Homes in 97% of U.S. cities are overvalued, Moody's says • Hacker News Board

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

#761

Post by hackerfromthefu » Sun, May 08, 2022, 12:27 AM UTC

ryanSrich wrote: post #211

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 esti…

But for someone just purchasing now, paying those mega high prices, a 10% drop is a lot of money they borrowed .

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

#762

Post by hackerfromthefu » Sun, May 08, 2022, 12:36 AM UTC

ohiovr wrote: post #585

If mortgage rates were 7% housing would come down in price nicely. Very nicely. So would rent.

If rates go up like that the housing market will freeze up and people wont sell if at all possible to avoid. Banks who own the assets if they force people to sell don't want to see the asset values go down below their collateral required. Hence banks move softly and let the majority of underwater people ride it out instead of selling.

Why would rents go down? It might go up?

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

#763

Post by danans » Sun, May 08, 2022, 5:53 AM UTC

zamfi wrote: post #676

danans wrote: post #381

Earlier quoted context omitted.

> The US has mind-boggling amounts of land available. What's changed is the ability and desire to build on it. Times have changed and most people don't want to live in marginal lands that are available in mind boggling quantities. In addition, the reason that a lot of cities were built a few generations ago in the hinterlands was because manpower was needed for resource extraction industries, which have since either…

> most people don't want to live in marginal lands that are available in mind boggling quantities That's not "times have changed" -- people have never wanted to live on marginal lands, that's why the government paid people to move there . > a lot of cities were built a few generations ago in the hinterlands Few cities are built in the hinterlands for the purposes of resource extraction; cities grow where trade is, bu…

I think we are in agreement. In particular about the effects of Bay Area suburban zoning.

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

#764

Post by coward123 » Sun, May 08, 2022, 6:01 AM UTC

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

Then how would you recommend houses trade ownership?

>so developers are incentivized to build more housing

How do you prevent the development of shitboxes (it's a technical industry term)? Because that's what builders build when they need to hit a particular price point at scale. Houses that are quickly built out of low end materials and will decay over about twenty year period unless a homeowner invests considerably in upgrades.

>one shouldn't be "priced out" of the home they've lived in for 20 years

I'm in full support of the concept, but when you start to look at the causes of this, it gets complicated quickly and many of the causes aren't even directly related to housing. It's not just as simple as property tax moratoriums.

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

#765

Post by nr2x » Mon, May 09, 2022, 2:52 AM UTC

wctawcta wrote: post #339

nr2x wrote: post #254

Earlier quoted context omitted.

Eventually, housing costs begin to outstrip income. Starts at the bottom and goes up. In South Bay a quarter million of household income can’t get you a modest family home. Simple single family homes go for $3M.

It's wild. Single family houses are being listed at $2M-$3M and going for $1M over asking. And the houses would often be considered fairly modest anywhere else in the country. I imagine a lot of buyers can afford this by selling their existing homes. Or perhaps they socked away a huge nest egg during after an IPO or over the duration of the stock market run up. But new homebuyers would need to earn about $750k+/year…

If I were paying a mortgage with equity rather than salary I’d be nervous right now. There has to be a non trivial amount of people in that situation, and the stock market tanking means some people will not have the planned upon income. Then what?

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

#766

Post by jacobr1 » Mon, May 09, 2022, 5:14 PM UTC

carapace wrote: post #723

Ekaros wrote: post #721

Earlier quoted context omitted.

Yes, terminate the contract according to local regulations. Rent again for higher price. Then those who can't afford would need to either move out to cheaper regions or find ways to pay the correct market rate.

That seems like it would make for a pretty precarious living situation for people who can't find ways to pay the correct market rate, eh? The bottom line (no pun intended) is that the corporation that owns Park Merced has (presumably) done the math and they expect to make more money by keeping the apartments empty and eating the losses now (and paying the overhead of evicting gangs of squatters) so they can rent them…

> But I don't follow how getting rid of rent control would incentivize supply increases?

Leaving units empty, or locked into lower-than-market rates are going to reduce the average profitability of investments. Investment in new units is in part a function of how profitable they will be sell, or to rent out.

But honestly the incentive for bay area real-estate is there, what really is needed is the ability to build with fewer encumbrances.

> That seems like it would make for a pretty precarious living situation for people who can't find ways to pay the correct market rate, eh?

Yes, this is generally referred to as gentrification. But, renting, even to poorer people, nevertheless is still usually profitable, albeit with more risk requiring a larger portfolio.

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

#767

Post by harambae » Tue, May 10, 2022, 9:43 PM UTC

bmmayer1 wrote: post #510

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)…

Isn't the problem that housing isn't more of a market? In an actual market, margins are competed away and prices drop over time, there's elasticity in supply and demand, and people don't view their 15-year old cars or whatever as "investments", they trade them up for a newer model and pass down the older stuff to people who can't afford them as much. In housing, we artificially constrain supply with zoning laws and b…

This is how I view it as well. And there'd be a analogous method for getting medical costs lower in America by increasing competition (within reason, I understand why no one wants to go back to the days of snake oil remedies in an unregulated free for all).

Also odd is how these HN threads on housing often devolve into redesigning a socialist utopia from scratch in America, as if such a radical revolution has any chance, when Californians can't even organize enough to get Prop 13 repealed. Removing red tape and zoning to get to a more efficient market is much more achievable.

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

#768

Post by ohiovr » Tue, May 10, 2022, 10:03 PM UTC

hackerfromthefu wrote: post #762

ohiovr wrote: post #585

If mortgage rates were 7% housing would come down in price nicely. Very nicely. So would rent.

If rates go up like that the housing market will freeze up and people wont sell if at all possible to avoid. Banks who own the assets if they force people to sell don't want to see the asset values go down below their collateral required. Hence banks move softly and let the majority of underwater people ride it out instead of selling. Why would rents go down? It might go up?

If rates go up, there would be massive liquidations all across the board. Landlords with 12 properties would have to scale back to survive. Those properties would be sold for fire sale prices. Fire sale priced homes are not going to rent for a lot of money. Bonus; it will totally bankrupt Blackrock. Rates will go up if we are lucky enough to have a world in which we will be in it.