121–130 of 768 posts
There’s something happening with Euro/JPY vs USD that is forcing a significant inflow into US assets. It’s going to continue because: (1) EU kicked the can for far too long and they cannot meaningfully raise rates without facing the realities of the debt crisis of 2010-12, and now made impossible due to Ukraine, and (2) Japan is committed to driving down the yen even further. USD is king and real-estate will reflect…
Essentially, a few hundred rich people moving from SF to some smaller town won't move SF's housing cost but will skyrocket the small town housing cost. However, the few hundred rich won't boost the income significantly.
This is a data artifact made from the fact that "prices" are determined by what's on the book and "income" is determined as a whole. The difference between what's on the book vs. the whole is best illustrated by San Francisco, where most people pay far less for a 1 br apartment than the "going rate for a 1 br apartment".
Even the repeat-sales method for home pricing is not immune to this data artifact because we don't use a new-job method for income. This causes decoupling of the fundamentals when you get the remote-work revolution.
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…
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.
People with large sums of spare money always look for ways to park their money. Interest based products (term deposits, bonds etc.) will now become more attractive, diverting some cash flows away from housing.
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…
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…
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.
So my question is, if there is twice as much money in the system, but the same number of assets, why would it be shocking that housing continues to inflate?
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.
Yes and no. I would agree, but housing is, for the most part, fungible (at least for people with tech salaries). If I sold my house, I could pay for rent in my high-cost area for the better part of a decade with just the income off the sale. I am starting to think I might be crazy not to sell and pocket the money: I could rent down the street and pay rent off my salary while that large pile of money collects rent. A…
Earlier quoted context omitted.
Forever? Here in Brazil we negotiate a yearly rate for the whole extension of the contract. Isn't this standard?
In the US, 15, 20, and 30 year fixed are boring standard mortgages, with various adjustable rate mortgages available from 1-10 years (and even some interest only products, where you’re essentially just renting the property from the bank and not building any equity).