171–180 of 768 posts
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It also ignores the vast differences between densely populated and not very populated cities.
Even Manhattan is cheaper than most places according to the same metric.
In my city, 10 years ago, a nice starter home was around 150k. Now you can’t buy a dump for less than 200k. And those same nice starter homes are 250k+. It’s not hard to imagine why. People flipping burgers can easily make 40k per year now just in base pay. A single person working an incredibly low end job now makes enough money to get approved for nearly 200k loan.
Sorry but I don't put a lot of stock in what Moody's says about anything.
There's pretty strong evidence that the rise in house values is structural not speculative. This is essentially the constraint of supply. There are multiple causes of this including:
1. The US building very few new homes 2010-2020. There are lots of reasons for this. A big problem is the type of housing being built, particularly in urban center where like NYC where the vast bulk of new housing units are ultra-luxury condos;
2. Permissive policies allowing the rich to park money in real estate. This particularly includes foreign nationals from places like China, India and Russia; and
3. An increase in people owning multiple properties. These include second homes, vacation homes and short-term rentals (most notably for AirBnB). There's strong evidence that AirBnB in particular has huge negative impacts on a lot of metropolitan areas.
A lot of tempted to blame Blackrock and other instituationl investors as constraining suply. this is completely overblown. These account for less than 1% of US homes.
[1]: https://www.ft.com/content/6457f28a-d9fa-11e6-944b-e7eb37a6a...
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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.
Don’t forget to mention they still have full health coverage in the EU. It’s not possible to afford housing or robust healthcare in the US. Keep in mind there’s no rule we have to tolerate either. Imagine being a teenager in the US, having just seen how essential workers are treated, knowing in all likelihood your future is an “essential worker”. Then watch Congress scapegoat Facebook.
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> 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.
Not necessarily. For anyone who's been working at FAANG and amassed certain amount of financial independence, the advice generally ran along the following scenario:
1) Secure a pledged-asset loan against your stock portfolio. That reduces the need to sell anything and trigger capital gains.
2) Shop around for real estate and submit a cash based offer to signal that you can close quickly.
3) Finalize the transaction.
4) Shop around cashout refi loans with fixed rates. Refi. Cashout. Repay the asset-backed loan.
If those 30% who are cash buyers kept their cash locked up in their houses, you wouldn't see household mortgage debt (that includes refi) skyrocket https://www.emarketer.com/newsroom/index.php/us-mortgage-deb...
Earlier quoted context omitted.
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.
Too many people seem to think 'cash deals' in real estate equate to a guy showing up with a louis vutton bag full of 100s that's been collecting dust in their shoe closet
It's just an indication of a lack of nuance in the deal-making, lack of contingencies (i.e. I'll give you $XYZ for your house as soon as I get $ABC for my house - agreed?!)
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.
The market is being completely rational. What "overvalued" here means is "are homes expensive compared to local wages" not "are homes irrationally expensive." Normally this would drive construction but the market is distorted by credit such that new construction is less economical (a result of 2008.)
This also forms a feedback loop: people are giving up on labor since housing consumes more than they make, driving up the price of construction, driving up the price of housing. It's likely the dollar will crash before middle/lower class hosing will.
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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.
Earlier quoted context omitted.
Don’t forget to mention they still have full health coverage in the EU. It’s not possible to afford housing or robust healthcare in the US. Keep in mind there’s no rule we have to tolerate either. Imagine being a teenager in the US, having just seen how essential workers are treated, knowing in all likelihood your future is an “essential worker”. Then watch Congress scapegoat Facebook.
“Full health coverage” according to all my EU and especially British friends I would still be on a waitlist for a surgery I had 2+ years ago.
But you’re right, you’ve put me off on the whole idea. Good effort. There’s no way around artificial scarcity.
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.