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Comment by recursivedoubts | Hacker News Reader

I'm in a mountain ski town, same dynamic. If you want housing prices to come down for real you are gonna have to pop The Everything Bubble. Moderately not insane interest rates haven't done that yet. Maybe this time it's different.

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Interest rates aren't the issue. Many of these are all cash buyers as per the article. The issue is supply and demand. Building lots more housing in ski towns is what will bring prices down.

The issue is wealth inequality - DINK households with 2 six figure incomes massively dwarf what’s possible for a regular American family (one breadwinner, 2.4 kids) - they’re the top 5% which isn’t Elon Musk territory, but as a group it’s distorting housing way more than a tiny amount of billionaires would

Fwiw I don’t think there’s anything inherently “wrong” with it, the market is a brutal mistress

And ultimately, the only way to let the regular American family buy a house is to build more houses. A desirable location, low density, and low cost. You get to pick two.

That cash came from somewhere, and that somewhere is inflated asset values, and those asset values are from comically low interest rates for a decade.

No, real value goes up. There isn't a fixed pie of value that never changes.

The houses are expensive, because a lot of people want them and there aren't enough to satisfy demand.

When everything is expensive that isn't value going up, that's the value of money going down.

That's not to say that there aren't shifts in preferences that cause relative valuation changes as well, obviously covid/remote work changed the situation wrt housing to an extent. But that shift is also superimposed on top of The Everything Bubble caused by a decade+ of negative real rates, which has dramatically inflated asssets relative to incomes, concentrating wealth and allowing second-home buyers, investors, etc to buy up these smaller towns.

Let's watch and see if the market ever comes down and, if it does, if mountain town housing prices also come down. That will confirm or disprove my theory.

Even without inflation, the real value of assets increases. Economies are not zero sum. The mountain town prices aren't going to come down until more houses are built (or other scenarios, like climate change reducing snowfall and closing the ski resort).

I don't know why you keep focusing on zero-sum here. My claim is that a large component of mountain-town value increases is driven by second home, investor and semi-retirement of wealthy people driven by cheap credit and, now, by the asset gains of that cheap credit. There has been an inflationary expansion, the early receivers of that inflation (myself included) then can put that money into mountain towns. That doesn't mean that there aren't other factors, just that I believe it to be the major one. There are others, such as people fleeing chaos in the large western cities, remote work, etc. And, as you say, we can expect some increase in the land value of these places over time as well.

If the market ever crashes and mountain west towns stay relatively expensive, I will be shown to be wrong. We'll see.

> My claim is that a large component of mountain-town value increases is driven by second home, investor and semi-retirement of wealthy people driven by cheap credit and, now, by the asset gains of that cheap credit.

Then why is it still a problem when mortgage rates are so high? This is also explicitly contradicted by the article: many of the offers are all cash. Credit is not a factor there.

That cash is coming from sales of inflated assets that have grown during The Everything Bubble. The Everything Bubble grew during a decade of negative real rates and, thus far, has not popped during rate normalization (although you can argue that rates are still very low or negative in real terms, depending on your measure of inflation.)

If The Everything Bubble eventually deflates (maybe it's different this time) and mountain towns remain expensive then I will be proven wrong. And I have to admit, the longer interest rates stay high and asset prices do not adjust down the less certain I am of my thesis.

We will see.

I’m also in a mountain ski town (same one as you after some profile snooping).

Housing prices aren’t going to come down for a while, it’s gone from a happy little remote town to a nice-place-to-be.

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