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U.S. home prices have far outpaced paychecks. See what it looks like
- nojvek 2y agoExplains the decline in birth rates.
- 6LLvveMx2koXfwn 2y agoInteresting that this report is produced by an academic institute in the US (in this case Harvard), in the UK the government releases statistics annually [1] around the same issues of affordability and access to housing. 1. https://www.ons.gov.uk/peoplepopulationandcommunity/housing/bulletins/housingaffordabilityinenglandandwales/2023 https://www.ons.gov.uk/peoplepopulationandcommunity/housing/...
- seydor 2y agoErgo, people should just own houses instead of working
- kelseyfrog 2y agoThere were times a few years ago where my estimated home value rose faster in one month than what I brought home in pay. It was wild.
- lifestyleguru 2y agoWe need Adam Smith of the new "real estate economy", e.g. buying bricks of a building instead of stocks, dividends from rent profits.
- seydor 2y agoIt's the UBI in physical form
- andrewstuart 2y agoRich people love the housing ponzi so it's only going to get worse.
- aeternum 2y agoIt's just too easy, all we had to say is that housing developers are evil capitalists and all the plebs bought it hook line and sinker. Want to build housing? Good luck with the five environmental reviews you need to submit before breaking ground. And that make sure you have enough below-market rate units, and parking, and you only use union labor. oh does all that make the economics difficult? Such a shame, maybe it's just not a fit to build around here.
- Glyptodon 2y agoI mean the numbers are just bad unless something changes. I have a small house with a low mortgage rate and low payment that's more than doubled in value over the last 10 years. Yet there aren't any near term realistic situations where it's worth it to sell unless interest rates go up by quite a bit more or the overall cost to rent crashes. As it stands, rental income would be like 3.x the monthly cost. Even accounting for vacancy while assuming any kind of continued value growth is comfortably ahead of any reduction in payment on a new place that I'd get from selling. The only things that make selling look attractive are much higher interest rates (IE something that would let common bonds approach 10% yield), or significant depreciation in home prices, or some combo of the two, neither of which look that likely for now. (I guess substantially lower rates without significant price changes would be a third option that seems even less healthy.) At the same time I'd love to have more space, my house is waaay too cramped. But purchasing also looks like a non wonderful choice (since it's likely to increase monthly costs by > $2k for a mediocre larger house even taking rental picture into account). At the same time you'd think at some point declining birth rates would become a factor and make houses cheaper again. Problem is also maybe partially that geographic concentration of economic activity into the top urban centers outweighs overall population behavior? And that household size it probably increasingly one person.
- thriftwy 2y agoImagine what will happen if all that extra cash went into private space exploration instead.
- shiroiushi 2y agoThat's a terrible idea. It's far more important to society that realtors and title lawyers get rich.
- Aeolun 2y agoThis story is the same nearly all over the world. The earth is getting pretty full.
- vsuperpower2020 2y agoWhere did you hear that house prices are expensive because the "earth is full"? Did you notice that housing prices doubled and almost tripled in the last 4 years alone?
- gyudin 2y agoA lot of units are straight empty, but large landlords just refuse to lower rent prices.
- somnic 2y agoIf I recall correctly, what's happening here is that a property is valued at a particular level based on the rent, and the owner can borrow against that to make other investments. Demand drops, and lower rents would affect the valuation of the property, the owner wouldn't be eligible to borrow as much against it any more and may not have the liquidity to readjust things. So it's more profitable and secure to keep the rents at a higher, but vacant, level. It kind of suggests the solution here is more regular and rigorous revaluations of property, or limits on how much it can be leveraged.
- pas 2y agoVacancy in areas where people want to live are historically low. Bad valuation in contracts doesn't change the big picture. (As it mostly affects office buildings.) Urbanization is ongoing for hundreds of years (and got absolutely turbocharged since agriculture productivity skyrocketed), but a sufficiently high number of incumbents/voters in cities don't want their city to densify, so they have the resources to block most effective redevelopments. States, governments, politics mostly managed this by providing more cheap loans/mortgages, and mostly by ignoring the problem, or even by not even believing that the demand is real. (Remember when housing was called a bubble because prices were rising too fast? Yeah, prices are much higher.) A very significant portion of young people's economic output is basically converted into spending a lot of money on shitty inefficient and extremely uneconomic housing and its consequences. (More and more and more .. and more suburbs, roads, cars, etc.)
- meragrin_ 2y ago> If demand continues to tick up while the slowdown in construction persists, the Harvard report warns that this will "risk sparking another period of rapid rent increases similar to the recent run-up that has contributed to the worst renter affordability conditions on record." That may be true in certain areas, but I don't think it applies where I live. Prices of existing homes just simply chase the cost to build a new home. The older the neighborhood, the less authoritarian the covenants are. The new development down the road start out at about $150k more for smaller lots, less house, and an HOA primed with rules ready to ream you a new one for simply breathing wrong. I poked around and some of the other recent developments have the same or similar covenants.
- HDThoreaun 2y agoMost large metros land costs around 300-500k just for an empty lot. In chicago lots are often 400k while houses next door are 550k. Clearly the cost to build the house is not the issue here.
- gyudin 2y agoI have no idea how people can afford buying a house/apartment and having kids in big cities. Feels as feasible as a space travel to Mars x) Especially with partners that are frequently so spoiled they expect you to pay for everything.
- iancmceachern 2y agoFamily money, it's the only way anymore
- gyudin 2y agoOne step from layoffs and one step from bankruptcy if I get hit with some big medical bill YOLo :)
- rand846633 2y agoYou make it sounds as if one would not choose one’s spouse.
- lifestyleguru 2y agoIt feels like entire western world is putting all their money into local real estate and magnificient seven US stocks.
- colechristensen 2y agoThere's literally just too much money. Covid involved creating many trillions of dollars right when it was about time for a recession. What those dollars are doing now that they can't just be easily taken back is... well inflation and booming stock markets and nobody getting a raise.
- lifestyleguru 2y agoIndeed, none of these trillions land in my bank account. Massive part of this surplus also goes into military spending caused by recent wars.
- badpun 2y agoUS military spending is up by only 10-15% compared to pre-COVID levels.
- harambae 2y agoTotal military spending in 2019 was approximately $746 billion (including the DoD, nuclear weapons spending under the DoE, and other defense-related activities). The projected defense spending for 2024 is around $891 billion. So roughly 19.4% in total defense spending over that five-year period. Which is not chump change, considering how high it was before.
- colechristensen 2y agoThat 19.4% increase is very near to the inflation between 2019 and 2024.
- beautifulfreak 2y agoI'd like to see an overlay showing which red areas are also college towns. Did easy student loans help fuel the increase in rents? That's what happened where I live, where dormitories are mainly for new undergrads. After a year or two, students are expected to find apartments. (And I wonder if something similar would happen if Universal Basic Income became a thing.)
- figassis 2y agoIt would absolutely happen and this is why I don’t believe in UBI. Inflation would just catch up.
- CalRobert 2y agoUBI combined with abundant housing could have a different outcome.
- figassis 2y agoPrices are not determined in a vacuum. Sellers price things as high as possible based on what they think buyers can afford. If buyers can afford more, sellers will find a way to absorb the extra liquidity in the market. We will end up where we started. The solution is not UBI, it is to make certain things basic rights, like housing, food, transportation, infrastructure, education, but not excessively cheap. So people can afford to live, but need to work harder to live better. New housing development, prices need to be reasonably anchored to what people there earn. If what people earn in that location goes down next year? So does rent/housing prices. Exceptions for higher end housing and things can be made. This is what I think anyway, don't really have any hard science to back this up, but I have a feeling UBI will not work like we expect.
- HDThoreaun 2y agoYou forgot the supply part of supply and demand. If units are left vacant sellers have to lower their prices.
- torginus 2y agoSorry to be ignorant about this, but I just checked out the stats and the US has had like 50% population growth in the past 40 years, which is a crazy amount (proportionally more than China). Where does this come from? Natural growth? Immigration? If so, what countries do people come from? In contrast, most West-European countries (where immigration seems to be an oft-discussed issue), the growth in the same period is much more modest.
- decremental 2y ago[dead]
- yegle 2y agoGiven China's one child policy between 1980 and 2015, comparing the growth percentage between US and China probably doesn't make sense (of course China population would grow slower).
- csomar 2y ago50% population growth over 40 years is far from "crazy". Especially considering that most of the USA is empty.
- reducesuffering 2y agoThat population growth did not go into "most of the USA is empty", it went into the same metro areas of SF Bay, LA, NYC, Texas, DC, etc. contributing to the speculative investment cost of living crisis that many homeless peoples lives have been destroyed by.
- happytoexplain 2y agoYes, but we are not building in the empty area. We either need to reduce population growth, or convince politicians, voters, people looking to buy, and developers that just because we can't make a new hip metro area overnight doesn't mean we simply ignore all our available land (rather than continuously talking past each other on the issue of "we need more housing in desirable areas" vs "we need to not harm desirable areas"). Both seem like impossible tasks, depressingly.
- carabiner 2y agoDon't hate the playa hate the GAME.
- CalRobert 2y agoHow could it not? Until we no longer have a shortage of housing won't all surplus income/cash go in to outbidding our peers for the existing stock? If a town has 11 billionaires and 10 houses then the houses will presumably be a billion dollars. (That's obviously an oversimplification but you get the drift) Similarly, Ireland makes it damn near impossible to build anything and started a program to give first time buyers €20,000. New home prices went up by... around €20,000.
- lynx23 2y agoThis is why I am very sceptical about UBI.
- ActorNightly 2y agoUBI can be done, just not in a cash form. You get an efficiency apartment with all the amenites, food stamp allowance per week, healthcare, cheap android phone with internet, and a chromebook.
- CalRobert 2y agoIt's part of why "just build the damn homes" might be a simple solution but I feel like it could just work.
- darraghenright 2y agoYeah, this sounds like a classic Irish solution. It's hard to see any light at the end of the tunnel here between the shortfall, cost and availability of labour and materials, and so on. To paraphrase what someone once said on this site — housing as an investment or a human right, choose one. I bought a house in Cork city six years ago, paid more than I hoped because it's quite the fixer upper — we've done almost nothing and "the market" suggests that its value has increased about 50% since. Which is meaningless to me but means a lot to many people I know who can no longer afford a buy a home.
- CalRobert 2y agoI somehow managed to lose money because I'm an idiot. I bought a thatched house in Offaly in 2019. Then I lost insurance (like many other thatched home owners in Ireland since the last insurer stopped writing policies) and the house became uninsurable and unmortgageable. Took a huge loss on it and moved to the Netherlands, where it's still possible to get insurance on thatched homes (though I sure as hell will never have one again). Good riddance.
- boerseth 2y agoTook me a moment to get that heatmap. An axis labelled 1-10 from pale to red seemed absurd to me at first. "On a scale from-one-to-ten, how expensive are houses?" It is a shame how vulgarization of science and statistics seems to necessitate a simplification of the data set to the point where its usefulness becomes debatable. It always seems to me like I want access to the axes that they've simplified away down to just a mean or an average. I get that presenting data is hard, but if I'm left more puzzled than informed at the end, what have you really presented to me? In this case, I wish I could see the distribution of salaries through time and by location, as well as that of home prices. There ought to be a more interesting metric available than simply calculating the average of either and dividing the two.
- vasco 2y agoThe source: https://www.jchs.harvard.edu/son-2024-price-to-income-map https://www.jchs.harvard.edu/son-2024-price-to-income-map Explaining price to income ratio (the 1 to 10): https://data.oecd.org/price/housing-prices.htm https://data.oecd.org/price/housing-prices.htm
- boerseth 2y agoI was eager to see the data, but exporting from the first source only gives the same data shown in the article, although in a spreadsheet. The explanations in your second link are more like definitions than justifications for why this and those boiled down quantities are worth talking about.
- vasco 2y agoI'm not trying to excuse them, I just had similar questions and googled around a bit and those looked interesting to save the next person a couple minutes! I also shamelessly sorta use my own HN comments as a brain dump sometimes for myself in the future.
- yegle 2y agoOne big reason that CA has a reduced housing supply (therefore higher housing price) is https://en.wikipedia.org/wiki/1978_California_Proposition_13 https://en.wikipedia.org/wiki/1978_California_Proposition_13 The retired people who brought their house in 80s/90s can stay and hold onto the house for much longer, since the property tax is very "affordable". Whereas in other states, the property tax will push people to move to cheaper places during retirement years, thus increasing the supply to the market.
- foogazi 2y agoThat leaves 49 other states + territories to live in
- CalRobert 2y agoThis will _eventually_ get phased out with recent changes, but only as the owners die off. You can still pass on a residence to an heir but they have to actually live in it (within 1 year of you dying, IIRC).
- ryathal 2y agoThe effects of prop 13 are overstated. The problem is California didn't build enough where people want to live. Many states have laws restricting property tax growth, my own state limits it to the lesser of inflation or 5%. It's the lack of building that pushed prices so high that selling only makes sense to leave the state.
- HDThoreaun 2y agoNo, the effects of prop 13 are not overstated. NIMBYism is a bigger problem, but prop 13 makes it financially reckless to ever move. Yimby policy would lead to less drastic divergence between value and tax rate as value increases slower, but there would still be a gap as people who bought SFHs in the town center would see the properties value grow due to the lack of land value tax.
- ryathal 2y ago
- keiferski 2y agoSo many good things would happen if the coastal class occasionally remembered that the United States is a huge country with a vast interior. There are tons and tons of towns with affordable housing in Ohio, Kentucky, Michigan, Pennsylvania, and so on. The problem is that the incomes are lower, too – but that is fixable with remote work, companies being incentivized to hire locally, and so forth. There is really no reason why everyone needs to be centralized in 10 urban centers on the coasts.
- alexanderscott 2y agothat heatmap be like https://www.reddit.com/r/PeopleLiveInCities/ https://www.reddit.com/r/PeopleLiveInCities/