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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

#191

Post by dlp211 »

inetknght wrote: post #185
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% (…

> In other words: Houses are still way cheaper, in actual out-of-pocket terms for average people, than they were in 2008 False. Actual average people are making significantly less today than they were in 2008. Their buying power is therefore also significantly less too.

Um, no: https://fred.stlouisfed.org/series/MEHOINUSA672N

Median household income is greater than it has ever been.

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

#192

Post by bluGill »

geebee wrote: post #102
skystarman wrote: post #90

Earlier quoted context omitted.

If you live in a place like the Bay Area/NYC where cities/local zoning boards are preventing almost and and all new construction then in all likelihood your home price will continue to appreciate throughout your lifetime. Supply and demand. There are way more people that want to live in these places than houses available. And we keep making new people every year.

I'm not sure they'll even drop if building codes are relaxed. After all, those SFH owners also own the land beneath their house. The price per square foot of living space could drop while the price per square foot of land goes up.

Any change will take 20 years to start working through the system.

That said, prices will change. SFH owners move once in a while. Even if you live in the same house for 50 years (about the max possible given human lifespans), someone else on your block will move every few years. When someone moves a developer will look at the location and decide if it is wroth buying the house for the lot, tearing down and building something else. Right now in the Bay you could buy a lot of SFHs, tear them down, replace with a 10-plex and rent it out for enough to make it worth it. (Assuming zoning codes would allow this without a large cost over the cost of labor and materials) Eventually though housing will catch up and rent will fall until it isn't worth it.

We can't prove the above because of course zoning codes won't let you do it.

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

#193

Post by imtringued »

notanzaiiswear wrote: post #155
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.

Growth means that things get better. If you build better houses and cars, that is growth. Likewise if you cure more cancers. Economic growth does not imply consuming more resources. Developing a more fuel efficient car is also growth, for example.

You can build a money system that maximizes growth without requiring it to happen predictably every single quarter.

What is needed is a money system that lets the economy grow as much as is sustainable, not 3% per year because that is what someone wrote into a contract 20 years ago.

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

#194

Post by aidenn0 »

b9a2cab5 wrote: post #146
jmharvey wrote: post #35

Earlier quoted context omitted.

No. The first paragraph of the article states that these are inflation-adjusted prices. > The average price of American homes, in real terms, is now the highest it's ever been

Core CPI understates localized inflation in certain assets. Real estate happens to be highly inelastic, illiquid, and has a limited supply due to NIMBYism. The federal government has also handed people tens of thousands of dollars in printed money through stimulus checks and extended unemployment benefits. That lets people stay where they live now instead of moving to a place they can afford, which takes supply off t…

It doesn't seem to me that overall, either supply or demand of houses should be more correlated to e.g. the stock price of Alcoa as compared to the price of aluminum.

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

#195

Post by Johnny555 »

fartcannon wrote: post #116
PragmaticPulp wrote: post #81

Earlier quoted context omitted.

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.

There are lots of valid reasons besides "I can't afford to buy" to rent. I've been a renter for most of my life because I liked the freedom of being able to move to a new area (either locally, or in an entirely new region) with little hassle. I'm a homeowner now, but I was renting even when I could afford a house.

In an economic downturn many people get stuck with a house that's underwater and unable to sell while also needing to look outside of the area for a new job.

Also, if your income (or family size) changes, its a lot easier to trade up (or down) when you rent than when you own.

Instead of mandating that everyone buy a house whether they want to or not, I'd rather see renter protections, particularly in capping rent increases.

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

#196

Post by cko »

cudgy wrote: post #171
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’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.

I'm not sure about the more equity part. You mean you would put down a higher down payment?

Because once the house is paid off there would be more equity for the more expensive house.

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

#197

Post by bluGill »

jfengel wrote: post #165
gruez wrote: post #85

Earlier quoted context omitted.

>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 includ…

I'd invest in something more efficient. If I can find a better way to turn the natural resources into something else can make a profit.

Or I'd invest in games/movies/art. People are always interested in something new even if the plot 3000 years old.

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

#198

Post by inetknght »

notanzaiiswear wrote: post #155
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.

Growth means that things get better. If you build better houses and cars, that is growth. Likewise if you cure more cancers. Economic growth does not imply consuming more resources. Developing a more fuel efficient car is also growth, for example.

> Growth means that things get better.

Growth does not mean that things get better. Growth means that things get more. More is not always better. More humans, for example, seems to destroy habitability of the Earth. Is that better?

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

#199

Post by belter »

dlp211 wrote: post #191
inetknght wrote: post #185

Earlier quoted context omitted.

> In other words: Houses are still way cheaper, in actual out-of-pocket terms for average people, than they were in 2008 False. Actual average people are making significantly less today than they were in 2008. Their buying power is therefore also significantly less too.

Um, no: https://fred.stlouisfed.org/series/MEHOINUSA672N Median household income is greater than it has ever been.

What matters is the Housing Affordability Index, not income levels. Houses prices might rise in price more than income plus it needs to be in the area where you live/work. See my post in this thread.

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

#200

Post by omgwtfbyobbq »

symlinkk wrote: post #144
b9a2cab5 wrote: post #130

Earlier quoted context omitted.

2008 had a lot of variable rate mortgages. That's not the case today. Most people (at least I'd hope) don't use their house as an investment so if their mortgage is still the same payment each month and they can afford it there's no reason they'd default and tank their credit. The losses are purely paper losses.

Why do you hope people don’t use houses as an investment? It’s one of the few investments where: * you can get a huge loan with a tiny interest rate * you can actually enjoy the investment by living in it * everyone around you is doing everything they can to keep house prices up and therefore keep your investment growing I mean seriously, the only other option is dumping all your money in a stock market that you can’…

To be fair, people don't have that much control over home values either.

The biggest reservation I can think of with housing as an investment is that it's singular in terms of economic sector and geography.

With the market people can diversify, although there's no guarantee they will.

Being able to leverage a small down payment for a more valuable asset can also be advantageous or disadvantageous depending on what the value of the asset does.

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