Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Home Price to Income Ratio

longtermtrends.net

Post reply on HN
Print view View original

351–360 of 704 posts

Re: Home Price to Income Ratio

#351

Post by whimsicalism »

shados wrote: post #260
brendoelfrendo wrote: post #238

Earlier quoted context omitted.

This is something that Elizabeth Warren and her daughter Amelia covered in their book "The Two Income Trap." I'm aware that recommending a book by a political figure is fraught, but I'm not aware of any economists who took umbrage with the claim, either. They make the observation in chapter 1 that "Even as millions of mothers marched into the workforce, savings declined, and not, as we will show, because families wer…

I've thought about this a lot, though if you google around you'll find people who dispute this claim. Still, it makes sense to me. If you have single income households, and all of a sudden everyone's a double income households, you're not any better off. You'll get inflation, especially in housing. People will point out that stay at home moms weren't THAT pervasive, even decades ago (not as pervasive as us younglins…

> If you have single income households, and all of a sudden everyone's a double income households, you're not any better off. You'll get inflation, especially in housing.

?? The growth in output would offset the increase in dollars bidding for the same goods - ie. more people working would mean more supply and also more $$ bidding for goods.

Seems absurd to say "you're not any better off."

Re: Home Price to Income Ratio

#352

Post by antognini »

shadilay wrote: post #302
mywittyname wrote: post #286

Earlier quoted context omitted.

Well, and most people have fucked up views on what defines "upper middle class". There was a topic on reddit the other night where the most popular posts were saying, without jest, that upper middle class starts at $10 million bucks in liquid savings (and ends around $50MM). That seems to be a typical view on income and wealth in this country: people's opinions are wealth are out or proportion with reality by factors…

I think a bigger factor is that wealth is almost entirely defined by where you live. 120k/yr would be a lot in Iowa but not so much in SF.

Indeed, in San Francisco the low income threshold for a family of four is $117,400 / yr. [1]

[1]: https://sfgov.org/scorecards/safety-net/poverty-san-francisc...

Re: Home Price to Income Ratio

#353

Post by flyinglizard »

munk-a wrote: post #204
flyinglizard wrote: post #164

Earlier quoted context omitted.

I’ve never seen any data showing that housing bubbles are attributed to “the rich”. The housing market is made of tens of millions of individual home owners, not some moguls cornering the market.

It might be helpful to take a deeper look at the housing markets of Toronto and Vancouver - both are urban centers with a lot of employment opportunities and homes owned by regular folks - but they've also both been ravaged by a plethora of investment properties which, in a self-fulfilling manner, are driving demand through the roof thus justifying more investment.

If you asked me what keeps NYC real estate prices up, I'd say "rich people", but the dynamics of distinctive urban centers such as Toronto, London, San Francisco and others don't apply at all on a country level. It's not the same types of assets, buyers or price levels.

So yes Toronto might have been influenced by rich Chinese buying properties, but does that extend to Canada as a whole?

Re: Home Price to Income Ratio

#354

Post by quantumBerry »

kimburgess wrote: post #345
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 ma…

Raw land is cheap. Housing codes are what keep people like myself out of the housing market. If I could just dump a yurt on the land, or a cabin like our forefathers, then housing prices would be a total non issue. But a bunch of selfish NIMBYs are so scared of the poors building a yurt instead of a 2000 sq ft brick house for two people and a dog, they'll never allow it.

Re: Home Price to Income Ratio

#356

Post by ryanSrich »

The most surprising thing here to me is that a home is 5 times annual income. That seems insane to me. That would mean someone making $250k per year would be able to afford a $1.25m home. I don’t see how that’d work, unless that person has almost no other bills and or lives in a state with extremely low income tax. After taxes and other expenses $250k / 12 is not that much. Certainly not enough to buy a $1.25m home.

Re: Home Price to Income Ratio

#357

Post by dragonwriter »

ralph84 wrote: post #178
nradov wrote: post #60

Earlier quoted context omitted.

San Jose limits annual rent increases to 5%. That seems reasonable (unless inflation gets out of control). Tenants aren't immediately forced out of their homes if the market rate jumps 20% in one year. But landlords can still eventually raise rents to market rates spread out over several years. There's no absolute limit on maximum rent.

Inflation may not be out of control yet, but certainly things like insurance, parts and labor for repairs and maintenance, and HOA dues are already increasing more than 5%/year. And property taxes alone are guaranteed to increase 2%/year in California. Not saying we should feel sorry for landlords, but when some parts of a market have price controls and other parts don't, distortions are inevitable.

> And property taxes alone are guaranteed to increase 2%/year in California

No, they aren't. Assuming no increase in property tax rate (which is a good assumption, since your local taxing jurisdiction almost certainly already charges the maximum nominal rate of 1% allowed under Prop. 13), your property taxes will increase only by the amount your assessed value for taxation increases, which is capped to the lower of 2% or the actual annual (trailing) rate of inflation.

For 2021/2022 the actual cap is 1.036%, based on the actual California CPI for October 2019 through October 2020.

Re: Home Price to Income Ratio

#358

Post by fcsp »

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…

This is something that has been keeping me wondering for years. Since the financial crisis the European Central Bank has basically fixed base rate at negative (since 2012), leaving the market flooded with desperate investment money (due to all old school investment options becoming a negative) Now also of course since it's "cheap" the real estate prices have almost doubled in that timespan, having previously hovered around the same mark for the ten years before that.

What I wonder is - is there any way out of this curse of growth with all the money spent into those inflated prices at this point that does not mean complete economic collapse?

Re: Home Price to Income Ratio

#359

Post by dragonwriter »

laverya wrote: post #91
nradov wrote: post #60

Earlier quoted context omitted.

San Jose limits annual rent increases to 5%. That seems reasonable (unless inflation gets out of control). Tenants aren't immediately forced out of their homes if the market rate jumps 20% in one year. But landlords can still eventually raise rents to market rates spread out over several years. There's no absolute limit on maximum rent.

If it was inflation + 5%, I'd be fine with that - but a flat 5% limit only works so long as inflation stays low.

Technically, it only works if the (notional, I’m not sure this is an actual tracked category) PPI for rental housing is low, general (CPI) inflation may loosely correlate with that, but its not directly relevant.

Re: Home Price to Income Ratio

#360

Post by barneysversion »

lotsofpulp wrote: post #311
throwdecro wrote: post #304

Earlier quoted context omitted.

> Homebuyers will make purchasing decision based on their monthly mortgage payments, instead of the home price. Which is crazy, right? People max out their "borrowing power" at low interest rates and take on huge loans, without considering that the declining interest rates that fueled past appreciation don't have much room left to move down, and that they'll be underwater on that huge loan if interest rates go up* an…

> Which is crazy, right? No, because this is not accurate: > Homebuyers will make purchasing decision based on their monthly mortgage payments, instead of the home price. Homebuyers make their purchasing decisions based on the options available to them. They are not paying $x because they can afford $x+1, they are paying $x because that is how much they are willing to spend on that specific house in that specific loc…

> If you are projecting a receding economy and/or decreased demand for the land you are buying, then it does not make sense to pay as much as you can afford...

I think this is the above commenter's concern; homebuyers are not adequately pricing the risk of rising interest rates. If interest rates go up, demand falls and you're left in a highly leveraged position that amplifies your losses. Monthly mortgage payments don't make the leverage apparent. Sticker price does.

Post reply on HN