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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

#231

Post by frumper »

xenadu02 wrote: post #169
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 ti…

In your made up scenario there hasn't been a pop so of course it's been better to buy asap. If you chose 2006-2011 as your 5 years there absolutely is a time when it was a good idea to wait.

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

#232

Post by coryrc »

100-xyz wrote: post #189
rrrrrrrrrrrryan wrote: post #151

Earlier quoted context omitted.

This logic doesn't hold in all housing markets. In California, people generally buy the absolute most house they can possibly afford. Houses are extremely expensive and people don't want to live in shacks, so they stretch their budget as far as they can. Home prices in these markets are extremely sensitive to changes in interest rates, as you've described. However in other markets, interest rates can wiggle up and do…

Sincere question - can you point me to such markets where interest rates can wiggle up and down without having as dramatic an effect on prices?

I can't, but as prices go lower more people can just save money rather than borrow to purchase. So an exponential curve, the higher the rate the smaller the effect on asset price.

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

#233

Post by gruez »

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.

>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.

The math does not check out. 1.03^16 = 1.6, not 2 like you'd expect if it was "double".

Moreover, inflation only necessitates that the money supply grow infinitely, not economic activity and/or resources. If we doubled the bank balance of everyone overnight, and the price of everything doubled, that's not really "growth" in any meaningful sense.

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

#234

Post by betwixthewires »

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.

That's ridiculous.

While I agree with you that these problems are caused by using houses as a speculative vehicle, "only the initial sale should be profitable" would cause way way worse problems than this. This is a very ill thought out proposal, hammers destroy everything but nails.

The actual solutions to this problem are things like higher taxes on second properties, high capital gains tax on selling more than X homes in your lifetime (similar to the lifetime gift tax cap) or on "short term" speculative buys, reduction in ridiculous code and regulations on what sort of shelters people can live in/build for themselves, and I'm sure others I haven't thought of or heard of.

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

#235

Post by ineedasername »

ineedasername wrote: post #47
skywal_l wrote: post #3

So is this finally the inflation that we were promised for so long? I guess all that money created during covid had to go somewhere. Too bad it's not going into education or healthcare...

A few thousand of covid money isn't going to buy you a a house. Low interest rates have a lot more to do with it than covid money: 1% to 2% lower interest rates mean buyers can afford to pay more for a house, they're in demand, and supply is low relative to demand.

For example, compare to the ore-bible burst in 2007, a $300,000 loan with prevailing interest rates at the time would have a roughly 40% or 50% more in monthly payment in 2007 than right now.

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

#236

Post by jfengel »

bluGill wrote: post #197
jfengel wrote: post #165

Earlier quoted context omitted.

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.

In your first paragraph, that's the point that the OP was making: you're assuming that we won't reach a point of diminishing returns. That's not guaranteed.

We might be able to guarantee infinite creativity... but will you be able to invest in it? If you're not the one writing the game/movie/novel, why would the artist permit you to invest and reap the benefit of their creativity?

Until recently, you could gain that power by owning key industries: the cinemas, the advertising agencies, etc. But those middle men are increasingly squeezed out; what would you offer that they can't get elsewhere? They'd cut your marginal return to the bone by playing you off against other people who have money to invest but nothing of their own to invest in.

In the best case, the resources would be distributed well enough that you could write your own novel, or whatever creative project, and not care about who will pay for it. In the worst case, you could find that all of the money ends up in the hands of a very few, who would out-compete you for any investment opportunity that arose.

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

#237

Post by rebelos »

chasebank wrote: post #97
PragmaticPulp wrote: post #93

Earlier quoted context omitted.

Right, but most buyers finance with a mortgage. The affordability is determined by monthly payments, which are a function of home price and interest rates. If home prices are up but interest rates are way, way down (which is currently the case) it can be possible that houses are still more affordable. You have to consider home costs as down payment + monthly mortgage payment (+ taxes if you're getting specific) to un…

Yes, I understand. I'm saying a $500k house in 2007 is now $1M in many markets.

No, you don't understand. A combination of normal housing price inflation and lower mortgage rates can easily explain that result.

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

#238

Post by SilasX »

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% (…

Color me un-reassured. It never ends well when you have a massive market driven by people who only think in terms of monthly payment.

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

#239

Post by SilasX »

mdorazio wrote: post #92
fridif wrote: post #69

Earlier quoted context omitted.

No, I disagree. Law of big numbers. Houses in Seattle area are mortgaging for 1.2M. Property taxes are low. Houses in NY are mortgaging for $500,000. Property taxes and interest rates are higher. You shouldn't apply 8% interest rate from 2000 and think that it somehow is the correct rate when prices are 5x higher.

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.

>Most people don’t buy a house based on the sale price, they buy based on what their monthly payment will be.

... which is itself an antipattern, just as it is for cars.

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

#240

Post by SomewhatLikely »

The analysis of value by this researcher seems to be entirely dependent on future price. But houses have value even if the price goes down: a place to live, space to own more things, for kids to play, stability where no one can kick you out etc. Someone buying a house during a "bubble" can be deciding that they value these intangibles more than future profit of selling the house later.
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