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How Many Years of Life Does That House Cost?

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Re: How Many Years of Life Does That House Cost?

#271

Post by ddeck »

peterburkimsher wrote: post #253
ddeck wrote: post #182

Earlier quoted context omitted.

That's true in the US. In other areas, leaving the city might not be a realistic option. Consider Hong Kong as an (extreme) example, where leaving the city means emigrating to another country with another language etc. (yes, HK is technically a Special Administrative Region of China, but can be considered standalone in this respect). The median apartment price/income ratio here is 18, compared to a US average of 3.9…

I would really like to see similar graphics for Europe, Asia, Australia, and Canada. I don't know where to get the data though, and I don't think I could make such a beautiful visualisation as he did.

For the data, the Demographia International Housing Affordability Survey provides affordability data for many countries and cities:

http://www.demographia.com/dhi.pdf

The top 10 least affordable with respect to median price/income ratios:

    China Hong Kong              18.1
    Australia Sydney, NSW,       12.2
    Canada Vancouver, BC         11.8
    N.Z. Auckland                10.0
    U.S. San Jose, CA             9.6
    Australia Melbourne, VIC      9.5
    U.S. Honolulu, HI             9.4
    U.S. Los Angeles, CA          9.3
    U.S. San Francisco, CA        9.2
    U.K. Bournemouth & Dorset     8.9

Re: How Many Years of Life Does That House Cost?

#272

Post by mabbo »

A better metric I like to use: how many extra years of work before retiring will this large expense cost me? (Admittedly: this does not work the same for housing for lots of obvious reasons).

An example: a friend of mine is renovating the exterior of his house for $100,000. He plans to live there until he dies (it's a lovely house), so he'll never see that money again. He'll just have a nicer house. My alternative option for him: retire 4 years early instead.

If you invest $1 now, you can expect it to double in about 14 years, give or take. So since he has more than 14 years left until retirement, that $100,000 would be $200,000. If he plans to live off $50,000/year, then he's giving up 4 years of retirement for the sake of his house looking nicer. If he plans on living off $30,000, then it's nearly 7 years early retirement.

It's not exact math, but it's a good metric to put things in perspective.

Re: How Many Years of Life Does That House Cost?

#273

Post by tim333 »

The article looks at the cost to buy which is high in places like SF but not total cost of ownership including change in value over the time of ownership. I bought a place in London and the initial cost was >10 wages but then it's gone up by 1 or 2 wages per year so the TCO is negative - it pays me to own it. It can be a mistake not to take that stuff in to account.

Re: How Many Years of Life Does That House Cost?

#274

Post by PoachedSausage »

IanCal wrote: post #263
PoachedSausage wrote: post #140

Earlier quoted context omitted.

I'm in my thirties and work for a government funded research organisation doing work on a particle accelerator. I don't expect or want to retire, but then 'retirement' means different things. I would definitely want to retire if I worked as a brick layer. Pensions are a Ponzi scheme, don't fall for it. http://www.bbc.co.uk/news/business-41204209

> Pensions are a Ponzi scheme, don't fall for it. Pensions are mostly just highly tax advantaged wrappers for investments now. They are most definitely not ponzi schemes. Your link is for a defined benefit pension, which is not typical anymore.

That's the point.

Large numbers of current retirees have been promised unaffordable pensions.

Re: How Many Years of Life Does That House Cost?

#275

Post by jvvw »

If you are in a professional career, then it's not the median salary that matters but the median salary for your particular profession (and indeed whether there are any jobs in your profession in that area). You also want to be looking at home prices for a particular class/size of home as the nature of housing stock varies considerably from place to place.

I'm in the UK, 50 minutes by train from one of the mainline London train stations, but prices here are a fraction of what they would be next to that train station. Median salaries here would also be much lower, but if you moved out here and commuted into London, your salary would effectively only decrease by your commuting cost, not lower to the media salary in this area (although you of course then need to commute which has its own set of disadvantages). Other costs such as childcare are significantly cheaper here too than in central London.

Re: How Many Years of Life Does That House Cost?

#276

Post by muninn_ »

sn9 wrote: post #193
gozur88 wrote: post #186

Earlier quoted context omitted.

>Does someone who makes bad choices deserve to be homeless and destitute later in life? The rest of us don't deserve to pay for their bad choices.

Bad choices don't happen in a vacuum any more than good choices do.

Sure but a bad choice can be buying a new BMW while I put 25% of my savings away to retire and now I'm stuck paying for you to retire because you didn't save your money. What's the incentive? I'm a democratic socialist, and I support safety nets and wealth redistribution where it makes sense, but it's important to keep in mind that we need to make sure we are continually incentivizing good practices. If you make a bunch of money and save nothing, you should live in poverty in you're retirement. Sure you can be fed and clothed and have your healthcare taken care of, but aside from that? You made a poor choice in the face of very clear information telling you to save for retirement.

Frankly I think people need to be scared of what happens when they retire: they should be thinking "crap if I don't save money I'm going to live very poorly when I retire". Right now it's "the government will take care of me so let me go buy this unaffordable thing".

Even worse is that the government encourages this because without consumerism our economic charade falls flat. Keep buying poorly made, cheap goods from China and overpriced homes and cars with low interest rates!!

Re: How Many Years of Life Does That House Cost?

#277

Post by taway_1212 »

danans wrote: post #139
zaroth wrote: post #27

Earlier quoted context omitted.

That's funny, my takeaway was that the vast majority of the US has incredibly affordable housing. But I suppose if your call center employees simply must be living in downtown S.F. the answer must be that we just need lax zoning and higher density!

> But I suppose if your call center employees simply must be living in downtown S.F. the answer must be that we just need lax zoning and higher density! The call center employees living en masse in SF is a very far fetched claim that requires strong evidence here, along with the implication that they are what necessitates higher density. This framing is insensitive to both call center workers who likely could never a…

> This framing is insensitive to both call center workers

Capitalism is a ladder (To paraphrase a certain GoT character). No one has to be a call center worker till the end of their days, it's just stuff you do until you can find a better job (perhaps after attaining some extra training in your off-hours).

Re: How Many Years of Life Does That House Cost?

#278

Post by mobiletelephone »

ddeck wrote: post #271
peterburkimsher wrote: post #253

Earlier quoted context omitted.

I would really like to see similar graphics for Europe, Asia, Australia, and Canada. I don't know where to get the data though, and I don't think I could make such a beautiful visualisation as he did.

For the data, the Demographia International Housing Affordability Survey provides affordability data for many countries and cities: http://www.demographia.com/dhi.pdf The top 10 least affordable with respect to median price/income ratios: China Hong Kong 18.1 Australia Sydney, NSW, 12.2 Canada Vancouver, BC 11.8 N.Z. Auckland 10.0 U.S. San Jose, CA 9.6 Australia Melbourne, VIC 9.5 U.S. Honolulu, HI 9.4 U.S. Los Angel…

Wait... Bournemouth and Dorset!?!?

Re: How Many Years of Life Does That House Cost?

#279

Post by AstralStorm »

njarboe wrote: post #236
WalterBright wrote: post #166

Earlier quoted context omitted.

Easy access to credit is an important component to a free market. Making borrowing illegal just leads to all sorts of inefficient contortions to do it another way. For example, businesses often need to borrow money in order to get started. For another, "bridge" loans and "revolving lines of credit" allow a business to operate when the timing of receiving payments does not line up with the timing of when bills are due…

I agree credit can be very useful and good, but most people are not using debt to try an investment that allows them to pay back the debt and make some profit. They are buying consumables: dinners out, clothing, gadgets, vacations, cars, even housing is really a cost of something you are using. A depreciating asset and not an investment. I think it would be really good to use some of this education everyone gets to g…

The problem again is that consuming using available funds is not possible if you need to work 10 years of median salary for it - that in the more affordable states.

The figures mentioned use full salary, in reality you might get some 50% of that possible to allocate to paying off the debt. You still get to pay utilities, cost of life for the family, transportation, education and probably extras. Note I've even ignored any savings - and with high mortgage debt, you can be wiped out by any more expensive health problem.

Re: How Many Years of Life Does That House Cost?

#280

Post by pjmorris »

zaroth wrote: post #27
sbenitoj wrote: post #23

This is an awesome site, visually depicting how unaffordable housing has become in so many parts of the US. It's truly amazing how much the Fed (with perpetually low interest rates) and local restrictions on building (making it more expensive or impossible to build) have increased the cost of home ownership over the past 60 years. Anyone who's seriously considering purchasing a home should read The Housing Trap by Pa…

That's funny, my takeaway was that the vast majority of the US has incredibly affordable housing. But I suppose if your call center employees simply must be living in downtown S.F. the answer must be that we just need lax zoning and higher density!

> That's funny, my takeaway was that the vast majority of the US has incredibly affordable housing.

What are you comparing against? In the US, the old rule of thumb (up until the ~1990's) was that you shouldn't buy more house than 2X your income. That's more affordable than what is depicted here.

EDIT: I've added link to a Calculated Risk post on the ratio between US house prices and median income since 1976 [0]. By their estimates, the typical ratio has been 3X, low by your standards.

[0] http://www.calculatedriskblog.com/2017/07/house-prices-to-na...

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