5 ms·

No, I disagree. Law of big numbers. Houses in Seattle area are mortgaging for 1.2M. Property taxes are low. Houses in NY are mortgaging for $500,000. Property

by fridif 5y ago

No, I disagree. Law of big numbers. Houses in Seattle area are mortgaging for 1.2M. Property taxes are low. Houses in NY are mortgaging for $500,000. Property taxes and interest rates are higher. You shouldn't apply 8% interest rate from 2000 and think that it somehow is the correct rate when prices are 5x higher.

mdorazio 5y ago
I don’t think you understood the parent post’s point. Most people don’t buy a house based on the sale price, they buy based on what their monthly payment will be. Historically low interest rates mean that people can afford a lot higher price house than they could in 2008. That’s obviously not the whole story, but it is a big factor in what’s going on.
- fridif 5y ago
  But also salaries have risen and additionally so has the value proposition of owning a home compared to living in an apartment. Why? Because they've stopped building homes for the most part in desirable areas close to big tech companies.
  - wonnage 5y ago
    Salaries have not risen outside of certain industries like tech
    - adventured 5y ago
      Salaries have climbed. Particularly for the home buying demographics. The real (inflation adjusted) median household income hit an all-time high in 2019. At $68,700 it was approximately $12,000 higher than 2012, and roughly 10-11% higher than the peak of the housing bubble. Incomes shot up rapidly from 2014 to 2019. For the people at the median or above, things have continued to be great in terms of income position (Covid didn't roll back those gains), as labor supply remains tight for most median pay and above jobs. So if mortgage rates have declined considerably (cut in half), and we're just now back to home prices being inflation adjusted where they were during the housing bubble peak, and real median household incomes are also 10% higher, and the US household disposable income to debt service payment ratio is near decades lows, that leaves a lot more room for higher mortgage payments - which fully explains the upward trajectory in housing prices.
    - IkmoIkmo 5y ago
      That's simply not true, in nominal terms income has increased quite substantially. In real terms they haven't climbed much, but then you're comparing a home price increase to an income that's already been adjusted for prices, that makes no sense. To understand if housing became more affordable you'd have to look at nominal income levels versus nominal housing costs. Look at median income for example here: https://fred.stlouisfed.org/series/MEHOINUSA646N https://fred.stlouisfed.org/series/MEHOINUSA646N That's a 50% increase since 2008. It's not the top 1%, it's not an average where the high-earners jack up the average. It's a median, the middle-earning person in the US, now earning 50% more yearly than 2008. Combined with much lower interest rates and consistently bigger homes, housing is much more affordable compared to then.
- SilasX 5y ago
  >Most people don’t buy a house based on the sale price, they buy based on what their monthly payment will be. ... which is itself an antipattern, just as it is for cars.
imtringued 5y ago
Land is non reproducible. The fact that it goes up in value when money is cheap is not very surprising. Yet nobody tries to tax the problem away. You know, everyone pretends that the government is doing MMT or whatever. If MMT were a recipe book of economic policy (which it isn't) then the government would simply raise taxes on land.

by fridif 5y ago

mdorazio 5y ago

I don’t think you understood the parent post’s point. Most people don’t buy a house based on the sale price, they buy based on what their monthly payment will be. Historically low interest rates mean that people can afford a lot higher price house than they could in 2008. That’s obviously not the whole story, but it is a big factor in what’s going on.

fridif 5y ago
But also salaries have risen and additionally so has the value proposition of owning a home compared to living in an apartment. Why? Because they've stopped building homes for the most part in desirable areas close to big tech companies.
- wonnage 5y ago
  Salaries have not risen outside of certain industries like tech
  - adventured 5y ago
    Salaries have climbed. Particularly for the home buying demographics. The real (inflation adjusted) median household income hit an all-time high in 2019. At $68,700 it was approximately $12,000 higher than 2012, and roughly 10-11% higher than the peak of the housing bubble. Incomes shot up rapidly from 2014 to 2019. For the people at the median or above, things have continued to be great in terms of income position (Covid didn't roll back those gains), as labor supply remains tight for most median pay and above jobs. So if mortgage rates have declined considerably (cut in half), and we're just now back to home prices being inflation adjusted where they were during the housing bubble peak, and real median household incomes are also 10% higher, and the US household disposable income to debt service payment ratio is near decades lows, that leaves a lot more room for higher mortgage payments - which fully explains the upward trajectory in housing prices.
  - IkmoIkmo 5y ago
    That's simply not true, in nominal terms income has increased quite substantially. In real terms they haven't climbed much, but then you're comparing a home price increase to an income that's already been adjusted for prices, that makes no sense. To understand if housing became more affordable you'd have to look at nominal income levels versus nominal housing costs. Look at median income for example here: https://fred.stlouisfed.org/series/MEHOINUSA646N https://fred.stlouisfed.org/series/MEHOINUSA646N That's a 50% increase since 2008. It's not the top 1%, it's not an average where the high-earners jack up the average. It's a median, the middle-earning person in the US, now earning 50% more yearly than 2008. Combined with much lower interest rates and consistently bigger homes, housing is much more affordable compared to then.
SilasX 5y ago
>Most people don’t buy a house based on the sale price, they buy based on what their monthly payment will be. ... which is itself an antipattern, just as it is for cars.

imtringued 5y ago

Land is non reproducible. The fact that it goes up in value when money is cheap is not very surprising. Yet nobody tries to tax the problem away. You know, everyone pretends that the government is doing MMT or whatever. If MMT were a recipe book of economic policy (which it isn't) then the government would simply raise taxes on land.