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Home Price to Income Ratio

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Re: Home Price to Income Ratio

#121

Post by helen___keller »

gp wrote: post #32

While it doesn't directly affect the average person's purchasing power, the same dramatic increase is happening in other asset values as well. [0] One interesting thing to note is that 2019 EV / EBITDA values were already "high," before the coronavirus was spreading. I suspect these two phenomena have different causes overall, but low interest rates are a common factor that cause all asset prices to increase. On the…

> On the housing side, I suspect consumers purchase the house that their cashflow can comfortably support, not necessarily the one where they believe it is correctly valued, because the assumption that house values only increase means purchasing a well constructed house is almost never a "bad deal."

I'd agree with this. I think housing in my area is wildly overpriced, but I still bought a 100 year old condo for a solid million. Compared to renting, I got double the space, plus parking, plus a private garden, plus an outdoor patio, and my monthly costs went up about 25%.

Re: Home Price to Income Ratio

#122

Post by lordnacho »

mrfusion wrote: post #19
ido wrote: post #10

Earlier quoted context omitted.

Why do you consider the 2 examples you gave “draconian”?

Rent control really doesn’t make sense. If we could make things cheaper by passing a law we’d do it for everything. Rent control won’t work for the same reason a price control for food or cars won’t work. https://freakonomics.com/podcast/rent-control/

As described by Freakonomics and general economic education, this is more or less right.

However keep in mind there's two kinds of rent. You can rent a house, or you can rent money and buy a house.

Historically and across countries there's been some willingness to restrict mortgage LTVs and interest-to-income ratios. At least in some European countries the interest ratio depends on a fixed interest rate (eg 5%) rather than the current interest rate.

We can create and destroy money more easily than we can create and destroy homes, maybe that's a worthwhile lever to try.

Re: Home Price to Income Ratio

#123

Post by giantg2 »

tharne wrote: post #108
loeg wrote: post #103

Earlier quoted context omitted.

The solution is to build more housing. California has historically been terrible about that but SB9 and 10 are significant steps in the right direction.

It consistently shocks me how rarely this is brought up as a solution. Price of something too high? Increase the supply.

Increasing supply can help some. But when you do that, you increase demand for material and labor, which can negate some of the benefit depending on what markets we're looking at.

The real problem isn't supply at all, it's the distribution of supply and the choices of people to live there.

Re: Home Price to Income Ratio

#124

Post by jandrese »

How much of this is a result of our "don't tax the rich" policies that created a staggering amount of wealth at the top that has nowhere else to go? So many ultra rich investors are looking for something, anything, to invest in. Plus there is the feedback loop of massive growth you get as the bubble inflates.

Is this a direct result of our fiscal policy? Have we destabilize the economy in order to create the richest muilti-billionaires?

Re: Home Price to Income Ratio

#125

Post by markus_zhang »

the_gastropod wrote: post #120
dpweb wrote: post #118

Earlier quoted context omitted.

When it's all assets going up, it's not the assets cost more, it's the dollar is worth less. So for all the help and assistance. Housing is LESS affordable than ever before. You cannot infuse trillions of extra dollars into the economy without inflation. There's no magic pill - there must be consequences.

I know this is a common belief in the hilarious world of crypto enthusiasts. But, y'know, we measure inflation, and what you're suggesting is just flat out not true. https://tradingeconomics.com/united-states/inflation-cpi

It's more like inflation of asset prices.

Re: Home Price to Income Ratio

#126

Post by cestith »

nradov wrote: post #82
toomuchtodo wrote: post #80

Earlier quoted context omitted.

US pharma spends an outsized amount on sales and marketing, expenses that could be eliminated if public funding was spent directly on R&D. Europeans aren’t free riding; they’re paying a reasonable rate for these goods while Americans are shouldered with extraction of revenue for pharma profits and those inefficient (and arguably unnecessary) sales and marketing expenses. Only two countries in the world permit marketi…

There is already a lot of public funding for basic biomedical research. Actual drug development is another thing entirely. If this were publicly funded then funding would be allocated based on political priorities rather than realistic scientific and economic assessments. That misallocation of resources would overwhelm any savings from reducing sales and marketing expenses. But in general the traditional drug develop…

A ban on marketing prescription-only drugs directly to the public existed in the US until recent decades. The amount spent on marketing skyrocketed when that ban was removed.

Re: Home Price to Income Ratio

#127

Post by fake-news »

jandrese wrote: post #124

How much of this is a result of our "don't tax the rich" policies that created a staggering amount of wealth at the top that has nowhere else to go? So many ultra rich investors are looking for something, anything, to invest in. Plus there is the feedback loop of massive growth you get as the bubble inflates. Is this a direct result of our fiscal policy? Have we destabilize the economy in order to create the richest…

[flagged]

Re: Home Price to Income Ratio

#128

Post by greesil »

dpweb wrote: post #118
gp wrote: post #32

While it doesn't directly affect the average person's purchasing power, the same dramatic increase is happening in other asset values as well. [0] One interesting thing to note is that 2019 EV / EBITDA values were already "high," before the coronavirus was spreading. I suspect these two phenomena have different causes overall, but low interest rates are a common factor that cause all asset prices to increase. On the…

When it's all assets going up, it's not the assets cost more, it's the dollar is worth less. So for all the help and assistance. Housing is LESS affordable than ever before. You cannot infuse trillions of extra dollars into the economy without inflation. There's no magic pill - there must be consequences.

You can if you're in a liquidity trap. Question is, are we in one now?

Re: Home Price to Income Ratio

#129

Post by toxik »

cryptoz wrote: post #117
tharne wrote: post #108

Earlier quoted context omitted.

It consistently shocks me how rarely this is brought up as a solution. Price of something too high? Increase the supply.

This is brought up all the time. There is frequently huge opposition from locals anywhere regarding increasing housing supply.

And many times rightly so, living next door to a long construction project is a mistake I will only make once in my life. Utter insanity to be woken up by literal bombs going off in the bedrock.

Re: Home Price to Income Ratio

#130

Post by the_gastropod »

markus_zhang wrote: post #125
the_gastropod wrote: post #120

Earlier quoted context omitted.

I know this is a common belief in the hilarious world of crypto enthusiasts. But, y'know, we measure inflation, and what you're suggesting is just flat out not true. https://tradingeconomics.com/united-states/inflation-cpi

It's more like inflation of asset prices.

I take much less issue with that assertion. That high housing prices are because the dollar is worth less is what I find rather absurd. Inflation is measurable. And you have to embrace some real quacky conspiratorial thinking to go down the rabbit hole that dpweb seems to have gone down.
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