Inflation and a recession are now here :(

[HuffyCane]

I agree that high rates are fundamentally a problem right now, but the housing supply right now is still vastly dwarfed by the housing demand. Analyses from Freddie Mac, the National Assoc. of Realtors, and Zillow put the shortage number somewhere between 2.5 and 4.5 million homes. It's not just the rates that are the problem.... even if relatively low rates were to come along tomorrow, you're talking about mortgages for national average homes being astronomical and sellers would likely play into those low rates and raise their prices even more, add to that the rising cost of home insurance and you're really in trouble.

You are focusing on only the demand side of the analysis. The supply side drives it as well.

The cost and availability of lots, lending, lumber/materials, and legal/regulatory policies and fees play as much a role, if not more, than demand side issues like rates, new home inventory, and the like.

I’ll leave the analysis to poke, but it ain’t no secret why homes are expensive when the cost of framing jumps from $20,000 to $60,000 inside the same gated community during a build out. And it has nothing to do with Wall Street or Washington.

We had a housing crisis. The industry switched to building multi family complexes just at the moment some popular government subsidies for SFR home buying ended. That led to under building that has only recently increased to an acceptable available supply.

In areas of the country where people want to live (the South) home prices continue to rise despite run away costs. If you are willing or able to live in places with low supply side variables like lot price, reduced competition for materials, and reasonable govt impact fees, housing remains affordable. But not everyone wants to live 60 miles west of Wichita.

And that’s the trick. In an inflationary economy how do you bring down the price of materials to build houses near decent safe schools during a period of spiking demand due to simple demographics. A whole generation delayed home buying and child rearing due to the 2008 housing crisis then again during CoVid. And suddenly wanted to make up for lost time. Right when the government decided to print money like it’s the end of the world.

No amount of bank manipulation is going to overcome the hormones of middle class families ready to settle down. Especially a two family income household over $500?000 a year with a fertile female occupant with no children age 36 and above. And there’s a lot of them for the next few years at least.

The real question is what happens when the demand cools and the supply side can no longer triple prices/costs with impunity? Is it a bubble or not?

That’s what poke and I warned about when it comes to inflationary economies so many years ago.

 

[astonmartin708]

You are focusing on only the demand side of the analysis. The supply side drives it as well.

The cost and availability of lots, lending, lumber/materials, and legal/regulatory policies and fees play as much a role, if not more, than demand side issues like rates, new home inventory, and the like.

I’ll leave the analysis to poke, but it ain’t no secret why homes are expensive when the cost of framing jumps from $20,000 to $60,000 inside the same gated community during a build out. And it has nothing to do with Wall Street or Washington.

We had a housing crisis. The industry switched to building multi family complexes just at the moment some popular government subsidies for SFR home buying ended. That led to under building that has only recently increased to an acceptable available supply.

In areas of the country where people want to live (the South) home prices continue to rise despite run away costs. If you are willing or able to live in places with low supply side variables like lot price, reduced competition for materials, and reasonable govt impact fees, housing remains affordable. But not everyone wants to live 60 miles west of Wichita.

And that’s the trick. In an inflationary economy how do you bring down the price of materials to build houses near decent safe schools during a period of spiking demand due to simple demographics. A whole generation delayed home buying and child rearing due to the 2008 housing crisis then again during CoVid. And suddenly wanted to make up for lost time. Right when the government decided to print money like it’s the end of the world.

No amount of bank manipulation is going to overcome the hormones of middle class families ready to settle down. Especially a two family income household over $500?000 a year with a fertile female occupant with no children age 36 and above. And there’s a lot of them for the next few years at least.

The real question is what happens when the demand cools and the supply side can no longer triple prices/costs with impunity? Is it a bubble or not?

That’s what poke and I warned about when it comes to inflationary economies so many years ago.

You are focusing on only the demand side of the analysis. The supply side drives it as well.

The cost and availability of lots, lending, lumber/materials, and legal/regulatory policies and fees play as much a role, if not more, than demand side issues like rates, new home inventory, and the like.

I’ll leave the analysis to poke, but it ain’t no secret why homes are expensive when the cost of framing jumps from $20,000 to $60,000 inside the same gated community during a build out. And it has nothing to do with Wall Street or Washington.

We had a housing crisis. The industry switched to building multi family complexes just at the moment some popular government subsidies for SFR home buying ended. That led to under building that has only recently increased to an acceptable available supply.

In areas of the country where people want to live (the South) home prices continue to rise despite run away costs. If you are willing or able to live in places with low supply side variables like lot price, reduced competition for materials, and reasonable govt impact fees, housing remains affordable. But not everyone wants to live 60 miles west of Wichita.

And that’s the trick. In an inflationary economy how do you bring down the price of materials to build houses near decent safe schools during a period of spiking demand due to simple demographics. A whole generation delayed home buying and child rearing due to the 2008 housing crisis then again during CoVid. And suddenly wanted to make up for lost time. Right when the government decided to print money like it’s the end of the world.

No amount of bank manipulation is going to overcome the hormones of middle class families ready to settle down. Especially a two family income household over $500?000 a year with a fertile female occupant with no children age 36 and above. And there’s a lot of them for the next few years at least.

The real question is what happens when the demand cools and the supply side can no longer triple prices/costs with impunity? Is it a bubble or not?

That’s what poke and I warned about when it comes to inflationary economies so many years ago.

I know that you like to cosplay as a middle class guy, but in very few parts of the country is $500K household considered "middle class". Nationally the top 4% of households are making more than $200K.

 

[lawpoke87]

One of the forgotten effects when housing becomes unaffordable for so many

 

[aTUfan]

We are pumping more oil than in the history of the nation.

so why are we using the reserve and buying foreign oil?

 

[astonmartin708]

so why are we using the reserve and buying foreign oil?

We have increased reserve capacity by 11% in the past year.

As to the second part of your question.... Chat GPT's response:

1. Crude Oil Grade Mismatch​

• Crude oil comes in different grades based on its sulfur content (sweet or sour) and density (light or heavy).
• The U.S. produces a large amount of light, sweet crude, especially from shale formations, but its refineries, particularly those along the Gulf Coast, are optimized to process heavy, sour crude.
• To maximize efficiency and profits, the U.S. imports heavy crude from countries like Canada, Mexico, and Venezuela while exporting surplus light crude to countries with refining capabilities for that grade.

2. Geographic Considerations​

• The cost and logistics of transporting oil and gas can make it more practical to import resources regionally. For instance, refineries on the East Coast might find it cheaper to import oil from West Africa or the Middle East than to transport it from U.S. oilfields like those in Texas or North Dakota.

3. Global Market Integration​

• Oil and natural gas are traded on a global market, meaning prices and availability are influenced by international demand and supply.
• The U.S. participates in this market by exporting oil and gas to buyers willing to pay competitive prices while importing resources to meet domestic needs.

4. Demand vs. Production Distribution​

• The U.S. is a large country with diverse energy needs, and domestic production doesn’t always align with local demand. Some regions, such as the Northeast, have limited pipeline infrastructure and rely on imports to meet natural gas demand, particularly in winter.

5. Strategic and Economic Relationships​

• Importing and exporting energy resources helps the U.S. maintain strategic trade relationships and ensure energy security through diversified supply sources.

6. Price Arbitrage​

• The U.S. exports natural gas (primarily as liquefied natural gas or LNG) and crude oil because international prices are often higher than domestic prices, providing economic benefits to U.S. producers.
• Meanwhile, the U.S. imports resources that may be cheaper than producing or transporting from domestic sources.