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Why Can't We Build an Affordable House?

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Re: Why Can't We Build an Affordable House?

#41

Post by euccastro »

gaius wrote: post #12
eru wrote: post #9

Earlier quoted context omitted.

You can't blame the sellers. They took whatever price they got away with. That's what they are supposed to do in a market.

Well, exactly. Here in the UK there are lots of people complaining that locals are being priced out of their own coastal towns, as city folk are buying up properties as second homes. But when the time comes to sell, those locals are perfectly happy to take the money. Most of today's problems are caused by people who want to have their cake and eat it.

The people that complain aren't probably the ones taking the money, but the ones that can no longer afford to buy a "first home" in their (increasingly deserted and dehumanized) hometown.

I'm for taxing "nth-homes" exponentially to n. It would only hurt speculators who overall destroy value anyway. If you'll be using a house for two weeks a year, you should rent it.

Re: Why Can't We Build an Affordable House?

#43

Post by eru »

euccastro wrote: post #41
gaius wrote: post #12

Earlier quoted context omitted.

Well, exactly. Here in the UK there are lots of people complaining that locals are being priced out of their own coastal towns, as city folk are buying up properties as second homes. But when the time comes to sell, those locals are perfectly happy to take the money. Most of today's problems are caused by people who want to have their cake and eat it.

The people that complain aren't probably the ones taking the money, but the ones that can no longer afford to buy a "first home" in their (increasingly deserted and dehumanized) hometown. I'm for taxing "nth-homes" exponentially to n. It would only hurt speculators who overall destroy value anyway. If you'll be using a house for two weeks a year, you should rent it.

Speculators are helping price-discovery.

How do you want to distinguish between 'nth-homes' and landlords?

Re: Why Can't We Build an Affordable House?

#44

Post by hugh »

weegee wrote: post #34
rsheridan6 wrote: post #26

Here's why we wouldn't : cheap houses = poor neighbors = various social pathologies and stigmas. You can get an affordable trailer now, but most people don't if they can afford not to.

not necessarily true. there is a distinction to be made between cheap and affordable. around where I live, there are no affordable houses being built anywhere. every new home is at least $600k, far outside the wage of the average resident. I can remember in the late 1980s you could buy a new home for less than $100k. Good luck doing that now!! I find it incredible that people can afford to buy, and live in, these hug…

I don't know where exactly you live, but for any house worth $600K, the land value is probably at least $400K.

The difference in cost between building a smallish 3 bedroom house and a hugeish five-bedroom house is quite small as a portion of the total cost (<$100K). On the other hand, in any major metropolitan area the difference between having a small backyard and a big one is huge. Hence, new construction tends to be huge houses on tiny lots.

Re: Why Can't We Build an Affordable House?

#45

Post by anamax »

lacker wrote: post #29
anamax wrote: post #13

Earlier quoted context omitted.

> People didn't "buy houses they couldn't afford". They bought houses who's value was 40-50% inflated and then had that value disappear, almost overnight. If they can't pay for their houses, they can't afford said houses, no matter what said houses are worth or how said worth changes. Mortgages aren't "called" when a house's value changes. Mortgages aren't "called" when the lender goes bankrupt (someone else buys the…

It is technically true that the terms don't change when the house value changes, but it is misleading to suggest that house value doesn't affect affordability. The distinguishing feature of most subprime loans is that the interest rate changes after a few years. A typical subprime loan could be 3 years at 8%, then 27 years at 12%. The assumption (made by bankers to justify the subprime model) was that after paying lo…

> The assumption (made by bankers to justify the subprime model) was that after paying lower prices for a few years, the borrower would have some equity built up in the house, so they would be a better credit risk, and they could refinance at that point for a lower rate.

No, that's not what happened. Folks got loans where they could afford the teaser rate but not the regular rate. Even if they'd put down 20% and the house didn't go down in value, they couldn't afford what they'd bought.

If housing prices had continued to appreciate, they could have done a cash-out refinance and used that money to help them pay for the new loan, but that just delays the inevitable. ($50k doesn't go very far when a payment that you can't afford goes up by $1k/month.)

Or, they could have sold and taken the equity to buy something that they could afford.

The only way that they could have kept those houses (without significantly increasing their income) is if they'd been able to do no-cost refis with teaser rates until they were paid off. Since many/most of those loans were interest-only....

Note that most of the teaser-rate loans had prepayment penalties.

The amount of equity that one has in a house has very little effect on the interest rate. The big driver is interest rates in general.

Re: Why Can't We Build an Affordable House?

#46

Post by anamax »

lacker wrote: post #29
anamax wrote: post #13

Earlier quoted context omitted.

> People didn't "buy houses they couldn't afford". They bought houses who's value was 40-50% inflated and then had that value disappear, almost overnight. If they can't pay for their houses, they can't afford said houses, no matter what said houses are worth or how said worth changes. Mortgages aren't "called" when a house's value changes. Mortgages aren't "called" when the lender goes bankrupt (someone else buys the…

It is technically true that the terms don't change when the house value changes, but it is misleading to suggest that house value doesn't affect affordability. The distinguishing feature of most subprime loans is that the interest rate changes after a few years. A typical subprime loan could be 3 years at 8%, then 27 years at 12%. The assumption (made by bankers to justify the subprime model) was that after paying lo…

> But, when housing prices dropped, many of these houses were now worth less than the outstanding amount on the mortgage, even after a few years of paying down the loan.

If you look at the loan amortization table for a 30 year fixed loan, you'll see that there's very little pay-down in the first several years. There's zero pay-down with interest-only loans, which many of the teaser-programs were. There's NEGATIVE pay-down with interest-deferred loans (which many of the teaser-programs were).

> Basically, it is easier to afford a house if it maintains its value after you buy it, because the equity gives you more flexibility in refinancing.

Refinancing makes a house more affordable only if interest rates decline, and then only if you don't take money out.

Re: Why Can't We Build an Affordable House?

#47

Post by newaccountname »

eru wrote: post #43
euccastro wrote: post #41

Earlier quoted context omitted.

The people that complain aren't probably the ones taking the money, but the ones that can no longer afford to buy a "first home" in their (increasingly deserted and dehumanized) hometown. I'm for taxing "nth-homes" exponentially to n. It would only hurt speculators who overall destroy value anyway. If you'll be using a house for two weeks a year, you should rent it.

Speculators are helping price-discovery. How do you want to distinguish between 'nth-homes' and landlords?

If it is rented, it isn't an nth home.

Re: Why Can't We Build an Affordable House?

#48

Post by gojomo »

niels_olson wrote: post #25

The whole article is based on the failed idea that the burbs are the way to go. Many people who have read A Pattern Language understand that the neighborhood is also key, though they often can't realize it alone, so they instead build really fancy and eclectic single-family two-story homes, (how novel /sarcasm). I would be interested in connecting with more people who understand and want to realize Christopher Alexan…

I can't resist posting some patterns observed by a neighbor at Alexander's actual residence in Berkeley:

"Another Pattern Language: Real Life Patterns Chez Christopher Alexander"

http://internettime.com/Learning/alexander.swf

Re: Why Can't We Build an Affordable House?

#49

Post by euccastro »

eru wrote: post #43
euccastro wrote: post #41

Earlier quoted context omitted.

The people that complain aren't probably the ones taking the money, but the ones that can no longer afford to buy a "first home" in their (increasingly deserted and dehumanized) hometown. I'm for taxing "nth-homes" exponentially to n. It would only hurt speculators who overall destroy value anyway. If you'll be using a house for two weeks a year, you should rent it.

Speculators are helping price-discovery. How do you want to distinguish between 'nth-homes' and landlords?

Speculators are helping price-discovery.

Care to elaborate how that works for urbanism, esp. in coastal zones?

"Discovery" is not even an apt word to use here. It connotes there is some "optimal" price towards which supply and demand will converge no matter what, just speculation will help that happen faster. In the real world, urbanistic speculation promotes overdevelopment, which greatly affects quality of landscape and living environment, thus effectively -and, what's worse, irreversibly- changing the value of the land.

Does "Tragedy of the Commons" ring a bell?

Re: Why Can't We Build an Affordable House?

#50

Post by [deleted] »

gojomo wrote: post #48
niels_olson wrote: post #25

The whole article is based on the failed idea that the burbs are the way to go. Many people who have read A Pattern Language understand that the neighborhood is also key, though they often can't realize it alone, so they instead build really fancy and eclectic single-family two-story homes, (how novel /sarcasm). I would be interested in connecting with more people who understand and want to realize Christopher Alexan…

I can't resist posting some patterns observed by a neighbor at Alexander's actual residence in Berkeley: "Another Pattern Language: Real Life Patterns Chez Christopher Alexander" http://internettime.com/Learning/alexander.swf

[deleted]
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