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Home Price to Income Ratio

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Re: Home Price to Income Ratio

#101

Post by kipchak »

zzleeper wrote: post #64
MrFlibbles wrote: post #53

Affordability is limited by lending requirements. Start with home price of $250k for example. If you can manage a 5% down payment (arguable) then the loan is for $237.5k. With a 30 year loan at 3.5%, the principal and interest is $1,066.48 per month. Gross this up by 0.7 for taxes and insurance to get $1,523.54/month. Lenders will typically allow your payment to be as much as 28.0% of your gross income. This get us t…

I just got a 15yr fixed rate at 2% (!) which made me think a lot about what's behind your comment. In particular, what will happen once rates go back up: 1) Right now we are at zero short term rates, and moreover mortgage rates are propped due to Fed purchases of Agency MBS 2) Say rates go up 2% (not crazy) in parallel. So now your 3.5% becomes 5.5% which is still historically moderate. However, the 5441 required mon…

Regarding 3 I would figure either prices would have to come down, financial assistance comes from somewhere, or the house winds up being rented after being purchased by a management group.

Re: Home Price to Income Ratio

#102

Post by quartesixte »

bakuninsbart wrote: post #55
zbrozek wrote: post #23

Earlier quoted context omitted.

Not the OP, but I'll guess that it's because both of them strongly erode property rights. Another, more freedom-preserving, approach is to make it easier to build build build. Planet Money had a decent introduction a couple years ago.[0] In the current NIMBY climate, my neighbor is struggling with the red tape to repave her driveway. Building a new home around here seems about as improbable as a hobbyist making the f…

Are property rights freedom-preserving? One of the most infuriating bits of my visit to the US West coast was driving up from LA to SF and a lot of the really nice bits of coast not being accessible to the public. There's compromises like germanic Jedermansrecht [0], but overall I think limiting property rights is often a net gain of freedom. I do agree on the problem of NYMBYism though. There's a funny-if-not-so-sad…

Those coast lines are most likely either inaccessible due to environmental protection concerns, or just straight up not easily accessible — lots of cliffs on the West Coast.

Or just not very fun to be on. The beach cities of Southern California are blessed with having some of the most accessible beaches.

Re: Home Price to Income Ratio

#103

Post by loeg »

standardUser wrote: post #5

Some very clever and influential people better start finding and implementing real solutions to housing prices right now. If they don't, expect overwhelming support from Millennials for massive expansions to public housing and rent control, if not even more draconian measures.

The solution is to build more housing. California has historically been terrible about that but SB9 and 10 are significant steps in the right direction.

Re: Home Price to Income Ratio

#104

Post by alexpotato »

itake wrote: post #100
gp wrote: post #32

While it doesn't directly affect the average person's purchasing power, the same dramatic increase is happening in other asset values as well. [0] One interesting thing to note is that 2019 EV / EBITDA values were already "high," before the coronavirus was spreading. I suspect these two phenomena have different causes overall, but low interest rates are a common factor that cause all asset prices to increase. On the…

I suspect that dual income families could be a contributing factor in increased home prices of single-family homes. Even 'worse' is dual income, no kid families that are delaying and skipping child costs. Thus with "double" the cash flow and shared costs, couples afford higher prices at a lower cost.

I've often wondered about this myself.

E.g. it's a lot easier to have two working people in a couple make $300K total vs only one person making $300K. It would be interesting to go back in time and correlate the rise of dual working couples vs housing prices adjusted for other factors e.g. inflation

Re: Home Price to Income Ratio

#105

Post by Glyptodon »

lastofthemojito wrote: post #9

I've heard 3x income as a rule of thumb for how much house one can afford, but it looks like that's never been widely followed. It also doesn't make a whole heck of a lot of sense as interest rates have varied so widely - a better rule of thumb might be a ratio between the total amount of payments over the life of a mortgage and one's income.

3x income for your debt load or for the overall home cost? Either way it seems like it wouldn't really directly translate to a % of income as monthly payment.

Re: Home Price to Income Ratio

#106

Post by jcrawfordor »

reducesuffering wrote: post #75
bakuninsbart wrote: post #55

Earlier quoted context omitted.

Are property rights freedom-preserving? One of the most infuriating bits of my visit to the US West coast was driving up from LA to SF and a lot of the really nice bits of coast not being accessible to the public. There's compromises like germanic Jedermansrecht [0], but overall I think limiting property rights is often a net gain of freedom. I do agree on the problem of NYMBYism though. There's a funny-if-not-so-sad…

All of the California coastline is public.

California coast is public up to mean high tide. This is appreciably different from, for example, Oregon where it is public further in (typically to the vegetation line, details are slightly complex). It makes it significantly easier for California property owners to de facto remove public access to beaches, which is very common in some areas. On top of this, CA courts have often been reluctant to enforce public rights to beaches.

Re: Home Price to Income Ratio

#107

Post by beepbooptheory »

standardUser wrote: post #18
ido wrote: post #10

Earlier quoted context omitted.

Why do you consider the 2 examples you gave “draconian”?

Draconian is a strong word (but cool-sounding) and what I really mean is "antiquated". But they are also somewhat blunt instruments and have historically lead to unwanted consequence. We already have more modern, market-oriented solutions, like vouchers and tax-credit housing, but those have problems too. My bigger point was, Millennials tend to react big when specific issues rise to the forefront, and if there aren'…

Its interesting how often on HN the main problem always ends up being how people will "feel" about the next crisis, and the danger of that feeling itself. It's a weird kind of proxy self-consciousness older generations have on behalf of the economy. Always and forever: "no no, it's not that bad, really!"

meanwhile people are very much homeless, whether they are millenials or not, whether they react strongly or not.

Re: Home Price to Income Ratio

#108

Post by tharne »

loeg wrote: post #103
standardUser wrote: post #5

Some very clever and influential people better start finding and implementing real solutions to housing prices right now. If they don't, expect overwhelming support from Millennials for massive expansions to public housing and rent control, if not even more draconian measures.

The solution is to build more housing. California has historically been terrible about that but SB9 and 10 are significant steps in the right direction.

It consistently shocks me how rarely this is brought up as a solution. Price of something too high? Increase the supply.

Re: Home Price to Income Ratio

#109

Post by toiletfuneral »

simonsarris wrote: post #70
tempfs wrote: post #41

Earlier quoted context omitted.

1. Residential homes are no longer allowed to be 'investment properties' aka every person(or married couple) can own exactly one house. Corporate entities except for Banks(even then can only own it for the time it takes to sell it in the case of foreclosure) can't either. 2. Only actual Americans can own property in America. Single-fam, multi-fam, land,etc. doesn't matter. Exactly no one needs to rent houses if mulit…

Doesn't that sound insane from a mile away? By the time you are done making exceptions, you'll have infinity carve outs. This is not a solution so much as a way to squish the problem into a different, weirder shape. 1. Everyone is forced to sell their lakehouses, cabins, ADUs? Detached mother-in-laws? (wtf is "Exactly one house?") No one is ever able to rent a single family home ever again? Right now 14.5 million hou…

[dead]

Re: Home Price to Income Ratio

#110

Post by itake »

Miner49er wrote: post #71
alex_sf wrote: post #39

Earlier quoted context omitted.

Millenial homeownership is almost at 50% this year. The people priced out are the loudest, but it's not overwhelmingly common in most parts of the US.

That's still way lower then older generations.

I don't know if this is a problem? I am perfectly happy focusing on my career and my hobbies and not worrying about home repairs, insurance, taxes, natural disasters, etc.

It is more financially and emotionally rewarding for me to prep leetcode, solve software problems, etc. than it is to deal with home renovations, plumbing repair, etc. on a home.

Plus the flexibility of location is huge. I can follow the job market much easier if I am not locked into an address.

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