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Home Price to Income Ratio

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Re: Home Price to Income Ratio

#361

Post by moonchrome »

fcsp wrote: post #358
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…

Japan like stagflation ?

Re: Home Price to Income Ratio

#362

Post by travoc »

quantumBerry wrote: post #354
kimburgess wrote: post #345

Earlier quoted context omitted.

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.

There are plenty of trailer parks all over the country that will let you plop your yurt down and even plumb it in to local utilities. You may not enjoy your neighbors very much.

Re: Home Price to Income Ratio

#363

Post by spaetzleesser »

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…

That assumes that people want to stay in debt forever. Decades ago you could quickly pay off your house but this is much harder now.

Replacing affordable price and decent wages with cheap credit makes banks and companies happy but is a very bad deal for the little guy.

Re: Home Price to Income Ratio

#364

Post by jbjbjbjb »

barneysversion wrote: post #360
lotsofpulp wrote: post #311

Earlier quoted context omitted.

> 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 d…

But if you go one move deeper central bankers will factor the high leverage in and therefore won’t increase rates.

Re: Home Price to Income Ratio

#365

Post by nly »

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…

Interest rates are irrelevant when you can only borrow 4.5x income but home prices are at 8-9x

Interest rates are irrelevant when you need 20% down and it will take you a decade to save that up while renting, because of said multiple.

Re: Home Price to Income Ratio

#366

Post by gamegoblin »

mywittyname wrote: post #286
rayiner wrote: post #257

Earlier quoted context omitted.

Segueing from “rich” to “multi-billionaires” is a neat trick by rich professionals to divert attention from themselves. Five years ago, we moved into a 3,000 square foot house in the Annapolis suburbs. We are right on the water so it cost a princely $485,000. But it was easy to get a house in the neighborhood for $300,000 or so, or just 4 times the county’s median income. As a result, the neighborhood has lots of you…

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…

In my mental model, I’ve always considered upper middle class to be people who still do their own grocery shopping, but don’t really look too closely at the prices.

In my experience the kind of people this heuristic selects for is around the same monetary threshold you’ve noted in the low 6 figures.

Re: Home Price to Income Ratio

#367

Post by giantg2 »

resonantjacket5 wrote: post #292
giantg2 wrote: post #244

Earlier quoted context omitted.

Remote work can unbound that, at least within a low percentage situation, like under 10% vacant. Not to mention that some companies are moving out of higher cost areas to lower cost ones (like CA to TX).

Lol, and once you build houses in those new regions, I'd assume those neighbors also block new housing from being built near them? Plus there's still plenty of jobs that cannot be done remotely, I feel generally in the tech world people are highly overestimating the amount of remote jobs proportional to the rest of the population. Why the companies are moving from California to Texas is exactly because Texas' local z…

"The fix really isn't that complicated, it's allow more houses to be built where jobs are demanded."

Or move jobs to areas where housing is cheaper and easier to build. Just allowing more houses to be built doesn't solve it entirely. For example, labor will be more expensive in HCOL areas.

"Why the companies are moving from California to Texas is exactly because Texas' local zoning laws aren't as stringent allowing for cheaper housing."

Not really, although it might be a secondary component. The main part is taxes and regulation.

Re: Home Price to Income Ratio

#368

Post by Rd6n6 »

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…

Regardless of the cause, I wish we could have nice trustworthy graphs that start the y axis at 0

Re: Home Price to Income Ratio

#369

Post by tryptophan »

robterrin wrote: post #295

Came here to upvote anybody who mentioned Henry George and the land value tax. Can't believe I'm the first one in this thread. Read Progress and Poverty, he predicted it all over 100 years ago, and provided the solution. https://oll.libertyfund.org/title/george-progress-and-povert...

He didn't provide a workable solution for how to value land.

I love George as much as anyone, but valuing land independently from what is on it is very tricky. Yes, yes, i know there are a bunch of suggestions for how to do this, but none of them seem to work well easily in practice.

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