4 ms·

It seems they both impact mobility equally? In a rising market, people are priced out of entering an area. In a falling market, people are priced out of leaving

by darawk 8y ago

It seems they both impact mobility equally? In a rising market, people are priced out of entering an area. In a falling market, people are priced out of leaving. Seems symmetrical to me, unless i'm missing something.

ChuckMcM 8y ago
I see it a bit differently. If people are priced out of buying into a market they can often still rent in that market, and the rising sales prices allow people with ownership to sell and move to new markets. But in a falling market the renters can still move but owners can't (or are pressured not to) sell and move. They do have the option of becoming landlords but that can limit their cash flow and make it harder elsewhere.
- darawk 8y ago
  I don't think that quite follows. When property values increase, so do rents. When rents increase, someone is getting priced out. That is, if you could buy before, maybe now you have to rent. But if you could only rent before...maybe now you can't even rent.
  - jbarham 8y ago
    > When property values increase, so do rents. Maybe, but probably not at the same rate. Broadly speaking, rents are tied to incomes, house prices to the availability and cost of credit (i.e., interest rates). Average income places an upper bound on rents because renters can only pay rent from income (since no bank will lend you money to pay rent). I'm currently benefiting from this phenomenon myself as I rent a house for ~$25k/year (in Melbourne, Australia). Buying that same house would cost me ~$45k/year.
    - thaumasiotes 8y ago
      > no bank will lend you money to pay rent I'm pretty sure every bank will do this, in the form of a credit card.
      - alsetmusic 8y ago
        >> no bank will lend you money to pay rent >I'm pretty sure every bank will do this, in the form of a credit card. I’ve never seen an option to pay rent with a credit card. Cash, check, money order, or cashier check have been options I’ve seen.
        thaumasiotes 8y ago
        Credit cards will advance you cash that you can use for whatever you want.
      - namibj 8y ago
        Which bank allows you to take >10 years to pay it off? For less than 5% (over inflation) annual interest?
    - dcosson 8y ago
      > Broadly speaking, rents are tied to incomes, house prices to the availability and cost of credit Mind citing a source for this? I've seen a situation where rents and house prices didn't both rise together. Maybe not precisely the same rate, there may be some noise from other factors, but within a few percentage points of each other. Rents may be somewhat related to the incomes of the people who are renting in the area, but these people are not necessarily the average population. In a housing shortage the people with high paying jobs rent decent places, everyone who makes less is forced to live with roommates or commute from further away and many leave the area altogether. And then in your example, that's not necessarily so crazy. Some of that $45k goes towards the mortgage interest which is tax deductible (in the US, not sure about Australia), and of course over time more and more of it goes to the principle so effectively paying yourself.
      - jbarham 8y ago
        https://www.economist.com/graphic-detail/2018/02/09/the-economist-house-price-indices https://www.economist.com/graphic-detail/2018/02/09/the-econ... lets you play around with comparing house prices vs income and rents. In Australia (where I live) and Canada (where I'm from) house prices are more overvalued compared to rent than income (i.e., rents have increased slower than house prices). > Rents may be somewhat related to the incomes of the people who are renting in the area, but these people are not necessarily the average population. By definition renters must live in the are where they rent, and must work within commuting distance of where they rent (even if it's a very long commute). Landlords, however, can live anywhere, provided they have someone to manage their rented properties. E.g., my landlord lives in Singapore, but I pay my rent to a Melbourne based property management agency. But since I live (and work) in Melbourne my rent is set by the market rate in Melbourne, not the (much higher) rate in Singapore. Unfortunately for non-techies in SF, their rents have been pushed up massively due to the much higher tech salaries. But that only proves the strong correlation between rent and income. BTW, mortgage interest in not tax deductible in Australia. Somewhat crazily, however, rental losses on investment properties are tax deductible ("negative gearing").
  - wtvanhest 8y ago
    Rents are based on willingness to pay per month. Prices (values) are based on that market willingness to pay divided by the cost of capital. If the cost of capital goes up, all else equal, values will fall while rents are flat.
wtvanhest 8y ago
In a rising market, both renters and owners can move. In a falling market, only renters can move.
- darawk 8y ago
  Why?
  - danans 8y ago
    I think they're saying renters can move without taking a large loss, but owners generally can't, since they have to either sell at a loss, or rent out their property at a loss.
  - oldcynic 8y ago
    Negative equity. £200k mortgage on a house now worth £150k. To move, first find £50k.
    - scotty79 8y ago
      You can just leave the house empty without selling it. You just need to pay taxes and mortgage but not utilities for your empty house.
      - oldcynic 8y ago
        That can work for some. Paying a mortgage and rent on the new location, along with 2 sets of taxes gets expensive real quick. Some utilities have standing charges/line rental too.
- jbarham 8y ago
  I've witnessed this myself. In 2009 the company I was working for in Calabasas, California, laid off a lot of people. Since I rented, I was able to end my lease and move to a new job in Orange County. Colleagues who had bought and were underwater were forced to search for new jobs within commuting distance of their house.

by darawk 8y ago

ChuckMcM 8y ago

I see it a bit differently. If people are priced out of buying into a market they can often still rent in that market, and the rising sales prices allow people with ownership to sell and move to new markets. But in a falling market the renters can still move but owners can't (or are pressured not to) sell and move. They do have the option of becoming landlords but that can limit their cash flow and make it harder elsewhere.

darawk 8y ago
I don't think that quite follows. When property values increase, so do rents. When rents increase, someone is getting priced out. That is, if you could buy before, maybe now you have to rent. But if you could only rent before...maybe now you can't even rent.
- jbarham 8y ago
  > When property values increase, so do rents. Maybe, but probably not at the same rate. Broadly speaking, rents are tied to incomes, house prices to the availability and cost of credit (i.e., interest rates). Average income places an upper bound on rents because renters can only pay rent from income (since no bank will lend you money to pay rent). I'm currently benefiting from this phenomenon myself as I rent a house for ~$25k/year (in Melbourne, Australia). Buying that same house would cost me ~$45k/year.
  - thaumasiotes 8y ago
    > no bank will lend you money to pay rent I'm pretty sure every bank will do this, in the form of a credit card.
    - alsetmusic 8y ago
      >> no bank will lend you money to pay rent >I'm pretty sure every bank will do this, in the form of a credit card. I’ve never seen an option to pay rent with a credit card. Cash, check, money order, or cashier check have been options I’ve seen.
      - thaumasiotes 8y ago
        Credit cards will advance you cash that you can use for whatever you want.
    - namibj 8y ago
      Which bank allows you to take >10 years to pay it off? For less than 5% (over inflation) annual interest?
  - dcosson 8y ago
    > Broadly speaking, rents are tied to incomes, house prices to the availability and cost of credit Mind citing a source for this? I've seen a situation where rents and house prices didn't both rise together. Maybe not precisely the same rate, there may be some noise from other factors, but within a few percentage points of each other. Rents may be somewhat related to the incomes of the people who are renting in the area, but these people are not necessarily the average population. In a housing shortage the people with high paying jobs rent decent places, everyone who makes less is forced to live with roommates or commute from further away and many leave the area altogether. And then in your example, that's not necessarily so crazy. Some of that $45k goes towards the mortgage interest which is tax deductible (in the US, not sure about Australia), and of course over time more and more of it goes to the principle so effectively paying yourself.
    - jbarham 8y ago
      https://www.economist.com/graphic-detail/2018/02/09/the-economist-house-price-indices https://www.economist.com/graphic-detail/2018/02/09/the-econ... lets you play around with comparing house prices vs income and rents. In Australia (where I live) and Canada (where I'm from) house prices are more overvalued compared to rent than income (i.e., rents have increased slower than house prices). > Rents may be somewhat related to the incomes of the people who are renting in the area, but these people are not necessarily the average population. By definition renters must live in the are where they rent, and must work within commuting distance of where they rent (even if it's a very long commute). Landlords, however, can live anywhere, provided they have someone to manage their rented properties. E.g., my landlord lives in Singapore, but I pay my rent to a Melbourne based property management agency. But since I live (and work) in Melbourne my rent is set by the market rate in Melbourne, not the (much higher) rate in Singapore. Unfortunately for non-techies in SF, their rents have been pushed up massively due to the much higher tech salaries. But that only proves the strong correlation between rent and income. BTW, mortgage interest in not tax deductible in Australia. Somewhat crazily, however, rental losses on investment properties are tax deductible ("negative gearing").
- wtvanhest 8y ago
  Rents are based on willingness to pay per month. Prices (values) are based on that market willingness to pay divided by the cost of capital. If the cost of capital goes up, all else equal, values will fall while rents are flat.

wtvanhest 8y ago

In a rising market, both renters and owners can move. In a falling market, only renters can move.

darawk 8y ago
Why?
- danans 8y ago
  I think they're saying renters can move without taking a large loss, but owners generally can't, since they have to either sell at a loss, or rent out their property at a loss.
- oldcynic 8y ago
  Negative equity. £200k mortgage on a house now worth £150k. To move, first find £50k.
  - scotty79 8y ago
    You can just leave the house empty without selling it. You just need to pay taxes and mortgage but not utilities for your empty house.
    - oldcynic 8y ago
      That can work for some. Paying a mortgage and rent on the new location, along with 2 sets of taxes gets expensive real quick. Some utilities have standing charges/line rental too.
jbarham 8y ago
I've witnessed this myself. In 2009 the company I was working for in Calabasas, California, laid off a lot of people. Since I rented, I was able to end my lease and move to a new job in Orange County. Colleagues who had bought and were underwater were forced to search for new jobs within commuting distance of their house.