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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

#191

Post by thaumasiotes »

mlyle wrote: post #164
thaumasiotes wrote: post #159

Earlier quoted context omitted.

> 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.

> 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. If you have 25% equity in the house, and something happens that knocks down the value by 30%... the person getting screwed is you.

OK, you have a $750,000 mortgage on a $1,000,000 house, plus $250,000 in equity.

Then the price declines and you have a $750,000 mortgage on a $700,000 house, plus $175,000 in meaningless equity.

You can sell the house and pay the bank $50,000, screwing the bank, or you can deliver the house to the bank and pay them $0, screwing the bank much harder.

Meanwhile, you've lost... the opportunity to take out a second mortgage against the equity you had in your house? What was the equity doing for you?

That equity was only useful to you if you had the option to sell your house. If it was your only house, the equity concept wasn't all that meaningful, as applied to you, to begin with.

Try changing the numbers. You have 100% equity in your house and the price falls by 120%. (What happened?) Are you getting screwed? How?

You have 70% equity in your house and the price falls by 100%. Are you getting screwed?

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

#192

Post by pas »

411111111111111 wrote: post #143
FredPret wrote: post #136

Earlier quoted context omitted.

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…

Vacancy rates are historically low. It's entirely possible that some units are left empty by investors, but that's not the general trend.

It makes a lot of money, there are companies managing them, the owners don't have to.

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

#193

Post by pas »

lamontcg wrote: post #105
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 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. Misses the fact that homes are bought (most of the time) with borrowed money and leverage. You can either look at that as increasing the supply of money or lowering the cost of money, and its reflection in housing prices.

Sure, asset bubbles are a known phenomena. Zero-interest rate policy made a lot of big bubbles. That doesn't mean there are enough units built, or that there's no real demand. (It means the opposite, the bubble happened because it is such a good investment.)

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

#194

Post by pas »

jjav wrote: post #158
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. 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…

Housing is still a very conservative industry, productivity is very low, because any transformative technology only works at scale, but the US is super big and even the population centers are low-density, in many jurisdictions, zoning basically mandated labor intensive low density housing for decades, etc.

Land is available. What's not is infrastructure, and economic surplus to maintain all the required new homes and infrastructure (roads, pipes, power grid, etc).

Housing suffers from the same curse as the transit infrastructure, or the nuclear industry, enormous economic and political inertia keeping/prefering the status quo, any new projects are small, low-efficiency, lack economies of scale, lack innovation (because copy-paste building just one more is the lowest risk thing).

Look at the recent California zoning remedy program, so few real estate developers are taking it, because it turns out that those small local markets are basically incompetitive cronyist distopias, and it makes no sense for them to get into a fight with the zoning/approval board.

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

#195

Post by pas »

junofan wrote: post #166
buro9 wrote: post #157

Earlier quoted context omitted.

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.

I’m talking about an individual home’s value. The sort of thing that leads to bitter zoning fights at the local level.

that's good old fashioned predujice, short-termism, close-mindedness.

they just don't want to live next to anything (which I get), they don't like change (sure, I get that too, buy that's how you get historical landromats) then they realize they can't get that (as you would have to buy the land to keep it from being used), so the next best thing is to make it as similar to theirs as possible... (which ironically makes their house worth a bit less, because of increased low-quality supply leads to slightly lower price locally)

increasing density leads to having higher-quality services around, which would increase value

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

#196

Post by inglor_cz »

pzo wrote: post #43
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…

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?

Even here in Czechia, where we mostly build out of brick/stone/concrete (and not wood), ordinary 1950s and older homes are pretty undesirable unless thoroughly modernized. (Luxury homes are a different story.)

One of my colleagues lived in such a multi-apartment block where there was a common toilet for the entire floor, so four households. In freezing weather, the toilet was bitterly cold.

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

#197

Post by EVa5I7bHFq9mnYK »

fsckboy wrote: post #185
EVa5I7bHFq9mnYK wrote: post #179

Earlier quoted context omitted.

Yes, Americans build everything of wood, rather than cement or bricks, like in the civilized world. Remember the tale about 3 little pigs? After 50-70 years it falls apart and needs to be teared down.

Americans use wood because they have wood, it's an excellent building material. The parts of the world where they don't use wood, it's because they don't have wood, they've used it all up. America is covered in forests, Canada even more.

The cost of the frame today is a very low percentage of the total house cost, the issue is more cultural: that there are few people in America who know how to build from any other material, there are few cement or brick factories etc.

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

#198

Post by elihu »

drewrbaker wrote: post #151
htag wrote: post #97

Earlier quoted context omitted.

> 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 i…

I've looked into building in Portland OR. I don't think we're quite as bad as what you describe (except for the bureaucracy which is spot on), but I came to the conclusion that there'd be about $100k in fees. Just the fees to be allowed to hook up to the city sewer I think came out around $30k if I understand them correctly. (It's possible I'm missing something. I'm not an expert.)

For some people that's probably a bargain, but if you're not wealthy it's a lot of money just for /permission/ to do something.

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

#199

Post by landoftheice »

lamontcg wrote: post #105
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 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. Misses the fact that homes are bought (most of the time) with borrowed money and leverage. You can either look at that as increasing the supply of money or lowering the cost of money, and its reflection in housing prices.

[dead]

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

#200

Post by havblue »

tstrimple wrote: post #61
havblue wrote: post #37

Earlier quoted context omitted.

If it's an expensive neighborhood in a region with a growing economy then I would think the McMansions would be fine.

Not based on the one I’m living in. It’s the definition of lipstick on a pig. Serious fundamental problems with a nice looking exterior. It’s been nothing but problems for the last 8 years.

Could you elaborate on what problems occur on those houses versus normally sized ones? Framing? The foundation?
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