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There Were Half As Many Affordable Homes For Sale In 2022 As There Were In 2021

210 points by jackcosgrove 4y ago

panny 4y ago
>it’s mostly due to the fact that higher mortgage rates made the listings hitting the market less affordable House prices didn't appreciate faster, mortgage rates went up. A great transfer of wealth from the property tax man to the banker is afoot. >Only 9% of homes for sale last year were affordable for the typical Black household, compared with 28% for the typical white household and the lowest share of any race in this analysis. That seems expected when you account for the fact that blacks have larger families. I don't know why every article on housing has to bring in identity politics when it's clear that having more children raises your housing cost, independent of race.
- Kye 4y ago
  https://www.census.gov/data/tables/2016/demo/families/cps-2016.html https://www.census.gov/data/tables/2016/demo/families/cps-20... "Table AVG1. Average Number Of People Per Household, By Race And Hispanic Origin, Marital Status, Age, And Education Of Householder: 2016" Looks like 2.50 for white- and black-led households and doesn't change enough to account for the difference any way you slice it. Of course, that doesn't say anything about composition, especially with younger families now that the demographic effects of America's long history of segregation and ongoing redlining are just barely starting to fade. Where did you get your stat from?
WalterBright 4y ago
It's the inevitable result of a rapid population increase and endless roadblocks to building more housing.
- _cenw 4y ago
  15 million vacant homes in the United States would like to disagree with you.
  - WalterBright 4y ago
    Depends on why they're vacant. Many homes are vacant because it takes months to sell them. Some are vacant because nobody wants to live there (Detroit and other declining locales). Some are vacant because they are undergoing renovation.
zephrx1111 4y ago
Lie like this: 90% of students have difficulty to learn high school math.
more_corn 4y ago
Housing is expensive in part because interest rates are high. Interest rates will come down when inflation is under control. Inflation is still up because… housing costs are elevated. GOTO 1
hifromLA 4y ago
I often wonder how this story ends. I think there’s two paths: The first, where we don’t make substantial change and renting for life becomes a norm for all but the wealthiest of the wealthiest. First in the large coastal cities then in more and more American cities over time. The second, where we rezone our cities and orient them around robust mass transit systems. We build tons of infill housing to keep up with demand and reduce our reliance on private transportation to accommodate the influx of people. If I was betting I’d bet on #1, but I hope we can do #2.
- Tade0 4y ago
  #2 didn't help Europe - it's the exact same story over here and housing close to mass transit disproportionally shot up in price. If anything it's the places unreachable by anything but a car that remained affordable. Case in point: one couple I know bought an apartment(so not even a detached house) in a place without any public transport whatsoever because it was roughly half the price per unit area comparing to the equivalent in the city. They now need a car to do even the most basic things, but at least they have their own place to live. As long as real estate is seen as an investment opportunity, this will continue.
- anonymouskimmer 4y ago
  I would like to see more distribution in jobs. Starting with remote jobs and continuing with distributed work locations for non-remote jobs (to smaller cities and towns).
  - crooked-v 4y ago
    That wouldn't fundamentally fix the issue in the long run, just delay it until housing also becomes completely unaffordable in the mid-size cities people move to from the too-expensive big cities.
    - anonymouskimmer 4y ago
      It really depends on what carrying capacity our population increase stops at.
throwaway09223 4y ago
There are three kinds of lies: lies, damned lies, and statistics - Twain Key observations: * All else being equal, we would expect 50% of homes to be unaffordable to a median buyer. This is the reasonable base figure (not zero). We would expect 2 in 5 if everyone were buying homes they could properly afford. * But they're comparing median county incomes to homes in a metro area. For example they call out Boise, ID but use income from Ada county (already 20% lower!). This issue alone could account for the difference. * There is also an issue of counting homes for sale, vs homes in general. If more expensive homes are sold more often (or, are listed for sale longer - say years - because they're unique) then we will see a skew towards more expensive homes being listed more frequently. It won't accurately represent the actual underlying home inventory. I recommend not reading too much into these numbers.
- lkrubner 4y ago
  "All else being equal, we would expect 50% of homes to be unaffordable to a median buyer." Unaffordable? Why? There is a difference between "dislike" and "unaffordable." I'd expect the median buyer to want a house that is better than what 50% of buyers will settle for, but that is not the same as "unaffordable." If a society does a good job of providing housing then 100% of housing should be affordable. Put differently, if housing is affordable for the poorest citizens, then it is affordable for 100% of the population.
  - deleted 4y ago
    [deleted]
  - ClumsyPilot 4y ago
    this is a surprisingly good point.
  - throwaway09223 4y ago
    "If a society does a good job of providing housing then 100% of housing should be affordable." This can never be true, it's a mathematical impossibility. Housing is not equal. There are always preferred units. A skyscraper will have a side with a better view, people will prefer to live near the top rather than the bottom, people will prefer bigger units with better amenities, etc. It's impossible to solve this by "providing housing" because no matter how much you build it cannot solve the issue of relative value. So no, housing cannot ever be 100% affordable under any kind of market economy system. People with money will always be able to out-bid people without. People will always be able to construct homes which are better than others -- and this is a very good thing!
M3L0NM4N 4y ago
Not saying we don't need more affordable housing in the US (we absolutely do), but I would expect rich people to own more homes than the typical household, so I don't think this stat is as egregious as it initially appears. It wouldn't be unordinary for a rich person to own 3 unaffordable homes for the typical household, whereas the typical household will only own 1 affordable home.
- SamoyedFurFluff 4y ago
  Yeah but there are way fewer rich people than there are typical people. Even if an every wealthy person owns 3 homes, wealthy people are not 33% of all homeowners(or families trying to become homeowners).
- deleted 4y ago
  [deleted]
- zuminator 4y ago
  Even if that scenario were true and we were to generously call "rich" the top 10% of the income distribution, and let's go further and discount the entire bottom 50% of households as renters, then the naive breakdown would be 3 "unaffordable" homes owned by the 10th (richest) decile, 4 owned by the 6-9th deciles, and 0 homes owned by the rest. So 43% (3/7) of homes should be priced for the rich and 57% for the non-rich. The fact that it deviates so egregiously from that is pretty striking, I think. The graphic indicates that as recently as ten years ago, 50% of homes were affordable to the median household. Seems clear that the US is simply not building nearly enough homes in places where people want to live, and therefore what is being put up for sale fetches a huge premium. That works out great for home builders and people who are already homeowners and are seeing their homes appreciate in value, and since people who are truly wealthy willing pay a premium to buy property in locations with restrictive housing laws, there's a disincentive to alter the status quo.
spaceman_2020 4y ago
Housing speculation is going to be the downfall of western-style capitalism. Outside of a small percentage of upper-middle class and rich people, there is deep frustration about the housing situation among most people.
- iExploder 4y ago
  you are right and TBH this crap has to stop... especially since there are people with questionable sources of income buying up property (speaking about EU) further propagating this issue...
- anonymouskimmer 4y ago
  > western-style capitalism. It's happening in China, too.
  - deleted 4y ago
    [deleted]
hn_throwaway_99 4y ago
I think the first bar graph in this article is excellent. I was actually pleasantly surprised that you only had to go back to 2013 to find a situation where 50% of houses for sale were affordable on the median income, which is what you would expect in a balanced situation. In terms of "where this ends", that graph actually made me more hopeful, because it highlights the transitory nature of the current situation. The reason for-sale inventory is currently so unaffordable is you had a ton of people who paid top dollar for houses in the past few years, but at rock bottom rates. Now rates have skyrocketed, but unemployment is also really low, so at present few people are forced to sell. So you have a ton of people who just refuse to sell right now, because the price would be drastically lower than what they paid when they bought, and they're sitting on long-term mortgages with rates that they'll never see again in their lifetimes. At some point, either inflation will catch up with home prices, or people will eventually be forced to sell (not just due to job loss but for tons of other reasons that people are putting off right now because they don't want to sell at a loss). The overhang could easily last years, though.
- slantedview 4y ago
  > The reason for-sale inventory is currently so unaffordable is you had a ton of people who paid top dollar for houses in the past few years, but at rock bottom rates That's part of it. The other part is that builders stopped building enough to keep up with population growth over the last decade, which contributed to the massive inventory shortage. Couple that with the supply side crunch of the pandemic, which made it more expensive than ever to build, and we have a perfect storm.
  - nerdponx 4y ago
    There was an article posted here a while ago about how the supply of smaller starter homes specifically is much lower than it used to be in the past.
  - crooked-v 4y ago
    Of course, much of that is that many major cities effectively stopped builders from building anything. See, for example, Santa Monica, which allowed a total of 225 new housing units per year for the past twenty years, and where there are now thousands of new units in planning this year because of California's builder's remedy rules bypassing local refusal.
lunaru 4y ago
Just offering up a food for thought, as I recently did some research in the cost of construction (for the Bay Area, California): I see a lot of comments denouncing NIMBY-ism for the lack of construction or other reasons to answer the question of "Why not just build more housing?" but I suspect this, as true as it is, is the most popular talking point because it's politically a juicy topic to talk about. However, at least in HCOL places like the Bay Area, there is also another very basic economic reason: Construction is simply too expensive. The cost per square foot of standard construction (wood frame, slab foundation, nothing fancy in terms of doors and windows) is about $450-$550 per square foot. This sets a real hard lower bound on the price of net-new housing. If you're talking larger buildings (more concrete, steel frame, drilled pier foundations in consideration of soil conditions and structural weight) the costs start sky rocketing to unbelievable numbers. Sure we can point at bureaucracy and the permitting process, but when we're talking about large scale construction of SFH and multi-unit residential buildings, the permitting and legal barriers are a small slice of the overall cost pie. In the Bay Area, and I suspect soon in various geo areas, labor is simply too expensive. (And labor is an input to a lot of costs along the supply chain as well, like wood, concrete, steel, and glass.) In a culture where we all strive to be white collar workers abstracted away from the real physical reality that our world still runs on physical objects, most importantly housing, perhaps "learn to code" is not the universal answer and there needs to be just as much "learn to plumb" or "learn to concrete". And I know this last point is politically touchy, but big buildings housing hundreds and thousands of residents simply don't get built by an all-middle-class society. You need cheap labor (or better yet cheap automation?) so that this housing problem is tractable at an economic level.
- concordDance 4y ago
  Why is construction so much more expensive than 70 years ago?
- urthor 4y ago
  $450 to $550 seems like the price for detached homes. For a 2BR apartment at 850 sqft, that's $425,000. In the Bay Area I presume, Anecdotally, from memory, the price of high quality apartment, globally, varies around the $125,000 to $200,000 USD mark. Depending as you say, on materials. The interesting fact I was told is this price scales linearly with high rise, for quite a long time. 85 stories can and will average out to the magic $200,000. Even presumably adding a Bay Area markup, a $300,000 cost of construction is eminently affordable. For 2BR apartments for childless couples, $300,000 is a excellent. To me, the obstacle is purely zoning and supply side constraints for large high rises. Singapore style high rises given proper zoning would provide umpteenth $250,000 two bedroom apartments, on Singapore sized parcels of land. Providing sufficient land, construction of high rise units would grossly improve the housing affordability situation. It's purely a zoning/public services provisioning issue.
monero-xmr 4y ago
Fixed rate mortgages, which are extremely common in the US especially for average priced homes, maintain the same monthly payment for 30 years. This is a great deal for buyers - it’s a subsidy paid for by taxpayers. My first home was about 45% of my income. 15 years later (I rent it out now) it’s absurdly affordable for the area. Combined with workers’ natural tendency to increase their income as years of experience increase, what is unaffordable at the time of purchase easily becomes more affordable when given time.
- PaulDavisThe1st 4y ago
  > it’s a subsidy paid for by taxpayers. I think you're referring to the tax credit for mortgage interest payments? If so ... this subsidy ironically only applies to those carrying the largest mortgages. During the Trump administration, the standard deduction was doubled, which means that (a) many, many people who used to itemize (and thus include mortgage interest payments) would no longer do so (b) this deduction somewhat levelled the playing field between median renters and median mortgage holders. To have enough mortgage interest payments that you can itemize deductions implies a very substantial mortgage. $500,000 @ 4% only gets you to $20k of mortgage interest in a year, not enough (by itself) to make you itemize. So yeah, but no, except sort of.
  - monero-xmr 4y ago
    No - a fixed rate mortgage, which can be paid off early without penalty, refinanced at any time, and fully backstopped by the US government, is a luxury only possible because of subsidy. A free market for mortgages would not enable such a product, or at least not with such amenable terms.
    - ClumsyPilot 4y ago
      > A free market for mortgages would not enable such a product The complaint doesnt make sence. 'Free market' does not set fiscal policy or manage base interest rates at all. There is no subsidy - If you take a 2% mortgage and suddenly base rate goes up to 20%, the taxpayer does not pay 18%. The government would be paying itself.
benced 4y ago
Isn’t this just bad statistics? Houses that would be affordable would be bought already… there’s a selection effect.
- bdcravens 4y ago
  There's still significant construction going on, and many of those new homes are sitting on the market at prices similar to those purchased. I bought new in such a community; my section (finished last summer) was sold out pretty quickly, and the section just finishing filled in much slower, and the ones still under construction are sitting available even longer. I got caught up in the middle of the massive rise in rates. I had a lock at 3.25, but documentation requirements that were a bit onerous forced me to shop. I found a decent alternative but by that time the rates were sitting at 5.25, which would have represented a $400 payment increase for the exact same house. Fortunately I was able to get things worked out with the original lender, but $400 is a significant difference. I could have done it with a developer income, but not everyone can. Takeaway: An affordable house 2 years ago isn't the same thing as an affordable house now, even at the same price.
htag 4y ago
1. This report only looks at the 100 most populous metropolitan areas. A list that wouldn't include Reno NV or Montgomery AL. I understand that these 100 areas represent over half the population, but they also represent more expensive homes than the places not studied. This skews the percentage, and the title is over generalizing. 2. They assume a 5% down payment and a PMI in their affordability calculation, when it's common for households to make a larger downpayment. Even though they looked at single individuals when making their income calculations they did not factor in single bedroom condos/townhouses/houses as part of the housing supply. Anything with an estimated cost over 30% income is calculated as unaffordable, which is a bit low. All of these factors conspire to push the percentage high. 3. I'm actually much more interested in different numbers when looking at affordable housing. Numbers such as what percentage of household budgets are spent on housing. What is the size and quality of the average house. What is the median age of a first time home buyer. What is the rate of home ownership. The numbers aren't great there either, but they are more relevant numbers. 4. I suspect Redfin is trying to stir up a bit of FOMO. Redfin makes commission on house sales. If they can make someone feel like their opportunity window to own a home is closing they might be able to generate more sales. Maybe this is actually the case for some folk, but the economic incentive should be acknowledged.
- 2020aj 4y ago
  FOMO for buyers or sellers? Showing how unaffordable housing is right now doesn't make me more likely to rush to buy. It makes me more likely to wait. Sellers on the other hand may be more likely to come off their asking price some, which may increase overall sales.
  - htag 4y ago
    Both? I can imagine someone looking at the graph showing a decrease of affordable homes sold over time and wondering if they will soon be on the other side of the line.
    - swatcoder 4y ago
      It’s a big leap from “I can imagine someone” to “this demonstrates a meaningful financial incentive that colors the content”
darth_avocado 4y ago
Oakland affordable listings were 2% and San Francisco 0.3%. This is just ridiculous.
- hackernewds 4y ago
  The average household also does not NEED to live in Oakland or San Francisco.
  - swatcoder 4y ago
    The stores, restaurants, offices, manufacturers, warehouses, and other industries in those cities likely feel differently. They sure would struggle if all their staff had to commute from rural homesteads in Wyoming.
UIUC_06 4y ago
If the houses are unaffordable, then they will remain unsold. What am I missing? Maybe people who have more money move in from elsewhere. Or else the seller drops the price, or pulls it off the market. One last possibility: someone buys it who can't really afford it. In that case, either they eventually can make it, or they give up and sell or get foreclosed.
- hezralig 4y ago
  > What am I missing? Entities such as Blackrock. You might not be able to afford a house in the future. People may just be renting as the norm.
  - refurb 4y ago
    One of Blackrock’s biggest funds (coincidentally doing quite poorly) was $69B. It was a global fund. The value of residential real estate in the US is
    - EVa5I7bHFq9mnYK 4y ago
      ChatGPT timed out?
      - refurb 4y ago
        Total value of US residential real estate is $4,225B. Blackrock’s fund is 1.6% of that, if it were exclusively a US fund, which its not.
- t-writescode 4y ago
  Regular people can't purchase it, but extremely wealthy investors can, and then they rent the property out for >= the mortgage rate, and they raise the cost year over year to higher than their mortgage, making more and more money, and costing the regular person more and more and more, such that the regular person can never catch up and be able to afford a down payment themselves. That's literally what's happening in the world at present.
mullingitover 4y ago
Housing can either be affordable for most people or it can be a safe, lucrative investment. It will never be both, but the people who expect the latter vote and vigorously involve themselves in the legislative process. Eventually the landed gentry will have to be brought to heel, but they’re not going down without a fight.
- twblalock 4y ago
  > Housing can either be affordable for most people or it can be a safe, lucrative investment. For most of the period since WWII housing was both affordable and a good investment. We have no "landed gentry." Stop sharpening your guillotine and deal with reality. People who can afford housing are not guilty of anything -- we should celebrate success, rather than meet it with envy and veiled threats.
  - jackstraw14 4y ago
    > We have no "landed gentry." It's just a bit less immediately tangible than it used to be. It's still there, and the market still ebbs and flows.
    - twblalock 4y ago
      One of the things about "landed gentry", in the countries where they actually exist, is that they inherited their land. In America almost all of the homes sold today are purchased with money from income, rather than being inherited. Almost all of the people who are buying homes today can afford them by themselves, based on their income. They aren't "landed gentry", they are just successful people. To demean them by implying they don't deserve their success is insulting and wrong. That is very different than being angry that the Compte du Whatevertheheck inherited a chateau from his parents. And it requires a different response than fulminating about how the "landed gentry will have to be brought to heel" which is total nonsense.
      - Arkhaine_kupo 4y ago
jhoechtl 4y ago
So 79% of theses houses weren't sold? If no, prices will likely adjust, unless those selling are not in need for the money. If yes, * the headline is either false because of these 79%, people re-adjusted their behaviors in order to be able to afford, which would make it a regular transaction. You can't buy without shifting your current life-style. * only the rich could buy, further adding to inequality. Nothing can prevent that from happening but state regulation.
- Oxidation 4y ago
  > So 79% of theses houses weren't sold? Likely they were bought by people who already have houses, as investments. Your logic, that over-expensive housing won't sell at all, only holds if people are only buying houses that they will live in: to a first approximation, people generally live in just one house.
amir734jj 4y ago
How can we do something about it? I think we as HN community can come up with a solution to make housing affordable again. I'm open.
deleted 4y ago
[deleted]

210 points by jackcosgrove 4y ago

>it’s mostly due to the fact that higher mortgage rates made the listings hitting the market less affordable House prices didn't appreciate faster, mortgage rates went up. A great transfer of wealth from the property tax man to the banker is afoot. >Only 9% of homes for sale last year were affordable for the typical Black household, compared with 28% for the typical white household and the lowest share of any race in this analysis. That seems expected when you account for the fact that blacks have larger families. I don't know why every article on housing has to bring in identity politics when it's clear that having more children raises your housing cost, independent of race.

Kye 4y ago
https://www.census.gov/data/tables/2016/demo/families/cps-2016.html https://www.census.gov/data/tables/2016/demo/families/cps-20... "Table AVG1. Average Number Of People Per Household, By Race And Hispanic Origin, Marital Status, Age, And Education Of Householder: 2016" Looks like 2.50 for white- and black-led households and doesn't change enough to account for the difference any way you slice it. Of course, that doesn't say anything about composition, especially with younger families now that the demographic effects of America's long history of segregation and ongoing redlining are just barely starting to fade. Where did you get your stat from?

WalterBright 4y ago

It's the inevitable result of a rapid population increase and endless roadblocks to building more housing.

_cenw 4y ago
15 million vacant homes in the United States would like to disagree with you.
- WalterBright 4y ago
  Depends on why they're vacant. Many homes are vacant because it takes months to sell them. Some are vacant because nobody wants to live there (Detroit and other declining locales). Some are vacant because they are undergoing renovation.

zephrx1111 4y ago

Lie like this: 90% of students have difficulty to learn high school math.

more_corn 4y ago

Housing is expensive in part because interest rates are high. Interest rates will come down when inflation is under control. Inflation is still up because… housing costs are elevated. GOTO 1

hifromLA 4y ago

I often wonder how this story ends. I think there’s two paths: The first, where we don’t make substantial change and renting for life becomes a norm for all but the wealthiest of the wealthiest. First in the large coastal cities then in more and more American cities over time. The second, where we rezone our cities and orient them around robust mass transit systems. We build tons of infill housing to keep up with demand and reduce our reliance on private transportation to accommodate the influx of people. If I was betting I’d bet on #1, but I hope we can do #2.

Tade0 4y ago
#2 didn't help Europe - it's the exact same story over here and housing close to mass transit disproportionally shot up in price. If anything it's the places unreachable by anything but a car that remained affordable. Case in point: one couple I know bought an apartment(so not even a detached house) in a place without any public transport whatsoever because it was roughly half the price per unit area comparing to the equivalent in the city. They now need a car to do even the most basic things, but at least they have their own place to live. As long as real estate is seen as an investment opportunity, this will continue.
anonymouskimmer 4y ago
I would like to see more distribution in jobs. Starting with remote jobs and continuing with distributed work locations for non-remote jobs (to smaller cities and towns).
- crooked-v 4y ago
  That wouldn't fundamentally fix the issue in the long run, just delay it until housing also becomes completely unaffordable in the mid-size cities people move to from the too-expensive big cities.
  - anonymouskimmer 4y ago
    It really depends on what carrying capacity our population increase stops at.

throwaway09223 4y ago

There are three kinds of lies: lies, damned lies, and statistics - Twain Key observations: * All else being equal, we would expect 50% of homes to be unaffordable to a median buyer. This is the reasonable base figure (not zero). We would expect 2 in 5 if everyone were buying homes they could properly afford. * But they're comparing median county incomes to homes in a metro area. For example they call out Boise, ID but use income from Ada county (already 20% lower!). This issue alone could account for the difference. * There is also an issue of counting homes for sale, vs homes in general. If more expensive homes are sold more often (or, are listed for sale longer - say years - because they're unique) then we will see a skew towards more expensive homes being listed more frequently. It won't accurately represent the actual underlying home inventory. I recommend not reading too much into these numbers.

lkrubner 4y ago
"All else being equal, we would expect 50% of homes to be unaffordable to a median buyer." Unaffordable? Why? There is a difference between "dislike" and "unaffordable." I'd expect the median buyer to want a house that is better than what 50% of buyers will settle for, but that is not the same as "unaffordable." If a society does a good job of providing housing then 100% of housing should be affordable. Put differently, if housing is affordable for the poorest citizens, then it is affordable for 100% of the population.
- deleted 4y ago
  [deleted]
- ClumsyPilot 4y ago
  this is a surprisingly good point.
- throwaway09223 4y ago
  "If a society does a good job of providing housing then 100% of housing should be affordable." This can never be true, it's a mathematical impossibility. Housing is not equal. There are always preferred units. A skyscraper will have a side with a better view, people will prefer to live near the top rather than the bottom, people will prefer bigger units with better amenities, etc. It's impossible to solve this by "providing housing" because no matter how much you build it cannot solve the issue of relative value. So no, housing cannot ever be 100% affordable under any kind of market economy system. People with money will always be able to out-bid people without. People will always be able to construct homes which are better than others -- and this is a very good thing!

M3L0NM4N 4y ago

Not saying we don't need more affordable housing in the US (we absolutely do), but I would expect rich people to own more homes than the typical household, so I don't think this stat is as egregious as it initially appears. It wouldn't be unordinary for a rich person to own 3 unaffordable homes for the typical household, whereas the typical household will only own 1 affordable home.

SamoyedFurFluff 4y ago
Yeah but there are way fewer rich people than there are typical people. Even if an every wealthy person owns 3 homes, wealthy people are not 33% of all homeowners(or families trying to become homeowners).
deleted 4y ago
[deleted]
zuminator 4y ago
Even if that scenario were true and we were to generously call "rich" the top 10% of the income distribution, and let's go further and discount the entire bottom 50% of households as renters, then the naive breakdown would be 3 "unaffordable" homes owned by the 10th (richest) decile, 4 owned by the 6-9th deciles, and 0 homes owned by the rest. So 43% (3/7) of homes should be priced for the rich and 57% for the non-rich. The fact that it deviates so egregiously from that is pretty striking, I think. The graphic indicates that as recently as ten years ago, 50% of homes were affordable to the median household. Seems clear that the US is simply not building nearly enough homes in places where people want to live, and therefore what is being put up for sale fetches a huge premium. That works out great for home builders and people who are already homeowners and are seeing their homes appreciate in value, and since people who are truly wealthy willing pay a premium to buy property in locations with restrictive housing laws, there's a disincentive to alter the status quo.

spaceman_2020 4y ago

Housing speculation is going to be the downfall of western-style capitalism. Outside of a small percentage of upper-middle class and rich people, there is deep frustration about the housing situation among most people.

iExploder 4y ago
you are right and TBH this crap has to stop... especially since there are people with questionable sources of income buying up property (speaking about EU) further propagating this issue...
anonymouskimmer 4y ago
> western-style capitalism. It's happening in China, too.
- deleted 4y ago
  [deleted]

hn_throwaway_99 4y ago

I think the first bar graph in this article is excellent. I was actually pleasantly surprised that you only had to go back to 2013 to find a situation where 50% of houses for sale were affordable on the median income, which is what you would expect in a balanced situation. In terms of "where this ends", that graph actually made me more hopeful, because it highlights the transitory nature of the current situation. The reason for-sale inventory is currently so unaffordable is you had a ton of people who paid top dollar for houses in the past few years, but at rock bottom rates. Now rates have skyrocketed, but unemployment is also really low, so at present few people are forced to sell. So you have a ton of people who just refuse to sell right now, because the price would be drastically lower than what they paid when they bought, and they're sitting on long-term mortgages with rates that they'll never see again in their lifetimes. At some point, either inflation will catch up with home prices, or people will eventually be forced to sell (not just due to job loss but for tons of other reasons that people are putting off right now because they don't want to sell at a loss). The overhang could easily last years, though.

slantedview 4y ago
> The reason for-sale inventory is currently so unaffordable is you had a ton of people who paid top dollar for houses in the past few years, but at rock bottom rates That's part of it. The other part is that builders stopped building enough to keep up with population growth over the last decade, which contributed to the massive inventory shortage. Couple that with the supply side crunch of the pandemic, which made it more expensive than ever to build, and we have a perfect storm.
- nerdponx 4y ago
  There was an article posted here a while ago about how the supply of smaller starter homes specifically is much lower than it used to be in the past.
- crooked-v 4y ago
  Of course, much of that is that many major cities effectively stopped builders from building anything. See, for example, Santa Monica, which allowed a total of 225 new housing units per year for the past twenty years, and where there are now thousands of new units in planning this year because of California's builder's remedy rules bypassing local refusal.

lunaru 4y ago

Just offering up a food for thought, as I recently did some research in the cost of construction (for the Bay Area, California): I see a lot of comments denouncing NIMBY-ism for the lack of construction or other reasons to answer the question of "Why not just build more housing?" but I suspect this, as true as it is, is the most popular talking point because it's politically a juicy topic to talk about. However, at least in HCOL places like the Bay Area, there is also another very basic economic reason: Construction is simply too expensive. The cost per square foot of standard construction (wood frame, slab foundation, nothing fancy in terms of doors and windows) is about $450-$550 per square foot. This sets a real hard lower bound on the price of net-new housing. If you're talking larger buildings (more concrete, steel frame, drilled pier foundations in consideration of soil conditions and structural weight) the costs start sky rocketing to unbelievable numbers. Sure we can point at bureaucracy and the permitting process, but when we're talking about large scale construction of SFH and multi-unit residential buildings, the permitting and legal barriers are a small slice of the overall cost pie. In the Bay Area, and I suspect soon in various geo areas, labor is simply too expensive. (And labor is an input to a lot of costs along the supply chain as well, like wood, concrete, steel, and glass.) In a culture where we all strive to be white collar workers abstracted away from the real physical reality that our world still runs on physical objects, most importantly housing, perhaps "learn to code" is not the universal answer and there needs to be just as much "learn to plumb" or "learn to concrete". And I know this last point is politically touchy, but big buildings housing hundreds and thousands of residents simply don't get built by an all-middle-class society. You need cheap labor (or better yet cheap automation?) so that this housing problem is tractable at an economic level.

concordDance 4y ago
Why is construction so much more expensive than 70 years ago?
urthor 4y ago
$450 to $550 seems like the price for detached homes. For a 2BR apartment at 850 sqft, that's $425,000. In the Bay Area I presume, Anecdotally, from memory, the price of high quality apartment, globally, varies around the $125,000 to $200,000 USD mark. Depending as you say, on materials. The interesting fact I was told is this price scales linearly with high rise, for quite a long time. 85 stories can and will average out to the magic $200,000. Even presumably adding a Bay Area markup, a $300,000 cost of construction is eminently affordable. For 2BR apartments for childless couples, $300,000 is a excellent. To me, the obstacle is purely zoning and supply side constraints for large high rises. Singapore style high rises given proper zoning would provide umpteenth $250,000 two bedroom apartments, on Singapore sized parcels of land. Providing sufficient land, construction of high rise units would grossly improve the housing affordability situation. It's purely a zoning/public services provisioning issue.

monero-xmr 4y ago

Fixed rate mortgages, which are extremely common in the US especially for average priced homes, maintain the same monthly payment for 30 years. This is a great deal for buyers - it’s a subsidy paid for by taxpayers. My first home was about 45% of my income. 15 years later (I rent it out now) it’s absurdly affordable for the area. Combined with workers’ natural tendency to increase their income as years of experience increase, what is unaffordable at the time of purchase easily becomes more affordable when given time.

PaulDavisThe1st 4y ago
> it’s a subsidy paid for by taxpayers. I think you're referring to the tax credit for mortgage interest payments? If so ... this subsidy ironically only applies to those carrying the largest mortgages. During the Trump administration, the standard deduction was doubled, which means that (a) many, many people who used to itemize (and thus include mortgage interest payments) would no longer do so (b) this deduction somewhat levelled the playing field between median renters and median mortgage holders. To have enough mortgage interest payments that you can itemize deductions implies a very substantial mortgage. $500,000 @ 4% only gets you to $20k of mortgage interest in a year, not enough (by itself) to make you itemize. So yeah, but no, except sort of.
- monero-xmr 4y ago
  No - a fixed rate mortgage, which can be paid off early without penalty, refinanced at any time, and fully backstopped by the US government, is a luxury only possible because of subsidy. A free market for mortgages would not enable such a product, or at least not with such amenable terms.
  - ClumsyPilot 4y ago
    > A free market for mortgages would not enable such a product The complaint doesnt make sence. 'Free market' does not set fiscal policy or manage base interest rates at all. There is no subsidy - If you take a 2% mortgage and suddenly base rate goes up to 20%, the taxpayer does not pay 18%. The government would be paying itself.

benced 4y ago

Isn’t this just bad statistics? Houses that would be affordable would be bought already… there’s a selection effect.

bdcravens 4y ago
There's still significant construction going on, and many of those new homes are sitting on the market at prices similar to those purchased. I bought new in such a community; my section (finished last summer) was sold out pretty quickly, and the section just finishing filled in much slower, and the ones still under construction are sitting available even longer. I got caught up in the middle of the massive rise in rates. I had a lock at 3.25, but documentation requirements that were a bit onerous forced me to shop. I found a decent alternative but by that time the rates were sitting at 5.25, which would have represented a $400 payment increase for the exact same house. Fortunately I was able to get things worked out with the original lender, but $400 is a significant difference. I could have done it with a developer income, but not everyone can. Takeaway: An affordable house 2 years ago isn't the same thing as an affordable house now, even at the same price.

htag 4y ago

1. This report only looks at the 100 most populous metropolitan areas. A list that wouldn't include Reno NV or Montgomery AL. I understand that these 100 areas represent over half the population, but they also represent more expensive homes than the places not studied. This skews the percentage, and the title is over generalizing. 2. They assume a 5% down payment and a PMI in their affordability calculation, when it's common for households to make a larger downpayment. Even though they looked at single individuals when making their income calculations they did not factor in single bedroom condos/townhouses/houses as part of the housing supply. Anything with an estimated cost over 30% income is calculated as unaffordable, which is a bit low. All of these factors conspire to push the percentage high. 3. I'm actually much more interested in different numbers when looking at affordable housing. Numbers such as what percentage of household budgets are spent on housing. What is the size and quality of the average house. What is the median age of a first time home buyer. What is the rate of home ownership. The numbers aren't great there either, but they are more relevant numbers. 4. I suspect Redfin is trying to stir up a bit of FOMO. Redfin makes commission on house sales. If they can make someone feel like their opportunity window to own a home is closing they might be able to generate more sales. Maybe this is actually the case for some folk, but the economic incentive should be acknowledged.

2020aj 4y ago
FOMO for buyers or sellers? Showing how unaffordable housing is right now doesn't make me more likely to rush to buy. It makes me more likely to wait. Sellers on the other hand may be more likely to come off their asking price some, which may increase overall sales.
- htag 4y ago
  Both? I can imagine someone looking at the graph showing a decrease of affordable homes sold over time and wondering if they will soon be on the other side of the line.
  - swatcoder 4y ago
    It’s a big leap from “I can imagine someone” to “this demonstrates a meaningful financial incentive that colors the content”

darth_avocado 4y ago

Oakland affordable listings were 2% and San Francisco 0.3%. This is just ridiculous.

hackernewds 4y ago
The average household also does not NEED to live in Oakland or San Francisco.
- swatcoder 4y ago
  The stores, restaurants, offices, manufacturers, warehouses, and other industries in those cities likely feel differently. They sure would struggle if all their staff had to commute from rural homesteads in Wyoming.

UIUC_06 4y ago

If the houses are unaffordable, then they will remain unsold. What am I missing? Maybe people who have more money move in from elsewhere. Or else the seller drops the price, or pulls it off the market. One last possibility: someone buys it who can't really afford it. In that case, either they eventually can make it, or they give up and sell or get foreclosed.

hezralig 4y ago
> What am I missing? Entities such as Blackrock. You might not be able to afford a house in the future. People may just be renting as the norm.
- refurb 4y ago
  One of Blackrock’s biggest funds (coincidentally doing quite poorly) was $69B. It was a global fund. The value of residential real estate in the US is
  - EVa5I7bHFq9mnYK 4y ago
    ChatGPT timed out?
    - refurb 4y ago
      Total value of US residential real estate is $4,225B. Blackrock’s fund is 1.6% of that, if it were exclusively a US fund, which its not.
t-writescode 4y ago
Regular people can't purchase it, but extremely wealthy investors can, and then they rent the property out for >= the mortgage rate, and they raise the cost year over year to higher than their mortgage, making more and more money, and costing the regular person more and more and more, such that the regular person can never catch up and be able to afford a down payment themselves. That's literally what's happening in the world at present.

mullingitover 4y ago

Housing can either be affordable for most people or it can be a safe, lucrative investment. It will never be both, but the people who expect the latter vote and vigorously involve themselves in the legislative process. Eventually the landed gentry will have to be brought to heel, but they’re not going down without a fight.

twblalock 4y ago
> Housing can either be affordable for most people or it can be a safe, lucrative investment. For most of the period since WWII housing was both affordable and a good investment. We have no "landed gentry." Stop sharpening your guillotine and deal with reality. People who can afford housing are not guilty of anything -- we should celebrate success, rather than meet it with envy and veiled threats.
- jackstraw14 4y ago
  > We have no "landed gentry." It's just a bit less immediately tangible than it used to be. It's still there, and the market still ebbs and flows.
  - twblalock 4y ago
    One of the things about "landed gentry", in the countries where they actually exist, is that they inherited their land. In America almost all of the homes sold today are purchased with money from income, rather than being inherited. Almost all of the people who are buying homes today can afford them by themselves, based on their income. They aren't "landed gentry", they are just successful people. To demean them by implying they don't deserve their success is insulting and wrong. That is very different than being angry that the Compte du Whatevertheheck inherited a chateau from his parents. And it requires a different response than fulminating about how the "landed gentry will have to be brought to heel" which is total nonsense.
    - Arkhaine_kupo 4y ago

jhoechtl 4y ago

So 79% of theses houses weren't sold? If no, prices will likely adjust, unless those selling are not in need for the money. If yes, * the headline is either false because of these 79%, people re-adjusted their behaviors in order to be able to afford, which would make it a regular transaction. You can't buy without shifting your current life-style. * only the rich could buy, further adding to inequality. Nothing can prevent that from happening but state regulation.

Oxidation 4y ago
> So 79% of theses houses weren't sold? Likely they were bought by people who already have houses, as investments. Your logic, that over-expensive housing won't sell at all, only holds if people are only buying houses that they will live in: to a first approximation, people generally live in just one house.

amir734jj 4y ago

How can we do something about it? I think we as HN community can come up with a solution to make housing affordable again. I'm open.

deleted 4y ago

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