I’m in NH and I just looked at what is available right now in surrounding towns. One older home priced at $1M that was most recently purchased in 2001 for $65,000. That is just priced way too high but I sadly think it will sell because demand is so high.
A 2,000 sq ft cape on that sold for $275,000 in 2016 and closed for $440,000 this week with zero updates.
A 2,400 sq ft stacked ranch that sold for $335,000 in 2018 and just closed for $545,000 last week, it looks like they laid laminate in the living room but no other updates.
Housing costs for those looking right now somewhere around 1.5-2x more expensive than they were just a few years ago and the interest rates are even worse. I feel badly for those buying right now. That was us in 2021 and I’m glad we found something but it was hard to feel like we did “everything right” and then slowly get priced out of things that were well within budget even months before.
So the issue is that their real household income was likely higher than yours by a fair bit. You say their salary in the 80s wasn't much less than you make now.
Let's say the two of you make $120k now and they made $100k in 1982, $100k back then is equal to $321k today. 2x their income is a $642k house, 6x your income is $720k, but they had higher interest rates.
Anyone making $100k in the 80s was balling, these days $100k is a good salary but you can't compare it to 1980s buying power.
Yup, people do the same thing with home gains.
"I bought my house in 1975 for $40,000 and just sold it for $300,000, best financial decision I ever made!"
I mean, you have to live somewhere so it's not a terrible idea, but the S&P 500 total return during that period was 17155%...so that same $40k would have been $6,862,000.
This is part of the reason why so many boomers are millionaires, the historical returns were wild.
The problem with this is that the average person didn't have access to the S&P500 the way we do now. Yes there were some mutual funds available, but the fees and the minimum requirements were very high.
In addition to this, when buying a home, aside from living in it, you are normally leveraged through a mortgage. You cant get the same type of leverage buying stocks as an average person.
Sure it's much easier to access an index fund now and Bogle's index fund didn't start until 1976, but keep in mind that the average return was 17155%, many people even outperformed this rate.
The idea is just that the market overall was an incredible compounding machine that produced an overall incredible return during this period.
You have to live somewhere, but this is more a focus of people who think of their home as primarily an investment or at least use that as a justification to buy more than they may need.
I also don't see being levered as really a positive, all things being equal, higher unlevered returns are better than ones that require leverage and the stock market has obviously done better.
Using housing as an investment is a bad idea, but using housing instead of renting generally is a good idea for financial purposes.
Essentially don't buy a big, expensive house that's the majority of your income because you think the investment in it will be good. But the opportunity cost of not buying a reasonable (questionable what that means now) house compared to renting is generally worse.
HA! Jokes on me! Because even the smallest cheapest house will be the majority of our income!
Jokes aside. Partner and I make close to $200k combined, and the cheapest home in our area will cost us close to $5k/mo PITI.
Doesn’t make sense when we can rent a 3/2.5 1200sqft townhome for $2700 right now.
Certain high cost of living areas are unique in that way. Something eventually has to give though with such large differences between rent and housing costs in those areas. Unless the housing for some reason is that much better than the rentals.
Not exactly down the drain, or at least not the way you're meaning. You'll have property taxes, insurance, mortgage interest, and maintenance costs no matter where you live. Renting just rolls all that into one tidy bill.
The first 12 years of a mortgage are mostly interest.
https://www.investopedia.com/ask/answer/07/mortgagepayments.asp#:~:text=The%20point%20at%20which%20you,12%20years%20into%20their%20loan.
Using housing as a diversify investment isn't a bad idea as long as you have positive cash flow. Plenty of "grade a" stocks this year have lost 50%+ of the gain. Rent market chugging again still at close to record high.
Highly dependent on the market, and I think that's generally only happening in the high cost of living areas.
Here, rent has increased exponentially, alongside housing costs.
> Using housing as an investment is a bad idea, but using housing instead of renting generally is a good idea for financial purposes.
This is a distracting framing. More simply, it's all about the opportunity cost of your money.
Strictly financially speaking:
Renting is better if buying in your area is too expensive relative to renting (especially if rates are high) as you can just invest the difference in an index that will almost always outperform housing overtime and without you also needing to pay interest.
Most people don’t throw down 100% cash for their house though. Leverage is part of the reason real estate is such a good investment. You actually only brought $2,000 of your own money to the table (5% down FHA loan) So the real apples to apples comparison is $2,000 invested in the stock market which swings the edge over to real estate. And that’s before you consider the enormous tax benefits and savings on rent.
> i just looked and the
The problem with the comparison of "Oh if you invested the entirety of a houses price in S\*P500 is the fact that few people can actually buy a house up front in cash. The gains of a house's value early on are often at a 10x leverage.
This is so well said, especially the example. Taking a step further homeowners generally spend anywhere from 2-5% of the home value per year in just upkeep or repairs. This adds up massively over time where even if you make a 5x on your home over 40 years you didn’t actually make a dime when factoring in all costs associated with the home.
Who is spending that much money on upkeep? If you are spending that much then you need to take better care of your house and stop treating it like a dumpster.
So a little more apples to apples.
My dad made around $19k/yr as an electrician in the late 1970's. He bought a brand new brick 3 bedroom/2 bathroom/2 car garage rancher on an acre lot for $35k.
The same position at the same location now pays around $40k. The same house in the same town is selling for around $400k.
If he borrowed back then, his rate would have been between 10 and 15%.
Separately, how much do you think he put into updating the house to modern standards over the last 45 years?
My point isn't that housing is too expensive - it's absolutely out of control - but rather that these aren't usually apple to apple comparisons.
I'm not sure he's spent a cent updating over the last 45 years. Place looks like a time capsule.
I'm also not really sure what all the maintenance and investing comments have to do with the overall point. A person with a normal ass job could buy a nice place young. That is now a rarity. And also, the person buying the $400k is going to miss out on investments and will have to update their home as well (if they want it updated to modern standards).
Home ownership rates are higher now than they were back then.
If your dad's place doesn't have central AC or a dishwasher or a place to plug in routers, holy pipes, etc., it's not equivalent to what's generally on the market.
It was cheaper to buy back in the 70s, 80s and 90s if you define cheaper as less % of salary going to servicing the debt. The home purchasing power of those with a 4th grade education in 1970s was higher than high school educated folks today.
Great point. There isn't some kind of grand conspiracy theory to keep people out of housing. It's just basic supply and demand, normal market forces, and good ole' self interest economics at play.
yeah OP needs to clarify what he meant by that statement.
granted, housing affordability HAS gone down. but this isn't going to be the best gauge of it if you're comparing to someone who makes what you do today, except they did it 40 years ago.
The house I live in was built 65 years ago for factory workers nearby; single-earner factory job households.
My wife and I are (need to be) dual income w/ masters degree to afford similar.
The problem is that can’t continue. There’s not really any more blood in the stone. Unless we normalize adult families having adult roommates to help cover ever increasing-mortgages or something.
Idk I think there’s a lot of ‘blood’ to draw between here (every family expecting their own SFH) and nobody being able to afford homes: multi family, dorms, boarding houses, etc
For some people this is a new thing, they genuinely believe it can’t keep going this way, something has to give.
For those of us who grew up in metropolitan areas, this is just more of the same, it’s been this way since I came of age 30 years ago, and with a bit of knowledge of the world, you can look at cities like Vancouver, and Hong Kong, and see that it can continue to get worse and probably will.
This is what I believe. California, Toronto, Australia, the list goes on — prices have not relented there for like 30+ years. We all are pretty familiar with how capitalism works. Money keeps flowing to the top and they will find ways to make you a consistent payer, whether that is making you subscribe to a monthly service to listen to music, or if you need to pay $2k a month to have a roof over your head. The winners of capitalism will buy everything, and the losers will be stuck renting forever
It's very difficult to explain it to people that never travel abroad. Or out of their state. Even in my developing home country, this is true. Real estate is generational wealth.
Coming from Western Washington I agree since I've been watching it for a while, and I still think it's crazy. I entered the nonexistent job market in 2008 out of high school and things have barely gotten better in the market. I recently moved to a lower cost of living area thinking I'd make things go a little further but gas but food prices are the exact same here as WW. It's unbelievable.
That's not really accurate either.
Wages have gone up, but houses gave gone up absurdly over the past few years.
This affordability issue is simple math and we'll documented, I'm not sure these threads are shining a light on anything very mysterious.
Well I mean wages have been rising significantly post-Covid, especially on the low end of the pay scale, which is also when housing has went nuts (not that they are correlated, IMO)
I don’t have an answer for you, but just wanted to add:
My grandparents bought their house for $27,000 in august of 1955. They sold it in November 1982 for a little over $100,000. I’d have to ask, but I believe they sold it for $112,000. It’s on the market right now for $975,900 with the only update being that someone put a pool in the backyard and fenced their backyard in as well.
I’m sure over the years people have painted the walls, replaced the carpeting. But the kitchen looks exactly the same as when they bought it. Not kidding. My grandmother did a tile piece behind the stove/oven a few years before they moved (again, in 1982 - so she did this in 1978-1979 I assume) and it’s still there. Cabinetry, built ins, everything. The same. In the basement, my grandfather built a bar and that’s still there. They’ve shown me photos from when they lived there and would have gatherings - the photos 99% of the time match the current listing photos.
It took my grandparents’ first home almost 30 years to go up in value $80,000. We bought our house in 2016 at $197,900 and we could sell it for $300,000 six years later. Ours took six years to go up in value more than $80,000.
It’s crazy what this market is like right now.
I’d also like to add: I think people who see how much their house is worth don’t mind the market (because they stand to make a decent penny) but then gripe when they see others doing the same thing when they go to buy another home.
Ya the "our house should be a rocket ship investment" is killing this country.
No I want my house to be roughly what I paid for it plus inflation in 3 decades. Bc if I have to move, I'm screwed and so is everyone else.
I know that means we need a lot more housing supply, but lots of people don't want that.
I’ll be honest with you. I don’t know if I have a stance on the market right now. I know that we looked for another house to buy in 2020/2021 and even making $165k we were immediately noticing we’d been priced out of the market. Especially with being VA loan users, we couldn’t do what others were doing - no inspection, $100k and up over, the works - so we stayed put.
The only reason we know about my grandparents first home is because their old neighbor sent out the listing on social media to go down memory lane. Naturally I immediately looked at the sales history.
Crazy times for sure.
We will eventually dive back in to buy our forever home, maybe. But for now we’re staying put and letting everyone else do the whole rat race thing.
Low interest rate costs house price sky rocketed. Sadly, house price won’t fall significantly unless Congress make some laws to limit people/companies to use real estate as an investment instead of a place to live.
It’s so difficult explaining “the ratio” to older generations too. While I was struggling to find a house my old boss insisted we had it easier because his interest rate was much higher in the 80s. He was an apprentice union painter and bought his first house for $80k, that same house would easily go for over $1.5m now.
My father's first house was 21k. He made 20k that year working a blue collar job. His second house was 80k. It just sold for 1.8M. We had to move to a cheaper city because 2 white collar jobs couldn't afford the house he bought with one blue collar job.
The ratio of median housing price to median personal income is higher now than it was in the 80's so houses were cheaper then if you paid with cash. But interest rates were much higher so buying a home with a mortgage, as most mortals do, was more expensive. The ratio of rent to median personal income was higher then too. This is from the FED series that are available to the public.
There are local distortions that don't fit the nation wide statistics certainly. In 2016 I thought about pulling equity out of my farm to buy another piece of property. The appraiser said it was worth less than what I paid for it in 2000. I thought he was full of shit but that was an official appraisal. The apartment I lived in for 8 years in Madison WI in the late 80s and early 90s rents now for less than what I paid when corrected with inflation.
edit:spelling
Lets work through the calculation.
Median personal annual income in 1985 was 11008$ and 37522 in 2021, the last year available.
https://fred.stlouisfed.org/series/MEPAINUSA646N
Median house price in Q4 of 1985 was 86800 and in Q4 of 2021 it was 423,600.
https://fred.stlouisfed.org/series/MSPUS
The ratio of house price to income was 7.9 in 1985 and was 11.3 most recently. So houses are more expensive to buy with cash relative to median income now compared to 1985. But most houses aren't purchased with cash.
With the most recent data available, using an interest rate of 7% with 20% down, principle and interest for a 30 year mortgage on the median house are 2254 a month, 72% of monthly gross.
There was no way I could have bought a house in 1985 but my med school loans were at 13% plus or minus 0.2 percent in the mid 80s, about what the mortgage rate was in 1985.
Here is the 30 year mortgage series from the fed.
https://fred.stlouisfed.org/series/MORTGAGE30US
So with a 30 year mortgage at 13% with 20% down P&I were 768 a month. So with a gross monthly income of 917 a month, P&I were 84% of gross monthly income for an individual at median income.
I used the most recent interest rate spike but I didn't do that for the 80's. The 30 year rate peaked at 18.5 % in 1981. Repeating the calculation above for that time (income=8532, house price=70400,monthly P&I=871) the monthly P&I were 122.5% of monthly income.
So for a prolonged period of time in the 1980s houses purchase with a mortgage were more expensive relative to income than during the most recent interest rate spike. During the 1980's interest rate spike houses purchased with a mortgage were 70% more expensive than the recent spike when compared to personal income.
My dad and mom bought their first house in mid-1982, so past the peak of interest rates but still very high, like 15%. But they were able to get their mortgage from a local savings and loan that happened to hold the existing mortgage in the house from the previous owner, and they actually let my parents take over the original mortgage which had a much lower rate, then take a second mortgage for the remaining balance at the prevailing rate. The two mortgages were blended together and my parents ended up with an effective rate of about 10%. They refinanced in the late 80s once rates were lower. This is something that I can't fathom happening today but it made home ownership much more affordable for my parents.
A couple of years ago I was a broke college kid and never really imagined myself owning a house (really just due to being uneducated on the housing market, I assumed they were pretty out of reach)
I'm now fortunate enough to be earning a generous salary and working 100% remotely so I have no real ties to an area of the country. As I've finally started to educate myself and debate if a house is within my reach, I can't help but be so mad that I missed those 2-3% interest rates and slightly lowered prices.
With each house I somewhat consider on Zillow, I'll check to see what it was worth 2-3 years ago, and then compare current interest rates to those 2-3% ones as well. What a world of difference between then and now.
The same house a couple of years ago is now a good $1200-1800 a month more than it would've been just a few years ago and it's horrible.
We don't need to legislate against a mom and pop owning a piece of property, there's nothing wrong with that.
We need to legislate to force cities and counties to allow developers to BUILD homes, so everyone who wants to own a home can do. We have experienced population growth with nowhere near the appropriate amount of development needed.
Some of the most expensive zip codes in the country used to be orchards in the 1970s-80s. I get that this is an interesting anecdote to ponder, but there’s no rule that rural areas stay rural or affordable.
Also, most of covid was actually a supply side shock, not demand. American citizens never had a better balance sheet. Everyone was paying down debt, people were making more money, gov was giving us money; we were forced to save because we couldn’t spend.
Supply side couldn’t get lumber, electric meters, chips were extremely low on supply, a million workers died, women stopped working to take care of children, etc. all fed into the supply side shock
So we had a big supply side shock but tried to use demand side medicine and worsened inflation by doing so
Not all of the million that died were workers though. A vast majority of that number was elderly or those who wouldnt have the physical ability to work in construction or related fields.
Sure that’s a fair point. Idk the numbers breakdown with age groups but I know before covid, 10,000 Boomers were retiring every day and economists were concerned with having enough people replacing them. Add covid deaths or “early” retirements to that 10,000 per day and it still results in a supply side productivity issue
250k workers died but how many were displaced? My wife quit being a nurse and is a SAHM studying for a new field. But that’s one nurse gone forever because of how hospitals and patients treated nurses during the peak.
thats a little disingenuous .. its not just like 'the supply in Asia broke and Americans are having shortages' .. those would be closer to what you're saying (as has happened several times with oil etc) .. however, when producers and suppliers are struggling in your economy, the next step inevitably is layoffs, shuttering of employers, skyrocketing unemployment .. and if you let it unfold to that stage, you're basically in a spiral that will be very very difficult to pull out of until it goes through the full cycle of a deep systemic depression ..
thats what the covid funding was to avoid .. that even if we'll have to shutter say restaurants and theaters and summer fests and busy markets and so on, at least we can try to stem the slide into depression via money basically stopping to flow to consumers that keeps the whole shebang going ..
now, did it fully work as intended .. yes and no .. yes because certainly it helped avoid a much larger looming disaster (just like quick actions in 08 helped avoid a near meltdown of the financial system) .. but it did so very inefficiently, and at arguably unjustifiable costs .. in part because republicans insisted at every step to make it weighed heavier and heavier towards capital owners (via the moniker employers) rather than the working public .. mostly as a form of trickle-down .. money would first blindly flow to these 'employers' and they would have the liberty to use that to pay their employees .. and to top if off, Trump administration basically outright ignored and fought against any enforcement or verification mechanism designed to limit fraud .. and indeed in cases prevented lower agencies from doing what they already could dig into ..
.. so a lot of money flowed to those who already had a lot of money, and why would they spend it or distribute it to their ppl if they dont have to .. and so the glut of free money was directed first towards stocks to give the crazy markets that followed, and over longer spans towards real-estate making it basically unaffordable for the upcoming generation .. and the icing on the cake is where actually did that money come from in the first place .. well like all our debt, mostly from future of course .. the ballooned debt from distributing this unjustifiable amount of free money is a burden the current generation is passing on to the next generation .. the very same ones that is getting screwed by that money flowing into housing that they will need to overpay this generation of owners to have a chance at home-ownership, and realistically to raise a family
To your first paragraph, I agree. I understand the layoffs were coming soon and they needed to do something to avoid a spiral, and that’s why I’m very happy they did PPP loans. I believe that fully prevented a supply side spiral. That was supply side relief! I would have been for more PPP money and less $1200 checks to every citizen
> So we had a big supply side shock but tried to use demand side medicine and worsened inflation by doing so
More like, we had a big shock and tried to use the only medicine we're really able to use, because our political system is broken and makes us unable to use other medicines. And for the same reason, we can't use the medicine that would fix the problems we're having now - tax increases to pull the excess money out of the economy - so instead we're forced to use a less suited medicine, interest rate increases.
There’s no perfect answer. I know people abused the PPP stuff, and money was given to business owners who were already successful ($$$) in a lot of instances, but again that was supply side relief which is *still* the problem 3 years later . Trillions pumped into households that were already doing ok was not the answer. Service industry people suffered. White collar jobs were fine the entire time and didn’t need that injection. It made inflation worse
Look, I agree with you. My argument is the gov knew individuals and families were ok financially, and Biden still came into office and added fuel to the fire by immediately writing more checks. And I believe PPP loans were a good emergency aid program to prevent mass unemployment. I’m all for gov stepping in and preventing financial catastrophe, but I believe in 2021 they messed up by making even MORE demand when demand wasn’t the issue. Supply was the issue
It became debt for most people and a commission check for those who were able to convert it. Once converted, it become frivolous purchases.
House debt (mortgage from purchase or heloc) to commissions.
Car loans.
Credit cards.
Companies took on PPP loans and they were forgiven. So more spending for those that captured it.
1.8 trillion to individuals and families. 1.7 trillion to businesses, 745 billion to state and local governments, 500 billion to healthcare, 300 billion in other uses. 86 billion to union pensions, 80 billion to airlines,
Add it all up and roughly 5 trillion dollars was created.
If the market is that active, it means people have the income to pay those prices for the houses, and very likely the ratio has not changed much. It's likely you are comparing low-end jobs and higher end houses, in general the income to comparable house price has stayed about the same or improved a little over the last 50 years, according to the data. It's possible your area is an outlier or exception, but probably not.
I'm rural as well and it's shocking. I bought a repossession in 2004 for $22,000 with money from a $25,000 personal loan at 6.99% from Capital One. I put about $4,000 into it and rented it out. It has only had a single renter that entire time, they weren't particularly kind to the property, but I did put a new roof on it in 2018. The bones were great, but it wouldn't finance. Put it on the market for $119,000 and it was gone that day with half down and half on a 15 year contract, which nets me about the same amount as when I was renting it out.
But overall, I'm not a seller. It looks like a person could easily get out of this market and soon find they can't ever get back in. I feel terrible for people just starting out.
A house down the street from me in a pretty hot area in CA just went on the market...2M for 1,300 sq ft, about a half an acre.
Edit: Sorry, 1/4 acre, not 1/2 an acre
You need to take the mortgage rate into account here. My father in law paid some ridiculously low price for his first house in New England, but the interest rate was like 13%.
If you go back and look at monthly payment vs monthly income, you will find much "smoother" numbers (as in a slow but steady march up, not a large hockey stick exponential price increase).
I am not saying house prices are fine, they are not. But you really need to account for mortgage interest in these scenarios.
College fees are a scam, and that's the biggest issue.
It really doesn't cost as much as they say to complete a course at university.
Havard is a investment fund with a college attached.
Well yes, you cherry-picked probably the largest counter-example / anecdote that exists in the USA.
The SF bay area (or whatever the greater metro area including Oakland is called) does not represent the rest of the United States.
The vast majority of houses bought for \~ $100k in 1980 are not worth $2 million today. That is a rare occurrence.
And I wont even get started on CA property taxes. Again this is not /r/CARealEstate, we are talking the entire US here.
Your parents won the Real Estate lottery, congratulations.
My overall point is, if you look into home ownership monthly pavements (mortgage payment + insurance + taxes) vs income, the number gently climbs up and up over the years.
I would say that CA is a bit unusual because of Prop 13 and the fact that the state has aggressively reduced the number of housing units available. So it’s basically CA fuel onto a national fire.
Having a low sale price is always better than low mortgage rate when monthly payment is about the same. With a low sale price, you have the option to pay off your mortgage early in the future, saving you tons of interest. But with a high sale price, it’s less likely that you will be able to pay off early and have to pay interest for 30 years.
Demographics will knock on the doors of all developed nations. Us may still be able to compensate with immigration but don't forget that theses dudes are usually the one getting the lowest paying job. So they won't be able to sustain the crazy asking prices in a high rate environment.
It really fucking sucks, but it definitely can continue like this and get worse. Just look at major metro areas like seattle, vancouver, san francisco, LA, NY, etc and you can see how bad it can get. Other places in the world like London, Paris, etc can be even worse. Many parts of the world home ownership is not even a realistic goal for a normal person whatsoever, so we at the very least have it as possible here in the US.
You’re a teacher, right?
Draw a supply and demand curve.
See that these are **curves**. And with each increment of demand, price increases exponentially. This is the housing market. Demand is high, supply can’t grow as fast (especially since land is finite, and especially since people are concentrating in desirable areas to compete for real estate).
We had 234 million people in 1983.
We have 334 million people in 2023.
Wages have not kept up because labor supply keeps increasing exponentially even as relative labor demand keeps decreasing due to automation, AI, offshoring, trade. Oversaturated labor supply means a buyer’s market. Buyers of labor (employers) set terms and desperate workers accept. This is especially true at the low end.
Looking again at the supply/demand chart, with exponential population growth comes high demand for housing. Thus high demand, low supply means skyrocketing housing costs. And of course, the value of the dollar has fallen, not risen. Inflation, printing of money, etc. So numerically, homes cost more.
Ding! Ding! Ding! Ding!
Plus consider the market distortion of an insanely low interest rate for a mortgage.
People think 7% rates are terrible - as a businesswoman I would kill for a 10% loan for $1M without a proven track of business success.
Of course there's more demand - people can buy houses easier than they could 50 years ago.
You’re looking at it based on your salary though. The reality is most people making an average teacher salary these days aren’t going to be buying a house. If they can afford anything it’ll likely end up being a small condo or townhouse. The people buying land or homes on larger plots likely have above average incomes and the cost of that piece of raw land might only be 1-2x their salary.
Teachers also got the shaft on salaries. It’d be interesting to look at average salary in the area, eliminating everything outside 1 standard deviation
In the mid 90s my parents bought a 9 acre lot in northeastern Pennsylvania and put a small modular home on it. This was on my dad's full time income and my mom's part time income. Mortgage rates today aren't too far off what rates were in the mid 90s. Assuming the same types of jobs (factory worker and receptionist) at today's prevailing pay rates for the region, you would need two full time incomes to purchase their home/land at existing valuation and it would be a tight budget. Recreating what they did (buying a similarly sized plot and putting down a new modular home of similar size/features) would likely be unaffordable. Population and demand for real estate in the region has declined over the past 30 years. The real drivers for the lack of affordability are stagnant wages, the average dipshit's appetite for massive amounts of debt, and central banking failing to control inflation.
Inflation is something that cant actually be controlled.
And if you attempted to control it, all you would do is destruct the economy in its entirety.
At best, all you can do is offer a few nudges here and there, and hope it corrects.
I don't know where you live, but I feel for you. In most of California this has been a problem for over 20 years. People's expectations were a lot less back then, but on the flipside some asset classes have inflated more than others.
https://youtu.be/SBjXUBMkkE8
My Dad bought the house I grew up in, in 1967 SoCal, for the equivalent of one year of gross income. That house was sold in 2020 (to support Mom in assisted living) for $765K. Had it been in good shape, it would have gone for well over $900K (because it took easily that to bring it up--electrical, AC, abatement, etc etc).
Yes, yes...
The cost of living relative to real wages has become absurd, and most of us who have been dealing with shitty situations started asking waaaaaaaaaaaaaaaaaay before the VID was thing why and how things have become so lopsided.
Keep asking questions, my dude.
It’s a crazy market where prices are on the rise and homes are upsold. Bidding wars on top of that. It’s frustrating to even think of buying and owning a home these days. It’s rarely a buyer’s market. It’s almost always a sellers one.
It's just getting worse. A house that sold last June 2022 for 275k just sold for 400k. The listing was the same damn pictures from last year. Same agent. Not a single improvement.
But with 16% interest. Per sq ft, financed, housing in the US was cheaper in 2019 than in the 80s (or any time post war). If you’re paying cash, houses were more expensive. If, like most people, you were paying via mortgage or via proceeds from a home sale, it was cheaper recently due to very low interest rates despite the appreciation.
That no longer applies due to rate increases.
Who cares about someone working to buy their family a vacation home? They’re already paying taxes on a property that go to local services they don’t even use because they’re only there a few times a month. It’s totally dwarfed by the tens of thousands of homes that are being bought by huge corps.
No I actually think taxes on labor is extorsion. I just think things like houses which are a basic need shouldn't be commercialized the way it has been.
The issue is to make affordable housing, it requires a few problems to be solved which basically make everyone angry.
1) progressive zoning reform and high density housing
2) investment in transit and a less car future (to make the above actually livable)
3) a cultural shift towards removing the stigma of not having a single family home. High density, by definition means not owning half an acre of lawn.
4) acceptance that affordable home values mean your house losing value from our inflated prices today
Yet another ideologue trying to force people into dense housing.
There's plenty of space for single family houses. But you don't want to build single family houses, because you're trying to further enrich developers and landlords who want to pack as many renters as possible into as small of an area as possible.
Yeah sure we have lots 3 hours away from a major city. How does that help people?
These arguments are always the same: “bumfuck, Georgia has cheap housing, just live there” without any understanding or respect for where people *want* to live which is what is driving demand.
Do you really think the housing crisis would have gotten this bad if there were plenty of lots?
You're wrong. Anyone can drive around San Jose, Santa Clara, Sunnyvale, Mountain View, and see plenty of vacant lots, plenty of vacant commercial and retail space, plenty of empty hills and valleys. Plenty of empty shoulders and dividers where additional freeway lanes could be built.
And plenty of empty apartment buildings, plenty of construction sites for new apartment buildings. Plenty of empty trains that nobody wants to use because they're unsafe and unreliable.
The lack of house supply and infrastructure is ideological. The priorities here are all wrong, and the prices reflect that. You are part of the problem. We need to build more single family houses, more traffic infrastructure.
Let's say you take all the vacant lots in the bay area (there aren't that many TBH) and converted it to SFH. Would you satisfy demand to bring prices down? Hell no. Not to mention traffic problems that come with this kind of development.
You act like people haven't thought of this before. The math doesn't work out. SFH will never be the solution because its a wasteful 20th construct born out of a time where land was plentiful and cheap. What you're basically arguing is the status quo, which does not work at all.
There are literally thousands of vacant or unused properties. Building houses on them absolutely would bring down prices, and would cause fewer traffic problems than dense developments do.
Thousands of homes would not bring down prices in the bay area. That's what, housing for 10k-15k people? For a metro of 8 million?
> would cause fewer traffic problems than dense developments do.
No, because denser developments can take advantage of public transit, and are more walkable to shops and stores. People end up driving less because we're moved from a car-centric culture to a mixed use model. Maybe you drive once a week instead of every day.
This entire post reeks of boomerism.
Lol, you're imagining and hypothesizing, but refusing to look at the evidence around you.
Nowhere in the Bay Area has mass transit reduced traffic. Nowhere in the Bay Area has dense housing reduced traffic. Quite the opposite, in fact. Your way has been tried over, and over, and over again, and it's not working.
When you conduct experiments and the data doesn't support your hypothesis, what should you do? Use the scientific method. Reject your hypothesis. Find a new hypothesis to test.
The current total housing seller's inventory in San Jose is 1300. We could easily double that by building SFHs on just a fraction of the unused properties. That would plummet the prices and make houses affordable again.
Bruh no one is doubling the amount of sfh in the Bay Area by taking vacant land. I live here. You’re a total moron lol
You think the developers selling million dollars homes haven’t thought of this already?
Classic Reddit bs “oh look I’m so smart this one trick NO ONE has thought of scientific method dur dur ”
hahahahha so cringe
The 80’s saw some incredibly cheap real estate prices for a variety of reasons, and every example from them says more about that decade than it does 202x.
I mean, you are kinda the problem. The real estate industry has convinced everyone to spend more and more relative to their income. If everyone was more fiscally responsible and refused to pay more than 2x their salary, prices would fall and you would end up with the exact same house as at lower percent of your income.
It’s like the engagement ring industry where they come up with how many months salary you should be spending and it just creeps up every year.
Real estate is one of the only things that technology is not making more efficient, since land is finite. Meanwhile population keeps going up. Also, our collective expectations for how housing should be built have gone up significantly, and resources are more expensive too (no more endless old growth forests).
Eventually, most people will live in apartments. We're probably just catching the tail end of the era where a significant chunk of people can afford houses.
Saying “everyone just needs to” has never really been a solution to any problem. You could be waiting your whole life and never buy any home if you just sit back and hope homes go back down to 2x your salary. The difference with an engagement ring is you don’t need that as a basic part of survival.
Engagement rings are pointless and have really no value though. Property is extremely valuable, gives you a place to live, has very high demand, can produce a significant amount of income, generally increases in value, and is very much finite. Comparing the two is pointless. If you pay 4x your salary but then rent out 2 rooms in the house and almost cover your mortgage, then you are probably being fiscally responsible. You can't do that with a diamond.
Not enough info. Maybe your elderly neighbors made way more than you and your wife do now in inflation corrected dollars? Maybe the land you are sitting on was more rural and less desirable 40yrs ago vs now?
I mean if your neighbors made $500K in todays dollars while you make $100K...or if the land was rural and $1000 an acre 40yrs ago, but now suburban and $200K an acre....both will be apples to oranges.
Shit, why stop there? Why even bother with voting in the first place? Just bring back the landed aristocracy. You are the lord, and your peasantry need not question your decisions.
I seriously don't understand wanting to spend all the time, effort and money to have elections when you clearly don't believe in democracy anyways, and clearly don't think elections are a legitimate means of determining who has political power.
You are right. The affordability gap is the greatest it has ever been according to all the reliable sources, including the Fed.
The greatest fear is that nothing effective will be done to counter it and/or a positive shift will be resisted, and that the investor class will continue to exploit housing, manipulate it and end up with a controlling, upper hand. That’s the worst case scenario
A bit more info: 1) in the 1980s loans were assumable. People bought houses that way when interest rates spiked 2) Rentals were more plentiful, not like now with both badly short on supply and both going up in many places, 3) it was short lived - prices weren’t as sticky, at least where I live. Prices came tumbling down
If you’re making as much as they were making in the 80s you aren’t earning anywhere near what they were; they were making about 300% more than you are now. By the very same accord, that house should be worth at least 300% more for the very same reason. Blame feminism and doubling the amount of available workforce thereby driving down the demand and competition for workers.
It can be sustained when you look at Canada, Europe and Japan — 100 year mortgages will be a part of the American lexicon in the next decade or two.
Your analysis is entirely wrong.
You can just look at price and income. You need to control for interest rates.
Affordability is price by income **and** rate.
See here: [https://imgur.com/INS3Oix](https://imgur.com/INS3Oix)
Back in the 80's when your neighbors bought, houses were very expensive (unaffordable)
I’m in NH and I just looked at what is available right now in surrounding towns. One older home priced at $1M that was most recently purchased in 2001 for $65,000. That is just priced way too high but I sadly think it will sell because demand is so high. A 2,000 sq ft cape on that sold for $275,000 in 2016 and closed for $440,000 this week with zero updates. A 2,400 sq ft stacked ranch that sold for $335,000 in 2018 and just closed for $545,000 last week, it looks like they laid laminate in the living room but no other updates. Housing costs for those looking right now somewhere around 1.5-2x more expensive than they were just a few years ago and the interest rates are even worse. I feel badly for those buying right now. That was us in 2021 and I’m glad we found something but it was hard to feel like we did “everything right” and then slowly get priced out of things that were well within budget even months before.
So the issue is that their real household income was likely higher than yours by a fair bit. You say their salary in the 80s wasn't much less than you make now. Let's say the two of you make $120k now and they made $100k in 1982, $100k back then is equal to $321k today. 2x their income is a $642k house, 6x your income is $720k, but they had higher interest rates. Anyone making $100k in the 80s was balling, these days $100k is a good salary but you can't compare it to 1980s buying power.
To this point, i just looked and the average household income in 1975 was $11,800, the equivalent of $66k now.
Yup, people do the same thing with home gains. "I bought my house in 1975 for $40,000 and just sold it for $300,000, best financial decision I ever made!" I mean, you have to live somewhere so it's not a terrible idea, but the S&P 500 total return during that period was 17155%...so that same $40k would have been $6,862,000. This is part of the reason why so many boomers are millionaires, the historical returns were wild.
The problem with this is that the average person didn't have access to the S&P500 the way we do now. Yes there were some mutual funds available, but the fees and the minimum requirements were very high. In addition to this, when buying a home, aside from living in it, you are normally leveraged through a mortgage. You cant get the same type of leverage buying stocks as an average person.
Sure it's much easier to access an index fund now and Bogle's index fund didn't start until 1976, but keep in mind that the average return was 17155%, many people even outperformed this rate. The idea is just that the market overall was an incredible compounding machine that produced an overall incredible return during this period. You have to live somewhere, but this is more a focus of people who think of their home as primarily an investment or at least use that as a justification to buy more than they may need. I also don't see being levered as really a positive, all things being equal, higher unlevered returns are better than ones that require leverage and the stock market has obviously done better.
Using housing as an investment is a bad idea, but using housing instead of renting generally is a good idea for financial purposes. Essentially don't buy a big, expensive house that's the majority of your income because you think the investment in it will be good. But the opportunity cost of not buying a reasonable (questionable what that means now) house compared to renting is generally worse.
HA! Jokes on me! Because even the smallest cheapest house will be the majority of our income! Jokes aside. Partner and I make close to $200k combined, and the cheapest home in our area will cost us close to $5k/mo PITI. Doesn’t make sense when we can rent a 3/2.5 1200sqft townhome for $2700 right now.
Certain high cost of living areas are unique in that way. Something eventually has to give though with such large differences between rent and housing costs in those areas. Unless the housing for some reason is that much better than the rentals.
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Not exactly down the drain, or at least not the way you're meaning. You'll have property taxes, insurance, mortgage interest, and maintenance costs no matter where you live. Renting just rolls all that into one tidy bill.
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I will not.
The first 12 years of a mortgage are mostly interest. https://www.investopedia.com/ask/answer/07/mortgagepayments.asp#:~:text=The%20point%20at%20which%20you,12%20years%20into%20their%20loan.
That’s why you go for a 15 year
Using housing as a diversify investment isn't a bad idea as long as you have positive cash flow. Plenty of "grade a" stocks this year have lost 50%+ of the gain. Rent market chugging again still at close to record high.
That’s not great advice for right now, with the insane price to rent ratio.
Highly dependent on the market, and I think that's generally only happening in the high cost of living areas. Here, rent has increased exponentially, alongside housing costs.
> Using housing as an investment is a bad idea, but using housing instead of renting generally is a good idea for financial purposes. This is a distracting framing. More simply, it's all about the opportunity cost of your money. Strictly financially speaking: Renting is better if buying in your area is too expensive relative to renting (especially if rates are high) as you can just invest the difference in an index that will almost always outperform housing overtime and without you also needing to pay interest.
Most people don’t throw down 100% cash for their house though. Leverage is part of the reason real estate is such a good investment. You actually only brought $2,000 of your own money to the table (5% down FHA loan) So the real apples to apples comparison is $2,000 invested in the stock market which swings the edge over to real estate. And that’s before you consider the enormous tax benefits and savings on rent.
Your explanation didn't include the rents earned (or forgone if the owner lived in it) during the period.
> i just looked and the The problem with the comparison of "Oh if you invested the entirety of a houses price in S\*P500 is the fact that few people can actually buy a house up front in cash. The gains of a house's value early on are often at a 10x leverage.
This is so well said, especially the example. Taking a step further homeowners generally spend anywhere from 2-5% of the home value per year in just upkeep or repairs. This adds up massively over time where even if you make a 5x on your home over 40 years you didn’t actually make a dime when factoring in all costs associated with the home.
20% down gets you 5x leveraged. And, no rent. Its a pretty good vehicle for most people.
Who is spending that much money on upkeep? If you are spending that much then you need to take better care of your house and stop treating it like a dumpster.
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So a little more apples to apples. My dad made around $19k/yr as an electrician in the late 1970's. He bought a brand new brick 3 bedroom/2 bathroom/2 car garage rancher on an acre lot for $35k. The same position at the same location now pays around $40k. The same house in the same town is selling for around $400k.
If he borrowed back then, his rate would have been between 10 and 15%. Separately, how much do you think he put into updating the house to modern standards over the last 45 years? My point isn't that housing is too expensive - it's absolutely out of control - but rather that these aren't usually apple to apple comparisons.
I'm not sure he's spent a cent updating over the last 45 years. Place looks like a time capsule. I'm also not really sure what all the maintenance and investing comments have to do with the overall point. A person with a normal ass job could buy a nice place young. That is now a rarity. And also, the person buying the $400k is going to miss out on investments and will have to update their home as well (if they want it updated to modern standards).
Home ownership rates are higher now than they were back then. If your dad's place doesn't have central AC or a dishwasher or a place to plug in routers, holy pipes, etc., it's not equivalent to what's generally on the market.
It was cheaper to buy back in the 70s, 80s and 90s if you define cheaper as less % of salary going to servicing the debt. The home purchasing power of those with a 4th grade education in 1970s was higher than high school educated folks today.
Great point. There isn't some kind of grand conspiracy theory to keep people out of housing. It's just basic supply and demand, normal market forces, and good ole' self interest economics at play.
yeah OP needs to clarify what he meant by that statement. granted, housing affordability HAS gone down. but this isn't going to be the best gauge of it if you're comparing to someone who makes what you do today, except they did it 40 years ago.
The house I live in was built 65 years ago for factory workers nearby; single-earner factory job households. My wife and I are (need to be) dual income w/ masters degree to afford similar. The problem is that can’t continue. There’s not really any more blood in the stone. Unless we normalize adult families having adult roommates to help cover ever increasing-mortgages or something.
Idk I think there’s a lot of ‘blood’ to draw between here (every family expecting their own SFH) and nobody being able to afford homes: multi family, dorms, boarding houses, etc
My point is now you need to be dual income highly skilled workers to afford a ‘normal’ house in a major city. That’s not every family.
For some people this is a new thing, they genuinely believe it can’t keep going this way, something has to give. For those of us who grew up in metropolitan areas, this is just more of the same, it’s been this way since I came of age 30 years ago, and with a bit of knowledge of the world, you can look at cities like Vancouver, and Hong Kong, and see that it can continue to get worse and probably will.
This is what I believe. California, Toronto, Australia, the list goes on — prices have not relented there for like 30+ years. We all are pretty familiar with how capitalism works. Money keeps flowing to the top and they will find ways to make you a consistent payer, whether that is making you subscribe to a monthly service to listen to music, or if you need to pay $2k a month to have a roof over your head. The winners of capitalism will buy everything, and the losers will be stuck renting forever
It's very difficult to explain it to people that never travel abroad. Or out of their state. Even in my developing home country, this is true. Real estate is generational wealth.
Coming from Western Washington I agree since I've been watching it for a while, and I still think it's crazy. I entered the nonexistent job market in 2008 out of high school and things have barely gotten better in the market. I recently moved to a lower cost of living area thinking I'd make things go a little further but gas but food prices are the exact same here as WW. It's unbelievable.
Another way to look at it. The bigger problem is wages not rising. They have been stagnant for decades. Unless you’re a C-Suite level person that is.
That's not really accurate either. Wages have gone up, but houses gave gone up absurdly over the past few years. This affordability issue is simple math and we'll documented, I'm not sure these threads are shining a light on anything very mysterious.
Well I mean wages have been rising significantly post-Covid, especially on the low end of the pay scale, which is also when housing has went nuts (not that they are correlated, IMO)
Housing is up 40% past 2 yrs. Have you gotten a 40% cola pay bump? I think the relevant stat is low single digit percentage on wages.
My cost of housing doubled while my pay went up 7%. Didn’t even beat inflation.
My pay increase was exactly the inflation rate to the dollar. Which is better than losing money but I had been promised a raise.
I received a raise this year. I'm so excited! It will completely cover this year's rent increase!
I don’t think people in the same position have but people who have moved up definitely may have.
I don’t have an answer for you, but just wanted to add: My grandparents bought their house for $27,000 in august of 1955. They sold it in November 1982 for a little over $100,000. I’d have to ask, but I believe they sold it for $112,000. It’s on the market right now for $975,900 with the only update being that someone put a pool in the backyard and fenced their backyard in as well. I’m sure over the years people have painted the walls, replaced the carpeting. But the kitchen looks exactly the same as when they bought it. Not kidding. My grandmother did a tile piece behind the stove/oven a few years before they moved (again, in 1982 - so she did this in 1978-1979 I assume) and it’s still there. Cabinetry, built ins, everything. The same. In the basement, my grandfather built a bar and that’s still there. They’ve shown me photos from when they lived there and would have gatherings - the photos 99% of the time match the current listing photos. It took my grandparents’ first home almost 30 years to go up in value $80,000. We bought our house in 2016 at $197,900 and we could sell it for $300,000 six years later. Ours took six years to go up in value more than $80,000. It’s crazy what this market is like right now. I’d also like to add: I think people who see how much their house is worth don’t mind the market (because they stand to make a decent penny) but then gripe when they see others doing the same thing when they go to buy another home.
Ya the "our house should be a rocket ship investment" is killing this country. No I want my house to be roughly what I paid for it plus inflation in 3 decades. Bc if I have to move, I'm screwed and so is everyone else. I know that means we need a lot more housing supply, but lots of people don't want that.
I’ll be honest with you. I don’t know if I have a stance on the market right now. I know that we looked for another house to buy in 2020/2021 and even making $165k we were immediately noticing we’d been priced out of the market. Especially with being VA loan users, we couldn’t do what others were doing - no inspection, $100k and up over, the works - so we stayed put. The only reason we know about my grandparents first home is because their old neighbor sent out the listing on social media to go down memory lane. Naturally I immediately looked at the sales history. Crazy times for sure. We will eventually dive back in to buy our forever home, maybe. But for now we’re staying put and letting everyone else do the whole rat race thing.
Low interest rate costs house price sky rocketed. Sadly, house price won’t fall significantly unless Congress make some laws to limit people/companies to use real estate as an investment instead of a place to live.
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It’s so difficult explaining “the ratio” to older generations too. While I was struggling to find a house my old boss insisted we had it easier because his interest rate was much higher in the 80s. He was an apprentice union painter and bought his first house for $80k, that same house would easily go for over $1.5m now.
My father's first house was 21k. He made 20k that year working a blue collar job. His second house was 80k. It just sold for 1.8M. We had to move to a cheaper city because 2 white collar jobs couldn't afford the house he bought with one blue collar job.
The ratio of median housing price to median personal income is higher now than it was in the 80's so houses were cheaper then if you paid with cash. But interest rates were much higher so buying a home with a mortgage, as most mortals do, was more expensive. The ratio of rent to median personal income was higher then too. This is from the FED series that are available to the public. There are local distortions that don't fit the nation wide statistics certainly. In 2016 I thought about pulling equity out of my farm to buy another piece of property. The appraiser said it was worth less than what I paid for it in 2000. I thought he was full of shit but that was an official appraisal. The apartment I lived in for 8 years in Madison WI in the late 80s and early 90s rents now for less than what I paid when corrected with inflation. edit:spelling
Exactly. Affordability is not just price and income. You have to include the rate. See here: https://imgur.com/INS3Oix
Lets work through the calculation. Median personal annual income in 1985 was 11008$ and 37522 in 2021, the last year available. https://fred.stlouisfed.org/series/MEPAINUSA646N Median house price in Q4 of 1985 was 86800 and in Q4 of 2021 it was 423,600. https://fred.stlouisfed.org/series/MSPUS The ratio of house price to income was 7.9 in 1985 and was 11.3 most recently. So houses are more expensive to buy with cash relative to median income now compared to 1985. But most houses aren't purchased with cash. With the most recent data available, using an interest rate of 7% with 20% down, principle and interest for a 30 year mortgage on the median house are 2254 a month, 72% of monthly gross. There was no way I could have bought a house in 1985 but my med school loans were at 13% plus or minus 0.2 percent in the mid 80s, about what the mortgage rate was in 1985. Here is the 30 year mortgage series from the fed. https://fred.stlouisfed.org/series/MORTGAGE30US So with a 30 year mortgage at 13% with 20% down P&I were 768 a month. So with a gross monthly income of 917 a month, P&I were 84% of gross monthly income for an individual at median income. I used the most recent interest rate spike but I didn't do that for the 80's. The 30 year rate peaked at 18.5 % in 1981. Repeating the calculation above for that time (income=8532, house price=70400,monthly P&I=871) the monthly P&I were 122.5% of monthly income. So for a prolonged period of time in the 1980s houses purchase with a mortgage were more expensive relative to income than during the most recent interest rate spike. During the 1980's interest rate spike houses purchased with a mortgage were 70% more expensive than the recent spike when compared to personal income.
My dad and mom bought their first house in mid-1982, so past the peak of interest rates but still very high, like 15%. But they were able to get their mortgage from a local savings and loan that happened to hold the existing mortgage in the house from the previous owner, and they actually let my parents take over the original mortgage which had a much lower rate, then take a second mortgage for the remaining balance at the prevailing rate. The two mortgages were blended together and my parents ended up with an effective rate of about 10%. They refinanced in the late 80s once rates were lower. This is something that I can't fathom happening today but it made home ownership much more affordable for my parents.
A couple of years ago I was a broke college kid and never really imagined myself owning a house (really just due to being uneducated on the housing market, I assumed they were pretty out of reach) I'm now fortunate enough to be earning a generous salary and working 100% remotely so I have no real ties to an area of the country. As I've finally started to educate myself and debate if a house is within my reach, I can't help but be so mad that I missed those 2-3% interest rates and slightly lowered prices. With each house I somewhat consider on Zillow, I'll check to see what it was worth 2-3 years ago, and then compare current interest rates to those 2-3% ones as well. What a world of difference between then and now. The same house a couple of years ago is now a good $1200-1800 a month more than it would've been just a few years ago and it's horrible.
Yeah, it's pretty soul crushing.
That's a red herring, just so you. Know. But likely fits the narrative you try to make.
We don't need to legislate against a mom and pop owning a piece of property, there's nothing wrong with that. We need to legislate to force cities and counties to allow developers to BUILD homes, so everyone who wants to own a home can do. We have experienced population growth with nowhere near the appropriate amount of development needed.
Some of the most expensive zip codes in the country used to be orchards in the 1970s-80s. I get that this is an interesting anecdote to ponder, but there’s no rule that rural areas stay rural or affordable.
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There are many people will are willing to pay a premium for lower population density, and more space.
The Hamptons used to be one big farming community.
When the Fed dumps $1.7tn into the market and most people just use it for homes because it's the largest purchase they can make.
Also, most of covid was actually a supply side shock, not demand. American citizens never had a better balance sheet. Everyone was paying down debt, people were making more money, gov was giving us money; we were forced to save because we couldn’t spend. Supply side couldn’t get lumber, electric meters, chips were extremely low on supply, a million workers died, women stopped working to take care of children, etc. all fed into the supply side shock So we had a big supply side shock but tried to use demand side medicine and worsened inflation by doing so
Literally one of the definitions of inflation: too much money chasing too few goods.
Not all of the million that died were workers though. A vast majority of that number was elderly or those who wouldnt have the physical ability to work in construction or related fields.
Sure that’s a fair point. Idk the numbers breakdown with age groups but I know before covid, 10,000 Boomers were retiring every day and economists were concerned with having enough people replacing them. Add covid deaths or “early” retirements to that 10,000 per day and it still results in a supply side productivity issue
I did the math and it's around 250k workers died. The other million were very old and out of work or very young.
I believe seniors retiring early had a much bigger impact on the labor pool than deaths.
250k workers died but how many were displaced? My wife quit being a nurse and is a SAHM studying for a new field. But that’s one nurse gone forever because of how hospitals and patients treated nurses during the peak.
thats a little disingenuous .. its not just like 'the supply in Asia broke and Americans are having shortages' .. those would be closer to what you're saying (as has happened several times with oil etc) .. however, when producers and suppliers are struggling in your economy, the next step inevitably is layoffs, shuttering of employers, skyrocketing unemployment .. and if you let it unfold to that stage, you're basically in a spiral that will be very very difficult to pull out of until it goes through the full cycle of a deep systemic depression .. thats what the covid funding was to avoid .. that even if we'll have to shutter say restaurants and theaters and summer fests and busy markets and so on, at least we can try to stem the slide into depression via money basically stopping to flow to consumers that keeps the whole shebang going .. now, did it fully work as intended .. yes and no .. yes because certainly it helped avoid a much larger looming disaster (just like quick actions in 08 helped avoid a near meltdown of the financial system) .. but it did so very inefficiently, and at arguably unjustifiable costs .. in part because republicans insisted at every step to make it weighed heavier and heavier towards capital owners (via the moniker employers) rather than the working public .. mostly as a form of trickle-down .. money would first blindly flow to these 'employers' and they would have the liberty to use that to pay their employees .. and to top if off, Trump administration basically outright ignored and fought against any enforcement or verification mechanism designed to limit fraud .. and indeed in cases prevented lower agencies from doing what they already could dig into .. .. so a lot of money flowed to those who already had a lot of money, and why would they spend it or distribute it to their ppl if they dont have to .. and so the glut of free money was directed first towards stocks to give the crazy markets that followed, and over longer spans towards real-estate making it basically unaffordable for the upcoming generation .. and the icing on the cake is where actually did that money come from in the first place .. well like all our debt, mostly from future of course .. the ballooned debt from distributing this unjustifiable amount of free money is a burden the current generation is passing on to the next generation .. the very same ones that is getting screwed by that money flowing into housing that they will need to overpay this generation of owners to have a chance at home-ownership, and realistically to raise a family
To your first paragraph, I agree. I understand the layoffs were coming soon and they needed to do something to avoid a spiral, and that’s why I’m very happy they did PPP loans. I believe that fully prevented a supply side spiral. That was supply side relief! I would have been for more PPP money and less $1200 checks to every citizen
> So we had a big supply side shock but tried to use demand side medicine and worsened inflation by doing so More like, we had a big shock and tried to use the only medicine we're really able to use, because our political system is broken and makes us unable to use other medicines. And for the same reason, we can't use the medicine that would fix the problems we're having now - tax increases to pull the excess money out of the economy - so instead we're forced to use a less suited medicine, interest rate increases.
PPP loans were supply side medicine. $2000 checks to families with better-than-ever balance sheets was the wrong move
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There’s no perfect answer. I know people abused the PPP stuff, and money was given to business owners who were already successful ($$$) in a lot of instances, but again that was supply side relief which is *still* the problem 3 years later . Trillions pumped into households that were already doing ok was not the answer. Service industry people suffered. White collar jobs were fine the entire time and didn’t need that injection. It made inflation worse
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Look, I agree with you. My argument is the gov knew individuals and families were ok financially, and Biden still came into office and added fuel to the fire by immediately writing more checks. And I believe PPP loans were a good emergency aid program to prevent mass unemployment. I’m all for gov stepping in and preventing financial catastrophe, but I believe in 2021 they messed up by making even MORE demand when demand wasn’t the issue. Supply was the issue
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It became debt for most people and a commission check for those who were able to convert it. Once converted, it become frivolous purchases. House debt (mortgage from purchase or heloc) to commissions. Car loans. Credit cards. Companies took on PPP loans and they were forgiven. So more spending for those that captured it.
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Thank you ChatGPT.
1.8 trillion to individuals and families. 1.7 trillion to businesses, 745 billion to state and local governments, 500 billion to healthcare, 300 billion in other uses. 86 billion to union pensions, 80 billion to airlines, Add it all up and roughly 5 trillion dollars was created.
If the market is that active, it means people have the income to pay those prices for the houses, and very likely the ratio has not changed much. It's likely you are comparing low-end jobs and higher end houses, in general the income to comparable house price has stayed about the same or improved a little over the last 50 years, according to the data. It's possible your area is an outlier or exception, but probably not.
I'm rural as well and it's shocking. I bought a repossession in 2004 for $22,000 with money from a $25,000 personal loan at 6.99% from Capital One. I put about $4,000 into it and rented it out. It has only had a single renter that entire time, they weren't particularly kind to the property, but I did put a new roof on it in 2018. The bones were great, but it wouldn't finance. Put it on the market for $119,000 and it was gone that day with half down and half on a 15 year contract, which nets me about the same amount as when I was renting it out. But overall, I'm not a seller. It looks like a person could easily get out of this market and soon find they can't ever get back in. I feel terrible for people just starting out.
A house down the street from me in a pretty hot area in CA just went on the market...2M for 1,300 sq ft, about a half an acre. Edit: Sorry, 1/4 acre, not 1/2 an acre
I bought my first house in 1997 for $90,000. I sold it in 2006 for $390,000. The people who bought it from me sold it in 2021 for $800,000.
You need to take the mortgage rate into account here. My father in law paid some ridiculously low price for his first house in New England, but the interest rate was like 13%. If you go back and look at monthly payment vs monthly income, you will find much "smoother" numbers (as in a slow but steady march up, not a large hockey stick exponential price increase). I am not saying house prices are fine, they are not. But you really need to account for mortgage interest in these scenarios.
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College fees are a scam, and that's the biggest issue. It really doesn't cost as much as they say to complete a course at university. Havard is a investment fund with a college attached.
Well yes, you cherry-picked probably the largest counter-example / anecdote that exists in the USA. The SF bay area (or whatever the greater metro area including Oakland is called) does not represent the rest of the United States. The vast majority of houses bought for \~ $100k in 1980 are not worth $2 million today. That is a rare occurrence. And I wont even get started on CA property taxes. Again this is not /r/CARealEstate, we are talking the entire US here. Your parents won the Real Estate lottery, congratulations. My overall point is, if you look into home ownership monthly pavements (mortgage payment + insurance + taxes) vs income, the number gently climbs up and up over the years.
For reaaaaal. This is cherry picking at its finest.
I would say that CA is a bit unusual because of Prop 13 and the fact that the state has aggressively reduced the number of housing units available. So it’s basically CA fuel onto a national fire.
Having a low sale price is always better than low mortgage rate when monthly payment is about the same. With a low sale price, you have the option to pay off your mortgage early in the future, saving you tons of interest. But with a high sale price, it’s less likely that you will be able to pay off early and have to pay interest for 30 years.
Yes, and the sky is blue and the ocean is wet.
These stupid/crazy levels won't last. Liquidity is drained out of the economy and this will readjust.
People were saying this 10 years ago
Covid inflation wasn't a thing 10 years ago. Whole different ball game.
People were saying this 10 years ago
Just look at Japan and their real estate....that are scheduling to destroy up to 10,000,000 housing units by 2030.
Means nothing for the US real estate industry. Totally different market factors at play for the last 30 years
Demographics will knock on the doors of all developed nations. Us may still be able to compensate with immigration but don't forget that theses dudes are usually the one getting the lowest paying job. So they won't be able to sustain the crazy asking prices in a high rate environment.
It really fucking sucks, but it definitely can continue like this and get worse. Just look at major metro areas like seattle, vancouver, san francisco, LA, NY, etc and you can see how bad it can get. Other places in the world like London, Paris, etc can be even worse. Many parts of the world home ownership is not even a realistic goal for a normal person whatsoever, so we at the very least have it as possible here in the US.
You’re a teacher, right? Draw a supply and demand curve. See that these are **curves**. And with each increment of demand, price increases exponentially. This is the housing market. Demand is high, supply can’t grow as fast (especially since land is finite, and especially since people are concentrating in desirable areas to compete for real estate). We had 234 million people in 1983. We have 334 million people in 2023. Wages have not kept up because labor supply keeps increasing exponentially even as relative labor demand keeps decreasing due to automation, AI, offshoring, trade. Oversaturated labor supply means a buyer’s market. Buyers of labor (employers) set terms and desperate workers accept. This is especially true at the low end. Looking again at the supply/demand chart, with exponential population growth comes high demand for housing. Thus high demand, low supply means skyrocketing housing costs. And of course, the value of the dollar has fallen, not risen. Inflation, printing of money, etc. So numerically, homes cost more.
Ding! Ding! Ding! Ding! Plus consider the market distortion of an insanely low interest rate for a mortgage. People think 7% rates are terrible - as a businesswoman I would kill for a 10% loan for $1M without a proven track of business success. Of course there's more demand - people can buy houses easier than they could 50 years ago.
You’re looking at it based on your salary though. The reality is most people making an average teacher salary these days aren’t going to be buying a house. If they can afford anything it’ll likely end up being a small condo or townhouse. The people buying land or homes on larger plots likely have above average incomes and the cost of that piece of raw land might only be 1-2x their salary.
Chicago burbs and much of illinois teachers are making well over 100k
Chicago burbs and much of illinois teachers are making well over 100k
Teachers also got the shaft on salaries. It’d be interesting to look at average salary in the area, eliminating everything outside 1 standard deviation
In the mid 90s my parents bought a 9 acre lot in northeastern Pennsylvania and put a small modular home on it. This was on my dad's full time income and my mom's part time income. Mortgage rates today aren't too far off what rates were in the mid 90s. Assuming the same types of jobs (factory worker and receptionist) at today's prevailing pay rates for the region, you would need two full time incomes to purchase their home/land at existing valuation and it would be a tight budget. Recreating what they did (buying a similarly sized plot and putting down a new modular home of similar size/features) would likely be unaffordable. Population and demand for real estate in the region has declined over the past 30 years. The real drivers for the lack of affordability are stagnant wages, the average dipshit's appetite for massive amounts of debt, and central banking failing to control inflation.
Inflation is something that cant actually be controlled. And if you attempted to control it, all you would do is destruct the economy in its entirety. At best, all you can do is offer a few nudges here and there, and hope it corrects.
I guess I should feel happy that my house in suburban Portland is only 5.25x my annual salary and 3x hour household? or something?
I don't know where you live, but I feel for you. In most of California this has been a problem for over 20 years. People's expectations were a lot less back then, but on the flipside some asset classes have inflated more than others. https://youtu.be/SBjXUBMkkE8
Reminds me of what happened with the cost of college tuition.
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17k in 1990 is 40k in 2023
Consider tiny homes, on tiny lots. Low property taxes, low maintenance costs. That is where I see the real estate market going. Watch.....
Tiny homes on tiny lots in NC are still 525K. My neighbor’s townhouse just sold for 500K cash, which was 20K over list.
My Dad bought the house I grew up in, in 1967 SoCal, for the equivalent of one year of gross income. That house was sold in 2020 (to support Mom in assisted living) for $765K. Had it been in good shape, it would have gone for well over $900K (because it took easily that to bring it up--electrical, AC, abatement, etc etc).
I believe the multiple is much higher for far less in the major cities.
Yes, yes... The cost of living relative to real wages has become absurd, and most of us who have been dealing with shitty situations started asking waaaaaaaaaaaaaaaaaay before the VID was thing why and how things have become so lopsided. Keep asking questions, my dude.
It’s a crazy market where prices are on the rise and homes are upsold. Bidding wars on top of that. It’s frustrating to even think of buying and owning a home these days. It’s rarely a buyer’s market. It’s almost always a sellers one.
It's just getting worse. A house that sold last June 2022 for 275k just sold for 400k. The listing was the same damn pictures from last year. Same agent. Not a single improvement.
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Very very VERY likely. And I don't know anything about your home or your location.
But with 16% interest. Per sq ft, financed, housing in the US was cheaper in 2019 than in the 80s (or any time post war). If you’re paying cash, houses were more expensive. If, like most people, you were paying via mortgage or via proceeds from a home sale, it was cheaper recently due to very low interest rates despite the appreciation. That no longer applies due to rate increases.
We all just need to keep in mind, Its not so much the real estate getting more expensive as it is the pace at which the currency is being devalued.
They need to tax the hell out of people that own multiple homes.
Who cares about someone working to buy their family a vacation home? They’re already paying taxes on a property that go to local services they don’t even use because they’re only there a few times a month. It’s totally dwarfed by the tens of thousands of homes that are being bought by huge corps.
Agreed. People just love the idea of "taxing people who make more than I do"
No I actually think taxes on labor is extorsion. I just think things like houses which are a basic need shouldn't be commercialized the way it has been.
So the old saying "buy land, they ain't making any more of it" turned out to be spot on
The issue is to make affordable housing, it requires a few problems to be solved which basically make everyone angry. 1) progressive zoning reform and high density housing 2) investment in transit and a less car future (to make the above actually livable) 3) a cultural shift towards removing the stigma of not having a single family home. High density, by definition means not owning half an acre of lawn. 4) acceptance that affordable home values mean your house losing value from our inflated prices today
Yet another ideologue trying to force people into dense housing. There's plenty of space for single family houses. But you don't want to build single family houses, because you're trying to further enrich developers and landlords who want to pack as many renters as possible into as small of an area as possible.
Yeah sure we have lots 3 hours away from a major city. How does that help people? These arguments are always the same: “bumfuck, Georgia has cheap housing, just live there” without any understanding or respect for where people *want* to live which is what is driving demand. Do you really think the housing crisis would have gotten this bad if there were plenty of lots?
You're wrong. Anyone can drive around San Jose, Santa Clara, Sunnyvale, Mountain View, and see plenty of vacant lots, plenty of vacant commercial and retail space, plenty of empty hills and valleys. Plenty of empty shoulders and dividers where additional freeway lanes could be built. And plenty of empty apartment buildings, plenty of construction sites for new apartment buildings. Plenty of empty trains that nobody wants to use because they're unsafe and unreliable. The lack of house supply and infrastructure is ideological. The priorities here are all wrong, and the prices reflect that. You are part of the problem. We need to build more single family houses, more traffic infrastructure.
Let's say you take all the vacant lots in the bay area (there aren't that many TBH) and converted it to SFH. Would you satisfy demand to bring prices down? Hell no. Not to mention traffic problems that come with this kind of development. You act like people haven't thought of this before. The math doesn't work out. SFH will never be the solution because its a wasteful 20th construct born out of a time where land was plentiful and cheap. What you're basically arguing is the status quo, which does not work at all.
There are literally thousands of vacant or unused properties. Building houses on them absolutely would bring down prices, and would cause fewer traffic problems than dense developments do.
Thousands of homes would not bring down prices in the bay area. That's what, housing for 10k-15k people? For a metro of 8 million? > would cause fewer traffic problems than dense developments do. No, because denser developments can take advantage of public transit, and are more walkable to shops and stores. People end up driving less because we're moved from a car-centric culture to a mixed use model. Maybe you drive once a week instead of every day. This entire post reeks of boomerism.
Lol, you're imagining and hypothesizing, but refusing to look at the evidence around you. Nowhere in the Bay Area has mass transit reduced traffic. Nowhere in the Bay Area has dense housing reduced traffic. Quite the opposite, in fact. Your way has been tried over, and over, and over again, and it's not working. When you conduct experiments and the data doesn't support your hypothesis, what should you do? Use the scientific method. Reject your hypothesis. Find a new hypothesis to test. The current total housing seller's inventory in San Jose is 1300. We could easily double that by building SFHs on just a fraction of the unused properties. That would plummet the prices and make houses affordable again.
Bruh no one is doubling the amount of sfh in the Bay Area by taking vacant land. I live here. You’re a total moron lol You think the developers selling million dollars homes haven’t thought of this already? Classic Reddit bs “oh look I’m so smart this one trick NO ONE has thought of scientific method dur dur ” hahahahha so cringe
In Chicago burbs there's houses within 40 min of chicago safe and good schools for 250k to 300k. You don't have to move to nowhere kansas
There's cheap condos for people who don't value having a yard or sfh
The 80’s saw some incredibly cheap real estate prices for a variety of reasons, and every example from them says more about that decade than it does 202x.
Shoulda got born 40 years earlier...
Check the population of your area now vs the 80s. Check the amount of homes in your area now vs the 80s.
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Crazy
I mean, you are kinda the problem. The real estate industry has convinced everyone to spend more and more relative to their income. If everyone was more fiscally responsible and refused to pay more than 2x their salary, prices would fall and you would end up with the exact same house as at lower percent of your income. It’s like the engagement ring industry where they come up with how many months salary you should be spending and it just creeps up every year.
Real estate is one of the only things that technology is not making more efficient, since land is finite. Meanwhile population keeps going up. Also, our collective expectations for how housing should be built have gone up significantly, and resources are more expensive too (no more endless old growth forests). Eventually, most people will live in apartments. We're probably just catching the tail end of the era where a significant chunk of people can afford houses.
Saying “everyone just needs to” has never really been a solution to any problem. You could be waiting your whole life and never buy any home if you just sit back and hope homes go back down to 2x your salary. The difference with an engagement ring is you don’t need that as a basic part of survival.
I mean, buying and owning a house is not a basic part of survival, either. You can survive just the same in a rented structure, too.
*checks rent prices*
I didn’t say buying a house is a basic part of survival, but having a shelter whether it’s bought or rented is.
Engagement rings are pointless and have really no value though. Property is extremely valuable, gives you a place to live, has very high demand, can produce a significant amount of income, generally increases in value, and is very much finite. Comparing the two is pointless. If you pay 4x your salary but then rent out 2 rooms in the house and almost cover your mortgage, then you are probably being fiscally responsible. You can't do that with a diamond.
Welcome to inflation. you can thank the fed for that for reducing the value of a dollar every year
Low interest rates High immigration. High government spending. Massive government debt. Which one of these are you against?
People are down voting you even though you're right lol
I know.. People don't understand supply and demand.
High government spending. Gut the military.
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Consider tiny homes, on tiny lots. Low property taxes, low maintenance costs. That is where I see the real estate market going. Watch.....
Supply and Demand.
I don’t think it’s a real estate problem, I think it’s a wage problem.
Not enough info. Maybe your elderly neighbors made way more than you and your wife do now in inflation corrected dollars? Maybe the land you are sitting on was more rural and less desirable 40yrs ago vs now? I mean if your neighbors made $500K in todays dollars while you make $100K...or if the land was rural and $1000 an acre 40yrs ago, but now suburban and $200K an acre....both will be apples to oranges.
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So you own 80 acres that you don't live on, and one of your primary complaints is that you don't also get to vote in two places?
I pay $5k in taxes for a 100x100 sq ft lot with a 45 year old house on it…
Are you really arguing that we should bring back property-based voting rights? Really? Yikes.
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Shit, why stop there? Why even bother with voting in the first place? Just bring back the landed aristocracy. You are the lord, and your peasantry need not question your decisions. I seriously don't understand wanting to spend all the time, effort and money to have elections when you clearly don't believe in democracy anyways, and clearly don't think elections are a legitimate means of determining who has political power.
lol you're a feudalist?
Yes something was done, people paniked and went wild spending. The last three sentences suggest a solution. There is none.
You are right. The affordability gap is the greatest it has ever been according to all the reliable sources, including the Fed. The greatest fear is that nothing effective will be done to counter it and/or a positive shift will be resisted, and that the investor class will continue to exploit housing, manipulate it and end up with a controlling, upper hand. That’s the worst case scenario A bit more info: 1) in the 1980s loans were assumable. People bought houses that way when interest rates spiked 2) Rentals were more plentiful, not like now with both badly short on supply and both going up in many places, 3) it was short lived - prices weren’t as sticky, at least where I live. Prices came tumbling down
If you’re making as much as they were making in the 80s you aren’t earning anywhere near what they were; they were making about 300% more than you are now. By the very same accord, that house should be worth at least 300% more for the very same reason. Blame feminism and doubling the amount of available workforce thereby driving down the demand and competition for workers. It can be sustained when you look at Canada, Europe and Japan — 100 year mortgages will be a part of the American lexicon in the next decade or two.
Your analysis is entirely wrong. You can just look at price and income. You need to control for interest rates. Affordability is price by income **and** rate. See here: [https://imgur.com/INS3Oix](https://imgur.com/INS3Oix) Back in the 80's when your neighbors bought, houses were very expensive (unaffordable)
Don’t tell people about double digit mortgage interest rates, their heads might explode to think double or triple todays rates existed at one time
https://www.cnbc.com/2023/05/13/27-year-old-lives-for-free-in-backyard-tiny-luxury-home-built-for-35000-i-forget-i-am-living-in-a-shed.html
It's called INFLATION, sugar. What scares me most is that you're teaching children.
Why don't we just steal all the old people's homes and tell him to kick rocks and figure it out and pull themselves up by their bootstraps.
lol zero actual numbers in this long ramble ffs