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House prices surpass housing-bubble peak on price-to-rent ratio

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Re: House prices surpass housing-bubble peak on price-to-rent ratio

#11

Post by chadcmulligan »

JimTheMan wrote: post #3
austincheney wrote: post #2

Houses are way over valued right now due to the lumber shortage and then are selling for inflated values on top of that due to demand following the pandemic. My house, according to Zillow, has increased in value over 20% since the start of the year and I could likely raise the selling price by another 10% if I were to put it on the market.

While I am sure that is one of the factors in house prices, the main driving factor is very low interest rates and massive amounts of credit.

I heard a theory the other day that houses are more affordable than they were in the 70's - because even though the house prices are high, the repayments are lower because the interest rates are a lot lower. It was a business commentator trying to rationalise the housing market.

Re: House prices surpass housing-bubble peak on price-to-rent ratio

#12

Post by JimTheMan »

chadcmulligan wrote: post #11
JimTheMan wrote: post #3

Earlier quoted context omitted.

While I am sure that is one of the factors in house prices, the main driving factor is very low interest rates and massive amounts of credit.

I heard a theory the other day that houses are more affordable than they were in the 70's - because even though the house prices are high, the repayments are lower because the interest rates are a lot lower. It was a business commentator trying to rationalise the housing market.

The repayments seem to stay about the same but the overall payment is incredibly large.

And because getting the % deposit is a big factor in whether you can afford a house, it pushes lower income people out of the market.

And if you bought in 1980, the high rates kept the lid on prices. However while you may have started with the same payment but the rates have been steadily ticking down since then. Creating a massive generation gap between those who bought while rates were high and those who didn't have the opportunity.

And I am sure this is only one of the factors in housing affordability but in my fairly uneducated opinion it seems like the largest.

Re: House prices surpass housing-bubble peak on price-to-rent ratio

#13

Post by dd36 »

JimTheMan wrote: post #3
austincheney wrote: post #2

Houses are way over valued right now due to the lumber shortage and then are selling for inflated values on top of that due to demand following the pandemic. My house, according to Zillow, has increased in value over 20% since the start of the year and I could likely raise the selling price by another 10% if I were to put it on the market.

While I am sure that is one of the factors in house prices, the main driving factor is very low interest rates and massive amounts of credit.

I would add a continued reduction in supply. In AZ, SFR REITs have and continue to vacuum up 1,000s of homes every year. And they don’t ever sell them. This is a new phenomenon. It may more than offset new development. We may have a shrinking supply. The other downside is they aggressively put upward pressure on rents.

Re: House prices surpass housing-bubble peak on price-to-rent ratio

#15

Post by angarg12 »

austincheney wrote: post #2

Houses are way over valued right now due to the lumber shortage and then are selling for inflated values on top of that due to demand following the pandemic. My house, according to Zillow, has increased in value over 20% since the start of the year and I could likely raise the selling price by another 10% if I were to put it on the market.

Real state in the UK is increasing in price the fastest since before the 2008 crisis [1]. Lumber is a very specific circumstance to the US, but similar trends are happening in other developed countries.

One specific circumstance of the UK is a tax break introduced last year to incentivise home buying. Beyond that, as others pointed out, some shared causes are more people on the market for a new home due to the pandemic, and historically low interest rates.

[1] https://www.theguardian.com/business/2021/may/26/value-of-uk...

Re: House prices surpass housing-bubble peak on price-to-rent ratio

#16

Post by ghaff »

OldTimeCoffee wrote: post #4
JimTheMan wrote: post #3

Earlier quoted context omitted.

While I am sure that is one of the factors in house prices, the main driving factor is very low interest rates and massive amounts of credit.

Both of those were true pre-COVID and houses prices were not going up nearly as fast as they are now. People staying in their houses makes them actually pay attention to where they're living. Some end up wanting to renovate and some people just want to move. It's a high demand low supply time so prices increase and interest rates don't have much to do with that.

Yeah, it's hard not to see it as a COVID-related effect, at least in part. Anecdotally, I know a lot of people renovating and moving, often from an urban apartment to somewhere suburban or rural/small town. One factor is probably that this sort of migration is always going on as people get older and the pandemic has probably pushed up a lot of timetables.

Re: House prices surpass housing-bubble peak on price-to-rent ratio

#17

Post by ChrisLomont »

JimTheMan wrote: post #12
chadcmulligan wrote: post #11

Earlier quoted context omitted.

I heard a theory the other day that houses are more affordable than they were in the 70's - because even though the house prices are high, the repayments are lower because the interest rates are a lot lower. It was a business commentator trying to rationalise the housing market.

The repayments seem to stay about the same but the overall payment is incredibly large. And because getting the % deposit is a big factor in whether you can afford a house, it pushes lower income people out of the market. And if you bought in 1980, the high rates kept the lid on prices. However while you may have started with the same payment but the rates have been steadily ticking down since then. Creating a massiv…

>And because getting the % deposit is a big factor in whether you can afford a house, it pushes lower income people out of the market.

Median downpayment is 6%, a common low end is 3%, some places and programs go lower. Median house price sold in 2020 was 347k, well over 25% of houses sell for under 250k [1].

So, for a starter home, saving 3% of say 200k is 6k. If someone can pay this mortgage without killing themselves (30%, say 4%, monthly payments ~1K) then they can save a 6K downpayment over a reasonable time. So downpayment should not be keeping many people out of homes that want one that can afford a mortgage.

If their income is so low that they cannot even afford a mortgage, then yes, they are pushed out of the market, but there is no way they could enter anyways.

[1] https://www.census.gov/construction/nrs/pdf/quarterly_sales....

Re: House prices surpass housing-bubble peak on price-to-rent ratio

#18

Post by homero »

helen___keller wrote: post #5
JimTheMan wrote: post #3

Earlier quoted context omitted.

While I am sure that is one of the factors in house prices, the main driving factor is very low interest rates and massive amounts of credit.

> the main driving factor is very low interest rates and massive amounts of credit. This doesn't tell the whole story. Low interest rates don't make people offer 150k over asking while waiving all contingencies. I'm closing on a home soon and I saw this kind of stuff. I myself went 25k over with all contingencies waived on a condo in a 100 year old multifamily building. Relatively speaking, I was quite lucky to get t…

Low interest rates do make the monthly payment much much lower so people can pay more and still have a low payment. Someone might just compare against monthly rent vs mortgage.

Re: House prices surpass housing-bubble peak on price-to-rent ratio

#19

Post by sokoloff »

COVID added two factors, both positive for housing prices: additional time in the home, making its faults more apparent and spending money to address them more sensible.

It also added trillions of dollars of government borrowing without creating offsetting trillions of dollars of production in the economy, leading many to worry about an uptick in inflation. As inflation fears increase, borrowing money and buying productive or hard assets makes an increasing amount of sense.

Re: House prices surpass housing-bubble peak on price-to-rent ratio

#20

Post by aurizon »

Of course, this is a massive arranged crime akin to and having it's roots in the sub-prime mortgage crash. Rates are low. corporations can borrow unlimited cash and buy a residence, then rent it out to get 4-5% interest and pay 1.5 to 2.5 = risk free make the spread with no limits. I would like to borrow 10 billion and buy a zillion homes and make the spread ~~3%. They hire property managers and that costs .5% to .75%.

And we pay = we MUST HAVE A PLACE TO LIVE.

Easy to fix = make an income property subject to business taxes in addition to the usual real estate taxes. All the small retail shops pay business taxes as well as realty taxes. Make it a law that increased business taxes can not be passed to the people who live there. Exempt people who rent rooms in their own residence. This would kill the spread and make houses affordable again. Of course powerful corporates vesteds would whine away = WGAS for them, the people need this racket to be broken NOW.

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