Home buyers need 80% more income to buy than 4 years ago
washingtonexaminer.com
washingtonexaminer.com
I think the above is true, but I'd welcome counterexamples.
So, the way to depress housing prices is to build more houses. _Most_ housing regulations, including making it illegal for people to own four houses, reshuffle the ownership of existing houses, and don't depress their prices. As regards that regulation: if the super-rich aren't able to own $many houses, the merely-rich will buy more, and thus housing prices would be the same.
We need more places to live, at the end of the day there's no way around that.
Regulation might help though. If we regulate it so that it's harder to profit from real estate, then people will find other investments instead. This is good, because as long as real estate is a favorite investment for the wealthy, there will be a "mysterious" resistance to any efforts to lower the prices by building more houses.
I'm not an expert here, but this makes sense to me. Did I miss anything?
You missed that it’s 10 families, with 20 houses. With one family owning 18 of them.
The demand will not go down. The supply always lags behind, and can face hurdles to build, for example - renters are generally not present in city politics.
The supply then use price controlling algorithms to slowly increase and extract the wealth and income of the renters.
Pick any US jurisdiction (with the possible exception of Puerto Rico? I’m not very familiar with how taxation works there) and contemplate the tax implications of selling an appreciated property. Further contemplate how those implications are different for different potential buyers and sellers of that same property at the same price. Then say again that it’s perfectly competitive.
Hint: there are all manner of effects here. Capital gains. The basis step up at death. 1031 exchanges and their associated rules. Transfer fees, title fees (which is pretty close to being a tax).
(I’m not the one who downvoted you.)
>Further contemplate how those implications are different for different potential buyers and sellers of that same property at the same price.
Sure -- this is why I was asking for examples. "Rich people having more options than poor people" (which is what I think 1031 exchanges and your nod to capital gains refers to) is true across all domains without exception. It's true that I tend to discount that, acknowledging its unfairness. My point was prices are public(!), and historic sale-prices are public(!). A _particular_ (rich) buyer may have individual reasons for buying a house, but the market is almost perfectly competitive, because prices are public.
Not really. They affect buyers and sellers in ways that are, for the most part, quite arbitrary. In expensive markets, capital gains taxes can hit homeowners harder than landlords, which has all manner of weird effects. (And homeowners are not necessarily poorer.)
Look around any old-ish city with heavily appreciated property values, especially in California, and you’ll see older people in oversized houses who can’t really afford to downsize. This, IMO, seriously corrupts the market and hurts people who want cheaper housing.
I'm talking about people up north realizing that massive amounts of immigration isn't exactly great for home/rental pricing. "Build more homes" is easy to say but hard to do - you need skilled workers, there's only so much land in specific areas, NIMBYism, etc. "Reduce immigration" for some is hard to say but in practice is easy to do, and it has the exact same effect.
Just imagine if we banned building new grocery stores or expanding existing ones. Lines would get longer and longer and produce would quickly go out of stock. And then instead of fixing the root of the problem, we banned people from moving to the area due to grocery shortages.
However, I live in the middle of nowhere. The nearest town to me has a population of 600. Homes that were $300k pre-pandemic are now $500-$600k. Zoning is no issue here. There aren't many places in our country where home prices have gone down or stayed the same.
There are a lot of immigrants working in construction. Decreased immigration in the past few years has pushed up wages especially in lower wage jobs like construction laborer. Trade wars and the aftershocks of the Covid pandemic have pushed up the cost of materials. 3% mortgages supercharged demand.
Restricting immigration won't stop a San Jose, CA resident from moving to Boise, ID.
Where's the line? How many people should be allowed, and of what caliber? That number is the whole point of having an immigration system.
Maybe we should just build more houses.
Pass a regulation saying any building permit application that isn't reviewed in 10 days is default approved. Then defund the permit offices.
In tandem, gut the ability for anyone to file suits (I'm looking at you, CEQA) that block development.
At (inflation adjusted) price X in location Y + regulator time/cost Z, the number of housing units that can be legally built has decreased considerably. Part of this is we've exhausted undeveloped/raw land and haven't upzoned in most locations.
The fixed costs and regulatory hurdles for building housing units can certainly be reduced - if the political challenges can be overcome.
Even some relatively sane regulations like insulation and safety standards could be re-evaluated. The issue is we are not doing any cost-benefit analysis of these regulations; even a 10% increase in the average home price should logically have a large impact on overall quality of life; that extra 10% spent on housing (~$50,000) in young adulthood reduces retirement savings >$300,000 assuming 8% returns, 30-40 years of investment, etc.
source: two years in a professional US urban planning office
Or heck, more than 2 should basically be taxed at massive rates. Like, 40-50%.
You just have to test before purchasing. And, of course, this costs more.
Joking aside, I would ask the inspector to test the building materials and widths of floors and ceilings. I assume there’s some standard performance that if you have 4 inches of concrete that’s bad but 12 inches is ok, or something like that.
When I bought my unit, I didn’t use an inspector but did talk to neighbors and my realtor had worked on multiple purchases in the building and had those accounts.
Investors are allowed to speculate. But speculation must be risk, sometimes you win and sometimes you lose.
It would require hundreds of thousands or even millions of construction workers to coordinate, and also have a way to prevent new builders from competing. If you really think it is true, you should go into construction, undercut the competition, and get rich quick.
The real answer is much more boring. High costs of land, labor, and regulation.
If you ignore these three things, you can build your own livable starter home for ~100k in materials.
In the U.K. there are only a few housebuilders that operate at any scale, and they have the best links into gaining owrmission and buying land to develop.
‘Landbanking’ is the keyword for the phenomenon in the UK, but ultimately the housebuilders slow building when prices aren’t rising to maximise their return. It’s economically rational.
My view is that government should step in and build competing social developments to house those that can’t afford market rent. The first order effect — less homeless, greater security — is nice, the second order effect is even more powerful in my opinion.
Anchoring prices towards cost of production. The UK housing market is now, since we privatised social housing, another asset class and logically the operators of that asset only consider financial returns — not social ones.
As I understand it planning permission doesn’t exist in many parts of the US and so ‘building your own’ is feasible. The only problem is that mass transit into desirable cities also doesn’t exist and so urban sprawl and you have to commute even more insane distances to leverage that land that can be built upon.
This is the area where fundamentalist market thinkers miss the key role government can play because they’re that far down the ‘government is the problem’ rabbit hole they can’t imagine positive market intervention because the market itself is the holy arbiter of creation
I owned a place and lived in an expensive part of London and over 10-15 years, through normal gentrification, I saw the centre of the city become far less fun as communities were pushed out due to rising prices. Everyone nearby had to be in a specific socioeconomic bracket to be there, which made it a bit, meh.
I’d be worried a land tax wouldn’t be progressive and so whilst it might be an economically efficient to force highest $value use, that might push out character businesses. That happened in London as well. Chain coffee shops everywhere, no sense of community or neighbourhood. No families etc.
It might be tweakable but the reason I’m also biased towards social housing is that’s what existed in the UK and it was only after that got privatised that housing became an issue / an asset class
This makes me super nervous. This means private citizens will compete with government bids on land in desirable areas.
> build competing social developments to house those that can’t afford market rent.
The government participating in the market this way robs the middle class and gives it to the homeless.
In my city in Seattle, the government found its cheaper to buy existing apartments and hotels than to build a brand new building (reducing the housing supply for middle class. Socialized housing is horrible to live in. Rampant indoor drug use (cigs, marijuana, fent, meth), gang and drug violence, and noise. The government can't/wont kick them out, so everyone trying to get back on their feet can't due to the horrible living conditions.
Seattle also requires new private developments to allocate a % of units for low income people, in order to get a massive tax break. This sounds nice on paper, but it also hurt middle/upper class homeowners that have enough land to build 2-4 units on their property.
This is why culturally and politically the west is on the path that it is. In a real democracy the counterbalance to $power is one person, one vote.
If you disable government from taking meaningful action, you remove the power of voting, and $accumulation dominates decision making reducing a citizen’s relative power over their future.
In my opinion this is the underlying force that is the cause of political angst in the US and UK, enabling demagoguery. People have less power now than when their governments put a man on the moon (NASA), or decided to build single-payer healthcare free for everyone (NHS/UK), and just did it through direct employment and ownership.
Those institutions rotted as soon as private provision and crony cost-plus contracts were not only agreed to, but the state itself wasn’t allowed to bake it’s own biscuits.
I’m not saying no private institutions, I’m just saying that by completely disabling government’s direct (ie ownership stakes) involvement in some areas, citizens and taxes subsidise private profits by underwriting the likes of Boeing, or in the UK’s housing situation — private landlords.
I think there’s a balance to be struck, but culturally government ownership or involvement is ideologically frowned upon to such an extent that those governments can’t directly improve the life of the average citizen leading to destabilisation.
At most, in my lifetime, UK and US governments just print money and put it on the table for private firms to grab. In my Great Grandparent’s generation the government built things
The government can do many things, but one thing it should not do is take away homes from the middle class.
It is much easier to focus resources ($$ and labor) on building 1 luxury building with 20% margin than building 10 buildings with 2% margin (and much higher risk that a single misstep results in a loss).
In theory, this reduces pressure on the mass market properties, because it reduces the number of high-income people in the marketplace.
The supply of housing was unhealthy then also.
Based on the $343,000 house price, and the 3%/7% rate difference they mention between 2020 and 2024, the mortgage on a house the exact same price would've gone up from $1900/mo to $2650/mo. That alone is already a 40% increase.
Obviously houses prices have inflated along with everything else, but the pain is really mostly coming from the increased mortgage rates. Even a cheaper house would still be painfully more expensive today.
What I wonder is... when would it make sense to try to return to a low interest rate environment (if ever)? Is there a point where we think it will?
Sadly, in real estate, one can easily own a $1M house, prefer to live in a $800k house, and have a situation in which making that trade results in a net loss of cash.
Along with many of the places people keep building are in areas short of water. Since most of it is SFH larger water transport infrastructure has to be installed at great cost and though places that are already developed. Then you add more expensive road infrastructure that taxes on the SFHs won't fully pay for. You build a huge infrastructure debt trap that we're both paying for now (from the past) and the us in the future will have to pay even more for.
My point is that, if you remove distortions from a market, prices may go down.
This is some kind of memic impossibility. It's impossible to move into a city for a high paying job AND have a partner AND the partner earning a lot too. The closest I've ever been was when my job and the relationship disintegrated at the moment the partner got such job after over 5 years of searching, and I really don't feel like trying again ever.
People/sheep are renters.
Houses around the world are being sold to:
corporate mega landlords
"Mum and Dad" investors
international money laundering criminals
money fleeing countries like China where economies are collapsing and the government is becoming more authoritarian
Right now, it is at 65.7% - higher than the fabled 60s and 70s.
There are a lot of conspiratorial comments blaming everyone from investors and speculators to contractors and developers. The reality is that it's largely homeowners and the government to blame. The number of homes bought by investors is a rounding error. And developers will build homes as long as there is profit margin.
The government (and society) turned housing into a retirement plan. We decided to enact policies to push people onto the "housing ladder". We confused cause and effect, and the result is the largest misallocation of capital in human history. Blame NIMBYs and ZIRP. Want to get rid of speculators? Stop making houses an investable asset. People should not be relying on a commodity for their retirement.
https://www.reddit.com/r/canadahousing/comments/tose5z/landl...
When there wasnt regulatory capture in late 19th, entire US ended up getting owned by ~12 robber barons. The housing situation was the same back then: Barons would be buying up or building entire neighborhoods in which people would have to live like feudal tenants on knife's edge.
These futile attempts to redeem capitalism are making it difficult to address the problems that it creates.
I really can’t understand how people are so desperate to drive a new car that they’d go into debt to do it. Why would you sign up for years worth of payments on a $15k+ car when you could just buy a used one outright for like $4k, and not have to worry about it?
A house, sure, you then own real estate, you even can borrow money against the value you’ve already paid into your property, and when you’re ready you can sell it, likely for significantly more than you paid. Real estate is such a solid investment.
But a car??
https://www.iseecars.com/what-happened-to-affordable-cars-st...
https://site.manheim.com/en/services/consulting/used-vehicle...
Because I want my child to be in a relatively new car, with a proven safety record, no history of accidents, surrounded by airbags and all the other safety features we've come up with.
For $4k, she'd be sitting in the back seat of a 1992 Nissan Sentra, counting lane-changes through the rusted-out hole in the back-seat floor: "one... two... dad, the hole getting bigger!"
(Not 80% but you need to include that)
It's the second paragraph in the article.