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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

#261

Post by scarface74 »

seanmcdirmid wrote: post #92
lupire wrote: post #67

Earlier quoted context omitted.

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…

I’m not disputing your citation. But I believe this is a lot clearer.

https://dqydj.com/household-income-percentile-calculator/

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

#262

Post by jrumbut »

state_less wrote: post #135
epistasis wrote: post #98

Earlier quoted context omitted.

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.

> If there's housing scarcity, then prices will rise far ahead of ability to pay. Housing costs tend toward people's ability to pay, otherwise folks default. That's why the banks ask you about your income and credit worthiness, they want to know you'll be able to pay the mortgage and not default. If money costs increase faster than income, folks won't be able to afford as much money (as high a price).

The connection between interest rates and housing prices is weaker than I would have expected (it certainly exists, just not to the extent I imagined) and oddly enough it takes a couple years to show up: https://www.bis.org/publ/work665.pdf

I suppose it makes sense. They say not to spend more than 1/4 (or 1/3) of your income on housing but if a house costs 2/5 of your income you're probably not going to set up a tent and wait for interest rates to come down.

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

#263

Post by alexb_ »

ryanSrich wrote: post #197
streetcat1 wrote: post #81

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.

Why would anyone pay cash for a house when even a horrendous mortgage rate is still only 6%? That cash is earning 10% easily with zero effort. Put 15 minutes of effort in and open a Betterment account and you’re likely getting closer to 20%. Cash buyers make no sense to me.

"Just get 20% returns easily" LOL! The fact that you would not only think that type of return is consistent and "easy", but literally think that you should go into debt betting on that, is laughable. If it was guaranteed money, everyone would be doing it.

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

#264

Post by xeromal »

scarface74 wrote: post #256
xeromal wrote: post #217

Earlier quoted context omitted.

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.

What part of metro Atlanta are you referring to?

Altoona area. Some places in Woodstock. If you're willing to commute from Canton, it's got some great options too.

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

#265

Post by galangalalgol »

tristor wrote: post #196
oceanplexian wrote: post #111

Earlier quoted context omitted.

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.

> There’s no rule that you should be able to afford a house on a middle class income Here in the US, if one was asked to define “middle class” from a lifestyle perspective, probably the first thing that comes to mind is “homeowner.” I don’t think it’s possible to separate home ownership from class distinctions in the US social strata. Case in point, home ownership rate has remained largely stable for decades at aroun…

I was told that middle class in the US is the class that owns tools that they use to augment or repair their home, whether owned or rented. Poorer and you don't have time between jobs to do it or the spare income for the tools, so it doesn't get done. Wealthier, and you just hire it done, because it isn't worth your labor rate.

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

#266

Post by asdff »

9oliYQjP wrote: post #203
jmyeet wrote: post #173

Moody's who quite famously engaged in what should be criminal conspiracy regarding the rating of MBS [1] leading up to 2008 that cost pension funds, mutual funds and investors billions of dollars makes further statements about the housing market. 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…

You might be right. But I just want to add that this housing asset bubble is global in nature. We here in Canada have been running the interest rate increase experiment ahead of the US. We've also had a much worse run up in housing prices. There are rundown shacks in Oshawa, Ontario selling for more than nice homes in Los Angeles. Where the hell is Oshawa? That's the whole point, it really doesn't matter but it's a f…

I think the biggest factor whether or not prices have room to fall is how built out an area is to its zoned capacity and how many jobs there are in the given metro area. Job growth incurs population growth with incurs development. Development will continue if there is sufficient population demand. In cities like LA, job growth has triggered huge surges in the population over the past century, and in turn this triggered development to the limits of zoned capacity. LA is 92% built out (1). In other words, all the low hanging fruit of how much can actually be built has been built already, and what's left in that 8% are probably the edge cases that for one reason or another have been picked last by developers for development because they are not going to very easily receive financing by lenders who are going to want to see penciled out and sound business plans before loaning money, not the crap in the remaining 8% of zoned capacity that is hardly going to generate a profit.

In order to stand a chance of working our way out of this, we need to make it easy to build in terms of what happens at city halls to make more supply increasing projects viable in the eyes of lenders. We need to increase the zoned capacity of our job centers so they can actually support the workers they employ versus force the lowest earning workers to far flung commutes or into living multiples per bedroom. It's like a law of physics. Make it possible for developers to build and supply will expand like a gas to fill available zoned capacity until demand incurred by labor are met, and prices should not appreciably rise if there is no need to enter bidding wars far above ask.

1. https://la.curbed.com/2015/4/8/9972362/everything-wrong-with...

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

#267

Post by notch656a »

ahoy wrote: post #107
mberning wrote: post #65

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.

If you think 40k/yr is buy-a-house money you've never lived off 40k/yr.

Highly dependent on the area. If that city is say Indianapolis or Toledo it would easily pay all your bills and buy you a house. If that city is San Francisco it's enough to buy some lube for the moonlighting profession you'll have to do to make rent.

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

#268

Post by JumpCrisscross »

babyshake wrote: post #234
sidlls wrote: post #151

Earlier quoted context omitted.

You can't compare Western Europe to the US. Maybe to specific regions or super-urban areas, e.g., the LA to SD corridor or the Bay Area. In which case the two are comparable: there are few if any middle-class families in the bay area that own their homes except by inheritance or some other luck (gift, lottery). Even condos and other high-density housing are all but completely out of reach for all but the top 10% of i…

> there are few if any middle-class families in the bay area that own their homes except by inheritance or some other luck (gift, lottery) Plenty of middle class people bought nice homes they could afford in the bay area in the 90s. Although I suppose you could consider this "luck".

The Bay Area wasn’t the economic centre it is now, then. It was closer to a boomtown, and even that effect was constrained.

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

#269

Post by Dylan16807 »

majormajor wrote: post #229
thereisnospork wrote: post #131

Earlier quoted context omitted.

>Should the home they deserve just magically appear? They should have the right to purchase one, or have one commissioned, at the fair market value for materials, labor, and land.

What does this mean, exactly? They do have the right to purchase on at fair market value for structure + land - it's just they can't afford it. The land is crazy expensive. I'm assuming "have one commissioned" is suggesting something about supply/zoning, but it's not clear to me what, exactly - if someone could afford to build or buy a house 3 miles from Dallas, should they also have the right to pay the same price t…

Both the price of land and the amount of land you need per unit of housing have some serious fairness problems right now.

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

#270

Post by tmnvix »

jmyeet wrote: post #173

Moody's who quite famously engaged in what should be criminal conspiracy regarding the rating of MBS [1] leading up to 2008 that cost pension funds, mutual funds and investors billions of dollars makes further statements about the housing market. 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…

We've been hearing the 'under-supply' argument for over a decade in NZ. StatsNZ shows that in the last 30 years the number of private residences relative to households has increased considerably (roughly 3.5% difference to about 6.5% from memory).

Our housing market is in deep trouble right now. Big falls in the major cities over the past few months (-20% in Auckland city). Listings where I am are up from 1000 this time last year to 3000. Prices are falling. Rentals up significantly too with prices falling.

A speculative boom creates excess demand. Just like Ireland did, we are seeing that the problem was not on the supply side, but the demand side. Speculative vacancies are now being revealed.

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