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U.S. home prices are the most unaffordable they've been in nearly 100 years

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Re: U.S. home prices are the most unaffordable they've been in nearly 100 years

#141

Post by NDizzle »

dalyons wrote: post #73
noisenotsignal wrote: post #49

Earlier quoted context omitted.

This seems a bit extreme. If you can afford to move, does interest rate really factor in? If rates get worse you’ve still locked a better rate, if rates get better you refinance. Besides, there’s plenty of reasons to move besides for a job (and not everyone can work remotely or get a remote job with comparable compensation). Yeah, you’re going to pay some more interest if you get a new mortgage, but don’t you just ad…

Yeah I think the HN crowd is vastly overestimating how much people care about rates. Most people are not perfect financial optimizers - they’ll just pay whatever they can maximally afford per month for a house that most closely matches what they need for their present life. Few people are coldly rate rational. You only have to look at what people pay for car loans to confirm this.

They care about what they can afford each month. They indirectly care about the rate. The sign on the starter home neighborhood near me was $719/mo when I moved here in 2020. It crept up to 850, 970, 1100, and then they changed the sign to not have that information. Same houses.

Hopefully only sane mortgage products continue to be used so it doesn’t end up like automobile loans. Aren’t most car loans 72 months now? That’s what is required to get the monthly note affordable for most buyers.

Re: U.S. home prices are the most unaffordable they've been in nearly 100 years

#142

Post by NDizzle »

angmarsbane wrote: post #82
dangus wrote: post #18

Earlier quoted context omitted.

Prices actually have adjusted and have fallen somewhat. What life event would cause someone who currently owns a home at a It’s a once in a generation type of rate. You’d have to be a complete fool or have some kind of crazy life circumstance to sell. Over 30% of employers in the US exclusively hire remote employees. Post-pandemic it’s hard for me to imagine someone in the home ownership socioeconomic class giving up…

Divorces, deaths in the family, growth in the family, people move to be close to certain hospitals / schools etc. Maybe one half of a marriage gets a remote role but the other doesn’t.

With remote roles you no longer need two income households. Raise your kids yourself. That statement will get me downvoted, but if even one person is inspired to think that through it’s plenty worthwhile.

Re: U.S. home prices are the most unaffordable they've been in nearly 100 years

#143

Post by 411111111111111 »

FredPret wrote: post #136
mint2 wrote: post #133

Earlier quoted context omitted.

Demand for homes may exceed supply but ask what that demand really is. A big chunk of that demand is for 2nd or 3rd or even 4th properties as investment rental properties. Can’t afford a house in the sf Bay Area, no problem, go buy 4 investment properties in the Midwest! I know people who’ve done that. Also look what houses are built, they aren’t starter homes in many areas. They are “luxury” (luxury per home markete…

That makes zero sense. Do you think those rental units disappear off the market? There isnone unified housing market, rent and buy. People can still rent if they can’t buy. Building more will inevitably fix the housing market, even if one investor owns every single new house.

> Do you think those rental units disappear off the market?

There have been reports on this which observed the properties being removed from the housing market, so yes.

Its supposedly not worth the risk/effort to find renters which could potentially wreak your property, never pay and need to be evicted.

That makes it more cost -effective to just hold onto the property while paying someone to occasionally check up on it until it's resold for profit

Re: U.S. home prices are the most unaffordable they've been in nearly 100 years

#144

Post by Joeri »

junofan wrote: post #132
pphysch wrote: post #106

There's a lot of noise about supply, demand, investment cycles, AirBnB, but the elephant in the room is that USA housing is a casino and the banks are the "house", which always wins. The banks only care that housing prices remain astronomical--the mechanics are not important--so that mortgages must be taken out. And, as recent history shows, the mortgage casino is "too big to fail" because of the globally-systemic ro…

It’s pretty unusual that we have people approach residential real estate in this hyper-financialized way. It’s a weird 1930s way to inject liquidity, and we have better tools now. An individual is fucked if something happens to crater the price of their house. Nobody hedges, really. It’s a toxic system.

It’s weird that the insurance industry hasn’t capitalized on this. Make people pay for covering the risk that their house will drop in value, and make money on the fact that the vast majority of houses will rise in value.

Re: U.S. home prices are the most unaffordable they've been in nearly 100 years

#145

Post by fifticon »

vkou wrote: post #121
chiefalchemist wrote: post #2

This is to be expected. Sellers are always reluctant to be reasonable when they are on the wrong side of a peak. The raising of interest rates means prices have to adjust. But after so many years of increasing prices sellers are not yet rational. And yes, some more inventory would help. That said, as the population ages, who is going to buy all the McMansions? Price not only need to adjust to interest rate but demogr…

> That said, as the population ages The US population is projected to continue growing throughout most of the 21st century. If you're waiting for people to die so you can afford real estate, you'll be waiting a long time.

Also, with the american quality level of construction for houses, by then those houses will require major investments and renovations to continue to stand.

Re: U.S. home prices are the most unaffordable they've been in nearly 100 years

#146

Post by bagels »

echelon wrote: post #35
hn_throwaway_99 wrote: post #30

This article is missing perhaps the most important graph, which is median income to some common monthly payment metric (e.g. average monthly payment for a 30 year mortgage with 20% down). Reason being that the article mentions interest rates, but then just shows graphs comparing to sales price. Ironically, showing a metric that took interest rates into consideration would probably highlight why the current situation…

> Owners won't sell at a loss if they don't have to Supply and demand. If supply drops and demand doesn't... That's what /r/REBubble refuses to acknowledge. Nobody's giving up their 2% if they don't have to.

Yes, I will keep the house and rent it if I need to live somewhere else. Also saves on capital gains.

Re: U.S. home prices are the most unaffordable they've been in nearly 100 years

#147

Post by dukeofdoom »

Part of the problem is that governments erode savings through inflation. They can't raise taxes much more, but insist on printing more money. The only way things balance is through inflation. Houses have been a safe place for people to put their life savings into. So think of it as a house + plus a savings account in one.

Re: U.S. home prices are the most unaffordable they've been in nearly 100 years

#148

Post by fifticon »

RDaneel0livaw wrote: post #12
whitemary wrote: post #9

Earlier quoted context omitted.

> as the population ages, who is going to buy all the McMansions? The McMansions will be unlivable by that point. They weren't built to last.

ENTIRE vinyl villages of McMansions will be unlivable. They aren't even built to last the standard 30y mortgage because the builders know the initial buyers will sell and move on. Cheapest possible 2x4's with worst insulation ever known, all covered up in plastic siding. But hey, it's 10k sq ft right?

I had a suspicion you would be downvoted for telling the truth here :-). It's an unfortunate choice between being truthful and being popular.. As I understand it, part of the difference between US and Europe is that US has massive access to cheap lumber, which makes it very cost-effective to build with balloon framing, which is not much used in Europe. US saves a lot on construction this way, but it has consequences for durability.

Re: U.S. home prices are the most unaffordable they've been in nearly 100 years

#149

Post by Slix »

junofan wrote: post #132
pphysch wrote: post #106

There's a lot of noise about supply, demand, investment cycles, AirBnB, but the elephant in the room is that USA housing is a casino and the banks are the "house", which always wins. The banks only care that housing prices remain astronomical--the mechanics are not important--so that mortgages must be taken out. And, as recent history shows, the mortgage casino is "too big to fail" because of the globally-systemic ro…

It’s pretty unusual that we have people approach residential real estate in this hyper-financialized way. It’s a weird 1930s way to inject liquidity, and we have better tools now. An individual is fucked if something happens to crater the price of their house. Nobody hedges, really. It’s a toxic system.

What kind of hedge would protect against this?

Re: U.S. home prices are the most unaffordable they've been in nearly 100 years

#150

Post by pandaman »

anovikov wrote: post #100
hn_throwaway_99 wrote: post #30

This article is missing perhaps the most important graph, which is median income to some common monthly payment metric (e.g. average monthly payment for a 30 year mortgage with 20% down). Reason being that the article mentions interest rates, but then just shows graphs comparing to sales price. Ironically, showing a metric that took interest rates into consideration would probably highlight why the current situation…

I think these days, proportion of cash buyers in the last several years was highest in history - inequality did it's job and most people who can afford buying a house, can afford buying it on cash. And before, prices were much lower so most certainly won't fall down back again, forcing banks to invoke foreclosures. So i don't even think rising rates or falling prices may cause a snowballing collapse like they did in…

"Cache buyers" does not really mean people buy houses with their disposable funds. It means only that the deal does not involve a mortgage contract. The deal can still be financed through a loan, just not a mortgage. During the highly competitive market in 2021 people had been takin such loans to make cache offers and beat competition [1]. Also we had massive emigration from the states with high RE prices such as CA and NY to TX and FL, with much lower prices. These emigrants might have had enough equity in their old houses to buy a whole house in the new place too.

But it would really be great if your assertion had been true, in 2021 alone 6M houses had been sold so there would be at least several million people so rich that they buy houses like groceries.

1. https://www.npr.org/2021/12/06/1061896221/everyday-people-ca...

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