4 ms·

How so? The cost per square foot of the average American home has remained exactly the same, adjusted for inflation, since 1974. In major metros, it's artific

How so? The cost per square foot of the average American home has remained exactly the same, adjusted for inflation, since 1974. In major metros, it's artificial supply constraints that have kept prices going up, and those aren't about to ease. In SF for instance, over certain periods, the city added only 10% of the houses needed to keep up with job growth. Even a massive shock to the industry wouldn't have much real effect. I strongly suspect there won't be much to write home about on the housing front this time. Folks seem to think 'expensive' means 'bubble' - but houses have always cost what folks can afford to pay, otherwise, you know, they'd be less expensive.

0des 4y ago
Now do wages, adjusted for inflation, since 1971.
- arcticbull 4y ago
  They have also kept pace with inflation, why do you ask? [1] [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
  - baremetal 4y ago
    https://image.cnbcfm.com/api/v1/image/106972802-1636474969966-20211109-mobile-fallaback-i3rrt-growth-in-u-s-home-values-outpaces-that-of-incomes.png?v=1636475060 https://image.cnbcfm.com/api/v1/image/106972802-163647496996... from cnbc the growth of real estate prices vs wage growth. wage growth has been flat since the '70s.
    - arcticbull 4y ago
      Nothing in that article contradicts anything I said, you've missed some nuance. The BLS data shows that wages have kept pace with inflation. The Census Bureau data shows that the price per square foot of the average American home has remained the same since the 1970s. The spread is that the average new American home now has twice the square footage per person. [1] Of course in major metros, supply constraints keep prices high (and the gap between supply and demand is so large it would take something truly catastrophic to close the gap - SF barely had a 2008, for instance). Outside metros, houses have gotten enormous. In both places, families are smaller. I'm just saying, I don't see a housing bubble looking at price alone. [1] https://fee.org/articles/new-homes-today-have-twice-the-square-feet-per-person-as-in-1973/ https://fee.org/articles/new-homes-today-have-twice-the-squa...
BadCookie 4y ago
"The median monthly payment of a 30-year mortgage is up 56% year-over-year" And this number was calculated before rates went even higher last week. Source: https://www.calculatedriskblog.com/2022/06/30-year-mortgage-rates-increase-to-585.html https://www.calculatedriskblog.com/2022/06/30-year-mortgage-...
- arcticbull 4y ago
  Yeah but is that super relevant? Mortgage monthly payments overwhelmingly aren't up because, obviously, they're usually fixed for a 30 year period. This rate affects new buyers, and only temporarily as of course, they can refinance into lower rates in the future. Mortgage rates may be up compared to 6 months ago, but they're back where they were in 2018 when I bought my condo. People were screaming 'housing bubble' back then too. Even that is misleading because... Keep in mind that with an 8% inflation rate, a 5.85% interest rate on a 30-year fixed is a -2.15% real interest rate. Once you take into account mortgage interest tax deductions, the real interest rate is -4.5%. This is dramatically lower than last time we saw 5.85% interest rates (2018) when we had a 1-2% inflation rate. That's a real interest rate of +3.85%. Once you take into account mortgage interest tax deductions, the real interest rate was +1.5%.
  - wintermutestwin 4y ago
    >Keep in mind that with an 8% inflation rate, a 5.85% interest rate on a 30-year fixed is a -2.15% real interest rate. You are leaving out (as so many do): Taxes, Insurance and Maintenance. For example, where I live, those add up to a minimum of 3%. On top of all that, you need to factor in your personal stability - what's the risk that your career or partnership could intervene in your plans and force you to sell < 7-10 years out? If that happens, you are eating closing costs and potentially being forced to sell at a bottom out moment in house prices due to interest rate instability.
    - arcticbull 4y ago
      That’s fine but not relevant to my point. Those things also all existed last time nominal rates were at this level. My point is real rates are dramatically lower now than last time. This is going to keep demand high, maybe not from the same individual buyer as before but there’s a good reason we see institutional gobbling up all this real estate. The market doesn’t differentiate between institutional and retail buyers when a house goes up for sale. However all those property taxes and HOA fees are tax deductible for institutional buyers. I don’t think that’s good of course - and I’m not advocating people run out and buy a house either - I’m just saying, there’s a ton of factors that make “housing market collapse imminent” more of a pipe dream than a sure thing. How much did housing go down in SF during COVID? Charts say zero, and that’s during the biggest exodus of people actually living there in recent memory.
lamontcg 4y ago
If half of the commercial real estate is forced to convert to residential due to remote work then there's your new supply.
- arcticbull 4y ago
  With respect, remote work is over.
  - ls15 4y ago
    It barely has begun. Climate change and high gasoline prices are making remote work an absolute necessity. Travelling on a daily basis, just to look at another screen, will soon be seen as obscene. Like switching your rare real fur coats daily.
  - lamontcg 4y ago
    no it isn't, lol. https://news.ycombinator.com/item?id=31709394 https://news.ycombinator.com/item?id=31709394
    - arcticbull 4y ago
      I don’t see what SF has to do with anything? SF has made a number of incredibly poor anti-tech decisions that have pushed tech companies out of town. They kicked out Square, Stripe and PayPal (and I assume a myriad other payments companies, probably Airbnb) with Prop C. Of course people are leaving. Their jobs moved. I wouldn’t confuse a particularly poorly managed city for a broader trend. The same is certainly not happening a few towns over in South San Francisco where Stripe is now located, or in Cupertino, or in Menlo Park. Or at Tesla. Or every financial business in New York. Anecdotally every early stage startup I know is starting in person. Couple years from now, work from home will once again be the exception.

0des 4y ago

Now do wages, adjusted for inflation, since 1971.

arcticbull 4y ago
They have also kept pace with inflation, why do you ask? [1] [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
- baremetal 4y ago
  https://image.cnbcfm.com/api/v1/image/106972802-1636474969966-20211109-mobile-fallaback-i3rrt-growth-in-u-s-home-values-outpaces-that-of-incomes.png?v=1636475060 https://image.cnbcfm.com/api/v1/image/106972802-163647496996... from cnbc the growth of real estate prices vs wage growth. wage growth has been flat since the '70s.
  - arcticbull 4y ago
    Nothing in that article contradicts anything I said, you've missed some nuance. The BLS data shows that wages have kept pace with inflation. The Census Bureau data shows that the price per square foot of the average American home has remained the same since the 1970s. The spread is that the average new American home now has twice the square footage per person. [1] Of course in major metros, supply constraints keep prices high (and the gap between supply and demand is so large it would take something truly catastrophic to close the gap - SF barely had a 2008, for instance). Outside metros, houses have gotten enormous. In both places, families are smaller. I'm just saying, I don't see a housing bubble looking at price alone. [1] https://fee.org/articles/new-homes-today-have-twice-the-square-feet-per-person-as-in-1973/ https://fee.org/articles/new-homes-today-have-twice-the-squa...

BadCookie 4y ago

"The median monthly payment of a 30-year mortgage is up 56% year-over-year" And this number was calculated before rates went even higher last week. Source: https://www.calculatedriskblog.com/2022/06/30-year-mortgage-rates-increase-to-585.html https://www.calculatedriskblog.com/2022/06/30-year-mortgage-...

arcticbull 4y ago
Yeah but is that super relevant? Mortgage monthly payments overwhelmingly aren't up because, obviously, they're usually fixed for a 30 year period. This rate affects new buyers, and only temporarily as of course, they can refinance into lower rates in the future. Mortgage rates may be up compared to 6 months ago, but they're back where they were in 2018 when I bought my condo. People were screaming 'housing bubble' back then too. Even that is misleading because... Keep in mind that with an 8% inflation rate, a 5.85% interest rate on a 30-year fixed is a -2.15% real interest rate. Once you take into account mortgage interest tax deductions, the real interest rate is -4.5%. This is dramatically lower than last time we saw 5.85% interest rates (2018) when we had a 1-2% inflation rate. That's a real interest rate of +3.85%. Once you take into account mortgage interest tax deductions, the real interest rate was +1.5%.
- wintermutestwin 4y ago
  >Keep in mind that with an 8% inflation rate, a 5.85% interest rate on a 30-year fixed is a -2.15% real interest rate. You are leaving out (as so many do): Taxes, Insurance and Maintenance. For example, where I live, those add up to a minimum of 3%. On top of all that, you need to factor in your personal stability - what's the risk that your career or partnership could intervene in your plans and force you to sell < 7-10 years out? If that happens, you are eating closing costs and potentially being forced to sell at a bottom out moment in house prices due to interest rate instability.
  - arcticbull 4y ago
    That’s fine but not relevant to my point. Those things also all existed last time nominal rates were at this level. My point is real rates are dramatically lower now than last time. This is going to keep demand high, maybe not from the same individual buyer as before but there’s a good reason we see institutional gobbling up all this real estate. The market doesn’t differentiate between institutional and retail buyers when a house goes up for sale. However all those property taxes and HOA fees are tax deductible for institutional buyers. I don’t think that’s good of course - and I’m not advocating people run out and buy a house either - I’m just saying, there’s a ton of factors that make “housing market collapse imminent” more of a pipe dream than a sure thing. How much did housing go down in SF during COVID? Charts say zero, and that’s during the biggest exodus of people actually living there in recent memory.

lamontcg 4y ago

If half of the commercial real estate is forced to convert to residential due to remote work then there's your new supply.

arcticbull 4y ago
With respect, remote work is over.
- ls15 4y ago
  It barely has begun. Climate change and high gasoline prices are making remote work an absolute necessity. Travelling on a daily basis, just to look at another screen, will soon be seen as obscene. Like switching your rare real fur coats daily.
- lamontcg 4y ago
  no it isn't, lol. https://news.ycombinator.com/item?id=31709394 https://news.ycombinator.com/item?id=31709394
  - arcticbull 4y ago
    I don’t see what SF has to do with anything? SF has made a number of incredibly poor anti-tech decisions that have pushed tech companies out of town. They kicked out Square, Stripe and PayPal (and I assume a myriad other payments companies, probably Airbnb) with Prop C. Of course people are leaving. Their jobs moved. I wouldn’t confuse a particularly poorly managed city for a broader trend. The same is certainly not happening a few towns over in South San Francisco where Stripe is now located, or in Cupertino, or in Menlo Park. Or at Tesla. Or every financial business in New York. Anecdotally every early stage startup I know is starting in person. Couple years from now, work from home will once again be the exception.