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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

#151

Post by drewrbaker »

htag wrote: post #97
hayst4ck wrote: post #81

Earlier quoted context omitted.

If home prices are going up, that means that demand exceeds supply. If home prices are going up everywhere that means demand is exceeding supply everywhere. If homes are a good monetary investment, that means home prices are going up, which means supply is not keeping pace with demand. If home prices are going up at a rate faster than wages, then they are becoming more expensive for our children. Not in a round-a-bou…

> If homes are to be affordable that means more need to be built. Try pricing what it would take to buy a plot of land and build a home on it. In some places there are very expensive local regulations that must be satisfied. However, just the base value of some land with utility access, physical materials, and labor to assemble the home is "unaffordable." If the difference between the cost to produce a home and the s…

In 2019 I purchased land in Mt Washington, about 15mins outside downtown Los Angeles for $200k. My father is a builder back home in Australia so we know more about building that most. Even the after 3+ years, we finally received permits. The city is making us widen the road ($75k), extend a water main 12 feet ($75k), move 3 power poles (can’t get LADWP to tell us what that’s going to cost yet as they have to design it) and install a septic system. We are going to go all electric so we don’t have to run gas lines.

The amount of bureaucracy is insane. Often times we have been the go between for different departments of city that have offices in the same building as each other. They all point the finger at each other. Can’t get answers to the power pole questions from LA DWP without Bureau of Street Lighting, Bureau of street lighting won’t do anything with out LA DWP etc… it’s madness.

House will be 3200sqft, very nice with a pool but lots of value engineering (thanks to my dad). Construction budget is $2m. Will be getting a construction loan. Requires monthly income of $35k combined. Lucky I’m doing this with my twin brother, so we might just be able to afford it, but currently can not due to interest rate rises since we started. Swinging big.

Bank appraised finished project at $3.5m.

My take away from the whole process is that LA infrastructure is terrible, and the city has effectively made it impossible for new construction by family’s. LA DWP single handedly cost us a year in permitting and its incentives are just so not aligned with home owners. My dream is we can go solar and batteries and tell them to get lost. I now have a real respect for what Starlink is doing. Down with the entrenched utilities!!!

You have to be rich to build a house in LA. Renovation is the only real option for individuals. Which just drives up house prices. New houses built is the only way out I think, and the government seems to only be making it harder.

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

#152

Post by grensley »

Joeri wrote: post #144
junofan wrote: post #132

Earlier quoted context omitted.

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.

Will the vast majority of houses rise in value?

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

#153

Post by evv555 »

randcraw wrote: post #135
hayst4ck wrote: post #81

Earlier quoted context omitted.

If home prices are going up, that means that demand exceeds supply. If home prices are going up everywhere that means demand is exceeding supply everywhere. If homes are a good monetary investment, that means home prices are going up, which means supply is not keeping pace with demand. If home prices are going up at a rate faster than wages, then they are becoming more expensive for our children. Not in a round-a-bou…

Another explanation is that the average new house costs more than it used to. Housebuilders have chosen to build bigger homes at a higher finish level because there's more profit in it. New affordable housing is becoming rarer.

Another factor here is the rising costs and complexity of zoning/permits. In my area it will cost you 6 figures just to put down a foundation with the paperwork. This puts a floor to how cheap a house can be and what is financially viable to build.

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

#154

Post by rcpt »

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…

"No Silver Bullet Solutions to the Werewolf Crisis"

https://progressandpoverty.substack.com/p/no-silver-bullets-...

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

#155

Post by parineum »

poulsbohemian wrote: post #114
pzo wrote: post #43

Earlier quoted context omitted.

So in those 7 decades there has been build 175 million houses. Population of usa is around 350 million. Most people probsbly also not living alone and some houses that were build before 1950 probsbly still are in use just maybe modernized. Not familiar with USA market but wondering: Are current houses just more fragile and fell apart within 50 years?

>Are current houses just more fragile and fell apart within 50 years? Obsolescence gets overlooked but it is important. Not only are houses often poorly constructed, but many are simply no longer desirable. For example in my area, anything pre-1960 is likely very small, possibly without a garage, and may only have one bathroom. The modern homeowner wants something better. Houses in the 1970s were frankly, weird. They…

> Not only are houses often poorly constructed

You have no idea what you're talking about. Houses are built to standards significantly higher than they used to be (aka, with standards).

Contractors skimp where they can but, due to threats of litigation, those cut corners are cosmetics.

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

#156

Post by fifticon »

xupybd wrote: post #40
rootusrootus wrote: post #33

Earlier quoted context omitted.

> As interest rates rise people will no be able to afford their mortgages I really wonder how many people in the last 10 years actually felt like buying a variable rate mortgage was a good idea? People on fixed rate mortgages are staying put, and watching inflation deflate the value of their debt.

It amazes me that in the US you can fix for the life of your mortgage. Here in NZ 5 years is close to the max.

you can fix for full mortgage in denmark, europe too. I'm not sure which other countries do this.

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

#157

Post by buro9 »

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.

The hedge is that everybody is in this predicament and that is what makes it too big to fail, that the state will always support the bank's to prevent a total collapse. It's a collective hedge.

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

#158

Post by jjav »

hayst4ck wrote: post #81
superkuh wrote: post #10

From 1950 to 2008 the USA built ~25 million homes per (edit, not year) decade. From 2008 to 2018 it was about 7 million. In recent years building rates have mostly recovered but there's still that gap in production combined with everything else the last handful of years. This isn't to discount the shift of ownership from human persons to corporate persons, that's a factor too. But just numbers of available houses ver…

If home prices are going up, that means that demand exceeds supply. If home prices are going up everywhere that means demand is exceeding supply everywhere. If homes are a good monetary investment, that means home prices are going up, which means supply is not keeping pace with demand. If home prices are going up at a rate faster than wages, then they are becoming more expensive for our children. Not in a round-a-bou…

> If homes are to be affordable that means more need to be built.

I'm not convinced it's that simple. Houses aren't widgets that you can flood the market with an unlimited supply to drop the price as much as desired. Homes cost a lot to build and use limited resources, which means at a certain point building more increases the cost.

Picture a city that is building only 1000 homes a year and then they decide to start building 10,000 a year. Will the prices drop? If the prices were very high due to excess demand, probably not because there is enough demand to absorb those 10k units without meeting all the demand, so prices won't drop.

Ok then, let's go all out and build a million units (let's imagine that land is somehow available for that in this thought exercise). Will prices go down? No, prices will go up! Ask anyone trying to build a home in a tight market, labor prices are extremely high because there is so much demand for a limited supply of labor. If this hypotetical city tried to build a million units, labor costs will skyrocket and so will the price per unit.

There are no efficiencies of scale left in a mature industry like house builing. Building more doesn't make the per unit cost cheaper, it actually makes it higher due to labor availability.

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

#159

Post by thaumasiotes »

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.

> An individual is fucked if something happens to crater the price of their house.

If they've already paid off the house and they want to sell it without buying another house, sure.

If they have a mortgage on the house, someone gets screwed, and that someone is the bank that issued the mortgage. The mortgage is secured by the house. You can just let them take it.

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