581–590 of 704 posts
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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…
I have a ~million dollar fixed rate mortgage. If rates go up, I’ll be sad that the value of my house went down. On the other hand, I’ll be very happy to have a large fixed rate loan. Let’s call my mortgage rate X%, and let us assume that rates go to X+5. Then I can invest money to earn at (X+5)%, which means my loan is essentially a $50k/year annuity. My only wish would be that I could make the loan even bigger. On t…
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This jibes with my experience of buying a house about 6 months ago. My reasoning was that we were experiencing rapid asset inflation fueled by low interest rates and COVID stimulus, and our cash was losing its value relative to housing by the month. I figured that this propping up of asset prices is likely to continue, as any administration that lets housing / 401k values collapse will get massacred in elections.
People are working, unemployment has been falling like a stone since 2017. That money is going to go somewhere (and for most that is not 'the bank'). It's going to get spent or put into investments. We're going to continue to see strong commodity prices (and most of these have been rising into the headwind of a stronger dollar) until unemployment creeps up, or real wages falls too far behind inflation rate. I think t…
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> 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…
> 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.
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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…
A more up to date government source has the following;
> Weighted average (mean) of the eight capital cities Residential Property Price Index... rose 16.8% over the last twelve months.
We could go on forever trying to work out the exact numbers. The main thing I want to do is show non-australians how quickly our prices have risen and are rising!
https://www.abs.gov.au/statistics/economy/price-indexes-and-...
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Not sure about the US but fixed-rate term in Australia is about 5 years. Nobody would give you a 30 year fixed rate. You'd eventually have to pay 6% on the $1M.
Damn, I would assume houses must be much cheaper in Australia than in the US? Or only the very very rich can afford to buy their own home? (Or is it amortized over more than 5 years, you just have a balloon you need to refinance?) In the US, where 30-year mortgages are standard, the LARGE majority of homeowners would not be able to afford payments on their home amortized over only 5 years.
(Australian housing markets in major cities are some of the most expensive in the world.)
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> 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 $…
OK but this is not actually happening. Young, well-educated people with high incomes are the only types of people who continue to flow into California. They are driving out poorer and generally less-well-educated people, because of course that is how it will work in a competitive housing price market. See this report for details: https://lao.ca.gov/LAOEconTax/Article/Detail/675
It doesn't say that rich young people are replacing old.
It just says that wealthy & older people are leaving in big enough numbers that there's a sizeable ourmigration.
It's important to note that natural born residents have been fleeing California for a long time, and a substantial portion of the young, high paid workers are on H1B - so non-permanent.
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>Damn, I would assume houses must be much cheaper in Australia than in the US? The median home price in Australia is about US$725k. So no.
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…
See https://www.google.com/amp/s/amp.abc.net.au/article/10042389...
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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…
https://www.afr.com/property/residential/what-the-national-m... . AUD$955,927 national median and AUD$1.4m Sydney median.
People who happened to own property in a pre-gentrified area would have negative costs. Just holding the asset as prices rise would be worthwhile. In a socialist scheme that owner would be everyone/the government.
Meanwhile, someone moving into that same area will be paying more for the already baked in price rise assumption which may entirely cancel out the expected future asset price increase. Who pays and who benefits is random and unrelated to any useful economic input, like building homes people want in areas that need people.
But then how do you price in the uncertainty? Maybe the market collapses for several unrelated reasons.
Feels like there should be an insurance/socialist answer to this problem, where the risks and rewards of property investment are shared between people with no control over them.
Land value tax is one element of this.
Normalising renting and having democratic control over the landlord/renter contracts is another.
Singapore seems to do well with this, but not sure how translatable this is. Feels like the kind of thing that needs to go very wrong before the sensible approach gets taken.
Society generally seems to need to touch the fire to believe it's hot.
edit: business idea - private land value tax.
You buy into a corporation, that corporation buys lots of buildings in popular locations. You pay a land value tax to the corporation and a market rate 'rent' for the building.
As the land value tax rises, you might get priced out and be forced to move to one of their cheaper homes (or cash out) but if the land value tax gets too high for anyone, the corporation can sell the building to someone else at market rate, or if the location is great, knock down the existing building and rebuild more compact apartments to spread the land tax over more owners.
Basically the Singapore model, but private. You get to live in cool places, move easily (if the scheme is big enough) and profit from the insane property bubble with hedged risk.