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Priced out of home ownership

bbc.co.uk

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Re: Priced out of home ownership

#911

Post by bernawil »

ipsento606 wrote: post #744
banannaise wrote: post #724

Earlier quoted context omitted.

> if interest rates being high was making housing unaffordable, one would expect prices to be down. I think you have to be careful with the definition of "unaffordable". Housing, at this moment, is unaffordable in the sense that the cost of housing squeezes many people's discretionary budget, savings, and even sometimes the budget for necessities. It is not unaffordable in the sense that (most) people do have enough…

> Housing is an inelastic good - particularly for demographics who have limited access to transportation and therefore need to live very close to where the jobs are. The price increases until it consumes all the money available to pay for it. Housing is not rising in price because it is an inelastic good. Housing is rising in price because the growth in the supply of housing is less than the growth in the demand for…

but what raises demand IS that it's an inelastic.

Anyway, supply and demand are murky concepts that don't map well to reality when trying to take them out of the supply/demand chart. You can't actually quantify potential "demand" because "someone wants a good or service" is not a data point for demand, only actual trades that happened do.

Re: Priced out of home ownership

#912

Post by bernawil »

AlexandrB wrote: post #394
WalterBright wrote: post #361

Earlier quoted context omitted.

Two more causes: 1. People have mortgages with very low interest rates. If they sell the home, they give up that cheap mortgage for a much higher mortgage interest rate with the next home. So, they stay. 2. The capital gains tax exemption of $500,000 has not risen with inflation. Selling your appreciated home will result in a large tax bill. It makes sense to sit in the home until you die, then it gets a basis boost…

> 1. People have mortgages with very low interest rates. If they sell the home, they give up that cheap mortgage for a much higher mortgage interest rate with the next home. So, they stay. This may be true only in the US. In Canada, for example, the maximum term a mortgage rate is fixed for is 5 years, after which you have to "renew" your mortgage and renegotiate the rate. So a lot of people are already being forced…

let us all remember the US is special. The government buys all mortgages -kind of- and that's what makes it possible and cheap to get 30 year fixed rates.

Re: Priced out of home ownership

#913

Post by underlipton »

oooyay wrote: post #164
speeder wrote: post #104

I live in Portugal and here the situation is outright ridiculous. 1. There are a ridiculous amount of abandoned properties, when I walk the streets of major cities, sometimes more than half of the buildings even in expensive areas are boarded-up. 2. Meanwhile I am afraid of being homeless soon, I lost my job recently, and the unemployment benefit I can receive is literally half of my rent. Thing is, there is no "wors…

I live on a sleepy street that's half dense housing and half single family homes. Density will likely take over more than half of the street some day because the city has been relegating more dense housing to the working class areas of the city, which is where I happen to live. [1] Of those single family homes there is one that was owner-occupied for a year when we moved in. Since, it's been locked up and has had no…

>and likely the ability of our street to tolerate the traffic it was designed for as another issue is the city not investing in road-building and maintenance on our street.

To be fair, the vast majority of cities need to be investing in non-car transit more than auto infrastructure. Yes, probably even Portland.

Re: Priced out of home ownership

#914

Post by dukeyukey »

QuarterReptile wrote: post #835
derlvative wrote: post #707

Earlier quoted context omitted.

This is a lot of mental gymnastics to pretend people don't need places to live. More people are born, hence more housing is needed.

How much more housing? More housing is being built. Average house size has increased significantly over time. Average household size trends broadly downward, with rare counterexamples. When is "better" also "more"? Because better costs more, just like more area costs more. What resources should be redirected from quality to quantity?

Definitely hasn't increased everywhere. UK house sizes are actually decreasing over time, down to an average of ~800sqft.

Re: Priced out of home ownership

#915

Post by h12nz »

the_gipsy wrote: post #512
neilwilson wrote: post #336

Earlier quoted context omitted.

The issue is always lack of building. Higher interest rates just mask the problem and hand more money to rich people for no effort. The problem is that the private housing production system responds to increased credit availability only at the margins and does not over produce. That’s largely because houses are still hand built and not really substitutable like a vehicle. You don’t generally have a choice of two hous…

Lack of building is not the problem - on the contrary. You cannot realistically build enough so that the rents decrease. And when you build you just fuel the vicious cycle of people -> opportunities -> people.

So an actual recipe for increasing GDP? If only.

Re: Priced out of home ownership

#916

Post by h12nz »

Arainach wrote: post #425
johngladtj wrote: post #416

Earlier quoted context omitted.

>Ask yourself, do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build or is there maybe some other common cause? Do they all have zoning, urban planning requirements, and restrictions on what landowners can do with their property? Yes? This isn't a complicated issue, this is 100% a self inflicted "problem" that can be solved with the stroke of a pen. Pro-tip: abolish al…

That's not a winning formula at all. When my neighbor's DIY grow farm in a shed burns down, the fire spreads and affects me. When my neighbor decides to open a diesel engine repair business, the noise and fumes affect me. Most people don't want that.

We still have tort law. No need to impose the equivalent of years of average income on buyers, to entertain people’s neuroticism

Re: Priced out of home ownership

#917

Post by dan-robertson »

banannaise wrote: post #724
dan-robertson wrote: post #351

Earlier quoted context omitted.

> do Canada, Australia, New Zealand, the US, Britain, Ireland, etc, all have the same inability to build …? Sort of? See eg https://www.ft.com/content/dca3f034-bfe8-4f21-bcdc-2b274053f... for some graphs that show Europe vs anglophone countries in an obvious way. Obviously there are lots of differences between the countries, eg the specifics of their planning systems and economies. The US is different because of the…

> if interest rates being high was making housing unaffordable, one would expect prices to be down. I think you have to be careful with the definition of "unaffordable". Housing, at this moment, is unaffordable in the sense that the cost of housing squeezes many people's discretionary budget, savings, and even sometimes the budget for necessities. It is not unaffordable in the sense that (most) people do have enough…

That’s a fair point. To be more precise, I mean that many people who buy houses need mortgages to do so. Higher interest rates mean that for a fixed deposit and budget for mortgage payments, the amount one can borrow decreases. All other things being equal, one would expect the demand for purchasing houses (I’m trying to be careful here to not talk about renting, which I guess the term ‘housing’ often includes) to decrease. Something that might not be equal is the available mortgage payment budget – it may be lower due to more money being spent on other things or it may be higher due to wage increases – so perhaps that’s part of it.

Re: Priced out of home ownership

#918

Post by dan-robertson »

mlrtime wrote: post #653
dan-robertson wrote: post #627

Earlier quoted context omitted.

I guess I was surprised by the increase mentioned in the article. Rereading, it says: “The median home sale price, external in the US has jumped by nearly 30% since the end of 2019” So I guess you could have the increase due to Covid effects (or whatever else happened around then) and then seller hesitancy due to high interest rates, even though most potential sellers don’t stand to lose much.

Sellers do have much to lose. I think you're saying they have 30%+ in equity so why not sell and use it? Well they have 30%+ equity AND low interest rates. If they sell, they need to buy again at a higher interest rate. So they can sell at a profit but then monthly payments will be higher. Anyway, this is only 1 scenario. Urban areas are hit hard NYC/SF and sellers are sitting out waiting for recovery, so they rent t…

My claim about ‘not losing much’ was more that many sellers would have had the property since before 2019 so in some sense they could feel like they didn’t lose anything if they just forget the 30% rise since 2019. But I guess you’re right about many not wanting to lose long mortgage terms at low rates (this does feel like a US-specific thing though hard to change in the short term as mortgages would have been priced based on the current rules)

Re: Priced out of home ownership

#919

Post by fragmede »

jncfhnb wrote: post #162
fragmede wrote: post #156

Earlier quoted context omitted.

unfortunately, since they own the homes, unless you want to take them from them by force, you'll have to give them some sort of incentive to give up their homes so no matter how much you structure it, it will amount to the same thing in order to get them to move.

Build more homes

Where? The desirable places to build the homes have homes with said people already in them.

Re: Priced out of home ownership

#920

Post by int_19h »

jltsiren wrote: post #581
Wytwwww wrote: post #383

Earlier quoted context omitted.

> for some graphs that show Europe vs anglophone countries in an obvious way Housing is still extremely expensive in most major European cities relative to income. e.g. Milan, Lisbon, London, Rome, Munich are significantly more expensive than San Francisco or San Jose (e.g. Milan is more than 2x more expansive) if you're earning the median income. It's not like most people in some European countries chose to live in…

Housing affordability is qualitatively different between Europe and the US. When a European city is expensive, it's usually only the central part that's expensive. Prices drop steeply as you get to the suburbs and satellite towns. In the US, suburbs and satellite towns are more likely to remain expensive, as long as you are within a semi-reasonable commuting distance. I guess that's because the US city is more likely…

Prices can drop quite steeply in suburbs in US as well. It's just that when the rent is that high in most desirable areas to begin with, it's still too expensive for many after that drop.
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