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Home Price to Income Ratio

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Re: Home Price to Income Ratio

#661

Post by wyclif »

kjkjadksj wrote: post #524
wyclif wrote: post #448

Earlier quoted context omitted.

What do you think are the best books to recommend to people who don't have enough financial literacy? This is a common theme in this kind of HN thread but I haven't seen many recommendations or lists of books that can help people level up in their financial wisdom. The bigger problem is that everyone wants to live in the same place (usually in urban centers, where the jobs are, and where you don't have to drive an ho…

There are a lot more reasons to live somewhere than commuting convenience alone. The reports of the death of the city have been greatly exaggerated. It turns out city dwellers need a lot more infrastructure than just a local brewery. Namely a functional school district and a population that isn’t 97% white and strongly skewed conservative.

Some people want a community that skews conservative, and don't want to live in a shithole hellscape like San Francisco or Portland, with overpriced housing, tent cities under every bridge, drug dealers on every corner, and human feces on the sidewalks. Especially people who have families with children.

Re: Home Price to Income Ratio

#662

Post by spywaregorilla »

lottin wrote: post #654
spywaregorilla wrote: post #638

Earlier quoted context omitted.

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.

Bob, with a net worth $1M lower than Alice, would probably disagree that she has not profited.

Re: Home Price to Income Ratio

#663

Post by lottin »

spywaregorilla wrote: post #662
lottin wrote: post #654

Earlier quoted context omitted.

> 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.

Bob, with a net worth $1M lower than Alice, would probably disagree that she has not profited.

Only if you do fraudulent accounting. Mark-to-market is limited to assets held for trading, as far as I can tell, and for a good reason.

Re: Home Price to Income Ratio

#665

Post by civilized »

spywaregorilla wrote: post #635
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.

Because you don't want to keep 1 million dollars under your mattress.

Maybe I do if my other options are this bad.

Although if the reason the government is doing negative interest rates is to prop up home prices forever and ever, I guess I better put my money into housing.

Re: Home Price to Income Ratio

#666

Post by throw0101a »

noduerme wrote: post #259
throw0101a wrote: post #231

Earlier quoted context omitted.

> Print 10% more money, that's 10% inflation. No: If you're approved for a $100K loan, you are credited with $100K balance to draw from your account, and the money supply is recorded as going up by $100K. But if you don't withdraw any money from the account (e.g., a HELOC that you intended only for emergencies), then how can it be inflationary if it's not circulating in the economy? But it is registered as increased…

Do a lot of people take out loans they never use? If you get a loan to buy a house, the seller gets the money immediately and uses it to buy another house. You've just put a whole house's worth of debt into circulation.

> Do a lot of people take out loans they never use?

Many business may have them. As I mentioned, HELOCs are a thing as well.

Neither may be used to the absolute limit, but only on an as-needed basis.

Re: Home Price to Income Ratio

#667

Post by lottin »

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…

> So no, when rates go up to x+5 you will never be able to find bonds that pay x+5.

What? If the current rate is x, this means that this is the rate a bond being issued right now is paying. If the rate goes up to whatever, it means that bonds being issued right now are paying whatever.

Re: Home Price to Income Ratio

#668

Post by bogomipz »

lottin wrote: post #667
bogomipz wrote: post #619

Earlier quoted context omitted.

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…

> So no, when rates go up to x+5 you will never be able to find bonds that pay x+5. What? If the current rate is x, this means that this is the rate a bond being issued right now is paying. If the rate goes up to whatever, it means that bonds being issued right now are paying whatever.

No, there is an inverse relationship between between interest rates and bond prices. This is an axiom in the bond market. See:

https://www.investopedia.com/ask/answers/why-interest-rates-...

Re: Home Price to Income Ratio

#669

Post by qwerty456127 »

Valakas_ wrote: post #613
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…

It's not a bug, it's a feature. - How do you keep so big part of the population working all their lives otherwise in jobs they don't like if not by necessity? - How can you earn as much passive income as possible (landlords, investors)?

> How do you keep so big part of the population working all their lives otherwise in jobs they don't like if not by necessity?

Why do you need this? I always expected working time to keep decreasing but it doesn't. Humanity generally achieved 8x5 work week but doesn't seem progressing any further. If I had more spare time with same income I would continue my education and spend more time on hobbies, side projects, leisure, fitness and family (all these can still keep people busy contributing to the economy).

> How can you earn as much passive income as possible (landlords, investors)?

Why do you need this? As every normal person I would love to have passive income covering all my needs but "as much passive as possible" sounds like a waste of effort. I only want as much as I can reasonably spend without wasting my time on inventing new problems.

Re: Home Price to Income Ratio

#670

Post by qwerty456127 »

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…

I would add government requirements to the list of problems. You can't just build a house the way you like/can and live there like you could in the past. Today you have to get the authorities approve every detail in your house construction design, hire licensed builders, use certified materials etc. This makes sense in cities but is required in rural areas too, all over the developed world. As a kid I spent some time in a number of houses built by their owners out of scrap and "hobby market" materials with just their hands, simple tools and no serious design and that was great.
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