Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Homes in 97% of U.S. cities are overvalued, Moody's says

cbsnews.com

Post reply on HN
Print view View original

271–280 of 768 posts

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#271

Post by trgn »

pjmorris wrote: post #91
melissalobos wrote: post #4

Isn't this one of those "If everyone is crazy, you're crazy" situations? If every house is overvalued by some metric, then maybe the metric is wrong. People's perceptions of value are a large part of the actual value(meaning what someone would really pay) for things like housing that should depreciate over time.

I think there's a more concrete measure of value: house prices related to income. Historically (Robert Shiller has a chart for the US going back to 1890) house prices (and mortgages and rents) have maintained a stable relationship with income. Occasionally that relationship is strained but it has usually fallen back in line. One exception to this was the extraordinary, ongoing, support to the financial system post-20…

The US is rotating from housing as commodity investment to housing as intergenerational asset, something which has happened in a lot of other countries already (see e.g. Western Europe, mentioned in other comments here).

House prices will remain up because any gain from sale will be plowed into the next home. It's a ratchet upward. Higher mortgage rates are somewhat irrelevant in this dynamic, because the home itself is not an asset to get capital gain from, but a claim to shelter a family for an _indefinite_ period of time in a chosen location.

USA was inoculated for a very long time, because horizontal expansion over cheap land allowed for expansion of supply. That era is over. Car and highway technology is no longer adequate to expand cheaply and still remain within viable commuting distance.

There really is no limit on how high home prices relative to income can be. When meemaw dies, her inheritance will fund the downpayment of little Sally. That's the perpetuum mobile in Europe, which the US is now cranking up as well.

Rents may still remain affordable, but home prices will detach.

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#272

Post by asdff »

ryanSrich wrote: post #197
streetcat1 wrote: post #81

Earlier quoted context omitted.

So this is not entirely correct. If I am not mistaken 30% of buyers are cash buyers, hence they do not care about the mortgage rate. Second, the big issues is with houses supply. The high rate basically lock most current sellers which have very low mortgage rate (compared to 5%), hence reducing the supply more.

Why would anyone pay cash for a house when even a horrendous mortgage rate is still only 6%? That cash is earning 10% easily with zero effort. Put 15 minutes of effort in and open a Betterment account and you’re likely getting closer to 20%. Cash buyers make no sense to me.

Because they aren't just sitting on the house, they are cashing out after buying and also taking advantage of the market with that money.

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#274

Post by JumpCrisscross »

> Locals in Boise are now competing with buyers from San Francisco and other big cities, who often have more money to spend on housing. That is driving up prices beyond the reach of many people earning a typical salary in those regions.

I’m always wary of “this time is different.” But sometimes, times are different.

If we assume a house bought by an exiting San Franciscan must be resold to a local, yes, the home value is askew. But if we assume it will be sold to another tech worker forged in New York or the Bay Area before achieving sufficient seniority to go remote only at high pay, the denominator is different.

I don’t think that explains the gap. And code fixes would burst the bubble; while there has been historical opposition to such tweaks, a carpetbagger-longtime local divide is about the best fodder for it. But local deviations from the national premium may be explained by permanent factors.

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#275

Post by jacobsenscott »

lumost wrote: post #90

Yet another asset crash would annihilate whatever assets millennials have happened to acquire. This would leave the millennial generation largely asset free as they enter their 40s except for inheritance.

A housing crash only matters if sell your house during the crash. Prices will eventually come back up. And your fixed rate mortgage gets cheaper every year due to inflation. Certainly some people will have not choice but to sell. But a millennial should be able to ride out a crash - don't read the news and don't stress.

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#276

Post by bombcar »

nitrogen wrote: post #212
bradleyjg wrote: post #163

Earlier quoted context omitted.

A majority of consistent voters own homes and want house prices to increase. That means most politicians want house prices to increase. The government dominates all aspects of residential lending. What’s the smart bet on what will happen?

This comes up a lot. But it's wrong, or at least incomplete. People who want to live in their house don't want the value of that house to go up, because then their taxes go up.

Most people who own are moderately content for their house to stay somewhat stable in price.

They definitely don't want it to go down, especially below the loan amount; but tools like Zillow make it way too easy to book "paper profits".

If you bought for $100k and later noticed Zillow say your house as $250k, and now it's saying $200k you can feel like you lost out even though you're still "up" - something that was more difficult before as you'd have to try to compare similar homes for sale.

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#277

Post by EVa5I7bHFq9mnYK »

trgn wrote: post #271
pjmorris wrote: post #91

Earlier quoted context omitted.

I think there's a more concrete measure of value: house prices related to income. Historically (Robert Shiller has a chart for the US going back to 1890) house prices (and mortgages and rents) have maintained a stable relationship with income. Occasionally that relationship is strained but it has usually fallen back in line. One exception to this was the extraordinary, ongoing, support to the financial system post-20…

The US is rotating from housing as commodity investment to housing as intergenerational asset, something which has happened in a lot of other countries already (see e.g. Western Europe, mentioned in other comments here). House prices will remain up because any gain from sale will be plowed into the next home. It's a ratchet upward. Higher mortgage rates are somewhat irrelevant in this dynamic, because the home itself…

Houses in the US couldn't serve as intergenerational asset simply because they are built of wood with average livespan of ~70 years. While in Europe houses are generally build of brick or cement and last centuries.

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#278

Post by asdff »

endisneigh wrote: post #11

I used to believe such things and then I did a median income vs price per square foot worldwide comparison and it turns out the United States is one of the cheapest, if not the, cheapest place in the world when it comes to the “affordability” (median income vs price per square foot). I think the issue is that the United States has been too cheap and finally that era of abundance at a low cost is coming to an end.

Some parts of the US have pretty high price per square foot and pretty low median incomes within that neighborhood though, so looking at things nationally hides a lot of the nuance that is important to understand the whole. Overcrowding is common among low income people in the U.S. as it is anywhere else in the world. I can take you to parts of CA that will make you think I'm referring to central america and not california with that abbreviation, and these aren't far from cushy white collar jobs and expensive white collar owned homes, sometimes within a couple miles or so. OTOH in areas where housing is considered cheap the poor often aren't faring much better, since social safety nets are either worse or nonexistant and wages (and sometimes even available unskilled labor) amounts to little after the mandatory costs paid in these areas (perhaps car dependency due to a lack of reliable transit to commute to work).

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#279

Post by foolfoolz »

melissalobos wrote: post #4

Isn't this one of those "If everyone is crazy, you're crazy" situations? If every house is overvalued by some metric, then maybe the metric is wrong. People's perceptions of value are a large part of the actual value(meaning what someone would really pay) for things like housing that should depreciate over time.

i agree. and the other paradox i keep thinking about is everyone says houses are too expensive it’ll to buy, but every house sells within 1-2 weeks on the market

Re: Homes in 97% of U.S. cities are overvalued, Moody's says

#280

Post by akomtu »

snowwrestler wrote: post #78
DoubleDerper wrote: post #31

Earlier quoted context omitted.

Relative to which assets? Stocks? Cars? Forex? IP? Crypto? Genuinely curious because everything is more expensive than it was before. If everything is overvalued, then nothing is overvalued [relatively]

Stocks would be an obvious point of comparison. They’re down but real estate prices remain up. The argument for overvalued housing is that everyone got antsy during the pandemic and wanted to change houses and change neighborhoods, but that will settle down now that the pandemic is waning. Tech stocks seem to be falling because the pandemic-driven surge of screen time is fading now that the pandemic is waning. So: is…

Tech stocks falling won't necessarily lower home prices. The number of tech employees is growing rapidly, but the number of houses for sale isn't, so if ten years ago it was enough to win the bidding war against the top 10%, now you compete with the top 5% and their finances, even with lower stocks, are a lot better. By 2050 it will be a competition among the top 1%.
Post reply on HN