I think there's a more concrete measure of value: house prices related to income. Historically (Robert Shiller has a chart for the US going back to 1890) house prices (and mortgages and rents) have maintained a stable relationship with income. Occasionally that relationship is strained but it has usually fallen back in line. One exception to this was the extraordinary, ongoing, support to the financial system post-2008. House prices and other financial assets have ballooned in relative proportion to wage income. That's more than a perception of value, that's a matter of social stability as most people depend on the same paycheck for not only housing but food, medicine, etc, as well as housing.

The US is rotating from housing as commodity investment to housing as intergenerational asset, something which has happened in a lot of other countries already (see e.g. Western Europe, mentioned in other comments here).

House prices will remain up because any gain from sale will be plowed into the next home. It's a ratchet upward. Higher mortgage rates are somewhat irrelevant in this dynamic, because the home itself is not an asset to get capital gain from, but a claim to shelter a family for an _indefinite_ period of time in a chosen location.

USA was inoculated for a very long time, because horizontal expansion over cheap land allowed for expansion of supply. That era is over. Car and highway technology is no longer adequate to expand cheaply and still remain within viable commuting distance.

There really is no limit on how high home prices relative to income can be. When meemaw dies, her inheritance will fund the downpayment of little Sally. That's the perpetuum mobile in Europe, which the US is now cranking up as well.

Rents may still remain affordable, but home prices will detach.

> USA was inoculated for a very long time, because horizontal expansion over cheap land allowed for expansion of supply. That era is over.

True.

> Car and highway technology is no longer adequate to expand cheaply and still remain within viable commuting distance.

False. The US has mind-boggling amounts of land available. What's changed is the ability and desire to build on it. Used to be, the government would pay you (in land, anyway) to build a house. We gave railroads untold amounts of land to develop it.

These days, to build a house you pay the government for all manner of permits, studies, etc. -- and that's if they even let you build in the first place! Zoning laws prohibit new construction in overwhelming amounts of the country, especially in the most expensive areas. In NYC and SF, most existing buildings would be illegal to build under current zoning rules.

What makes building housing expensive is policy, not a lack of "cheap land".

I don't know if the same applies in Europe, perhaps not. In both Europe and the US land has long been the primary vehicle for intergenerational wealth transfer (think estates and productive land, not housing, though -- middle-class homeownership is an extremely recent phenomenon).

> What makes building housing expensive is policy, not a lack of "cheap land".

I am flummoxed every time the discussion of housing prices shows up. Seems like 95% of everyone who comments is completely clueless to the most basic aspects of it.

In the vast majority of Western regions, high home prices are caused by a deliberate decision not to allow building enough homes to match demand, in the places where people want to live. It's really that simple.

In itself, this is a state of affairs we could accept as the current democratic consensus, but it's really stupid when most discussion of the problem pretends that the root cause is something else.

I agree with current zoning and permitting is harmful. I can't wait for a better urban life here, with services and amenities in proximity, which more homes closer together would enable. I don't think it will meaningfully reduce cost of home ownership. Infill development is more expensive, and the dynamics at play (if I'm correct) are moving to a European model. Generally pointing in a direction of demand having really high ceilings(the estates of those dead boomers are really going to help with that, the biggest wealth transfer in history is only just starting), and supply will be incredibly responsive to changing conditions, since a home is a claim to a location, sellers will only sell when they can buy again into the existing market.

It's very possible I'm wrong. We'll see what the rate hikes will do to home prices in the next 2-4 years, and already we're seeing relaxing of zoning in many metros, so we'll see the effect of that in 5-10.

Fertility rates are dropping, and national population growth is slow across the West -- the problem is generally where the housing is rather than how much there is in aggregate. Old estates in the hinterlands are cheap, that's not where the wealth transfer is happening. Google will yield you some fantastic estates across the UK and Western Europe costing less than half of a modest 2br ranch-style home in Palo Alto.

> I don't think it will meaningfully reduce cost of home ownership.

More housing would absolutely meaningfully reduce the cost of home ownership. Just look at cities like Detroit and Pittsburgh that, for a time, had a surplus of housing and a declining population: houses became super super cheap.

What's happening now is that housing stock is increasing 0.5% per year, while city population is increasing 5% per year, and then policymakers are turning around and saying "look, we're building more housing, and prices keep rising, it's not working!" -- of course, because cities need to build enough housing to satisfy demand, not just "more housing". Each year we have a new housing deficit, the housing "debt" goes up. To reduce prices, you need to build more than the demand is, which we are so far from doing it is laughable.

> Infill development is more expensive

This, too, is per policy. The sweet spot price-wise for construction costs alone is 4-5 story apartment buildings; outside parts of SF, Manhattan, and a few other inner cities, we aren't there yet. But the cost of infill development these days also includes (1) drafting environmental impact reports; (2) multiple sets of meetings with neighbors to convince them not to oppose your plans; (3) delay and stalling tactics from well-heeled neighbors who oppose your plans anyway (see: CEQA); (4) extensive requirements on insulation, window area, solar panel inclusion, etc. that push costs upwards; and finally (5) years of paying property taxes while you attempt all of the above to get your plans approved. That's leaving out (6) extremely high labor costs for construction, because construction workers need housing too, and their rent is also super high.

We are not going to see meaningful change until we remove at least some of the constraints on housing construction and new supply can begin to exceed new demand. In California, lawmakers are starting to wake up to the problems, but solutions are slow to come.

> The US has mind-boggling amounts of land available. What's changed is the ability and desire to build on it.

Times have changed and most people don't want to live in marginal lands that are available in mind boggling quantities. In addition, the reason that a lot of cities were built a few generations ago in the hinterlands was because manpower was needed for resource extraction industries, which have since either become highly automated or fallen into secular decline. We are no longer a nation of farmers and miners.

> most people don't want to live in marginal lands that are available in mind boggling quantities

That's not "times have changed" -- people have never wanted to live on marginal lands, that's why the government paid people to move there.

> a lot of cities were built a few generations ago in the hinterlands

Few cities are built in the hinterlands for the purposes of resource extraction; cities grow where trade is, but yes there are definitely towns that have vanished because we don't as many farmers and miners.

The SF Bay Area is dominated by single family homes on large lots. Yes, SF proper has a high density, but the surrounding areas really don't, and not for lack of demand: developers who would build more housing are literally stymied at every turn, and this is not an accident, it is an intentional plan to reduce the availability of housing and keep it expensive, to avoid "traffic", "crowding", and "changing the character of the neighborhood".

I think we are in agreement. In particular about the effects of Bay Area suburban zoning.

> In NYC and SF, most existing buildings would be illegal to build under current zoning rules.

The NYC number is 40%, according to the NYT. But close enough and here are some nice maps breaking my down why those buildings couldn’t go up today.

https://www.nytimes.com/interactive/2016/05/19/upshot/forty-...

I like your thesis, but the problem is we only need to look back 15 years to see that housing has had massive corrections before.

I think you're underestimating buyer sentiment. In Canada all it took was a couple rate increases in April for housing prices in the 'burbs of Toronto to drop ~20%.

Housing can go from "hot" to "not" really damn quick when prices start their downhill trajectory. What was suddenly a "must have, hot asset" becomes a "fool's game" when people get burned badly.

And based on social media posts, people are getting burned badly in Canada right now.

Thanks, I'm sensitive to that, and it's a great point, in the US for sure the 2008 correction was felt for years.

US will likely continue to see rate increases in the next couple years. We'll see if that is going to affect home prices here. Let's check back in 2025 :)

Houses in the US couldn't serve as intergenerational asset simply because they are built of wood with average livespan of ~70 years. While in Europe houses are generally build of brick or cement and last centuries.

All houses need maintenance and upkeep to survive.

My wood frame house in Oakland was built in 1896. Clearly it lasted longer than 70 years. Brick is a terrible building material in California, due to earthquakes.

My brick house in Amsterdam was built in 1886. However, the piles it sat on were wood, which decayed, and the house sank 8 cm.

Both needed new foundations, both were gutted and remodeled on the inside to update them to modern standards.

My (paid for) house in the Bay Area was built ~70 years ago, and it’s just fine, thanks :)

As a European living over here for the last two decades, I agree that European houses are generally sturdier (my parents house pre-dates the USA, I don’t expect mine to last that long), but when you’re spending 6 figures on something, looking after it is a good policy. Catching problems early is the key - as soon as you notice something, fix it and fix the cause…

I think it is clear that the parent is using home-ownership to include land-ownership.

Don’t know how it is in most of Europe, but I think that, in the UK, you don’t actually own the land your house sits on; Lord Such-and-Such owns it, and collects rent from you.

In the US, we own the land, and that is usually the real value. I’m the proud owner of a 0.125-acre New York postage stamp. It’s in a fairly affluent area, so is fairly valuable. In Wyoming, they’d laugh at it.

I think Japan is similar.

That is not correct.

In the UK, there is a concept of Freehold and Leasehold. In the former case you own the land under and everything built on it. In most of the country you buy the Freehold.

The Leasehold gives you ownership of the building but not the land under it. You lease the land from the owner. I've personally considered this form of "ownership" a trap. It has become more common in recent years as a way for sellers to screw buyers. Particular in the London area where demand is always extra high.

It’s not incorrect, either. I phrased it carefully, to indicate that I don’t know for sure. It describes my grandparents’ house, in Liverpool (I assume it was a “leasehold.” I never knew the official name). I know that my mother did not inherit their house, but there may have been other factors, involved.

Technically, I guess I don’t “own” my own land, either, but I pay (significant) taxes on it (because I “own” it, according to the taxing authorities. They don’t tax the bank; they tax me). The taxes are assessed on the total value of the land and the building, and location^3 is a fairly significant coefficient.

Land is a weird (but frequently lucrative) investment. You can’t lock it in a safe, and, if your neighbors start a hog farm, you can’t just pick it up and move away.

> I think that, in the UK, you don’t actually own the land your house sits on; Lord Such-and-Such owns it, and collects rent from you.

This isn't quite right.

There's something kinda like that called leasehold, where you basically own an extremely long lease on a property (typically 70+ years, often up to 999 years), with the freehold (outright ownership) sitting beneath it. Generally it's used on apartment blocks and certain new-builds in specific areas (e.g. they're more common in London, but outright banned in Scotland outside of some pre-existing edge cases). There's a good chance the whole thing will be functionally reformed out of existence in the near future (see here https://commonslibrary.parliament.uk/leasehold-reform-in-eng...).

But in any case, the vast majority of UK property is sold freehold, or as you put it "we own the land, and that is usually the real value".

Thanks for the correction.

The only reference I had, was my grandparents’ “named” house, in Liverpool (It was actually a pretty nice place, near the beach, for what that’s worth, in Liverpool).

I remember my grandmother, explaining it to me, and that was what I got from it.

I was too young to have a decent frame of reference, though.

No, that's not the universal case in the UK. My freehold gives me ownership of my house and the land on which it is built.

You're right that most of the value of the property is in the land and not the building though.

You're paying taxes, yeah? And if you were to overlook those tax payments, what would become of your supposed ownership? And subject to eminent domain? Not to mention the many laws of the lands and social expectations besides.

How much do you really own?

In that sense, you don't own your body either: At any time, the government could send goons to shoot you or jail you or harvest your kidneys. Even if you leave the country, they could put a bounty on your head or send assassins.

Sure, there's courts and laws, but they pick the judges and can choose to change the laws. They could pass a constitutional amendment tomorrow giving themselves the right to harvest your kidneys, the same way local counties can pass a law at any time raising your property taxes.

And, even if you argue that you have rights under the current government, empires don't last forever. 300 years from now, who's to say barbarians won't be ransacking the house you left to your kids? In that sense, your rights are only contingent on the barbarians being too scared to attack, and not absolute.

So if your argument is, "You can't own a house because the government could take it away", it seems like you have no hope and no possible policy change would give you any "true rights" to anything.

What you say is absolutely correct.

While you have governments that can legally steal everything from you just because they can, you'll never really be free.

That said, there are degrees of freedom.

Property taxes in the US are very high so I consider it an inferior degree of freedom compared to owning a house in a country where I don't have property taxes. The more corporation / income tax I have to pay the less free I am, hence why I'll move to a country which charge less corporation / income tax.

Sure, I'm still owned by the government because they have soldiers and guns and I have none - but at least I can live my life as close as possible to how I'd like to live it.

It is possible to fix this situation once and for all: abolish the government and its idea of legitimacy, let people organise their own defence from the goons of other countries by paying voluntarily.

You won't end up with a much different system, you'll still have some people not paying anything and some people paying more to defend their community - but at least I would pay voluntarily what's needed for my defence without enriching the politicians, fake intermediaries with empty promises, and it wouldn't be coerced out of me under threat of fines and imprisonment.

That seems like it would very quickly turn into tribute to the local warlord.

That was, at least the common narrative goes, the fundamental basis for most if not all states. Mutual defense. And it's hardly any different today. There have been many cases of non-state societies who did organize their own protections. But to try and connect the dots with such factions (many of which are still functioning today) and the modern man is an error. We're talking societies with scribal and priestly classes which in no ways exist in the modern era, when the global average literacy sits at 83% and the mindblowing advancements we've seen in the last two decades alone is a force multiplier for autonomous organization that is totally unprecedented, like most of all of the advancements seen since the seminal moments of the industrial revolution.

But ultimately your negative outlook on the human condition is your own, 99% of daily life proceeds under conditions of total anarchy, authority and security are entirely illusory and we pay incredible costs to maintain those illusions, not in terms of liberty alone, but in toil and life itself. It leaves little left to live for, read the Death of Ivan Illyich if you want a better understanding of what I mean.

> 99% of daily life proceeds under conditions of total anarchy, authority and security are entirely illusory and we pay incredible costs to maintain those illusions

Those costs are totally worth it. I'd rather live in a nation with liberal democracy and property laws, than whatever more "pure" or original model you seem to have in mind.

You say that but history has lots of examples of people taken in by such egalitarian societies and doing an about-face, and when the European societies took in people, they more often sought to return.

In any case, what I'm talking about is democratic and does not forego property rights, in fact it could give you stronger property rights. But you didn't read the grandparent.

> but I think that, in the UK, you don’t actually own the land your house sits on; Lord Such-and-Such owns it, and collects rent from you.

I've never heard this before. Is this actually true? Is this some background technical legal truth that isn't noticed in practice?

To be clear, anyone can own the freehold that you’re leasing the property from. The mention of ”Lord Such-and-Such” could give you the idea that this is some antiquated construct where all lands are somehow truly owned by the nobility, but that’s not how it is.

Called a leasehold. Not all property is like this though.

Like, 85% in London though.

About 34% of London is leasehold: https://www.gov.uk/government/statistics/leasehold-dwellings...

Ok, maybe I should have specified "under £650k within zones 1, 2 and 3".

I'm sure Roman Abramovich's mansion is freehold as are all those semidetached houses on the outskirts with a 55 minute commute to the centre.

You don’t really own it. That’s just a legal construct. If you have to pay rent to the government (property taxes) to “keep” it then you don’t really own it

In Virginia, you need to pay taxes for your car (at least, you used to. Not sure if they still do). This was different from registration, and applied, even if your car is sitting in your driveway without plates.

I think they also used to charge tax for significant-value property, like computers.

This is a bizarre comment because:

1. there is housing that is >100 years old all over the US, some of it the most expensive in the country.

2. Brick and cement houses are certainly not maintenance free and crumble apart over time

3. Most of the value is the land, not the house

The really old homes I’ve seen in Europe are made out of wood oddly enough. Of course, when the house was built in the 1400s, it is probably a ship of Theseus. Well, most homes that are around for a whole have to be maintained, even (especially) if they are made out of concrete or brick.

I think it depends where in Europe? In Germany and Austria they're mostly made of masonry.

Here for example is a 1000+ years old church in Vienna: https://en.wikipedia.org/wiki/St._Rupert%27s_Church,_Vienna

That church undergoes a lot of maintnence, masonry requires constant repair, so it gets constant repair.

A decently built wood home will last centuries too if it is maintained.

The land the asset, less so the structure.

I’ve seen the houses being built and “intergenerational asset” is an almost laughable assumption (not by you, but by the American public). Yes the land is worth $$, but I would be surprised if a currently-priced $300k home lasts more than 20 years without needing a $50-100k injection and who knows what labour and materials will actually cost by then.

There’s no rule that you should be able to afford a house on a middle class income. In fact in many countries, particularly in Western Europe, it’s unimaginable that you would be able to afford a detached, single family home on a middle class income. Lots of people in that situation will live in apartments, row houses, or condos for the rest of their lives.

You can't compare Western Europe to the US. Maybe to specific regions or super-urban areas, e.g., the LA to SD corridor or the Bay Area.

In which case the two are comparable: there are few if any middle-class families in the bay area that own their homes except by inheritance or some other luck (gift, lottery). Even condos and other high-density housing are all but completely out of reach for all but the top 10% of income earners. And those condos are almost all studios or 1- or 2-bedroom units that are very tiny.

> there are few if any middle-class families in the bay area that own their homes except by inheritance or some other luck (gift, lottery)

Plenty of middle class people bought nice homes they could afford in the bay area in the 90s. Although I suppose you could consider this "luck".

And plenty of middle class families bought homes in Detroit in the 1950's that nobody wants any more and are either abandoned or torn down long ago.

I suppose you could consider this "bad luck".

The Bay Area wasn’t the economic centre it is now, then. It was closer to a boomtown, and even that effect was constrained.

Or a different definition of “middle class”.

"... there are few if any middle-class families in the bay area that own their homes except by inheritance or some other luck ..."

This is a ridiculous statement.

There are plenty of middle class (by Bay Area standards) folks who have bought houses in Fremont and San Pablo and San Leandro and Hayward.

In fact, even in Marin there are parts of Novato and weird pockets of West Marin (Forest Knolls ?) where this was, and continues to be, done.

They are boring places and middle class folks working boring jobs have purchased homes there year in and year out for the past 25 years. Yes, they had to make choices and sacrifice some things for other things in order to do this.

Perhaps the ability to do that is comparable to a lottery win ?

I’m surprised anyone has heard of Forest Knolls! I grew up there. It definitely used to be weird and relatively affordable for the middle class but not really any more. Last year someone bought a house in the neighborhood for $1.3 m. It was worth $350k when my parents moved to the area about 25 years ago. The new owners have a pair of new Porsches in the driveway. Maybe that counts as middle class in the Bay Area these days but it’s still not obtainable for the vast majority of Americans.

$350k in 1997-dollars means that 25 years ago, it was worth $627k in today-dollars.

Adjusting for inflation, it's doubled in real value over 25 years, which works out to <3% APR. It's a decent return, but we've also ignored 25 years of property tax and maintenance. (on the other hand, we've also ignored 25 years of effective rent)

I guess the point I'm trying to make is that $1.3M isn't worth what it used to be but it sounds big in our head because we remember a time when a dollar went a lot further than it does today.

Just running some numbers into affordability calculators. Buying a house at $350k probably had your annual income between 70-80k which was about the top 1/3 of households 25 years ago. That was middle class. To afford $1.4M you're looking at an annual income around 350k. That's about the top 2%. Even if you stretch your budget more and have a hefty down payment you're still going to probably be in the top 5% of income to buy that house.

You wrote: <<there are few if any middle-class families in the bay area that own their homes except by inheritance or some other luck (gift, lottery).>> That is a bold, sweeping statement with no supporting evidence provided.

I Googled for about 10 seconds to find some statistics about Bay Area homeownership.

  Zoomable map to visualise California homeownership (very cool!): https://dig.abclocal.go.com/california/homeownership-maps/BayArea_homeowners_zip_map.html

  Homeownership Rate (5-year estimate) for San Francisco: https://fred.stlouisfed.org/series/HOWNRATEACS006075

At a glance on the first link (zoomable map), the Bay Area looks similar to SoCal (LA/OC/SD). Why do people think homeownership is so low in areas of California with lots of good jobs? It isn't. To be clear: I doubt people on this discussion are interested in homeownership rates in extreme suburbs (2+hours away) and rural areas.

Maybe there should be? Maybe not single-family detached homes, but people need to own something

> There’s no rule that you should be able to afford a house on a middle class income

Here in the US, if one was asked to define “middle class” from a lifestyle perspective, probably the first thing that comes to mind is “homeowner.” I don’t think it’s possible to separate home ownership from class distinctions in the US social strata.

Case in point, home ownership rate has remained largely stable for decades at around 65% of the population. That’s despite incomes being more varied in relation to actual value over time.

I was told that middle class in the US is the class that owns tools that they use to augment or repair their home, whether owned or rented. Poorer and you don't have time between jobs to do it or the spare income for the tools, so it doesn't get done. Wealthier, and you just hire it done, because it isn't worth your labor rate.

That’s an interesting take. It sounds intuitively correct, other than the part about “owned or rented”. Generally speaking in the US, the one major advantage to renting is it’s the landlords responsibility to take care pf the property, and on the flip side you are usually not allowed to modify or augment it in any way.

So I’d say if you extended it to incorporate that understanding, it’s pretty accurate.

I would love to buy a duplex, rowhouse, townhome, 3 bedroom apartment or condo if they existed and were reasonable.

Western Europe is both considerably more crowded and poorer than the US.

Total population / total land area is an irrelevant statistic for country comparison. By population-weighted density the United States isn't significantly less dense than Western Europe.

Unfortunately, directly comparable, prepared numbers are difficult to come by. The 3 most memorable sources I've found are:

* https://theconversation.com/think-your-country-is-crowded-th... - Discusses (introduces?) the concept of "lived density" and provides graphs for Europe. I'm not sure how well the author was familiar with related work regarding population-weight density, which seems to be the more correct term.

* https://ssrn.com/abstract=3119965 - A low-level analytical discussion regarding population-weighted density as a metric.

* https://arxiv.org/abs/2005.01167 - A COVID-19 pandemic-related paper which incidentally includes comparable population-weighted density metrics for both Western Europe and the United States.

I haven't looked into things since 2018 (excepting taking note of the 2020 COVID-19 paper), but IIRC census.gov has some population-weighted density numbers somewhere based on MSA and census block (tract?) proximity. It's not easily comparable to available European statistics, but it might be a good place to start if you want to play around with U.S. density numbers.

Maybe there have been better resources published since the above.

More and more Americans have been finding out how poor they are or are getting (relatively) in recent decades.

That’s a sweeping comparison. I’ve visited both and my take would be that Europeans have a higher standard of living than Americans. But that’s just a hunch, I’d be interested to see a breakdown by specific metric and class.

I'd take data over an anecdote or hunch.

Specific breakdowns are harder to find, but top of line numbers are pretty easy to find in a minute on Google: https://datacommons.org/tools/timeline#place=country%2FUSA%2...

I’m not sure GDP is a reliable national wealth indicator in countries with very high levels of inequality and cost of living. Certainly not as a comparator. Plenty to google on that too. This isn’t a criticism of your point - more that we need a better set or metrics to evaluate “wealth”.

Dutch to you, to!

You will live in the pod, you will eat the bugs, you will own nothing, and you will be happy

> There’s no rule that you should be able to afford a house on a middle class income.

This isn't really an ownership issue, it is an occupancy issue. Monthly rent needs to cover the expenses of a property including any mortgage, property taxes, etc as well as maintenance, so rents wind up tracking house prices. If you can't house the middle class, a) they're not really middle class and b) you have a societal problem.

Sorry, but isn’t that part of the definition of middle class?

Most of those cities have a lot more density. They were designed before cars existed. I wonder what a fresh piece of earth chopped up and designed for the future would look like economically.

Row houses in any marginally desired area in western Europe easily go for half a million now. That’s firmly out of reach of the middle class.

Western Europe is also way smaller than the united states, so I'm not sure how apt this comparison is.

Don’t forget to mention they still have full health coverage in the EU.

It’s not possible to afford housing or robust healthcare in the US.

Keep in mind there’s no rule we have to tolerate either.

Imagine being a teenager in the US, having just seen how essential workers are treated, knowing in all likelihood your future is an “essential worker”.

Then watch Congress scapegoat Facebook.

What does this have to do with whether or not the housing market is overvalued?

It seems like a thread-derailing comment likely to drag down the quality of discussion.

The EU Apple to US orange comparison you mean? What’s the EU have to do with US home values?

I replied to that comment as well. Affordability of housing the EU (or Japan, or China, or India, etc) isn't really that relevant to the situation in the US.

What does your policing add to the conversation? Unrelated syntax and semantics is not related to US housing

Based on your green account name, it appeared you were new to HN. I commented because the site guidelines include:

> “ Eschew flamebait. Avoid unrelated controversies and generic tangents.”

Your comment, “Don’t forget to mention they still have full health coverage in the EU.” was doing exactly what the guidelines ask us not to.

My hope was that bringing attention to this would help deflate the impending generic argument about health care and help you improve future conversations on the site.

It was just an attempt to be helpful.

https://news.ycombinator.com/newsguidelines.html

I did not see that or a TOS as part of sign up

If the HN communities behavior is to point to a TOS I didn’t agree to at sign up, I’ll go ahead and logout and stay away

That’s some bait n switch, end run around norms, patronizer enabling, dark pattern nonsense.

It's not a ToS, they're guidelines. You're not legally bound, relax.

The point of these guidelines is that _generally_ most people follow them and it stops this place going to garbage like every forum before it, and allows it to stay a place for professionals to discuss topics, rather than us vs them flamebaiting and boring jokes.

You're totally welcome to go, but you're also welcome to stay. If you step back and calm down, you might find you like it here :).

“Full health coverage” according to all my EU and especially British friends I would still be on a waitlist for a surgery I had 2+ years ago.

Non-essential surgeries tend to have longer wait times (such as hip replacements in elderly people), but conversely, essential care is accessible to everyone at no cost and in a timely manner.

I live in Canada, and recently had appendicitis. My appendix was removed less than 24 hours after symptoms began, and 10-12 hours after I arrived at the hospital. I walked in to the ER (after a very painful car ride), they asked me some questions and gave them my health card, they said how much, I said 7, they did blood tests and I had a CT scan, I waited a few hours, and then I was wheeled up to the operating room, after which I spent the night in the hospital and discharged the following morning. Not once did the question of insurance or payment come up, and I even had a private room after the surgery.

> Non-essential surgeries tend to have longer wait times (such as hip replacements in elderly people)

Something ridiculous like 70% of lifetime healthcare spending in the US occurs in the last two years of a person's life (half-remembered number from like 10 years ago). The uncomfortable truth is that we spend way too much on hail-mary treatments for people who are almost certainly going to die, and too much on useless shit like knee replacements for the elderly, and far too little on the earlier stages of their life. But nobody wants to tell the elderly "no" because they vote.

Obamacare had the right idea with "death panels". A lot of treatments that happen near the end aren't medically justified by quality-adjusted years-of-life or similar metrics. And that money comes out of the healthcare of younger people, whom the US treats like shit compared to the elderly. Because they don't vote.

But nobody likes the optics of "pulling the plug on grandma".

What you describe in your last sentence is one of the reasons I went with Kaiser. Yes, there are still co-pays for most treatments and prescriptions, but they have in my experience never been more than $20. This includes an elective procedure. It seems to share some aspects of the Canadian system you described, such as longer wait times for non-essential care, and a relative lack of choice in which doctor you see. But to me that is an acceptable trade-off for care where no single visit has cost me more than I would have spent on lunch that same day, and has been consistently of high quality.

I’ve waited longer for basic treatment in the US than I did anywhere else in the world and still paid exponentially more.

And all that extra time and money got me was people saying “You should be glad it isn’t socialized health care!” Yeah. If it were, I would’ve gotten treated faster and cheaper.

Both of these things are true. I don’t want to fully derail the larger discussion, but having lived in both EU and US and used healthcare in both, basic care is significantly better in the EU than the US on nearly every facet. The exact reverse is true for specialized care.

I'm waiting 4 months to see my GP for a physical in Wisconsin.

In Europe they don’t even normally have physicals! The NHS has never just checked up on me like that - they just couldn’t afford to do it.

NHS Health Check is the equivalent of the Medicare Annual Wellness Visit. It's recommended every five years, starting at age 40, for people without pre-existing conditions.

For people with pre-existing conditions it begins at a younger age and is recommended more frequently, based on the determination of your GP Surgery.

You should get your first invitation to an NHS Health Check around the time of your 40th birthday.

https://www.nhs.uk/conditions/nhs-health-check/what-is-an-nh...

Physicals are annual in the US and done pretty much every year and covered 100% by every insurance I have ever had.

Vastly different across Europe

They could lobby their elected officials to spend more on staff, and facilities.

But you’re right, you’ve put me off on the whole idea. Good effort. There’s no way around artificial scarcity.

Zombie argument. This has been show to be inaccurate numerous times.

One major problem I see with comparing housing prices to income is that most homebuyers in the US are using leverage (a mortgage) to buy their home, and the last 15 years or so have seen comparatively low mortgage rates compared to the several decades beforehand.

Housing prices have been able to balloon because debt has been very, very cheap. Whether or not that will continue remains to be seen.

A majority of consistent voters own homes and want house prices to increase. That means most politicians want house prices to increase. The government dominates all aspects of residential lending.

What’s the smart bet on what will happen?

This comes up a lot. But it's wrong, or at least incomplete. People who want to live in their house don't want the value of that house to go up, because then their taxes go up.

There are laws like California's prop 13 which allow some demographics of consistent voters and home buyers to have their cake and eat it too by insulating them from property tax increases as their home value increases.

> People who want to live in their house don't want the value of that house to go up, because then their taxes go up.

That's the real reason California has Prop 13

How many people in this day have actually decided "Hey, I want to be in this one house for the rest of my life."; moreover how many are actually presented with that option? I live in a boom town so I can't really say one way or another, but it strikes me that very few people born of recent generations have the impetus or place enough faith in the systems they're reliant on to yield the security necessary for that sort of commitment - and it's not a new development, and it's not necessarily specific to my locale, but is rather a shift in principals of business and government.

So while I understand your argument I'm reticent to accept it on the basis of the concerns mentioned above. Settling down permanently is not the same proposition it was fifty years ago. My grandma grew up in Denver, the rapidity that it grew with was apparently astounding and that growth drastically altered the culture and the landscape, what were once dirt roads are now median-divided 3-lanes with cookie cut houses lining them as far as the eye can see. If you can imagine not wanting to live there with the rapidly accelerating growth and the headaches that come with it, you're not alone.

There are also economic concerns, which can be highly unpredictable, and these are considerations I'm sensitive to. I've watched commodity fluxuations result in massive layoffs time and time again. When given the requisite information to make a decision on whether or not to sell, it's plain to see that it's a benefit to have pricing steadily increasing, whether it's to avoid the wave of sells when an industry reels back or shutters, or when one is intent on moving to greener pastures, or at least a better home in a more agreeable neighborhood.

I'd pay taxes which, given the parent statements terms, would roughly equivocate them with asset price insurance before I stuck my neck out to get burned or blown up.

Most people who own are moderately content for their house to stay somewhat stable in price.

They definitely don't want it to go down, especially below the loan amount; but tools like Zillow make it way too easy to book "paper profits".

If you bought for $100k and later noticed Zillow say your house as $250k, and now it's saying $200k you can feel like you lost out even though you're still "up" - something that was more difficult before as you'd have to try to compare similar homes for sale.

Exactly right. I would be much happier if the prices of the houses and properties around me didn't go up so much out of proportion to everything else.

> A majority of consistent voters own homes and want house prices to increase.

Are there actually data that say that? I'd only expect data to exist on the first half, but there may also be data (as opposed to a fairly good supposition) from the second.

If we ignore the word majority (since that will vary by jurisdiction I'm sure) and say that homeowners are more likely to vote and pay particular attention to issues that affect their home's price then this recent paper does provide some support: https://www.andrewbenjaminhall.com/homeowner.pdf

I'll say from personal experience, it does change your perspective. If a sewage treatment plant moves in next door, I can't move like a renter can. It's a feeling of real vulnerability that I didn't fully understand until I felt it.

Thanks for the paper.

I understand the NIMBY-ism. I do wonder how much people care about the value of their house going up if they don't plan to sell soon. There are advantages to your home being less valuable and the only disadvantages come if you want to leverage your home more, refinance (not likely with rates going up) or sell it.

If they didn't care except when they were selling, that makes the effect of them being more consistent voters on zoning issues hard to explain.

I think this idea of wanting your house price to be low to avoid property taxes then suddenly increase the value when it's time to sell is like the idea of having your employer pay a trust so you can collect food stamps 11 months of the year then the trust pays you all your money in December.

It might be possible and it wouldn't shock me if a few people do it but it's not the normal approach.

> the effect of them being more consistent voters on zoning issues hard to explain.

No one wants to live next to a dump. That's why it affects property values. Because it also effects living conditions.

Meanwhile, a lot of people never plan to sell their home. Yes, if you plan on moving soon, you care about property values going up. If your horizon is 10 years, 20 years, or your kids selling the place? Less so.

As rates rise to more normal historical levels, and purchasing power diminishes, who will people sell their homes to? Prices will eventually have to come down.

This is the argument that homes are currently overvalued.

Companies will. We are in a new era.

> Prices will eventually have to come down.

Or, as an alternative, market is going to freeze.

This is the exact same phenomenon as with the stock market. Yields progressively moving towards zero means more and more leverage driving PE ratios and prices to extremes.

Given that we've rediscovered fiscal stimulus and inflation as a result, I have a feeling that era is dead. You can't have low rates in an inflationary environment.

Yup, buried half way down the page this is the simple answer. Cheap money means people can and do borrow more.

Yes, and interest rates have gone up, thus all those homes are now over valued (if price of debt is your metric)

That would work if the supply of houses has kept up with populations growth, and just as importantly, the desired location of where people want to live.

If there's housing scarcity, then prices will rise far ahead of ability to pay. That's the source of a lot of other types of today's inflation, for example, cars.

> If there's housing scarcity, then prices will rise far ahead of ability to pay.

Housing costs tend toward people's ability to pay, otherwise folks default. That's why the banks ask you about your income and credit worthiness, they want to know you'll be able to pay the mortgage and not default. If money costs increase faster than income, folks won't be able to afford as much money (as high a price).

Housing costs do tend towards ability to pay, and when there's scarcity, that "ability to pay" starts cutting out those with the lowest incomes, since they do not get the housing.

That's how housing costs can increase faster than the income of an area, it's the market displacing those with lower incomes, and readjusting to only house the wealthiest.

Add in that housing prices are distinct from the housing costs, and that leases only change rent occasionally, and lots of people are owners and have fixed costs, and prices can rise quite a bit faster than incomes.

Population of the US is effectively flat over the last two years. In California it actually declined.

And new home construction is at an all time high.

Scarcity of inventory is not at all the same thing as scarcity of housing. This has been a powerful narrative in driving FOMO buyers though.

https://fred.stlouisfed.org/series/UNDCONTSA

Population may have flattened, but a toooooon of people were looking to move suddenly to new areas, which is another way that scarcity is created.

Your chart is the number of units under construction, but that high number doesn't translate into more new homes than ever before, because completions have been massively delayed. So there's a lot of homes sitting half finished as they wait for supply chain crunch's to resolve. And to compare this to numbers from the 80s means normalizing for length of construction, something which is getting delayed more and more.

Overall, construction has massively constructed since 2008, and even before that it had been trending down for a long time.

Also a lot of those homes are tear down/replace vs. net new

The connection between interest rates and housing prices is weaker than I would have expected (it certainly exists, just not to the extent I imagined) and oddly enough it takes a couple years to show up: https://www.bis.org/publ/work665.pdf

I suppose it makes sense. They say not to spend more than 1/4 (or 1/3) of your income on housing but if a house costs 2/5 of your income you're probably not going to set up a tent and wait for interest rates to come down.

One criticism I have of Shiller is his index looks at comparable houses across time. This under estimates appreciation due to the housing stock itself becoming more luxurious. In my area, houses are about 500 sqft larger than a generation ago and have amenities like AC and often a granny unit.

This doesn’t really matter if there are no houses available that are 500 sqft less.

> This under estimates appreciation due to the housing stock itself becoming more luxurious.

How so? Large, luxurious, houses get counted just the same way as small houses. If you mean that new houses that have not been resold aren't a factor in the index and that this biases it against the latest housing, OK. But even new houses tend to be priced in line with comparable sales, linking them to history in a way compatible with how the index is calculated.

We’re just way over due for actual real and universal price inflation on all goods & services. It’s not fun but it’s finally happening.

Another exception was the housing bubble leading up to 2008

https://www.longtermtrends.net/home-price-median-annual-inco...

>I think there's a more concrete measure of value: house prices related to income.

So it could also be that 97% (or close) of wage earners in the U.S are underpaid?

Or I guess it could be a combination of some underpaid, some overpriced.

The question is - how much do historical patterns predict future ones.

Can attitudes and norms on what % income spent on housing change? As people attain a higher standard of living, can this trend up?

The Case-Schiller price index is at all time highs across almost every real estate category. As my friend would put it, a dollar is not worth a dollar. A pack of gum and a house are going to value that same dollar differently for you but, as you said, you only have so many dollars :(. As it is I don't think many people will ever own a home in the near term.

your comment is screaming for a link...is it this one?

https://fred.stlouisfed.org/series/CSUSHPINSA

Case-Shiller Index?

No that’s more a chart of home prices values

https://www.spglobal.com/spdji/en/index-family/indicators/sp...

You’re looking for this:

https://fred.stlouisfed.org/graph/?g=n9xI

The specific chart I picture was originally in a 2005 article in the NYT, but it is reproduced as the second chart on the Wikipedia page [0] for the Case-Shiller index. Note also that page's section on 'Key events and episodes.'

[0] https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index

We'll find out over the next 6-12 months. At some point, a lot of home buyers started shopping by payment without regard to total price. With interest rates near their lowest in anyone's lifetimes that was workable.

With interest rates rising, as buyers who haven't locked in lower rates begin looking at the current payments on offer, they will have to look at lower priced homes or drop out of the market. If this boom has been driven primarily by buyers flush with cash, foreign or domestic, then prices should remain high. Payments are largely irrelevant to cash buyers. Any buyer using debt will be forced into lowering their ceiling of properties they can afford. Home prices should then fall.

The concept of the cash buyer is a bit of a farse as well. What usually takes place is a cash offer. They just need to proof of funds to do this. But then, they get financing to close. Nobody in their right mind is putting that sum of cash in real estate when they could borrow at 2% or whatever it was before the recent run up. The mortgage interest even has favorable tax treatment so it’s effectively much less. Oh and the actual cash can also grow tax deferred. I really don’t understand why you’d actually put a large sum into a house when interest rates were as low as they were.

Not true at all. If you are self employed getting underwritten can be a nightmare.

We had savings galore but they wouldn't count it for a variety of reasons (withdrawn from biz account in last 90 days, biz account showed slight decrease because of covid), then calcs with old place and new together are hard.

Sometimes if you just leverage equity in old place you will be moving from + hard money + savings, you can do a cash offer, then sell off old place (we had a preemptive offer 4 days in well over asking - bay area).

Now you only have to be underwritten for one property (before selling old property they included both in calculations which made it hard). We got a 3% rate, then used that to settle up everything back to the way it was.

California also have firms like Reali (https://reali.com/how-to-guide-cash-offer/) that do a cash offer on new place, then you sell old place and buy from them.

This might be unique to the insanity of the CA market in last 2 years. I think it is cooling down thankfully?

Actually there a lot on business owners that can’t get mortgages because they don’t don’t have stable income reported on a w2. It can often be easier to buy cash and refinance than try to get a purchase mortgage

The ultimate endpoints of personal wealth are… home equity itself (down payments) and cash flow (retirement). There are also major purchases like college but compared to housing they’re pretty small. A fancy private education costs just 10% ($250k) of a decent 3BR in a walkable neighborhood ($2.5m).

It seems like home equity is actually a pretty safe and efficient form of cash flow. Even with a cheap mortgage, the payments I need to make each year are about 5% of the principal, which is of course more than the standard 3-4% safe withdrawal rate for investment. The mortgage interest deduction is relevant, but the mortgage is also the reason I would need to realize so much taxable income in the first place. There are no taxes on imputed rent or home equity. Living in a paid off home, you can appear to the income tax system and even some means-tested programs (those that consider income not wealth) as a pauper.

Because housing so dwarfs all other expenses, it is not clear to me why growing my principal at the expense of housing-sized cash flow would be a good tradeoff.

Because for some people, it’s not about maximizing financial returns, but to have only their name in the deed and not the bank. Zero hassling with banks is freedom.

Only if you had lots (lots!) of excess cash. That is, folk who are diversifying a big portfolio (ie: a 500k home is less than 20% of your total book)

> At some point, a lot of home buyers started shopping by payment without regard to total price

Isn't this how everyone has always shopped for housing? House prices are just a Present Value calculation. For example, if you can afford $3,000/mo over the next 25 years and you have a copy of Excel or OpenOffice calc handy:

Affordable house price at a 5% mortgage rate: =PV(0.05/12,25*12,-3000,0) => $513K + [your down payment]

Affordable house price at a 2.5% mortgage rate: =PV(0.025/12,25*12,-3000,0) => $668K (30% higher) + [your down payment]

Atm, here in the UK interest rates are basically back to where they were in late 2019, but housing is still priced 20% higher. This is due to the chronic lack of housing stock and shifting buying patterns

The interest rate hasn't even gotten to 1% yet and these things take time to filter through to the market. And it is worth pointing out that as you can see from the link below the UK has had rates at less than 1% since the GFC.

https://www.propertyinvestmentproject.co.uk/property-statist...

I have no idea where interest rates are going to end up however I wouldn't assume that the relevant reference point is late 2019 to now.

Sure, we've had sub 1% zero rates since 2009, but over that 13 years the cost of housing has tripled. Even going to 2% over a couple of years could be devastating to home equity when people are so leveraged.

Home prices will fall if rentals fall, otherwise no one will want to sell and low market supply will keep prices where they care. But with rising interest rates, sustained demand for rental can be expected.

> . At some point, a lot of home buyers started shopping by payment without regard to total price.

At a N-year fixed interest rate, it's smarter to shop by payment without regard to total price. All the more if you can avoid a large downpayment. After all, that's what matters, right?

Cheap and easy credit has driven house prices up with people continuing to pay very large sums only because they anticipate capital gains. Many buyers just want a home but wouldn't pay these prices if capital gains were out of the question.

If we reach debt saturation due to higher interest rates or some other economic shock then capital gains are not so certain. In that situation it would be a wondrous trick for prices to somehow 'levitate' and not fall.

With investors and home buyers no longer anticipating capital gains - even anticipating falls - what sets the price?

I would say two things. For investors, the income potential of the asset - in this case rent. For home buyers, the cost of servicing a loan relative to the cost of renting (with a markup to account for the additional benefits of ownership over renting).

What are interest rates now? What were they two years ago (pre-covid)? Price falls are likely to take us back to where we were when we had similar interest rates, perhaps further if sentiment shifts enough.

In NZ this is playing out now. 20% down in Auckland city already. That happened within a few months of the peak. 30% would take us to pre-covid prices, but interest rates are likely to reach higher levels than they were then. How long they stay elevated is the million dollar question. Regardless, I think we'll see falls somewhere between 30-50% in NZ in an astonishingly short amount of time. Ireland saw -50% over five years, but that was with the support of global QE and falling rates.

EDIT: Of course we just don't know what central banks and politicians will cook up to try to kick this one down the road again. Thankfully, the correction looks almost inevitable this time. Perhaps inflation is the answer - as unpalatable as it is?

Well, according to the University of Michigan Survey of Consumers, the "buying conditions for houses" index has reached its lowest point since 1982, with 68% of respondents saying it is a bad time to buy in the March 2022 survey. A year ago respondents were equally likely to say that prices were low or high, now 20x more respondents say that prices are high.

Over vs under valued is more a question of stability than current prices.

The question is less about today than how risky and how profitable an investment it would likely be relative to other investments.

Yes and no. I would agree, but housing is, for the most part, fungible (at least for people with tech salaries). If I sold my house, I could pay for rent in my high-cost area for the better part of a decade with just the income off the sale. I am starting to think I might be crazy not to sell and pocket the money: I could rent down the street and pay rent off my salary while that large pile of money collects rent. A house isn't a particularly liquid asset, and half a house worth of liquidity seems like a safer position in the current market.

Look more than 10 years into the future.

20 years from how as a renter your ongoing costs will be high.

20 years from now as a home owner with the mortgage lower and inflation on everything higher, your ongoing costs will be low.

Owning a house is an exercise in deferred gratification, similar to owning most businesses.

Rent has also gone up

Not only that; rent can keep going up.

And I'll add to that: if you ever have no income (which can happen when you retire for example), at least as a owner you have somewhere to live.

Overvalued not necessarily mean the value of current stock has to drop. This is - an ongoing for at least decade now - cry that we don't build enough and we don't built fast enough. Pandemic obviously didn't help either.

So I don't consider articles like that a bell ringing "sell sell sell". Until we are overwhelmed with new constructions coming up everywhere, there will be more people willing to buy, than to sell.

Anecdotally, we decided with wife to pull a trigger on $380k house in Florida (decent ZIP code) just a month before COVID hit, in March 2019. We had 90 days to cancel with $2,500 penalty, pandemic scared us with possibility of builder being lawfully able to be stuck on a construction site for up to 3 years. But eventually we decided to go on because we got tired of renting. By end of 2021 I got offer for $475k, cash, and someone "stole" our plans and our builder built exactly same house next street for $450k (we went inside everything was the same so same options were selected). Then "correction" should come and everyone expected Jan-April 2022 to be a 25% cool off since market rose so much. Well, our "correction" was that prices stopped going up, that's it. Now just few days ago I got an offer by mail (they find your address and mass-mail you) for "amazing amount, just to call". Out of curiosity, I called and was told upon doing title and lean research, an Executive Manager can show up overnight with $525,000 check.

Weird times...

No because houses as an asset class could still be overvalued relative to other assets.

So a slightly more sophisticated analysis would be "how does housing appreciation in each market compare to stock market appreciation over the same time period" - but the description in the article leaves that out, looking just at historical incomes/costs/rents. In a world where homebuying is increasingly out of reach of a larger percent of people, you'd expect it to be more disconnected with average or median income/rent, and more pegged to higher percentiles.

I mean, just about every house has an owner that lives in it.

Homes are expensive. Most people just can’t afford a big slice of land and home. They have to accept they will have to make do in an apartment that may be shared. Should the home they deserve just magically appear?

> just about every house has an owner that lives in it

Just under 2/3 of US homes have an owner that lives in it.

and the trend is clearly and strongly towards fewer owners.

Look at the percentage of houses bought by PE vs individuals in 2021.

https://www.redfin.com/news/investor-home-purchases-q3-2021/ Real-Estate Investors Bought a Record 18% of the U.S. Homes That Sold in the Third Quarter

yes, I know 18% < 1/3. But I also know that 18% > 6%, which was the figure in 2000.

the trend is pretty obvious.

You can look at the percentage of people in the under 45 bracket, and it's been trending down for decades. The total is probably remaining high because the lifespan was going up.

What's the number of owners + long-term renters? (the likely relevant metric when looking at housing price vs local incomes)

Ah, that's one of the ways the statistic I quoted is skewed. Short term rentals aren't considered "homes" by it, so it would be 100%.

>Should the home they deserve just magically appear?

They should have the right to purchase one, or have one commissioned, at the fair market value for materials, labor, and land.

What does this mean, exactly? They do have the right to purchase on at fair market value for structure + land - it's just they can't afford it. The land is crazy expensive.

I'm assuming "have one commissioned" is suggesting something about supply/zoning, but it's not clear to me what, exactly - if someone could afford to build or buy a house 3 miles from Dallas, should they also have the right to pay the same price to build something in the middle of Dallas?

Fair is the key word. The present government enforced scarcity is neither a free nor a fair market. A free market lets participants take the economically optimal choice[0]. A fair market cannot require kowtowing to the arbitrary and capricious whims of a planning board.

Ergo I hold that the respective governments and their zoning/construction policies are trampling on the individual right to a fair market and worse are creating grotesque amount of economic inefficiency, and by extension social damage, in the process.

[0]Trivially: adding units to a lot to capitalize on a high price of land relative to materials + labor.

Who is going to build these structures? Tradesmen today are already overbooked. And they’re going to work on projects that pay the best. That’s probably not affordable housing projects at scale.

The point is between land, materials, and labor, a lot of people can’t afford what they think they deserve.

Both the price of land and the amount of land you need per unit of housing have some serious fairness problems right now.

They could be overvalued relative to rent which is a much more compelling case, since renting a property is a near exact (not perfect, but close) substitute for owning one, on a practical utility level.

Where I live (not USA), monthly rent is about 0.1% - 0.2% of the price value of an apartment. For example, I pay about 350 USD/month and the owner is (trying) to sell the apartment for 180,000 USD.

It doesn't make sense to me, but whatever.

The Moodys analysis, as I understand it, is house prices relative to median incomes in a market.

I don’t think it’s a fluke that the overvalued markets correlate to regions that a lot of tech has moved over the pandemic like Boise, FL, TX and Nashville.

If they’re measuring current house prices to 2020 and 2021 tax data then they may be missing an influx of income in the denominator as well.

Relative to which assets?

Stocks? Cars? Forex? IP? Crypto?

Genuinely curious because everything is more expensive than it was before.

If everything is overvalued, then nothing is overvalued [relatively]

I remember a family member saying almost exactly the same thing to me in a conversation about the real estate market that took place in early 2008.

> If everything is overvalued, then nothing is overvalued [relatively]

Could it be that maybe peoples work is under valued relative to the value they help create?

Yes. This is why we're seeing a bunch of whining about a labor shortage, because people can now choose to be paid a little more fairly.

Stocks would be an obvious point of comparison. They’re down but real estate prices remain up.

The argument for overvalued housing is that everyone got antsy during the pandemic and wanted to change houses and change neighborhoods, but that will settle down now that the pandemic is waning.

Tech stocks seem to be falling because the pandemic-driven surge of screen time is fading now that the pandemic is waning.

So: is real estate entirely different from stocks? Or will it see a similar post-pandemic slump but just has more lag?

Stocks are still massively up even today (S&P 500, Dow, Nasdaq) since early 2000, the "before times" for much of this current real estate spree.

S&P 3400 in Jan 2020, 4146 today.

Dow 28,600 to almost 33,000 today.

Nasdaq 9000 to 12,300 today.

Tech stocks falling won't necessarily lower home prices. The number of tech employees is growing rapidly, but the number of houses for sale isn't, so if ten years ago it was enough to win the bidding war against the top 10%, now you compete with the top 5% and their finances, even with lower stocks, are a lot better. By 2050 it will be a competition among the top 1%.

According to the article, they’re mostly comparing it to income.

I agree with the sentiment though, in which case maybe the currency in which the assets are denominated is overvalued.

A lot of things are overvalued relative to the income they can generate. Credit has been cheap and easy so speculation has been rife. That will end.

Agreed. So what’s the historical price of homes relative to gold? S&P500? Do you know?

The money supply expands primarily by debt, and it relies on people paying back the debt with actual value (or dollars representing the actual value).

When tightening, there arent enough dollars in circulation to do that.

But the bankers get the actual value (homes, collateral, liens on income) regardless. Lenders dont keep seized collateral on their balance sheet, so they sell it at the best price (and they dont need the max price because they already made so much on interest payments). So they push prices down in their firesales.

For the tightening money supplt and people trying to find dollars, think of it like the poison map closing in on Call of Duty Warzone.

So you can base housing prices on that outcome.

Eventually, housing costs begin to outstrip income. Starts at the bottom and goes up. In South Bay a quarter million of household income can’t get you a modest family home. Simple single family homes go for $3M.

It's wild. Single family houses are being listed at $2M-$3M and going for $1M over asking. And the houses would often be considered fairly modest anywhere else in the country.

I imagine a lot of buyers can afford this by selling their existing homes. Or perhaps they socked away a huge nest egg during after an IPO or over the duration of the stock market run up.

But new homebuyers would need to earn about $750k+/year for the foreseeable future for this to make financial sense. That could be a risky wager over the next few years.

If I were paying a mortgage with equity rather than salary I’d be nervous right now. There has to be a non trivial amount of people in that situation, and the stock market tanking means some people will not have the planned upon income. Then what?

There are multiple ways to value an asset other than its current price. One is cash flows: if you rented it, how much money would you get? Another is historical norms: if historically a city with N million jobs providing average income X can only support housing prices of Y, then one could conclude that housing is overpriced relative to the ability of people to pay for it.

The HCOLA house my wife owns in which we live would rent for ~5,000 a month as it is inside our respective city beltway, in a good school district, in a low crime, historic area. When we got married $5,000 is pretty close to our much smaller apartment rental costs, summed. The vacancy rate is pretty low, and the demand is strong.

Like all real estate calculations though, this is completely local.

Just look at the price to rent index - 15 to 16 is neutral (renting and owning cost the same).

San Francisco is currently 52.

In HCOL areas, renting tends to be cheaper than owning because home price reflect not only cash flow, but expected appreciation as well.

https://smartasset.com/mortgage/price-to-rent-ratio-in-us-ci...

You’re assuming that the people who buy house in an area work in the area. People who are able to work remotely statistically have jobs that pay more. They can live anywhere. A $700K house is a steal for even a mid level person working at BigTech who use to live on the west coast.

OTOH not everyone is crazy and not everyone is participating in this market. The only people playing are those who can afford to pay at these prices. Huge numbers of people are sidelined and can't afford to even put in an offer. IMO either those people on the sidelines manage to save or generate enough to jump into play or prices fall to meet the buyers when there are simply no more high income people who can pay those prices within a given local market, since high income people are ultimately a finite entity given how there are a few and finite amount of high income jobs in a given market to support these payments. Even with remote work shifting that regional effect some, I can't imagine there are enough people migrating to cause crazy long term effects outside of already supply constrained popular places (like Tahoe/other skiing etc).

You are participating in the housing market by both owning and renting

Renters aren't really active participants like homeowners and sellers are, they are passively beholden to the market. For example, they aren't actively setting prices the way home buyers do when they try and put in a bid. They are passively setting prices perhaps, but once again the only reason why these drum ups are also possible is because there are renters who are willing to pay at these prices because they are compensated enough to pay these prices.

Plenty of people are on the sidelines in this situation too, either in waiting in a rent controlled apartment perhaps, or opting to add another roommate and keep rent low in the face of an increase which also removes this new roommate from entering the market for themselves and contracts further the number of renters who are out shopping for apartments on the market at these prices.

> If every house is overvalued by some metric, then maybe the metric is wrong.

We're seeing people moving, and supply limits are influencing both rental prices and purchase prices. It's a weird housing market.

The question of the rationality of the valuation is:

1. Do you expect these migration patterns to continue? 2. If so, when do you expect new construction to pick up the slack for demand? 3. How bad of a recession is the Fed going to cause to break inflation?

> housing that should depreciate over time.

It does, amusingly. Housing stock ages and units you build now will generally be worth less in 10-20 years. Land is the thing that can appreciate in value.

I don't know how it works in the US, but in France, when you buy an apartment or house, you pay about 8% to the state (notary / attorney fees), that participates in the inflation I guess

In the US, you pay about 6.5-7%. You pay 5.5 to 6% to the two agents (buyer and seller agents) and about 1% in closing costs (title insurance, etc).

It has always seemed wildly inefficient to me. Especially the “buyer agent” who gets a couple percent entirely for escorting the buyer through homes and submitting an offer.

The buyer’s agent might show someone dozens of properties all around town and not get a sale. The seller’s agent has it much easier: an almost guaranteed sale, and for what effort? They just hire a photographer, help choose a listing price, and maybe do one open house. I’d rather be a seller’s agent any day.

My buyer’s agent could be replaced by giving me access to MLS and lockboxes.

My seller’s agent, on the other hand, was super useful and irreplaceable except by another smart human. I felt like he got us top dollar for the house based on how he renovated, staged, photographed… much more money than we expected.

Also, my experience was I set a budget, put my stuff in truck, left my house a dirty mess, handed the agent my keys, and left town. Then he did all the renovating/etc, posted it, collected offers, and we got paid.

Well, crashes are a real thing, and these guys are in the business of trying to predict them. Let's remember to revisit their statement in five years.

who's everyone exactly? it's moody's saying that homes in 97% of //cities// are overvalued. or, in other words, moody's is predicting a sudden drop in house prices in basically all american cities.

is it not typically the case that, before the price of something goes off a cliff, most people think it's worth the going price?

your first sentence is quippy, but i don't think it's saying anything.

This is exactly like saying if the S&P was 30% higher 3 months ago, clearly it was not wrong.

You either believe the market is efficient or you don't.

Not when you have a populace that is by definition average & in need of a place to live/start a family, but have an external investor class of the foreign ultra rich or Wall street douche canoes buying everything up because fuck you & they can.

Crazy if you believe most of our nation should be essentially indentured servants for basic housing.

Something like that, I think.

Its the Cantillon effect.

https://river.com/learn/terms/c/cantillon-effect/

Banks will loan some people billions at rates half of which they would give you, if they even gave you a loan. Thus they can buy everything for inflated prices.

We need to end the fed.

"essentially indentured servants" is a bit rhetorically distracting, don't you think? Let's pin that down. What's a reasonable amount of work that a human should be expected to do to live? Not just housing, but food, and whatever else.

some economic theorists take this seriously -- BlackRock is Buying Houses made a large headline in daily news here.

i agree. and the other paradox i keep thinking about is everyone says houses are too expensive it’ll to buy, but every house sells within 1-2 weeks on the market

I thought that was weird also until I became a homeowner (in Seattle). There are two other townhomes in my cluster, both are owned but unoccupied most of the time. My neighbors have other homes, one is technically owned by parents in China (who might occupy it someday, my wife is Chinese so chatted about it with the person who occupies it occasionally). It might be totally weird luck, but maybe those houses are being bought by a small segment who are acquiring multiple ones?

>> Isn't this one of those "If everyone is crazy, you're crazy" situations?

No.

Hopefully you aren't using that justification to do something stupid.

>No.

just no?

group consensus and participation shapes nearly every human endeavor; why do you think that this round-a-bout consensus (97%) is unrelated?

Because for all that today's sales prices are driven by that consensus, you can do math on the expected future income stream (including imputed rent) (adjusting it for interest rates and inflation and risks) and determine that it comes up a bit short by most measures.

every bubble in history would suggest yes ... then no.