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> Demand comes in two forms. Demand for housing and demand for property investments. We should not lose site of the drivers of the second type of demand. Has t

> Demand comes in two forms. Demand for housing and demand for property investments. We should not lose site of the drivers of the second type of demand. Has the US ever lost sight of the second kind? To me (as someone who feels hopeless about home ownership) that seems to be the only demand we care about. There’s barely anything new being built, constant blocking by NIMBYs, and investors buying up so much property when interest rates were dirt cheap. I really wish there would be some form of housing market crash but it’s nowhere in sight. My biggest fear is it’s going to come the moment I do end up buying after saving so much.

disgruntledphd2 3y ago
> My biggest fear is it’s going to come the moment I do end up buying after saving so much. Honestly, I figured this was gonna happen after Covid, when we finally bought (in a good area, but a small house for far too much money). However, here we are almost three years later, and prices have again increased such that I'm looking at a nominal gain of like 10% (now obviously inflation played a role, and we've put a bunch of money into the house). The irish housing market just defies all understanding. We have whole areas of the capital city where the median price of housing is 650k euro, when the top 10% household incomes start at about 100k, and you can only borrow 4 times (for the last year or so) of your total household income. It. Makes. Absolutely. No. Sense. And this insanity cost me a bunch of money as I didn't purchase in 2019 because prices seemed too high. Something something markets irrationality, me solvent.
- reducesuffering 3y ago
  It makes sense if you don't expect the median housing price to be determined by the immediate 4x income loan without any savings. If you think housing price should be income * borrow rate, then you're entirely discounting any amount of time saving up, like a 22 year old graduate that rents for 13 years and then after saving up for that time decides to dump 300k into property and take out a loan of 350k (4 * 87.5k/yr). Also a huge factor, housing price is determined at the margins. If 70% of people already own homes, it doesn't matter what their incomes are. Only the 30% that are competing and trying to outbid each other, which of course is going to skew high income. I.e in the extreme, you could have all of Ireland own their 300k homes and make 30k euro, but if you suddenly get 1% new population that needs to buy a home, and no one wants to sell, then the new 1% can outbid each other to the tune of offering 800k for homes, and it wouldn't matter that the people making 30k euro couldn't afford 800k homes, they already have them.
  - disgruntledphd2 3y ago
    That doesn't explain the huge parts of Dublin with a 650k median price in a country where a household income of 100k puts you in the top 10%. That's the part that seems insane to me. Like some proportion are cashing out previous gains but it's hard to believe that this is more than 50% of them.
    - reducesuffering 3y ago
      Yes it does. You're assuming that the median person's income should be affording the median home price. But that's incorrect because it doesn't take into account peoples' existing asset values. Again, if most people have 300k home assets, and then recently high income people competitively outbid each other to raise those assets to 600k prices, only the high income people were attempting to buy a small % of the homes. But, it raised everyone else's prices to 600k. Now they have that as equity, even though their incomes were still like 40k, they're not currently on the market attempting to buy a house, and when they do, they'll have existing 600k equity.
      - disgruntledphd2 3y ago
        > in a country where a household income of 100k puts you in the top 10%. Note this point I made. If we assume that I earn 100k, and have no house. I have savings of 50k, and want to buy a house. I can buy a house of 450k, four times my income plus my savings. If I (theoretical I, at least) cannot afford the median (i.e. 50% of properties sell for more than this price) price in basically half of Dublin (not a small, city centre area), despite being in the top 10% of income earners, then something seems off with the market. Even if I have a house worth 300k somewhere else, and everything else remains the same, I won't be able to release all the equity in this house as I've probably only paid half the mortgage (being generous) so I have an extra 150k. I still don't have enough money to buy the median house in these areas, despite both having a house to release equity from, and a top 10% household (note not individual) income. This seems very strange to me, but then I live here and have spent a long time trying to understand what's happening in the irish property market. > Again, if most people have 300k home assets, Note that this would be a mortgage free house in most of Ireland, until recently at least. > But, it raised everyone else's prices to 600k. This won't raise the median price to 600k, it will take way more sales to shift the median (if we're talking about the mean then this is more likely).
robocat 3y ago
Homes are hovering about 65% owned by occupiers in the US, chart: https://en.m.wikipedia.org/wiki/File:Home_Ownership_rate.png https://en.m.wikipedia.org/wiki/File:Home_Ownership_rate.png So I presume the other 35% is investors? And obviously banks actually own most of your home until you've paid the mortgage in full. https://en.m.wikipedia.org/wiki/Homeownership_in_the_United_States https://en.m.wikipedia.org/wiki/Homeownership_in_the_United_...

disgruntledphd2 3y ago

> My biggest fear is it’s going to come the moment I do end up buying after saving so much. Honestly, I figured this was gonna happen after Covid, when we finally bought (in a good area, but a small house for far too much money). However, here we are almost three years later, and prices have again increased such that I'm looking at a nominal gain of like 10% (now obviously inflation played a role, and we've put a bunch of money into the house). The irish housing market just defies all understanding. We have whole areas of the capital city where the median price of housing is 650k euro, when the top 10% household incomes start at about 100k, and you can only borrow 4 times (for the last year or so) of your total household income. It. Makes. Absolutely. No. Sense. And this insanity cost me a bunch of money as I didn't purchase in 2019 because prices seemed too high. Something something markets irrationality, me solvent.

reducesuffering 3y ago
It makes sense if you don't expect the median housing price to be determined by the immediate 4x income loan without any savings. If you think housing price should be income * borrow rate, then you're entirely discounting any amount of time saving up, like a 22 year old graduate that rents for 13 years and then after saving up for that time decides to dump 300k into property and take out a loan of 350k (4 * 87.5k/yr). Also a huge factor, housing price is determined at the margins. If 70% of people already own homes, it doesn't matter what their incomes are. Only the 30% that are competing and trying to outbid each other, which of course is going to skew high income. I.e in the extreme, you could have all of Ireland own their 300k homes and make 30k euro, but if you suddenly get 1% new population that needs to buy a home, and no one wants to sell, then the new 1% can outbid each other to the tune of offering 800k for homes, and it wouldn't matter that the people making 30k euro couldn't afford 800k homes, they already have them.
- disgruntledphd2 3y ago
  That doesn't explain the huge parts of Dublin with a 650k median price in a country where a household income of 100k puts you in the top 10%. That's the part that seems insane to me. Like some proportion are cashing out previous gains but it's hard to believe that this is more than 50% of them.
  - reducesuffering 3y ago
    Yes it does. You're assuming that the median person's income should be affording the median home price. But that's incorrect because it doesn't take into account peoples' existing asset values. Again, if most people have 300k home assets, and then recently high income people competitively outbid each other to raise those assets to 600k prices, only the high income people were attempting to buy a small % of the homes. But, it raised everyone else's prices to 600k. Now they have that as equity, even though their incomes were still like 40k, they're not currently on the market attempting to buy a house, and when they do, they'll have existing 600k equity.
    - disgruntledphd2 3y ago
      > in a country where a household income of 100k puts you in the top 10%. Note this point I made. If we assume that I earn 100k, and have no house. I have savings of 50k, and want to buy a house. I can buy a house of 450k, four times my income plus my savings. If I (theoretical I, at least) cannot afford the median (i.e. 50% of properties sell for more than this price) price in basically half of Dublin (not a small, city centre area), despite being in the top 10% of income earners, then something seems off with the market. Even if I have a house worth 300k somewhere else, and everything else remains the same, I won't be able to release all the equity in this house as I've probably only paid half the mortgage (being generous) so I have an extra 150k. I still don't have enough money to buy the median house in these areas, despite both having a house to release equity from, and a top 10% household (note not individual) income. This seems very strange to me, but then I live here and have spent a long time trying to understand what's happening in the irish property market. > Again, if most people have 300k home assets, Note that this would be a mortgage free house in most of Ireland, until recently at least. > But, it raised everyone else's prices to 600k. This won't raise the median price to 600k, it will take way more sales to shift the median (if we're talking about the mean then this is more likely).

robocat 3y ago

Homes are hovering about 65% owned by occupiers in the US, chart: https://en.m.wikipedia.org/wiki/File:Home_Ownership_rate.png https://en.m.wikipedia.org/wiki/File:Home_Ownership_rate.png So I presume the other 35% is investors? And obviously banks actually own most of your home until you've paid the mortgage in full. https://en.m.wikipedia.org/wiki/Homeownership_in_the_United_States https://en.m.wikipedia.org/wiki/Homeownership_in_the_United_...