Well...they are kinda right.
3k a month mortgage when the interest rate was low, now I imagine it would be closer to 4k per month. Housing prices might not be growing as fast but I haven't seen them dropping.
$2716 is still 40% of your pretax household income at the median household income of $78k annually. Post tax, if you include all the other home ownership costs (taxes, insurance, upkeep), this comfortably exceeds 50% of your income, which is unaffordable at that income levels.
As mentioned in my post "this ignores taxes and insurance". OP just said mortgage payment so I was only looking at that specifically. Taxes and insurance varies wildly by location.
I pay more than $4000 / month in rent. In order to reduce this my SO or I would have to leave a respective dream job or spend 3-4 hours a day commuting.
Even if we thought ditching dream jobs was something worth doing, we would only be trading into lower income / less fulfilling jobs to enter a historically awful housing market.
This is simple math that is true in every state. The median price is of course different in Cali. And different in Montana. And different in every state. We're discussing "Americans" as a whole here.
What's sliding with the definition of "afford"? I thought there was broad agreement that housing should be no more than 30% of your gross income, give or take a couple percent based on who you ask.
Sliding because features of housing keep increasing. Things that were luxury few decades back and still in most parts of the world are part of an economy house in US.
Dot com boom and 2008, moreso 2008, that 30% slid up to around 50%. People justified it to themselves because, as mentioned elsewhere, "Real estate always goes up!"
We can barely agree on what the definition of middle class is. A quick search shows one source quoting anywhere between $48,500 to $145,500 a year which is a very broad range. Part of this is cost of living varies significantly in different parts of the US. With the current average salary, average home price, and current interest rates, people aren't wrong that housing is very unaffordable in most places.
Middle class is anybody who is not poor and not rich.
So it is clear from this definition that the lower bound for it is income of $48,500 from what you are not considered poor anymore and upper bound is income of $145,500 from what you are considered rich.
Now the most important consideration is - if a person can't afford a home, then can they really considered to be not poor?
The notion of "middle class" is a convenient propaganda piece. Turns out most folks consider themselves middle class. So as a politician, you can score easy points by saying scary stuff like "the middle class is disappearing" or "I'm here to help the middle class". The moment you start using more meaningful classifications (for example proletariat, which has a precise definition), you alienate some part of your voterbase. I guess with a term like proletariat there's also the fact that it's one of the scary words that the bad people use, which might turn off voters.
> The notion of "middle class" is a convenient propaganda piece. Turns out most folks consider themselves middle class.
Yup. I've met people living paycheck-to-paycheck, never having much more than 1 paycheck's worth of money in their bank account, that think they're middle class. Shit, I've seen people that are on food stamps that think they're middle class.
The worst part is that so many of them will vote against their own best interests because they think they'll be millionaires one day.
Those numbers are probably the 2nd, 3rd, and 4th quintiles of household income. ie, the middle 60%, so that’s a large swath but it seems reasonable to me.
I would say its rather backwards. Thinking of things as lower class seeks to afford rent, middle class seeks to afford housing, and upper class is beyond it. House ownership is basically the cornerstone of class wealth in the US. Prehaps with secondary lower/middle/upper modifiers your degree of success there (e.g. upper middle class comfortably affords their house, but it's still the bulk of their wealth; lower lower cannot reliably afford rent)
When I was young in the days of yore, “middle class” was something like “median household income”, maybe a bit more but not double, which got you a 30-year fixed in a part of town that was safe but not swanky, and was easily had by a worker with a college education or trade, or a hard worker, great saver, without.
“Upper middle class” was your doctors and lawyers, but the typical kind (the 100-week partner guy was fucking “RICH”). They had nice houses in desirable parts of town.
“Lower middle class” were workers without differentiated skills or educated folks with really bad money habits / some other issue like that. With my folks it was some college but dropped out to start a family (have me), got in tax trouble young. Lower middle class almost always rented forever.
“Poor” was like, no skills or flat lazy, or conspicuous drug problem, or something like that. They rented in bad parts of town. But rented.
That’s context or color, not numbers. But we were “the poor relations” relative to the spiffy college graduates or the folks with two incomes, and had IRS trouble, and rented in unglamorous but perfectly nice places.
I always thought all that numerous stratification into "upper middle class" and "lower middle class" and "upper lower middle class" and "lower middle upper middle class" and so on was kind of pointless and only serves to either 1. satisfy people who feel the need to precisely identify their own position on the totem pole or 2. pits people against each other who are actually in the same class and should be fighting together.
Most of us are N missed paychecks away from being broke. For some, that N is 1 or 2, for some it's 5, for retirees, the number may be even larger; but we all inevitably need money from our labor to come in in order to live. And this is true regardless of the dollar amount on that paycheck. We're all in the same boat.
For a very few lucky people, that N is infinite because their money grows faster than they can spend it. They get richer just by existing.
To me, these are really the only two meaningful economic classes. Do you have to work for your living or not?
We spent 40 years believing that house prices were fine because the debt load didn't matter because interest rates would go down forever. Prices are based on the seller extracting the maximum ability to pay from the buyer, so payments were effectively fixed, and every drop in interest rates was perfectly offset by an increase in the purchase price.
Then we hit interest zero, there was nowhere left to go. Now we're finally back to more historically normal and healthy interest rates, and it has broken the housing market.
We're going to have to have a cultural shift towards housing as shelter, not investment. We have to increase supply to meet demand. And we're going to have to pay more attention to driving down the actual dollar cost of homes, not just the monthly payment.
> We're going to have to have a cultural shift towards housing as shelter, not investment.
We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people.
To be clear, I completely agree with you that this system has to be dismantled before it gets worse, and a lot of this supposed wealth is illusory anyway: if your house has a "market value" of $750K but no millennial or zoomer can ever possibly pay that, it's not actually worth $750K. But making it actually happen is going to involve a huge, ugly political fight which you can't just handwave away with "we need to have a cultural shift". There are real material considerations at play here, not just culture.
> We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people.
So the question is if the wealthy can remain wealthy, or if the poor can get houses?
I'm sorry, but... as a Catholic the choice is obvious to me. Blessed are the poor, etc. etc. We should favor those who don't have wealth yet.
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There's other investments, and any such large-scale buildup of houses will take place over a long-enough time period that investors can reallocate wealth appropriately (reverse mortgages and then move the money to the stock market or something). Talk to a financial advisor if you need help moving wealth out of your house and dumping that onto someone else.
Meanwhile, there's no actual solution to the young couple who needs a house for their next baby to raise their family. Get them a damn house. Period.
I mean I agree with you. But what I'm trying to convey is, if you go to voters and say, "here's a policy update that will fix the housing crisis and secure a future for the next generation, but it will also subtract $400K from your total wealth", they're going to not just say no, but fight you to their last breath. Proposed policies need to account for this if they're going to have a realistic hope of success.
And no, "move it to the stock market" will not fix this problem. Again, imagine putting this question to someone in their 50s with a house they have nearly paid off: "I could take this wealth and move it to the volatile stock market, or I could continue the policy of protectionist zoning restrictions so my always-appreciating asset can keep on appreciating as it has done for decades. Gonna go with door #2, Bob."
The wealthy throughout history have often made sacrifices when wealth was obviously unfair. Or when wealth was needed to move society forward.
What a wealthy person wants isn't necessarily greed, and we need to stop thinking like that. Even in Roman times, wealthy got together to fund various projects for the greater good.
What the wealthy want most of all, is if you take their wealth, that it truly does go towards a greater good. And "building more houses" takes wealth through free-market capitalist systems in any case (ie: its not a direct wealth taking we're talking about, but a steady change as zoning laws allow more houses to be built).
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Most of these "wealthy retirees" are looking aghast at their children's opportunities. My brother-in-law's parents may own 3 houses, but they were complaining to me about their daughter's inability to find a house in this current market.
They care far, far more about their daughter finding a good house and starting her family, than the value of their 3 houses. And I bet many, many, many other families are in the same situation. (Rich/Wealthy retirees scared for their children / grandchildren).
Houses that are good for wealthy retired people are not so good for young couples raising children.
In particular, the school systems that are around such homes. Location, Location, Location.
Secondly: those houses have tenants. They're not sitting empty.
Thirdly, for the young couple. Being tied to your parents financially basically makes them a slave-owner of you. When the parents drop by or use the yard to store project-cars, or refuse to fix issues with the house... the young couple is not in a position to fix those issues themselves without pissing off the parents. (Its not their house after all). So getting their own house leads to a better relationship between child and parent anyway, and should be preferred.
I’m sorry, but you don’t seem to understand the concept of giving. If I give something to my family, it is theirs. They can use it, lend it, sell it, destroy it.
I agree with parent comment, if they have 3 houses, buy one for their daughter. As in put her name on the deed. Either they care about her and love her and their grandchildren or they are selfish and would rather have 3 rentals then what’s best for their kids.
I'm very tangentially related to them. (Sister's husband's parent + sister's husband's sister). So I'm not really going to meddle with their life choices.
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But I'm trying to say that policies that help their daughter (even if it costs them a bit of wealth by subtracting it from their 3x houses due to looser construction laws causing more houses to be built and therefore lowering the prices of houses in this area) is something they likely will support.
The houses have tenants, so they can't use them for their children? It sounds like they prioritize the income stream over their child finding a home. Yeah, it isn't fun for the people who need to relocate but that isn't some impossible hurdle.
Did you see point#1? The homes aren't in locations ideal for raising children in any case.
You need a good school district if you want your child to growup smart. Retired folk having 3x homes in lower-educated areas is fine for retired folk. But that doesn't mean that those homes are immediately useful to a new family.
Building new homes (and cheaper homes) in the better school districts makes more sense overall. Some neighborhoods naturally become "retirement communities" but kind of a ghetto for education (ie: young couples try to escape those areas due to poor schooling).
That's just regular church stuff in countries with organised centralised religion. That's why one of the major things the French Revolution did was first sell bonds against Church land, then directly sell off that land. It was wasted on the Church and the state needed the money and more productive use out of it (taxes, because of course Church land wasn't taxed).
I’m not religious, but it is worth noting that the Catholic Church does provide an insane amount of charity to the less fortunate. Their churches do take up space but they also do provide a ridiculous amount of shelter and free food for poor people.
Globally the catholic church alone "owns" more land than the entire of France. It's total wealth is measured in dozens of billions of dollars. Obviously this is lower in the UK due to henry viii who confiscated it and gave some to his mates and formed a new church with all that land, but it's the same type of organisation.
Personally I'm of the opinion that no entity should own land, it should be rented from the people according to the value, but that's a minority opinion.
>We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people.
As someone staring down never having the ability to get into that club: that's a price I'm willing to pay.
In fact I'm willing to pay much more than that. This is the issue that dictates my vote.
I don't think I follow - which club are you not getting into, retirement or home ownership? Because if you don't have a home, then you aren't the one paying if the value decreases.
> you nuke the retirement accounts of 100 million people.
I don't understand how this works - if the assumption is you're going to sell your house for a profit, isn't a significant chunk of your upside just going to be rolled into your new housing?
> if your house has a "market value" of $750K but no millennial or zoomer can ever possibly pay that, it's not actually worth $750K.
The valuation isn’t illusory if you can constrain supply and monopolize ownership. The plan for the next generations is for them to never own housing and instead be parasitized by huge investment firms who buy up all the existing stock.
We have to start somewhere. We have people who say that we can't demolish houses as investments because it's one of the few remaining holds of generational, familial wealth left. And that's true. But we also don't have enough housing, and building more housing will naturally devalue the housing that exists. That's also true. But we can't simply let this keep going. There are people who can afford those homes: private equity firms, and they're buying more than they ever have to rent them out. While we bicker about which way to go about it is best while ensuring we harm as few people as possible, the people already in charge right now are teeing up to not only destroy them as investment vehicles for the people who own them, but ensure that no people will ever own them again, that we'll all just be little rent-paying serfs in their various fiefdoms.
These issues are complicated, and any action taken will have ripple effects across centuries, much like the practices of redlining have led to generations of impoverished minorities and over-policed communities. But at some point we have to begin solving the damn problems instead of just arguing and debating ad-infinitum while the system already in place is making all of it objectively, factually worse.
And frankly, my inner cynic sees the drumbeat of the neoliberal establishment, the ones most likely to have the most valuable "investment accounts" in the form of homes, constantly saying "well we need to make thoughtful considerations about this before we do anything" over and over and over, for years on end, while their investments continue to gain value year over year, and the societal harms inflicted on others continue to not be their problem, as frankly, not positioned or well incentivized to actually fix it since they directly profit from the problem they're being asked to solve. I don't want to believe none of you are capable of empathy, but incentives are much, much stronger than feelings, and none of the establishment middle-class has any solid, incentivized reason to wind down the profit machines that are continuing to make them insanely rich. That worries me.
> We have to start somewhere. We have people who say that we can't demolish houses as investments because it's one of the few remaining holds of generational, familial wealth left.
Why would we want that? My great great grandfather was luckier than yours, and that's why I live like a king and you clean my shoes?
Because historically in the United States at least, the ability to pass down your wealth to your children has been one of few reliable ways to ensure your children aren't themselves thrown into the meat grinder of poverty. Hence why huge swaths of it are called "generational poverty:" their parents didn't have shit, and they too will not have shit.
That the privileged groups have leveraged this to keep their children from suffering the same fate is not a bad thing. No one deserves to be squeezed dry like the poor are. But the notion that we need to replace houses for these people as a way to accomplish this is not wrong, and making whatever it is be not-houses is a way to get communities that were brutalized by red-lining the ability to accomplish the same thing.
This is far above my pay grade. I just sick of the status-quo warriors endlessly citing the fact that we don't yet have a perfect solution as a reason to keep on using the broken current solution.
As a wealthy parents you can already afford massive leg-ups with your children by supporting their education and offering the opportunities. How does inheriting 300k when they turn 50 help?
Any many more won't be able to because their parents don't own a home?
Carry on like that and you end up with the landed gentry and feudalism.
Far better to ensure millennials (many who are now in their 40s) and zoomers can own a home regardless of their parents. One way would be to prevent generational transfer of wealth -- meaning that everyone is in the same boat, you have to work on your merits, rather than who your parents are.
> nuke the retirement accounts of 100 million people
Your house is only a "retirement account" if you're willing to take out a reverse mortgage, move into some much cheaper home, or share a living room with other old folks in an "assisted living" institution.
Some of us on the other hand would prefer a future unencumbered by debt, "aging in place" in our own homes.
> If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people.
A similar argument is advanced to protect shareholders who facilitate the degradation of quality of life across society.
Perhaps retirement options should come with complete and crystal clear disclosure of actual consequences - and that those consequences needed to be vocally repeated by the buyer prior to acceptance. Recorded and witnessed, of course.
> We're going to have to have a cultural shift towards housing as shelter, not investment.
Good luck with that one. We’ve been dealing with this since the 70s when Prop 13 passed in California. The primary responses have been to vilify the homeless for their own plight and funnel billions into “affordable housing schemes” that are little more than graft engines for local politicians.
Many fellow Bay Area Californians apparently like to sit back and watch their cities crumble into a neoliberal hellscape as long as its profitable to them. Folks in Berkeley pretending they’re progressive while fighting housing initiatives for instance. It’s becoming a nightmare fueled by pure greed.
The problem is that people who could afford it, bought homes at a higher price. They will not sell it for less than they bought it for. Combined with high interest rates, total cost of ownership is a through the roof.
This wouldn’t have been a problem if this was an asset that everyone doesn’t need and the supply was more.
It's that they won't sell at a loss AND take on a new mortgage with a rate that is 2-3x what their existing mortgage costs to service.
Owning a home creates losses of its own. I'd know, with my water heater going out, furnished basement flooding in a freak incident, and a tree falling on my roof, all in the same year. If I could get 3% on a different home, it wouldn't take a ton of enticing. Not doing it at 7% for anything though.
I am personally very curious to know when interest rates are not perfectly offset by increased purchase price. I believe this is a popular belief that is wrong. That can’t possibly be the case, not even in the majority of mkts.
Well, the real problem with regards to housing is that we just didn't build enough houses IMO.
Cheap houses in particular get voted off of most city councils or other local politics. It only costs $20k per trailer in a trailerpark IIRC, and so trailer parks can build hundreds of housing units for under 10-million invested.
Or various apartment buildings can be built with similar cost-efficiencies. Or Row-homes, or multiplex homes, etc. etc.
The issue is convincing the public that low-cost housing is to the benefic of society and that its a good thing to build. Most people see them as ways of attracting drug-dealers, black people / minorities, or turning a neighborhood into a Ghetto.
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So build enough low-cost housing. Build enough medium-cost housing. Etc. etc.
The problem is that in most municipalities, people are only happy when high-cost housing is built. But that's just not sustainable.
The real problem is that there isn't enough housing where everyone wants to live. There is a shortage in a few popular cities while the rest of the country can have a surplus of housing to live in.
Yes, Seattle could use more trailer parks, but there is absolutely nowhere to put them. We build lots of multiplexes, row homes, town homes, apartment buildings, but we still have a net influx of a 30k/year into the area, so its a losing battle.
> The real problem is that there isn't enough housing
Because too little has been built and little of that fits widespread need.
> where everyone wants to live.
Wants to live infers worthwhile choices. The reality is that people live anywhere they can survive. Worthwhile choices don't include locations that are likely to lead to homelessness.
> Because too little has been built and little of that fits widespread need.
But housing has been built and is being built. We leave it to the market, so its mostly higher end housing that gets built (more money to be made), but plenty of well to do techies are moving to the city that there isn't a shortage of people who want to live in that.
> Wants to live infers worthwhile choices. The reality is that people live anywhere they can survive. Worthwhile choices don't include locations that are likely to lead to homelessness.
Actually, cites with nice weather but expensive weather attract the chronic homeless in droves. They don't care about the high cost of housing (they couldn't afford to live in Detroit either, so what does it matter?), and the nicer more mild weather works better for sleeping rough and not dying.
I'm not really sure what is your point. If all American residents wanted to live in San Francisco, should we fit 380 million people in that small area?
Note that our population has been growing at much faster rates than housing. So the overall trend is inevitable: fewer housing units than our population growth means that we will just have more expensive houses.
Our population isn’t growing fast (.1% excluding immigration), but it is becoming more concentrated in fewer popular cities. Those cities of course, there is not a house for everyone, but there are plenty of houses in unpopular cities.
So we don’t have a residency system in the states, so everyone is free to live wherever they want, only supply of housing being a limiting factor in where they want to move (which we use the market to sort out).
> Those cities of course, there is not a house for everyone, but there are plenty of houses in unpopular cities.
So build houses where people want to live.
As I already said earlier: the problem is that we stopped building houses at respectable rates. Its going to be a decade before we catch up to where the population wants to live.
I'm pushing for trailer parks (aka, low end housing), and other cheap forms of housing most of all. Townhomes or Multiplexes as well.
Cheap, dense, highly deployable. There are other forms of dense housing (multiplex units) and whatnot as well. People don't necessarily need the best house per se, but having at least a crappy housing market that's vibrant and healthy is hugely important to the lower class.
So something like Hong Kong's old Kowloon Walled City? I mean, its been tried, slums and shanty towns exist in spades in other countries. I don't call that living. Or if you want better than developing world, the Parisian suburbs, where...only a few cars are lit on fire a year now.
Low-cost housing solves the worst-of-the-worst problems. Its better for the poor to live in cheap rowhomes or trailer-parks than for them to be roaming the streets at night in de-facto homeless encampments.
I’m not really addressing greedy corporation shitbags. I’m talking about the relationship between rates and prices. If you need someone to vent to about shitbag greedy corporations, go elsewhere. (I’m not disagreeing that corps are shitty greedy horrible inhuman profit machines)
That's the point I'm making, though. You're ignoring Occam's Razor, that the most likely explanation, when none of the others fit quite right, is greed.
A greedy investor would have built more homes that better matched our population dynamics.
Greed is insufficient to explain the problem. We have a market failure here for sure. (Markets work even in the presence of greed, with the proper regulatory environment. Whatever the hell has gone wrong with our society over the last 30 years to cause us to stop building houses is... well... "Greed" just is insufficient to explain the behavior)
> We're going to have to have a cultural shift towards housing as shelter, not investment.
I've been saying this for years.
Real estate investing is an absolute cancer on society. It is utterly unreal to me that people think their house should go up in value over time higher than the rate of inflation without doing any improvements.
But it's not even just that, but people and corporations buying up houses for the sole purpose of renting them out, which merely furthers wealth inequality. The owners are financial vampires, taking advantage of the fact that a bank will tell someone "We don't think you can afford a $2,000/month mortgage" when their current rent is $2,500/month.
I think what upsets me the most isn't the widening inequality, but that so many of these landlords have a savior complex, thinking they're doing a huge service. No, you took a home off the market for the sole purpose of enriching yourself. The demand for rental properties pushes house prices up, locking more people out of home ownership.
We need severe disincentives for purchasing single family homes for the purpose of renting them out.
I'm sure someone is going to accuse me of being a sour renter, but nope. I've owned my house since 2015. In 2019, I could have bought a second house to rent out, but I chose not to because it's incredibly immoral.
I totally agree with this stance. Among my peer group a couple of folks own a second property they rent out and the "if we didn't where would our tenant live?" vibe is bizarre. They'd live in a house, maybe even being able to afford the one you rent to them.
It’s how liberals resolve the cognitive dissonance of getting someone poorer than them to pay for their mortgage, without seeing themselves as greedy or parasitic.
In America, "Liberal" can mean different things depending on where you sit on the spectrum.
If you divide the spectrum into just left/center/right, then people on the right would label both left and center as liberal, but people on the left would label just the center as liberal. I don't know what the centrists would label as liberal because we have very few genuine centrists. Most of them are actually right-wing but don't want to admit it.
To me, a liberal is someone that sees one group of people that wants to lynch all black people, another group saying "hey we just want to live", and thinking there's a compromise that can be made. A liberal seeks to maintain the status quo and to keep things quiet and peaceful. They prioritize order over justice.
Yeah that absolutely makes no sense. As a tenant, I live in this house, it is mine no matter what paper you have that says you own it. You didn't provide it for me from the graciousness of your heart but rather from a pit of greed that gatekeeps me from doing what I see fit with it.
Nah, they'd live in a house that they rent from Blackrock. Possibly at a lower rent due to reduced demand without small landlords in the fray, and due to a lower cost of financing for Blackrock, but it'd take actually banning residential rentals to seriously move the needle rather than just change who the landlords are.
The problem is a lot of people that want to purchase a home know it’s a scam and the owners of homes want to perpetuate that scam because they bought into it. Guess who has more political clout.
> Real estate investing is an absolute cancer on society.
Yes, so much so that Adam Smith himself described real estate speculators and landlords as destructive parasites, whose power and influence should be diminished at all costs. So much for that part of his philosophy, though…
In most ways the lives of middle class Americans are better than that of their counterparts 30 years. We have an idealized view of what prior generations’ middle class looked like.
Home ownership is the one exception. We need to build denser, and we need to build actual communities that are livable without needing to drive 30 minutes to go to the grocery store.
The middle class of today has every right to be infuriated at our housing inaction.
Yea, well... but besides the costs of health care, automobiles, groceries, education, and homes (I'd also add gas and energy), things are totally better than 30 years ago! In other words, I'd trade lifestyles with my "parents of 30 years ago" any day.
I would not. This is the first time a generation has been able to say this in 400 years. I would much rather have no cell phones or big TVs if it meant I could have a place of my own.
>needing to drive 30 minutes to go to the grocery store.
I understand that this is hyperbole, but in this age-of-big-data, is there a way to quantify this? I'd like to see a histogram of miles from nearest grocery store vs. number of homes/apartments.
The Home Price to Median Household Income Ratio is higher than it's been in 70 years.
Between 1965 and the year 2000, it fluctuated between 3.5 and 4.5. At the top of the housing bubble in 2008, it hit 6.8. Right now it's at 7.6. And I don't believe the housing price data this index uses (from S&P CoreLogic Case-Shiller U.S. National Home Price Index) considers the cost mortgage interest rates, so the actual cost of ownership is even higher (relative to a low interest rate environment) than this data shows.
The Home Price to Personal Average Income Ratio is a bit different, but tells the same broad picture.
The average new construction house size changes from 1500 square feet in
1975 to 2500 square feet in 2022.
So yes, some of the higher cost of housing is simply that buyers want more house. I know my personal house is nearly double the size of house I grew up with, despite only having 3 kids vs my parents 2.
This doesn’t necessarily follow - it may be that the average potential buyer wants the same amount of house as before, but due to supply issues the lower end of potential buyers can’t afford to buy anything at all. And size doesn’t scale linearly with price - it’s usually sublinear. So it could be that the only homes that get built/sold are larger because nobody is building homes for middle-lower income price ranges.
I can't find it at the moment, but in the last year or so there was a really informative "why aren't developers building more affordable housing" article on (I believe) NPR.
There were lots of factors, but basically it comes down to the fact that it's significantly more profitable for builders to build bigger, more expensive houses than smaller, more affordable houses.
AKA, a builder will make much more profit on a single $750K house, than building 3x $250k houses.
So I'm sure the reason houses are getting bigger is some combination of consumers wanting bigger houses, and bigger houses being what's available.
So wants have increasingly overtaken needs. I agree with one 750K house will be more profitable but it won't be that simple because once demand is aggregated selling 50 3x priced homes would quite a bit more difficult then selling 150 1x priced homes. Just an example in my area I see townhomes selling much faster than single family homes. So much that there is premium on town homes.
> significantly more profitable for builders to build bigger, more expensive houses
This is also the reason why car buying also sucks so much now. There is more profit it bigger higher trim cars full of features than smaller reliable basic cars.
Some of this is also fuel economy regulation. You can't make an F150 the size they were in 1992 without onerous fees because of the gas mileage the engine will get (while still being able to meet the needs of anyone who wants a truck, such as towing capacity). The regulations are written so that larger vehicles are permitted to have lower gas mileage. As a result, we see the ever growing trucks and SUV's on the road when people would kill for small trucks that companies just will not make anymore.
Everywhere else, buyers can only buy what exists. Affordable home buyers buy nothing because there is nothing within reach.
The notion that people would choose detrimental living because they couldn't get a house that was 3x their need seems absurd.
The more likely cause is the reality that new houses cost more than double what they were in the 1980s - adjusting for inflation and comparing for size, amenities and market.
> Each kid gets their own bedroom. A home office. Maybe a movie room.
With dropping fertility rates I'm sure there are plenty of people with 1 or even no kids that don't need those rooms. Home office will be entirely domain dependent (I don't see e.g. a couple of dentists needing or wanting a home office).
So the fact that the default house is pretty massive means that all sorts of people are priced out entirely.
Anecdata; my dad is a dentist I've been in 20 or 30 dentists' homes for parties and such, they all have home offices which are glorified library / trophy rooms.
Same thing happened with trucks and the auto market in general as well, There is more profit margins in bigger stuff so thats what companies focus on making and stop making the low end rendering everything unafforadable.
Also the cheap base models went from majority to mostly nonexistant.
Buyers want more house? Or builders want richer buyers?
Starter homes generally just don't get built, as it generally costs more per square foot to build a start home than a larger home (as some of the features are going to mostly cost the same regardless of the floor plan, such as some of the kitchen outfitting). The reduced supply moreover makes it so smaller houses don't even end up costing much less, because there's enough demand for them from people who not only don't need the space, but would prefer not paying the utility bills and dealing with the maintenance.
You don't have to ask realtors whether houses cost too much. The U. Michigan survey of consumers shows that "price reasons for buying conditions for houses" i.e. whether the mortgage is too damned high stands at historically bad levels. Sentiment was never this bad, at any time between WW2 and 2020.
There is one rather large and serious problem with this statistic: it censors suppressed household formation. Because it is the tenure of households, there is no consideration for the households that aren't being formed, for example because an adult still lives with their parents. That person is counted under "homeowner" which is deeply misleading. The worse the housing crisis gets, the better this statistic looks.
Sure. If we surveyed a bunch of Americans who perceived the world was flat, I expect that we'd augment that perceptual survey with additional data and context.
Someone may live in an owner-occupied home and not own it--e.g.: adult children living with their parents, cohabitating adults.
> The share of young adults ages 18 to 34 who have formed an independent household has declined since 2010, while the share living with their parents has increased sharply. In 2010, less than one-third (32 percent) of young adults ages 18 to 34 were living with their parent(s), but this share jumped to 35 percent by 2017. The increase was sharpest among 25- to 29-year-olds, rising from 21 percent in 2010 to 26 percent in 2017. The share of 30- to 34-year-olds living with their parent(s) also increased by 4 percentage points across this period.
Feedback systems with long delays are going to be easier to destabilize than systems with short feedback cycles.
There's a lot of "memory" in housing prices.
Houses are just about the hardest item to build in America today. You need land, and you cannot make them in a factory. All cost cutting measures have been in materials (to the point where quality is degrading).
Regulations push new players out of the market - increasing prices.
Housing is a social prestige item like health care and education - so that will drive costs up too.
The US will have 100m more people in the coming decades no matter what - so demand will always be high.
Solution? There is none. It's how the power elite want it.
> You need land, and you cannot make them in a factory
The land part is true, but there are people working on the second part. One of the more exciting ones I’ve seen recently is Cover [0]. They do the majority of building in their factory and only the foundation work and assembly is done onsite. But they’ve got enough flexibility to adapt their designs to the lot and they help buyers with the permitting hassles, so it’s a lot more appealing than some of the other kit home options. And, more importantly, their product has a luxury feel, so it doesn’t feel like you’re compromising. They’re focused on the LA area and the ADU market right now, but if that works out, it’s easy to see them getting a lot of funding to scale out their efforts to other markets. I’m hopeful that an approach like this can drive down the cost of new construction, especially when combined with streamlined permitting in places with housing crises where the political motivation will be there to adopt more a more builder-friendly environment.
If anyone is interested in seeing an actual finished project, a luxury real estate YouTuber did a tour [1] of one of their houses recently.
But the expensive part in most places is the land.
Even if the material and labor were free, an empty lot here in Boulder would cost over $500k, and you won't find any. I imagine it's the same problem in most cities (though maybe not so expensive).
I've been saving up for the past 8 years and have got a pretty decent deposit built up but the costs of houses in my area are just so expensive that the deposit barely makes a scratch in the overall mortgage costs and I wouldn't be able to afford the mortgage, seems like the more I save up the higher the housing prices go. It absolutely amazes (and infuriates) me that some of the houses I see going for 400-500k now went for 150-200k 10 years ago.
For a stock, maybe not. But for a house? It is absolutely beyond ridiculous for a house to double in 10 years. Are you kidding me?
That's far beyond the rate of inflation. Unless there are significant improvements to the house or the surrounding area, the value of house should not rise faster than inflation, at least not by some significant margin.
I think the meaning is clear given the full context of my comment.
It is ridiculous for a home owner to expect the value of their home to rise faster than inflation by a significant margin without there being massive improvements to either the home itself or the neighborhood.
And skyrocketing housing prices means the rich get richer while utterly fucking over the young generation and locking them out of home ownership as prices rise significantly faster than wages.
Because they can't as a result of private equity firms and hedge funds buying houses for investment purposes. Without legislation, people are going to be renting for the rest of their lives like modern day serfs.
There's a recent Redfin analysis on this. On average, only 16% of homes were affordable for households earning a median income [1]. It's wild how broadly these affordability numbers vary, and just how much less affordable homes are today than they were just 2 years ago.
Ohio must either be a very undesirable state to live in, or they're doing something right to keep house prices relatively reasonable: 3 of the top 5 most affordable cities are in Ohio!
I can afford to buy a house, and I'm middle class.
The trouble is, that house would be in the middle of nowhere, with Starlink being the only viable internet option. Nowhere else is going to have house prices under $200k for something family-livable.
Not true at all, there are plenty of small-to-mid-sized cities with good Internet (fiber even!) where you can buy a 3 bedroom home in good shape for well than that. Topeka, Dayton, Peoria, Paducah...
If you use the metric "price per square foot per person adjusted for inflation" it's not as bad. Part of the problem: household size has been shrinking and house size has been increasing steadily. That effect combined with the decrease of "good blue collar jobs" causes the crunch.
Today's average 30 year fixed mortgage rate is 7%. Assuming a 10% down payment, 0.5% to private mortgage insurance, and the usual bits and bobs, that approximates a $2800/month payment, or $33600 per year, which is 45% of that median income.
What you can afford is based on what you've modeled based on assumptions about your future cash flow, unless you're talking about what you can afford to pay out of pocket, without taking on any debt in the process. Which isn't how people talk about buying houses.
Any time credit is involved, belief in one's assumptions is absolutely part of the equation.
I can't afford a home, even though I'm considered a high earner. But always ask, how much is an affordable house? In California the answer can vary between 200k to a million dollars. Travel across the states and the range continues to stretch.
I can't afford a decent house in California without disrupting my children schooling and schedule. But then you may ask, what is a decent house?
Well, yeah. I live in Seattle, where the median household income is $115k, which would mean a home would have to cost around $350k to be affordable, given the 30% of income rule of thumb. The median home price in Seattle is $816k.
Hmm, now that I think about it, that's still affordable if you can afford a modest $500k down payment. Most couples I know who both make around $60k a year have at least that much in the bank. Never mind please disregard, everything is actually fine.
I just turned 30. If I can’t afford a house in the next 10 years I’m going to be a lifelong renter.
Why get a 30 year mortgage at 40, to only pay it off at 70 and then die in two decades? It feels like the wrong thing to do but…I really don’t know how else to look at it.
Sure. I could afford a house today where I grew up. But I’d have to surround myself with the highly undesirable culture (in my opinion) in those places. To put it nicely.
> Why get a 30 year mortgage at 40, to only pay it off at 70 and then die in two decades?
1) Inflation hedge.
2) At some point in the next 30 years, you will be able to sell your home at / above what you paid for it, just due to the cyclical nature of things.
I'm not saying real estate always goes up... but for example, I bought at age 41. $515k. Current estimated value, $900k. When the kids are all graduated and out of the house (when I'm 53-54ish) I can sell this, buy something outright in cash, and increase my saving rate from ~35% to about 60% without any change in my current standard of living.
I think the idea of being able to downsize (or stay where you are after paying your mortgage off) is underrated. Going into retirement with no big outgoing costs for housing outside of insurance and maintenance is a big upside of owning a house (I'm not in the US, so no property taxes either). You don't need to make a profit on a home for it to pay off longer term.
Having a pension that can cover living costs while NOT having to also cover rent gives a lot of security. While it's also an option to get cheaper rent and put the difference into another investment, rent costs are hard to predict, so I'd rather not end up worrying about it later in life.
If you pay a mortgage till the day you die, how’s that different than paying rent till you die?
If you can find a home you like more than places you can rent, and the payments are similar enough, seems like it’s still better to get a mortgage.
A mortgage payment can’t increase like rent can and most likely will, forcing you to move every X years if you decide you can find somewhere more affordable.
Of course there are tradeoffs in the other direction, like if you need to move to a distant location for job/family/health, I just don’t think it’s as one-sided as you present it.
Most people don't take 30 years to pay off their mortgage, which is why mortgage rates tend to move with the 10 year treasury rather than say, the 30 year rate. The investors generally assume the average prepayment results in them being paid off in about 10 years, and since they're the ones the mortgage lender is offloading to, it's what your rate is determined by.
You buy a house, service the mortgage while you're there, then sell it (using the proceeds to pay off the mortgage), and if you've not made a bad investment, you come out with more money than you went in with, which presumably, you put toward a down payment on your next home. If you're downsizing, it may mean you're buying your next home outright, or with very little of the capital borrowed.
Unless, of course, your property value declines. Watch out for bubbles, and get sensible insurance to mitigate the risks.
I grew in upper middle class southern California. I work in tech for the last 7 years.
My parents house went from $500K when they bought in 1995 to +$3M today. If my math is right, that would mean the all-in payment (principal, interest, taxes) would be around $20,000/month at today's rate. Assume you do not want to spend more than 1/3 of your income on housing, your household would need to make $720,000/year.
Nominally, I make a lot more than my parents did at their peak, but in real terms, I can't afford a home in the neighborhood I grew up in.
Anecdotally, the only people I know that can afford to live in my old neighborhood are young people who get help from their parents or people who bought way before covid and rolled up their existing equity into their new home purchases. Among the upper middle class people I know, no one can afford that area or they are not interested bc they think the cost is not worth it.
What's going to happen to the firefighters, cops, and teachers in that area?
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[ 2.7 ms ] story [ 263 ms ] threadThink $5-7k/mo.
Not to say things aren't tough out there. Just that a $4k mortgage is still 30%+ more than what people can expect to pay at the median.
This ignores taxes and insurance of course.
An actual mortgage payment would probably be closer to 3,000-3,200 after escrowed PMI, taxes, insurance, on a typical loan.
Even if we thought ditching dream jobs was something worth doing, we would only be trading into lower income / less fulfilling jobs to enter a historically awful housing market.
What's sliding with the definition of "afford"? I thought there was broad agreement that housing should be no more than 30% of your gross income, give or take a couple percent based on who you ask.
But there's a lot of places where you can't even get an affordable apartment. And it's hard to get a smaller house at a proportionally smaller price.
So it is clear from this definition that the lower bound for it is income of $48,500 from what you are not considered poor anymore and upper bound is income of $145,500 from what you are considered rich.
Now the most important consideration is - if a person can't afford a home, then can they really considered to be not poor?
Yup. I've met people living paycheck-to-paycheck, never having much more than 1 paycheck's worth of money in their bank account, that think they're middle class. Shit, I've seen people that are on food stamps that think they're middle class.
The worst part is that so many of them will vote against their own best interests because they think they'll be millionaires one day.
I would say its rather backwards. Thinking of things as lower class seeks to afford rent, middle class seeks to afford housing, and upper class is beyond it. House ownership is basically the cornerstone of class wealth in the US. Prehaps with secondary lower/middle/upper modifiers your degree of success there (e.g. upper middle class comfortably affords their house, but it's still the bulk of their wealth; lower lower cannot reliably afford rent)
“Upper middle class” was your doctors and lawyers, but the typical kind (the 100-week partner guy was fucking “RICH”). They had nice houses in desirable parts of town.
“Lower middle class” were workers without differentiated skills or educated folks with really bad money habits / some other issue like that. With my folks it was some college but dropped out to start a family (have me), got in tax trouble young. Lower middle class almost always rented forever.
“Poor” was like, no skills or flat lazy, or conspicuous drug problem, or something like that. They rented in bad parts of town. But rented.
That’s context or color, not numbers. But we were “the poor relations” relative to the spiffy college graduates or the folks with two incomes, and had IRS trouble, and rented in unglamorous but perfectly nice places.
Sounds crazy now.
Most of us are N missed paychecks away from being broke. For some, that N is 1 or 2, for some it's 5, for retirees, the number may be even larger; but we all inevitably need money from our labor to come in in order to live. And this is true regardless of the dollar amount on that paycheck. We're all in the same boat.
For a very few lucky people, that N is infinite because their money grows faster than they can spend it. They get richer just by existing.
To me, these are really the only two meaningful economic classes. Do you have to work for your living or not?
Then we hit interest zero, there was nowhere left to go. Now we're finally back to more historically normal and healthy interest rates, and it has broken the housing market.
We're going to have to have a cultural shift towards housing as shelter, not investment. We have to increase supply to meet demand. And we're going to have to pay more attention to driving down the actual dollar cost of homes, not just the monthly payment.
Not really. We just had impetus to raise them.
We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people.
To be clear, I completely agree with you that this system has to be dismantled before it gets worse, and a lot of this supposed wealth is illusory anyway: if your house has a "market value" of $750K but no millennial or zoomer can ever possibly pay that, it's not actually worth $750K. But making it actually happen is going to involve a huge, ugly political fight which you can't just handwave away with "we need to have a cultural shift". There are real material considerations at play here, not just culture.
So the question is if the wealthy can remain wealthy, or if the poor can get houses?
I'm sorry, but... as a Catholic the choice is obvious to me. Blessed are the poor, etc. etc. We should favor those who don't have wealth yet.
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There's other investments, and any such large-scale buildup of houses will take place over a long-enough time period that investors can reallocate wealth appropriately (reverse mortgages and then move the money to the stock market or something). Talk to a financial advisor if you need help moving wealth out of your house and dumping that onto someone else.
Meanwhile, there's no actual solution to the young couple who needs a house for their next baby to raise their family. Get them a damn house. Period.
And no, "move it to the stock market" will not fix this problem. Again, imagine putting this question to someone in their 50s with a house they have nearly paid off: "I could take this wealth and move it to the volatile stock market, or I could continue the policy of protectionist zoning restrictions so my always-appreciating asset can keep on appreciating as it has done for decades. Gonna go with door #2, Bob."
What a wealthy person wants isn't necessarily greed, and we need to stop thinking like that. Even in Roman times, wealthy got together to fund various projects for the greater good.
What the wealthy want most of all, is if you take their wealth, that it truly does go towards a greater good. And "building more houses" takes wealth through free-market capitalist systems in any case (ie: its not a direct wealth taking we're talking about, but a steady change as zoning laws allow more houses to be built).
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Most of these "wealthy retirees" are looking aghast at their children's opportunities. My brother-in-law's parents may own 3 houses, but they were complaining to me about their daughter's inability to find a house in this current market.
They care far, far more about their daughter finding a good house and starting her family, than the value of their 3 houses. And I bet many, many, many other families are in the same situation. (Rich/Wealthy retirees scared for their children / grandchildren).
In particular, the school systems that are around such homes. Location, Location, Location.
Secondly: those houses have tenants. They're not sitting empty.
Thirdly, for the young couple. Being tied to your parents financially basically makes them a slave-owner of you. When the parents drop by or use the yard to store project-cars, or refuse to fix issues with the house... the young couple is not in a position to fix those issues themselves without pissing off the parents. (Its not their house after all). So getting their own house leads to a better relationship between child and parent anyway, and should be preferred.
I’m sorry, but you don’t seem to understand the concept of giving. If I give something to my family, it is theirs. They can use it, lend it, sell it, destroy it.
I agree with parent comment, if they have 3 houses, buy one for their daughter. As in put her name on the deed. Either they care about her and love her and their grandchildren or they are selfish and would rather have 3 rentals then what’s best for their kids.
I'm very tangentially related to them. (Sister's husband's parent + sister's husband's sister). So I'm not really going to meddle with their life choices.
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But I'm trying to say that policies that help their daughter (even if it costs them a bit of wealth by subtracting it from their 3x houses due to looser construction laws causing more houses to be built and therefore lowering the prices of houses in this area) is something they likely will support.
You need a good school district if you want your child to growup smart. Retired folk having 3x homes in lower-educated areas is fine for retired folk. But that doesn't mean that those homes are immediately useful to a new family.
Building new homes (and cheaper homes) in the better school districts makes more sense overall. Some neighborhoods naturally become "retirement communities" but kind of a ghetto for education (ie: young couples try to escape those areas due to poor schooling).
In the UK the 13th largest landowner is the church. If it used its lands to build at average density of Hackney it could house 2.5 million people.
Personally I'm of the opinion that no entity should own land, it should be rented from the people according to the value, but that's a minority opinion.
As someone staring down never having the ability to get into that club: that's a price I'm willing to pay.
In fact I'm willing to pay much more than that. This is the issue that dictates my vote.
I don't understand how this works - if the assumption is you're going to sell your house for a profit, isn't a significant chunk of your upside just going to be rolled into your new housing?
The valuation isn’t illusory if you can constrain supply and monopolize ownership. The plan for the next generations is for them to never own housing and instead be parasitized by huge investment firms who buy up all the existing stock.
The alternative is that the younger generations defer or forego having children due to housing insecurity.
These issues are complicated, and any action taken will have ripple effects across centuries, much like the practices of redlining have led to generations of impoverished minorities and over-policed communities. But at some point we have to begin solving the damn problems instead of just arguing and debating ad-infinitum while the system already in place is making all of it objectively, factually worse.
And frankly, my inner cynic sees the drumbeat of the neoliberal establishment, the ones most likely to have the most valuable "investment accounts" in the form of homes, constantly saying "well we need to make thoughtful considerations about this before we do anything" over and over and over, for years on end, while their investments continue to gain value year over year, and the societal harms inflicted on others continue to not be their problem, as frankly, not positioned or well incentivized to actually fix it since they directly profit from the problem they're being asked to solve. I don't want to believe none of you are capable of empathy, but incentives are much, much stronger than feelings, and none of the establishment middle-class has any solid, incentivized reason to wind down the profit machines that are continuing to make them insanely rich. That worries me.
Why would we want that? My great great grandfather was luckier than yours, and that's why I live like a king and you clean my shoes?
That the privileged groups have leveraged this to keep their children from suffering the same fate is not a bad thing. No one deserves to be squeezed dry like the poor are. But the notion that we need to replace houses for these people as a way to accomplish this is not wrong, and making whatever it is be not-houses is a way to get communities that were brutalized by red-lining the ability to accomplish the same thing.
This is far above my pay grade. I just sick of the status-quo warriors endlessly citing the fact that we don't yet have a perfect solution as a reason to keep on using the broken current solution.
As a wealthy parents you can already afford massive leg-ups with your children by supporting their education and offering the opportunities. How does inheriting 300k when they turn 50 help?
Carry on like that and you end up with the landed gentry and feudalism.
Far better to ensure millennials (many who are now in their 40s) and zoomers can own a home regardless of their parents. One way would be to prevent generational transfer of wealth -- meaning that everyone is in the same boat, you have to work on your merits, rather than who your parents are.
Your house is only a "retirement account" if you're willing to take out a reverse mortgage, move into some much cheaper home, or share a living room with other old folks in an "assisted living" institution.
Some of us on the other hand would prefer a future unencumbered by debt, "aging in place" in our own homes.
A similar argument is advanced to protect shareholders who facilitate the degradation of quality of life across society.
Perhaps retirement options should come with complete and crystal clear disclosure of actual consequences - and that those consequences needed to be vocally repeated by the buyer prior to acceptance. Recorded and witnessed, of course.
Europe went to negative rates while USA did QE rounds actually.
Good luck with that one. We’ve been dealing with this since the 70s when Prop 13 passed in California. The primary responses have been to vilify the homeless for their own plight and funnel billions into “affordable housing schemes” that are little more than graft engines for local politicians.
You can also reduce demand by reducing immigration (legal and illegal).
1980s interest rates were higher than now. The 1980s middle class could afford homes.
A new 1987 townhome that cost $212k (in inf adj 2023 dollars) costs about $500k today - allowing for similar quality, features, market.
I think houses are unaffordable because they cost more than double what they did.
This wouldn’t have been a problem if this was an asset that everyone doesn’t need and the supply was more.
It's that they won't sell at a loss AND take on a new mortgage with a rate that is 2-3x what their existing mortgage costs to service.
Owning a home creates losses of its own. I'd know, with my water heater going out, furnished basement flooding in a freak incident, and a tree falling on my roof, all in the same year. If I could get 3% on a different home, it wouldn't take a ton of enticing. Not doing it at 7% for anything though.
Interest rates went up, and then prices went up. No offset occurred, everything just became dramatically more expensive.
Bam. Theory already busted.
Cheap houses in particular get voted off of most city councils or other local politics. It only costs $20k per trailer in a trailerpark IIRC, and so trailer parks can build hundreds of housing units for under 10-million invested.
Or various apartment buildings can be built with similar cost-efficiencies. Or Row-homes, or multiplex homes, etc. etc.
The issue is convincing the public that low-cost housing is to the benefic of society and that its a good thing to build. Most people see them as ways of attracting drug-dealers, black people / minorities, or turning a neighborhood into a Ghetto.
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So build enough low-cost housing. Build enough medium-cost housing. Etc. etc.
The problem is that in most municipalities, people are only happy when high-cost housing is built. But that's just not sustainable.
Yes, Seattle could use more trailer parks, but there is absolutely nowhere to put them. We build lots of multiplexes, row homes, town homes, apartment buildings, but we still have a net influx of a 30k/year into the area, so its a losing battle.
Because too little has been built and little of that fits widespread need.
> where everyone wants to live.
Wants to live infers worthwhile choices. The reality is that people live anywhere they can survive. Worthwhile choices don't include locations that are likely to lead to homelessness.
But housing has been built and is being built. We leave it to the market, so its mostly higher end housing that gets built (more money to be made), but plenty of well to do techies are moving to the city that there isn't a shortage of people who want to live in that.
> Wants to live infers worthwhile choices. The reality is that people live anywhere they can survive. Worthwhile choices don't include locations that are likely to lead to homelessness.
Actually, cites with nice weather but expensive weather attract the chronic homeless in droves. They don't care about the high cost of housing (they couldn't afford to live in Detroit either, so what does it matter?), and the nicer more mild weather works better for sleeping rough and not dying.
I'm not really sure what is your point. If all American residents wanted to live in San Francisco, should we fit 380 million people in that small area?
We dramatically slowed-down homebuilding after 2007, and have *NEVER* recovered.
https://www.census.gov/econ/currentdata/?programCode=RESCONS...
Note that our population has been growing at much faster rates than housing. So the overall trend is inevitable: fewer housing units than our population growth means that we will just have more expensive houses.
There's simply not enough houses for everyone.
So we don’t have a residency system in the states, so everyone is free to live wherever they want, only supply of housing being a limiting factor in where they want to move (which we use the market to sort out).
So build houses where people want to live.
As I already said earlier: the problem is that we stopped building houses at respectable rates. Its going to be a decade before we catch up to where the population wants to live.
You create immeasurable value, wealth, and dignity to hundreds, thousands, or even tens-of-thousands of people.
So we should do that. Full stop.
I'm pushing for trailer parks (aka, low end housing), and other cheap forms of housing most of all. Townhomes or Multiplexes as well.
Cheap, dense, highly deployable. There are other forms of dense housing (multiplex units) and whatnot as well. People don't necessarily need the best house per se, but having at least a crappy housing market that's vibrant and healthy is hugely important to the lower class.
Low-cost housing solves the worst-of-the-worst problems. Its better for the poor to live in cheap rowhomes or trailer-parks than for them to be roaming the streets at night in de-facto homeless encampments.
Greed is insufficient to explain the problem. We have a market failure here for sure. (Markets work even in the presence of greed, with the proper regulatory environment. Whatever the hell has gone wrong with our society over the last 30 years to cause us to stop building houses is... well... "Greed" just is insufficient to explain the behavior)
I've been saying this for years.
Real estate investing is an absolute cancer on society. It is utterly unreal to me that people think their house should go up in value over time higher than the rate of inflation without doing any improvements.
But it's not even just that, but people and corporations buying up houses for the sole purpose of renting them out, which merely furthers wealth inequality. The owners are financial vampires, taking advantage of the fact that a bank will tell someone "We don't think you can afford a $2,000/month mortgage" when their current rent is $2,500/month.
I think what upsets me the most isn't the widening inequality, but that so many of these landlords have a savior complex, thinking they're doing a huge service. No, you took a home off the market for the sole purpose of enriching yourself. The demand for rental properties pushes house prices up, locking more people out of home ownership.
We need severe disincentives for purchasing single family homes for the purpose of renting them out.
I'm sure someone is going to accuse me of being a sour renter, but nope. I've owned my house since 2015. In 2019, I could have bought a second house to rent out, but I chose not to because it's incredibly immoral.
If you divide the spectrum into just left/center/right, then people on the right would label both left and center as liberal, but people on the left would label just the center as liberal. I don't know what the centrists would label as liberal because we have very few genuine centrists. Most of them are actually right-wing but don't want to admit it.
To me, a liberal is someone that sees one group of people that wants to lynch all black people, another group saying "hey we just want to live", and thinking there's a compromise that can be made. A liberal seeks to maintain the status quo and to keep things quiet and peaceful. They prioritize order over justice.
Yes, so much so that Adam Smith himself described real estate speculators and landlords as destructive parasites, whose power and influence should be diminished at all costs. So much for that part of his philosophy, though…
We spent half a century engineering scarcity. Falling rates were a nice add-on. But they were never a central part of the thesis.
Home ownership is the one exception. We need to build denser, and we need to build actual communities that are livable without needing to drive 30 minutes to go to the grocery store.
The middle class of today has every right to be infuriated at our housing inaction.
we can buy a TV cheaper than ever but anything important has massive inflation
I understand that this is hyperbole, but in this age-of-big-data, is there a way to quantify this? I'd like to see a histogram of miles from nearest grocery store vs. number of homes/apartments.
Check out the graphs on this page: https://www.longtermtrends.net/home-price-median-annual-inco...
The Home Price to Median Household Income Ratio is higher than it's been in 70 years.
Between 1965 and the year 2000, it fluctuated between 3.5 and 4.5. At the top of the housing bubble in 2008, it hit 6.8. Right now it's at 7.6. And I don't believe the housing price data this index uses (from S&P CoreLogic Case-Shiller U.S. National Home Price Index) considers the cost mortgage interest rates, so the actual cost of ownership is even higher (relative to a low interest rate environment) than this data shows.
The Home Price to Personal Average Income Ratio is a bit different, but tells the same broad picture.
https://www.statista.com/statistics/529371/floor-area-size-n...
The average new construction house size changes from 1500 square feet in 1975 to 2500 square feet in 2022.
So yes, some of the higher cost of housing is simply that buyers want more house. I know my personal house is nearly double the size of house I grew up with, despite only having 3 kids vs my parents 2.
There were lots of factors, but basically it comes down to the fact that it's significantly more profitable for builders to build bigger, more expensive houses than smaller, more affordable houses.
AKA, a builder will make much more profit on a single $750K house, than building 3x $250k houses.
So I'm sure the reason houses are getting bigger is some combination of consumers wanting bigger houses, and bigger houses being what's available.
This is also the reason why car buying also sucks so much now. There is more profit it bigger higher trim cars full of features than smaller reliable basic cars.
Is it that buyers are wanting more house or that builders make more profit selling more house due to red tape and zoning?
Each kid gets their own bedroom. A home office. Maybe a movie room.
Compare that to the 1950s boomer house, that has 2 kids in 1 bedroom, and no "extra" rooms.
Perhaps you have them all.
Everywhere else, buyers can only buy what exists. Affordable home buyers buy nothing because there is nothing within reach.
The notion that people would choose detrimental living because they couldn't get a house that was 3x their need seems absurd.
The more likely cause is the reality that new houses cost more than double what they were in the 1980s - adjusting for inflation and comparing for size, amenities and market.
With dropping fertility rates I'm sure there are plenty of people with 1 or even no kids that don't need those rooms. Home office will be entirely domain dependent (I don't see e.g. a couple of dentists needing or wanting a home office).
So the fact that the default house is pretty massive means that all sorts of people are priced out entirely.
Builders want more house. Buyers can't buy what isn't built.
Starter homes generally just don't get built, as it generally costs more per square foot to build a start home than a larger home (as some of the features are going to mostly cost the same regardless of the floor plan, such as some of the kitchen outfitting). The reduced supply moreover makes it so smaller houses don't even end up costing much less, because there's enough demand for them from people who not only don't need the space, but would prefer not paying the utility bills and dealing with the maintenance.
https://data.sca.isr.umich.edu/fetchdoc.php?docid=74465#page...
No. Fed is currently at 8.5%. Highest bubble rate was 8.25% in Q4 2007. In 2008 rates started at 7.76% and ended at 5%.
ref: https://www.ferc.gov/interest-calculation-rates-and-methodol...
Is the median (or even 40th percentile) household not middle class?
https://fred.stlouisfed.org/series/RHORUSQ156N
> The share of young adults ages 18 to 34 who have formed an independent household has declined since 2010, while the share living with their parents has increased sharply. In 2010, less than one-third (32 percent) of young adults ages 18 to 34 were living with their parent(s), but this share jumped to 35 percent by 2017. The increase was sharpest among 25- to 29-year-olds, rising from 21 percent in 2010 to 26 percent in 2017. The share of 30- to 34-year-olds living with their parent(s) also increased by 4 percentage points across this period.
https://www.prb.org/resources/u-s-household-composition-shif...
There's a lot of "memory" in housing prices.
Houses are just about the hardest item to build in America today. You need land, and you cannot make them in a factory. All cost cutting measures have been in materials (to the point where quality is degrading).
Regulations push new players out of the market - increasing prices.
Housing is a social prestige item like health care and education - so that will drive costs up too.
The US will have 100m more people in the coming decades no matter what - so demand will always be high.
Solution? There is none. It's how the power elite want it.
Medicine shows that others are going to bat for you to keep you alive.
You most certainly can build 80% of a house in a factory.
The land part is true, but there are people working on the second part. One of the more exciting ones I’ve seen recently is Cover [0]. They do the majority of building in their factory and only the foundation work and assembly is done onsite. But they’ve got enough flexibility to adapt their designs to the lot and they help buyers with the permitting hassles, so it’s a lot more appealing than some of the other kit home options. And, more importantly, their product has a luxury feel, so it doesn’t feel like you’re compromising. They’re focused on the LA area and the ADU market right now, but if that works out, it’s easy to see them getting a lot of funding to scale out their efforts to other markets. I’m hopeful that an approach like this can drive down the cost of new construction, especially when combined with streamlined permitting in places with housing crises where the political motivation will be there to adopt more a more builder-friendly environment.
If anyone is interested in seeing an actual finished project, a luxury real estate YouTuber did a tour [1] of one of their houses recently.
[0] https://buildcover.com/
[1] https://youtu.be/h2_CcNuNgXw
Even if the material and labor were free, an empty lot here in Boulder would cost over $500k, and you won't find any. I imagine it's the same problem in most cities (though maybe not so expensive).
I just purchased my first home because I could finally afford it after a few lucky cash windfalls. I spent the last 5 years in a 700 sq ft apartment.
What I learned: I would have been much better off buying a worse home 5 years ago that was at least better than the 700 sq ft apartment.
I don’t think saving up that down payment makes as much sense any more. I felt like I was chasing a target which was moving faster than I was.
So, you know, ridiculous.
It also seems to be finally hitting a wall post COVID.
That's far beyond the rate of inflation. Unless there are significant improvements to the house or the surrounding area, the value of house should not rise faster than inflation, at least not by some significant margin.
What does "should" even mean here?
It is ridiculous for a home owner to expect the value of their home to rise faster than inflation by a significant margin without there being massive improvements to either the home itself or the neighborhood.
And skyrocketing housing prices means the rich get richer while utterly fucking over the young generation and locking them out of home ownership as prices rise significantly faster than wages.
Ohio must either be a very undesirable state to live in, or they're doing something right to keep house prices relatively reasonable: 3 of the top 5 most affordable cities are in Ohio!
[1] https://www.redfin.com/news/share-of-homes-affordable-new-20...
https://www.zillow.com/homedetails/336-N-Bridge-St-Gettysbur...
The 3 metros mentioned (Akron, Dayton, and Cleveland) collapsed economically in the 1990s.
Columbus has been growing, but that's also why unaffordability has grown by 46.7% from 2022 to 2023 in the same dataset.
A better model would be Lake County, IL - that's a suburb of Chicago, and Chicagoland is very construction friendly.
You need at least another 200k on top of the home value to have recurring income to pay those bills annually.
The trouble is, that house would be in the middle of nowhere, with Starlink being the only viable internet option. Nowhere else is going to have house prices under $200k for something family-livable.
Median house price, per article: $388,000.
Today's average 30 year fixed mortgage rate is 7%. Assuming a 10% down payment, 0.5% to private mortgage insurance, and the usual bits and bobs, that approximates a $2800/month payment, or $33600 per year, which is 45% of that median income.
That's not affordable, by anyone's definition.
Any time credit is involved, belief in one's assumptions is absolutely part of the equation.
I can't afford a decent house in California without disrupting my children schooling and schedule. But then you may ask, what is a decent house?
Hmm, now that I think about it, that's still affordable if you can afford a modest $500k down payment. Most couples I know who both make around $60k a year have at least that much in the bank. Never mind please disregard, everything is actually fine.
If you financed during low rates, you're OK, but if you're trying to buy a house now, you're it is hard?
Why get a 30 year mortgage at 40, to only pay it off at 70 and then die in two decades? It feels like the wrong thing to do but…I really don’t know how else to look at it.
Sure. I could afford a house today where I grew up. But I’d have to surround myself with the highly undesirable culture (in my opinion) in those places. To put it nicely.
1) Inflation hedge. 2) At some point in the next 30 years, you will be able to sell your home at / above what you paid for it, just due to the cyclical nature of things.
I'm not saying real estate always goes up... but for example, I bought at age 41. $515k. Current estimated value, $900k. When the kids are all graduated and out of the house (when I'm 53-54ish) I can sell this, buy something outright in cash, and increase my saving rate from ~35% to about 60% without any change in my current standard of living.
Having a pension that can cover living costs while NOT having to also cover rent gives a lot of security. While it's also an option to get cheaper rent and put the difference into another investment, rent costs are hard to predict, so I'd rather not end up worrying about it later in life.
If you can find a home you like more than places you can rent, and the payments are similar enough, seems like it’s still better to get a mortgage.
A mortgage payment can’t increase like rent can and most likely will, forcing you to move every X years if you decide you can find somewhere more affordable.
Of course there are tradeoffs in the other direction, like if you need to move to a distant location for job/family/health, I just don’t think it’s as one-sided as you present it.
You buy a house, service the mortgage while you're there, then sell it (using the proceeds to pay off the mortgage), and if you've not made a bad investment, you come out with more money than you went in with, which presumably, you put toward a down payment on your next home. If you're downsizing, it may mean you're buying your next home outright, or with very little of the capital borrowed.
Unless, of course, your property value declines. Watch out for bubbles, and get sensible insurance to mitigate the risks.
I grew in upper middle class southern California. I work in tech for the last 7 years. My parents house went from $500K when they bought in 1995 to +$3M today. If my math is right, that would mean the all-in payment (principal, interest, taxes) would be around $20,000/month at today's rate. Assume you do not want to spend more than 1/3 of your income on housing, your household would need to make $720,000/year.
Nominally, I make a lot more than my parents did at their peak, but in real terms, I can't afford a home in the neighborhood I grew up in.
Anecdotally, the only people I know that can afford to live in my old neighborhood are young people who get help from their parents or people who bought way before covid and rolled up their existing equity into their new home purchases. Among the upper middle class people I know, no one can afford that area or they are not interested bc they think the cost is not worth it.
What's going to happen to the firefighters, cops, and teachers in that area?