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Homes in 97% of U.S. cities are overvalued, Moody's says

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Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#91

Post by pjmorris »

melissalobos wrote: post #4

Isn't this one of those "If everyone is crazy, you're crazy" situations? If every house is overvalued by some metric, then maybe the metric is wrong. People's perceptions of value are a large part of the actual value(meaning what someone would really pay) for things like housing that should depreciate over time.

I think there's a more concrete measure of value: house prices related to income. Historically (Robert Shiller has a chart for the US going back to 1890) house prices (and mortgages and rents) have maintained a stable relationship with income. Occasionally that relationship is strained but it has usually fallen back in line. One exception to this was the extraordinary, ongoing, support to the financial system post-2008. House prices and other financial assets have ballooned in relative proportion to wage income. That's more than a perception of value, that's a matter of social stability as most people depend on the same paycheck for not only housing but food, medicine, etc, as well as housing.

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#92

Post by seanmcdirmid »

lupire wrote: post #67
seanmcdirmid wrote: post #58

Earlier quoted context omitted.

Higher average wages, but not do much higher median wages. Unless those rich people who are driving up the average are giving their money away, the ones who are closer to the median are in a sore spot.

Average wage is always reported as median.

No...average is always average, median is always median. Newspapers often mislabel the numbers they are reporting, but the distinction is always made clear in the data. See:

> The average annual wage in 2019 in the US was $51,916.27, and the median annual wage was $34,248.45. The median wage is the wage “in the middle,” while average refers to the measure of central tendency for all the data.

https://policyadvice.net/insurance/insights/average-american...

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#93

Post by ericmay »

mogadsheu wrote: post #9
melissalobos wrote: post #4

Isn't this one of those "If everyone is crazy, you're crazy" situations? If every house is overvalued by some metric, then maybe the metric is wrong. People's perceptions of value are a large part of the actual value(meaning what someone would really pay) for things like housing that should depreciate over time.

No because houses as an asset class could still be overvalued relative to other assets.

Agreed. So what’s the historical price of homes relative to gold? S&P500? Do you know?

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#94

Post by cjmb »

jjcon wrote: post #44
adamomada wrote: post #23

I picture that vertical M2 supply graph from March 2020 whenever I hear ‘overvalued’ when it comes to real assets. The money has changed, not the property. I’m now curious how undervalued it really is and what a huge accounting trick it was to play on everyone over the past two years.

Its because they changed the definition of m2 in may 2020 not because anything fundamentally changed - not sure why people keep thinking this. >Beginning May 2020, M2 consists of M1 plus (1) small-denomination time deposits (time deposits in amounts of less than $100,000) less IRA and Keogh balances at depository institutions; and (2) balances in retail MMFs less IRA and Keogh balances at MMFs. Seasonally adjusted M2…

You can use the old definitions too and see the same effect: https://gonzoecon.com/wp-content/uploads/2021/04/chart-line-...

The change increased M1 by moving common components of M2 downstream into M1. It's why M2 is all anyone should track. And a "definition change" is not in fact the primary reason for a large increase in the money supply in 2020.

Smart source: https://fredblog.stlouisfed.org/2021/01/whats-behind-the-rec... Gonzo source: https://gonzoecon.com/2021/04/m1-and-m2-have-changed/

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#95

Post by mikeryan »

mogadsheu wrote: post #9
melissalobos wrote: post #4

Isn't this one of those "If everyone is crazy, you're crazy" situations? If every house is overvalued by some metric, then maybe the metric is wrong. People's perceptions of value are a large part of the actual value(meaning what someone would really pay) for things like housing that should depreciate over time.

No because houses as an asset class could still be overvalued relative to other assets.

The Moodys analysis, as I understand it, is house prices relative to median incomes in a market.

I don’t think it’s a fluke that the overvalued markets correlate to regions that a lot of tech has moved over the pandemic like Boise, FL, TX and Nashville.

If they’re measuring current house prices to 2020 and 2021 tax data then they may be missing an influx of income in the denominator as well.

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#96

Post by frankbreetz »

lumost wrote: post #90

Yet another asset crash would annihilate whatever assets millennials have happened to acquire. This would leave the millennial generation largely asset free as they enter their 40s except for inheritance.

Wouldn't a housing market crash be good for most millennials? They can't afford housing and a real estate crash would change that.

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#97

Post by [deleted] »

maxerickson wrote: post #30
endisneigh wrote: post #11

I used to believe such things and then I did a median income vs price per square foot worldwide comparison and it turns out the United States is one of the cheapest, if not the, cheapest place in the world when it comes to the “affordability” (median income vs price per square foot). I think the issue is that the United States has been too cheap and finally that era of abundance at a low cost is coming to an end.

Square feet aren't a great affordability measure (they tend to come in rather larger lumps). In any case, why not just continue the era of abundance? We aren't really running short on space, and there is at least some indication that the lack of housing availability is a policy failure (rather than an expected outcome of some physical process or limit).

[deleted]

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#98

Post by epistasis »

pjmorris wrote: post #91
melissalobos wrote: post #4

Isn't this one of those "If everyone is crazy, you're crazy" situations? If every house is overvalued by some metric, then maybe the metric is wrong. People's perceptions of value are a large part of the actual value(meaning what someone would really pay) for things like housing that should depreciate over time.

I think there's a more concrete measure of value: house prices related to income. Historically (Robert Shiller has a chart for the US going back to 1890) house prices (and mortgages and rents) have maintained a stable relationship with income. Occasionally that relationship is strained but it has usually fallen back in line. One exception to this was the extraordinary, ongoing, support to the financial system post-20…

That would work if the supply of houses has kept up with populations growth, and just as importantly, the desired location of where people want to live.

If there's housing scarcity, then prices will rise far ahead of ability to pay. That's the source of a lot of other types of today's inflation, for example, cars.

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#99

Post by serf »

rufus_foreman wrote: post #84
melissalobos wrote: post #4

Isn't this one of those "If everyone is crazy, you're crazy" situations? If every house is overvalued by some metric, then maybe the metric is wrong. People's perceptions of value are a large part of the actual value(meaning what someone would really pay) for things like housing that should depreciate over time.

>> Isn't this one of those "If everyone is crazy, you're crazy" situations? No. Hopefully you aren't using that justification to do something stupid.

>No.

just no?

group consensus and participation shapes nearly every human endeavor; why do you think that this round-a-bout consensus (97%) is unrelated?

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#100

Post by majormajor »

nwiswell wrote: post #62
coward123 wrote: post #7

I can’t help but think of that saying “the market can stay irrational longer than you can stay solvent.” Yes, prices in many markets are very high and appreciating at a rapid clip, but if there are buyers, competition, and houses are continuing to move quickly, then it’s a bold statement to say they are overvalued and that we should predict a significant decline.

> if there are buyers, competition, and houses are continuing to move quickly, then it’s a bold statement to say they are overvalued and that we should predict a significant decline. No, for the simple reason that (most) people buy homes with mortgages. Take a look at the 30 year mortgage interest rate over the past few months. The total cost to own a newly purchased home is what matters, not the actual sale price. T…

I doubt the 10%+ year over year increases will be sustained with increased mortagage rates.

That's a long way away from predicting a crash or even a significant decline in prices, though. That would require a lot more inventory, and all those folks with 3% mortgages are going to be in no hurry to sell, and the stats on their mortgage amounts vs incomes looks WAY better than it did in 2007.

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