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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

#111

Post by oceanplexian »

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…

There’s no rule that you should be able to afford a house on a middle class income. In fact in many countries, particularly in Western Europe, it’s unimaginable that you would be able to afford a detached, single family home on a middle class income. Lots of people in that situation will live in apartments, row houses, or condos for the rest of their lives.

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

#112

Post by shostack »

frankbreetz wrote: post #96
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.

It would likely trigger larger economic shifts that could cause job loss, tank the market, etc. Hard to buy homes if you have no income or have your investments obliterated before you can sell.

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

#113

Post by noasaservice »

Housing should never have been an asset to make piles of money on. That's how we're in this mess to begin with. We need a place to live. The first priority for a house is to HOUSE someones. That should matter first and foremost.

Investors should be forced to legally go fuck themselves. Same with flippers. Same with landlords. All of these just add extra cost and exfiltrate equity for some rich person to get richer. (I've lived with landlords for 40 years. My hatred is deep here. They've taken my money, built their equity, and charged 1.5x more than the housing would have cost. Damn straight I'm angry.)

there's few cases where landlords of a form make sense - dense housing is needed in cities. Treat them like cooperatives, or do like utility companies where this service is guaranteed and here's the cost. But companies should not be able to unduely profit on the fact that people have to live.

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

#114

Post by dukeofdoom »

Would you rather hold cash or a home during a period of inflation. Most people wisely chose to put it in a house. With a 7% compound interest rate, your money doubles every 10 years. With a 7% inflation rate, I believe it halves in the same time frame. Perhaps it's not that houses are worth more, it's that money is worth less. A 350k house in 2010 should be 700k now if the real inflation was 7%. And at least where I live, that checks out. However, employers haven't raised wages to keep up with this new reality.

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

#115

Post by AYBABTME »

brewdad wrote: post #110
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.

We'll find out over the next 6-12 months. At some point, a lot of home buyers started shopping by payment without regard to total price. With interest rates near their lowest in anyone's lifetimes that was workable. With interest rates rising, as buyers who haven't locked in lower rates begin looking at the current payments on offer, they will have to look at lower priced homes or drop out of the market. If this boom…

Home prices will fall if rentals fall, otherwise no one will want to sell and low market supply will keep prices where they care. But with rising interest rates, sustained demand for rental can be expected.

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

#116

Post by atwebb »

streetcat1 wrote: post #81
nwiswell wrote: post #62

Earlier quoted context omitted.

> 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…

So this is not entirely correct. If I am not mistaken 30% of buyers are cash buyers, hence they do not care about the mortgage rate. Second, the big issues is with houses supply. The high rate basically lock most current sellers which have very low mortgage rate (compared to 5%), hence reducing the supply more.

Many of the cash buyers are either proxies (Ribbon, etc) or turn right around and get a mortgage. One of the touted benefits of real estate is enhanced leverage with equity as the collateral. "Cash" on an offer is more of a waiver of financing contingency, it does sound cool though.

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

#117

Post by 01100011 »

nemo44x wrote: post #43

Where I live, in an affluent town on the east coast, homes have been going for 50%+ over ask. And the asks were high. Something is broken. Homes that wound have been listed at $1,000,000 in 2019 are going for $1.750,000 today. Interest rates going up should cool it off but I fear it will break much of the rest of the economy. There was a massive mismatch in executive policy and fed policy and here we are.

> Something is broken

Say it with me:

> “Inflation is always and everywhere a monetary phenomenon...” - Milton Friedman

It turns out years of suppressing rates combined with dumping many trillions of dollars onto a supply constrained economy causes a rise in prices. Huh... You'd think the trained professionals at the fed would know this by now, but they continue to believe they can defy reality.

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

#118

Post by angmarsbane »

oceanplexian wrote: post #111
pjmorris wrote: post #91

Earlier quoted context omitted.

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…

There’s no rule that you should be able to afford a house on a middle class income. In fact in many countries, particularly in Western Europe, it’s unimaginable that you would be able to afford a detached, single family home on a middle class income. Lots of people in that situation will live in apartments, row houses, or condos for the rest of their lives.

I would love to buy a duplex, rowhouse, townhome, 3 bedroom apartment or condo if they existed and were reasonable.

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

#119

Post by atwebb »

ahoy wrote: post #104
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.

I'm not really sure how. I can count on 1 hand the number of under-40 homeowners I know.

I'm guessing that is location dependent, though it has changed recently, many people I've known (admittedly college educated or further, corporate tech) have been homeowners since their early-mid 20s. (millenial)
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