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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

#171

Post by cudgy »

meterplech wrote: post #105
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% (…

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’ll take a cheaper house with higher interest rates (up to a point of course) all things being equal. More equity and interest is deductible.

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

#172

Post by axiolite »

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…

> I have been patiently waiting for the next "bubble" to pop,

The moratorium on evictions (due to COVID-19) still lingers on. When it once and finally ends, things will change.

Companies switched to remote work, allowing people more flexibility in where they could live, and giving them fewer expenses. Those companies will either 1) Require their people to switch back to in-office work, or 2) Start to ask why they need to hire US workers in high cost-of-living cities, when remote world could be done from countries with far less expensive employees.

In either case, you'll start to see people shifting where they live, either because it's no longer practical to live in that area, or because they can't really afford it.

So hold tight. I can't tell you exactly what all the changes will look like, but things will certainly change, soon.

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

#173

Post by jscheel »

sbahr001 wrote: post #170

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…

We were about to put an offer down on a home in a rural-ish area of north Nashville when we got additional information that showed it was ~120k overvalued. It still ended up with multiple offers in less that 24 hours.

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

#174

Post by [deleted] »

kodah wrote: post #123
meterplech wrote: post #105

Earlier quoted context omitted.

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…

It's going to be quite interesting how the bay area fairs if more companies leave over time. I've refused to buy a house thus far and have been looking into more economical (and practical ways) to live on the move given that I've had to move so much in this industry.

[deleted]

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

#175

Post by acchow »

avidiax wrote: post #108
acchow wrote: post #86

Earlier quoted context omitted.

> 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…

You can use your equity in the first house to buy the 2nd house, right? And this person with the $2M home in California can, even after taxes and transaction fees, recover their original investment, plus have enough left over to e.g. buy a $1.5m home in cash, or a much higher priced home with a mortgage?

That is not at all a trade. That is picking up more debt to make up for the tax losses when trying to swap homes.

Suppose you haven't worked for the past 20 years.

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

#176

Post by kipchak »

leetcrew wrote: post #125
larrik wrote: post #25

Earlier quoted context omitted.

compute? GPUs used to basically top out at $400, now the cheap ones go for more than that.

when? the nvidia 8800 GTX launched in 2006 at $599 MSRP. it wasn't even the top card of that generation. that would be the 8800 ultra which launched eight months later at $829 MSRP. unless I'm mistaken, you would have to go back to the Ti 4600 to find a flagship GPU that launched at/under $400. that was in 2002. ten years after the 8800 GTX, I bought a 1080 ti not long after launch for about $650. that card is more t…

As an aside, as an owner of a x1950 pro at the time it's fun to read old reviews of how sick the 8800 GTX was at launch and think reminisce about thinking of maybe buying a $400 almost as good 8800 GTS someday, while now they're $20 on eBay.

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

#177

Post by imtringued »

api wrote: post #114
meterplech wrote: post #105

Earlier quoted context omitted.

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.

Interest rates must go down when inflation is low. If you insist on high interest rates you will also need higher inflation to justify them. Think about it this way. Interest raises the cost of borrowing, it makes reproducible assets more expensive. Over the long term you see cost push inflation. If interest rates can't be passed onto consumers then the borrower will default. That's not a good thing.

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

#178

Post by belter »

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% (…

> "...Houses are still way cheaper, in actual out-of-pocket terms for average people, than they were in 2008. Today's interest rates are way too low."

Only true for a small minority...Although your calculations are correct, its not how it works. What matters is average house price to income ratio and the Housing Affordability Index, that measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home, at the national and regional levels based on most recent price and income data.

There are also huge variations in housing markets, as they are also very much specific to local laws, regulations, job markets, and at the moment Europe is in a much worst situation than the US.

I like this definition:

"A housing market is defined by the ability of residents to reach employment by daily commutes. Generally this can be defined as a maximum 60 minute one-way commute time, while average work trip times tend to be about 30 minutes in most areas. Housing markets are thus also labor markets, which are also called metropolitan areas. In a well-functioning market, middle-income households should be able to afford the median priced house."

Its not as bad in the US as in the other parts of the world but its getting worst.

"Demographia International Housing Affordability" http://www.demographia.com/dhi.pdf

"Housing affordability has deteriorated materially in recent decades, which has been a principal factor in an internationally observed reduction in middle-income standards of living."

Its pretty bad in Australia

"Dramatic rises in house prices in Australia"

https://www.globalpropertyguide.com/Pacific/Australia/Price-...

Very very bad in UK:

"House price affordability at its worst in a decade"

https://www.financialreporter.co.uk/mortgages/house-price-af... https://archive.is/OGV5g

"UK house price affordability worsens over past decade"

https://www.ft.com/content/afead1e2-3143-11ea-9703-eea0cae3f... https://archive.is/G5zV3

Dramatic in the Netherlands

"Average Joe can only afford one of 5 homes in Amsterdam"

https://nltimes.nl/2021/08/20/average-joe-can-afford-one-5-h...

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

#179

Post by bko »

meterplech wrote: post #105
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% (…

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 went down a rabbit hole and analyzed Fannie Mae data and found buying a home is increasingly affordable when you consider low interest rates and the median income.

> In October 2019, the median mortgage payment would cost the typical American 18.21% of their income. Apart from a few months in the early 1970s and 2011–2013 period, homes have never been more affordable. [0]

>That's why the 30 year fixed is such a fantastic bet if you are willing + able to hold and lock that fixed price... but housing is a pretty lousy investment if you need to sell.

That's not necessarily true because if rates go up you can bet that property values would go down as home ownership would become less affordable. And if you bought a home for $300k and rates go up and now your home is only worth $250k, that's not a great value, because had you not bought, you would be able to buy the same home for less, although that might be offset with the higher payment

[0] https://mleverything.substack.com/p/buying-a-home-in-the-us-...

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

#180

Post by xadhominemx »

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% (…

> Today's interest rates are way too low

Why do you think this?

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