Are we close to another housing bubble like in 2008?
We're in an everything bubble that's about to pop. Evergrande is about to take it all down.
Are you shorting any stocks / indexes?
Home Price to Income Ratio
211–220 of 704 posts
Re: Home Price to Income Ratio
#212Earlier quoted context omitted.
Because it doesn't actually work. It helps a tiny little bit, in the places that are actually somewhat constrained (like SF/BayArea specifically). But it's not any kind of significant fix. Housing is an investment asset for stock market folks, it doesn't follow a Econ-101 understanding of "supply" and "demand" in any meaningful way. The Midwest and the South are both way ahead of California on the whole "just build m…
Are you saying that if the housing market has 10 million homes and 7 million people live there, prices will continue to appreciate to stratospheric levels because someone will magically appear to buy the excess 3 million properties and leave them without tenants? That's what it sounds like to me.
there will never be a market with 1/3 of homes empty and surplus - where do the builders get the capital to pay for land and construction?
Re: Home Price to Income Ratio
#213While 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 sol…
Is there a difference in the property tax there for multifamily vs single family dwellings? Around here people pay almost double their mortgage in property taxes for a single family dwelling, but landlords have managed to get much lower taxes for multifamily dwellings.
Re: Home Price to Income Ratio
#214Earlier quoted context omitted.
Agreed, but the fundamental problem is that inventory is so low. Super low inventory and vacancy rates cause far more problems in addition to prices being set by a wealthier percentile.
Ironically the inventory would have been higher if more rich people invested in real estate projects, instead of stocks and bonds.
I don't think the bottleneck for new housing is investment capital, it's mostly about getting permitted to build, and also getting enough labor. There's a fairly big shortage in the trades, as the boom-bust-cycle has forced more experienced people out, and there hasn't been many new people getting trained.
Also, a lot of the opportunity for large scale projects is gone; building a large tract of homes in the Bay Area means building super-exurban in places like Tracy. Projects like the Vallco mall replacement in Cupertino take a decade+, and what ends up getting permitted will not usually look anything like the initial plans, or what's technically allowed by law. (This is changing slightly in California in that by adding enough below-market-rate deed restricted units, you can build according to code and zoning without greedy neighbors vetoing the project. )
Re: Home Price to Income Ratio
#215Earlier quoted context omitted.
> 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 sol…
Is there a difference in the property tax there for multifamily vs single family dwellings? Around here people pay almost double their mortgage in property taxes for a single family dwelling, but landlords have managed to get much lower taxes for multifamily dwellings.
In my municipality I'm not aware of a difference between multifamily vs single family, but there aren't many single families anyways. Property tax is absurdly low, with a very nice deduction for owner-occupied units. My effective tax rate is around 0.3%
(Municipality: Cambridge, MA)
Re: Home Price to Income Ratio
#216Copying 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…
Does this mean that when interest rates go up, home values may drop, leaving people underwater?
Absolutely.
Although it's more likely that they'll just remain stagnant, which would be just fine.
Re: Home Price to Income Ratio
#217Earlier quoted context omitted.
> For 99% of you that means living far away from your preferred locale among people you probably loath. Parent comment is vitriolic but not actually wrong. Myself, I take great comfort in the idea of huge swaths of liberal, well-educated millennials and xennials migrating out of coastal cities and into small towns across the South and Midwest. Can you work remotely? Want to own your own home on a multi-acre lot for $…
Hey, you can leave US you know. Europe will probably gladly have you.
Please don't. The housing market is fucked in EU urban areas now too. Without an inheritance you can't afford to buy anything decent around a developed city with jobs even on a tech salary.
As selfish as this may sound, the last thing we need is more foreign competition on the housing market with bigger pockets.
It would be fair that if people from the US want to buy property here with their foreign megabucks, we should also get unrestricted visa-free access to the US labor market. Tit for tat. Otherwise it's just unfair to Europeans to be outspent out of their own housing market.
Re: Home Price to Income Ratio
#218Earlier quoted context omitted.
"better start finding and implementing real solutions to housing prices right now" They can't. Providing supply will suffer the wrath of BANANA/CAVE/NIMBY anywhere you dream of living. Constraining demand will either get you voted out of office or devastate your political network or both, depending on which policy you attempt. You're competing with a whole planet full of people that want to live here and have more me…
> For 99% of you that means living far away from your preferred locale among people you probably loath. Parent comment is vitriolic but not actually wrong. Myself, I take great comfort in the idea of huge swaths of liberal, well-educated millennials and xennials migrating out of coastal cities and into small towns across the South and Midwest. Can you work remotely? Want to own your own home on a multi-acre lot for $…
OK but this is not actually happening. Young, well-educated people with high incomes are the only types of people who continue to flow into California. They are driving out poorer and generally less-well-educated people, because of course that is how it will work in a competitive housing price market.
See this report for details: https://lao.ca.gov/LAOEconTax/Article/Detail/675
Re: Home Price to Income Ratio
#219Earlier quoted context omitted.
Why do you consider the 2 examples you gave “draconian”?
Econ 101 says that rent control (in effect a price ceiling) just results in scarcity (people are unable to get ANY housing), rather than actually reducing the cost of housing.
I'm not sure why you're being downvoted. This is the theoretical prediction based on simple microeconomics. By example, I believe NY rent controls were ineffective to the point where rents outside of controlled areas went higher than they otherwise would have and within rent control areas there was (and is) scarcity of housing.
Re: Home Price to Income Ratio
#220Earlier quoted context omitted.
I mostly just look at the money supply. Print 10% more money, that's 10% inflation. It may not be uniform throughout the economy, or take effect immediately but that's 10% more money chasing the same assets. It's all has to go somewhere.
What is the actual money supply though - if I earn 1k and put it in a bank and it gets loaned out to someone else is there now 2k in circulation since my money is insured? Only a teensy tiny portion of "value" in the economy is actually on printed bills - but even the abstract value we can track won't tell the whole story.
One note, is that bank loans are not taken from deposits anymore, that story we were told as children does not reflect modern banking. There's not even "fractional reserve" so much anymore, just "stress tests." So banks really do own a printing press when it comes to money, which is sometime called horizontal money, as opposed to the "vertical" money that comes from a monetary sovereign.