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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

#201

Post by 34679 »

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% (…

A big part of the reason the housing market collapsed in 2008 was adjustable rate mortgages. People took on loans at affordable rates and then when things started going south for the banks, the rates were ratcheted up on the high risk buyers who had been getting easy credit.

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

#202

Post by aidenn0 »

dsp wrote: post #119
sputknick wrote: post #103

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/

Priced in gold, real-estate looks quite affordable; mid 80s levels.

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

#203

Post by imtringued »

nicoffeine wrote: post #157
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…

Modern capitalism depends on fiat currency and investment from those with capital. Currency loses value over time to inflation, so investors are always trying to get better returns against a baseline. Even at 3% per year, consumption has to double every 16 years if investors only want to break even. So, it's not "nice" if the economy grows, it's an absolute requirement to keep investors interested.

It isn't. People keep credit (aka bank money) in their bank accounts even at negative nominal interest rates. The problem is the insistence on positive interest because of moral attachments to the idea of frugality.

Central banks target positive inflation because of the inability to cut interest rates below zero.

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

#204

Post by aidenn0 »

dsp wrote: post #149
after_care wrote: post #42

Earlier quoted context omitted.

How will future mortgage rates generate a cascade of foreclosures for people with existing mortgages?

Adjustable rate mortgages and people who need to move who are now underwater. I couldn’t easily find nationwide stats on ARM issuance, but a quarter of First Republic Bank’s loans are adjustable rate. https://ir.firstrepublic.com/static-files/1a464a0b-9396-4bd4...

Who is buying ARMs? The fixed rate is near all-time lows and is lower than 5/1 ARMs

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

#205

Post by alistairSH »

PragmaticPulp wrote: post #81
MontyCarloHall wrote: post #74

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…

no tear-down rebuilds, only new houses where previous houses didn't exist

I assume "tear down 1 unit, build 5-10 units" is OK? Otherwise, what you're suggesting just leads to more suburban sprawl. There isn't room in SF, NYC, etc for infill development (from vacant lots) at the scale necessary to make a dent in housing prices.

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

#206

Post by 34679 »

imtringued wrote: post #186
throwdecro wrote: post #121

Earlier quoted context omitted.

Affordability is only part of the picture though. A higher value loan means higher risk as well. If interest rates rise, or something else happens that reduces the value of the property, then that $500,000 mortgage might be against a house worth less than $500,000. At that point people have to start playing chicken with the banks again, trying to mitigate the losses with strategic defaults.

Ok, I will bite. What will cause interest rates to rise? Do you expect a war that destroys Taiwan or something? (a permanent semiconductor shortage would have a massive impact on modern life). Increasing trust, stability and keeping inflation low will keep interest rates low forever. Japan had decades of deflation.

>What will cause interest rates to rise?

Banks deciding they want to own more real property.

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

#208

Post by karakot »

b9a2cab5 wrote: post #130
throwdecro wrote: post #121

Earlier quoted context omitted.

Affordability is only part of the picture though. A higher value loan means higher risk as well. If interest rates rise, or something else happens that reduces the value of the property, then that $500,000 mortgage might be against a house worth less than $500,000. At that point people have to start playing chicken with the banks again, trying to mitigate the losses with strategic defaults.

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.

it's the other way :D, since i bought the house in 2015, my gains are paper gains (~200%), but my property taxes are real loses, since they've grown almost twice as well.

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

#209

Post by ausbah »

amrcnimgrnt wrote: post #61
c7DJTLrn wrote: post #55

It is atrocious that the law allows using shelter as an investment. Only for the initial sale of the property should it be permitted to make profit. After that, properties should only be sold at cost between buyers.

Why?

i am sympathetic to this viewpoint because the incentives for homeowners are mostly orthogonal to that of increasing home ownership for all. why would a homeowner support increasing the supply of housing when it drives down the price of their home?

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

#210

Post by alistairSH »

OrvalWintermute wrote: post #154
strangattractor wrote: post #32

I keep hearing about a housing shortage. How we are not building fast enough. I personally know several people that own more than one home and AirBnB it when not in use. Also hedge funds are now targeting real estate. I can't help but wonder if this is partially an AirBnB and hedge fund created situation. Of course these are the same people that have access to all this free money. The average Joe still has to pay int…

There is a specific locality to housing that is key to think about. This report from Brookings [1] titled "The Washington, DC region has built too much housing in the wrong places", lays out a strong case for what is happening in my general geography. All politics aside, this is very accurate anecdotally as all the major housing developments I know of were fairly distant from work. We have housing going up, but not i…

So true. That fact that people consider it normal to commute from Fredericksburg, VA to Tysons/Ashburn/Reston is bonkers.

Fredburg to DC isn't quite so bad - at least there's commuter rail and slug lines. But exurb-to-suburb commuting should never be something that's encouraged.

And FWIW, we downsized to a TH to be closer to work. Couldn't be happier. I now walk to work; my wife cycles. We're in walking distance to all local schools. And a short bike ride to dining and shopping. I don't know why more people don't do the same. The house cost was in the same ballpark as the single-family we owned previously.

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