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Home Price to Income Ratio

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Re: Home Price to Income Ratio

#181

Post by greesil »

robocat wrote: post #180
greesil wrote: post #128

Earlier quoted context omitted.

You can if you're in a liquidity trap. Question is, are we in one now?

I imagine creating cash to solve a liquidity trap is like continuously taking laxitives for a constipation problem... At some point you get a different problem! On topic: my experience of housing prices in NZ is that people bid up house prices to the point that they can only just afford the mortgage payments. Creating more housing doesn't "fix" the problem, because the more wealthy buy two or more houses, and are hap…

Wrong liquidity.

Re: Home Price to Income Ratio

#182

Post by willcipriano »

haskellandchill wrote: post #166
willcipriano wrote: post #160

Earlier quoted context omitted.

I mostly just look at the money supply. Print 10% more money, that's 10% inflation. It may not be uniform throughout the economy, or take effect immediately but that's 10% more money chasing the same assets. It's all has to go somewhere.

Money supply in theory is chasing actual economic effects such as growth, so your view of just one side is not very meaningful. The flaw is in considering assets static.

To some extent sure but were 2020 and 2021 boom years in terms of productivity, because they were certainly boom years in terms of money printing.

Re: Home Price to Income Ratio

#183

Post by taurath »

Doches wrote: post #133
topspin wrote: post #111

Earlier quoted context omitted.

"better start finding and implementing real solutions to housing prices right now" They can't. Providing supply will suffer the wrath of BANANA/CAVE/NIMBY anywhere you dream of living. Constraining demand will either get you voted out of office or devastate your political network or both, depending on which policy you attempt. You're competing with a whole planet full of people that want to live here and have more me…

> For 99% of you that means living far away from your preferred locale among people you probably loath. Parent comment is vitriolic but not actually wrong. Myself, I take great comfort in the idea of huge swaths of liberal, well-educated millennials and xennials migrating out of coastal cities and into small towns across the South and Midwest. Can you work remotely? Want to own your own home on a multi-acre lot for $…

I think there’s plenty of real reasons people don’t do this economically, but don’t downplay the social parts of it - we have very Balkanized communities in the US. Ask a minority what it’s like going on a road trip sometime - I guarantee there’s many places where they won’t want to stop.

Living in a place with no amenities, an extremely regressive/borderline extreme social climate and a lack of economic opportunity for people who don’t have remote tech jobs and it gets depressing really fast. Also when you try to buy healthy food from a dollar general.

Re: Home Price to Income Ratio

#184

Post by rurp »

nradov wrote: post #82
toomuchtodo wrote: post #80

Earlier quoted context omitted.

US pharma spends an outsized amount on sales and marketing, expenses that could be eliminated if public funding was spent directly on R&D. Europeans aren’t free riding; they’re paying a reasonable rate for these goods while Americans are shouldered with extraction of revenue for pharma profits and those inefficient (and arguably unnecessary) sales and marketing expenses. Only two countries in the world permit marketi…

There is already a lot of public funding for basic biomedical research. Actual drug development is another thing entirely. If this were publicly funded then funding would be allocated based on political priorities rather than realistic scientific and economic assessments. That misallocation of resources would overwhelm any savings from reducing sales and marketing expenses. But in general the traditional drug develop…

It's not like profit motive is a great allocation method either though. There are massive perverse incentives to favor expensive ongoing treatments over cures or prevention.

Re: Home Price to Income Ratio

#185

Post by wombatpm »

itake wrote: post #112
alexpotato wrote: post #104

Earlier quoted context omitted.

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

At least in tech hubs, the "one person making $300k" is marrying up with another person that makes $300k, resulting in a $600k household and $1-3M home prices.

Which then leads to the dual income trap.

Re: Home Price to Income Ratio

#186

Post by jandrese »

flyinglizard wrote: post #164
jandrese wrote: post #153

Earlier quoted context omitted.

It doesn't matter so much if a country is taxing their own rich if they allow rich people from other countries to buy real estate.

I’ve never seen any data showing that housing bubbles are attributed to “the rich”. The housing market is made of tens of millions of individual home owners, not some moguls cornering the market.

The term you want to look for is "investment properties", or in some cases "foreign investment".

Re: Home Price to Income Ratio

#187

Post by useful »

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…

Home prices are a function of monthly costs. As much as people want to compare the value of a home from year to year, in every instance, I've seen values reflect to monthly spending power.

I would love to see some estimate that takes more into account like household income, tax breaks, and interest rates. If I have a interest deduction, my relative taxes are lower. If I have children, my taxes are lower. If I have historic property, my taxes are lower. If I have solar, my monthly bill is lower. All these things make owning a home easier and allows people to buy more home.

Education is another example, prices largely mirror federal subsidized loan values. I'm not arguing that government should get out of housing, people should realize that the value of something is relative to the demand especially when the supply is largely fixed or has linear growth.

Re: Home Price to Income Ratio

#188

Post by giantg2 »

km3r wrote: post #159
giantg2 wrote: post #123

Earlier quoted context omitted.

Increasing supply can help some. But when you do that, you increase demand for material and labor, which can negate some of the benefit depending on what markets we're looking at. The real problem isn't supply at all, it's the distribution of supply and the choices of people to live there.

No, vacancy rates are at near all time lows. Any reputable study will show we have a housing shortage. Even in rural America, house prices are skyrocketing. We need to build more, ideally near transit hubs as to minimize the effect on infrastructure, and reduce our environmental impact.

Tons of empty houses in the Appalachian region.

The vacancy rate may be at a low, but it is still about 10%. Sure, we still need to build more houses, but the point here is that distribution is important to both. If you build houses in a HCOL area, the cost will be higher. We should be looking at redistributing to areas with the highest rates of vacancy an LCOL.

Part of why prices are going up is inflation and cost of materials and labor. Prices in rural america are up, but I wouldn't say skyrocketing. There might be places that are skyrocketing, but I'm guessing they are in commute distance of the cities.

Re: Home Price to Income Ratio

#189

Post by munk-a »

dpweb wrote: post #118
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…

When it's all assets going up, it's not the assets cost more, it's the dollar is worth less. So for all the help and assistance. Housing is LESS affordable than ever before. You cannot infuse trillions of extra dollars into the economy without inflation. There's no magic pill - there must be consequences.

Even when the world ran on the gold standard not all value was actually backed by anything - now we're not even close. You can pick a stick up off the ground and whittle it into a boat - you have, by doing so[1], made the dollar worth slightly more since, for all the dollars in existence, there are now more goods to purchase. Inflation is spurred to increase over time for a variety of reasons - but asset accrual is not one - in actuality all the houses people own are constantly depreciating while the land they're built on continues to gain value from age - they gain value from the increased shortage of supply - and they gain value from the constantly increasing cost of building houses (labour and materials - the material increase mostly also due to labour).

There are some incredibly complex feedback loops in the economy - especially in the housing market - but inflation isn't the issue for most first home buyers. Inflation does, however, hit people with savings harder - every dollar you have in a savings account is slowly losing value. That, however, is quite intended since savings accounts are poor tools for economic growth (banks can leverage the value for loans but there are more efficient investment methods - and that leaves us with all our eggs in one basket which might be a quite irresponsible bank that's pumping out subprime mortgages).

1. In a very very infinitesimally unmeasurably minor manner.

Re: Home Price to Income Ratio

#190

Post by splistud »

pfisherman wrote: post #57
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…

This jibes with my experience of buying a house about 6 months ago. My reasoning was that we were experiencing rapid asset inflation fueled by low interest rates and COVID stimulus, and our cash was losing its value relative to housing by the month. I figured that this propping up of asset prices is likely to continue, as any administration that lets housing / 401k values collapse will get massacred in elections.

People are working, unemployment has been falling like a stone since 2017. That money is going to go somewhere (and for most that is not 'the bank'). It's going to get spent or put into investments. We're going to continue to see strong commodity prices (and most of these have been rising into the headwind of a stronger dollar) until unemployment creeps up, or real wages falls too far behind inflation rate. I think the increased commodity supply that would normally rebalance pricing before demand does is going to be delayed. Why? Though interest rates are low, loans aren't going into commodity capital projects (because risk and returns ratios don't look good to lenders when compared to inflation rate? not sure).
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