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Home Price to Income Ratio

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Re: Home Price to Income Ratio

#341

Post by tomtheelder »

Doches wrote: post #138
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.

The solution, like it's been for pretty much all of American history, is to _move_. We're a migrant people; when opportunity calls or the cost of living where you are gets too high, we go west in search of greener, cheaper, less heavily-zoned pastures. Seems fitting that in the 21st century we flip that on its head. Cost of living in SF or Seattle got you down? Go East, young man! Head down to Texas or east to Ohio,…

This is emphatically not the solution, nor is it a viable option for the vast majority of people. Uprooting oneself and losing your personal and professional networks is simply not realistic for most who aren't already very comfortable. Not to mention the damage that does to the communities that people migrate into.

The solution is, and always has been, to increase supply, specifically in the form of increased density.

Re: Home Price to Income Ratio

#342

Post by somehnacct3757 »

game_the0ry wrote: post #284

A more relevant metric to consider - monthly mortgage payment to monthly income ratio. Average interest rates in 2007 were 6.34% vs ~2.80% today. [1] * 6.34% / $2,000 monthly payment / 20% down (~$65k) >> $328,319 price of home * 2.80% / $2,000 monthly payment / 20% down (~$98k) >> $489,794 price of home Homebuyers will make purchasing decision based on their monthly mortgage payments, instead of the home price. When…

If you focus on mortgage payment instead of home price, you also need to take mortgage term length into account for a generational study. 30 year mortgages only came about in the 1950's. Before then the choices were typically 15 and 20 years.

Re: Home Price to Income Ratio

#343

Post by MeinBlutIstBlau »

mmaunder wrote: post #334

IMO we are in an inflationary cycle that is being underreported. Everything is becoming more expensive including you. It’s just that housing is becoming expensive faster than you are. The US has a strong incentive to inflate their way out of debt post Covid. But the optics are catastrophic if they do it overtly. So they’ll keep reporting it low as long as possible. Look around you for reality. If I’m right, you’ll wa…

It still boggles my mind. I started working in 2009 when 7.25 became the defacto minimum wage. But since then, I've noticed that the cost of everything has almost doubled faster in just the past 2 years than it did in the preceding 10. It's almost as if limitless government stimulus and inflation is bad for the economy...

Re: Home Price to Income Ratio

#344

Post by whimsicalism »

hcurtiss wrote: post #290
blake1 wrote: post #265

Earlier quoted context omitted.

Do you mean fiscal policy? You absolutely can infuse trillions of dollars into the economy without causing inflation after the economy takes a $4T hit from a pandemic; the government spending will be what prevents disastrous deflation. People worry about inflation, but forget how awful deflation is. (And on a side-rant, it’s really bizarre how the hyperinflation of Weimar Germany is cited as enabling the rise of the…

I've never understood how deflation could ever be a concern in countries that print their own money. Can you not just print your way out of it every time?

Political constraints around central bank policy.

Or really strong deflationary market expectations, for whatever reason.

Re: Home Price to Income Ratio

#345

Post by kimburgess »

game_the0ry wrote: post #284

A more relevant metric to consider - monthly mortgage payment to monthly income ratio. Average interest rates in 2007 were 6.34% vs ~2.80% today. [1] * 6.34% / $2,000 monthly payment / 20% down (~$65k) >> $328,319 price of home * 2.80% / $2,000 monthly payment / 20% down (~$98k) >> $489,794 price of home Homebuyers will make purchasing decision based on their monthly mortgage payments, instead of the home price. When…

While this is accurate, a more concerning secondary impact is the increased deposit. In Australia specifically, house prices are soaring. The most in-demand markets increases are currently ~$1200 per day [1]. For many people their home is a more 'productive' than they are, greatly outpacing their own earning potential. Those who already have wealth can buy in, or continue to buy in and leverage themselves into the market as it skyrockets. Anyone not in this position is left to watch as the ladder disappears into the clouds.

Shelter has changed from a base need to a commodity that's traded in a rigged system and the societal implications of this are frankly terrifying.

[1] https://www.abc.net.au/news/2021-08-26/fact-check-are-house-...

Re: Home Price to Income Ratio

#346

Post by whimsicalism »

willcipriano wrote: post #160
the_gastropod wrote: post #143

Earlier quoted context omitted.

Right, vs REAL inflation, which is measured by whatever I think happens to be too expensive right now.

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.

Velocity effects are extremely important.

https://fred.stlouisfed.org/series/M2V

Re: Home Price to Income Ratio

#347

Post by jackcosgrove »

somethoughts wrote: post #249
exporectomy wrote: post #162

Earlier quoted context omitted.

It's fun to blame the super rich but I'd say it's fundamentally due to a combination of population shift from rural to urban areas https://ourworldindata.org/grapher/urban-and-rural-populatio... and normal homeowners stopping densification out of fear of reducing the value of their own home or just not wanting the riff-raff living near them. These people are really the ones doing a directly harmful thing for pure sel…

Agree! It's also the densification of urban areas. Where once each occupant had a private office, now 5-6 SW engineers occupy the same office space footprint. That has implications for already dense urban office and associated housing needs.

The long-term trend in urban housing is diffusion, not densification. One hundred years ago a family of five lived in an apartment now occupied by a couple.

Re: Home Price to Income Ratio

#348

Post by whimsicalism »

marcusverus wrote: post #325
itake wrote: post #100

Earlier quoted context omitted.

I suspect that dual income families could be a contributing factor in increased home prices of single-family homes. Even 'worse' is dual income, no kid families that are delaying and skipping child costs. Thus with "double" the cash flow and shared costs, couples afford higher prices at a lower cost.

This seems unlikely given that the share of dual income households has been flat for 30 years. https://www.pewresearch.org/ft_dual-income-households-1960-2...

Seems dumb to be conditioning on married couples. My parents were unmarried dual income earners. I likely will end up being the same.

Given that long-term unmarried couples are both increasing in number and (I believe) more likely to be dual income, this tells the opposite picture.

Re: Home Price to Income Ratio

#349

Post by [deleted] »

ItsMonkk wrote: post #242
throw0101a wrote: post #223

Earlier quoted context omitted.

Lots of money supply in Japan, and are their asset prices going up? * https://fred.stlouisfed.org/series/MYAGM2JPM189S Their central rate has been Stocks and equities in the US have been going up for 10+ and the infusion of "trillions of extra dollars" wasn't present for all of those years. Canada has had increasing home prices, barely slowing down in 2008, and it hasn't had QE.

Lyn covers this topic fairly well in her article on Japan[0]. In short, private debt in Japan has shrunk by 300 trillion yen over the past 25 years. The growth of the money supply is all coming from public debt. It matters who gets the new money and what they spend it on. [0]: https://www.lynalden.com/economic-japanification/

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