12 ms·

House prices surpass housing-bubble peak on price-to-rent ratio

74 points by ping_pong 5y ago

podgaj 5y ago
I need to start facing the fact that I am going to be homeless for the rest of my life.
- podgaj 5y ago
  Ha, wow. The fckin internet. I am disabled and homeless, and I get downvoted for expressing my concerns. Goodbye.
- imtringued 5y ago
  If it can go up it also can go down.
austincheney 5y ago
Houses are way over valued right now due to the lumber shortage and then are selling for inflated values on top of that due to demand following the pandemic. My house, according to Zillow, has increased in value over 20% since the start of the year and I could likely raise the selling price by another 10% if I were to put it on the market.
- JimTheMan 5y ago
  While I am sure that is one of the factors in house prices, the main driving factor is very low interest rates and massive amounts of credit.
  - dd36 5y ago
    I would add a continued reduction in supply. In AZ, SFR REITs have and continue to vacuum up 1,000s of homes every year. And they don’t ever sell them. This is a new phenomenon. It may more than offset new development. We may have a shrinking supply. The other downside is they aggressively put upward pressure on rents.
  - OldTimeCoffee 5y ago
    Both of those were true pre-COVID and houses prices were not going up nearly as fast as they are now. People staying in their houses makes them actually pay attention to where they're living. Some end up wanting to renovate and some people just want to move. It's a high demand low supply time so prices increase and interest rates don't have much to do with that.
    - ghaff 5y ago
      Yeah, it's hard not to see it as a COVID-related effect, at least in part. Anecdotally, I know a lot of people renovating and moving, often from an urban apartment to somewhere suburban or rural/small town. One factor is probably that this sort of migration is always going on as people get older and the pandemic has probably pushed up a lot of timetables.
  - helen___keller 5y ago
    > the main driving factor is very low interest rates and massive amounts of credit. This doesn't tell the whole story. Low interest rates don't make people offer 150k over asking while waiving all contingencies. I'm closing on a home soon and I saw this kind of stuff. I myself went 25k over with all contingencies waived on a condo in a 100 year old multifamily building. Relatively speaking, I was quite lucky to get this condo for this cheap. There's a legitimate demand here: people, like myself, who renewed a lease on a tiny apartment shortly after the pandemic started then spent a miserable year indoors. Informing each other of your meeting schedule so you aren't loud in the kitchen while your partner is presenting in a meeting. Wishing your relaxation space wasn't the same as your work space. I'm now roughly doubling the square footage of my living space, adding a garden and a patio. I'm thrilled. And yeah, I'm paying a million bucks for it.
    - bko 5y ago
      > Low interest rates don't make people offer 150k over asking while waiving all contingencies Paying above offer always struck me as strange. In my housing market its very common as well, to the point I believe under-pricing the home is intentional. There's no reason the home should be priced considerably below the market price. Sometimes you get it wrong but homes consistently selling above ask tells you the sellers are under-pricing intentionally. The upside for the seller is that bidders enter blind bids where the top bidder could bid significantly higher than the next highest bid. I think systematic under-pricing could happen when prices increase a lot in a short period and it takes the brokers a while to adjust their pricing as the trend becomes more clear. But it could also be cultural to a market where brokers feel comfortable under-pricing homes to encourage a bidding war, but that obviously doesn't work in all markets. As for waving contingencies, that's just another form of incentive in lieu of cash.
      - helen___keller 5y ago
        > There's no reason the home should be priced considerably below the market price. Partially because you comp against recent sales in the area to determine market rate, it takes a while to close so the comps you have available are usually a few months old, and the price moved a lot in a few months This happened to me multiple times. Recent sales as late as January suggested X could win this house, I put in an offer at X+15, I'm later contacted that there's an offer at X+50 and I can put another bid in if I want to one up them Of course in this example X is already over asking so you're right I think that this is done intentionally.
  - meragrin_ 5y ago
    Don't forget the moratoriums on evictions and foreclosures.
  - chadcmulligan 5y ago
    I heard a theory the other day that houses are more affordable than they were in the 70's - because even though the house prices are high, the repayments are lower because the interest rates are a lot lower. It was a business commentator trying to rationalise the housing market.
    - JimTheMan 5y ago
      The repayments seem to stay about the same but the overall payment is incredibly large. And because getting the % deposit is a big factor in whether you can afford a house, it pushes lower income people out of the market. And if you bought in 1980, the high rates kept the lid on prices. However while you may have started with the same payment but the rates have been steadily ticking down since then. Creating a massive generation gap between those who bought while rates were high and those who didn't have the opportunity. And I am sure this is only one of the factors in housing affordability but in my fairly uneducated opinion it seems like the largest.
      - ChrisLomont 5y ago
        >And because getting the % deposit is a big factor in whether you can afford a house, it pushes lower income people out of the market. Median downpayment is 6%, a common low end is 3%, some places and programs go lower. Median house price sold in 2020 was 347k, well over 25% of houses sell for under 250k [1]. So, for a starter home, saving 3% of say 200k is 6k. If someone can pay this mortgage without killing themselves (30%, say 4%, monthly payments ~1K) then they can save a 6K downpayment over a reasonable time. So downpayment should not be keeping many people out of homes that want one that can afford a mortgage. If their income is so low that they cannot even afford a mortgage, then yes, they are pushed out of the market, but there is no way they could enter anyways. [1] https://www.census.gov/construction/nrs/pdf/quarterly_sales.pdf https://www.census.gov/construction/nrs/pdf/quarterly_sales....
        throwaway210222 5y ago
        > If someone can pay this mortgage […] then they can save a 6K downpayment Not if they are paying rent - there would be no surplus every month to save.
- tristanj 5y ago
  [deleted]
  - austincheney 5y ago
    My house is not on the market, so at the moment it is priceless.
- angarg12 5y ago
  Real state in the UK is increasing in price the fastest since before the 2008 crisis [1]. Lumber is a very specific circumstance to the US, but similar trends are happening in other developed countries. One specific circumstance of the UK is a tax break introduced last year to incentivise home buying. Beyond that, as others pointed out, some shared causes are more people on the market for a new home due to the pandemic, and historically low interest rates. [1] https://www.theguardian.com/business/2021/may/26/value-of-uk-house-sales-forecast-to-leap-46-this-year-as-boom-continues https://www.theguardian.com/business/2021/may/26/value-of-uk...
- newaccount2021 5y ago
  HN is endlessly obsessed with disavowing monetary policy and the inflation we are seeing as a result. Your grocery bill and cost of gas are rising similarly to housing...just accept it, this inflation
sokoloff 5y ago
COVID added two factors, both positive for housing prices: additional time in the home, making its faults more apparent and spending money to address them more sensible. It also added trillions of dollars of government borrowing without creating offsetting trillions of dollars of production in the economy, leading many to worry about an uptick in inflation. As inflation fears increase, borrowing money and buying productive or hard assets makes an increasing amount of sense.
- dragonwriter 5y ago
  Three: widespread (and in many cases transitioning to long term) WFH: that’s not just time in the home, its new demands on what the home is used for.
  - ryathal 5y ago
    Four: a 1-3 month pause in new construction, and construction materials. Five: record low interest rates are here to stay so borrowers can pay more up front for the same payment.
aurizon 5y ago
Of course, this is a massive arranged crime akin to and having it's roots in the sub-prime mortgage crash. Rates are low. corporations can borrow unlimited cash and buy a residence, then rent it out to get 4-5% interest and pay 1.5 to 2.5 = risk free make the spread with no limits. I would like to borrow 10 billion and buy a zillion homes and make the spread ~~3%. They hire property managers and that costs .5% to .75%. And we pay = we MUST HAVE A PLACE TO LIVE. Easy to fix = make an income property subject to business taxes in addition to the usual real estate taxes. All the small retail shops pay business taxes as well as realty taxes. Make it a law that increased business taxes can not be passed to the people who live there. Exempt people who rent rooms in their own residence. This would kill the spread and make houses affordable again. Of course powerful corporates vesteds would whine away = WGAS for them, the people need this racket to be broken NOW.
- bequanna 5y ago
  This isn’t how taxation works or even can work. It would be trivial to avoid the tax you propose if it is based on income from the properties. If the tax is more like a property tax then it would be impossible for it to not be passed on to renters. Indeed, ALL taxes are passed onto consumers!
  - yunohn 5y ago
    > it would be impossible for it to not be passed on to renters. Indeed, ALL taxes are passed onto consumers! Agreed. While not immediately intuitive, this is unfortunately very true for all taxes that are imposed upon institutions, corporations, investors, etc. I wish this is something that could be fixed in a fair manner…
    - pnutjam 5y ago
      All taxes are passed on is a very simplistic view. Do I pass the taxes on to my employer when I negotiate salary? Probably to some extent, but this is like saying all cubes are squares and calling it good enough. EDIT: typo
gregwebs 5y ago
Rents have been depressed due to eviction moratoriums So I don’t think this metric is useful right now to gauge the housing bubble. The main mistake usually made with housing is not accounting for inflation. Here is a data driven analysis that does: https://realestatedecoded.com/case-shiller https://realestatedecoded.com/case-shiller Housing prices will eventually mean revert like they always do. However, interst rates are so low right now that it still can make sense to buy now.
MobileVet 5y ago
Clearly there are a lot of variables including interest rates, desire for better space due to Covid lockdowns and more recently FOMO. One thing that should not be overlooked is the basic economics of supply and demand. Right now the supply is extremely low compared to much of our historical data. This at the same time as demand has been red hot (due mostly to Covid). Check out the data below, especially over the last year. https://fred.stlouisfed.org/series/MSACSR https://fred.stlouisfed.org/series/MSACSR We are seeing the same macro level forces impact the used car market. In that case, the supply is off ~30% due to rental car turnover being nonexistent.
- sys_64738 5y ago
  Lack of supply is precisely the issue causing panic buying through bidding wars. You need to go 10% over asking to be guaranteed to be close. Low demand and continued increases of buyers coming to market cause the snowball effect.
  - deleted 5y ago
    [deleted]
- ghaff 5y ago
  Rental cars seem to be a mess. I know at least one person who canceled a trip because they couldn't get a rental car. And I reserved one for a trip at the end of September "just in case" and the price seemed significantly higher than normal.
  - cletus 5y ago
    Rental car prices are extremely high. That’s not your imagination. This is a result of car rental companies selling a third of their fleet last year to survive so supply is way down and demand came roaring back. Tip: hire a UHaul instead. Much cheaper.
    - harambae 5y ago
      >Tip: hire a UHaul instead. Much cheaper. I see everyone recommending this, but the U-Haul's I'm used to charge per mile so watch out for this if you're planning a roadtrip
question000 5y ago
There are a lot of people vaguely guessing around at what the "real value" of a home is. In a world where you need shelter to produce income the value of a house is essentially all your income over the entire span of your life. So really arguments that houses are "overvalued" are ridiculous to me, houses have never decreased in value historically, why would they do so now? I am fully expecting single family residential properties to reach 7 and 8 figures in my lifetime. Why wouldn't they continue the track of the last 100 years? No, increasing the supply will do nothing, speculators already own most of the available real estate so that will only drive the prices up further. Look at the number of single family home that are being bought and immediately rented out, in new construction the renters far outnumber the owners. Until speculation is banned or the government locks in reasonable prices, prices will continue to rise in perpetuity.
- ghaff 5y ago
  >Look at the number of single family home that are being bought and immediately rented out, in new construction the renters far outnumber the owners. I'm not sure I see the problem. People are living in the property one way or the other. It's not like there is some infinite pool of renters not living someplace who will absorb any supply. What would be (and is in some places) a problem is if speculators/people parking cash bought property and let it sit empty.
  - yunohn 5y ago
    > I'm not sure I see the problem. I don’t see why only parked properties are a problem? Rentals are always more expensive than the underlying mortgage - that’s what makes it an investment opportunity. This is a big problem since most people could’ve afforded the original property if they weren’t priced out by investors.
    - leetcrew 5y ago
      there are a few ways this could not be true. the mortgage could have been locked in a long time ago at a much lower valuation. the rent would still be above the underlying mortgage, but that doesn't mean I would have bought the house when I was a child. the landlord might own the building outright, or the valuation might be increasing so fast that the rent only needs to offset the rent. either way, the rent could be pushed below the mortgage (or what the mortgage would be). there are some us cities with extremely high price-to-rent ratios. some of those properties must be renting for below the underlying mortgage.
akudha 5y ago
I wish something is done about these rentiers. Someone I know is amassing a rental property portfolio, while I am struggling to buy my first home. I am not against people making money and getting rich, but it would be nice if it wasn’t so easy to buy up multiple properties simply because they have the cash. There should be all kinds of incentives for first time home buyers. But it should be made very expensive/very painful from second home onwards. I don’t care that I can’t afford a luxury car or overpay for Google stock. But it annoys me to no end that the so called “investors” (not just rental companies but small time landlords too) buy properties with the sole aim of jacking up the rent and pushing first time buyers out. Housing is not a luxury, it is a basic human need. People can own a hundred Ferraris for all I care, but there should be some sane policy on letting individuals and companies own entire neighborhoods and blocks. Along the same lines, Bill Gates owns 242,000 acres of farm land. What for? I don’t know. It is just plain ugly to let someone own huge lands, water supplies (there are companies buying up large water sources) etc. This amount of monopoly on basic human needs is just bad. I know this is an unpopular opinion here, as many HN readers see real estate as a way to get rich and likely own rental properties themselves. But across the world, in many urban areas, there is severe housing shortage (artificial in most cases, and houses sit empty because “investors”, see Canadian cities for example). On top of all this, most cities and towns have extremely unfriendly policies towards tiny houses. That is whole another level of unfairness.
- mc32 5y ago
  Some of it is to take money out of authoritarian regimes and move it into more rule of law countries. Another reason is a hedge against inflation which we may be beginning to see right now.
  - akudha 5y ago
    The very fact that you are trying to rationalize someone buying multiple homes at the expense of someone trying to buy their first home highlights the problem. Take Canada for example. A whole lot of homes are bought by Chinese buyers and are sitting idle, at the expense of Canadians trying to buy their first home. How can you say this is morally right? It is all find and dandy for the Chinese buyers, but what of Canadians?
texaswhizzle 5y ago
This measure of value is no longer relevant. Short term rentals are the lucrative market segment now. Long term tenants provide stability, but much lower upside. There are other factors at play. Bonus depreciation rules from the tax cut and jobs act. Real estate investors can depreciate 100% of an investment within the first year until 2022. Low interest rates. Borrow money cheaply now and secure cash flow later. Interest only financing. Financing schemes that allow investors maximum leverage. More leverage means more buying. All together the current market is tilted heavily toward real estate investors. Unless the tax law changes, I wouldn’t expect things to fundamentally change until 2025.
newaccount2021 5y ago
The Fed has turned us all into gamblers. If you've ever wanted to know what living in something like the .com bubble was like, we are in something much bigger now. The next Fed chair will have no choice but to pull a Volcker
- Workaccount2 5y ago
  The forest is so incredibly overgrown, sooner or later someone has to set it on fire.
miketyson2000 5y ago
It is weird for me read comments on HN lately. I do not know where it became a thing to argue that being able to buy whatever you want at any time is a god given right. It comes across as rants of a spoiled child that has only seen prosperity. I am seeing the same complaint in crypto wars on GPU shortages and so on. You are not owed anything. You have a shot at an offer. That is it.
underseacables 5y ago
Help. I’m lost. Does a higher nationwide house price-to-rent ratio mean a good thing for home owners, or does it mean a good thing for renters?
eutropia 5y ago
Just your annual reminder that the Land Value Tax is the Least Evil Tax. Tax "rent"[0] at 85-100%, allow owner-residents to defer LVT taxes owed to time of sale with modest interest. Speculators would be naturally driven out in favor of people actually using the land. [0] - Which is gatekeeping/charging for land (finite natural unimproved resources like space, spectrum, water, wildlife, oil, etc)
- imtringued 5y ago
  Another way would be to simply raise capital gains taxes on land. Making money off of land (as opposed to renting) just doesn't make sense. It's basically Bitcoin with real life consequences.
  - rasz 5y ago
    But what if all I want is to park hundreds of millions I managed to steal from eastern state run power company? I dont care about gains, I dont care about rents. I simply know that I wont lose money buried in land/buildings. I already have tens of millions in prime Manhattan commercial real estate, all vacant obviously.
- chid 5y ago
  I don't see how you could justify it's the 'least evil tax'. In theory the least evil tax is something that doesn't change behaviour. We have a land value tax here in Australia which doesn't apply to owner-residents. That said, most places are excluded.
  - deleted 5y ago
    [deleted]
  - perilunar 5y ago
    The "least evil tax" probably comes from Milton Friedman, who called land tax the "least bad tax". Owner-occupiers do pay land tax in Australia — local council rates are effectively land taxes as they are based on the unimproved value of the land (but they often include stormwater and waste charges as well).
thehappypm 5y ago
This is way more about a drop in rents than anything else, obviously. Rents are super low nationwide right now, as folks abandoned high-rent areas in the pandemic. Meanwhile the housing market is very long-term oriented, and reasonably rational.
- hnburnsy 5y ago
  Looks like in many places rents are much higher... https://www.apartmentguide.com/blog/apartment-guide-annual-rent-report/ https://www.apartmentguide.com/blog/apartment-guide-annual-r... 'The following cities have experienced the biggest increases in one-bedroom rent prices year-over-year. None of them make the 10 most expensive markets for one-bedroom apartments by rent prices. Three of them — Gilbert, AZ; Buffalo, NY and Durham, NC — have populations of 300,000 or less. Kansas City, MO (+33.5%) Gilbert, AZ (+26.0%) Las Vegas, NV (+25.3%) Riverside, CA (+24.9%) Buffalo, NY (+23.3%) Columbus, OH (+22.1%) Durham, NC (+20.0%) Detroit, MI (+18.6%) New Orleans, LA (+18.3%) Virginia Beach, VA (+15.3%)

74 points by ping_pong 5y ago

podgaj 5y ago

I need to start facing the fact that I am going to be homeless for the rest of my life.

podgaj 5y ago
Ha, wow. The fckin internet. I am disabled and homeless, and I get downvoted for expressing my concerns. Goodbye.
imtringued 5y ago
If it can go up it also can go down.

austincheney 5y ago

Houses are way over valued right now due to the lumber shortage and then are selling for inflated values on top of that due to demand following the pandemic. My house, according to Zillow, has increased in value over 20% since the start of the year and I could likely raise the selling price by another 10% if I were to put it on the market.

JimTheMan 5y ago
While I am sure that is one of the factors in house prices, the main driving factor is very low interest rates and massive amounts of credit.
- dd36 5y ago
  I would add a continued reduction in supply. In AZ, SFR REITs have and continue to vacuum up 1,000s of homes every year. And they don’t ever sell them. This is a new phenomenon. It may more than offset new development. We may have a shrinking supply. The other downside is they aggressively put upward pressure on rents.
- OldTimeCoffee 5y ago
  Both of those were true pre-COVID and houses prices were not going up nearly as fast as they are now. People staying in their houses makes them actually pay attention to where they're living. Some end up wanting to renovate and some people just want to move. It's a high demand low supply time so prices increase and interest rates don't have much to do with that.
  - ghaff 5y ago
    Yeah, it's hard not to see it as a COVID-related effect, at least in part. Anecdotally, I know a lot of people renovating and moving, often from an urban apartment to somewhere suburban or rural/small town. One factor is probably that this sort of migration is always going on as people get older and the pandemic has probably pushed up a lot of timetables.
- helen___keller 5y ago
  > the main driving factor is very low interest rates and massive amounts of credit. This doesn't tell the whole story. Low interest rates don't make people offer 150k over asking while waiving all contingencies. I'm closing on a home soon and I saw this kind of stuff. I myself went 25k over with all contingencies waived on a condo in a 100 year old multifamily building. Relatively speaking, I was quite lucky to get this condo for this cheap. There's a legitimate demand here: people, like myself, who renewed a lease on a tiny apartment shortly after the pandemic started then spent a miserable year indoors. Informing each other of your meeting schedule so you aren't loud in the kitchen while your partner is presenting in a meeting. Wishing your relaxation space wasn't the same as your work space. I'm now roughly doubling the square footage of my living space, adding a garden and a patio. I'm thrilled. And yeah, I'm paying a million bucks for it.
  - bko 5y ago
    > Low interest rates don't make people offer 150k over asking while waiving all contingencies Paying above offer always struck me as strange. In my housing market its very common as well, to the point I believe under-pricing the home is intentional. There's no reason the home should be priced considerably below the market price. Sometimes you get it wrong but homes consistently selling above ask tells you the sellers are under-pricing intentionally. The upside for the seller is that bidders enter blind bids where the top bidder could bid significantly higher than the next highest bid. I think systematic under-pricing could happen when prices increase a lot in a short period and it takes the brokers a while to adjust their pricing as the trend becomes more clear. But it could also be cultural to a market where brokers feel comfortable under-pricing homes to encourage a bidding war, but that obviously doesn't work in all markets. As for waving contingencies, that's just another form of incentive in lieu of cash.
    - helen___keller 5y ago
      > There's no reason the home should be priced considerably below the market price. Partially because you comp against recent sales in the area to determine market rate, it takes a while to close so the comps you have available are usually a few months old, and the price moved a lot in a few months This happened to me multiple times. Recent sales as late as January suggested X could win this house, I put in an offer at X+15, I'm later contacted that there's an offer at X+50 and I can put another bid in if I want to one up them Of course in this example X is already over asking so you're right I think that this is done intentionally.
- meragrin_ 5y ago
  Don't forget the moratoriums on evictions and foreclosures.
- chadcmulligan 5y ago
  I heard a theory the other day that houses are more affordable than they were in the 70's - because even though the house prices are high, the repayments are lower because the interest rates are a lot lower. It was a business commentator trying to rationalise the housing market.
  - JimTheMan 5y ago
    The repayments seem to stay about the same but the overall payment is incredibly large. And because getting the % deposit is a big factor in whether you can afford a house, it pushes lower income people out of the market. And if you bought in 1980, the high rates kept the lid on prices. However while you may have started with the same payment but the rates have been steadily ticking down since then. Creating a massive generation gap between those who bought while rates were high and those who didn't have the opportunity. And I am sure this is only one of the factors in housing affordability but in my fairly uneducated opinion it seems like the largest.
    - ChrisLomont 5y ago
      >And because getting the % deposit is a big factor in whether you can afford a house, it pushes lower income people out of the market. Median downpayment is 6%, a common low end is 3%, some places and programs go lower. Median house price sold in 2020 was 347k, well over 25% of houses sell for under 250k [1]. So, for a starter home, saving 3% of say 200k is 6k. If someone can pay this mortgage without killing themselves (30%, say 4%, monthly payments ~1K) then they can save a 6K downpayment over a reasonable time. So downpayment should not be keeping many people out of homes that want one that can afford a mortgage. If their income is so low that they cannot even afford a mortgage, then yes, they are pushed out of the market, but there is no way they could enter anyways. [1] https://www.census.gov/construction/nrs/pdf/quarterly_sales.pdf https://www.census.gov/construction/nrs/pdf/quarterly_sales....
      - throwaway210222 5y ago
        > If someone can pay this mortgage […] then they can save a 6K downpayment Not if they are paying rent - there would be no surplus every month to save.
tristanj 5y ago
[deleted]
- austincheney 5y ago
  My house is not on the market, so at the moment it is priceless.
angarg12 5y ago
Real state in the UK is increasing in price the fastest since before the 2008 crisis [1]. Lumber is a very specific circumstance to the US, but similar trends are happening in other developed countries. One specific circumstance of the UK is a tax break introduced last year to incentivise home buying. Beyond that, as others pointed out, some shared causes are more people on the market for a new home due to the pandemic, and historically low interest rates. [1] https://www.theguardian.com/business/2021/may/26/value-of-uk-house-sales-forecast-to-leap-46-this-year-as-boom-continues https://www.theguardian.com/business/2021/may/26/value-of-uk...
newaccount2021 5y ago
HN is endlessly obsessed with disavowing monetary policy and the inflation we are seeing as a result. Your grocery bill and cost of gas are rising similarly to housing...just accept it, this inflation

sokoloff 5y ago

COVID added two factors, both positive for housing prices: additional time in the home, making its faults more apparent and spending money to address them more sensible. It also added trillions of dollars of government borrowing without creating offsetting trillions of dollars of production in the economy, leading many to worry about an uptick in inflation. As inflation fears increase, borrowing money and buying productive or hard assets makes an increasing amount of sense.

dragonwriter 5y ago
Three: widespread (and in many cases transitioning to long term) WFH: that’s not just time in the home, its new demands on what the home is used for.
- ryathal 5y ago
  Four: a 1-3 month pause in new construction, and construction materials. Five: record low interest rates are here to stay so borrowers can pay more up front for the same payment.

aurizon 5y ago

Of course, this is a massive arranged crime akin to and having it's roots in the sub-prime mortgage crash. Rates are low. corporations can borrow unlimited cash and buy a residence, then rent it out to get 4-5% interest and pay 1.5 to 2.5 = risk free make the spread with no limits. I would like to borrow 10 billion and buy a zillion homes and make the spread ~~3%. They hire property managers and that costs .5% to .75%. And we pay = we MUST HAVE A PLACE TO LIVE. Easy to fix = make an income property subject to business taxes in addition to the usual real estate taxes. All the small retail shops pay business taxes as well as realty taxes. Make it a law that increased business taxes can not be passed to the people who live there. Exempt people who rent rooms in their own residence. This would kill the spread and make houses affordable again. Of course powerful corporates vesteds would whine away = WGAS for them, the people need this racket to be broken NOW.

bequanna 5y ago
This isn’t how taxation works or even can work. It would be trivial to avoid the tax you propose if it is based on income from the properties. If the tax is more like a property tax then it would be impossible for it to not be passed on to renters. Indeed, ALL taxes are passed onto consumers!
- yunohn 5y ago
  > it would be impossible for it to not be passed on to renters. Indeed, ALL taxes are passed onto consumers! Agreed. While not immediately intuitive, this is unfortunately very true for all taxes that are imposed upon institutions, corporations, investors, etc. I wish this is something that could be fixed in a fair manner…
  - pnutjam 5y ago
    All taxes are passed on is a very simplistic view. Do I pass the taxes on to my employer when I negotiate salary? Probably to some extent, but this is like saying all cubes are squares and calling it good enough. EDIT: typo

gregwebs 5y ago

Rents have been depressed due to eviction moratoriums So I don’t think this metric is useful right now to gauge the housing bubble. The main mistake usually made with housing is not accounting for inflation. Here is a data driven analysis that does: https://realestatedecoded.com/case-shiller https://realestatedecoded.com/case-shiller Housing prices will eventually mean revert like they always do. However, interst rates are so low right now that it still can make sense to buy now.

MobileVet 5y ago

Clearly there are a lot of variables including interest rates, desire for better space due to Covid lockdowns and more recently FOMO. One thing that should not be overlooked is the basic economics of supply and demand. Right now the supply is extremely low compared to much of our historical data. This at the same time as demand has been red hot (due mostly to Covid). Check out the data below, especially over the last year. https://fred.stlouisfed.org/series/MSACSR https://fred.stlouisfed.org/series/MSACSR We are seeing the same macro level forces impact the used car market. In that case, the supply is off ~30% due to rental car turnover being nonexistent.

sys_64738 5y ago
Lack of supply is precisely the issue causing panic buying through bidding wars. You need to go 10% over asking to be guaranteed to be close. Low demand and continued increases of buyers coming to market cause the snowball effect.
- deleted 5y ago
  [deleted]
ghaff 5y ago
Rental cars seem to be a mess. I know at least one person who canceled a trip because they couldn't get a rental car. And I reserved one for a trip at the end of September "just in case" and the price seemed significantly higher than normal.
- cletus 5y ago
  Rental car prices are extremely high. That’s not your imagination. This is a result of car rental companies selling a third of their fleet last year to survive so supply is way down and demand came roaring back. Tip: hire a UHaul instead. Much cheaper.
  - harambae 5y ago
    >Tip: hire a UHaul instead. Much cheaper. I see everyone recommending this, but the U-Haul's I'm used to charge per mile so watch out for this if you're planning a roadtrip

question000 5y ago

There are a lot of people vaguely guessing around at what the "real value" of a home is. In a world where you need shelter to produce income the value of a house is essentially all your income over the entire span of your life. So really arguments that houses are "overvalued" are ridiculous to me, houses have never decreased in value historically, why would they do so now? I am fully expecting single family residential properties to reach 7 and 8 figures in my lifetime. Why wouldn't they continue the track of the last 100 years? No, increasing the supply will do nothing, speculators already own most of the available real estate so that will only drive the prices up further. Look at the number of single family home that are being bought and immediately rented out, in new construction the renters far outnumber the owners. Until speculation is banned or the government locks in reasonable prices, prices will continue to rise in perpetuity.

ghaff 5y ago
>Look at the number of single family home that are being bought and immediately rented out, in new construction the renters far outnumber the owners. I'm not sure I see the problem. People are living in the property one way or the other. It's not like there is some infinite pool of renters not living someplace who will absorb any supply. What would be (and is in some places) a problem is if speculators/people parking cash bought property and let it sit empty.
- yunohn 5y ago
  > I'm not sure I see the problem. I don’t see why only parked properties are a problem? Rentals are always more expensive than the underlying mortgage - that’s what makes it an investment opportunity. This is a big problem since most people could’ve afforded the original property if they weren’t priced out by investors.
  - leetcrew 5y ago
    there are a few ways this could not be true. the mortgage could have been locked in a long time ago at a much lower valuation. the rent would still be above the underlying mortgage, but that doesn't mean I would have bought the house when I was a child. the landlord might own the building outright, or the valuation might be increasing so fast that the rent only needs to offset the rent. either way, the rent could be pushed below the mortgage (or what the mortgage would be). there are some us cities with extremely high price-to-rent ratios. some of those properties must be renting for below the underlying mortgage.

akudha 5y ago

I wish something is done about these rentiers. Someone I know is amassing a rental property portfolio, while I am struggling to buy my first home. I am not against people making money and getting rich, but it would be nice if it wasn’t so easy to buy up multiple properties simply because they have the cash. There should be all kinds of incentives for first time home buyers. But it should be made very expensive/very painful from second home onwards. I don’t care that I can’t afford a luxury car or overpay for Google stock. But it annoys me to no end that the so called “investors” (not just rental companies but small time landlords too) buy properties with the sole aim of jacking up the rent and pushing first time buyers out. Housing is not a luxury, it is a basic human need. People can own a hundred Ferraris for all I care, but there should be some sane policy on letting individuals and companies own entire neighborhoods and blocks. Along the same lines, Bill Gates owns 242,000 acres of farm land. What for? I don’t know. It is just plain ugly to let someone own huge lands, water supplies (there are companies buying up large water sources) etc. This amount of monopoly on basic human needs is just bad. I know this is an unpopular opinion here, as many HN readers see real estate as a way to get rich and likely own rental properties themselves. But across the world, in many urban areas, there is severe housing shortage (artificial in most cases, and houses sit empty because “investors”, see Canadian cities for example). On top of all this, most cities and towns have extremely unfriendly policies towards tiny houses. That is whole another level of unfairness.

mc32 5y ago
Some of it is to take money out of authoritarian regimes and move it into more rule of law countries. Another reason is a hedge against inflation which we may be beginning to see right now.
- akudha 5y ago
  The very fact that you are trying to rationalize someone buying multiple homes at the expense of someone trying to buy their first home highlights the problem. Take Canada for example. A whole lot of homes are bought by Chinese buyers and are sitting idle, at the expense of Canadians trying to buy their first home. How can you say this is morally right? It is all find and dandy for the Chinese buyers, but what of Canadians?

texaswhizzle 5y ago

This measure of value is no longer relevant. Short term rentals are the lucrative market segment now. Long term tenants provide stability, but much lower upside. There are other factors at play. Bonus depreciation rules from the tax cut and jobs act. Real estate investors can depreciate 100% of an investment within the first year until 2022. Low interest rates. Borrow money cheaply now and secure cash flow later. Interest only financing. Financing schemes that allow investors maximum leverage. More leverage means more buying. All together the current market is tilted heavily toward real estate investors. Unless the tax law changes, I wouldn’t expect things to fundamentally change until 2025.

newaccount2021 5y ago

The Fed has turned us all into gamblers. If you've ever wanted to know what living in something like the .com bubble was like, we are in something much bigger now. The next Fed chair will have no choice but to pull a Volcker

Workaccount2 5y ago
The forest is so incredibly overgrown, sooner or later someone has to set it on fire.

miketyson2000 5y ago

It is weird for me read comments on HN lately. I do not know where it became a thing to argue that being able to buy whatever you want at any time is a god given right. It comes across as rants of a spoiled child that has only seen prosperity. I am seeing the same complaint in crypto wars on GPU shortages and so on. You are not owed anything. You have a shot at an offer. That is it.

underseacables 5y ago

Help. I’m lost. Does a higher nationwide house price-to-rent ratio mean a good thing for home owners, or does it mean a good thing for renters?

eutropia 5y ago

Just your annual reminder that the Land Value Tax is the Least Evil Tax. Tax "rent"[0] at 85-100%, allow owner-residents to defer LVT taxes owed to time of sale with modest interest. Speculators would be naturally driven out in favor of people actually using the land. [0] - Which is gatekeeping/charging for land (finite natural unimproved resources like space, spectrum, water, wildlife, oil, etc)

imtringued 5y ago
Another way would be to simply raise capital gains taxes on land. Making money off of land (as opposed to renting) just doesn't make sense. It's basically Bitcoin with real life consequences.
- rasz 5y ago
  But what if all I want is to park hundreds of millions I managed to steal from eastern state run power company? I dont care about gains, I dont care about rents. I simply know that I wont lose money buried in land/buildings. I already have tens of millions in prime Manhattan commercial real estate, all vacant obviously.
chid 5y ago
I don't see how you could justify it's the 'least evil tax'. In theory the least evil tax is something that doesn't change behaviour. We have a land value tax here in Australia which doesn't apply to owner-residents. That said, most places are excluded.
- deleted 5y ago
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- perilunar 5y ago
  The "least evil tax" probably comes from Milton Friedman, who called land tax the "least bad tax". Owner-occupiers do pay land tax in Australia — local council rates are effectively land taxes as they are based on the unimproved value of the land (but they often include stormwater and waste charges as well).

thehappypm 5y ago

This is way more about a drop in rents than anything else, obviously. Rents are super low nationwide right now, as folks abandoned high-rent areas in the pandemic. Meanwhile the housing market is very long-term oriented, and reasonably rational.

hnburnsy 5y ago
Looks like in many places rents are much higher... https://www.apartmentguide.com/blog/apartment-guide-annual-rent-report/ https://www.apartmentguide.com/blog/apartment-guide-annual-r... 'The following cities have experienced the biggest increases in one-bedroom rent prices year-over-year. None of them make the 10 most expensive markets for one-bedroom apartments by rent prices. Three of them — Gilbert, AZ; Buffalo, NY and Durham, NC — have populations of 300,000 or less. Kansas City, MO (+33.5%) Gilbert, AZ (+26.0%) Las Vegas, NV (+25.3%) Riverside, CA (+24.9%) Buffalo, NY (+23.3%) Columbus, OH (+22.1%) Durham, NC (+20.0%) Detroit, MI (+18.6%) New Orleans, LA (+18.3%) Virginia Beach, VA (+15.3%)