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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

#211

Post by ryanSrich »

lampshades wrote: post #5

A 10% drop is nothing for anyone that has owned for more than 3 years, at least in my area.

I live in a blue collar neighborhood of a west coast city. I’ve done extensive work to update my home, I’ve added features like central air, new floors, new lighting, and landscaping. It’s like a new house (though it was built in 1955). Both Zillow and Redfin tell me my house is worth roughly double of what I paid for it in 2015. That’s without even considering the upgrades I’ve done. A 10% drop from the current estimate is meaningless when most homes are worth 50-150% more than what they were worth 10 years ago.

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

#212

Post by nitrogen »

bradleyjg wrote: post #163
bkjelden wrote: post #136

Earlier quoted context omitted.

One major problem I see with comparing housing prices to income is that most homebuyers in the US are using leverage (a mortgage) to buy their home, and the last 15 years or so have seen comparatively low mortgage rates compared to the several decades beforehand. Housing prices have been able to balloon because debt has been very, very cheap. Whether or not that will continue remains to be seen.

A majority of consistent voters own homes and want house prices to increase. That means most politicians want house prices to increase. The government dominates all aspects of residential lending. What’s the smart bet on what will happen?

This comes up a lot. But it's wrong, or at least incomplete. People who want to live in their house don't want the value of that house to go up, because then their taxes go up.

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

#213

Post by olyjohn »

rufus_foreman wrote: post #141
Rury wrote: post #128

Curious, are people suddenly paying higher property taxes now that houses are worth much more in a short time span?

Maybe some people are. Property taxes are state by state. But that's not the way they do property taxes where I live. Where I live, they have an amount of taxes they need to collect, and then they divide that up based on property values. If the value of everyone's property doubles, they still need to collect the same amount of property taxes, so everyone's property taxes stay the same. I guess in some places, they ju…

I believe in some states, there's a limit to how much the tax-assessed value can increase in a year. So even if the housing prices double, they may only be able to increase taxes by a couple percent.

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

#214

Post by tempnow987 »

conductr wrote: post #139
brewdad wrote: post #110

Earlier quoted context omitted.

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…

The concept of the cash buyer is a bit of a farse as well. What usually takes place is a cash offer. They just need to proof of funds to do this. But then, they get financing to close. Nobody in their right mind is putting that sum of cash in real estate when they could borrow at 2% or whatever it was before the recent run up. The mortgage interest even has favorable tax treatment so it’s effectively much less. Oh an…

Not true at all. If you are self employed getting underwritten can be a nightmare.

We had savings galore but they wouldn't count it for a variety of reasons (withdrawn from biz account in last 90 days, biz account showed slight decrease because of covid), then calcs with old place and new together are hard.

Sometimes if you just leverage equity in old place you will be moving from + hard money + savings, you can do a cash offer, then sell off old place (we had a preemptive offer 4 days in well over asking - bay area).

Now you only have to be underwritten for one property (before selling old property they included both in calculations which made it hard). We got a 3% rate, then used that to settle up everything back to the way it was.

California also have firms like Reali (https://reali.com/how-to-guide-cash-offer/) that do a cash offer on new place, then you sell old place and buy from them.

This might be unique to the insanity of the CA market in last 2 years. I think it is cooling down thankfully?

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

#215

Post by HWR_14 »

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…

> . At some point, a lot of home buyers started shopping by payment without regard to total price.

At a N-year fixed interest rate, it's smarter to shop by payment without regard to total price. All the more if you can avoid a large downpayment. After all, that's what matters, right?

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

#216

Post by autokad »

bkjelden wrote: post #136
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…

One major problem I see with comparing housing prices to income is that most homebuyers in the US are using leverage (a mortgage) to buy their home, and the last 15 years or so have seen comparatively low mortgage rates compared to the several decades beforehand. Housing prices have been able to balloon because debt has been very, very cheap. Whether or not that will continue remains to be seen.

Yes, and interest rates have gone up, thus all those homes are now over valued (if price of debt is your metric)

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

#217

Post by xeromal »

seanmcdirmid wrote: post #55
maxerickson wrote: post #30

Earlier quoted context omitted.

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).

We lack space in the few urban areas people want to live in. If people were flexible about where they wanted to live, you’d think that the cheap land/lightly zoned places would prosper, but they don’t.

For sure. I grew up in the deep south outside ATL and houses there are still "cheap". They're certainly outpacing the poor folks who were born and raised there, but you can still snag a house with an acre or so of land in the 100,000s.

Beautiful land too. Forests, creeks, and wildlife.

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

#218

Post by jankyxenon »

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…

The question is - how much do historical patterns predict future ones.

Can attitudes and norms on what % income spent on housing change? As people attain a higher standard of living, can this trend up?

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

#219

Post by InTheArena »

01100011 wrote: post #117
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.

So much for MMt(at least the way that certain people perceived MMT to be)

We are about to pay for 12 years of easy money policies.

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

#220

Post by davidgay »

HWR_14 wrote: post #82
nemo44x wrote: post #53

Earlier quoted context omitted.

I mean, just about every house has an owner that lives in it. Homes are expensive. Most people just can’t afford a big slice of land and home. They have to accept they will have to make do in an apartment that may be shared. Should the home they deserve just magically appear?

> just about every house has an owner that lives in it Just under 2/3 of US homes have an owner that lives in it.

What's the number of owners + long-term renters? (the likely relevant metric when looking at housing price vs local incomes)
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