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US housing price higher than housing bubble 2008 (stlouisfed.org)
103 points by devops000 10 days ago | hide | past | favorite | 200 comments

It always strikes me as odd that I'm in the top 1% of income earners and even still the only hope I really have of ever owning a house is:

1. moving somewhere super rural

2. selling my business

3. sell my soul to Google or Facebook etc for 5-10 yrs

The situation is dire for me and basically hopeless for everyone else.

Put a huge tax on vacancies and cap the number of residential properties a business is allowed to purchase in a year.

EDIT: Apologies for the confusion everyone. I meant top 1% for my age bracket. Nowhere near rich old folk making 500k

Probably more like top 10% overall, thanks @geebee

> Put a huge tax on vacancies and cap the number of residential properties a business is allowed to purchase in a year.

While I'm not opposed at all to these policies, they won't do anything to help you. Vacant homes are less than 10% of existing homes, we need far more than that to solve the problem.

The only thing, literally the only thing that will help you, is more homes.

I'm not sure why people are so resistant to this idea. We have been under building for decades in the places where people want to live, the places that are economically productive.

There's a lot of ways to get there, and though changing zoning to allow density and ban sprawl is necessary, it won't solve the problem alone.

We should also do things like slap a huge tax on the value of land to force people to stop hoarding their land, and use that tax money to fund a government builder that will act counter cyclically to current market cycles. The huge business cycle for the building trades means that it's an unstable job and it makes it hard to have a solid workforce. Having more steady building will allow for lifetime careers, for more experience to be gained, and hopefully for productivity increases.

As it is now, there's not even enough productive capacity in places like California to build the amount of housing that's needed. We need to attack the problem from many angles simultaneously.

> Vacant homes are less than 10% of existing homes

To be clear, that number of vacant homes isn't even a problem. You need a certain number of vacant homes for liquidity.

> I'm not sure why people are so resistant to this idea. We have been under building for decades in the places where people want to live, the places that are economically productive.

There is a lot of marketing that was driven at Americans to think that a detached single family home is the only way to live, and it's going to be hard to undo.

The sprawling 20 and 30 story apartment complexes that are all around Taipei really expanded my view of how other countries do it. “Fields and fields” of these massive structures. Someplace tourists never go I’m certain.

Hadn’t seen anything like in NY or LA, etc.

I agree there are other ways to do it, I double agree it’s going to be hard if not impossible.

Look at how strong NIMBY is in SF with people who consider themselves to be bleeding heart ultra progressives. Everyone clams up when it effects them, but, build somewhere else? “Oh we definitely need to do that!”.

>>The sprawling 20 and 30 story apartment complexes that are all around Taipei really expanded my view of how other countries do it. “Fields and fields” of these massive structures.

As an Indian. This culture caught on some time here in Bangalore early 2000s. But most people, even those living in large apartments, eventually prefer living in individual detached homes over time. Simple reason: Privacy. There are also a whole lot of other things. Space to dry clothes, walking space. Disturbance from from people staying the floor above. Unhygienic neighbours. etc etc.

The plus point is it comes inside a gated community. It's Brazil like inequality contrast here in Bangalore these days. Rich IT/software MNC working families live behind these bespoke apartment gated communities. Which is often contained within a larger slum.

The detached home/row houses gated communities are fairly expensive and in terms of US dollars are anywhere between $500K to $1 million. Most people buying these are people who won the higher salary software job lottery.

People like me who have always been there in Bangalore stay in the inner parts of the city which are not this cool and jazzy. Most homes are old, crumbling and roads are full of potholes. It's mixed population and the areas aren't all that much gentrified. So not many posh software people like to stay here.

Eventually you just pay extra for living among people of your income class.

My nephew and his wife had a house, sold it, and moved to a brand new apartment building in our downtown area. This is supposedly an upscale development, with 2BR renting for $1900/mo in a city of 40K where most apartments rent for $800-1200.

I say supposedly, because instead of an upscale living experience, here's what they got:

1. the door to the parking garage is some fancy automated thing with sensors on the headlights. It doesn't work, so they have to keep backing up and re-approaching the door several times before it opens. Other residents have had the same problem.

2. Pets are allowed but are supposed to be leashed. People let their pets run around all the time not on a leash

3. There is a park across the street for people and dogs. People don't pick up their dogs' poop like they're supposed to.

4. People have dogs that bark in the apartment for hours on end. They've left notes on the door (ignored), called management ("We'll take care of it" but they don't), and ended up confronting the person directly. The dog owner acted like she didn't know anything about it.

5. Yesterday my nephew said they arrested a guy who was harassing people at the pool and people sitting on their balconies. He was also threatening the apt staff, so police arrested him.

This apt complex (according to my nephew) has a goal of filling up the building and then selling it, so they have all kinds of rent incentives and allow guarantors for people who don't really have $1900/mo for rent.

Who wants to put up with this kind of shit? This is only a 3-story apt building. I can't even imagine the kinds of problems in a 30-story apt building.

They're moving into a detached single-family house after their first-year lease is up.

> to think that a detached single family home is the only way to live

This isn't purely marketing. A lot of it is lived experience. Americans are generally just straight up terrible neighbors, and neither building owners nor police care. Many of us have learned that a 40 foot setback works way better than a poorly-sound-insulated 2x4 wall.

> I'm not sure why people are so resistant to this idea.

Because homeowners want the value of their homes to appreciate.

Actually basic economics says, all economic transactions in an economy are designed to benefit a private property owner. *All*.

The end beneficiary in an economy, the place where money stops is a private property owner. Every economic activity no matter what that is, just acts a long chain in which the eventual beneficiary is a property owner.

That's just how it is, there's really nothing that can be done about this.

If you live next to an empty lot, and the local government allows an apartment complex to be built on it, your house just dropped tremendously in value, both due to loss of privacy and the large boost in supply of housing, which was previously lower and inflating the price of your home.

How does that benefit you?

I don't think they were saying it benefits every private property owner. It's clear that there is at least one private party that benefits from the ownership of that apartment building.

If it's not benefiting the pre-existing home owners then it's not much of a rebuttal to the original point

> The only thing, literally the only thing that will help you, is more homes.

We are constantly told that we should become as dense Manhattan so we…can become as affordable as Manhattan?

The big cities where people want to live are already dense, they could be denser but the limitations are infrastructure related (transit, road capacity, schools, water, etc…). It might make more sense to expand where people find desirable to live rather than focus how to cram more people into the Bay Area and LA area.

But...land is where food comes from, and the people that work it are already poor. Maybe you mean suburban and non-rural communities?

No, I definitely mean tax the land, not at a constant rate, but based on its value.

This was originally a solution to help deal with rent-seeking on privatized agricultural land, when some land was more productive than others. The more productive land results in excess, unearned profit for landowners (not the workers). Farmers are very different from farm workers. Farmers have millions in assets, and though they talk big game about being poor, they have immense wealth. They extract it from the farm workers' labor on their land.

This effect is even larger in cities, where access to the city is required for access to those wages. The landowners who hoard land most effectively take most of profits, and analyses of our growing inequality (Piketty and Ronglie) show that the source of our growing inequality is a larger and larger share of wealth getting transferred to housing and land.

If we have high taxation on land value, the most expensive land in cities will be used more effectively, no longer can landlords take more than their fair share of our labor, because all that land will be used more effectively. Which also means more land is available for farming.

In short, most of our problems are caused by allowing people to rent-seek on the one thing that we can never really expand significantly: land

> I'm not sure why people are so resistant to this idea.

At some point we'll run out of land to concrete over.

And before that point we'll experience more problems due to water runoff from the land we are concreting over.

The way to avoid that is to stop building sprawl, and stack homes on top of each other.

Which, is the only way to add homes in the economically productive centers where housing prices are going through the roof.

I mentioned in my comment that we should ban sprawl, and I mean it. We instead ban multifamily buildings nearly everywhere, or use code to legislate them out of being feasible. This is what must change.

Instead, it's really easy to pave over farmland in the middle of nowhere, forcing people to hop on to freeway and drive for hours to get to jobs, because it's the only thing that's legal to build. Which is happening just outside the Bay Area, for Bat Area workers: large single family development far away from where the purchasers will work.

Oh, but then you change the character of my neighborhood and I can’t stand that (even though my house was built on an earlier open space, messing up someone else’s bucolic preserve, and I conveniently forget that fact).

You can keep building up or building out, adding more and more concrete... either way at some point you're going to run out of land, or water, or power, or food, or something else.

What is your alternative to house the population? Tent encampments? More wars/disease? Death squads?

Humans have a right to housing. Saying "no more housing" but not thinking through the rest of the consequences, because you are personally reliably housed, is not a solution that a society should consider even momentarily.

Refusing to house people today because at some unspecified point after we have many many more people, is not even remotely logical, ethical, or a solution to any problem.

Where do you think this ends?

At some point we'll destroy the planet and then nobody will be housed.

Crucial factor: building housing does not change the population. Population growth comes from people having children, not from physical structures.

If your "solution" is to stop building housing, you have absolutely no solution, you just want to make people suffer.

The real solution is already happening: give women control over their bodies, economic control over their own futures, give women education and ensure that women have political power in society. That along with industrialization is how to stop population growth in its tracks.

Additionally, different types of housing have vastly different environmental impacts. Detached housing with yards is environmentally disastrous, particularly when in the woods, for people that take part in normal society. Multiunit housing takes far less materials, water, heating/cooling, and as importantly it allows loving with less transportation requirements, greatly enhancing quality of life while using less energy.

I think I've spelled out my solution to this fairy well. If yours is anything other than "make people homeless" i would love to hear it, or if you have any defense of your non-solution to ever increasing population, I'd love to hear it.

> Crucial factor: building housing does not change the population. Population growth comes from people having children, not from physical structures.

Look up induced demand.

People think our roads are too crowded, so they build even more roads. Then the roads are more clear, so people drive more. So the roads get more crowded and we build more roads...

I'm only having one child, partly because of the cost. If we burn down more of the planet to make it cheaper to have a second child, people will do that. Then people will complain it's too expensive so we need to burn down more of the planet to make it cheaper again. Then people will have three children because it's cheap...

Burn, burn, burn.

I believe we're soon reaching the point where the world population will actually start to shrink - I'm not sure that running out of land would be a problem (at least not in the US)

We don't run out of land anytime soon. Currently there is 19310 m^2 for each person. 10x global population and we still could have 1930 m^2 for each person. That is quite big area.

Hmmm. The top 1% nationally is somewhere between $500k and $700k annually. Even here in SF, you can live in a nice house for that kind of dough.

Did you mean top 10%? Now you're down to about $150k. I do think a two income household at that level can manage it, but it's surprisingly difficult and maybe not worth it when you have kids and both parents have demanding jobs.

I hope that's not a nitpick. I agree with your list and what you've said, I just think that the top 1% isn't the threshold.

I think folks often confuse "I can't afford a home" with "I can't afford the house I want".

>"I can't afford the house I want

Americans especially have a very skewed expectation when it comes to housing. Many people here are like "I have an upper middle class professional income, my family should have no problem affording a 3-4 bedroom single family house on a quarter acre lot with a big backyard for our dogs to run around in right in the middle of one of the most desirable metropolitan areas on the planet! Oh btw the free public schools should be excellent too!".

Saying something like that would make you sound insane in pretty much all developed countries. U.S. is a big exception due to historical reasons, but people really need to adjust their expectations going forward.

Thing is: It was doable 10-30 years ago (depending on region).

I have neighbors who bought their $3m homes when they weren't even $800k (adjusted for inflation). And since salaries + stocks have grown much faster than their property tax burden (basically frozen) - they're all retiring early.

People have expectations based on what they grew up with or what their parents grew up with or what they saw people achieving as they grew up. Can't blame them when they get out into the market and finally start saving that they're gonna be 10 years behind for the rest of their life...

>It was doable 10-30 years ago

And 150 years ago you can probably buy a few acres of land in SF Bay Area for less than the inflation-adjusted price of a townhouse in Mountain View these days.

Real estate is one thing that does not scale infinitely. Population grow, things change.

>can't blame them when they get out into the market and finally start saving that they're 10 gonna be 10 years behind for the rest of their life...

That's the thing about Americans. The speed of change in this country has finally increased after decades, especially when comparing to many fast developing countries. A lot of people just don't know how to adjust for that.

Wouldn't be such a big issue if housing policy kept up with the change. That's the biggest issue for young people. They want the change but young people aren't in control. (And for whatever historical reasons - young people still don't vote enough to enact the change they wish to see)

I'm not sure if there is any policy that would lead to everyone being able to afford the same amount of real estate as if it were 30 years ago. That's just impossible given the context and population growth.

We could easily build more high density. There are a lot of young people who are interested in high quality high density housing - but it's just not available. Not everyone wants or needs a SFH. We don't build up in this country almost at all and that would solve a lot of the pressure. (It would also allow for people to use other means of transport that they actually prefer - many young people don't want to drive!)

There are a ton of people who are interested in living in densely populated big cities but the issue is that there isn't enough high rises or tall residential buildings to offset the demand.

There's definitely policy that could be done but it'd destroy the existing value for homeowners and landlords. That's why it doesn't get passed - obviously.

Also what the SF Bay Area lacks is family oriented high density housing. High density housing is built for the young and single. Family oriented means easy access to fenced in playgrounds and parks, small but numerous bedrooms with large living rooms, etc.

You've gotta admit, it's pretty messed up if you're making 3x the national median household income and your only options are run-down dumps on the wrong side of a 45+ minute commute

>it's pretty messed up if you're making 3x the national median household income

3x national median income would actually mean something if real estate costs the same nationally, but obviously it doesn't. Many areas in the country costs far more than 3x in terms of real estate prices.

If you make the 3x the median income of the area you live in, then it would be a stronger argument.

Maybe Americans should consider an apartment. I make only a small amount over the average and with my bf we can easily afford a nice 2 bedroom apt anywhere.

Every time I propose this people think I’m on another planet but the lifestyle is really great tbh.

Considering how poor soundproofing standards in America are, and how inconsiderate the average American is, apartments are not a consideration for anyone who can half afford a SFH.

This is not inherent to apartment buildings and is probably mostly an issue with the smaller wooden ones. I live in a 30 level building and haven’t heard a single sound from any neighbours. Turned my music up to what I used to in a house, went in to the hallway and could hardly hear a single thing from directly outside my door.

Probably the easiest way to find out before buying is to just stand in the lobby and ask the next person who walks past what they think.

Where do you find properly built apartment buildings with a soundproofing barrier in the underfloor and brick party walls?

My in-laws lived in a mid-height (4 floors) concrete-and-brick building that went up under Salazar. An equivalent building in the US would be built in wood and sheetrock pretty much everywhere. Even 5000 square foot doctors' palaces that go for half a million dollars are stick-and-cardboard. Solid construction you'd only find in highrises in urban centers, and even then it's not guaranteed that the walls aren't made out of cardboard.

You see these sprawling neighbourhoods of SFH's with 1.50 m separation between buildings and very much the whole lot paved over. Everywhere else there would be mid-rise multifamily buildings, but the American insists on an SFH, because soundproofing.

To be honest, I'm not sure what the appeal of mid height buildings are. They have all of the downsides of an apartment with none of the upsides of a high rise like better quality construction and better location.

To find out what the quality of a building is you are best off just asking people who live there what they think. Apparently you can also request that strata give you information like owner complaints which may bring up noise disputes.

The point of mid-height buildings is that you can line a road with it and get sufficient density so that all the urban amenities (parks, playgrounds &c) are within 15 minutes of walking. That was Salazar's explicit goal when he built the post-war Lisbon neighbourhoods - church and primary school were the focal points and had to be within walking distance. His architects did an admirable job.

But what's the appeal of a high-rise? It requires too much space around it, it's not made for the human scale.

Depends what the definition of high rise is I guess. I live in a 30 level building that I consider pretty high and it sits on the entire space of the block it is on with only walk ways between it and the next building. I'm more talking about these 4 level apartment buildings which seem pointless to me.

Pretty sure you can get a nice apartment - just not the US dream house.

Around Mountain View, 150k a year would let you buy a run-down dump of a condo 45 minutes away, or rent a crappy apartment and gradually become poorer every year as housing prices continue to inflate out of control

Ok, but then I think it’s just as many people think “I have enough money in my paycheck to cover that mortgage payment so that means I can afford this home”.

When they aren’t considering the rest of their finances or what they would do if our of a job for multiple months, etc. Not unrelated, the number of first time home buyers that buy a new car within 3 years is like 75%.

We do a really really bad job at teaching finance in schools.

Not in all schools, mind you. Americans are bred and battered to exist as consumers, to work to consume, to work more and more, to wade deeper and deeper into the sunk cost of lost opportunity and useless industrial waste made useful only by measuring its bulk in third party business income from storage units leased.

Since you're getting flak. I'll add on - I'm in the same boat. Just turned 31. Make about ~$400k/yr. I have about ~$1.5m in stock (will be sold in the next year - so - maybe $1m cash). I've sold my soul to FAANG and an ultra toxic startup to get here.

Can't or will not buy a home here in SF. If I wanted to stretch - I could afford a $1.6-2m home but it'd be unpleasant. Depending on the neighborhood - that's just a starter home. I'm not even talking like a nice starter home either. My neighbors just bought the house nextdoor for $2m and spent a year renovating/fixing. Would they have bought this place if they knew all the issues? Probably not but couldn't do anything about it since you have to buy without inspection. Even when you buy at these crazy prices: Usually still requires a few hundred K in cash to renovate to put up to modern standards. We're talking all the electrical, plumbing, insulation, roof, some structural issues that went unaddressed, kitchen and bath updates, etc. Add on that you can't even live in the damn thing while that's happening. People underestimate how much places here cost and how much work they take.

Only way you're getting a nice modern turnkey house in a decent neighborhood is if you go $3m+. And unfortunately that's still wildly out of reach for many of us at the threshold of 1% individual incomes. (~$350-450k - depending on the study)

If you are only 31, making $400k, and have 1.5m in liquid assets, the answer is that you can afford to spend a lot more than 1.6-2.0m on a home. Whether or not you’d want to is a different question.

I’m in my early 40s, and was in the same boat as you in my early thirties but in a different large American city.

First, you can absolutely afford a $2m home, let’s not pretend otherwise.

Second, I bought at 31, and 10 years later I pay far less for my mortgage than it would cost to rent a similar place AND my hone went up in value despite buying at the peak of the last bubble!

Here’s the advice I’d give, but if you want to live in your are for the next 15 years or more. If you don’t want to be there for the long run then it’s more complicated.

If I was married - it would be much simpler. Unfortunately - in all likelihood - I will either never marry or be married around 40. Buying a house to set down some roots when you're single, changing jobs every 1-2 years, and have friends spread apart in a sizable geographical area... well, not the best idea or easiest decision to make. Especially when none of the houses I can afford are the ones I want.

So you don't have a family and you want a house? Go find a sweet apartment or townhouse and let the equity build until you've got a family going. That may be a bit judge-y but come on, not everyone can/should live in a detached home.

EDIT: I'm assuming that's an option. Does the Bay Area have condos or is that one of the dumb zoning things y'all got going on?

Apartments and townhouses don’t take kindly to woodworking, music, working on sports cars and motorcycles, etc. At least not in the bay. Personally, I’m not ever going back to sharing walls or floors ever again.

And for the cost - you really don’t get much for your dollar.

So you’re very picky, but can totally afford a place where you live.

I don’t think having a bar where you’d like to not hear your neighbors at 3am anytime they open or close a door is a high bar.

But sure - keep moving the goal posts in your mind.

I’ve read all of your comments, you’re being very picky all while you can totally afford to buy a house where you live. You won’t consider a townhouse, want a woodworking shop, a music studio, and a motorcycle shop.

They have condos and townhouses.

Totally makes sense. I think people are reacting to the idea that someone making that much can’t afford a house.

It really only takes about 5 years of living in the same place to make buying worth it in the vast majority of cases, and 3 years is roughly the 50/50 point where it makes sense financially to rent because you haven't recouped the costs of buying.

SF housing prices are out of control, because faang can pay 400k per year (plus stock). If you are open to moving away from the bay that 1mil will buy an amazing property outright in most parts of the country, or a really nice home and a big amount towards retirement... Alternatively you can stick in the Bay Area and adjust to your high wage being in line with a high cost of living (and consider the million dollars as a sizable down payment).

You cannot purchase a home in one of the most competitive areas in the entire country. To me, the solution is obvious.

Make more money? Yeah, I agree. That's what I always end up doing.

They say money can't buy happiness, but in your case it can't even buy you the material goods you want. Just move! Even with the current housing crisis you could afford a small mansion in the midwest with half your income. Your investments alone are enough to pay it in cash. And I'm not talking about middle-of-nowhere midwest; I'm talking about suburbs for metropolitan areas.

This guy is just entitled, and a whiny entitled at that. “Why can’t I buy a 10 acre farm with avocado trees and chickens in the middle of the city!!!”

He was just trolling and drew some people in. Downvote and move on.

He’s an energy vampire

Yes but then I'd have to live in the midwest - wouldn't I? I'm not one to be taking on that level of social suicide.

I lived in poor rural communities for the first 18 years of my life. I've paid my dues to my poor working class roots and I'm more than glad to say goodbye forever. And you can tell me, "But Omaha isn't that bad!" but I'm not buying it. I know people in the midwest and there's a reason so many want to leave. Only reason they stay is because they can't afford somewhere else - not because they like it.

To each their own I guess. I live in the midwest and I'm perfectly happy here. No social problems whatsoever. I've spent enough time in some of the biggest US cities to know I'm not missing anything.

I'm not sure what sort of mass exodus you're talking about either. The midwest city I live in is among the top 10 fastest growing cities in the US.

If selling your soul to FAANG in exchange for a lousy appartment is your recipe for happiness then I guess have fun with that.

You could also move to the east coast, or the south, or even the somewhere else on the west coast that isn't the bay area.

Your options are not Bay Area or Omaha.

And would I have a $400K+ TC if I left? No. (Mind you - I'm at $400K now but I expect $500-700K in the next few years)

People act like these jobs and high earnings just follow you wherever you move - they don't.

Maybe. Sounds to me like you'd be happier without that and all its baggage.

Changing my answer to therapy

Per [1], the minimum income to be part of the top 1% of income earners is $538k / year. I find it incredibly hard to believe you cannot afford to own your own home with that level of income, even in the biggest cities in the US.

What level of income are you considering here, and what house price do you feel is approachable with that income level?

[1] https://www.usatoday.com/story/money/2020/07/01/how-much-you...

That’s household income. It takes a mere $367k to be in the top 1% for an individual. I think your overall point still stands.

"Mere 367k" as if that isn't enough to afford the down payment on a nice home. Sure, you're not going to pay cash for a $3M penthouse in NYC, but I make well below 1/4 of that in a city and I'm well on my way to a down payment on a nice home for myself. I would recommend one SERIOUSLY reconsiders their budget/priorities if they are unable to build a house fund (even over a couple year period if starting from scratch) at $367k/yr.

I mean I see comments like this from a lot of people, but if you're in the top 1% of income in America you could probably buy a house in pretty much any urban space outside of major tech hubs/NYC.

A lot of people don't want to live in the suburbs, or in a "2nd tier"/up and coming city, but they are still very affordable, especially for someone in the top 1% of incomes.

It's a bit odd to describe it as "dire". You earn more than 99% of Americans, and people who earn less are still buying a ton of houses. You could probably rent for the rest of your life and still have a higher NW than 90% of Americans.

If you do really want a house you'll probably need to make some concessions on your demands, but tons of people do that anyway, and they are buying a house and they probably are not making 1% level income.

> 1. moving somewhere super rural

I don't think you're necessarily just limited to rural locations, but this does depend on what you require in a house.

If you're willing to buy a 1000 square foot apartment/condo, those can be had for ~$300K in some nice neighborhoods here in Chicago, with full access to the city's amenities.

If you're willing to live in the Chicago burbs (I personally am not), that same money will buy you a larger house with a yard. Still not close to rural, but definitely brings the problems that come with suburbia.

I'm in Atlanta, GA.

I have a huge penthouse condo with 25ft ceilings and wraparound 12ft windows. >3000sqft. It's in a historic building with lots of charm that has been featured in several movies. I'm also in a hip area of the city with skyline views and extremely walkable neighborhoods (on the Beltline).

My mortgage is < $2000/mo. I make >$500k a year.

I know my neighbors by name. Lots of them are in local bands and play in the courtyard. The food is awesome, and we're surrounded by art. I can do everything I want on foot.

Maybe you're in an overpriced city or a city without capacity for residents. There are lots of alternatives. With remote work, there's little reason not to explore your options.

Atlanta has oppressive humidity 5 months of the year. No thank you

Top 1% of income earners in the US? Because that is $450k+. With that income, you should be able to easily buy a home anywhere in America in any city but the most expensive enclaves of those cities.

And in general, top 1% in any local context will be able to afford a house where you live, too. I don’t think GP is actually in the 1% they think they are.

It's actually more like 330ish according to some sources, but the point still stands.

I live fairly rural. My wife and I both have degrees in MINT disciplines. With both of us working full-time, the best house we could currently afford would be older (and in a worse condition) than the one my parents bought for themselves when they were young, my dad had a medium-income job, and my mom was working only half days.

Same boat. Basically, the only way to play is to already own, and use that inflated leverage to buy something else inflated. This is the opposite of what we should be doing, and nonplayers are completely priced out of the market.

Top 1% income is about $540k/year according to https://www.usatoday.com/story/money/2020/07/01/how-much-you...

In my experience, an income of $X lets you get a mortgage for a house worth ~$6X. Where do you live where $3m+ won't get you a house?

while a bank may write you a mortgage for 6x I think it’s very worthwhile considering how that fits into an overall financial plan.

I'm not a financial advisor, but I think housing is a very reasonable investment given:

1) you need a place to live no matter what

2) historically the real estate market does well over long time horizons

3) if you make $540k and your mortgage is $200k/year, you'll still have like $100k-$150k in spending money after taxes.

4) housing values are a good hedge against inflation

5) IMHO inflation is going to be bad over the next few years, which means your fixed mortgage payments will shrink rapidly in an inflation-adjusted sense.


This is probably referring to major cities like New York and San Francisco where the top 1% earners (Nationally) are. This is probably because the top 1% of earners in these states are in a bidding war.

Nonetheless, I agree there are some compelling arguments that, practically all homes will be driven to prices which are only sustainable by institutions and therefore there will be little American home ownership by citizens.

If you have a top 1% income you can easily afford a place that isn't super rural, unless your definition of super rural is wayyy out of touch

You forgot : 1. Something terrible happening to everyone else in the world except me.

I have been really banking on this one.

Is Des Moines, Iowa "super rural" now? I'm not even in the top 20% of income earners and I could comfortably start a reasonable mortgage on a single family home here. I mean... I know it's still Iowa which probably conjures images of corn fields and pigs for most people, but I'd hardly call a metropolitan area of over 600k "super rural".

Don't get me wrong, housing prices are still nuts here compared to where they were a few short years ago - even in actual "super rural" parts of the state thanks to materials and labor shortages. The whole 1% having to live somewhere "super rural" thing just threw me for a loop.

~100k for 20% down gets you a good place in the non-Seattle Western WA. Not rural, close to Seattle and Tacoma and the airport, nice weather. Monthly payment is already lower than Seattle rent and will surely continue to look better through the years. Doesn't take FAANG money to achieve - just west coast software dev money.

Before the market really caught fire in late 2020, you could've gone in under asking in this area + gotten that sweet sub-3% interest rate.

That said, I like living in the suburbs and own a (decade-old+) car.

If you are in the top 1%, you shouldn't have to look somewhere "super rural" in most states. Or maybe I have a different definition of "super rural" than you?

This comment is confusing. I know many people in my neighborhood who are not even close to your 1% and own their house. How is this possible? We are not super rural.

Agreed. Are we talking about the U.S? The data I'm seeing shows top 1% income as over 500K USD. That's enough to easily afford a home anywhere outside a few extremely expensive pockets of the U.S.

Also, you are not likely to do much better than that at Facebook/Google unless you are in the top 1% there as well (i.e. above Staff Software Engineer).

I'm also curious about this. I'm not even in the top 10% for the US and I own a home. I know multiple people who make noticeably less than me who also own homes. And there are multiple nearby cities where people who make even less still also own homes.

My guess is that either the definition of "super rural" being used here is overly broad (like for example anywhere outside of new york city ... ) or they're living in some ultra high cost of living area.

It means that someone that is considered high revenue earning via a job is priced out of the market, but if you have pre-existing assets you can hedge/borrow against them to get more.

It's also another way of wealth, many people assume having high revenue via salary/compensation is a good sign of wealth, but it's not.

Makes you a better consumer, e.g. you're priced out of buying a house, so you rent.

Since the parent is in the top 1%, he or she probably works in New York City, San Francisco, Seattle, Washington DC, Los Angeles, or San Diego.

Suburban DC here. I'm not in the 1% and can afford a house just fine. Plenty of homes here sub-$600k. A 1% income should be good for a home well in excess of $1 million.

You could afford a house in any of those places on 1%ile income.

The sharpest segment on that graph is since July 2020. If you bought any time other than November 2004 - November 2007, it was cheaper than it's been in the past 14 months. If you already own a home and have equity you are probably fine. The GP was describing what it feels like trying to enter the market right now.

My friend just bought a nice house near Indianapolis for less than $100,000. You have not listed all the options.

>Put a huge tax on vacancies and cap the number of residential properties a business is allowed to purchase in a year.

What makes you think that's an effective intervention? What do you think the vacancy rate is, and how much % of housing is being bought by businesses?

Are you willing to compromise on square footage and number of bedrooms, bathrooms, and garage? I don't know what kind of properties you're looking at. But have you considered settling for a smaller home within reasonable commuting distance?

> 1. moving somewhere super rural

Why is this such a deal-killer for so many people?

That's literally where most of the land is. And a good chunk of it has decent internet, even if you have to mount a 5 GHz airMAX dish on your house.

No jobs in rural areas. If remitr work becomes the new norm there is an incentive but I doubt it.

Great suggestions.

I would add forbidding foreign people and companies from owning real estate in any given country.

And exponential tax on second, third and more houses to remove hoarding, air BnB issues, and reduce flipping incentives.

>moving somewhere super rural

Why do you think you have to move somewhere super rural? I'm in the suburbs of a major city and decent sized 3 bedroom houses start at ~$200k.

At $545,978/year (the min to be in the 1%), you can afford a house anywhere in the United States, except for 3 very specific geographical regions.

lolwut? A top-1% income is north of $400k nationally. That buys plenty of house in most places. You could take a 50% pay cut and still be fine in suburban DC.

EDIT - OP edited their post to say "1% within age group, more like 10% overall". That's still likely a $100k+ annual income. I'd suggest buying a house is still possible on that income, just perhaps not across the street from Apple or Amazon offices.

yes, exactly my "problem". it feels weird earning a relatively high salary and at the same time buying a house somewhere at least suburban or even a flat in my town would require me to pay off a huge loan for a long time. in theory I could do that - but in practice this is not really achievable as I do not trust in my mental health stability. I don't know if I can keep that up for long enough.

You in a top price area like SF or NYC? Then you’re in local competition with other top 1-10%ers.

> top 1% of income earners

Probably not where you live, though.

You also left out commuting from Tracy.

Quick anecdote.

I bought my first house in Garland TX for $119,000 in 2003. 3 beds, 2.5 baths, a 'not bad' neighborhood. My wife was a teacher and we could afford it just on her income.

Looked up that house recently and it was for sale, now at $250,000 18 years later. Someone had updated it with typical flipper grade stuff, but ok it's double what it was even 5-10 years ago.

So then I go do the math on monthly payments for it. The interest rate back in 2003 was like 7-8%, and now we're down to 3%. Turns out the monthly payments I made 18 years ago and today are about the same.

We bought our second house in 2007, and similarly the price it fetches now is much higher, but the payments would be similar.

If you look at housing affordability like rent affordability; that is, what monthly payment can you afford, it seems like house prices are increasing to match interest rates decreasing. That house in Garland TX, inflation adjusted, is now MORE affordable than it was 18 years ago, even though it's purchase price has doubled.

EDIT to add - I now live in the Bay Area and this pattern doesn't hold up here. But most nation-wide patterns don't really hold up here. The house we bought in Oakland in 2016 has doubled, but we were already at like 4.25% back then, so the lower interest rate doesn't offset the whole increase.

Both parties and every level of government determined that the best path forward was re-inflating the bubble. Is it any surprise that kind of joint effort worked?

It’s great news for incumbent owners and at the end of the day that’s a majority of voters almost everywhere.

It is also a massive wealth distribution scheme for the rich.

starters are not able to afford a home, and instead have to rent from either a corporation which has the means the own property, or for a landlord who does the same.

It will cause a lot of issues with wealth disparity, especially for young people in the future.

Honestly, I'm curious to see how long these gains can hold, both in the stock market and in housing. It is just bananas, and I say this as someone that has had both types of investments since the 1980's.

The crashes of 1987, 2000, and 2008 all had very clear causes. I wonder what is going to be the cause of the next crash. Or maybe I suffer from 20/20 hindsight.

EDIT #1 : If housing prices crater, I'm buying another one because history shows the market recovers. Same goes for index ETFs. So people like me sitting on a big cash position and paranoid AF will have some kind of balancing effect, no?

EDIT #2 : "hindsight" not "hindisight", heh.

People treating houses as investment vehicles are a big reason why the housing market is so awful for people looking to buy their first home.

/Raises finger/


/Lowers finger/

Yeah, I'm part of the problem, but I'm also scared of getting fucked. I'm approaching my 60's and have The Fear. So I'm doing this "every man for himself" thing, because buying an investment property doesn't have a face associated with it, like mugging someone. I'm conflicted, but also worried for the future.

At least you aren't running an AirBnB. Not too long ago, I started a new job and quit within the week because the housing market in the area was completely oversubscribed. You couldn't even find a bedsit within driving distance in a month's time.

Some lady I was suggested to speak to had an AirBnB. Her suggestion was to live in the back of a U-haul truck while looking for something more permanent. The revolution can't come soon enough.

It's sad, but I think the only way out would involve violence/riots.

The system is just so incredibly inhuman - you have working class people commuting hours / working 2 shifts and barely being able to afford housing, while others just hoard houses and profit.

It's all just one big sad Monopoly game.

I'm freaking out in a similar fashion. It's bananas. Between money being practically free due to low interest rates, and the large incomes that are about, we keep feeding the beast: dumping more & more money into the stock market, into housing. Those valuations go up and up, further increasing the money supply of those with some stake. How and where does this cycle ever slow down or stop?

Hang on tight, we got this!

I've been watching Boise as the canary in the coalmine. You are starting to see it cool down as more listings are on the market now then 3-4 months ago. Homes are going for closer to asking if not under and homes are sitting on the market longer.

If Boise goes south then I feel a lot of other hot markets since covid will go 2-6 months after.

That's interesting, what do you think sets Boise apart as a good leading indicator?

I was thinking the same thing myself, presumably the economy will crumble from the bottom-up next time. So once my rural hometown is a flaming pile of wreckage, I'll close out all my risky positions

Because, there is not much manufacturing or reason for Boise or that area to really support high real estate prices.

That area IMO is akin to wealth leaving core metropolitan cities and investing in areas where are close enough, yet not near a metropolitan area.

Or something like that.

Coeur d'Alene/Spokane as well.

Would like to think it is going to get better but this recent spike has only left things open more for market manipulation in the rental market. Even if things get better in the housing prices there is still a huge housing issue for the people who make less than $100k a year (average rate of pay in Coeur d'alene is $20/hr, minimum wage still $7.25, waiters can be paid ~$3.60/hr plus tips).

The tent cities option that Ketchum was exploring recently is a thing we are going to be seeing a lot more often.

> The tent cities option that Ketchum was exploring recently is a thing we are going to be seeing a lot more often.

i wonder how long it will take before the goverments are forced to take action?

i mean, after world war 2, there was a massive housing crisis in europe because of cities turned to rubble, but thanks to massive public works programmes which created housing, this was solved relately quickly (<10 years in some cases).

The free market will not solve this problem because the shortage of houses is actually netting them more money, especially with the massive amount of money pumping going on.

> I'm curious to see how long these gains can hold

The gains can hold long. The dollar may not.

I don't have it handy at the moment, but apparently housing is still more affordable than in 2008. The key factor is that mortgage rates now are roughly half of what they were during the bubble, so a given monthly payment will buy more house today.

Depending on the local jurisdiction and price, this could mean that houses are 20% more affordable today than in 2008, modulo down payments.

I calculated the monthly payment inflation adjusted using 30-year interest rate and it looks lower than 2008.

Chart: https://fred.stlouisfed.org/graph/?g=GMT0

Formula used: https://www.wallstreetmojo.com/mortgage-formula/

Fred formula:

a = Median Sales Price of Houses Sold for the United States (MSPUS)

b = Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPIAUCSL)

c = 30-Year Fixed Rate Mortgage Average in the United States (MORTGAGE30US)

a/b * (c/100/12) * (1+c/100/12)^(30 * 12) / ( (1+c/100/12)^(30 * 12) - 1)

PS: Similar could be said for everything (e.g. stocks). Buying an overvalued asset using debt might be cheaper than before.

>I don't have it handy at the moment, but apparently housing is still more affordable than in 2008.

this? https://awealthofcommonsense.com/2021/03/what-if-housing-pri...

That's exactly the one! The last graph ("Inflation-Adjusted Monthly Mortgage Payment") is the key takeaway.

Fair enough, but that implies there may come a day when mortgage rates are much higher and then housing for new buyers is not at all affordable.

Homeowners that locked in 30-year fixed rates might not be too concerned at first. But eventually, even they may need to move or sell someday. Wages or buying power will need to catch up to avoid some downward price pressure.

housing is now an "investment" for everyone with extra cash and not just the owner occupiers. I live in a condo and honestly the majority of the units that have sold in my smallish 35 unit building are to people overseas, who then contract out a manager and rent the unit out. Non owner occupied units don't get tax abatement but that doesn't seem to matter.

I couldn't afford to live in my building if I hadn't bought around 20 years ago.

Its kinda astonishing that the past 10 years have been that.

Canada is like this too, except the trend never got interrupted by 2008. By now our bubble is in the stratosphere by comparison.

So is Australia

I sometimes feel like I'm living on another planet to the rest of Australia being in an inner CBD apartment. Whenever I look at the market I see loads of things for rent at reasonable prices and loads of things for sale within my budget. While the rest of the country is paying over a million dollars for a shack in crackhead land I can see really nice apts in great locations for $400-600k.

You're comparing land (and a house) to no land and no house.

I've often thought of buying an apartment before a house, but it makes very little sense since land is practically not at a premium in Australia.

Land not a premium in Australia?? Averaged size blocks with no house or an absolute dump sitting on the block are selling for $1-2M

Yes. And if you go <50km in any direction you can get hundreds of acres for the same thing. We're not stressed for space. We're stressed for infrastructure (and population).

I expected your response, so I want to say that $2M will buy you a great house on decent land, even in Sydney. Not that it's a nice way to spend that much money. Like the rest of the world.

Like an apartment. People don't want to buy a good piece of land outside the city. That doesn't mean we're running out of land.

This is a bit like saying we are not running out of water because there is plenty of water in the ocean. All that space in the middle of nowhere isn’t very useful because people do not want to live 50km away from cities.

No it's not. If you were surrounded by lakes. Sure.

It's extremely useful. It's just not in demand. Which is exactly what I just wrote. Land is not at a premium. Space in the cities is, like every nation around the world.

That's just arguing on semantics and deliberately ignoring the context. No one is arguing that there is literally no land to put a single building on anywhere in the country.

Obviously when people say land is scarce, they mean that the useful land that people actually want to live on is scarce.

Having a billion square km of sand in the desert isn't useful when someone wants to buy a place to live and exist in a society.

Yes. And they're wrong. Land is not scarce. No one is mentioning the "sand". There's more space empty with perfect soil than there is space taken up by residential. The outback has nothing to do with it.

When money is cheap, houses are expensive. When money is expensive, houses are cheap.

When you don’t build housing, houses are expensive.

Or so we thought, yet here we are with low interest rates and no inflation.

oh boy, there is inflation... and a crapton of it.

The economic policy of printing dirt cheap money and hiding all inflation is not working, because basic necessities (housing, food, basic services) are becoming more expensive while wages are not rising.

recently, i was looking at getting a mortage in my country. According to the accountant bureau, i was able to get roughly 400K in mortage (with 2 people that is). This ends up being around 1500 a month in payment.

My collegue got a house around 6 years ago, and was only able to get around 250K while stilling paying around 1400 a month...

Money is becoming inflated, but wages are not rising to play catchup fast enough.

This wil leave a lot of people in the dust, and if we do not change direction in terms of fiscal and economic policy, it will lead to massive problems in the long run. The housing shortage is putting young people on hold. Which in term means many are considering moving to other countries to get proper housing and be able to get children.

an anecdote.

In my direct team, around 1 in 6 young people has his own home. (rent or bought). The rest still live in student accomidation or at home. Many are in their late 20's and some are considering leaving the country for places with better housing markets.

These are people with high paying jobs who can afford to migrate, which will lead to brian drain in the future.

Also, i don't know the situation in the US. But many people are fed up with the current neoliberal economic model because it is not working them, and turning to more extreme politics as a result.

a good example of this is the youth wing of the dutch socialist party being cast out of the party because it is too extreme according to the party[0].


> But many people are fed up with the current neoliberal economic model because it is not working them, and turning to more extreme politics as a result.

What's sad is that we had sound financial axioms over 1,400 years ago by means of Islam. It prohibited things like interest, gambling/selling what you don't own (see: call and put options), and a handful of other things, while allowing society to move about within those bounds (which is still a very large space). Competition is welcome, so there is some overlap with Capitalism, but without its downsides.

Glances sideways at basically all assets

You sure? Is there a law that says inflation has to happen evenly across all sectors of all markets, at exactly the same time?

>and no inflation.

did you miss the last few CPI reports?

No inflation? Is this a joke or do you blindly believe the CPI numbers over your every day experience?

but the CPI numbers are showing inflation. It might not match the 30% (or whatever) estimate that's inside your head, but it's definitely there.

But you don't have money, because money is expensive.

Interest rates are at 3% for a 30 year loan.

What I meant is that when money is expensive, houses are cheap, they're cheap because no one has money, and no one has money because it's expensive.

Property prices will drop when credit is harder to come buy for businesses, as prices are being driven up by investors who have moved into residential housing. It’s a shame we can’t get the votes to financially penalize investment ownership, and instead give preference to home owners living in the homes. You’d think this would be something that employers would rally behind in the Bay Area as it would help them staff up.

We bought in December at a price that felt too high, but now with all the sales on the block there’s enough comps this month to suggest we could re-appraise with 20% or 22% of more of debt-to-equity.

Having said that I also know more friends/family trying to have kids and move into a home. I also see friends with parent’s in retirement living alone in large homes too afraid to downsize in this market.

I went remote in 2018 living in a Brooklyn studio. My wife and I utilized remote work to move to a smaller city in late 2019, living off a substantially smaller portion of wages, seriously snowballing debt payments and increasing savings. Had we just bought in Jan 2020 we would have saved a bunch. The market was wild then too and already not cooling down here through that winter as it usually would. Little did we know 2020 would bring a pandemic into the mix.

What seems like a really strong streak of pessimism + huge increases in housing prices always makes me a little confused.

People want to tie themselves to huge loans while not feeling great about he future?

Maybe my perception is off on the pessimism?

I think at least part of it is desperation.

Home ownership has been one of the very few reliable ways for the middle class to build wealth, and with housing prices skyrocketing and the future looking even worse, I suspect many people are trying to get whatever they can before any chance they have of owning is gone forever.

The question is whether this is a bubble or not. I was hoping for some insightful commentary on this. Are there any warning signs? I mean last time there was a rise in risky lending, rising defaults, etc.

Sure, but interest rates are crazy-low.

By that graph 2021 home prices are at 150% the trough in 2012. So that's like 4-5%/year compounded. Doesn't seem astronomical considering the trough was probably below intrinsic value. If you go back to 2000 you get the same price level and 2%/year compounded return.

Inflation isn't that higher than in the late 2000s, is this the right graph? https://fred.stlouisfed.org/graph/?g=GMNQ

If you are anxiously hoping this might be the end of the petrodollar era, having hard assets like houses seems smart and rational. I'm not naive enough to think this will go down without bloodshed, however

1. Forbid foreign investment in properties 2. Remove tax on first home, increase exponentially taxes on second, third, homes to reduce incentives for people to hoard houses.

Wonder what this looks like per capita. Not much population growth between now and then but enough that it’d skew it. Population has grown by 10% over this period

Hmmm. 2008 can’t happen again. No way. Safe as houses.

you will own nothing and you will be happy.

live in a pod, eat the bugs.

What do the gray columns represent?

Without doing any research, I suspect they're recessions. They line up perfectly with the 2008 and covid recessions.


Really looking forward to this bubble bursting.

I'm sure all the speculative "real estate investors" will get bailouts if it does. God forbid people accept the risk part of the equation in investing

This inflation is no joke.

Prices are inflation adjusted

Poster is probably insinuating that inflation is higher than reported. I tend to agree with that sentiment but not enough to change this chart meaningfully

How do you adjust for inflation? Because my thesis is the current inflation "on paper" is much smaller than the real inflation. Just look at all the people going "Inflation? Naah! T's all good!" - I just see no way this is true with the increasing prices to... well, everything.

Inflation is a squishy concept, but generally people refer to it as a general decrease in purchasing power for a unit of currency, across the entire economy.

When a single good, housing, goes up in price, that is not a general shift across many different goods.

What sort of "real" inflation are you talking about here that's bigger than on paper? What's your metric?

"But this time, it's different..."

I mean banking leverage is lower, accounting on collateralized debt is better, consumer/speculator leverage is limited while lending requirements are still mostly higher…

Those aspects are different than 2008.

The global market is still exposed to other forms of over-leveraged contagion (aka incestuous ownership), but just saying “US housing prices are higher than an over exuberant peak 13 years ago so therefore its a problem without really considering other supporting or negating factors” is pretty uncritical.

>consumer/speculator leverage is limited

What are your thoughts on the direction this graph is headed? https://fred.stlouisfed.org/series/BOGZ1FL663067003Q

Could be a consequence of near 0 interest rates inflating assets. Thankfully the fed memo is that its transitory and nothing to worry about so the money press in still on

I can understand the Fed not wanting to overreact. It has so much control over everything sometimes it's better not to swing.

It's always easy to wallow in apprehension when the status quo is politically convenient. The spectrum of forces, from home owners to bankers and everyone in between, is so vast that the only politically viable course is "see no evil, hear no evil, speak no evil," and it will remain so until the bubble pops. Again.

I don't really think it's appropriate to accuse the Fed of "wallowing in apprehension". The Federal reserve is an incredibly powerful institution and missteps are extremely consequential.

> Could be

That's a gentle way of putting it.

Nothing to see here folks! Move along. /s

QE does not involve printing money. How does swapping bonds for reserves, i.e. monies of different durations, invoke a money press?

EDIT: I am also using 'printing money' in the figurative sense, I'm not making some obtuse point about actual notes being printed. I don't think QE is equivalent to figurative money printing, the money is not coming out of thin air.

'Increasing fictional numbers on a computer screen through political intent' is the modern equivalent. I think everyone understands that, at this point...

Yes, I'm well aware. How is exchanging bonds for reserves, both of which are money, equivalent to money printing (in the figurative sense, obviously)?

Look at the M2 money supply since 2020

Can you give a particular source? The definition of M2 used by the Fed was expanded in May 2020, so the reading of any charts must account for that.

I also think it's kind of irrelevant anyway. Drawing down the duration of money by QE will increase M2, that doesn't mean money is being created from thin air. Bonds are drawn out of the economy in exchange for increased reserves. What are bonds if not a form of money?

Bonds are debt, they are not money.

If I hold a bond from the US government, that is money with a non-zero duration.

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