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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

#51

Post by akudha »

mc32 wrote: post #36
akudha wrote: post #35

I wish something is done about these rentiers. Someone I know is amassing a rental property portfolio, while I am struggling to buy my first home. I am not against people making money and getting rich, but it would be nice if it wasn’t so easy to buy up multiple properties simply because they have the cash. There should be all kinds of incentives for first time home buyers. But it should be made very expensive/very p…

Some of it is to take money out of authoritarian regimes and move it into more rule of law countries. Another reason is a hedge against inflation which we may be beginning to see right now.

The very fact that you are trying to rationalize someone buying multiple homes at the expense of someone trying to buy their first home highlights the problem. Take Canada for example. A whole lot of homes are bought by Chinese buyers and are sitting idle, at the expense of Canadians trying to buy their first home.

How can you say this is morally right? It is all find and dandy for the Chinese buyers, but what of Canadians?

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

#52

Post by JimTheMan »

ChrisLomont wrote: post #17
JimTheMan wrote: post #12

Earlier quoted context omitted.

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 themsel…

Depends where you live I suppose. I am in Australia where typically you need 20%. At 10% you need to purchase special insurance or get a guarantor.

I am surprised at how crazy low those US ratios are. Thats just bonkers.

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

#53

Post by mumblemumble »

TimPC wrote: post #37
akudha wrote: post #35

I wish something is done about these rentiers. Someone I know is amassing a rental property portfolio, while I am struggling to buy my first home. I am not against people making money and getting rich, but it would be nice if it wasn’t so easy to buy up multiple properties simply because they have the cash. There should be all kinds of incentives for first time home buyers. But it should be made very expensive/very p…

If only there was a law that allowed you to deduct a significant amount of mortgage interest from taxes on a home but not on other property.... Oh wait...

If we're talking the US, that law is for the benefit of the rich. In general, the interest won't exceed the standard deduction unless you've got a rather obscenely priced home.

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

#54

Post by akudha »

jhallenworld wrote: post #38
akudha wrote: post #35

I wish something is done about these rentiers. Someone I know is amassing a rental property portfolio, while I am struggling to buy my first home. I am not against people making money and getting rich, but it would be nice if it wasn’t so easy to buy up multiple properties simply because they have the cash. There should be all kinds of incentives for first time home buyers. But it should be made very expensive/very p…

It could be that the rich are getting into real estate as a hedge against inflation, even if there is no income. But rental income is really nice... the most extreme version of this is the Duchy of Cornwall, earning rent since the 1300s (currently $21M) for the Prince of Wales: https://www.princeofwales.gov.uk/features/duchy-cornwall

The Prince voluntarily pays income tax on all revenue from the estate.

lol, how magnanimous of him!

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

#55

Post by pnutjam »

throwaway210222 wrote: post #21
ChrisLomont wrote: post #17

Earlier quoted context omitted.

>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 themsel…

> If someone can pay this mortgage […] then they can save a 6K downpayment Not if they are paying rent - there would be no surplus every month to save.

Bingo, my rent is going up $100 bucks a month this year.

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

#56

Post by pnutjam »

yunohn wrote: post #46
bequanna wrote: post #27

Earlier quoted context omitted.

This isn’t how taxation works or even can work. It would be trivial to avoid the tax you propose if it is based on income from the properties. If the tax is more like a property tax then it would be impossible for it to not be passed on to renters. Indeed, ALL taxes are passed onto consumers!

> it would be impossible for it to not be passed on to renters. Indeed, ALL taxes are passed onto consumers! Agreed. While not immediately intuitive, this is unfortunately very true for all taxes that are imposed upon institutions, corporations, investors, etc. I wish this is something that could be fixed in a fair manner…

All taxes are passed on is a very simplistic view. Do I pass the taxes on to my employer when I negotiate salary? Probably to some extent, but this is like saying all cubes are squares and calling it good enough.

EDIT: typo

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

#57

Post by slv77 »

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.

When rates were higher total interest payments tended to dominate over the life of the mortgage. In most cases the interest payments would exceed the entire value of the principal over the life of the loan.

Over the life of a loan the interest portion is negotiable while the principal payments are not. A buyer in improving financial circumstances can accelerate payment on the principal and avoid future interest payments. The buyer could also refinance if interest rates came down.

Interest payments in the US were also tax deductible while principal payments were not. This preserved some purchasing power early in the mortgage when interest dominated the payment. Renters can deduct both interest, depreciation and upkeep while homeowners can only deduct interest. Lower interest rates skew the market more towards renting versus buying.

The result of lower interest rates is that today’s buyers are making a very different financial bet then buyers over the last 50 years. The only option buyers have to avoid payments on principal is to default. They won’t be able to accelerate repayment and reclaim future purchasing power like previous generations did.

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

#58

Post by leetcrew »

yunohn wrote: post #48
ghaff wrote: post #33

Earlier quoted context omitted.

>Look at the number of single family home that are being bought and immediately rented out, in new construction the renters far outnumber the owners. I'm not sure I see the problem. People are living in the property one way or the other. It's not like there is some infinite pool of renters not living someplace who will absorb any supply. What would be (and is in some places) a problem is if speculators/people parking…

> I'm not sure I see the problem. I don’t see why only parked properties are a problem? Rentals are always more expensive than the underlying mortgage - that’s what makes it an investment opportunity. This is a big problem since most people could’ve afforded the original property if they weren’t priced out by investors.

there are a few ways this could not be true.

the mortgage could have been locked in a long time ago at a much lower valuation. the rent would still be above the underlying mortgage, but that doesn't mean I would have bought the house when I was a child.

the landlord might own the building outright, or the valuation might be increasing so fast that the rent only needs to offset the rent. either way, the rent could be pushed below the mortgage (or what the mortgage would be).

there are some us cities with extremely high price-to-rent ratios. some of those properties must be renting for below the underlying mortgage.

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

#59

Post by ghaff »

JimTheMan wrote: post #52
ChrisLomont wrote: post #17

Earlier quoted context omitted.

>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 themsel…

Depends where you live I suppose. I am in Australia where typically you need 20%. At 10% you need to purchase special insurance or get a guarantor. I am surprised at how crazy low those US ratios are. Thats just bonkers.

Those down payments used to be the standard in the US. However, I am surprised that, indeed, median down payments do seem to be significantly below that these days.

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

#60

Post by miketyson2000 »

It is weird for me read comments on HN lately. I do not know where it became a thing to argue that being able to buy whatever you want at any time is a god given right. It comes across as rants of a spoiled child that has only seen prosperity. I am seeing the same complaint in crypto wars on GPU shortages and so on.

You are not owed anything. You have a shot at an offer. That is it.

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