Quote:
Originally Posted by opendoor
I mean, a huge price crash suddenly making everything affordable was never really realistic. High interest rates and recessions are what drive price crashes, and in that situation it's not like younger people are going to be flush with cash and credit to scoop up houses.
However, look at the long periods of stagnancy after peaks in that chart you linked. Inflation-adjusted real estate prices were the same in 1987 as they were in 1974 and had dropped as much as 20% in the interim. And they were the same in 2003 as they were in 1989, with a long period of prices being 20% below the 1989 peak. That's how affordability improves, as Real Wages increase while Real Property prices stagnate. So actual selling prices might not decline all that much in terms of dollars (and will even tend to go up eventually), but they become more affordable due to wage growth and inflation.
And that doesn't even get into the fact that post-1980, we have largely had a declining rate environment. So the actual mortgage costs for homeowners declined even more on an inflation-adjusted basis during those periods than the Real Property price would suggest.
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If you look at the graphs, prices have already been stagnant for 5 years now, with the 2022 adjustment erasing the big run up that began in 2019. Based on previous patterns, we'd be looking at another 5-9 years or so of stagnancy and then another run up.
The X factor here is housing supply. During those long periods of stagnancy, there was excess housing. Now there's a major shortage.