Opinions: What's causing the home price crisis?

[LostDollar]

Tahoe rays exactly correct . 84% of all home Loans are at 4% or less 7% now . Education time . I’m locked in my loan at 3% . I lost my job and I have 3 kids and a wife . My house payment is $1500 a month . If I lose my house and have to rent a place my payments $3-$3500 a month . I’ll stand on the street corner and beg and Steal to make my payment . The alternative is being on the street homeless as I can’t afford rent . My neighborhood has had zero homes for sale for over a yr . The moral of the story is nobody’s giving up their 3% mortgage thus zero inventory. Even if builders build like crazy crazy house prices x 7% mortgages means unaffordable .

You'd just have to sell some of your vast real estate holdings to make ends meet.

 

[LostDollar]

roughly 40 years ago a company I worked for brought a fellow from California into company management. He kept, and rented out, his house in California in case he wanted to move back. Five or six years later his situation with the company was terminated and he did move back.

Maybe the rest of the country is just starting to catch up to California in terms of obscene home price increases.

 

[Al3x Lee]

Another way to look at it is that the value of the dollar has gone down, so it takes more dollars to buy the same house. That doesn't mean the house went "up".

Isn't that the concept of inflation, which this chart is adjusted for?

I'll add to my other response.

I would love to see this graph based on sq feet.

Houses have just become stupidly big vs. A few decades ago.

Pricing is often based on sq foot comps so people keep building bigger houses, guess what they sell for more.

Interesting thought, but I see 600 sq/ft houses built in 1934 in my area selling for north of 200K with next to no land and no garage. Even if we're extremely generous and consider the price of a similar house before the great depression, it's purchase price would have been around $3,000 in 1930 dollars. That means if it just adjusted with inflation, it should sell for about $55,000 today. Instead we're seeing houses like that sell for $200-300K in neighborhoods that aren't sought after.

I think that's too much variable in price to say it's an inflationary or square footage issue.

 

[Markthebroker]

Isn't that the concept of inflation, which this chart is adjusted for?

Ahh, so it is.

 

[Tahoe Ray]

Isn't that the concept of inflation, which this chart is adjusted for?



Interesting thought, but I see 600 sq/ft houses built in 1934 in my area selling for north of 200K with next to no land and no garage. Even if we're extremely generous and consider the price of a similar house before the great depression, it's purchase price would have been around $3,000 in 1930 dollars. That means if it just adjusted with inflation, it should sell for about $55,000 today. Instead we're seeing houses like that sell for $200-300K in neighborhoods that aren't sought after.

I think that's too much variable in price to say it's an inflationary or square footage issue.

I don't think real estate is just general inflation. It has a lot of other factors baked in.

The average home size has almost tripled since 1930. I understand what you're saying but homes don't walk in lockstep with inflation.

And if they can actually sell that house for 200k, it obviously is sought after. Look at cities like Baltimore and Buffalo if you want to see places where the neighborhoods truly aren't sought after. They're practically giving houses away.

 

[Al3x Lee]

I don't think real estate is just general inflation. It has a lot of other factors baked in.

Agreed, I think it used to be a commodity that turned into a platform for investment. (And many other factors as you stated)

The average home size has almost tripled since 1930. I understand what you're saying but homes don't walk in lockstep with inflation.

Yeah, but why though? That's what has created the affordability crisis. If this weren't the case, people wouldn't care as much about the 4-5% change in interest rates.

And if they can actually sell that house for 200k, it obviously is sought after. Look at cities like Baltimore and Buffalo if you want to see places where the neighborhoods truly aren't sought after. They're practically giving houses away.

Let's not get in the weeds about exceptions to the rule. In 99%+ of American cities, this chart holds true. If I wanted a cheap house, I could go buy one for next to nothing in Flint, Michigan, but then we would get into a discussion about what economic factors are driving the exception in that area.

 

[Tahoe Ray]

Yeah, but why though?

I lived in apartments in NYC for the first 12 or so years of my adult life. Always thought we had more than enough room.

Then I got a house that was almost double the size of my last apartment. It was great.

Our current house is double the size of the first. Sometimes it feels small (especially with kids)...lol.

I guess once you get a taste of having more space, you want it and it's not like our country doesn't have a ton of land to build houses on.

All anecdotal so I don't know if any of this is valid but it's how I view it.

 

[Al3x Lee]

What's your interest rate on your mortgage?

Mine is under 3%. Like a lot of people I know. I can pay off my house in half of the time than if I got a mortgage today. No way I'd sell.

Mine is also under 3%, and I also wouldn't sell. The name of the game used to be, move to a bigger house once your family grows, but many are finding that to be an impossibility with prices outpacing their income. I know people who owned a house 5 years ago and sold it to get the equity with plans to move into something else. Those same people are renters today because they've been priced out of homes even smaller than the ones they used to own, despite their incomes increasing substantially in that time.

No supply = rising home prices.

Couple that with private equity firms snapping up properties all over the country to rent to locum workers, perfect storm.

It's not like our country doesn't have a ton of land to build houses on.

This is true, and yet pricing remains high, even in states that allow for urban sprawl. Oregon loves their urban growth boundaries, so it makes sense the supply is more limited here.

I do think it's a complex problem, though, and I think most of what has been said in this thread is valid, but it's all smaller facets of the larger picture.

I think the real answer is obvious. We need ACV only property insurance. (This message is paid for by the Al3x Lee for California Insurance Commissioner Committee Group Campaign tm)

 

[LostDollar]

".......and it's not like our country doesn't have a ton of land to build houses on."

Well.....................................

Maybe it (the land) will be needed for cemeteries. and then "they" will have to plow up cemeteries to get enough land to grow wheat.