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Home Price to Income Ratio

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Re: Home Price to Income Ratio

#651

Post by quantumBerry »

ncphil wrote: post #570
jdkee wrote: post #516

Earlier quoted context omitted.

They extract the maximum amount of rent they can. https://www.newyorker.com/magazine/2021/03/15/what-happens-w...

... and then kick the residents out when they finally get zoning approval to redevelop for luxury housing: from politicians whose votes are surprisingly cheap (most elected municipal officials have ties to the real estate industry, or are themselves in the business). This is happening right now, here in North Carolina. The worst part? Who do you think makes up the largest part of trailer park residents here? Yep. Tha…

Yes I have been to actual shanty towns including in a very poor latin american country and the middle east. I don't know why people here have such a hard on for there being something wrong with the people in trailer homes and shanty towns. They seemed like people who were just in different housing than some of the rest of us to me and I'm very glad their shanty town / trailer was available to them, because otherwise they'd be completely without shelter.

Re: Home Price to Income Ratio

#653

Post by lotsofpulp »

shados wrote: post #625
lotsofpulp wrote: post #329

Earlier quoted context omitted.

> Normally though, taxation is just a matter of the property value. Total tax burdens are a function of government expenditures. Property tax is a rough attempt at scaling the tax burden to a person’s wealth, but it has many caveats varying in many jurisdictions. However, government debt is a big part of expenses, and each city and state’s debt can vary greatly than from another. Here is a good website ranking the bi…

yes, though I'm not sure what it has to do with the original question. Someone is comparing 2 types of property in a given area. The city's tax burden is a constant between the two in that scenario, so the only variable will be how the tax burden is implemented by that city, which is usually property value with some abatements based on residency status and type of properties.

Oh yes, I misunderstood the chain of comments. My bad!

Re: Home Price to Income Ratio

#654

Post by lottin »

spywaregorilla wrote: post #638
lottin wrote: post #584

Earlier quoted context omitted.

Your home is not special. If the value of your home rises, the value of other homes also rises, which means for most homeowners an increase in the value of their home can't be turned into a profit.

If Alice buys a home for $100k and it appreciates $1M over ten years, and Bob rents for ten years for $100k, total. Alice has $1M more than Bob does. That isn't nullified if Alice chooses to buy a $1M home next. She can also go buy another $100k home instead and pocket the $900k. Bob, obviously, cannot pocket anything.

> She can also go buy another $100k home instead and pocket the $900k

No, that's my point. A home that cost $100k when Alice bought hers, now costs $1M, therefore if Alice sells her home for $1M and buys another one for $1M, she makes a profit of $0.

Re: Home Price to Income Ratio

#655

Post by CountDrewku »

hiram112 wrote: post #528
CountDrewku wrote: post #277

Earlier quoted context omitted.

The solution is to leave cities that aren't affordable. Sorry, but you may not get to live beach-side or be in walking distance from your hipster coffee joint in downtown SF. I really think a lot of the problem is our generation grew up watching too many movies and they just think it's normal to live in some high end condo in Manhattan while working for Enterprise Rent-A-Car. That's not realistic.

Yeah a lot of older millennials grew up on shows like Friends. We were disappointed in our mid-20s when we discovered our entry-level job wouldn't afford that large condo in downtown SF or Manhattan. But it has got out of hand. I earn 90% more than most full time workers. And like 50%+ of "households" out there, it's just me, so no dual income. And I don't think it's appropriate to expect 40 year olds to still live w…

>And if I - earning 2x-3x more than most workers - can't afford these basic homes, how the hell does everyone else who earns the median income of $60K do it?

By living in a rural area or not on the coasts.

>And I don't think it's appropriate to expect 40 year olds to still live with a bunch of roommates like they did when they're 22.

I guess that depends on your culture. It's pretty normal to have multiple families or roommates in other countries.

The only legit way I can see to fixing some of these issues is to ensure you do not let investors outside of your country buy up property. China is notorious for this. Secondly maybe you limit companies like Blackrock as well. I really dislike the idea of rent control. I don't think people that own a few properties should be punished and pushed out of the market. This just leads to larger corporations owning everything.

Re: Home Price to Income Ratio

#656

Post by mywittyname »

sbakzbsmx wrote: post #464
xyzzy123 wrote: post #457

Earlier quoted context omitted.

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.

Ya, the US has fixed 30 year rates. Interest rates are higher going from a 15 year to a 30 year to price in some of the risk to the bank. The difference every time I bought a house was about 1%

The difference between a 15- and 30-year mortgage is around one percentage point, or a 30% difference.

Re: Home Price to Income Ratio

#657

Post by jdhn »

imtringued wrote: post #604
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.

There is a reason why they must go negative... Inflation is going up because of a mix of supply shocks and fiscal stimulus. Not necessarily a bad thing but it's out of the realm of monetary stimulus. Low interest rates in Japan failed to drive inflation. Ask any Austrian economist and they would tell you that low interest rates are guaranteed lead to malinvestment, an artificial business boom and high inflation. You…

>You know, if it was that easy then central banks would have raised interest rates a long time ago. Probably shortly after 2008.

The Fed attempted to raise rates in 2011 which lead to the so-called "Taper Tantrum" where stocks plunged. The Fed either got scared, or received a phonecall, and promptly held off on increasing rates.

Re: Home Price to Income Ratio

#658

Post by mywittyname »

cronix wrote: post #382
llbeansandrice wrote: post #372

Earlier quoted context omitted.

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.

> you just have to buy personal mortgage insurance if you're below 20% down. You end up paying more in the long run when you add on PMI. I think they are internally conflating "should be avoided" with "can't." I do that with personal things all the time when I tell myself I can't do something that I shouldn't, but actually can do.

In general, I think it's a good tradeoff to pay PMI in order to get into a house earlier, or keep a larger down payment invested. PMI is generally I waited in order to save the traditional 20% down payment, and, in hindsight, that was a dumb financial move. Investment returns would have outpaced what I was paying in PMI by 10x each year, and the place appreciated enough in two years that I could have refinanced with no PMI without putting any additional money in.

Re: Home Price to Income Ratio

#659

Post by fshbbdssbbgdd »

bogomipz wrote: post #619
fshbbdssbbgdd wrote: post #541

Earlier quoted context omitted.

Treasuries are some of the lowest-yielding bonds out there.

Yes and treasures are the only bonds that move in lockstep with 30 year mortgages. When people talk about the correlation between bond yields and mortgages those are exactly the ones they are referring to. US Treasuries also are considered among the safest, least risky assets out there. This is true globally and has been for a very, very long time. This is all succinctly explained in the link I posted above. Lastly b…

> Lastly bond prices have an inverse relationship with interest rates, which means that as interest rates rise, bond prices go down. So no, when rates go up to x+5 you will never be able to find bonds that pay x+5.

Indeed, interest rates are inversely related to bond prices. And bond prices are inversely related to yields. Yields and rates are highly correlated. In fact, the way banks finance mortgages is by selling bonds. The market rate they can get on those bonds determines the rate they can offer to homeowners. So of course these rates move in tandem.

Re: Home Price to Income Ratio

#660

Post by munk-a »

xyzzy123 wrote: post #465
mywittyname wrote: post #225

Earlier quoted context omitted.

> 1. In a very very infinitesimally unmeasurably minor manner. Great point. And to explicit what you're alluding to: we live in a world where factories around the world are running 24/7 producing trillions of items with infinitesimally small values relative to global wealth. But none-the-less, these goods at up to real value.

Meanwhile entropy is eroding the value of many of the made and manufactured things in the world. Termites are eating houses, cars are wearing out, children are breaking toys, clothes get holes in them...

If you're interested in the scenario where that depreciation outpaces all else I might suggest reading the Foundation by Asimov series which includes an empire in its sunset and suffering from systems collapse. If we were in such a situation it'd be pretty clear to everyone as maintenance costs would prevent any sort of productive activity. I personally think that, short of a sudden disaster that causes extreme knowledge loss, a systems collapse is infeasible in the modern world since we've invested so much of our ongoing maintenance into detecting these sorts of insidious critical failures.

But, in short, those depreciations are far outweighed by value creation right now.

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