Depends where of course. All over the south and the rust belt midwest home prices have been more or less stabilized over the past 35 years or so. Even if they "went up 30% in covid" that could mean they only went up another 30k or so realistically. The land of 70k jobs and 150k 3-4br houses where all is well.
Then you go to the hot markets and salaries for comparable positions are only like 20% more but the exact same home (actually on west coast, subtract the full basement and lot large enough for a detached two car garage) is 10x in price or more.
The American dream is dead and none of our politicians on the right and not enough on the left are talking about it. The American dream isn't to get filthy rich by providing an innovative product or solution and gobbling up an astronomical percentage of monetary resources. The dream is to come out of college with easy to repay debt or work a trade with a good union, be able to buy a home after a few years of saving, start a family, not go deep into credit card debt just to survive, and retire on time. None of that is feasible anymore and will not without major changes. Trump may think he's bringing that back with his tariffs but it's not a one fix problem. Many things need to be addressed that we are not willing to talk about.
Short answer: banks infinite money creation glitch (credit creation) inflated the prices of everything, but especially houses because it’s seen as a safe investment. Solving the housing market is pretty simply: make it a depreciated asset, never an investment one, or better, end banks credit creation aka money creation out of thin air. Any other solution will never fix the issue.
In 1960 my parents bought a brand-new 3 bedroom 1.5 bath in Seaside California for just under $16,000, with no significant savings. He was an Army sergeant and she was a housewife and I had one sister. I doubt anyone in their situation could find a similar deal and location and pull that off today.
Is this even reversible without crashing the housing market? Considering that most Americans that already own homes treat it as part of their retirement nest egg. Also the cost of building new homes has gone up due to increases in material cost and land.
The thing is if you don't crash the market, you're looking at the Japanese experience of a long slide where prices slowly drop relative to inflation over 20+ years which means some generation is going to miss out and not own a home and potentially forgo raising a family.
If we can remove all the factors that force up prices on new builds (and don't care if the market for existing homes crashes) then it may be reversed.
Material cost should be reversible if you don't expect the house to look like you live at a resort. And we have to ensure supply like incentivising new plantations to eliminate timber shortages.
Fixing zoning restrictions will take political will. Stripped local councils of their zoning powers should mean any nimby-isms around building higher density housing, allowing smaller blocks could be ignored.
Land release is also fixable by taxing undeveloped land that is zoned residential. More land available should lower prices.
Stop doing Government incentives to buy houses. Giving first-home buyers grants simply drives up prices everywhere.
Eliminate tax write-offs for "investment" properties: Owning a house should have never been like owning a business. This had the effect of reducing available rentals (and increasing prices) as many were happy to take the growth and the write-off and avoid the maintenance and depreciation that comes with renting the property out. For the renters the price hike made saving for buying a home much more difficult.
Which only works because there's a massive Ponzi scheme supported by fresh buyers.
In New Zealand our demographics would lead to a crash (as seen in some places overseas), but we have a lot of immigration that props demand up.
Most people don't see systems, they make decisions based on the current state they see. And voters don't give politicians any incentive to deal with problems.
This has been the reality in Australian for the last 2 decades ever since Demographia first started publishing their annual report.
The Australian average right now is 9.7. Maybe 30 years ago, it was closer to 3 (the 150k house on a 50k wage).
Demographia unfortunately stopped covering my locality which consistently ranked in bottom 10 internationally. Given the local median house price is 1.3m and median household income is 90k it would be 14.4. Makes a mortgage literally a "death pledge" with no chance of paying it off in your working lifetime.
While I agree housing situation keeps getting worse year by year, I do wonder if we need to consider that historical comparison like these have become increasingly meaningless?
It's certainly not a good thing but part of the second order effects of the broad economic change is that household income alone has long stopped being a useful driver/source of house prices - interest rates, second order effect of boomer wealth through bank of mum & dad, more 2 person full time working households, global migratory movement have all changed the dynamic so much that it feels very apple and pears now.
There's also a point around averages being meaningless from a relativity perspective too. Australia is expensive but as someone who moved from London to non-sydney australia, I do sometimes find it amusing that what is deemed expensive here would get you a shoebox in London v 500+ m2 land house here.
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[ 4.3 ms ] story [ 51.2 ms ] threadThen you go to the hot markets and salaries for comparable positions are only like 20% more but the exact same home (actually on west coast, subtract the full basement and lot large enough for a detached two car garage) is 10x in price or more.
If we can remove all the factors that force up prices on new builds (and don't care if the market for existing homes crashes) then it may be reversed.
Material cost should be reversible if you don't expect the house to look like you live at a resort. And we have to ensure supply like incentivising new plantations to eliminate timber shortages.
Fixing zoning restrictions will take political will. Stripped local councils of their zoning powers should mean any nimby-isms around building higher density housing, allowing smaller blocks could be ignored.
Land release is also fixable by taxing undeveloped land that is zoned residential. More land available should lower prices.
Stop doing Government incentives to buy houses. Giving first-home buyers grants simply drives up prices everywhere.
Eliminate tax write-offs for "investment" properties: Owning a house should have never been like owning a business. This had the effect of reducing available rentals (and increasing prices) as many were happy to take the growth and the write-off and avoid the maintenance and depreciation that comes with renting the property out. For the renters the price hike made saving for buying a home much more difficult.
Which only works because there's a massive Ponzi scheme supported by fresh buyers.
In New Zealand our demographics would lead to a crash (as seen in some places overseas), but we have a lot of immigration that props demand up.
Most people don't see systems, they make decisions based on the current state they see. And voters don't give politicians any incentive to deal with problems.
The Australian average right now is 9.7. Maybe 30 years ago, it was closer to 3 (the 150k house on a 50k wage).
Demographia unfortunately stopped covering my locality which consistently ranked in bottom 10 internationally. Given the local median house price is 1.3m and median household income is 90k it would be 14.4. Makes a mortgage literally a "death pledge" with no chance of paying it off in your working lifetime.
It's certainly not a good thing but part of the second order effects of the broad economic change is that household income alone has long stopped being a useful driver/source of house prices - interest rates, second order effect of boomer wealth through bank of mum & dad, more 2 person full time working households, global migratory movement have all changed the dynamic so much that it feels very apple and pears now.
There's also a point around averages being meaningless from a relativity perspective too. Australia is expensive but as someone who moved from London to non-sydney australia, I do sometimes find it amusing that what is deemed expensive here would get you a shoebox in London v 500+ m2 land house here.
How so?
Some discussion then: https://news.ycombinator.com/item?id=35022207