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U.S. now short 4.5M homes as housing deficit grows

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Re: U.S. now short 4.5M homes as housing deficit grows

#61

Post by goalonetwo »

esalman wrote: post #52
goalonetwo wrote: post #6

Do we really have a housing deficit? If you look at prices they indeed go up because nobody wants to sell and too many people have been wrongly convinced that buying is always a good idea. If you look at rent on the other hand it has stabilized in most location. I was even able to negotiate a rent decrease last summer. I'm not convinced we have a housing deficit. But I'm convinced that too many people are blindly buy…

There's been a 13% rent hike in the similar townhomes to one that I am staying in. I wasn't thinking about buying in this VHCOL area but now I am forced to.

Even with a 13% increase you are probably still better off renting if you are in a VHCOL area. I'm in the bay area and at this point my rent could go up 100% and I would still rent. My rent is 3900$/month. The value of my townhouse is 1.9m$. (Palo Alto area). It would make zero sense to buy even if the rent was 8k$/month

Re: U.S. now short 4.5M homes as housing deficit grows

#62

Post by HDThoreaun »

silisili wrote: post #15

Question for anyone who may know from experience: where are all the people coming from? It's a question everyone in my home city keeps asking after seeing all the new developments, and never really investigating an answer I guess. They keep squishing in apartments and tract housing everywhere there's a postage stamp of land, and it's sold the next day. Even wayyy out in the rural county. My very quiet road was a traf…

Household sizes are shrinking, so same number of people want more homes. Plus the population is growing in many parts of the country.

Re: U.S. now short 4.5M homes as housing deficit grows

#64

Post by HDThoreaun »

esalman wrote: post #36
pneill wrote: post #29

Asking why there isn't enough housing is like asking why water is wet. The answer is state/local government regulation. There's an old saying "your margin is my opportunity" and I suspect that the current crop of homes that are built have decent margins, but in a deregulated market an entrepreneur could come in offer more affordable housing options with lower margins. You can see this in vehicles. Nobody complains ab…

Housing is actually a good business. Otherwise everyone starting from upper middle class families to trillion dollar hedge funds would not clamor to get into it. Also, there might be regulations, but there is also lots of incentives and tax benefits which makes up for it.

Trillion dollar hedge funds only got into housing recently when they realized NIMBYs would severely limit new construction. Before that speculating on housing didnt make sense.

Re: U.S. now short 4.5M homes as housing deficit grows

#65

Post by onlyrealcuzzo »

goalonetwo wrote: post #48
onlyrealcuzzo wrote: post #45

Earlier quoted context omitted.

> Now, your house is going up 4.63% a year. You have 3% of fees and 3% of interest a year (or 7.5% if you buy today). How is your 5:1 leverage going to help you? This is not how it works. You would have to pay rent. You'd take the opportunity cost of the difference in rent vs the cost of your house after the mortgage interest deduction (discounting principal, since that isn't a cost). If it's an investment - you'd co…

you are right and you also need to include the rent equivalent, yes. I would advise to use the rent or buy calculator: https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal... It is the best one I have found so far. Even in the ZIRP era, I couldn't find places that made sense buying based on that calculator. Nowadays it is even more clear cut that buying doesn't make sense financially (it could make sense for…

> I would advise to use the rent or buy calculator

I've used it. It's not good.

If you asked someone to make a calculator that makes renting as attractive as possible - it would look similar to the NYT calculator.

It's not surprising this calculator comes from a city where the majority of people rent, and is read mainly by "elites" who live in areas where more people rent...

At the time, I lived in LA in this exact calculator convinced me that housing was a horrible investment in 2013.

Had I bought then instead of had my money in the S&P my net-worth would almost be triple what it is now.

Luckily, I'm doing fine either way, and did buy and lock in a 2.7% interest rate, after learning this calculator has some serious flaws and building a much more realistic spreadsheet to model it...

Re: U.S. now short 4.5M homes as housing deficit grows

#66

Post by archagon »

onlyrealcuzzo wrote: post #65
goalonetwo wrote: post #48

Earlier quoted context omitted.

you are right and you also need to include the rent equivalent, yes. I would advise to use the rent or buy calculator: https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal... It is the best one I have found so far. Even in the ZIRP era, I couldn't find places that made sense buying based on that calculator. Nowadays it is even more clear cut that buying doesn't make sense financially (it could make sense for…

> I would advise to use the rent or buy calculator I've used it. It's not good. If you asked someone to make a calculator that makes renting as attractive as possible - it would look similar to the NYT calculator. It's not surprising this calculator comes from a city where the majority of people rent, and is read mainly by "elites" who live in areas where more people rent... At the time, I lived in LA in this exact c…

In what specific ways is the calculator flawed?

Re: U.S. now short 4.5M homes as housing deficit grows

#67

Post by t-writescode »

Friendly reminder when talking about housing that:

1) in 2022, there were 16M homes just lying empty. https://www.forbes.com/sites/brendarichardson/2022/03/07/16-...

2) Around 5% of Americans own at least a second home (https://www.statista.com/statistics/228894/people-living-in-...) and given a US population of about 340M and, given the very kind presumption that: people *only* own a second home and every group that owns a second home has 2 people in it, that'd be 340M * 2.5% = 8.5M second homes.

3) "Investor Homes", which according to ( https://todayshomeowner.com/blog/guides/are-big-companies-bu... ) tend to be the small houses that people want to buy account for about 22% of purchases *per year*; and they probably aren't selling them, so year over year that takes quite a few properties off the market.

We have *a lot* of spare homes if we incentivized real humans that will live in those properties themselves buying properties and more importantly disincentivized or even punished people and companies from owning second, third or more houses. Yes, many of those houses might be in undesirable places; but among 16M "just lying empty" and 8.5M "second homes", we could probably take a *huge* bite out of "4.5M" homes.

edit: I've edited the text twice now and I can't seem to get italics working, blah.

Re: U.S. now short 4.5M homes as housing deficit grows

#68

Post by esalman »

goalonetwo wrote: post #61
esalman wrote: post #52

Earlier quoted context omitted.

There's been a 13% rent hike in the similar townhomes to one that I am staying in. I wasn't thinking about buying in this VHCOL area but now I am forced to.

Even with a 13% increase you are probably still better off renting if you are in a VHCOL area. I'm in the bay area and at this point my rent could go up 100% and I would still rent. My rent is 3900$/month. The value of my townhouse is 1.9m$. (Palo Alto area). It would make zero sense to buy even if the rent was 8k$/month

Yeah tough decision for me. My rent is $4500. Equivalent townhouse is now being advertised at $5300. I can easily see this go up to 6000-7000 in 3-4 years. If I lock in a condo at the same price ($6000-$7000) right now, provided no housing or economic crash, I'll be in a much better position down the line.

Re: U.S. now short 4.5M homes as housing deficit grows

#69

Post by cyberge99 »

HDThoreaun wrote: post #62
silisili wrote: post #15

Question for anyone who may know from experience: where are all the people coming from? It's a question everyone in my home city keeps asking after seeing all the new developments, and never really investigating an answer I guess. They keep squishing in apartments and tract housing everywhere there's a postage stamp of land, and it's sold the next day. Even wayyy out in the rural county. My very quiet road was a traf…

Household sizes are shrinking, so same number of people want more homes. Plus the population is growing in many parts of the country.

Yes, but people are dying as well.

Re: U.S. now short 4.5M homes as housing deficit grows

#70

Post by cherry_tree »

archagon wrote: post #66
onlyrealcuzzo wrote: post #65

Earlier quoted context omitted.

> I would advise to use the rent or buy calculator I've used it. It's not good. If you asked someone to make a calculator that makes renting as attractive as possible - it would look similar to the NYT calculator. It's not surprising this calculator comes from a city where the majority of people rent, and is read mainly by "elites" who live in areas where more people rent... At the time, I lived in LA in this exact c…

In what specific ways is the calculator flawed?

I looked at it and what I noticed:

It assumes home prices will rise equal to inflation which hasn’t been true in recent years

It doesn’t allow you to add monthly utilities for renting but assumes 100$/month for buying. I personally have never rented a place where all utilities were covered

It assumes quite high property taxes compared to what I pay

It assumes market returns of 4.5% which is true in a long term sense but not really in the short term

It assumes rents will increase 3% per year, configurable but not true in recent years

It factors in closing costs so I guess it’s assuming you will sell at the end of the period? This is a somewhat strange assumption to me. At the end of the period I could borrow against the value of the house without selling it for instance.

I think it’s a really good tool though I wish it had just a few more options to tweak, and that the defaults got updated to reflect current rates perhaps

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