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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 sho

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).
    - reducesuffering 3y ago
      > then something seems off with the market That, there is no debate. > what's happening in the irish property market. This is happening in many countries' property markets, including the US, Canada, UK, Australia, etc. Two monetary factors can be used to purchase a house: income and wealth. You are assuming income should the only factor at play (it ought to be, but it is not), but not realizing that wealth is also used. The problem is that houses are now treated as a wealth asset, like a stock, with the expectations of 5-10% YoY growth, so there is an enormous appetite for dumping large savings/wealth into them. > 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). Do you price a stock based on the median transaction of the last 10 years? No, because they are usually increasing in value. The most recent transactions provide a better estimate on approximately what the median or mean is. The shorter the time interval, the less data points, but the more accurate. The crux of what you're missing is that home prices for everyone are set on the margin of most recent transactions, and income isn't the whole story, as that assumption isn't making sense to you or the data. It's because there is saved up wealth that is a large factor in price too. The solution is to build enough to break housing as an indefinite 7% YoY asset, which will stop this awful positive feedback loop.
disgruntledphd2 3y ago
And at the margin the median price should be determined by home loan plus 10% deposit.
- reducesuffering 3y ago
  Yes, but don't assume 100% of people are home buyers right now. Many already own the asset, so it's safe to say maybe the top 5% are buying via income, and some X% are also using existing wealth/savings.
frumper 3y ago
>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 So that 22 year old starts out making the median, pretty good. Thats' 25k/year in 2010. 13 years later he's kept up and is making 39k now. He's supposed to have saved 300k to dump into a house in that time? That's probably more than 100% of his take home pay during that time period.

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).
  - reducesuffering 3y ago
    > then something seems off with the market That, there is no debate. > what's happening in the irish property market. This is happening in many countries' property markets, including the US, Canada, UK, Australia, etc. Two monetary factors can be used to purchase a house: income and wealth. You are assuming income should the only factor at play (it ought to be, but it is not), but not realizing that wealth is also used. The problem is that houses are now treated as a wealth asset, like a stock, with the expectations of 5-10% YoY growth, so there is an enormous appetite for dumping large savings/wealth into them. > 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). Do you price a stock based on the median transaction of the last 10 years? No, because they are usually increasing in value. The most recent transactions provide a better estimate on approximately what the median or mean is. The shorter the time interval, the less data points, but the more accurate. The crux of what you're missing is that home prices for everyone are set on the margin of most recent transactions, and income isn't the whole story, as that assumption isn't making sense to you or the data. It's because there is saved up wealth that is a large factor in price too. The solution is to build enough to break housing as an indefinite 7% YoY asset, which will stop this awful positive feedback loop.

disgruntledphd2 3y ago

And at the margin the median price should be determined by home loan plus 10% deposit.

reducesuffering 3y ago
Yes, but don't assume 100% of people are home buyers right now. Many already own the asset, so it's safe to say maybe the top 5% are buying via income, and some X% are also using existing wealth/savings.

frumper 3y ago

>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 So that 22 year old starts out making the median, pretty good. Thats' 25k/year in 2010. 13 years later he's kept up and is making 39k now. He's supposed to have saved 300k to dump into a house in that time? That's probably more than 100% of his take home pay during that time period.