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Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

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Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#111
post #6

Earlier quoted context omitted.

Solar panels

That's a good example! The technology hasn't really improved that much (it has, but not like TVs), but the cost to deploy solar panels has gone down significantly likely due to manufacturing improvements.

Hmm, not sure if I agree with that. I think the best panels back in 2000 were ~11% efficient. Today we are closer to ~24%? I mean, it isn't a fast improvement, but production for a given area has more than doubled in 20 years.

And 11% was vastly better than just 10 years or so before that.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#112
post #76

Awesome. I've been trying to buy a home since 2015 or so and noting that housing prices continue to rise, without fail, regardless of economic or political climate. Economy is doing well? Price increase! Economy is doing terribly because of global pandemic? Price increase! I have been patiently waiting for the next "bubble" to pop, even as my realtor insists that oh no, we're not really in a bubble, this is just the…

I used to think 'no', but I think it pretty much can. You can have 2 classes: property owners and non-owners. The property owners have real estate that they can sell or collateralize to purchase different or additional real estate. This is why, for example, current California owners have no problem buying in e.g. Washington: even if a house in both places were $1billion*, they can just trade. Obviously, non-owners ma…

The appreciation also throws you up the economic ladder fast. Say you put 5% down on a 500k house, you are out 25k. Next year you have a 600k house with the same payments. You’ve now gained 75k just by existing, and you can even flip and use that profit on a down payment for a larger house, maybe even getting your monthly payment about the same as the smaller house since your down payment is a larger proportion and you are no longer paying pmi.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#113
post #86
post #76

Earlier quoted context omitted.

I used to think 'no', but I think it pretty much can. You can have 2 classes: property owners and non-owners. The property owners have real estate that they can sell or collateralize to purchase different or additional real estate. This is why, for example, current California owners have no problem buying in e.g. Washington: even if a house in both places were $1billion*, they can just trade. Obviously, non-owners ma…

> This is why, for example, current California owners have no problem buying in e.g. Washington: even if a house in both places were $1billion, they can just trade. If it's your primary residence, you can't trade one from California to Washington because you would have a large tax bill when selling one. You can't even trade within California itself. If you bought a home for $500k 20 years ago and now discover it is w…

That's largely true, though tax law does reduce the tax hit for people over 55. California recently amended prop 13 so that people over 55 can carry their existing property tax 3 times, and modified it so that they can purchase a more expensive house and keep the lower tax burden on the amount they got for their previous house. They also greatly reduced the extent to which heirs can inherit the low previous property tax (I think it's now limited to 1,000,000 and has to be a primary residence).

The inherited low property taxes always seemed pretty egregious to me (almost like an aristocracy of landed wealth). The whole thing is pretty dismal, honestly - I'm not opposed to low property taxes, but a tax regime where people pay vastly different taxes on similar properties causes all kinds of problems (and is fundamentally unfair, in my opinion).

Much of the change to the law, though, was driven by real estate agents who want to increase transactions. The previous law preserved low property taxes as long as elderly people didn't sell and left the house to an heir. Now, people 55 and and over can sell repeatedly without increasing their taxes, and there's more incentive for heirs to sell the house. That's as much was 4 commissions where there used to be none.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#114

They cite the numbers in "real terms", which would mean inflation adjusted: > The average price of American homes, in real terms, is now the highest it's ever been Of course, you really need to be looking at mortgage rates to understand housing affordability: http://www.freddiemac.com/pmms/pmms30.html July 2021 average 30-year mortgage rate: 2.87% (with 0.7 points) 2008 12-month average 30-year mortgage rate: 6.03% (…

100% true. And a good reminder of how much exposure housing prices have to interest rates. To frame the same math another way: If you bought a house for, say, $580k with a $500k mortgage... You paid $80k down payment + $20k closing costs and your monthly would be ~$2,073/month. If interest rates go up to 6%, and the person buying your house also wants to pay the same ~2,073/month, they would only be able to afford a…

I've wondered if we are in a regime today where interest rates simply can't go up. I can't imagine a scenario where they can go up more than a point or two without blood in the streets... possibly literally.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#115
post #86
post #76

Earlier quoted context omitted.

I used to think 'no', but I think it pretty much can. You can have 2 classes: property owners and non-owners. The property owners have real estate that they can sell or collateralize to purchase different or additional real estate. This is why, for example, current California owners have no problem buying in e.g. Washington: even if a house in both places were $1billion*, they can just trade. Obviously, non-owners ma…

> This is why, for example, current California owners have no problem buying in e.g. Washington: even if a house in both places were $1billion, they can just trade. If it's your primary residence, you can't trade one from California to Washington because you would have a large tax bill when selling one. You can't even trade within California itself. If you bought a home for $500k 20 years ago and now discover it is w…

It might not be a clean trade but their are situations where your equity growth in house 1 gives you enough liquidity for a larger down payment on house 2 where your monthly payments might even be lower, especially if it means things like you no longer paying pmi. This is how the property game is played in places with moving real estate markets, I know people who paid more a month for the condo they lived in a few years building equity and seeing gain to afford a down payment on a single family home.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#116

Earlier quoted context omitted.

> excluding down payment Therein lies the rub. It’s true that inflation adjusted average monthly mortgage payments have remained surprisingly constant over the last 40 years [*], since as you point out, low interest rates generally offset high home values (and vice versa). However, accruing enough cash in the first place to afford huge down payments keeps a lot of people out of the market who could otherwise afford t…

The down payment hurdle is indeed a problem. However, if we took steps to make down payments easier (by lowering down payment requirements or through something like Biden's first-time homebuyer credit) then we're also pumping more money into the housing market. That will drive prices up again, further raising prices and making it even harder for future buyers to enter the market. The only real way to push affordabili…

Build more and ban investment properties. No more AirBnB, no more rentals. Prices will come down and those people who previously had to rent, will now be able to own and life will be better for everyone except the poor souls who bought in the last 20 years.

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#118
post #100

Earlier quoted context omitted.

I don’t think you understood the parent post’s point. Most people don’t buy a house based on the sale price, they buy based on what their monthly payment will be. Historically low interest rates mean that people can afford a lot higher price house than they could in 2008. That’s obviously not the whole story, but it is a big factor in what’s going on.

But also salaries have risen and additionally so has the value proposition of owning a home compared to living in an apartment. Why? Because they've stopped building homes for the most part in desirable areas close to big tech companies.

Salaries have not risen outside of certain industries like tech

Re: Home Prices Are Now Higher Than the Peak of the 2000s Housing Bubble

#119

I don't have the source, but I saw recently that if you price houses in gold bars, prices have remained highly consistent over the past 125 years at a price between 225-250 ounces of gold for the average new home in America. It's the dollar that has changed it's value.

Seems not.

https://www.longtermtrends.net/real-estate-gold-ratio/

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