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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

#161

Post by anotherman554 »

ffggvv wrote: post #129
kjkjadksj wrote: post #101

Earlier quoted context omitted.

A lot of people still buy with like 5% down and pay pmi even in hot markets. There are also first time homeowner benefits. My city offers a down payment loan where you can pay 1% down up to like a 750k home if you are lower income. I think that not a lot of people are well educated on homeownership and think that you need to have a huge down payment or an all cash offer, when thats just not true, and often don’t know…

if you have a jumbo loan you need a much larger downpayment. which is basically required in any state on the coasts.

If you think most people in coastal states are getting jumbo loans you are out of touch.

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

#162

Post by hadlock »

ffggvv wrote: post #129
kjkjadksj wrote: post #101

Earlier quoted context omitted.

A lot of people still buy with like 5% down and pay pmi even in hot markets. There are also first time homeowner benefits. My city offers a down payment loan where you can pay 1% down up to like a 750k home if you are lower income. I think that not a lot of people are well educated on homeownership and think that you need to have a huge down payment or an all cash offer, when thats just not true, and often don’t know…

if you have a jumbo loan you need a much larger downpayment. which is basically required in any state on the coasts.

Loan originators who specialize in west coast markets can get qualified buyers a 15% down payment + 5% HELOC for Jumbo Loans, up to at least $2mm, which covers most comfortable condos in San Francisco and even some smaller single family homes.

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

#163

Post by IkmoIkmo »

PragmaticPulp wrote: post #20

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% (…

Yep, two points to add to the monthly costs approach:

1) you still have to correct the nominal monthly fees for nominal income levels of households, roughly 50k in 2008 to 70k today.

https://fred.stlouisfed.org/series/MEHOINUSA646N

2) the monthly fees is not a full expense figure. A 30 year mortgage that gets paid off 100%, has 3.3% of principal paydown per year on average, versus 2.8% mortgage rates.

That means a good chunk of the mortgage payments are in essence savings, rather than money you'll never see again like interest.

That's always going to be true, but the share of your monthly fees that goes towards principal paydown (i.e., equity that is building up, money that you actually own) is now much larger, as the interest payments per dollar borrowed came down.

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

#164

Post by hourislate »

Reminder that US housing prices are cheap and affordable compared to Canadian prices considering most people will never own a home again in Toronto and possible all of Ontario. Average house price in Toronto is 1 million + and it is not out of the norm to see 20%+ price increases every year. I was watching a co-op 2 bedroom condo that was selling for 300k in March/2019. They relisted it for 739k this week. There is also the fact that mortgages in Canada are only for 5 years and the interest can't be written off against your income. Amazing that at the current trend a house in Toronto will be several million dollars in just the next decade while the average salary is typically 60k CAD a year.

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

#165

Post by jfengel »

gruez wrote: post #85
minikites wrote: post #72

Earlier quoted context omitted.

Capitalism is predicated on the idea of perpetual and infinite growth. Those assumptions are reflected in many ways and we're going to need to rethink our economy and political systems with entirely different assumptions soon enough because we're already running into their limits.

>Capitalism is predicated on the idea of perpetual and infinite growth First sentence from wikipedia: >Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. How does this predicate "on the idea of perpetual and infinite growth"? I mean, it'll be nice if the economy grew infinitely, but I'd still want to invest my money into production even if that d…

Would you be able to invest? I'm trying to work through the thought experiment.

Suppose we've reached a point where the population has stabilized and all natural resources were being used at the sustainable rate. What production would you be able to buy? Would the current owners sell it to you? Would you be able to accumulate enough capital to induce them to sell?

Obviously the definition of capitalism doesn't include "perpetual growth", but it does seem like a reasonable extrapolation about the world. At the time capitalism was defined, indefinite growth was realistic, and easy to assume axiomatically. I'm not sure what capitalism looks like if that assumption fails.

I'm also not sure what it looks like for that assumption to fail, since "production" also includes creativity which isn't limited by natural resources. You can always invest in new books, video games, etc which are effectively unlimited.

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

#166

Post by snarf21 »

AdmiralAsshat wrote: post #34

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…

As long as the Fed keeps interests at 0% and prints money, assets will keep inflating.

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

#167

Post by arcticbull »

IkmoIkmo wrote: post #163
PragmaticPulp wrote: post #20

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% (…

Yep, two points to add to the monthly costs approach: 1) you still have to correct the nominal monthly fees for nominal income levels of households, roughly 50k in 2008 to 70k today. https://fred.stlouisfed.org/series/MEHOINUSA646N 2) the monthly fees is not a full expense figure. A 30 year mortgage that gets paid off 100%, has 3.3% of principal paydown per year on average, versus 2.8% mortgage rates. That means a go…

> That means a good chunk of the mortgage payments are in essence savings, rather than money you'll never see again like interest.

Interest on the first $750K is tax deductible, so you will see up to half that money again :)

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

#168

Post by brewdad »

arcticbull wrote: post #167
IkmoIkmo wrote: post #163

Earlier quoted context omitted.

Yep, two points to add to the monthly costs approach: 1) you still have to correct the nominal monthly fees for nominal income levels of households, roughly 50k in 2008 to 70k today. https://fred.stlouisfed.org/series/MEHOINUSA646N 2) the monthly fees is not a full expense figure. A 30 year mortgage that gets paid off 100%, has 3.3% of principal paydown per year on average, versus 2.8% mortgage rates. That means a go…

> That means a good chunk of the mortgage payments are in essence savings, rather than money you'll never see again like interest. Interest on the first $750K is tax deductible, so you will see up to half that money again :)

Assuming you itemize, which most taxpayers don't do anymore.

11.4% of taxpayers itemized in 2018*

* https://www.irs.gov/statistics/soi-tax-stats-tax-stats-at-a-...

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

#169

Post by xenadu02 »

AdmiralAsshat wrote: post #34

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…

You can end up worse off for waiting, even if there is a "bubble pop". Even people who correctly identify market bubbles and have good timing can lose in the long run because the gains during the run up of the market compound so much it ends up being smarter to ride out the dips.

Unlike any other investment a home has direct utility for the buyer as shelter. You should buy what home you can afford and don't try to time the market. You are much more likely to end up worse off by waiting.

Here's a hypothetical scenario for an SF home: A home that would have sold for 1.7m in 2015 blows up to 3.1m today, then the supposed bubble "pops" and it drops over the next year to 2.5m. Then over the following 5 years it recovers to 2.8m.

At no point was it a good idea to wait. Buying in 2015 was the best move. Buying today (at the supposed top of the bubble) only loses you 300k, while waiting to purchase cost you up to 1.4m. Buying post-pop costs you at least 800k, far more than you'd lose buying at the peak. All while paying rent instead of building equity.

Waiting for a bubble to pop assumes you have excellent timing, you invest $(mortgage - rent), that investment gains enough to offset the dead weight loss from paying rent, and that the pop is so catastrophic that home prices revert to the mean... all while this catastrophic scenario doesn't hurt your income/investments such that you are well-placed to take advantage of the pop (as opposed to laid-off or suffering from 50% losses on your investments).

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

#170

Post by sbahr001 »

This is really scary as a whole. Even though you have less interest rate you could be overpaying for you house by 100k+ in the current market. When interest rates do rise in the future(if it doesn't we will have larger problems) more people will be underwater with their homes, some may choose not to pay as they may never be able to be positive on their homes.

Take into account that salaries are not rising at an equal level. This may be correcting itself: "minimum wage" jobs are paying near/over double to get employees. If this wage increase is temporary homes would be way overpriced. If it is not temporary "white collar"/"blue collar" jobs have to increase their salaries to be competitive; which would allow property values to stay or rise over time.

Increase new home supply. Given that the demand is extremely high and home supply is limited there will likely be an increase in new home supply. On average it will take a few years before new homeowners develop some equity in their homes. During those years are where new homes have a really good market. This would lower the value of homes faster. Especially in states that had the most migration during the pandemic.

Something that negate everything and allow house prices to sore is the upcoming wealth transfer from the boomer + gen x wealth transfer to millennials. This will hurt a lot of minority communities as they didn't have the time to develop as much wealth(segregation being a big hindrance for black communities, and a large of first generation unskilled immigrants who's kids are now starting to improve the situation). Ultimately, this may lead to a larger wealth gap which can destroy a lot of things and how civilizations fall.

Let me leave it with this: Millennials and Gen-Z are going to be living in very interesting times.

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