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

371–380 of 704 posts

Re: Home Price to Income Ratio

#371

Post by heavyset_go »

jbay808 wrote: post #333
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…

This is a way bigger problem in Canada, where fixed term mortgages are unavailable (and where price to income ratio is even more absurd than in the US).

If anyone in the US thinks "housing costs can't keep rising, the market will correct itself", then just look at Canada. The average sale price of a home in the US is roughly $375k. In Canada, it is about $700k, and property values continue to rise.

Re: Home Price to Income Ratio

#372

Post by llbeansandrice »

nly wrote: post #365
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.

Why do people think you need 20% down? You don't need 20% down on a mortgage. There are first-time home buyer loans where you can put down as little as 0% and for conventional loans you just have to buy personal mortgage insurance if you're below 20% down.

This is such a weird home buying myth and I don't understand how it sticks around.

Re: Home Price to Income Ratio

#373

Post by resonantjacket5 »

giantg2 wrote: post #367
resonantjacket5 wrote: post #292

Earlier quoted context omitted.

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 f…

> Just allowing more houses to be built doesn't solve it entirely. For example, labor will be more expensive in HCOL areas.

Labor increased cost is really nothing compared to the zoning barring new construction. If labor was truly the barrier then when upzoned no construction would take place. Additionally a large reason why labor is so expensive is from the constrained housing in the first place -- again stemming from the zoning.

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

Zoning is regulation.

Re: Home Price to Income Ratio

#374

Post by elihu »

brendoelfrendo wrote: post #238
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 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…

> Housing is a great way to establish a level of security for your family and kids; but there's a finite number of houses with proximity to good schools, jobs, and other necessary resources, and so families needed to dedicate larger and larger portions of their income to compete against other dual-income families that were bringing new money to the housing market.

One way out of that is simply to increase the supply of desirable neighborhoods. The number of those are finite, but can be increased. The hard part is how to do it?

Sometimes I like to imagine there existing something like Kickstarter but for cities. You get a few thousand people that want to build a house but can't afford land, a handful of employers, and maybe a University that wants to establish a new branch and they pool their money and buy a couple square miles in the middle of nowhere. They divide it into lots and start building. Property values rise, and as that happens leftover lots get sold to finance construction of infrastructure, schools, fire departments, and so on.

Re: Home Price to Income Ratio

#375

Post by game_the0ry »

travoc wrote: post #362
quantumBerry wrote: post #354

Earlier quoted context omitted.

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.

Increasingly those trailer parks are being bought by private equity and institutional investors.

Re: Home Price to Income Ratio

#376

Post by Macha »

llbeansandrice wrote: post #372
nly wrote: post #365

Earlier quoted context omitted.

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.

Why do people think you need 20% down? You don't need 20% down on a mortgage. There are first-time home buyer loans where you can put down as little as 0% and for conventional loans you just have to buy personal mortgage insurance if you're below 20% down. This is such a weird home buying myth and I don't understand how it sticks around.

For some countries, there are legal requirements about maximum LTV. e.g. in Ireland the limit is 90% for a first time buyer of a personal home, and 70% otherwise.

Re: Home Price to Income Ratio

#377

Post by titovodka »

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...

I discovered Henry George in one of the previous threads on HN. Read the book review that was posted and felt like a light bulb went on in my head.

Over the next 2 months, i awkwardly would try to mention it in conversation to everybody haha. Most people patient enough to listen agree but see that there’s no hope of change because everybody’s lifesavings/nest are tied down to the value of their homes already.

One thing it made me realize is I should probably look into buying land more.

Re: Home Price to Income Ratio

#378

Post by dzabriskie »

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. Here's research to back this statement up:

Today's House Prices Are Over 40 Percent More Affordable Than The Housing Boom Peak:

https://blog.firstam.com/economics/todays-house-prices-are-o...

Re: Home Price to Income Ratio

#379

Post by rayiner »

taurath wrote: post #183
Doches wrote: post #133

Earlier 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 $…

I think there’s plenty of real reasons people don’t do this economically, but don’t downplay the social parts of it - we have very Balkanized communities in the US. Ask a minority what it’s like going on a road trip sometime - I guarantee there’s many places where they won’t want to stop. Living in a place with no amenities, an extremely regressive/borderline extreme social climate and a lack of economic opportunity…

> Ask a minority what it’s like going on a road trip sometime - I guarantee there’s many places where they won’t want to stop.

Certified brown person here. The only thing I think about in terms of deciding where to stop is how far I can get before needing gas, and what the odds of finding decent food are. I've travelled in rural areas all over the country: midwest (my wife grew up in rural iowa), west coast (wife's family is from the rural oregon coast), and south (worked a summer in southern virginia, my best friend lived in south georgia for a decade). I just got back from a road trip through rural Utah, Idaho, and Wyoming with my white wife, mixed kids, and Latina au pair. In all this time nobody has even looked at me sideways.

Hell, the precinct where I live went for Trump 58-34 in 2016 (the year I moved here). The precinct a few minutes away where my parents live was 57-32. Most of the ones around us were 60-30. Again, no problems.

I have to agree with the sibling comment. I have no idea how these folks would perform on an IAT (and I don't care because they're bad science: https://qz.com/1144504/the-world-is-relying-on-a-flawed-psyc...). Southerners are nice to visitors and keep their thoughts to themselves for the most part. I'd rather deal with that than west coast frigidity or NYC aggressiveness.

Re: Home Price to Income Ratio

#380

Post by dzabriskie »

nly wrote: post #365
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.

This is not accurate. The average down payment is currently 5% per the latest Urban Institute Research.

https://www.calculatedriskblog.com/2021/09/urban-institute-m...

Post reply on HN