9 ms·

As a new father, I share this perspective. To get an anecdotal sense of our financial struggle, we have 2-4x the net worth that my parents when they were our ag

As a new father, I share this perspective. To get an anecdotal sense of our financial struggle, we have 2-4x the net worth that my parents when they were our age, but cannot afford the same house that I grew up in and doubt we ever will.

PragmaticPulp 6y ago
I’ve been thinking about this lately. Similar to you, the house I grew up in is much more less affordable now than it was when my parents bought it. However, in my case it’s not really the same house any more. At the time, the location was thought to be on the outskirts of town, away from the desirable areas. As the city grew, this location became the desirable area. If I look to what is now considered the outskirts, I still see new construction in the $300K range (pre-COVID anyway), which is similar to the inflation-adjusted price of the house I grew up in. At some point we can’t escape supply and demand with more buyers fighting over the same limited housing supply. Many of my friends have been moving to less popular cities and up and coming towns as they start raising families, and it pays off. Obviously not an option for everyone’s situation, but thankfully the increase in remote work is relieving some of the pressure in overcrowded cities.
- bcrosby95 6y ago
  Same, but the "outskirts" has gone from a 30 minute drive to work to a 2 hour drive to work. At some point something has to give.
- shortandsweet 6y ago
  That's what I don't understand, if population growth is stagnant or declining, how is it these housing prices are reaching such heights?
  - whatshisface 6y ago
    Because nobody wants to hold currency for extended periods of time.
    - rgrieselhuber 6y ago
      Bingo
    - 0xfaded 6y ago
      Or more precisely, once a house attains some value beyond providing a roof over heads, the price of a house is no longer representative of a house, but a government backed asset that can never depreciate lest the pension funds fold.
      - supertrope 6y ago
        A single house's price can easily go down. Even an entire city like Detroit MI can devalue. But those mortgage backed securities represent the national average. With climate change the music may suddenly stop for flood prone areas like Miami once investors stop underwriting 30 year mortgages.
    - blockyhead 6y ago
      Not when the government is printing it by the trillions.
  - Clubber 6y ago
    We make up for it with immigration. I believe legal immigration is well over a million a year. https://www.pewresearch.org/fact-tank/2020/08/20/key-findings-about-u-s-immigrants/ https://www.pewresearch.org/fact-tank/2020/08/20/key-finding...
  - amanaplanacanal 6y ago
    The US is still growing its population, via immigration rather than births.
  - r3drock 6y ago
    One explanation is rising amounts of space per person, the apartments are just getting bigger.
    - whatshisface 6y ago
      When you watch the price of the same unit grow over time, it's not usually because the owners are building more. :)
    - scatters 6y ago
      And decreasing household size.
  - usefulcat 6y ago
    You can find cheap housing, the problem is it's all in places where most people don't want to live. For example, Detroit, or any of thousands of small towns all over the US. Not picking on Detroit, it's just an obvious example of a large city that used to have a much larger population.
    - Frost1x 6y ago
      That's a sort of two way street though. In areas affordable housing exists, there often aren't many opportunities financially speaking, especially in the labor market. It's one thing to live in a city, work for awhile to bank up capital, and then move somewhere with a low COL area to live comfortably with some supplemental income from the region with knowledge of that nest egg if investments you currently have. It's an entirely different story to live in such an and accumulate enough capital to purchase a home. Often, jobs are few and far between that are competitive, even after adjusting for COL. Employers in these areas often have less competition for positions and therefor have more leverage. Acquiring debt in these areas when you start your career could make it difficult to climb out of. Its not true with all positions. A lot of healthcare positions can pay better in these areas due to what are essentially government subsidies through medicare/medicaid. You'll occasionally have some industrial organization doing specialized work people with advanced degrees can prosper in but they need to strategically target these areas.
    - bonestamp2 6y ago
      That does make sense at least. The places with the least opportunity and/or desirability are going to be the cheapest.
    - WillPostForFood 6y ago
      There is a lot of cheap housing in places that people are willing to live, but people need a push to change. Allowing work from home, schools, and lockdowns have been helping provide the push. Most cities have reasonable housing prices, it is just distorted by a few areas which have become extremely unaffordable. Detroit is an interesting example. People did want to live there, but as the jobs declined, so did the city. If jobs can come back, the city can come back.
    - 6y ago
  - blockyhead 6y ago
    Because people want to live in the city. I bet you can find really cheap houses in the countryside. Iirc A couple of days ago there was even a post up on HN that listed places where the government would give you land for free, and I think also some starting capital.
  - mgolawala 6y ago
    Home prices keep reaching new heights in some areas due to: 1) Migration. Immigration from outside the country, but also internal immigration within the country from less economically vibrant parts to more economically vibrant regions. 2) Falling interest rates keeping the monthly mortgage payment the same or lower despite higher principals 3) Expectations that the price trend for homes will continue to look like the past. This expectation can lead to people buying more housing than they would normally consume. 4) Shrinking household sizes. You have gone from an average household size of 3.33 in the 1960s to an average household size of 2.53 today. That may not seem like much but you would need ~25% more housing today to accommodate the same population. 5) Larger house sizes. From a median of about 1000 sq ft in 1950 to 2300 sq ft today. The above can combine to keep pushing up house prices in some areas (as we see in the US) even as the population growth of a country stagnates.
    - wishysgb 6y ago
      In my opinion the thing that is leading most to inflation in addition to your points above, is that there are way too many land lords anyone who makes a little money goes and buys a house, increasing demand.
    - bobthepanda 6y ago
      Also add; limited housing development. Most new housing development after the war was gotten by turning farmlands and nature into single family houses. A lot of places have reached the limits of how far one can expand and run into some combination of geographical barriers, legal barriers (e.g. protected park or farmlands), or the barrier posed by time (most people have an upper limit of how long they are willing to commute.) The next logical step in density, subdivision of existing lots and/or intensifying into homes that accommodate two, three, four families in a place where a single family house stood, is pretty much illegal on most residential parcels in the US. Pre-zoning, neighborhoods were free to densify as they desired, so even in older single family neighborhoods there are sprinklings of slightly more intense development. But in 2021 zoning reform is hotly contested because people feel like they should have control over what their neighbors do with their land, and the overall result is that there isn’t too much developable land left.
  - pojzon 6y ago
    Rich elites buy-out all properties/flats in cities because its a better overall investment taking to account inflation. People who slave in that situation consider themselves unhappy and thus consider moving to a houses outside of the city. Due to limited infrastructure outside of the cities -> only a part of outskirts are really habbitable for those families. The demand in this case is higher than supply. Demand is so low only because city politicians are too inefficient in providing new places with infrastructure.
  - com2kid 6y ago
    > That's what I don't understand, if population growth is stagnant or declining, how is it these housing prices are reaching such heights? Housing prices around me are directly correlated to school quality. The same house near a good school is literally 1.5x-2x the price. The supply of good public schools is very limited. A good private school is ~20-30k a year. Figure that is worth 300k, not even counting that that over the years tuition prices will go up. So people pay to live near one of the handful of good schools. Seattle stopped busing kids awhile back, instead aiming to keep kids at "local" schools (IMHO to save money), so now unlike the opportunity I had as a kid (test well, get into a good school in the "right" part of town) the city is perpetuating generational poverty. This has the effect of making pockets of the city have well rated and poorly rated schools. Previously schools were kinda mixed in quality, good programs and teachers at many different schools. Sure some had a reputation, but now the ratings are incredibly bi-modal, and housing prices follow that distribution. Oh also in the last decade, the population has increased by 21 million. The growth rate is slowing, but it isn't zero. The way American cities are managed, it isn't possible to add sufficient housing. E.g. in 2019 around 40k people moved to the Seattle metro. 14k building permits were granted[1]. To put that in perspective, the most construction friendly city in America, Houston, approved 38k permits. (Not sure if these are for housing units, are permits overall inclusive of multi family dwellings). FWIW Dallas got ~131k new people (US Census Bureau) No surprise there is a problem. American cities are not capable of building fast enough. [1] https://www.wfaa.com/article/money/economy/dallas-fort-worth-ranks-second-new-residential-construction-report-shows/287-7e9b6117-e006-41bf-b8ed-ba0297c913f3 https://www.wfaa.com/article/money/economy/dallas-fort-worth...
    - treis 6y ago
      >Housing prices around me are directly correlated to school quality. Because "school quality" is basically indistinguishable from "socio-economic status". It has little to do with the quality of buildings or teachers or other resources. It's mostly about the ability and willingness of parents to be involved in their kid's life and the standards they hold.
  - rayiner 6y ago
    In the U.S. 1) Population continues to grow due to immigration and higher birth rates among immigrants. 2) Population is growing in some areas and declining in others, which is matched by housing prices increasing in some places but falling in others.
  - nradov 6y ago
    To some extent homes in affluent are expensive because they are expensive. Most rich people don't want to live near poor people and so they'll pay extra for that even if it seems economically irrational.
    - deleted 6y ago
      [deleted]
  - IkmoIkmo 6y ago
    Interest rates is much of it. Just calculate the total payments for a 30y, 100k mortgage in 1980 when the interest rate was 15%. It's 455k in total. The same amount as a 300k mortgage for today's 3% interest for 30 years, also 455k total. In other words, the monthly payments / total payments are the same and thus just as affordable at 3x higher prices, simply because interest rates dropped so much. Second, there's indications of further concentration. If you have a 10x10 square of land and 100 people, you can each live on one square (spread-out) You can also all live on one square (concentrated). The price levels of the homes in the lived-squares of course grows the more we concentrate, even if total population is constant. Concentration isn't a straight-line, e.g. NY depopulated in the 80s, but does tend to arc towards further urbanisation, further concentration, further population density. In large part because cities are knowledge/network centres, and our economy is based on knowledge/networks, whereas before our economy was based on e.g. agriculture, which is the opposite of concentrated. I'd be very interested to see if that will ever change due to a working-from-home / remote-work, and even virtual reality to have meaningful social and entertainment experiences remotely. It used to be if you lived in a small town, there'd be few jobs, few bars to meet people, few concerts to go to, no cinema. Many moved to the city despite higher prices, less room, noise and pollution and crime, in search for work and social life. But with remote work and VR, the calculus might change. (not 100%, but many a little bit, enough to bring a little bit of balance to the ever-growing concentration of people in a few big cities).
refurb 6y ago
But why would you expect to be able to afford the same house even with higher net worth? I mean, my folks bought a house I can afford either but when they bought it, it was on the edge of the city, not a desirable area in a 2nd tier city. That’s why it was cheap. Now it’s in a historic neighborhood, highly desirable in a city where everyone wants live. I could afford a house similar to the one they bought in terms of those qualities. In fact it would likely be cheaper compared to salary.
- threwawasy1228 6y ago
  Show me an affordable house in on the edge of NYC in the "undesirable" neighborhoods. Even if you pick neighborhoods past where subway lines end (a very undesirable quality for city property to have) that also happen to be high crime areas it is still too expensive for anyone to purchase. Like two examples look at New Lots/East New York and South Ozone Park/Jamaica. Both fit my description above, they are at the very edge of subway access, and are high crime areas, and both are too expensive for normal middle class people to buy property in. Contrast this with great people I've met who are ~60 now, who just stumbled into the east village/alphabet city in the 1980s in their mid-20s and bought up cheap houses while bumming around paycheck to paycheck. What area of NYC or the valley can I do that in now? If the answer is none, and you can't point me to a city in the midwest or south where buying up cheap affordable property IS going to turn me into a multimillionaire when I'm ~50 what does that mean for our growth/stagnation culturally and as a country? This is the difference, there is no place that even has the faintest whiff of a city that is about to take off where such gains would even be possible. In other countries that have similar issues in Europe, where a lot of cities are unbelievably expensive there are two solutions that you see a lot. One is that it is culturally common to live with your entire extended family and not be able to afford a house, and the second is welfare or new home ownership incentives that make it more viable. "Rugged Individualism" in American mindsets and cultures makes both options seem untenable but clearly we have to adapt.
  - bradleyjg 6y ago
    1980s NYC did not have “the faintest whiff of a city about to take off”. That couple bought property in a crime ridden part of a crime ridden city. Tompkins Square Park was an open air drug market. The equivalent today is a bad area of Detroit. I’m certain you can find something affordable there today. I doubt it will turn you into a multimillionaire, but if we were having this conversation in 1984 everyone would doubt buying in the East Village would get you anything other than mugged or shot.
castlecrasher2 6y ago
The exact house or equivalent in a similarly populated area as the one your parents bought in? If the former, I imagine it's because the area has developed significantly since.
- yortpyperty 6y ago
  Exact house.
sn41 6y ago
Yup. This is the same phenomenon in India as well - the salary is "high", so you can splurge on furniture, buy reasonably priced cars etc. much easier than earlier generations. But we cannot afford to buy the same house my parents lived in at our income level.
- lastofthemojito 6y ago
  This always feels like a weird argument. In the part of Maryland (USA) that I live in, quite a few areas are named after families who lived here in colonial times, and they were granted huge swaths of land. But a descendant from one of those families today can't reasonably expect an estate of hundreds of acres. There's just not enough land to go around with the size of today's population. Obviously, that's taking it to the extreme, but the population of India has probably doubled since 1980 or so. I don't know your age or your parents' ages, but there are certainly far more people in India now than when your parents were your age, so it wouldn't make sense for an equivalent amount of wealth to buy an equivalent piece of real estate compared to previous generations.
  - wcarss 6y ago
    This mostly makes sense if real estate is already fully utilised, but it isn't. I can't speak to India, but there's a feeling broadly in North America of having "new development" and "expansion" over time. Cities are much, much larger now than they were 40 years ago, and people imagine that the new farm land subsumed and developed should be available for a similar price relative to income to what it was 'back then'. The XXX-acre rural farmland wasn't as valuable as the same space in town when purchased as a lot, but now it holds as many homes as that downtown space used to. Is it worth the same today, relatively, as that space was then? No, they're both worth comparatively way, way more than they were. I don't mean to suggest that scarcity isn't a part of the equation here, more that there are a lot complex factors involved, e.g. wage levels relative to inflation over time.
    - lastofthemojito 6y ago
      You're right of course, that it's more complex than just land scarcity. But I feel like people sometimes have this strange default sense that something is wrong if things don't stay the same. "My dad fixed diesel engines and provided for a family of 5, so I ought to be able to do the same thing". Well, your dad lived in a different time. You can't be a Holy Roman warrior anymore, and there's also a chance you might not be able to make a good career at being a diesel mechanic at this point. Sort of like when you have kids and see them everyday, you only vaguely notice them growing up because the change from day-to-day is so subtle? But when the extended family visits once a year, they notice a huge change? The world is constantly changing like that...you might not notice that today is different from yesterday, but today is drastically different from when your parents were your age.
bradleyjg 6y ago
Is is it you that are the outlier or your dad? What kind of housing did your grandfathers and great-grandfathers have?
- yortpyperty 6y ago
  I have the same job as my father. Grandparents immigrated at a young age and grew up in the same area of the city.
- wcarss 6y ago
  The point is precisely that neither of them is an outlier within their respective time -- they are normal people who want "normal" housing: i.e. just enough to raise a family in. The parents born in the 30s-50s could largely afford to purchase homes large enough to raise a family in, but far fewer people born in the 70s-90s will be able to do the same.
  - bradleyjg 6y ago
    My point is that, at least in the US, the post World War II economy was unusual and the factors that lead to it are unlikely to ever be repeated. We are reverting to the status quo ante about what middle class means.
    - solosoyokaze 6y ago
      I agree with the first part of your comment but there wasn’t really a middle class prior to the 20th century. The petite bourgeoisie would probably be considered upper-middle class today. Even the industrial revolution was only a small period of humanity.
  - ivanche 6y ago
    This is highly dependent on society/nation standards. I grew up in a 750 sqft apartment (family of 5). My wife grew up in a 440 sqft (family of 4). Now I consider 250 sqft/person to be a palace, but in the US it's probably considered unlivable.
rimiform 6y ago
Makes you wonder whether you ever thought not having a baby might be a sensible option.
- yortpyperty 6y ago
  Please share the equation that determines the sensible option. I guess we'll disagree over the optimization ...
jjav 6y ago
Indeed. We make some 25x what my parents did, but with them I grew up in a property with a wonderfully large house and many acres of land. Yet here I am stuck in tiny house with no yard to speak of and couldn't possibly afford anything more given current cost of housing and land.
IkmoIkmo 6y ago
Some contend that this isn't a sign of poverty but rather a sign of wealth. i.e., suppose every consumption good becomes 10x as cheap overnight. Cars, food, phones, clothes, travel by air, electricity, movies, music. What would happen to home prices? Well, it's likely they'd skyrocket. All the additional disposable income has to flow somewhere, to some asset, and that's often real estate. There's some indication that that's been happening. Of course there's many other stories in real estate which clearly indicates we're less well off than before, particularly certain groups. But there's also many indications we're better off, but simply spending more of our money on RE, because in part, we can, because in part, we want to. For example, compare the average home size (square footage) in 1950 to 2020 and anywhere inbetween, it's a pretty straight line that ends up a 2.5x increase. Then compare the average persons per home, it decreased from about 3.4 to 2.5, in large part to the large number of single-person household, a luxury not affordable in the 1950s, especially not to women in a much more patriarchal society than today. This means we've seen a tremendous increase in the square foot per person. That's a measure of wealth. The fact home prices skyrocketed due to the demand for these luxuries, and the (by definition) ability for Americans to afford to push prices to these levels, should not necessarily be seen as an affordability crisis, but rather as an indication of wealth. Yes, if prices of bread skyrocketed and we were all consuming less because of it, that's poverty. But if the average bread consumption per household grew by 2.5x, and the average number of people eating that bread in the household dropped by 25%, then you can't quite say that on average we're less well-off, bread-wise. And homes aren't the same as in the 1950s either. Today's homes are well-equipped with many luxuries and comforts. Finally, high prices are a bit misleading without taking interest rates into account. In the 1980s for example interest rates were 15%, you'd pay your home in full every 6 years in interest alone. Just look at the historical trend of interest rates, they're at record lows. For example, a 30 year mortgage of 100k at the 1980's 15% interest rate, costs as much in total payments, as a 30 year mortgage of 300k at today's 3% interest rate. A 3x price increase alone has absolutely no effect on affordability in the past 40 years due to the massive drop in interest rates. If you take into account the fact that nominal income grew by 5x since the 1980s as well, plus the larger square footage and the fewer people per home, it's easy to see why the cost of a square foot has actually become way more affordable. And given many things got so much cheaper, it's easy to see why so much wealth has flowed to RE. Definitely don't want to pretend like there's no housing affordability issues anywhere, but I do want to nuance the view a bit that we're generally worse off than previous generations, in which housing is an oft mentioned example. But on balance, it's not really the clearest example for this generational loss of quality of life that people tend to think it is.

PragmaticPulp 6y ago

I’ve been thinking about this lately. Similar to you, the house I grew up in is much more less affordable now than it was when my parents bought it. However, in my case it’s not really the same house any more. At the time, the location was thought to be on the outskirts of town, away from the desirable areas. As the city grew, this location became the desirable area. If I look to what is now considered the outskirts, I still see new construction in the $300K range (pre-COVID anyway), which is similar to the inflation-adjusted price of the house I grew up in. At some point we can’t escape supply and demand with more buyers fighting over the same limited housing supply. Many of my friends have been moving to less popular cities and up and coming towns as they start raising families, and it pays off. Obviously not an option for everyone’s situation, but thankfully the increase in remote work is relieving some of the pressure in overcrowded cities.

bcrosby95 6y ago
Same, but the "outskirts" has gone from a 30 minute drive to work to a 2 hour drive to work. At some point something has to give.
shortandsweet 6y ago
That's what I don't understand, if population growth is stagnant or declining, how is it these housing prices are reaching such heights?
- whatshisface 6y ago
  Because nobody wants to hold currency for extended periods of time.
  - rgrieselhuber 6y ago
    Bingo
  - 0xfaded 6y ago
    Or more precisely, once a house attains some value beyond providing a roof over heads, the price of a house is no longer representative of a house, but a government backed asset that can never depreciate lest the pension funds fold.
    - supertrope 6y ago
      A single house's price can easily go down. Even an entire city like Detroit MI can devalue. But those mortgage backed securities represent the national average. With climate change the music may suddenly stop for flood prone areas like Miami once investors stop underwriting 30 year mortgages.
  - blockyhead 6y ago
    Not when the government is printing it by the trillions.
- Clubber 6y ago
  We make up for it with immigration. I believe legal immigration is well over a million a year. https://www.pewresearch.org/fact-tank/2020/08/20/key-findings-about-u-s-immigrants/ https://www.pewresearch.org/fact-tank/2020/08/20/key-finding...
- amanaplanacanal 6y ago
  The US is still growing its population, via immigration rather than births.
- r3drock 6y ago
  One explanation is rising amounts of space per person, the apartments are just getting bigger.
  - whatshisface 6y ago
    When you watch the price of the same unit grow over time, it's not usually because the owners are building more. :)
  - scatters 6y ago
    And decreasing household size.
- usefulcat 6y ago
  You can find cheap housing, the problem is it's all in places where most people don't want to live. For example, Detroit, or any of thousands of small towns all over the US. Not picking on Detroit, it's just an obvious example of a large city that used to have a much larger population.
  - Frost1x 6y ago
    That's a sort of two way street though. In areas affordable housing exists, there often aren't many opportunities financially speaking, especially in the labor market. It's one thing to live in a city, work for awhile to bank up capital, and then move somewhere with a low COL area to live comfortably with some supplemental income from the region with knowledge of that nest egg if investments you currently have. It's an entirely different story to live in such an and accumulate enough capital to purchase a home. Often, jobs are few and far between that are competitive, even after adjusting for COL. Employers in these areas often have less competition for positions and therefor have more leverage. Acquiring debt in these areas when you start your career could make it difficult to climb out of. Its not true with all positions. A lot of healthcare positions can pay better in these areas due to what are essentially government subsidies through medicare/medicaid. You'll occasionally have some industrial organization doing specialized work people with advanced degrees can prosper in but they need to strategically target these areas.
  - bonestamp2 6y ago
    That does make sense at least. The places with the least opportunity and/or desirability are going to be the cheapest.
  - WillPostForFood 6y ago
    There is a lot of cheap housing in places that people are willing to live, but people need a push to change. Allowing work from home, schools, and lockdowns have been helping provide the push. Most cities have reasonable housing prices, it is just distorted by a few areas which have become extremely unaffordable. Detroit is an interesting example. People did want to live there, but as the jobs declined, so did the city. If jobs can come back, the city can come back.
  - 6y ago
- blockyhead 6y ago
  Because people want to live in the city. I bet you can find really cheap houses in the countryside. Iirc A couple of days ago there was even a post up on HN that listed places where the government would give you land for free, and I think also some starting capital.
- mgolawala 6y ago
  Home prices keep reaching new heights in some areas due to: 1) Migration. Immigration from outside the country, but also internal immigration within the country from less economically vibrant parts to more economically vibrant regions. 2) Falling interest rates keeping the monthly mortgage payment the same or lower despite higher principals 3) Expectations that the price trend for homes will continue to look like the past. This expectation can lead to people buying more housing than they would normally consume. 4) Shrinking household sizes. You have gone from an average household size of 3.33 in the 1960s to an average household size of 2.53 today. That may not seem like much but you would need ~25% more housing today to accommodate the same population. 5) Larger house sizes. From a median of about 1000 sq ft in 1950 to 2300 sq ft today. The above can combine to keep pushing up house prices in some areas (as we see in the US) even as the population growth of a country stagnates.
  - wishysgb 6y ago
    In my opinion the thing that is leading most to inflation in addition to your points above, is that there are way too many land lords anyone who makes a little money goes and buys a house, increasing demand.
  - bobthepanda 6y ago
    Also add; limited housing development. Most new housing development after the war was gotten by turning farmlands and nature into single family houses. A lot of places have reached the limits of how far one can expand and run into some combination of geographical barriers, legal barriers (e.g. protected park or farmlands), or the barrier posed by time (most people have an upper limit of how long they are willing to commute.) The next logical step in density, subdivision of existing lots and/or intensifying into homes that accommodate two, three, four families in a place where a single family house stood, is pretty much illegal on most residential parcels in the US. Pre-zoning, neighborhoods were free to densify as they desired, so even in older single family neighborhoods there are sprinklings of slightly more intense development. But in 2021 zoning reform is hotly contested because people feel like they should have control over what their neighbors do with their land, and the overall result is that there isn’t too much developable land left.
- pojzon 6y ago
  Rich elites buy-out all properties/flats in cities because its a better overall investment taking to account inflation. People who slave in that situation consider themselves unhappy and thus consider moving to a houses outside of the city. Due to limited infrastructure outside of the cities -> only a part of outskirts are really habbitable for those families. The demand in this case is higher than supply. Demand is so low only because city politicians are too inefficient in providing new places with infrastructure.
- com2kid 6y ago
  > That's what I don't understand, if population growth is stagnant or declining, how is it these housing prices are reaching such heights? Housing prices around me are directly correlated to school quality. The same house near a good school is literally 1.5x-2x the price. The supply of good public schools is very limited. A good private school is ~20-30k a year. Figure that is worth 300k, not even counting that that over the years tuition prices will go up. So people pay to live near one of the handful of good schools. Seattle stopped busing kids awhile back, instead aiming to keep kids at "local" schools (IMHO to save money), so now unlike the opportunity I had as a kid (test well, get into a good school in the "right" part of town) the city is perpetuating generational poverty. This has the effect of making pockets of the city have well rated and poorly rated schools. Previously schools were kinda mixed in quality, good programs and teachers at many different schools. Sure some had a reputation, but now the ratings are incredibly bi-modal, and housing prices follow that distribution. Oh also in the last decade, the population has increased by 21 million. The growth rate is slowing, but it isn't zero. The way American cities are managed, it isn't possible to add sufficient housing. E.g. in 2019 around 40k people moved to the Seattle metro. 14k building permits were granted[1]. To put that in perspective, the most construction friendly city in America, Houston, approved 38k permits. (Not sure if these are for housing units, are permits overall inclusive of multi family dwellings). FWIW Dallas got ~131k new people (US Census Bureau) No surprise there is a problem. American cities are not capable of building fast enough. [1] https://www.wfaa.com/article/money/economy/dallas-fort-worth-ranks-second-new-residential-construction-report-shows/287-7e9b6117-e006-41bf-b8ed-ba0297c913f3 https://www.wfaa.com/article/money/economy/dallas-fort-worth...
  - treis 6y ago
    >Housing prices around me are directly correlated to school quality. Because "school quality" is basically indistinguishable from "socio-economic status". It has little to do with the quality of buildings or teachers or other resources. It's mostly about the ability and willingness of parents to be involved in their kid's life and the standards they hold.
- rayiner 6y ago
  In the U.S. 1) Population continues to grow due to immigration and higher birth rates among immigrants. 2) Population is growing in some areas and declining in others, which is matched by housing prices increasing in some places but falling in others.
- nradov 6y ago
  To some extent homes in affluent are expensive because they are expensive. Most rich people don't want to live near poor people and so they'll pay extra for that even if it seems economically irrational.
  - deleted 6y ago
    [deleted]
- IkmoIkmo 6y ago
  Interest rates is much of it. Just calculate the total payments for a 30y, 100k mortgage in 1980 when the interest rate was 15%. It's 455k in total. The same amount as a 300k mortgage for today's 3% interest for 30 years, also 455k total. In other words, the monthly payments / total payments are the same and thus just as affordable at 3x higher prices, simply because interest rates dropped so much. Second, there's indications of further concentration. If you have a 10x10 square of land and 100 people, you can each live on one square (spread-out) You can also all live on one square (concentrated). The price levels of the homes in the lived-squares of course grows the more we concentrate, even if total population is constant. Concentration isn't a straight-line, e.g. NY depopulated in the 80s, but does tend to arc towards further urbanisation, further concentration, further population density. In large part because cities are knowledge/network centres, and our economy is based on knowledge/networks, whereas before our economy was based on e.g. agriculture, which is the opposite of concentrated. I'd be very interested to see if that will ever change due to a working-from-home / remote-work, and even virtual reality to have meaningful social and entertainment experiences remotely. It used to be if you lived in a small town, there'd be few jobs, few bars to meet people, few concerts to go to, no cinema. Many moved to the city despite higher prices, less room, noise and pollution and crime, in search for work and social life. But with remote work and VR, the calculus might change. (not 100%, but many a little bit, enough to bring a little bit of balance to the ever-growing concentration of people in a few big cities).

refurb 6y ago

But why would you expect to be able to afford the same house even with higher net worth? I mean, my folks bought a house I can afford either but when they bought it, it was on the edge of the city, not a desirable area in a 2nd tier city. That’s why it was cheap. Now it’s in a historic neighborhood, highly desirable in a city where everyone wants live. I could afford a house similar to the one they bought in terms of those qualities. In fact it would likely be cheaper compared to salary.

threwawasy1228 6y ago
Show me an affordable house in on the edge of NYC in the "undesirable" neighborhoods. Even if you pick neighborhoods past where subway lines end (a very undesirable quality for city property to have) that also happen to be high crime areas it is still too expensive for anyone to purchase. Like two examples look at New Lots/East New York and South Ozone Park/Jamaica. Both fit my description above, they are at the very edge of subway access, and are high crime areas, and both are too expensive for normal middle class people to buy property in. Contrast this with great people I've met who are ~60 now, who just stumbled into the east village/alphabet city in the 1980s in their mid-20s and bought up cheap houses while bumming around paycheck to paycheck. What area of NYC or the valley can I do that in now? If the answer is none, and you can't point me to a city in the midwest or south where buying up cheap affordable property IS going to turn me into a multimillionaire when I'm ~50 what does that mean for our growth/stagnation culturally and as a country? This is the difference, there is no place that even has the faintest whiff of a city that is about to take off where such gains would even be possible. In other countries that have similar issues in Europe, where a lot of cities are unbelievably expensive there are two solutions that you see a lot. One is that it is culturally common to live with your entire extended family and not be able to afford a house, and the second is welfare or new home ownership incentives that make it more viable. "Rugged Individualism" in American mindsets and cultures makes both options seem untenable but clearly we have to adapt.
- bradleyjg 6y ago
  1980s NYC did not have “the faintest whiff of a city about to take off”. That couple bought property in a crime ridden part of a crime ridden city. Tompkins Square Park was an open air drug market. The equivalent today is a bad area of Detroit. I’m certain you can find something affordable there today. I doubt it will turn you into a multimillionaire, but if we were having this conversation in 1984 everyone would doubt buying in the East Village would get you anything other than mugged or shot.

castlecrasher2 6y ago

The exact house or equivalent in a similarly populated area as the one your parents bought in? If the former, I imagine it's because the area has developed significantly since.

yortpyperty 6y ago
Exact house.

sn41 6y ago

Yup. This is the same phenomenon in India as well - the salary is "high", so you can splurge on furniture, buy reasonably priced cars etc. much easier than earlier generations. But we cannot afford to buy the same house my parents lived in at our income level.

lastofthemojito 6y ago
This always feels like a weird argument. In the part of Maryland (USA) that I live in, quite a few areas are named after families who lived here in colonial times, and they were granted huge swaths of land. But a descendant from one of those families today can't reasonably expect an estate of hundreds of acres. There's just not enough land to go around with the size of today's population. Obviously, that's taking it to the extreme, but the population of India has probably doubled since 1980 or so. I don't know your age or your parents' ages, but there are certainly far more people in India now than when your parents were your age, so it wouldn't make sense for an equivalent amount of wealth to buy an equivalent piece of real estate compared to previous generations.
- wcarss 6y ago
  This mostly makes sense if real estate is already fully utilised, but it isn't. I can't speak to India, but there's a feeling broadly in North America of having "new development" and "expansion" over time. Cities are much, much larger now than they were 40 years ago, and people imagine that the new farm land subsumed and developed should be available for a similar price relative to income to what it was 'back then'. The XXX-acre rural farmland wasn't as valuable as the same space in town when purchased as a lot, but now it holds as many homes as that downtown space used to. Is it worth the same today, relatively, as that space was then? No, they're both worth comparatively way, way more than they were. I don't mean to suggest that scarcity isn't a part of the equation here, more that there are a lot complex factors involved, e.g. wage levels relative to inflation over time.
  - lastofthemojito 6y ago
    You're right of course, that it's more complex than just land scarcity. But I feel like people sometimes have this strange default sense that something is wrong if things don't stay the same. "My dad fixed diesel engines and provided for a family of 5, so I ought to be able to do the same thing". Well, your dad lived in a different time. You can't be a Holy Roman warrior anymore, and there's also a chance you might not be able to make a good career at being a diesel mechanic at this point. Sort of like when you have kids and see them everyday, you only vaguely notice them growing up because the change from day-to-day is so subtle? But when the extended family visits once a year, they notice a huge change? The world is constantly changing like that...you might not notice that today is different from yesterday, but today is drastically different from when your parents were your age.

bradleyjg 6y ago

Is is it you that are the outlier or your dad? What kind of housing did your grandfathers and great-grandfathers have?

yortpyperty 6y ago
I have the same job as my father. Grandparents immigrated at a young age and grew up in the same area of the city.
wcarss 6y ago
The point is precisely that neither of them is an outlier within their respective time -- they are normal people who want "normal" housing: i.e. just enough to raise a family in. The parents born in the 30s-50s could largely afford to purchase homes large enough to raise a family in, but far fewer people born in the 70s-90s will be able to do the same.
- bradleyjg 6y ago
  My point is that, at least in the US, the post World War II economy was unusual and the factors that lead to it are unlikely to ever be repeated. We are reverting to the status quo ante about what middle class means.
  - solosoyokaze 6y ago
    I agree with the first part of your comment but there wasn’t really a middle class prior to the 20th century. The petite bourgeoisie would probably be considered upper-middle class today. Even the industrial revolution was only a small period of humanity.
- ivanche 6y ago
  This is highly dependent on society/nation standards. I grew up in a 750 sqft apartment (family of 5). My wife grew up in a 440 sqft (family of 4). Now I consider 250 sqft/person to be a palace, but in the US it's probably considered unlivable.

rimiform 6y ago

Makes you wonder whether you ever thought not having a baby might be a sensible option.

yortpyperty 6y ago
Please share the equation that determines the sensible option. I guess we'll disagree over the optimization ...

jjav 6y ago

Indeed. We make some 25x what my parents did, but with them I grew up in a property with a wonderfully large house and many acres of land. Yet here I am stuck in tiny house with no yard to speak of and couldn't possibly afford anything more given current cost of housing and land.

IkmoIkmo 6y ago

Some contend that this isn't a sign of poverty but rather a sign of wealth. i.e., suppose every consumption good becomes 10x as cheap overnight. Cars, food, phones, clothes, travel by air, electricity, movies, music. What would happen to home prices? Well, it's likely they'd skyrocket. All the additional disposable income has to flow somewhere, to some asset, and that's often real estate. There's some indication that that's been happening. Of course there's many other stories in real estate which clearly indicates we're less well off than before, particularly certain groups. But there's also many indications we're better off, but simply spending more of our money on RE, because in part, we can, because in part, we want to. For example, compare the average home size (square footage) in 1950 to 2020 and anywhere inbetween, it's a pretty straight line that ends up a 2.5x increase. Then compare the average persons per home, it decreased from about 3.4 to 2.5, in large part to the large number of single-person household, a luxury not affordable in the 1950s, especially not to women in a much more patriarchal society than today. This means we've seen a tremendous increase in the square foot per person. That's a measure of wealth. The fact home prices skyrocketed due to the demand for these luxuries, and the (by definition) ability for Americans to afford to push prices to these levels, should not necessarily be seen as an affordability crisis, but rather as an indication of wealth. Yes, if prices of bread skyrocketed and we were all consuming less because of it, that's poverty. But if the average bread consumption per household grew by 2.5x, and the average number of people eating that bread in the household dropped by 25%, then you can't quite say that on average we're less well-off, bread-wise. And homes aren't the same as in the 1950s either. Today's homes are well-equipped with many luxuries and comforts. Finally, high prices are a bit misleading without taking interest rates into account. In the 1980s for example interest rates were 15%, you'd pay your home in full every 6 years in interest alone. Just look at the historical trend of interest rates, they're at record lows. For example, a 30 year mortgage of 100k at the 1980's 15% interest rate, costs as much in total payments, as a 30 year mortgage of 300k at today's 3% interest rate. A 3x price increase alone has absolutely no effect on affordability in the past 40 years due to the massive drop in interest rates. If you take into account the fact that nominal income grew by 5x since the 1980s as well, plus the larger square footage and the fewer people per home, it's easy to see why the cost of a square foot has actually become way more affordable. And given many things got so much cheaper, it's easy to see why so much wealth has flowed to RE. Definitely don't want to pretend like there's no housing affordability issues anywhere, but I do want to nuance the view a bit that we're generally worse off than previous generations, in which housing is an oft mentioned example. But on balance, it's not really the clearest example for this generational loss of quality of life that people tend to think it is.