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

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

#321

Post by brnaftr361 »

ChrisMarshallNY wrote: post #307
senkora wrote: post #286

Earlier quoted context omitted.

I think it is clear that the parent is using home-ownership to include land-ownership.

Don’t know how it is in most of Europe, but I think that, in the UK, you don’t actually own the land your house sits on; Lord Such-and-Such owns it, and collects rent from you. In the US, we own the land, and that is usually the real value. I’m the proud owner of a 0.125-acre New York postage stamp. It’s in a fairly affluent area, so is fairly valuable. In Wyoming, they’d laugh at it. I think Japan is similar.

You're paying taxes, yeah? And if you were to overlook those tax payments, what would become of your supposed ownership? And subject to eminent domain? Not to mention the many laws of the lands and social expectations besides.

How much do you really own?

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

#322

Post by refurb »

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…

I like your thesis, but the problem is we only need to look back 15 years to see that housing has had massive corrections before.

I think you're underestimating buyer sentiment. In Canada all it took was a couple rate increases in April for housing prices in the 'burbs of Toronto to drop ~20%.

Housing can go from "hot" to "not" really damn quick when prices start their downhill trajectory. What was suddenly a "must have, hot asset" becomes a "fool's game" when people get burned badly.

And based on social media posts, people are getting burned badly in Canada right now.

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

#323

Post by refurb »

EVa5I7bHFq9mnYK wrote: post #277
trgn wrote: post #271

Earlier quoted context omitted.

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.

This is a bizarre comment because:

1. there is housing that is >100 years old all over the US, some of it the most expensive in the country.

2. Brick and cement houses are certainly not maintenance free and crumble apart over time

3. Most of the value is the land, not the house

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

#324

Post by pj_mukh »

throw123123123 wrote: post #248
usrn wrote: post #177

Earlier quoted context omitted.

High immigration + no construction -> High demand + low supply. Then on top of that you have record inflation with stagnant wages. The market is being completely rational. What "overvalued" here means is "are homes expensive compared to local wages" not "are homes irrationally expensive." Normally this would drive construction but the market is distorted by credit such that new construction is less economical (a resu…

US immigration is cratering, it's a national crisis nobody cares about. The supply constraint is old but its not why housing is high - housing prices are high even in places where there is a lot of construction. Monetary policy explains it a lot better, and it predicts that at some point the trend will reverse.

Housing prices are high in places with construction because the places without construction are larger and are forcibly exporting demand.

It’s all about supply.

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

#325

Post by BadCookie »

andrewljohnson wrote: post #304
11235813213455 wrote: post #299

Earlier quoted context omitted.

I don't know how it works in the US, but in France, when you buy an apartment or house, you pay about 8% to the state (notary / attorney fees), that participates in the inflation I guess

In the US, you pay about 6.5-7%. You pay 5.5 to 6% to the two agents (buyer and seller agents) and about 1% in closing costs (title insurance, etc). It has always seemed wildly inefficient to me. Especially the “buyer agent” who gets a couple percent entirely for escorting the buyer through homes and submitting an offer.

The buyer’s agent might show someone dozens of properties all around town and not get a sale. The seller’s agent has it much easier: an almost guaranteed sale, and for what effort? They just hire a photographer, help choose a listing price, and maybe do one open house. I’d rather be a seller’s agent any day.

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

#327

Post by refurb »

babyshake wrote: post #234
sidlls wrote: post #151

Earlier quoted context omitted.

You can't compare Western Europe to the US. Maybe to specific regions or super-urban areas, e.g., the LA to SD corridor or the Bay Area. In which case the two are comparable: there are few if any middle-class families in the bay area that own their homes except by inheritance or some other luck (gift, lottery). Even condos and other high-density housing are all but completely out of reach for all but the top 10% of i…

> there are few if any middle-class families in the bay area that own their homes except by inheritance or some other luck (gift, lottery) Plenty of middle class people bought nice homes they could afford in the bay area in the 90s. Although I suppose you could consider this "luck".

And plenty of middle class families bought homes in Detroit in the 1950's that nobody wants any more and are either abandoned or torn down long ago.

I suppose you could consider this "bad luck".

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

#328

Post by rsync »

sidlls wrote: post #151
oceanplexian wrote: post #111

Earlier quoted context omitted.

There’s no rule that you should be able to afford a house on a middle class income. In fact in many countries, particularly in Western Europe, it’s unimaginable that you would be able to afford a detached, single family home on a middle class income. Lots of people in that situation will live in apartments, row houses, or condos for the rest of their lives.

You can't compare Western Europe to the US. Maybe to specific regions or super-urban areas, e.g., the LA to SD corridor or the Bay Area. In which case the two are comparable: there are few if any middle-class families in the bay area that own their homes except by inheritance or some other luck (gift, lottery). Even condos and other high-density housing are all but completely out of reach for all but the top 10% of i…

"... there are few if any middle-class families in the bay area that own their homes except by inheritance or some other luck ..."

This is a ridiculous statement.

There are plenty of middle class (by Bay Area standards) folks who have bought houses in Fremont and San Pablo and San Leandro and Hayward.

In fact, even in Marin there are parts of Novato and weird pockets of West Marin (Forest Knolls ?) where this was, and continues to be, done.

They are boring places and middle class folks working boring jobs have purchased homes there year in and year out for the past 25 years. Yes, they had to make choices and sacrifice some things for other things in order to do this.

Perhaps the ability to do that is comparable to a lottery win ?

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

#329

Post by onlyrealcuzzo »

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.

This is exactly like saying if the S&P was 30% higher 3 months ago, clearly it was not wrong.

You either believe the market is efficient or you don't.

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

#330

Post by dannyw »

ryanSrich wrote: post #204
11thEarlOfMar wrote: post #195

I live in a development of 115 homes, next to a development of 500 homes. Prices are up 50% in the last 18 months. There are zero out of 615 homes on the market and this is supposed to be high season for transactions. It makes no sense to me.

I think a lot of people are panic buying at this point. The fed has several rate hikes planned, so the TCO is only going up from here. I don’t see prices coming down. We could see the increase in prices slow down, but it’s almost guaranteed a house right now is going to be cheaper than a house in December. Even if the price stays the same, your rate might be 12% in November.

No; the price will decrease as buyers can't afford as much due to higher rates.
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