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Home Price to Income Ratio

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Re: Home Price to Income Ratio

#411

Post by giantg2 »

resonantjacket5 wrote: post #373
giantg2 wrote: post #367

Earlier quoted context omitted.

"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 fr…

"Zoning is regulation."

Business regulation.

"If labor was truly the barrier then when upzoned no construction would take place."

Not a barrier, but a factor. You seem to be misunderstanding me. It's not that it can't be done in the populated area, but that it's better done in areas not already in a precarious situation.

"Additionally a large reason why labor is so expensive is from the constrained housing in the first place -- again stemming from the zoning."

So we have circular logic here. If the labor is expensive, you aren't going to make it cheaper (at least short term) by building more houses because the labor cost to build those houses will still be high. They have to pay their existing mortgages.

Re: Home Price to Income Ratio

#412

Post by quantumBerry »

mikeryan wrote: post #408
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.

Raw land in most denser US urban areas is not cheap. There’s also huge incentives to build additional units. I’m Berkeley where I live it’s becoming more common to see developers buy a run down single family home and raze it and the city will allow you to build a 3 or 4 unit townhome in the space. Much of this forced by state laws, particularly if a unit or two is reserved for low income families.

The cheapest land on which you could build a yurt or small cabin (illegally) in Berkeley I found on realtor is 60k (it is pending sale). The cheapest house is well north of 200k. You could build your own yurt or cabin for only 10 grand. You're joking yourself if that isn't very cheap by comparison.

[1] https://www.realtor.com/realestateandhomes-detail/55-Panoram...

Re: Home Price to Income Ratio

#413

Post by davidw »

topspin wrote: post #111
standardUser wrote: post #5

Some very clever and influential people better start finding and implementing real solutions to housing prices right now. If they don't, expect overwhelming support from Millennials for massive expansions to public housing and rent control, if not even more draconian measures.

"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…

State level reform is important. Here in Oregon, we have HB2001 that allows for up to 4-plexes everywhere. City council's can't stop it. A local NIMBY lady ginned up a bunch of opposition to its local implementation and even put a full page ad in the newspaper. It went through anyway.

The folks at YIMBY Action are a great resource if you're serious about making progress on this kind of thing.

Re: Home Price to Income Ratio

#414

Post by itake »

gtaylor wrote: post #152
itake wrote: post #110

Earlier quoted context omitted.

I don't know if this is a problem? I am perfectly happy focusing on my career and my hobbies and not worrying about home repairs, insurance, taxes, natural disasters, etc. It is more financially and emotionally rewarding for me to prep leetcode, solve software problems, etc. than it is to deal with home renovations, plumbing repair, etc. on a home. Plus the flexibility of location is huge. I can follow the job market…

Not everyone has the same goals or mobility as you. What you described is especially tough for families with kids.

the mobility will be less valuable, but I'd imagine if I had children, renting would give me more time to spend with them since I won't have to maintain a home.

Re: Home Price to Income Ratio

#415

Post by woobar »

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.

Also, if you want to avoid paying PMI you can get a second mortgage to cover most of the down payment. With current low rates even if the APR for a second mortgage is 1% higher, one can save a lot by paying this high rate on a much smaller portion of the ballance.

Re: Home Price to Income Ratio

#416

Post by nly »

kolbe wrote: post #400
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.

Interest rates are extremely relevant when institutional investors are such large players in the real estate market. Also, the original submission noted that median homes cost 7x median income right now. That does not equate to 10 years of savings from responsible people. Also, 5:1 leverage is extremely generous, and in a free market they would never happen because it’s insanely risky to the lender. That’s ignoring t…

Yes, you're absolutely right.

People with big piles of capital have a great time during times of low rates, whereas the cash poor working class (even those on high incomes) still get squeezed out by lending criteria and price inflation.

> That does not equate to 10 years of savings from responsible people.

I don't agree with this. If you're putting 40% of your take home in to rent and property taxes then saving only 20% of your take home (say 12% of your gross) per year is a reasonable approximation. Saving a whole gross income (the 20% deposit if the remaining 80% equates to 4x income) is going to take you ~8 years. And most people suck at saving. And in 8 years property prices can easy go up 50-70%.

Re: Home Price to Income Ratio

#417

Post by exporectomy »

joppy wrote: post #393
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…

Whatever the case, what you end up with is an asset whose actual value is tied to the interest rate (interest goes down, people can afford larger loans with the same repayments, therefore houses are worth more). This is a highly leveraged situation: if you take out a $1m loan and then interest rates go up, you're still liable for the whole $1m even though your actual asset might only be worth $900k now. I think this…

Home ownership is not an essential need. People aren't excluded from housing because of that risk. They can just rent from a landlord who's taking that risk themselves.

Re: Home Price to Income Ratio

#418

Post by bink »

nostrademons wrote: post #335
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…

As long as most people in the U.S. buy houses with 30-year fixed mortgages, the total cost of a house will be 30 * 12 * monthly mortgage payment. When interest rates are low but home prices are high, they don't pay any more over the life of the loan. (Someone who buys when rates are high but prices are low does have the option to refinance, though, which is not available to someone who buys when prices are high.) The…

It's true that a homeowner who pays a higher principal and a lower rate isn't really at a disadvantage if they stay in the home for 30 years (with a 30 year loan). But if rates go up a bit as soon as they need to sell they're going to find far fewer buyers.

And their neighbors will have already found out they had to sell for lower amounts, resulting in some others walking away instead of bringing money to the table at a sale. At thus begins the downward cycle.

Re: Home Price to Income Ratio

#419

Post by bluGill »

robocat wrote: post #180
greesil wrote: post #128

Earlier quoted context omitted.

You can if you're in a liquidity trap. Question is, are we in one now?

I imagine creating cash to solve a liquidity trap is like continuously taking laxitives for a constipation problem... At some point you get a different problem! On topic: my experience of housing prices in NZ is that people bid up house prices to the point that they can only just afford the mortgage payments. Creating more housing doesn't "fix" the problem, because the more wealthy buy two or more houses, and are hap…

Eventually people decide they have enough house.
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