack of available jobs (take a guess of why that happened).
So you're way out in a rural area I imagine?
I live in the capital of Newfoundland, St. John's, but then again some might still consider that rural.

The Newfoundland economic situation is a long, complicated issue that even I don't know all the small details of. I feel that it distract from the main topic too much if we continued here. My earlier comments were mostly posting about an exception.

Back on-topic, I did notice the terrible rates when I went to B.C. earlier in the year. The town that the Airbnb I was staying at only had one house for sale that was under a million (this was an upper-class small town, but still) and that was due to it have a car stuck in the front of the building. Housing close to Vancouver seemed to be quite expensive as well.
 
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