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Home Price to Income Ratio

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Re: Home Price to Income Ratio

#531

Post by perl4ever »

throwawaythekey wrote: post #499
perl4ever wrote: post #493

Earlier quoted context omitted.

I looked for some official statistics, and while I'm not sure if I'm in the right place, it paints a rather different picture from yours. The figure for housing costs implies a typical home value of more like 300K USD or 400K AUD. Also, if this is accurate, Australia is more of a nation of homeowners than of renters. https://www.abs.gov.au/statistics/people/housing/housing-occ... "66% of Australian households owned t…

Nice data but that it's from 2018 before the covid boom... > The nation's median property price lifted by 1.5 per cent last month (to $666,514) https://www.abc.net.au/news/2021-09-01/property-housing-core... That's a >50% increase over ~3 years and from the article 20% over the last year.

'according to the latest CoreLogic data.'

This appears to be a data provider oriented towards entities with large real estate portfolios, and they specifically say on their website that their "hedonic" index is not meant for affordability calculations, for what that's worth.

It's difficult for me to tell which index is in the article, but the note about the missing data under the chart implies to me that the article is (inappropriately) using the hedonic index. I wonder how much difference it makes.

'this month's figures from CoreLogic did not include Perth or regional Western Australia "pending the resolution of a divergence from other housing market measures in WA" '

"Rather than relying solely on transacted sale prices to provide a measure of housing market conditions, the CoreLogic Daily Home Value Index is based on a ‘hedonic’ methodology which includes the attributes of properties that are transacting as part of the analysis."

https://www.corelogic.com.au/research/monthly-indices

"The fact that median or other percentile based series cannot be used to track changes in value of a market portfolio does not make them wrong: it is simply that they have different applications than hedonic indices. For example, median price series are useful in answering economic policy questions relating to housing affordability."

https://www.corelogic.com.au/research/types-of-indices

Re: Home Price to Income Ratio

#532

Post by jjnoakes »

zepto wrote: post #508
jjnoakes wrote: post #435

Earlier quoted context omitted.

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.

It affects things like refinancing, pmi removal, and helocs as well when appraisals come in lower.

Re: Home Price to Income Ratio

#533

Post by arrosenberg »

notJim wrote: post #442
dpweb wrote: post #118

Earlier quoted context omitted.

When it's all assets going up, it's not the assets cost more, it's the dollar is worth less. So for all the help and assistance. Housing is LESS affordable than ever before. You cannot infuse trillions of extra dollars into the economy without inflation. There's no magic pill - there must be consequences.

I'm not really sure the "dollar worth less" framing is super helpful, but maybe I'm wrong. I think it's a little better to specify in what context we're talking about. Actual inflation is generally low aside from short-term issues, but "asset inflation" if you want to call it that is high. I think the most important thing in terms of day-to-day existence is CPI-type measures that reflect your ability to consume thing…

> Is there a plausible way we can get out of this situation?

Yes, tax the hell out of the wealthy in order to reduce their total share of the money supply (which is driving asset inflation), shield the middle class, and provide better housing, social services and benefits to the working poor. Home prices would settle because supply would go up and the range of bids on a given property would be more egalitarian.

If we are responsible with the new revenues (we won't be) we would also destroy about $5-7T of what's collected to remove it from the overall supply to prevent reoccurrence.

Re: Home Price to Income Ratio

#534

Post by blobbers »

In order to raise home values further, they'll start offering a 40 year product to everyone. This will lower the monthly cost further. It makes sense, as the bank wants to keep the money train rolling. It's actually "good" for everyone; underwriters (lower payment = lower risk), salespeople (continue to close), C-level execs (keep that money train rolling), home-buyers (heck yeah I can afford that 4 quadrillion dollar home).

I believe the way they're currently handling "lowering payments" in delinquent loans in the United States is by offering 40 year terms on loans as adjustments. Rather than foreclosing, they offer a more palatable monthly rate by extending the loan for 10 years.

Re: Home Price to Income Ratio

#535

Post by blobbers »

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…

see my comment above; the 40 year loan will push home prices up further.

Re: Home Price to Income Ratio

#536

Post by dogman144 »

HeyLaughingBoy wrote: post #221
rjbwork wrote: post #154

Earlier quoted context omitted.

I was ready to buy an estate in the Georgia mountains earlier this year - then I saw the internet connection options. Then I looked up how much it would cost me to get a decent wired connection out there. Totally unviable for tech workers to live in most of the solid red areas of the country strictly due internet capabilities, or lack thereof.

Then keep looking. I'm a liberal, minority techie living on a farm: one of my base requirements for moving here 15 years ago was at least a minimal amount of wired broadband. This summer the phone company has been pulling fiber all over the place. I was told that it's not going to be put in use until next year, but at least they're planning ahead. Especially after the last year and a half of distance learning and wor…

Correct. There is fiber all over non-Asheville Appalachia right now. It’s reflecting in home prices too.

I’m looking at this move myself and the final decision point is state taxes (TN, WA, FL) or fiber/cheap homes (largely Western NC and GA), both paired with some cool nature.

All ears on places with $200k and below homes and fiber, quite candidly.

Re: Home Price to Income Ratio

#537

Post by dogman144 »

rjbwork wrote: post #321
kyleblarson wrote: post #308

Earlier quoted context omitted.

Extrapolating from 'rural mountainous Georgia' to all red states, including Texas and Florida is a bit of a stretch. I live in a remote mountain town in North Central Washington and there are dozens, if not hundreds, of remote tech workers. I have good internet through a local ISP and starlink is now prevalent in our area as well.

Fair enough. I was looking in the triangle between Asheville, Nashville, and Atlanta. The few homes i was like "I will buy this now if i can get good internets" did not play out for me. I'm looking for an excess of land though, to indulge my many hobbies, so that is certainly constraining my options. It's okay though, I'm in no rush. Once Starlink is rolled out en masse I'm sure the equation will drastically change f…

There’s fiber all over that area now because of Morris Broadband

Re: Home Price to Income Ratio

#538

Post by bogomipz »

fshbbdssbbgdd wrote: post #494
throw123123123 wrote: post #485

Earlier quoted context omitted.

The problem is that in a scenario of rates going up, both houses and general stock investments will go down together. They rarely diverge.

If rates go up to X+5, then I ought to be able to find bonds that pay X+5, no?

No. 30 year mortgages and 10 year treasuries move in unison but they are not the same rate. You can see this on the first graph here:

https://www.thebalance.com/treasury-note-and-mortgage-rate-r...

Re: Home Price to Income Ratio

#539

Post by noahtallen »

SilverRed wrote: post #456
qwerty456127 wrote: post #386

To me it feels like home prices are the single most important bug in the economy. If we filter out skilled IT professionals (and other high-paid jobs), fundamentally rich people and also extremely poor (homeless in developed countries and those living in stick/garbage huts in the "3-rd world"), the rest mostly spend almost all their income on paying for their home. We invent new technologies but average homes become…

Seems to me that there are two problems. As jobs and facilities are becoming more centralized. Cities are expanding and rural towns are shrinking. So even without any population growth, houses that people actually want become more expensive. And the second problem is the expectation that a piece of land near a city will always be more in demand tomorrow than it is today. This is almost certainly true based on the fir…

The main problem with that solution is that most young-ish people know that if they ever want to own a house, they need to get into the game early so they can build equity.

Besides that, rentals are often way too expensive (matching or exceeding a mortgage payment in big cities) without providing a similar amount of value:

- Can’t do what you like to the interior, like painting walls.

- Not built with the same sort of layout homes have. For examples, loads of three bed/three bath rentals meant to be split by roommates, but not many with a nice room for a home office.

- Often does not provide an important amenity (like AC).

- Almost definitely less space.

- Likely less peaceful, especially if noise insulation between units is poor. (Getting bothered by a neighbor is a lot easier.)

If we want to attract the type of people who want to buy a home to instead rent for the long term, those aspects need to become better. Apartments need to be more desirable than houses.

And that means the folks building apartments and the apartment management companies need to offer a lot more for less. And since apartment buildings are also investments, that will never happen, because the ultimate goal is profit.

I feel like in both cases, it comes back to the fact that property is an investment. It doesn’t make sense for anyone to loose value on an investment, which means there is an inherent pressure to make prices go up over time

Re: Home Price to Income Ratio

#540

Post by [deleted] »

woofie11 wrote: post #434
joppy wrote: post #393

Earlier quoted context omitted.

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…

Kinda. If I buy a 1M home at 2.5% interest, I have a $4,000 monthly payment. If rates go to 6%: - Housing prices plummet to $600,000, assuming people are willing to spend the same per month. - My monthly payments are identical to had I bought at $600k at 6%. If I stay there, I'm not much worse off. It's harder to pay off the home quickly. - If I move out, and I rent out my home, it covers monthly payments approximate…

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