4 ms·

I think there's a pretty critical piece of analysis missing here: inflation. An alternative explanation might be that housing prices are being driven up by infl

I think there's a pretty critical piece of analysis missing here: inflation. An alternative explanation might be that housing prices are being driven up by inflation, and wages haven't caught up yet. There are two ways to lower the home value/income ratio: 1. Decrease housing prices 2. Increase wages We haven't seen meaningful wage increases for a long time now, so perhaps it is time. Maybe this is just a symptom of wages not tracking with inflation, and the solution is to pay people more.

teagee 5y ago
Add our current low interest rates to the mix as well and the picture changes dramatically
- 88913527 5y ago
  100%. Though, interest rate based appreciation is likely at its apex, presuming zero is the floor. If we find ourselves with negative rates (after taxes and fees; there was one case of negative rates in Europe, but net inclusive of fees, it was still positive) -- then we're in truly uncharted territory. At this juncture, it seems most appreciation will arise from supply issues, which aren't new to the post-2008 world. And while we do have lots of unoccupied housing nationally, we don't have it stock in areas where it's most needed: e.g, job centers. You can easily find a $10k home in Detroit if you wish. The graph would be helpful it broke out metro versus rural areas, in addition to factoring interest rates.
newaccount2021 5y ago
3. raise interest rates
sorenn111 5y ago
I agree that wage growth is stagnant but I think the changes over the last 20 years of real median wages is definitely meaningful. Look at the changes from peaks in 2000, 2007 and also from a deep trough in 2012: https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N
bserge 5y ago
Why pay them more when they're content with what they get now?
- MathMonkeyMan 5y ago
  I upvoted your comment because it clicked with me, but now I'm thinking about it more. _I'm_ content with my pay now, perhaps others aren't and there is little they can do about it. How might we even define "content" for a cohort as large as "anyone buying a house"?
  - bserge 5y ago
    No, trust me, people are content with renting a room and living month to month. There's nothing to worry about.
    - HeyLaughingBoy 5y ago
      I'm starting a business selling guillotine insurance...
- kevinventullo 5y ago
  I don’t think I would characterize most millennials as “content” with their income level.
reducesuffering 5y ago
With increased wages come increased housing prices, as long as there is a supply mismatch to the baseline demand of housing to survive.
b9a2cab5 5y ago
An increase in wages (real or nominal) without any increase in housing supply just leads to more money chasing the same supply which means higher rents. We are seeing this play out as we speak in every major city in the U.S. The solution is not to pay people more, it's to increase the supply of housing to the point that people can pay drastically less for housing. Look at China: apartment towers on every street, each 30+ floors easily. Where is that kind of density in the U.S.?

teagee 5y ago

Add our current low interest rates to the mix as well and the picture changes dramatically

88913527 5y ago
100%. Though, interest rate based appreciation is likely at its apex, presuming zero is the floor. If we find ourselves with negative rates (after taxes and fees; there was one case of negative rates in Europe, but net inclusive of fees, it was still positive) -- then we're in truly uncharted territory. At this juncture, it seems most appreciation will arise from supply issues, which aren't new to the post-2008 world. And while we do have lots of unoccupied housing nationally, we don't have it stock in areas where it's most needed: e.g, job centers. You can easily find a $10k home in Detroit if you wish. The graph would be helpful it broke out metro versus rural areas, in addition to factoring interest rates.

newaccount2021 5y ago

3. raise interest rates

sorenn111 5y ago

I agree that wage growth is stagnant but I think the changes over the last 20 years of real median wages is definitely meaningful. Look at the changes from peaks in 2000, 2007 and also from a deep trough in 2012: https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N

bserge 5y ago

Why pay them more when they're content with what they get now?

MathMonkeyMan 5y ago
I upvoted your comment because it clicked with me, but now I'm thinking about it more. _I'm_ content with my pay now, perhaps others aren't and there is little they can do about it. How might we even define "content" for a cohort as large as "anyone buying a house"?
- bserge 5y ago
  No, trust me, people are content with renting a room and living month to month. There's nothing to worry about.
  - HeyLaughingBoy 5y ago
    I'm starting a business selling guillotine insurance...
kevinventullo 5y ago
I don’t think I would characterize most millennials as “content” with their income level.

reducesuffering 5y ago

With increased wages come increased housing prices, as long as there is a supply mismatch to the baseline demand of housing to survive.

b9a2cab5 5y ago

An increase in wages (real or nominal) without any increase in housing supply just leads to more money chasing the same supply which means higher rents. We are seeing this play out as we speak in every major city in the U.S. The solution is not to pay people more, it's to increase the supply of housing to the point that people can pay drastically less for housing. Look at China: apartment towers on every street, each 30+ floors easily. Where is that kind of density in the U.S.?