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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

#291

Post by tomc1985 »

snidane wrote: post #290

Houses lose value by depreciation. In few decades the value is zero, then becomes negative - the price of demolition for the next project. What gains value over time is land. Poeple only think they invest in houses, but they are fooling themselves and overspend on the construction and interiors. They pay for land. Easy to prove - construction material and labor are highly mobile. Cement, bricks and imported labor cos…

Japan also has a cultural habit of demolishing old homes to build new ones, and not building said new homes to last more than 30 years or so.

Here, the only time I see old homes getting demolished is to make way for a new apartment block.

Hell, the house I am living in appears to have been built some time in the 40s to 50s

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

#292

Post by HWR_14 »

jrumbut wrote: post #244
HWR_14 wrote: post #207

Earlier quoted context omitted.

> A majority of consistent voters own homes and want house prices to increase. Are there actually data that say that? I'd only expect data to exist on the first half, but there may also be data (as opposed to a fairly good supposition) from the second.

If we ignore the word majority (since that will vary by jurisdiction I'm sure) and say that homeowners are more likely to vote and pay particular attention to issues that affect their home's price then this recent paper does provide some support: https://www.andrewbenjaminhall.com/homeowner.pdf I'll say from personal experience, it does change your perspective. If a sewage treatment plant moves in next door, I can't…

Thanks for the paper.

I understand the NIMBY-ism. I do wonder how much people care about the value of their house going up if they don't plan to sell soon. There are advantages to your home being less valuable and the only disadvantages come if you want to leverage your home more, refinance (not likely with rates going up) or sell it.

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

#293

Post by AlchemistCamp »

oicU00 wrote: post #283
AlchemistCamp wrote: post #221

Earlier quoted context omitted.

What does this have to do with whether or not the housing market is overvalued? It seems like a thread-derailing comment likely to drag down the quality of discussion.

The EU Apple to US orange comparison you mean? What’s the EU have to do with US home values?

I replied to that comment as well. Affordability of housing the EU (or Japan, or China, or India, etc) isn't really that relevant to the situation in the US.

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

#294

Post by asdff »

gnopgnip wrote: post #259
asdff wrote: post #249

Earlier quoted context omitted.

OTOH not everyone is crazy and not everyone is participating in this market. The only people playing are those who can afford to pay at these prices. Huge numbers of people are sidelined and can't afford to even put in an offer. IMO either those people on the sidelines manage to save or generate enough to jump into play or prices fall to meet the buyers when there are simply no more high income people who can pay tho…

You are participating in the housing market by both owning and renting

Renters aren't really active participants like homeowners and sellers are, they are passively beholden to the market. For example, they aren't actively setting prices the way home buyers do when they try and put in a bid. They are passively setting prices perhaps, but once again the only reason why these drum ups are also possible is because there are renters who are willing to pay at these prices because they are compensated enough to pay these prices.

Plenty of people are on the sidelines in this situation too, either in waiting in a rent controlled apartment perhaps, or opting to add another roommate and keep rent low in the face of an increase which also removes this new roommate from entering the market for themselves and contracts further the number of renters who are out shopping for apartments on the market at these prices.

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

#295

Post by bombcar »

asdff wrote: post #266
9oliYQjP wrote: post #203

Earlier quoted context omitted.

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 trigger…

There's also strong differences in density - in the US it's often either single family homes or apartment high-rises; but if the City of Los Angeles had the 5-10 story wall-to-wall houses that Paris has it could see a population of 22 million, compared to the current 3.8.

Going for the metro area could be even larger.

One huge advantage places like Paris have is that they've been dense for so long that there is older housing available in dense areas; in the US any new density will be new construction, and therefore tend to aim at the luxury/higher-cost buyer.

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

#297

Post by bryanrasmussen »

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…

>I think there's a more concrete measure of value: house prices related to income.

So it could also be that 97% (or close) of wage earners in the U.S are underpaid?

Or I guess it could be a combination of some underpaid, some overpriced.

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

#298

Post by AussieWog93 »

_carbyau_ wrote: post #152
AussieWog93 wrote: post #16

Earlier quoted context omitted.

Not sure if it's different in the US, but in Australia rental incomes for residential property are a tiny percentage of the value of the investment and most of the money is made through leveraged capital gains. For example, I pay $24k a year on a house worth around $1.4m. This gives a return of around 1.7%, which is nothing compared to cap notes (5%) or dividends (~4%). However, someone buying our house would only ne…

I agree with you but to add another point, if house prices were to decrease significantly then loan margins would kick in for homeowners too. And with low interest rates, low wages(vs house price) for so long the margins for that are tight for a lot of (silly?) people who borrowed "as much as they could". It seems like: - house prices up, investors win. - house prices down, homeowners lose . It will be interesting to…

Theoretically, the market going up or down shouldn't make any difference at all to most owner-occupiers.

If they hold onto the house, short-term fluctuations don't affect the eventual sale price. If they buy a new property in a similar market after selling the old one, then the "losses" on the old house are made up for by the "savings" on the new property.

It's only people who downsize or leave the property market altogether that would be affected by a short-term dip.

(The caveat being, of course, that this completely handwaves away human psychology! Being "underwater" on the mortgage would definitely make a lot of people stressed and anxious.)

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

#299

Post by 11235813213455 »

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 don't know how it works in the US, but in France, when you buy an apartment or house, you pay about 8% to the state (notary / attorney fees), that participates in the inflation I guess

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

#300

Post by 01100011 »

jt_b wrote: post #181
01100011 wrote: post #150

Earlier quoted context omitted.

Pretty sure the covid stimulus passed while trump:Biden was/is president is like 2:1. Not giving either one a pass though because Biden reappointed Powell and failed to give Powell the political direction to raise rates late last year when it was obvious inflation was anything but transitory.

The Federal Reserve is independent of the executive branch's political aims. Its mandate is to keep inflation and unemployment in check with the tools it has at its disposal (interest rates, balance sheet).

> The Federal Reserve is independent of the executive branch's political aims.

That's the theory anyway.

The fed chair is appointed by the president and still has some accountability to the political machine. It is independent in many ways but it is not truly independent.

> Its mandate is to keep inflation and unemployment in check

Yes and now it is also trying to fight climate change, wealth gaps, and other "ESG" goals.

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