Home Price to Income Ratio
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Home Price to Income Ratio
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Re: Home Price to Income Ratio
#2A more accurate measure of affordability change might be home payment to income ratio:
https://www.corelogic.com/intelligence/comparing-two-home-pr...
Re: Home Price to Income Ratio
#3I think there's a pretty critical piece of analysis missing here: inflation. An alternative explanation might be that housing prices are being driven up by inflation, and wages haven't caught up yet. There are two ways to lower the home value/income ratio:
1. Decrease housing prices 2. Increase wages
We haven't seen meaningful wage increases for a long time now, so perhaps it is time. Maybe this is just a symptom of wages not tracking with inflation, and the solution is to pay people more.
Re: Home Price to Income Ratio
#4I think there's a pretty critical piece of analysis missing here: inflation. An alternative explanation might be that housing prices are being driven up by inflation, and wages haven't caught up yet. There are two ways to lower the home value/income ratio: 1. Decrease housing prices 2. Increase wages We haven't seen meaningful wage increases for a long time now, so perhaps it is time. Maybe this is just a symptom of…
Add our current low interest rates to the mix as well and the picture changes dramatically
Re: Home Price to Income Ratio
#5Some very clever and influential people better start finding and implementing real solutions to housing prices right now. If they don't, expect overwhelming support from Millennials for massive expansions to public housing and rent control, if not even more draconian measures.
Re: Home Price to Income Ratio
#6I think there's a pretty critical piece of analysis missing here: inflation. An alternative explanation might be that housing prices are being driven up by inflation, and wages haven't caught up yet. There are two ways to lower the home value/income ratio: 1. Decrease housing prices 2. Increase wages We haven't seen meaningful wage increases for a long time now, so perhaps it is time. Maybe this is just a symptom of…
3. raise interest rates
Re: Home Price to Income Ratio
#7Copying a link from a mysteriously dead comment below:
https://www.corelogic.com/intelligence/comparing-two-home-pr...
You have to take interest rates into account. The amount you pay, monthly, for a mortgage of the same size is very different at different interest levels.
What people care about is their monthly mortgage payment - that's what makes a home affordable or not.
(Which isn't to discount that downpayments are a percentage of home cost, and that's pricing people out of being able to buy anything at all, even something they can easily make repayments on.)
Re: Home Price to Income Ratio
#8One thing this ignores is interest rates and availability of credit.
The biggest determinant of homes people buy is not the total price, but rather how much cash do they need for down payment, and what will the monthly payment be.
With low interest rates and increased credit availability ( you don’t need 20% down payment in many cases now), people on the same income are actually able to buy a more expensive home.
I think looking at monthly mortgage payments to income ratio over the long term might actually be more informative.
Re: Home Price to Income Ratio
#9I've heard 3x income as a rule of thumb for how much house one can afford, but it looks like that's never been widely followed. It also doesn't make a whole heck of a lot of sense as interest rates have varied so widely - a better rule of thumb might be a ratio between the total amount of payments over the life of a mortgage and one's income.
Re: Home Price to Income Ratio
#10Some very clever and influential people better start finding and implementing real solutions to housing prices right now. If they don't, expect overwhelming support from Millennials for massive expansions to public housing and rent control, if not even more draconian measures.
Why do you consider the 2 examples you gave “draconian”?