3 ms·

not all housing everywhere has gone up, just the desirable housing in desirable locations where people have excess income to spend on housing. Housing can gobbl

by slashdot2008 5y ago

not all housing everywhere has gone up, just the desirable housing in desirable locations where people have excess income to spend on housing. Housing can gobble up as much of percentage of your incomine as you let it, and when incomes are large, and interest rates are low, the ceiling becomes quite high.

shados 5y ago
This is really important. 30% of someone making minimum wage isn't the same thing as 30% of someone making 500k/year. I'm fairly well off. If housing took 70% of my after-tax income, I'd still be able to live reasonably well (and would have one hell of a badass home to go with it). My food, my phone, my electricity bill, my insurance, my transportation, they cost me the same as they cost someone else living in the same city making 1/4th of the money. Since real estate is wealth storage at worse and an investment at best, I can pour everything else I make it into it. It's not particularly optimal, but I -can- do it if I so choose. The end result is that money available for housing goes up in a curve as you go up the income bracket. People below the threshold get screwed.
- bradlys 5y ago
  The problem there is that ratios are still important. If you are using 70% of your income on housing, you will lose your house as soon as you lose your job. Unless you spend less than 10% of your remaining income, you can’t really save for retirement or a rainy day. The ratios still matter unless you assume people never lose work (which isn’t realistic).
  - slashdot2008 5y ago
    That is the reality for virtually everybody I know - university educated folks in Canada with white collar jobs. job gone - house gone within a year, and probably not saving much for retirement. We live in an area with a bubbly real estate market and a place to live in now and have a family home is more important than saving for 'retirement'. As we have all seen over the last 15 years the real estate market only goes up and savings in secure low return investments is is not a winning strategy, so you have to get in as early as you can or move away and say 'see ya' to your friends and family. The thinner you can stretch it when you enter the market, the higher you can lever yourself out, the better off you become in the long run! it is sick but that is reality. I honestly don't know any of my peers to be without work, ever. The mothers are taking less than a year off work per child and then they are back to work too. I think dual income families are another reason house prices have skyrocketed, get two YUPPIE 'DINKS' saving for their downpayment and 1% interest rates and yeah they can afford to bid up the price of a house. Carpenters are getting $75/hr CAD around here in house construction, and a plumber is $125/hr, so per my grand parent commment people are also simply earning a lot of money so they can afford a $5k monthly payment. edit: grammar
    - epistasis 5y ago
      This all points to a huge undersupply of housing. If prices are set by the maximum that people can pay, rather than what the costs are to provide housing, then there's an easy solution: allow more housing to be built. Nearly everybody can afford to pay for the costs of providing housing: the maintenance, the amortized cost of construction over the lifetime of the house. What people can't afford to pay for are the increases in land prices due to the housing shortage. This sets up a two class system: those that own the land and see benefit from appreciating land prices, and continue to have the flexibility to move and own land becuase they bought early, and the unlanded, who are doomed to pay ever increasing land costs in their monthly rents, with all the benefit going to landlords and homeowners who reap the land rents. It's a gigantic unproductive transfer of wealth from those with less to those with more. In addition to the human misery and poverty that this causes among working people, this also greatly increases inequality, which further reduced economic output of society. And there's a simple solution to it all: allow people to pay to build housing rather than forcing them to bid up limited supply and pass off their stored labor to idle land owners. However, the homeowners who benefit from this system are the ones with the political power to keep their rentierism enforced by law...
      - shados 5y ago
        Building housing is starting to get really high. I don't know if its because the margin is so high that workers can be paid that much (I'd be skeptical), but the average price to build in the expensive cities is pretty high. Not as high as what it sells for, but definitely higher than a lot of people can afford. Add that right now there's a timber shortage (insurance costs are spiking recently for that reason), and it's probably not helping. The land value is the most actionable problem, but it doesn't solve everything.
        bradlys 5y ago
        Timber shortage is kind of the wrong way to put it. We have a lack of redundancy in sawmills. We actually have a lot of timber - just not enough sawmills to process the timber and turn it into wood products that people can use in construction. Just like the CPU shortage - no one wants to build new fabs/sawmills because everyone assumes demand is just high for now and won't stay high forever... So, for now, they all get to raise their prices and rain in the profit.

shados 5y ago

This is really important. 30% of someone making minimum wage isn't the same thing as 30% of someone making 500k/year. I'm fairly well off. If housing took 70% of my after-tax income, I'd still be able to live reasonably well (and would have one hell of a badass home to go with it). My food, my phone, my electricity bill, my insurance, my transportation, they cost me the same as they cost someone else living in the same city making 1/4th of the money. Since real estate is wealth storage at worse and an investment at best, I can pour everything else I make it into it. It's not particularly optimal, but I -can- do it if I so choose. The end result is that money available for housing goes up in a curve as you go up the income bracket. People below the threshold get screwed.

bradlys 5y ago
The problem there is that ratios are still important. If you are using 70% of your income on housing, you will lose your house as soon as you lose your job. Unless you spend less than 10% of your remaining income, you can’t really save for retirement or a rainy day. The ratios still matter unless you assume people never lose work (which isn’t realistic).
- slashdot2008 5y ago
  That is the reality for virtually everybody I know - university educated folks in Canada with white collar jobs. job gone - house gone within a year, and probably not saving much for retirement. We live in an area with a bubbly real estate market and a place to live in now and have a family home is more important than saving for 'retirement'. As we have all seen over the last 15 years the real estate market only goes up and savings in secure low return investments is is not a winning strategy, so you have to get in as early as you can or move away and say 'see ya' to your friends and family. The thinner you can stretch it when you enter the market, the higher you can lever yourself out, the better off you become in the long run! it is sick but that is reality. I honestly don't know any of my peers to be without work, ever. The mothers are taking less than a year off work per child and then they are back to work too. I think dual income families are another reason house prices have skyrocketed, get two YUPPIE 'DINKS' saving for their downpayment and 1% interest rates and yeah they can afford to bid up the price of a house. Carpenters are getting $75/hr CAD around here in house construction, and a plumber is $125/hr, so per my grand parent commment people are also simply earning a lot of money so they can afford a $5k monthly payment. edit: grammar
  - epistasis 5y ago
    This all points to a huge undersupply of housing. If prices are set by the maximum that people can pay, rather than what the costs are to provide housing, then there's an easy solution: allow more housing to be built. Nearly everybody can afford to pay for the costs of providing housing: the maintenance, the amortized cost of construction over the lifetime of the house. What people can't afford to pay for are the increases in land prices due to the housing shortage. This sets up a two class system: those that own the land and see benefit from appreciating land prices, and continue to have the flexibility to move and own land becuase they bought early, and the unlanded, who are doomed to pay ever increasing land costs in their monthly rents, with all the benefit going to landlords and homeowners who reap the land rents. It's a gigantic unproductive transfer of wealth from those with less to those with more. In addition to the human misery and poverty that this causes among working people, this also greatly increases inequality, which further reduced economic output of society. And there's a simple solution to it all: allow people to pay to build housing rather than forcing them to bid up limited supply and pass off their stored labor to idle land owners. However, the homeowners who benefit from this system are the ones with the political power to keep their rentierism enforced by law...
    - shados 5y ago
      Building housing is starting to get really high. I don't know if its because the margin is so high that workers can be paid that much (I'd be skeptical), but the average price to build in the expensive cities is pretty high. Not as high as what it sells for, but definitely higher than a lot of people can afford. Add that right now there's a timber shortage (insurance costs are spiking recently for that reason), and it's probably not helping. The land value is the most actionable problem, but it doesn't solve everything.
      - bradlys 5y ago
        Timber shortage is kind of the wrong way to put it. We have a lack of redundancy in sawmills. We actually have a lot of timber - just not enough sawmills to process the timber and turn it into wood products that people can use in construction. Just like the CPU shortage - no one wants to build new fabs/sawmills because everyone assumes demand is just high for now and won't stay high forever... So, for now, they all get to raise their prices and rain in the profit.