Home Price to Income Ratio • Hacker News Board

Re: Home Price to Income Ratio

#321

Post by rjbwork » Mon, Sep 20, 2021, 9:47 PM UTC

kyleblarson wrote: post #308

rjbwork wrote: post #154

Earlier quoted context omitted.

I was ready to buy an estate in the Georgia mountains earlier this year - then I saw the internet connection options. Then I looked up how much it would cost me to get a decent wired connection out there. Totally unviable for tech workers to live in most of the solid red areas of the country strictly due internet capabilities, or lack thereof.

Extrapolating from 'rural mountainous Georgia' to all red states, including Texas and Florida is a bit of a stretch. I live in a remote mountain town in North Central Washington and there are dozens, if not hundreds, of remote tech workers. I have good internet through a local ISP and starlink is now prevalent in our area as well.

Fair enough. I was looking in the triangle between Asheville, Nashville, and Atlanta. The few homes i was like "I will buy this now if i can get good internets" did not play out for me. I'm looking for an excess of land though, to indulge my many hobbies, so that is certainly constraining my options. It's okay though, I'm in no rush. Once Starlink is rolled out en masse I'm sure the equation will drastically change for me.

Also, FWIW, I meant more rural areas than just "red states". Even in solidly republican states there is a fairly prominent urban/rural divide.

Re: Home Price to Income Ratio

#322

Post by bogomipz » Mon, Sep 20, 2021, 9:47 PM UTC

Can anyone explain what the cause of the steep cliff drop in the first graph that occurred between 1953 and 1959 might have been? Would this be the postwar suburban building boom driving down prices? Something else?

Re: Home Price to Income Ratio

#323

Post by aidenn0 » Mon, Sep 20, 2021, 9:48 PM UTC

nostromo wrote: post #165

jandrese wrote: post #124

How much of this is a result of our "don't tax the rich" policies that created a staggering amount of wealth at the top that has nowhere else to go? So many ultra rich investors are looking for something, anything, to invest in. Plus there is the feedback loop of massive growth you get as the bubble inflates. Is this a direct result of our fiscal policy? Have we destabilize the economy in order to create the richest…

What "don't tax the rich" policies? 61% of Americans pay zero income tax. Why are the rich getting tremendously rich? Because the Federal Reserve has printed money at an astonishing rate, which inflates asset prices. Who owns the most assets? The rich do. People are so focused on taxation (because it's something the average poor or middle class understands) when the real issue is the Fed (something most Americans are…

> Why are the rich getting tremendously rich? Because the Federal Reserve has printed money at an astonishing rate, which inflates asset prices. Who owns the most assets? The rich do.

This is exacerbated by capital gains and dividends being taxed at a lower rate; if the gains due to asset inflation were being taxed at 37% instead of 15%, then at least all this money printing would help balance the budget a bit...

Re: Home Price to Income Ratio

#324

Post by lotsofpulp » Mon, Sep 20, 2021, 9:49 PM UTC

hcurtiss wrote: post #290

blake1 wrote: post #265

Earlier quoted context omitted.

Do you mean fiscal policy? You absolutely can infuse trillions of dollars into the economy without causing inflation after the economy takes a $4T hit from a pandemic; the government spending will be what prevents disastrous deflation. People worry about inflation, but forget how awful deflation is. (And on a side-rant, it’s really bizarre how the hyperinflation of Weimar Germany is cited as enabling the rise of the…

I've never understood how deflation could ever be a concern in countries that print their own money. Can you not just print your way out of it every time?

Not if you need to import anything, since you can inflate your currency all you want, but the world will deflate it relative to other currencies.

Re: Home Price to Income Ratio

#325

Post by marcusverus » Mon, Sep 20, 2021, 9:50 PM UTC

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.

This seems unlikely given that the share of dual income households has been flat for 30 years.

https://www.pewresearch.org/ft_dual-income-households-1960-2...

Re: Home Price to Income Ratio

#326

Post by yazaddaruvala » Mon, Sep 20, 2021, 9:54 PM UTC

shados wrote: post #297

mywittyname wrote: post #275

Earlier quoted context omitted.

You can do both. But housing has the benefit of high leverage-to-cost ratio. One can get 20% leverage at ~4% on a stock portfolio. One can get 2000% leverage (5% down) at 2.9% on a house. Granted, the leverage on the house requires paying interest and 1/3600th of principle each month. But, unlike the stock portfolio, it's not callable.

The math for this ends up being extremely complex. The leverage is one part, and a big one. You have to account for closing costs (especially when selling), and uncertainty around how long you'll stay. But you could theoretically rent it out. But as we've seen, some cities could keep an eviction moratorium going and that could be costly. Housing in some areas skyrocketed in values, but you could be buying a lemon sin…

What would be great are hyper-specific REITs.

e.g. I want to “own land” in Seattle so I’m never priced out, but averaged across the city so there is no single point of risk. With the added benefit that I can add capital in small increments.

If such a REIT were structured as a COOP that would be even even better from my perspective.

Re: Home Price to Income Ratio

#327

Post by silisili » Mon, Sep 20, 2021, 9:54 PM UTC

ChuckNorris89 wrote: post #217

polskibus wrote: post #203

Earlier quoted context omitted.

Hey, you can leave US you know. Europe will probably gladly have you.

Please don't. The housing market is fucked in EU urban areas now too. Without an inheritance you can't afford to buy anything decent around a developed city with jobs even on a tech salary. As selfish as this may sound, the last thing we need is more foreign competition on the housing market with bigger pockets. It would be fair that if people from the US want to buy property here with their foreign megabucks, we sho…

You've basically described the sentiment and current situation with the US midwest and south.

Re: Home Price to Income Ratio

#328

Post by ubermonkey » Mon, Sep 20, 2021, 9:56 PM UTC

game_the0ry wrote: post #284

A more relevant metric to consider - monthly mortgage payment to monthly income ratio. Average interest rates in 2007 were 6.34% vs ~2.80% today. [1] * 6.34% / $2,000 monthly payment / 20% down (~$65k) >> $328,319 price of home * 2.80% / $2,000 monthly payment / 20% down (~$98k) >> $489,794 price of home Homebuyers will make purchasing decision based on their monthly mortgage payments, instead of the home price. When…

Yeah, this is how I bought. I looked at what sort of loan terms I qualified for (very favorable), and then figured out what price home resulted in a payment I was comfortable with.

I'm pretty debt averse, so that resulted in me buying "less" house than the banks were willing to fund, but it was in the area I wanted, relatively new, styled to my taste, and from a reputable local builder, so from my POV I couldn't figure out why I'd buy MORE house.

I still live there, 21 years later.

Re: Home Price to Income Ratio

#329

Post by lotsofpulp » Mon, Sep 20, 2021, 9:56 PM UTC

shados wrote: post #287

galangalalgol wrote: post #213

Earlier quoted context omitted.

Is there a difference in the property tax there for multifamily vs single family dwellings? Around here people pay almost double their mortgage in property taxes for a single family dwelling, but landlords have managed to get much lower taxes for multifamily dwellings.

It depends where, as cities have some level of freedom in the shenanigan they implement in their tax structure. Normally though, taxation is just a matter of the property value. Often, cities with lower housing cost have higher tax rates (because the people working the sewers aren't any cheaper and they need to get paid). Many cities also have owner occupant or primary residence abatements, so the landlords pay more…

> Normally though, taxation is just a matter of the property value.

Total tax burdens are a function of government expenditures. Property tax is a rough attempt at scaling the tax burden to a person’s wealth, but it has many caveats varying in many jurisdictions. However, government debt is a big part of expenses, and each city and state’s debt can vary greatly than from another.

Here is a good website ranking the big cities and all the states:

https://www.truthinaccounting.org/news/detail/financial-stat...

I would expect cities and states where the per taxpayer debt burden is a standard deviation or more from the mean to have measurably higher taxes and/or fewer government services/investments.

Re: Home Price to Income Ratio

#330

Post by thaumasiotes » Mon, Sep 20, 2021, 9:56 PM UTC

pjerem wrote: post #310

throwdecro wrote: post #304

Earlier quoted context omitted.

> Homebuyers will make purchasing decision based on their monthly mortgage payments, instead of the home price. Which is crazy, right? People max out their "borrowing power" at low interest rates and take on huge loans, without considering that the declining interest rates that fueled past appreciation don't have much room left to move down, and that they'll be underwater on that huge loan if interest rates go up* an…

I don’t know how it works in US but can’t you just opt for fixed interest rates ?

Yes, you can, but it doesn't address the problem mentioned above.

>> the declining interest rates that fueled past appreciation don't have much room left to move down, and that they'll be underwater on that huge loan if interest rates go up* and the value of the property declines.

The price you can charge for something is related to how much other people can pay for it. If houses are usually bought with loans (which they are), then the availability of loan funding is a major influence on the price of a house. When funding is plentiful -- another way to say this is that interest rates are low -- the price of a house will be high. When funding is hard to find -- or interest rates are high -- the price of a house must drop to compensate for that.