Are we in a housing bubble?

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ballons
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Re: Are we in a housing bubble?

Post by ballons »

jfn111 wrote: Tue Jun 01, 2021 9:19 am
Random Musings wrote: Mon May 31, 2021 9:06 pm I sense the higher pricing will incentivize more people to sell rental properties to cash in, hence increasing supply a bit. I guess you can claim millenials as the driver to higher pricing, but my guess is that they will be a bit disappointed if inflation continues and puts pressure on interest rates.

RM
We have seen a lot of the inner city landlords selling off their single family rentals. Those who purchased after the 2008 crash are seeing that they can sell for 3 or 4 times their purchase price. Added to that is the cities changing rental laws to more favor the renter then the landlord and the landlords are figuring it's a good time to take the money and run.
No matter where you live, if you have rentals you should be liquidating them because a greater fool is waiting and willing to waive inspections.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

SmallSaver wrote: Tue Jun 01, 2021 12:58 pm
rockstar wrote: Tue Jun 01, 2021 12:29 pm
jay22 wrote: Tue Jun 01, 2021 11:37 am I feel sorry for the first time home buyers who have saved for 2-3 years but are now completely priced out of the market. :-(
I'm against the saving 20% thing. Having 5% plus fees is good enough. You'll either get to 20% via the home price going up or via paying it down faster. In either case you can eventually refi, so I don't know why anyone would wait to have 20% before buying. I'm pretty sure I've said that here before the market blew up.

The problem with housing is that it's leveraged and it's tied to interest rates. Both work against you. It's also a lot like equities. Time in the market really matters. It matters for housing too. But you lose the flexibility to move.
As someone in the boat, it's not the down payment, it's getting priced out. I know it's normal on these boards for people to buy $500k starter homes, but that's not an option for most people (including myself).
Homes are like investing. The earlier you start the better. But no one tells you this about housing.
Last edited by rockstar on Tue Jun 01, 2021 4:30 pm, edited 1 time in total.
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

rockstar wrote: Tue Jun 01, 2021 2:23 pm
SmallSaver wrote: Tue Jun 01, 2021 12:58 pm
rockstar wrote: Tue Jun 01, 2021 12:29 pm
jay22 wrote: Tue Jun 01, 2021 11:37 am I feel sorry for the first time home buyers who have saved for 2-3 years but are now completely priced out of the market. :-(
I'm against the saving 20% thing. Having 5% plus fees is good enough. You'll either get to 20% via the home price going up or via paying it down faster. In either case you can eventually refi, so I don't know why anyone would wait to have 20% before buying. I'm pretty sure I've said that here before the market blew up.

The problem with housing is that it's leveraged and it's tied to interest rates. Both work against you. It's also a lot like equities. Time in the market really matters. It matters for housing too. But you lose the flexibility to move.
As someone in the boat, it's not the down payment, it's getting priced out. I know it's normal on these boards for people to buy $500k starter homes, but that's not an option for most people (including myself).
Homes are like in investing. The earlier you start the better. But no one tells you this about housing.
Many years ago, I heard it said that real estate is expensive when you're young and outrageous when you're old.
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randomguy
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Re: Are we in a housing bubble?

Post by randomguy »

rockstar wrote: Tue Jun 01, 2021 12:29 pm
jay22 wrote: Tue Jun 01, 2021 11:37 am I feel sorry for the first time home buyers who have saved for 2-3 years but are now completely priced out of the market. :-(
I'm against the saving 20% thing. Having 5% plus fees is good enough. You'll either get to 20% via the home price going up or via paying it down faster. In either case you can eventually refi, so I don't know why anyone would wait to have 20% before buying. I'm pretty sure I've said that here before the market blew up.

The problem with housing is that it's leveraged and it's tied to interest rates. Both work against you. It's also a lot like equities. Time in the market really matters. It matters for housing too. But you lose the flexibility to move.
The 20% helps you in the case where the market tanks and you need to sell. That happens (job loss, family changes,...) a lot more than you might think. Lots of people live 20 years in a house. A lot end up more like 3. It is easy to say the latter group should buy but a lot of them thought they would be there 10+ years.

For the past 10 years buying early has paid off. Then there were like 4 years where not buying paid off. And then like 10 years where buying early did pay off. I am not sure if we are overheated the way 2007 was with no income, no asset loans and the like but prices are definitely inflated by monetary policy that leads to cheap loans and tons of cash. At some point there will be a market pause. If that is tomorrow or in 3 years is impossible to predict.
SmallSaver
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Re: Are we in a housing bubble?

Post by SmallSaver »

willthrill81 wrote: Tue Jun 01, 2021 2:41 pm
rockstar wrote: Tue Jun 01, 2021 2:23 pm
SmallSaver wrote: Tue Jun 01, 2021 12:58 pm
rockstar wrote: Tue Jun 01, 2021 12:29 pm
jay22 wrote: Tue Jun 01, 2021 11:37 am I feel sorry for the first time home buyers who have saved for 2-3 years but are now completely priced out of the market. :-(
I'm against the saving 20% thing. Having 5% plus fees is good enough. You'll either get to 20% via the home price going up or via paying it down faster. In either case you can eventually refi, so I don't know why anyone would wait to have 20% before buying. I'm pretty sure I've said that here before the market blew up.

The problem with housing is that it's leveraged and it's tied to interest rates. Both work against you. It's also a lot like equities. Time in the market really matters. It matters for housing too. But you lose the flexibility to move.
As someone in the boat, it's not the down payment, it's getting priced out. I know it's normal on these boards for people to buy $500k starter homes, but that's not an option for most people (including myself).
Homes are like in investing. The earlier you start the better. But no one tells you this about housing.
Many years ago, I heard it said that real estate is expensive when you're young and outrageous when you're old.
True, but something really did change about 20 years ago. Source Image
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

SmallSaver wrote: Tue Jun 01, 2021 4:14 pm
willthrill81 wrote: Tue Jun 01, 2021 2:41 pm
rockstar wrote: Tue Jun 01, 2021 2:23 pm
SmallSaver wrote: Tue Jun 01, 2021 12:58 pm
rockstar wrote: Tue Jun 01, 2021 12:29 pm

I'm against the saving 20% thing. Having 5% plus fees is good enough. You'll either get to 20% via the home price going up or via paying it down faster. In either case you can eventually refi, so I don't know why anyone would wait to have 20% before buying. I'm pretty sure I've said that here before the market blew up.

The problem with housing is that it's leveraged and it's tied to interest rates. Both work against you. It's also a lot like equities. Time in the market really matters. It matters for housing too. But you lose the flexibility to move.
As someone in the boat, it's not the down payment, it's getting priced out. I know it's normal on these boards for people to buy $500k starter homes, but that's not an option for most people (including myself).
Homes are like in investing. The earlier you start the better. But no one tells you this about housing.
Many years ago, I heard it said that real estate is expensive when you're young and outrageous when you're old.
True, but something really did change about 20 years ago.
It actually changed about 40 years ago: mortgage interest rates began falling.

Image
https://fred.stlouisfed.org/series/MORTGAGE30US

And another important factor changed: home sizes began increasing.

Image
https://www.businessinsider.com/houses- ... art-2015-6
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SmallSaver
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Re: Are we in a housing bubble?

Post by SmallSaver »

willthrill81 wrote: Tue Jun 01, 2021 4:20 pm
SmallSaver wrote: Tue Jun 01, 2021 4:14 pm
willthrill81 wrote: Tue Jun 01, 2021 2:41 pm
rockstar wrote: Tue Jun 01, 2021 2:23 pm
SmallSaver wrote: Tue Jun 01, 2021 12:58 pm

As someone in the boat, it's not the down payment, it's getting priced out. I know it's normal on these boards for people to buy $500k starter homes, but that's not an option for most people (including myself).
Homes are like in investing. The earlier you start the better. But no one tells you this about housing.
Many years ago, I heard it said that real estate is expensive when you're young and outrageous when you're old.
True, but something really did change about 20 years ago.
It actually changed about 40 years ago: mortgage interest rates began falling.

Image
https://fred.stlouisfed.org/series/MORTGAGE30US
Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

SmallSaver wrote: Tue Jun 01, 2021 4:35 pm Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
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rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

willthrill81 wrote: Tue Jun 01, 2021 4:39 pm
SmallSaver wrote: Tue Jun 01, 2021 4:35 pm Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
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Tubes
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Re: Are we in a housing bubble?

Post by Tubes »

Someone needs to find a price per sq. ft. chart.

We're in a somewhat modest 1,800 sq. ft. and our home price has gone exponential. If anything, smaller homes are gaining more traction in this market because they are more "affordable," at least this week.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

Tubes wrote: Tue Jun 01, 2021 4:51 pm Someone needs to find a price per sq. ft. chart.

We're in a somewhat modest 1,800 sq. ft. and our home price has gone exponential. If anything, smaller homes are gaining more traction in this market because they are more "affordable," at least this week.
Here you go:

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

You can also search the site by city or state.

And this will blow your mind given median household income:

https://fred.stlouisfed.org/series/MSPUS
Last edited by rockstar on Tue Jun 01, 2021 4:54 pm, edited 1 time in total.
SmallSaver
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Re: Are we in a housing bubble?

Post by SmallSaver »

rockstar wrote: Tue Jun 01, 2021 4:49 pm
willthrill81 wrote: Tue Jun 01, 2021 4:39 pm
SmallSaver wrote: Tue Jun 01, 2021 4:35 pm Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
Yes, without getting too political I will say that efforts to prevent the construction of new housing are pervasive. I'm not sure that increasing home size is a driver of increasing prices as much as an effect of them.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

SmallSaver wrote: Tue Jun 01, 2021 4:54 pm
rockstar wrote: Tue Jun 01, 2021 4:49 pm
willthrill81 wrote: Tue Jun 01, 2021 4:39 pm
SmallSaver wrote: Tue Jun 01, 2021 4:35 pm Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
Yes, without getting too political I will say that efforts to prevent the construction of new housing are pervasive. I'm not sure that increasing home size is a driver of increasing prices as much as an effect of them.
I'm just saying that I found it odd that I couldn't buy a smaller home because they couldn't be built. I ended up in a 2600 square foot home because that was the minimum. I had a lot of empty rooms that I turned the vents off. I wanted a 1600 square foot home. It was such a money pit because the upkeep also increased with the square footage.
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Tubes
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Re: Are we in a housing bubble?

Post by Tubes »

rockstar wrote: Tue Jun 01, 2021 4:53 pm
Tubes wrote: Tue Jun 01, 2021 4:51 pm Someone needs to find a price per sq. ft. chart.

We're in a somewhat modest 1,800 sq. ft. and our home price has gone exponential. If anything, smaller homes are gaining more traction in this market because they are more "affordable," at least this week.
Here you go:

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

You can also search the site by city or state.

And this will blow your mind given median household income:

https://fred.stlouisfed.org/series/MSPUS
Wow! That was fast. No wonder you are "rockstar."

You are right about comparing with income. It is out of alignment for recent years. Another reason to feel "soapy."
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Tubes
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Re: Are we in a housing bubble?

Post by Tubes »

rockstar wrote: Tue Jun 01, 2021 5:00 pm
SmallSaver wrote: Tue Jun 01, 2021 4:54 pm
rockstar wrote: Tue Jun 01, 2021 4:49 pm
willthrill81 wrote: Tue Jun 01, 2021 4:39 pm
SmallSaver wrote: Tue Jun 01, 2021 4:35 pm Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
Yes, without getting too political I will say that efforts to prevent the construction of new housing are pervasive. I'm not sure that increasing home size is a driver of increasing prices as much as an effect of them.
I'm just saying that I found it odd that I couldn't buy a smaller home because they couldn't be built. I ended up in a 2600 square foot home because that was the minimum. I had a lot of empty rooms that I turned the vents off. I wanted a 1600 square foot home. It was such a money pit because the upkeep also increased with the square footage.
The bigger houses are a kind of hidden inflation when it comes to maintenance and sustaining. You can turn vents off, but that only partly helps. You still have more roof area, so roof replacement will be more expensive. Same for painting, rotting siding, gutters, more pipe linear footage that can leak, more outlets to short out, and on, and on. Nothing you can do about any of that.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

Tubes wrote: Tue Jun 01, 2021 5:00 pm
rockstar wrote: Tue Jun 01, 2021 4:53 pm
Tubes wrote: Tue Jun 01, 2021 4:51 pm Someone needs to find a price per sq. ft. chart.

We're in a somewhat modest 1,800 sq. ft. and our home price has gone exponential. If anything, smaller homes are gaining more traction in this market because they are more "affordable," at least this week.
Here you go:

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

You can also search the site by city or state.

And this will blow your mind given median household income:

https://fred.stlouisfed.org/series/MSPUS
Wow! That was fast. No wonder you are "rockstar."

You are right about comparing with income. It is out of alignment for recent years. Another reason to feel "soapy."
If household income is around $70k, then most families should be buying homes around $210k using the 3x income rule. However, they are now north of $300k. It's more like 5x. So even if the buyer has good credit, they're still buying more house than they could afford. We are going to have a lot of house poor folk. But given how low inventories are these days, there won't be many of them nationwide.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

Tubes wrote: Tue Jun 01, 2021 5:03 pm
rockstar wrote: Tue Jun 01, 2021 5:00 pm
SmallSaver wrote: Tue Jun 01, 2021 4:54 pm
rockstar wrote: Tue Jun 01, 2021 4:49 pm
willthrill81 wrote: Tue Jun 01, 2021 4:39 pm

The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
Yes, without getting too political I will say that efforts to prevent the construction of new housing are pervasive. I'm not sure that increasing home size is a driver of increasing prices as much as an effect of them.
I'm just saying that I found it odd that I couldn't buy a smaller home because they couldn't be built. I ended up in a 2600 square foot home because that was the minimum. I had a lot of empty rooms that I turned the vents off. I wanted a 1600 square foot home. It was such a money pit because the upkeep also increased with the square footage.
The bigger houses are a kind of hidden inflation when it comes to maintenance and sustaining. You can turn vents off, but that only partly helps. You still have more roof area, so roof replacement will be more expensive. Same for painting, rotting siding, gutters, more pipe linear footage that can leak, more outlets to short out, and on, and on. Nothing you can do about any of that.
And good luck finding a house with copper water pipes given their cost.
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

rockstar wrote: Tue Jun 01, 2021 4:53 pm
Tubes wrote: Tue Jun 01, 2021 4:51 pm Someone needs to find a price per sq. ft. chart.

We're in a somewhat modest 1,800 sq. ft. and our home price has gone exponential. If anything, smaller homes are gaining more traction in this market because they are more "affordable," at least this week.
Here you go:

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

You can also search the site by city or state.

And this will blow your mind given median household income:

https://fred.stlouisfed.org/series/MSPUS
A few years ago, I compared the inflation-adjusted price per sq. ft. of the median newly built home in 1973 to current prices, and they were nearly identical.
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rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

willthrill81 wrote: Tue Jun 01, 2021 5:24 pm
rockstar wrote: Tue Jun 01, 2021 4:53 pm
Tubes wrote: Tue Jun 01, 2021 4:51 pm Someone needs to find a price per sq. ft. chart.

We're in a somewhat modest 1,800 sq. ft. and our home price has gone exponential. If anything, smaller homes are gaining more traction in this market because they are more "affordable," at least this week.
Here you go:

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

You can also search the site by city or state.

And this will blow your mind given median household income:

https://fred.stlouisfed.org/series/MSPUS
A few years ago, I compared the inflation-adjusted price per sq. ft. of the median newly built home in 1973 to current prices, and they were nearly identical.
Compare median household income to inflation. I don't think incomes are keeping up.
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

rockstar wrote: Tue Jun 01, 2021 5:33 pm
willthrill81 wrote: Tue Jun 01, 2021 5:24 pm
rockstar wrote: Tue Jun 01, 2021 4:53 pm
Tubes wrote: Tue Jun 01, 2021 4:51 pm Someone needs to find a price per sq. ft. chart.

We're in a somewhat modest 1,800 sq. ft. and our home price has gone exponential. If anything, smaller homes are gaining more traction in this market because they are more "affordable," at least this week.
Here you go:

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

You can also search the site by city or state.

And this will blow your mind given median household income:

https://fred.stlouisfed.org/series/MSPUS
A few years ago, I compared the inflation-adjusted price per sq. ft. of the median newly built home in 1973 to current prices, and they were nearly identical.
Compare median household income to inflation. I don't think incomes are keeping up.
It looks good to me.

Image
https://fred.stlouisfed.org/series/MEHOINUSA672N
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zaboomafoozarg
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Re: Are we in a housing bubble?

Post by zaboomafoozarg »

willthrill81 wrote: Tue Jun 01, 2021 2:41 pmMany years ago, I heard it said that real estate is expensive when you're young and outrageous when you're old.
When I graduated from college back in the mid-2000s, real estate prices were crazy high.

A lot of houses in my area are just now reaching their 2005/2006 sale prices.

That makes me hesitant to buy, but since it's 15 years later I could see this being a "permanently high plateau".
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unclescrooge
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Re: Are we in a housing bubble?

Post by unclescrooge »

willthrill81 wrote: Tue Jun 01, 2021 2:41 pmMany years ago, I heard it said that real estate is expensive when you're young and outrageous when you're old.
The best time to buy real estate was 20 years ago.

This has been true since the first time I heard nearly 40 years ago.
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unclescrooge
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Re: Are we in a housing bubble?

Post by unclescrooge »

rockstar wrote: Tue Jun 01, 2021 5:00 pm
I'm just saying that I found it odd that I couldn't buy a smaller home because they couldn't be built. I ended up in a 2600 square foot home because that was the minimum. I had a lot of empty rooms that I turned the vents off. I wanted a 1600 square foot home. It was such a money pit because the upkeep also increased with the square footage.
Were you unable to buy an older home with a smaller footprint?
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raven15
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Re: Are we in a housing bubble?

Post by raven15 »

Anecdata: the house next door just sold for $60k more than we bought ours for 10 months ago, even though it is 700 sqft smaller. Prices are up 33% in 10 months, and that was already an all time high.
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Re: Are we in a housing bubble?

Post by Valuethinker »

rockstar wrote: Tue Jun 01, 2021 5:00 pm
SmallSaver wrote: Tue Jun 01, 2021 4:54 pm
rockstar wrote: Tue Jun 01, 2021 4:49 pm
willthrill81 wrote: Tue Jun 01, 2021 4:39 pm
SmallSaver wrote: Tue Jun 01, 2021 4:35 pm Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
Yes, without getting too political I will say that efforts to prevent the construction of new housing are pervasive. I'm not sure that increasing home size is a driver of increasing prices as much as an effect of them.
I'm just saying that I found it odd that I couldn't buy a smaller home because they couldn't be built. I ended up in a 2600 square foot home because that was the minimum. I had a lot of empty rooms that I turned the vents off. I wanted a 1600 square foot home. It was such a money pit because the upkeep also increased with the square footage.
Roughly speaking, another 1000 square feet is going to cost say $200k on price of a new home. Also it may require a larger lot - and municipal services are more expensive, the lower the density.

That's very rough, because a volume housebuilder has economies of scale that a contractor won't have. So the price increment won't be anything like that.

There are some groups (such as South Asians) where it is normal for grandparents to live with the family. In such multigenerational households, 5+ bedrooms and large square footages may be justified.

For the rest of us? A family of 4 surely does not need more than 2500 square feet. I think I grew up in 1800 and I don't recall feeling deprived. (My mother has lived in that house 60 years, and the area has become even more desirable in that time).
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zaboomafoozarg
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Re: Are we in a housing bubble?

Post by zaboomafoozarg »

Valuethinker wrote: Wed Jun 02, 2021 4:25 amFor the rest of us? A family of 4 surely does not need more than 2500 square feet. I think I grew up in 1800 and I don't recall feeling deprived. (My mother has lived in that house 60 years, and the area has become even more desirable in that time).
As a single person, one part of me wants a nice small cheap house... but the other part of me wants a great room to stick a full-size grand piano in.

So I'll probably end up getting something in the mid-2000 sq ft range with a high ceiling living room.

Then again, if prices stay the way they are, then I'll probably be living in an apartment with a little electric keyboard until I die.
SmallSaver
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Re: Are we in a housing bubble?

Post by SmallSaver »

rockstar wrote: Tue Jun 01, 2021 5:00 pm
SmallSaver wrote: Tue Jun 01, 2021 4:54 pm
rockstar wrote: Tue Jun 01, 2021 4:49 pm
willthrill81 wrote: Tue Jun 01, 2021 4:39 pm
SmallSaver wrote: Tue Jun 01, 2021 4:35 pm Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
Yes, without getting too political I will say that efforts to prevent the construction of new housing are pervasive. I'm not sure that increasing home size is a driver of increasing prices as much as an effect of them.
I'm just saying that I found it odd that I couldn't buy a smaller home because they couldn't be built. I ended up in a 2600 square foot home because that was the minimum. I had a lot of empty rooms that I turned the vents off. I wanted a 1600 square foot home. It was such a money pit because the upkeep also increased with the square footage.
That's what I mean. I think the point about house size is often made to say that housing is expensive because consumers are demanding larger homes i.e. they have themselves to blame for their lavish tastes. I'm not sure that's the case, perhaps instead that restrictions on building lead to servicing the more upscale, expensive, and yes, larger, segment and neglecting the smaller, more affordable units. Half formed theory though.
Sasquatch1
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Re: Are we in a housing bubble?

Post by Sasquatch1 »

Have y’all not heard? Bigger is better?

-bigger house
-bigger vehicles
-bigger boats
-bigger debt loads

It’s the cool thing to do. YOLO right?
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

Sasquatch1 wrote: Wed Jun 02, 2021 11:36 am Have y’all not heard? Bigger is better?

-bigger house
-bigger vehicles
-bigger boats
-bigger debt loads

It’s the cool thing to do. YOLO right?
Because the music will never stop!

Until it does. Then we'll see who doesn't have a chair.
The Sensible Steward
THY4373
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Re: Are we in a housing bubble?

Post by THY4373 »

zaboomafoozarg wrote: Wed Jun 02, 2021 11:00 am
Valuethinker wrote: Wed Jun 02, 2021 4:25 amFor the rest of us? A family of 4 surely does not need more than 2500 square feet. I think I grew up in 1800 and I don't recall feeling deprived. (My mother has lived in that house 60 years, and the area has become even more desirable in that time).
As a single person, one part of me wants a nice small cheap house... but the other part of me wants a great room to stick a full-size grand piano in.

So I'll probably end up getting something in the mid-2000 sq ft range with a high ceiling living room.

Then again, if prices stay the way they are, then I'll probably be living in an apartment with a little electric keyboard until I die.
Yeah small high quality single family homes are really hard to find. I am a single person and expect to remain so for the rest of my life. I'd consider townhouses but everything being a different floor (for many designs) is a hassle and in my MCOL area they are often as or more expensive than a comparable single family home. I am tempted to build my own but that has its own complications. Oh well not buying/building for a few more years yet once I decide where the heck I want to be when I retire. Not terribly interested in condos due to the closeness of neighbors (been there done that).
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firebirdparts
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Re: Are we in a housing bubble?

Post by firebirdparts »

Coltrane75 wrote: Tue Jun 01, 2021 11:15 am Is it fair to summarize the thread's stance on the future of the housing market as pretty much unknown? (NKN)
I don't speak for the forum, but I have some predictions, with the reservation that real estate markets are local, and in fact they're so local as to apply to a single house. Houses are abandoned and subject to above-the-asking-price auctions in the same town.
1. The cost of lumber will come down. In the case of sheet goods they're 10X normal. That's a lot. They'll come down.
2. The shortage of housing, where there is a shortage, is incentive for building (and legalizing building), and the building will occur. The shortage over time is less short. there's no extra population coming along to fill a bunch of buildings in the aggregate.
3. A big opportunity is being created for people willing to repair a house in locations where repair is legally allowed. There are few people who know how to fix things that will see they could be making a killing. Some of these people will make a lot of money revitalizing a neighborhood here and there. See previous 2 posts by single people.

I couldn't say whether any particular house value will actually come down from where it is today. I don't know. Not my problem, really.
Last edited by firebirdparts on Wed Jun 02, 2021 12:25 pm, edited 2 times in total.
This time is the same
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firebirdparts
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Re: Are we in a housing bubble?

Post by firebirdparts »

Sasquatch1 wrote: Wed Jun 02, 2021 11:36 am Have y’all not heard? Bigger is better?

-bigger house
-bigger vehicles
-bigger boats
-bigger debt loads

It’s the cool thing to do. YOLO right?
I thought it was faster horses, younger women, older whiskey.
This time is the same
ballons
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Re: Are we in a housing bubble?

Post by ballons »

rockstar wrote: Tue Jun 01, 2021 5:03 pm If household income is around $70k, then most families should be buying homes around $210k using the 3x income rule. However, they are now north of $300k. It's more like 5x. So even if the buyer has good credit, they're still buying more house than they could afford. We are going to have a lot of house poor folk. But given how low inventories are these days, there won't be many of them nationwide.
https://www.huduser.gov/portal/pdredge/ ... 61118.html
Individual investors. About 22.7 million units in 16.7 million properties are owned by individual investors. Individual investors are more likely to own single-family and duplex rental homes. We often describe these investors as “mom and pop” landlords.
Over 15+ million homes available for sale in less than 12 months. There is no shortage.
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

ballons wrote: Wed Jun 02, 2021 1:30 pm
rockstar wrote: Tue Jun 01, 2021 5:03 pm If household income is around $70k, then most families should be buying homes around $210k using the 3x income rule. However, they are now north of $300k. It's more like 5x. So even if the buyer has good credit, they're still buying more house than they could afford. We are going to have a lot of house poor folk. But given how low inventories are these days, there won't be many of them nationwide.
https://www.huduser.gov/portal/pdredge/ ... 61118.html
Individual investors. About 22.7 million units in 16.7 million properties are owned by individual investors. Individual investors are more likely to own single-family and duplex rental homes. We often describe these investors as “mom and pop” landlords.
Over 15+ million homes available for sale in less than 12 months. There is no shortage.
Many disagree, including Forbes.
Coming into the 2020 recession, there was a supply shortage of 2.5 million units, according to research by Freddie Mac. Residential construction began to slowly ramp up in the latter half of 2020 (thanks to motivated buyers) after Covid shut down home building in the spring, typically the busiest season for new construction.
https://www.forbes.com/advisor/mortgage ... -forecast/

It's purely anecdotal, but in our bedroom city with a population of 10k, there is currently a grand total of one house currently for sale.
The Sensible Steward
ballons
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Re: Are we in a housing bubble?

Post by ballons »

rockstar wrote: Tue Jun 01, 2021 4:49 pm
willthrill81 wrote: Tue Jun 01, 2021 4:39 pm
SmallSaver wrote: Tue Jun 01, 2021 4:35 pm Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
I'm pretty sure every single city/town has minimum and max square footage codes. Mine is 700 something. It's not to prevent affordable housing, but to prevent a 13,000sqft 3 story home and a 50sqft shack from being built. Perhaps you are thinking of lot size?
alfaspider
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Re: Are we in a housing bubble?

Post by alfaspider »

SmallSaver wrote: Wed Jun 02, 2021 11:04 am
rockstar wrote: Tue Jun 01, 2021 5:00 pm
SmallSaver wrote: Tue Jun 01, 2021 4:54 pm
rockstar wrote: Tue Jun 01, 2021 4:49 pm
willthrill81 wrote: Tue Jun 01, 2021 4:39 pm

The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
Yes, without getting too political I will say that efforts to prevent the construction of new housing are pervasive. I'm not sure that increasing home size is a driver of increasing prices as much as an effect of them.
I'm just saying that I found it odd that I couldn't buy a smaller home because they couldn't be built. I ended up in a 2600 square foot home because that was the minimum. I had a lot of empty rooms that I turned the vents off. I wanted a 1600 square foot home. It was such a money pit because the upkeep also increased with the square footage.
That's what I mean. I think the point about house size is often made to say that housing is expensive because consumers are demanding larger homes i.e. they have themselves to blame for their lavish tastes. I'm not sure that's the case, perhaps instead that restrictions on building lead to servicing the more upscale, expensive, and yes, larger, segment and neglecting the smaller, more affordable units. Half formed theory though.
From the standpoint of the builder, it's usually better to build fewer more expensive homes than relying on low profit margin cheaper homes. The overhead of buying land, getting approvals, etc. is relatively fixed. If the market supports it, it's more profitable to build 100 homes in the $300-400k range than 100 homes in the $200-300k range.
ballons
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Re: Are we in a housing bubble?

Post by ballons »

willthrill81 wrote: Wed Jun 02, 2021 1:37 pm
ballons wrote: Wed Jun 02, 2021 1:30 pm
rockstar wrote: Tue Jun 01, 2021 5:03 pm If household income is around $70k, then most families should be buying homes around $210k using the 3x income rule. However, they are now north of $300k. It's more like 5x. So even if the buyer has good credit, they're still buying more house than they could afford. We are going to have a lot of house poor folk. But given how low inventories are these days, there won't be many of them nationwide.
https://www.huduser.gov/portal/pdredge/ ... 61118.html
Individual investors. About 22.7 million units in 16.7 million properties are owned by individual investors. Individual investors are more likely to own single-family and duplex rental homes. We often describe these investors as “mom and pop” landlords.
Over 15+ million homes available for sale in less than 12 months. There is no shortage.
Many disagree, including Forbes.
Coming into the 2020 recession, there was a supply shortage of 2.5 million units, according to research by Freddie Mac. Residential construction began to slowly ramp up in the latter half of 2020 (thanks to motivated buyers) after Covid shut down home building in the spring, typically the busiest season for new construction.
https://www.forbes.com/advisor/mortgage ... -forecast/

It's purely anecdotal, but in our bedroom city with a population of 10k, there is currently a grand total of one house currently for sale.
Over 15+ million homes available for sale in less than 12 months
- your 2.5 million "shortage"
-----------
= 12.5+ million homes available for sale in less than 12 months

Once there are no more individual landlords, then you have a shortage.
alfaspider
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Re: Are we in a housing bubble?

Post by alfaspider »

rockstar wrote: Tue Jun 01, 2021 5:03 pm
Tubes wrote: Tue Jun 01, 2021 5:00 pm
rockstar wrote: Tue Jun 01, 2021 4:53 pm
Tubes wrote: Tue Jun 01, 2021 4:51 pm Someone needs to find a price per sq. ft. chart.

We're in a somewhat modest 1,800 sq. ft. and our home price has gone exponential. If anything, smaller homes are gaining more traction in this market because they are more "affordable," at least this week.
Here you go:

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

You can also search the site by city or state.

And this will blow your mind given median household income:

https://fred.stlouisfed.org/series/MSPUS
Wow! That was fast. No wonder you are "rockstar."

You are right about comparing with income. It is out of alignment for recent years. Another reason to feel "soapy."
If household income is around $70k, then most families should be buying homes around $210k using the 3x income rule. However, they are now north of $300k. It's more like 5x. So even if the buyer has good credit, they're still buying more house than they could afford. We are going to have a lot of house poor folk. But given how low inventories are these days, there won't be many of them nationwide.
The average household is not the same thing as the average homebuyer. Homebuyers have historically tended to be more affluent than renters. People at or below median income levels are likely either renters, purchased homes below the median price.
Ron Ronnerson
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Location: Bay Area

Re: Are we in a housing bubble?

Post by Ron Ronnerson »

rockstar wrote: Tue Jun 01, 2021 5:03 pm
Tubes wrote: Tue Jun 01, 2021 5:00 pm
rockstar wrote: Tue Jun 01, 2021 4:53 pm
Tubes wrote: Tue Jun 01, 2021 4:51 pm Someone needs to find a price per sq. ft. chart.

We're in a somewhat modest 1,800 sq. ft. and our home price has gone exponential. If anything, smaller homes are gaining more traction in this market because they are more "affordable," at least this week.
Here you go:

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

You can also search the site by city or state.

And this will blow your mind given median household income:

https://fred.stlouisfed.org/series/MSPUS
Wow! That was fast. No wonder you are "rockstar."

You are right about comparing with income. It is out of alignment for recent years. Another reason to feel "soapy."
If household income is around $70k, then most families should be buying homes around $210k using the 3x income rule. However, they are now north of $300k. It's more like 5x. So even if the buyer has good credit, they're still buying more house than they could afford. We are going to have a lot of house poor folk. But given how low inventories are these days, there won't be many of them nationwide.
That 3x rule of thumb needs to be adjusted for the times, in my humble opinion. The thing is that mortgage rates are so low right now that look what happens when someone with a $70k income buys a $210k home and puts down 20% on that home.

Down payment: $42k
Mortgage: $168k
Mortgage Payment (Assuming 2.75% rate, 30-year fixed): $686/month
Mortgage Payment as a Percent of Gross Salary: (686 x 12)/$70k = 11.76%
Amount from mortgage payments in the first year of the loan that go toward building equity: About $3700 (this adds to net worth and is a form of savings)
Percent of mortgage payments that build equity in Year 1 at this interest rate: Approximately 45% (this would be closer to 1% at rates which were prevalent 40 years ago)
Portion of mortgage payment that goes toward interest as a percent of gross salary: 6.5%

I think the current ridiculously low interest rates and how they impact house affordability and the quick pace at which one ends up building equity in the home hasn't been fully digested by everyone. These are important things to factor in.
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unclescrooge
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Re: Are we in a housing bubble?

Post by unclescrooge »

ballons wrote: Wed Jun 02, 2021 1:46 pm
willthrill81 wrote: Wed Jun 02, 2021 1:37 pm
ballons wrote: Wed Jun 02, 2021 1:30 pm
rockstar wrote: Tue Jun 01, 2021 5:03 pm If household income is around $70k, then most families should be buying homes around $210k using the 3x income rule. However, they are now north of $300k. It's more like 5x. So even if the buyer has good credit, they're still buying more house than they could afford. We are going to have a lot of house poor folk. But given how low inventories are these days, there won't be many of them nationwide.
https://www.huduser.gov/portal/pdredge/ ... 61118.html
Individual investors. About 22.7 million units in 16.7 million properties are owned by individual investors. Individual investors are more likely to own single-family and duplex rental homes. We often describe these investors as “mom and pop” landlords.
Over 15+ million homes available for sale in less than 12 months. There is no shortage.
Many disagree, including Forbes.
Coming into the 2020 recession, there was a supply shortage of 2.5 million units, according to research by Freddie Mac. Residential construction began to slowly ramp up in the latter half of 2020 (thanks to motivated buyers) after Covid shut down home building in the spring, typically the busiest season for new construction.
https://www.forbes.com/advisor/mortgage ... -forecast/

It's purely anecdotal, but in our bedroom city with a population of 10k, there is currently a grand total of one house currently for sale.
Over 15+ million homes available for sale in less than 12 months
- your 2.5 million "shortage"
-----------
= 12.5+ million homes available for sale in less than 12 months

Once there are no more individual landlords, then you have a shortage.
Even if there is a shortage or a bubble, apparently anyone can make a wood cabin for $2500. :mrgreen:

Check out this excellent video: https://youtu.be/g-B_9Xzy9ds
SmallSaver
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Re: Are we in a housing bubble?

Post by SmallSaver »

ballons wrote: Wed Jun 02, 2021 1:42 pm
rockstar wrote: Tue Jun 01, 2021 4:49 pm
willthrill81 wrote: Tue Jun 01, 2021 4:39 pm
SmallSaver wrote: Tue Jun 01, 2021 4:35 pm Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
I'm pretty sure every single city/town has minimum and max square footage codes. Mine is 700 something. It's not to prevent affordable housing, but to prevent a 13,000sqft 3 story home and a 50sqft shack from being built. Perhaps you are thinking of lot size?
There are a million things in zoning - minimum setbacks, number of dwelling units, floor area ratios, required parking spaces, height restrictions. In some cases these are absolutely to prevent affordable housing ("preserving neighborhood character"), and in some cases it's just a byproduct. Something like 75% of the bay area is zoned single family only.
Last edited by SmallSaver on Wed Jun 02, 2021 3:43 pm, edited 2 times in total.
SmallSaver
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Re: Are we in a housing bubble?

Post by SmallSaver »

alfaspider wrote: Wed Jun 02, 2021 1:45 pm
SmallSaver wrote: Wed Jun 02, 2021 11:04 am
rockstar wrote: Tue Jun 01, 2021 5:00 pm
SmallSaver wrote: Tue Jun 01, 2021 4:54 pm
rockstar wrote: Tue Jun 01, 2021 4:49 pm

I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
Yes, without getting too political I will say that efforts to prevent the construction of new housing are pervasive. I'm not sure that increasing home size is a driver of increasing prices as much as an effect of them.
I'm just saying that I found it odd that I couldn't buy a smaller home because they couldn't be built. I ended up in a 2600 square foot home because that was the minimum. I had a lot of empty rooms that I turned the vents off. I wanted a 1600 square foot home. It was such a money pit because the upkeep also increased with the square footage.
That's what I mean. I think the point about house size is often made to say that housing is expensive because consumers are demanding larger homes i.e. they have themselves to blame for their lavish tastes. I'm not sure that's the case, perhaps instead that restrictions on building lead to servicing the more upscale, expensive, and yes, larger, segment and neglecting the smaller, more affordable units. Half formed theory though.
From the standpoint of the builder, it's usually better to build fewer more expensive homes than relying on low profit margin cheaper homes. The overhead of buying land, getting approvals, etc. is relatively fixed. If the market supports it, it's more profitable to build 100 homes in the $300-400k range than 100 homes in the $200-300k range.
Sure, but another way to address that is to put a bunch of units on one piece of land.
alfaspider
Posts: 4805
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Re: Are we in a housing bubble?

Post by alfaspider »

SmallSaver wrote: Wed Jun 02, 2021 3:38 pm
alfaspider wrote: Wed Jun 02, 2021 1:45 pm
SmallSaver wrote: Wed Jun 02, 2021 11:04 am
rockstar wrote: Tue Jun 01, 2021 5:00 pm
SmallSaver wrote: Tue Jun 01, 2021 4:54 pm

Yes, without getting too political I will say that efforts to prevent the construction of new housing are pervasive. I'm not sure that increasing home size is a driver of increasing prices as much as an effect of them.
I'm just saying that I found it odd that I couldn't buy a smaller home because they couldn't be built. I ended up in a 2600 square foot home because that was the minimum. I had a lot of empty rooms that I turned the vents off. I wanted a 1600 square foot home. It was such a money pit because the upkeep also increased with the square footage.
That's what I mean. I think the point about house size is often made to say that housing is expensive because consumers are demanding larger homes i.e. they have themselves to blame for their lavish tastes. I'm not sure that's the case, perhaps instead that restrictions on building lead to servicing the more upscale, expensive, and yes, larger, segment and neglecting the smaller, more affordable units. Half formed theory though.
From the standpoint of the builder, it's usually better to build fewer more expensive homes than relying on low profit margin cheaper homes. The overhead of buying land, getting approvals, etc. is relatively fixed. If the market supports it, it's more profitable to build 100 homes in the $300-400k range than 100 homes in the $200-300k range.
Sure, but another way to address that is to put a bunch of units on one piece of land.
Yes, you can build condos or townhouses, but in most housing markets consumers prefer single family homes. Permitting tends to be more difficult for condos- much more zoning restrictions and NIMBYism for condo projects. That's doubly true for condo buildings intended for less affluent buyers. For that reason, and for the same reason builders want to build larger homes, most new condo buildings are luxury buildings in urban areas.
SmallSaver
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Re: Are we in a housing bubble?

Post by SmallSaver »

alfaspider wrote: Wed Jun 02, 2021 3:43 pm
SmallSaver wrote: Wed Jun 02, 2021 3:38 pm
alfaspider wrote: Wed Jun 02, 2021 1:45 pm
SmallSaver wrote: Wed Jun 02, 2021 11:04 am
rockstar wrote: Tue Jun 01, 2021 5:00 pm

I'm just saying that I found it odd that I couldn't buy a smaller home because they couldn't be built. I ended up in a 2600 square foot home because that was the minimum. I had a lot of empty rooms that I turned the vents off. I wanted a 1600 square foot home. It was such a money pit because the upkeep also increased with the square footage.
That's what I mean. I think the point about house size is often made to say that housing is expensive because consumers are demanding larger homes i.e. they have themselves to blame for their lavish tastes. I'm not sure that's the case, perhaps instead that restrictions on building lead to servicing the more upscale, expensive, and yes, larger, segment and neglecting the smaller, more affordable units. Half formed theory though.
From the standpoint of the builder, it's usually better to build fewer more expensive homes than relying on low profit margin cheaper homes. The overhead of buying land, getting approvals, etc. is relatively fixed. If the market supports it, it's more profitable to build 100 homes in the $300-400k range than 100 homes in the $200-300k range.
Sure, but another way to address that is to put a bunch of units on one piece of land.
Yes, you can build condos or townhouses, but in most housing markets consumers prefer single family homes. Permitting tends to be more difficult for condos- much more zoning restrictions and NIMBYism for condo projects. That's doubly true for condo buildings intended for less affluent buyers. For that reason, and for the same reason builders want to build larger homes, most new condo buildings are luxury buildings in urban areas.
I think we basically agree here. Yes most people would prefer a single family home, but if the choices are buy a condo for $200k or rent forever because SFHs are $600k, lots of people would prefer the former. It's definitely harder to get them built, which brings me back to my original point that the growing size of homes may be a response to the housing market rather than a driver of it.
ballons
Posts: 782
Joined: Sun Aug 18, 2019 3:05 pm

Re: Are we in a housing bubble?

Post by ballons »

SmallSaver wrote: Wed Jun 02, 2021 3:37 pm
ballons wrote: Wed Jun 02, 2021 1:42 pm
rockstar wrote: Tue Jun 01, 2021 4:49 pm
willthrill81 wrote: Tue Jun 01, 2021 4:39 pm
SmallSaver wrote: Tue Jun 01, 2021 4:35 pm Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
I'm pretty sure every single city/town has minimum and max square footage codes. Mine is 700 something. It's not to prevent affordable housing, but to prevent a 13,000sqft 3 story home and a 50sqft shack from being built. Perhaps you are thinking of lot size?
There are a million things in zoning - minimum setbacks, number of dwelling units, floor area ratios, required parking spaces, height restrictions. In some cases these are absolutely to prevent affordable housing ("preserving neighborhood character"), and in some cases it's just a byproduct. Something like 75% of the bay area is zoned single family only.
https://thefrisc.com/sf-is-65-rental-ho ... 5adc80c68e

Our San Francisco is a place of renters, where an estimated 65 percent of households rent homes. Yet the city itself has no solid grasp of how many homes are actually for rent in SF, nor how many people are really living in them.
65% of San Francisco households can be ready for sale in less than 12 months. A simple law can flood the market with inventory.
ballons
Posts: 782
Joined: Sun Aug 18, 2019 3:05 pm

Re: Are we in a housing bubble?

Post by ballons »

SmallSaver wrote: Wed Jun 02, 2021 3:47 pm
alfaspider wrote: Wed Jun 02, 2021 3:43 pm
SmallSaver wrote: Wed Jun 02, 2021 3:38 pm
alfaspider wrote: Wed Jun 02, 2021 1:45 pm
SmallSaver wrote: Wed Jun 02, 2021 11:04 am

That's what I mean. I think the point about house size is often made to say that housing is expensive because consumers are demanding larger homes i.e. they have themselves to blame for their lavish tastes. I'm not sure that's the case, perhaps instead that restrictions on building lead to servicing the more upscale, expensive, and yes, larger, segment and neglecting the smaller, more affordable units. Half formed theory though.
From the standpoint of the builder, it's usually better to build fewer more expensive homes than relying on low profit margin cheaper homes. The overhead of buying land, getting approvals, etc. is relatively fixed. If the market supports it, it's more profitable to build 100 homes in the $300-400k range than 100 homes in the $200-300k range.
Sure, but another way to address that is to put a bunch of units on one piece of land.
Yes, you can build condos or townhouses, but in most housing markets consumers prefer single family homes. Permitting tends to be more difficult for condos- much more zoning restrictions and NIMBYism for condo projects. That's doubly true for condo buildings intended for less affluent buyers. For that reason, and for the same reason builders want to build larger homes, most new condo buildings are luxury buildings in urban areas.
I think we basically agree here. Yes most people would prefer a single family home, but if the choices are buy a condo for $200k or rent forever because SFHs are $600k, lots of people would prefer the former. It's definitely harder to get them built, which brings me back to my original point that the growing size of homes may be a response to the housing market rather than a driver of it.
Image
Image

Lots are also getting smaller.
rockstar
Posts: 6308
Joined: Mon Feb 03, 2020 5:51 pm

Re: Are we in a housing bubble?

Post by rockstar »

ballons wrote: Wed Jun 02, 2021 1:42 pm
rockstar wrote: Tue Jun 01, 2021 4:49 pm
willthrill81 wrote: Tue Jun 01, 2021 4:39 pm
SmallSaver wrote: Tue Jun 01, 2021 4:35 pm Right, there is a decades long decline in interest rates and concomitant rise in home prices. Along with a whole raft of other policies and programs to support home prices. Now rates are near zero, prices are at historic highs, and homeownership is arguably the least affordable it's been since WWII. Not sure how that unwinds, but it seems bad for most people who aren't already in the system.
The other big factor at work, which I later added to my above post, is the fact that house sizes have increased substantially over the last 40 years. Most people we know live in 2,500 sq. ft. homes or larger. A nearby HOA has a 3,500 sq. ft. minimum for most homes. But we are very content in our 1,200 sq. ft. 3/2 that we own outright.
I once lived in a city that had a minimum square footage for new home builds. They put this in place to prevent affordable housing from being built. The very idea blew my mind. I would have loved to buy a home half the size, but the city wouldn't allow them to be built.

What happened was that those that couldn't afford housing ended up living in extending stay hotels.
I'm pretty sure every single city/town has minimum and max square footage codes. Mine is 700 something. It's not to prevent affordable housing, but to prevent a 13,000sqft 3 story home and a 50sqft shack from being built. Perhaps you are thinking of lot size?
No. The city I lived in had a minimum sqft of 2575. My home was 2600. Folks tried to change it without any luck. And my home was built in 2004. It was clearly to prevent affordable homes that were smaller from being built.
rockstar
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Re: Are we in a housing bubble?

Post by rockstar »

willthrill81 wrote: Wed Jun 02, 2021 11:46 am
Sasquatch1 wrote: Wed Jun 02, 2021 11:36 am Have y’all not heard? Bigger is better?

-bigger house
-bigger vehicles
-bigger boats
-bigger debt loads

It’s the cool thing to do. YOLO right?
Because the music will never stop!

Until it does. Then we'll see who doesn't have a chair.
I just watched a news story trying to explain how this time is different. The big difference is that demand isn't be driven up by poor underwriting standards. There isn't enough homes available. Folks stopped listing their homes once COVID hit. As we exit the pandemic, those that didn't want potentially sick people going through their homes will start to list again. And as commodity prices come back down, new homes builds should start to increase.

However, higher home prices should stick to a point with the lower mortgage rate. In other words, the higher prices offset by the lower payment due to the lower interest rate. They should come down though as inventory grows to that sticking point.
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willthrill81
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Re: Are we in a housing bubble?

Post by willthrill81 »

rockstar wrote: Wed Jun 02, 2021 8:16 pm
willthrill81 wrote: Wed Jun 02, 2021 11:46 am
Sasquatch1 wrote: Wed Jun 02, 2021 11:36 am Have y’all not heard? Bigger is better?

-bigger house
-bigger vehicles
-bigger boats
-bigger debt loads

It’s the cool thing to do. YOLO right?
Because the music will never stop!

Until it does. Then we'll see who doesn't have a chair.
I just watched a news story trying to explain how this time is different. The big difference is that demand isn't be driven up by poor underwriting standards. There isn't enough homes available. Folks stopped listing their homes once COVID hit. As we exit the pandemic, those that didn't want potentially sick people going through their homes will start to list again. And as commodity prices come back down, new homes builds should start to increase.

However, higher home prices should stick to a point with the lower mortgage rate. In other words, the higher prices offset by the lower payment due to the lower interest rate. They should come down though as inventory grows to that sticking point.
Yes, it seems likely price increases will at least slow down once more listings become available and as more homes are built. But as long as mortgage rates remain low, I have a hard time seeing prices go backward at the national level at least.
The Sensible Steward
rockstar
Posts: 6308
Joined: Mon Feb 03, 2020 5:51 pm

Re: Are we in a housing bubble?

Post by rockstar »

willthrill81 wrote: Wed Jun 02, 2021 8:21 pm
rockstar wrote: Wed Jun 02, 2021 8:16 pm
willthrill81 wrote: Wed Jun 02, 2021 11:46 am
Sasquatch1 wrote: Wed Jun 02, 2021 11:36 am Have y’all not heard? Bigger is better?

-bigger house
-bigger vehicles
-bigger boats
-bigger debt loads

It’s the cool thing to do. YOLO right?
Because the music will never stop!

Until it does. Then we'll see who doesn't have a chair.
I just watched a news story trying to explain how this time is different. The big difference is that demand isn't be driven up by poor underwriting standards. There isn't enough homes available. Folks stopped listing their homes once COVID hit. As we exit the pandemic, those that didn't want potentially sick people going through their homes will start to list again. And as commodity prices come back down, new homes builds should start to increase.

However, higher home prices should stick to a point with the lower mortgage rate. In other words, the higher prices offset by the lower payment due to the lower interest rate. They should come down though as inventory grows to that sticking point.
Yes, it seems likely price increases will at least slow down once more listings become available and as more homes are built. But as long as mortgage rates remain low, I have a hard time seeing prices go backward at the national level at least.
Mortgage rates have dropped about a point. I expect the corresponding price to go up like a bond would. However, I think, we're also seeing speculation risk on top of the rate drop. I expect some of the speculation risk to come off the price in the future.
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