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Home Price to Income Ratio

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Re: Home Price to Income Ratio

#501

Post by ytpete »

civilized wrote: post #489
spywaregorilla wrote: post #391

Earlier quoted context omitted.

> without considering that the declining interest rates that fueled past appreciation don't have much room left to move down Negative is inevitable, imo If the value of your home rises, you've effectively taken out a hugely profitable leveraged loan, which is historically pretty common. Which is far from guaranteed of course, but broadly speaking it was an amazingly lucrative move for many many people.

Why would I lend you a million dollars only to be paid back over 30 years and have less than I started with at the end of the 30 years? I'd be better off doing nothing with the money.

You wouldn't, but the government might - to keep the economy propped up. I think this is what parent meant, anyway.

Not sure that's a healthy point for the government or the economy to get to, but with politics the way they are these days it doesn't sound that farfetched of an outcome...

Re: Home Price to Income Ratio

#502

Post by baybal2 »

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…

> Homebuyers will make purchasing decision based on their monthly mortgage payments, instead of the home price.

No, because not everybody is so risky to get a mortgage.

The prime majority of rational people don't buy such major life assets with debt.

Re: Home Price to Income Ratio

#503

Post by kadomony »

soperj wrote: post #280
corpdronejuly wrote: post #150

Earlier quoted context omitted.

The issue then becomes silly games with shell corporations hiding how many homes people own, which pushes homes into the hands of larger landlords who can afford to pay someone to play those silly games.

Don't allow corps to own housing.

This is what pisses me off the most. America's housing is being sold to the wealthy, who then just turn around and siphon the rest of the wealth out of the middle-class and younger generations by forcing them into renting because the barrier to break into homeownership simply eclipses them.

Re: Home Price to Income Ratio

#504

Post by B-Con »

akudha wrote: post #484
wffurr wrote: post #477

I never learn anything in these threads. It seems like everyone is just talking past each other with their pet theories and no particular way to tell which if any are correct or useful.

Economics is a weird subject, even economists get predictions wrong all the time. It is easier to talk about logical subjects like Math or programming, vs something like social issues or economics. I don't know how to have a useful conversation about such topics, I understand your frustration. I suppose everyone has good intentions and is trying to help at the same time by sharing their theories - which could be bad…

I think of economics as having the classic two sides of theory and practice, but with the quirk that the practice is grossly inefficient because it's a dynamic feedback system based on itself.

Engineering takes theoretical principles and pits them into practice. Here's what the free body diagram of a structure might be, but how do you ensure it stays up with abnormal conditions and a client who's going the extra mile to cut costs?

Imagine if in engineering, constants changed the more precisely they were measured. pi is different in the USA because China measured it more precisely yesterday. Or if weather patterns changed to exploit the weaknesses of a building to maximize damage.

I don't think econ is theoretically irrational, it's just that the application in the public eye is seldom isolated to simple, static systems. When applied to simple systems, I think econ is quite reasonable and makes accurate predictions.

Re: Home Price to Income Ratio

#505

Post by twofornone »

wildrhythms wrote: post #461
twofornone wrote: post #248

Earlier quoted context omitted.

>I guarantee there’s many places where they won’t want to stop. As someone who recently made the jump to a rural area, these problems are almost entirely imaginary. The notion of backwards, ignorant, racist rednecks occupying all the rural lands is nothing but a bigoted stereotype. Southern hospitality is real; and while rural peoples will be more likely to notice and acknowledge cultural differences, they generally…

This contradicts with my experience growing up in WV. The last time I went back there (5 years ago) I still saw the same confederate flags and n-words being thrown around casually. The reality is that 'the south', like anywhere, has pockets of diversity and acceptance; but your stereotype of universal 'southern hospitality' is not in line with my experience at all.

The reality is that the confederate flag only represents racism to the side that doesn't wave them.

The reality is that it's possible to "throw around the n-word" and still have respect for black friends.

The reality that we are forbidden from acknowledging is that those rallying the hardest against racism don't actually understand racism. Its not binary.

Re: Home Price to Income Ratio

#506

Post by rayiner »

gamegoblin wrote: post #366
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…

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.

Yes! My wife and my families both crossed that boundary (on opposite sides of the country) around when we were in high school and we both remember grocery shopping as a key difference.

Re: Home Price to Income Ratio

#507

Post by civilized »

ytpete wrote: post #501
civilized wrote: post #489

Earlier quoted context omitted.

Why would I lend you a million dollars only to be paid back over 30 years and have less than I started with at the end of the 30 years? I'd be better off doing nothing with the money.

You wouldn't, but the government might - to keep the economy propped up. I think this is what parent meant, anyway. Not sure that's a healthy point for the government or the economy to get to, but with politics the way they are these days it doesn't sound that farfetched of an outcome...

If things get to that point, the government might as well just buy all the housing.

Re: Home Price to Income Ratio

#508

Post by zepto »

jjnoakes wrote: post #435
zepto wrote: post #426

Earlier quoted context omitted.

Not if you get a fixed rate.

I think you misunderstood the parent comment. Even with a fixed interest rate, you still owe the entirety of your borrowed amount on the $1m purchase to the lender, but your property value may drop if the interest rates go up because, assuming the market value is tied to the interest rate, new buyers won't be able or willing to borrow $1m to buy your place at a rate higher than what you borrowed your $1m at. For the…

True. But that’s nonetheless likely to be transient over a reasonable time horizon for home ownership, e.g. 10 years.

Re: Home Price to Income Ratio

#509

Post by ezoe »

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…

Currently in Japan, interest rates for home loan are so close to zero. About 1% for fixed rate, 0.5% for 10 year fixed rate, less than 0.4% for variable rate.

New homes are built rapidly and supply is plentiful. When we say home, it almost always mean condominium.

Yet, the house price is rising in Japan.

I can think of a few reasons for that, like mere fact that home loans are available to virtually anyone who is employed and recieve average wage, old homes quickly lose value in Japan or people ditched the countrysides and concentrate to a few major cities.

I think home loan interest rate just reflect the inflation rate of the currency in that country. House price goes up simply because anyone can loan a money for.

So long as the credit is available, house price stays the maximum amount of money average people can loan for and it's increasing.

If rate goes up, it just mean the inflation rate goes up.

The house price goes down when

1. No demand. People don't want to live that place anymore.

2. Loan is not available.

3. The government turns into Communism and give all citizen a same house for free.

Re: Home Price to Income Ratio

#510

Post by user_named »

m_ke wrote: post #28
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.

Simple solution would be to put a property and sales tax ramp on additional homes. Make landlords who own N homes pay 1.5^N the normal rate.

The simple solution is to build more.
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