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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

#691

Post by sokoloff »

pj_mukh wrote: post #638
sokoloff wrote: post #553

Earlier quoted context omitted.

GP was explicitly arguing for government-assured “oversupply of decent housing at all affordability levels.” I do not support government assurance nor ownership for the high-end or luxury levels of affordability.

Right, the government should make sure housing is available at all levels. Presumably it’ll have to do very little to make sure luxury housing is available.

If there’s ready supply at the low and middle end of affordable for all family sizes up to ~12, the program will have succeeded in my book. I would not want so much a single taxpayer dollar go to “improve” the situation from that baseline to one where luxury housing was also readily available.

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

#692

Post by MisterBastahrd »

turtledove wrote: post #615
MisterBastahrd wrote: post #529

Earlier quoted context omitted.

Well then, feel free to buy a house and sell it at cost. Don't worry about all that money you put into the home over the years to improve or maintain it, either. Oh, and to add to the utter inanity of what you're proposing, make sure that you sell it at your purchase cost and not the 200%ish extra that they tack on to a 30 year loan at 4% interest. Go ahead. Chalk it up to a personal experiment and let us know how it…

Improving and maintaining a house is "at cost". And I've done what you describe. I was a landlord for a decade. I paid back each of my tenants all the profit I made from them, thousands and thousands of dollars per tenant. Adjusted upwards by the amount the property had appreciated. I now rent in a sliding scale, capped at the cost of the unit. Granted, it's only been ten years, not the thirty you suggest, but it's w…

When most people are talking about home ownership, we're not talking about being someone else's landlord. We're talking about living in a place until we move, and then selling that property.

You are discussing an entirely different issue.

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

#693

Post by cloutchaser »

mellavora wrote: post #559
closedloop129 wrote: post #525

Earlier quoted context omitted.

They will, as long as they have a job. All the forfeited houses from the people who cannot serve their mortgages will flood the market and drive down prices. Additionally, all the surplus construction infrastructure will be there, fighting for every project, which will make new houses cheap.

> All the forfeited houses from the people who cannot serve their mortgages will flood the market and drive down prices. I used to think this. How does your model change if there is a large pool of private equity, ready to buy properties for cash, and turn them into rental units? Assuming this pool can easily handle the flood (which it looks like it can).

I don’t have any proof of this but I strongly believe private equity, especially the big ones were the biggest beneficiaries of QE and they were closest to access the money.

If we are talking about a recession caused by fed tightening, PE won’t have any money. Especially as higher interest rates will mean they also can’t borrow lots to finance purchases or anything

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

#694

Post by HWR_14 »

jrumbut wrote: post #399
HWR_14 wrote: post #292

Earlier quoted context omitted.

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.

If they didn't care except when they were selling, that makes the effect of them being more consistent voters on zoning issues hard to explain. I think this idea of wanting your house price to be low to avoid property taxes then suddenly increase the value when it's time to sell is like the idea of having your employer pay a trust so you can collect food stamps 11 months of the year then the trust pays you all your m…

> the effect of them being more consistent voters on zoning issues hard to explain.

No one wants to live next to a dump. That's why it affects property values. Because it also effects living conditions.

Meanwhile, a lot of people never plan to sell their home. Yes, if you plan on moving soon, you care about property values going up. If your horizon is 10 years, 20 years, or your kids selling the place? Less so.

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

#695

Post by zamfi »

turtledove wrote: post #345

The sooner we collectively decide that housing shouldn't be a market, the better. We all need it, and we should figure out mechanisms to make it available to all. Practically that means paying to build and maintain housing stocks, changing tax incentives so developers are incentivized to build more housing and less luxury housing, charging a premium for unused land in desirable areas (parking lots don't house people)…

> The sooner we collectively decide that housing shouldn't be a market, the better

Housing is already barely a market. An actual market would be much better.

We artificially restrict the construction of new housing supply by policy and then act all surprised when demand exceeds supply and prices skyrocket.

The same thing is happening in medicine: we artificially constrain the training of new MDs and then act all surprised when demand exceeds supply and prices skyrocket.

Then people come out of the woodwork with "oh look markets aren't working!" -- but in fact the markets are working exactly as designed: those with control over the supply are acting to constrain the supply, in the process enriching themselves at the expense of all others. But instead of recognizing this fact, we look for other reasons. Sure, there are other reasons and interactions, too, but the primary drivers are supply constraints!

Imagine if we explicitly forbade the construction of new grocery stores, forced farms not to use modern agricultural techniques, causing reduced yield, and then bought up a bunch of farmland just to take it out of commission. What would happen? Food prices would, obviously, skyrocket! That's exactly what we're doing with housing.

Your proposed solutions probably won't hurt, but aside from making it easier to build housing, they're noise. In particular:

> upzone neighborhoods

This is the only one that matters -- and it needs to come with other changes too, including construction "by right", that is, without needing to go through a 3-year process of fighting with neighbors who will try whatever they can to prevent new construction because they've been convinced it will destroy their neighborhood and/or property values.

> changing tax incentives so developers are incentivized to build more housing and less luxury housing

We don't need to change tax incentives to get developers to build more housing, we just need to stop preventing them from building more housing. Developers are not sitting around waiting for incentives, they're actively being denied the ability to build. Let's fix that.

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

#696

Post by frumper »

Gh0stRAT wrote: post #485
tomato-sauce wrote: post #365

Earlier quoted context omitted.

I’m surprised anyone has heard of Forest Knolls! I grew up there. It definitely used to be weird and relatively affordable for the middle class but not really any more. Last year someone bought a house in the neighborhood for $1.3 m. It was worth $350k when my parents moved to the area about 25 years ago. The new owners have a pair of new Porsches in the driveway. Maybe that counts as middle class in the Bay Area the…

$350k in 1997-dollars means that 25 years ago, it was worth $627k in today-dollars. Adjusting for inflation, it's doubled in real value over 25 years, which works out to I guess the point I'm trying to make is that $1.3M isn't worth what it used to be but it sounds big in our head because we remember a time when a dollar went a lot further than it does today.

Just running some numbers into affordability calculators. Buying a house at $350k probably had your annual income between 70-80k which was about the top 1/3 of households 25 years ago. That was middle class. To afford $1.4M you're looking at an annual income around 350k. That's about the top 2%. Even if you stretch your budget more and have a hefty down payment you're still going to probably be in the top 5% of income to buy that house.

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

#697

Post by jjav »

vertis wrote: post #502
gameman144 wrote: post #494

Earlier quoted context omitted.

> Given that commoditization is a scale, I would say it could be toward that end of the spectrum if we wanted it to be. Commoditization is only a scale inasmuch as the underlying goods are fungible. Corn is a commodity because nobody cares about differences between individual kernels, but if some process came around that only worked with super-specific kernels, then you'd be reducing the commoditization of corn. I ca…

Those are things you're attaching because of privilege though. One visit to China will give you a view of just how much housing can be commodtized. Endless rows of apartment buildings, each identical, supplying everything you could need. If you're without a home, one house is very much like another. It's only once you have money and ambition that you might want a better view, better schools.

> If you're without a home, one house is very much like another. It's only once you have money and ambition that you might want a better view, better schools.

Particularly if you're poor, location matters a lot.

The very rich will build a mansion in a beautiful but inaccessible area and commute to work by helicopter. The merely rich have the nice cars to get to work. But the poor have no car so need to be either very close or within public transport (mostly nonexistent in the US) to get to that job.

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

#698

Post by HWR_14 »

davidgay wrote: post #220
HWR_14 wrote: post #82

Earlier quoted context omitted.

> 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)

Ah, that's one of the ways the statistic I quoted is skewed. Short term rentals aren't considered "homes" by it, so it would be 100%.

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

#699

Post by HWR_14 »

mellavora wrote: post #563
HWR_14 wrote: post #82

Earlier quoted context omitted.

> 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.

and the trend is clearly and strongly towards fewer owners. Look at the percentage of houses bought by PE vs individuals in 2021. https://www.redfin.com/news/investor-home-purchases-q3-2021/ Real-Estate Investors Bought a Record 18% of the U.S. Homes That Sold in the Third Quarter yes, I know 18% 6%, which was the figure in 2000. the trend is pretty obvious.

You can look at the percentage of people in the under 45 bracket, and it's been trending down for decades. The total is probably remaining high because the lifespan was going up.

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

#700

Post by diordiderot »

endisneigh wrote: post #661
lcnPylGDnU4H9OF wrote: post #659

Earlier quoted context omitted.

I believe the argument would be that the tenant might be empowered to pay for their own maintenance if they're not paying rent to a landlord.

Can’t said tenant just buy a house then?

Because homes are overpriced, because they're treated as capital instead of a durable good & because all financial / building policy advantages existing homeowners
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