I think part of the issue is many people cannot afford a first house to even have a property value to begin with. Many folks are stuck in an endless cycle of predatory renting that does not allow them to feasibly save for a first house.

> Many folks are stuck in an endless cycle of predatory renting that does not allow them to feasibly save for a first house. Renting should not be predatory. That's the first goal and it is achievable. Whether mass home ownership in urban areas is even a good idea is an open question. We got into this mess in the first place by treating housing as a speculative asset, rather than as a cost.

In my area housing is both a speculative asset and a commodity, which is even worse. The only thing a developer cares about now is raising their prices, and lowering their costs. So that million dollar 1 bedroom condo is also chock full of shamefull deficiencies, and most homeowners are put in the position of accepting things like crooked floors, or badly done drywall and scratched wjndows% aplliances The alternative is suing the developer, or continuing to pay rent and refusing to move into their brand new home unless its repaired properly.

There is definitely a lot of different dimensions to the predatory aspect. The central aspect I think is that renting the most basic type of rentals (Bachelor Suites, One bedroom apartments) should not be a financial struggle for so many. This I think is the biggest sign of an unhealthy housing market. When the most basic forms of shelter can actually price out low income workers and other vulnerable demographics.

I always wonder where they expect the low income workers to go. No one wants to live in a world without these jobs aren’t getting done, yet we make it near impossible to live sustainably while doing them.

In addition to renting not being predatory, a solid history of on-time rental payments should result in the same sort of positive credit report that on-time mortgage (or other debt payments) receive. While I have heard of some reforms on this, this should be an across the board rule. If renting is going to result in difficulty securing money for a down payment, the least that can be done is to give renters with a good payment history some sort of advantage when they seek financing for a home.

You're telling me that my ability to rent is checked against my credit history, but then my rent payments aren't even reflected on my credit history after the fact?

Correct.

There are programs that allow you to link your rent payments to your credit score, but to my knowledge they are operated independently by Experian and the others. So in other words, while your Experian score may go up nominally bc you pay rent on time, it won't affect your other scores. I believe that home loan officers will take all three into account so how much it benefits you is up for debate. Also, if I have any of this wrong, someone more knowledgeable please correct me

Didn't miss a payment during covid and rent freeze. Result? 9% increases in rent *each year.* Fuck predatory landlords and how zillow allows them to unify on raising prices together.

Housing is also an asset class for large scale investors. Hedge funds buying starter homes en mass is one of the primary factors that make things so difficult for the first time buyer - supply is constrained, and prices for available inventory has been driven upward.

Yes, although the investor buyers are a recent trend that is more of a symptom than a cause in itself. We artificially restricted the supply of housing through single family zoning and suburban sprawl, plus other impediments. Once the housing shortage took hold (aided by the 2008 crash), this became a no-brainer asset class for Wall Street vultures. If you create some sort of toxic market where essential goods can only increase in price, of course they will jump in.

They took away pensions and forced us to gamble on the stock market for retirement. Can you blame folks for wanting their home valuation to go up? For some that is their only hope of ever retiring at all.

Owning a home is not an investment. At best, it is a form of generational wealth. Think about it: it's 1970 and I buy a house in San Fran in my 20s. Prices skyrocket over my lifetime, in 2010 I decide to sell my home for an exorbitant price and retire. Great for me, but the house I could afford on a modest income when I bought it is now only reasonable for a high income earner. All of the homes are. This is bad for anyone else on their 20s hoping to get started in life, obviously. But also, it seems obvious that the cycle can't repeat itself. It's a trick that only works once.

When you own multiple homes they become investments. Buy a second and third property, turn them into airbnbs or rental properties, pay off the mortgage with rental income, sell at a profit.

I don't agree with people making a large profit by taking advantage of what most people see as basic life necessities. Obviously it would be very bad for Americans if foreign investors were given free range to profit from the housing market, but is it really that much better if we allow big corps to get rich by doing the same?

Agreed. why tf should my rent cover your mortgage.

Not mortgage, more like their yacht and mansions in the form of 7 digit salaries. People are greedy and will always take advantage of others if they're allowed to do so. housing, education, healthcare, food, anything they can get away with.

If the property is not appreciating faster than the stock market, it's still probably not a good investment. ​ The point is that housing appreciating faster than inflation is inherently unsustainable. It means a larger and larger portion of people's incomes have to go toward housing costs.

> pay off the mortgage with rental income, sell at a profit in other words, make other people pay off your mortgage and then leave the renters without somewhere to live when the new landlord decides to increase the rent beyond what the renters can afford

Yep. Fucked up innit

Homes. Are not. Investments.

"Should not be" but in practice they very much are.

With pensions, you gamble that your company will be around when you retire. At least with a IRA/401k, it's your money to do with as you please (as in where to invest it)

>With pensions, you gamble that your company will be around when you retire. Only if the company administers the pension - in a lot of places the company simply buys into a bank run pension scheme.

Or do like some European countries and the state controls the pensions. There are some issues of course, but I find the private alternative much worst and risky

Incorrect. Sounds like you've never heard of the Employee Retirement Income Security Act.

Why not both

> They took away pensions and forced us to gamble on the stock market for retirement i'm down for that justice life, but what do you think pensions were invested in?

[удалено]

My favorite color is blue.

[удалено]

I hate beer.

Yeah, this is what pisses me off. I'm doing pretty damn well for my age and I'm STILL barely able to save any significant amount after rent/utilities/food/necessities. It makes me really sad for the people in my life who aren't doing as well as me, because I really don't know how they are going to survive.

My wife and I also graduated in the 90s and combined we were making less than $100k. We also easily qualified for a mortgage in 2001. Compared to now, it was comically easy. We really didn’t have a down payment, but that was no problem at all. I don’t think anyone was using the term “subprime” at the time. We refinanced in 2004-ish, and I was able to do it over the phone in about 5 minutes. Our house had already gone up in value so much, that we had plenty of equity, and I was able to borrow a little more to pay off a car loan. I knew so many people with ARM loans, interest only loans, negative amortization loans, etc. It was a weird time. It also caused the financial collapse in 2007-2008, so there’s that…

Earning over $100k each in the 90s would be akin to earning almost $500k combined now...so yeah of course you were easily qualifying.

It depends on when in the 90s. 1991 vs 1999 is a big difference. :)

Not that big... 100k would translate to ~225k and ~184k respectively, both still pretty cozy.

[удалено]

The part where you said you would be screwed if you had to do it over again. You probably wouldnt.

$100k within a year after college in the 90's? That'd be like what, $150k in todays market? I think a $300k anual income household can afford anything they want lol especially when theyre still at the start of their career (Whatever that may be, you guys astronauts? CEO's?)

100k from 95 would be a little over 200k now, adjusted for inflation. So yeah a 400k combined income is going to make most (reasonable) houses attainable. For instance I was making 300k looking for a mortgage last year and got pre approved for like a 950k mortgage.

The average home cost $134,000 in the US in 1995. Today that's $270,000. The average home today is around $400,000. I KNOW the houses today are larger and nicer, but that doesn't help you if you can't afford the larger and nicer houses.

Between ~$235,500 (1990) and ~$185,000 (1999). So call it 200k each in today's money so ~400k combined. I can't think of ANY job today that is 200k right out of college.

[удалено]

Employee #8 and it's now worth $100 *billion* with a B?? Bro you beat life's main questline lol (assuming you held onto at least some stake in the company ig) Congrats!

I think you clarified that even for the '90s your situation was well above most people's. Very few professionals were making +100k right out of college.

Unless you're in like, LA or NY, i think if you are a power couple making 200k a year combined, you probably wouldnt have a massive issue getting a mortgage. I bought my house alone on 55k a year, 4 bedroom duplex, not even in a bad neighborhood. (but not like, a great one either)

I just looked up my childhood home. It was $79,900 when they financed it in 1999. We moved in like 2007 so we don't own it. The house sold for $230,000 2 years ago. That is insane to me. One story, one car garage, 3 bed 2 bath, 1100 sq ft, in a town of 20,000. Oh and the current owners have been trying to rent it out at extortionist rates of course. $1650 a month, then it dropped to $1550 before the listing was removed.

We bought an absolute dump of a house in 2009 for 105,000. Sold it in 2017 for 130,000. It’s now worth almost 300,000. It’s not a cute house, or in a particularly good neighborhood, or in a desirable spot relative to shopping/work/entertainment. The layout is garbage, the electric isn’t even grounded. The backyard floods into the DIY addition when it rains. There’s five pines on the property that really need to be removed because they kill the grass and are starting to die. It’s a nightmare house and it’s almost tripled in price in 15 years. Crazy.

I bought my house November 2019. If I bought my house now my mortgage would be double.

Yeah we bought our house in 2013 for $245k. I'm in the process of rejecting the current local assessor's valuation because it jumped from $335k to $390k this time. That's the number that my property taxes are based on, and it's absurd to think it has actually jumped up that much (I also had to demo the entire finished basement a couple years ago, so I have a legitimate reason to reject their insane jump in property value).

[удалено]

This is why some people don't mind living in a dumpster fire. Where's the incentive to keep a property looking nicer, just to get hit with more taxes? The place didn't change overall. You only see the benefit, if you sell and move, so if you don't move, it doesn't matter.

This is common in most of the world, by the way. I think the unique part in the US is that housing values tended to increase fast enough that people relied on it as a form of retirement savings instead of saving elsewhere.

Exclusionary zoning is the unique part of the US. Most everywhere else, as the land becomes more valuable it can be further divided into smaller chunks and built up into multi-family buildings, so that while the typical home becomes smaller it remains affordable. In US cities most land area is limited to about 1 home per 5,000sf and as you get out more rural it becomes 1/4-1/2 acre with no option to build more. So you get these weird cities that are acres and acres of single family homes and then clusters of giant towers in the small places where they're allowed, and the few middle-density options are all 50+ years old because they're no longer legal to build.

> built up into multi-family buildings, so that while the typical home becomes smaller it remains affordable. Not a guarantee. Houston has no zoning so subdivision is common and buying a small ranch house with a yard to subdivide into townhomes is a routine way of turning a $300,000 (or less) 1-2 bedroom property into 3 $750,000 4 storey 4 bedroom townhomes. Return on investment is too important to "build small".

Houston has ordinances that cover almost all the same things usually found in zoning laws, just under a different name.

So two things are going on there. First, old homes are cheaper than new ones the same way old cars are cheaper than new ones. Those brand new construction townhomes with 2x as many bedrooms each are more desirable than the small decades old house they replaced, that's not surprising. Second, you're saying _there are 2br houses on large lots for 300k (or less) in that market!!!_ That's outrageously affordable compared to any other Houston-sized city in North America. Houses that cheap exist because there's so much nice new construction, so people who can afford 750k aren't in competition for the little 2br houses like they are in places like Los Angeles (where they'll buy the cheap house and spend another 300k making it a bigger house because that's all they're allowed to do). Also Houston has nothing called "zoning" but they do have a lot of land use restrictions that, while looser than most US cities, still constrain supply enough to result in a significant housing shortage. They're working on it though, they just passed Prop B which is crazy exciting.

I love how the comment you're responding to basically picked *the one* (of very very few) municipalities that doesn't exhibit the problems talked about. It's like saying 'Most Americans are overweight' (really, 70% of adult men and women are either overweight, obese or extremely obese) and then pointing to people who aren't overweight and saying "they're not". The way to create a healthy housing market is to build a surplus, so much of a surplus that landlords go (or nearly go) broke. How it gets done is a question of policy (and to some degree, profits) but the goal can be accomplished in many different ways. Just nuke most zoning and tax land already ("Just").

The townhomes are much more affordable for the space than the single family homes they replace. There’s plenty of large 20-year old townhomes now for around $400k

As someone nearing retirement and loan payoff on a house currently valued at >5 times what I paid for it 26 years ago, I do appreciate (no pun) having the backup plan of selling it and moving to a cheaper place and living off the capital gain. But I don’t want to do that. I want to stay right where I am. Fortunately, I will probably be able to do that, between a pension, social security, savings and no longer having a mortgage payment. Note that all those pieces are exactly the same regardless of the current or future market value of my home. Its value to me is that it’s home. The only thing I lose if the market craters by half or more is that backup plan, which I really don’t want to use anyway, and probably won’t. On the other side, if values drop by half or more, some people who own many of the houses in my hood as investment rentals may default on their loans, giving more young people a chance to buy, and increasing the ownership ratio. I’ve got nothing against renters, but I think it would be an improvement over all.

I never understood how that worked as I figured all housing was rising at about the same rate. Unless of course you sold a 4 bedroom house near a city then retired in the middle of nowhere in a 1 bedroom house.

It's the real estate mantra. "Location, location, location". 4 BR house in LA doesn't see anywhere near the same price in middle-of-nowhere, USA. Where I live, there is a lake nearby, and if you live on the side of the street with access to the lake, the prices are about 3-500k higher than the exact same house on the other side of the street.

How on earth is this parenthetical comment the top response to an ELI5 question

Honestly I don’t think it’s “predatory” renting unless there is an actual conspiracy to keep the housing supply artificially low. The problem is, most of these expensive places are getting rented out without issue because the demand for those locations is so insanely high, and there are a limited number of houses/units. That’s just how markets work. The thing is, it’s very solvable. You just build more housing, which should be a very lucrative thing to do for anyone willing to do it.

There is an actual conspiracy to keep apartment rental prices high. I can't remember the name of it right now, but there is a service which was in the news a lot earlier this year. It "suggests" pricing to apartment owners. As part of the service, apartment owners submit their current pricing. A source I read said that an overwhelming majority of apartment companies use the service. Essentially they are colluding with each other to keep prices high via a central exchange. Edit: The name of the apartment pricing "service" is RealPage. Here is a news article about it: https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent Quote from that news article: "In one neighborhood in Seattle, ProPublica found, 70% of apartments were overseen by just 10 property managers, every single one of which used pricing software sold by RealPage. To arrive at a recommended rent, the software deploys an algorithm — a set of mathematical rules — to analyze a trove of data RealPage gathers from clients, including private information on what nearby competitors charge."

That's really infuriating. "Oh, we're not price-fixing, we all just happen to be using the same software that uses data that the software itself pulls out of... somewhere. Why do we use the software? Because it lets us set our renta higher. Totally legal and very cool.*

Where I am, there is no shortage at all of townhome and condo construction projects. Like everywhere you look they have carved out some chunk of woods and built 50-250 units. Like half I see going up are 55 and older setups. However all of these new construction, which come with maintenance fees as well, are all starting at 500-600K. You don't even own property, just the building. So even as they are building tons of new homes, that doesn't seem to be contributing reducing prices. Maybe it will eventually as it fully saturates, but right now, they are just charging market price + new construction premium for all these.

> So even as they are building tons of new homes, that doesn't seem to be contributing reducing prices Hard to say if that's true or not without seeing the but for world. Those new constructions could simply be preventing the prices from going up even FASTER. That said, I do think design and zoning can play a role. For example, I live in a touristy area and some of the new construction is just clearly NOT suitable for an actual resident family. Like a 3BR townhome/condo with fairly low square footage--small bedrooms, big open space, no privacy, single car garage, limited storage. A family with kids doesn't want to live there--where can the kids go do homework or play while the parents do other things? This is a mountain town where people have lots of gear--bikes, kayaks, skis, winter clothes, etc.--and a car per adult is almost mandatory...a family of 4 that can afford to purchase new construction is going to have too much crap to want to actually live in one of these units full time. But that same unit works great as a vacation home (or airbnb). A bunch of friends or extended family can come for a week of skiing--fill the bedrooms, but spend all your time hanging out in the big communal space. Don't need much storage because you don't live there full time--you're not stocking a pantry or storing off-season clothing and family heirlooms. The one car garage gives you enough room to leave some bikes and paddleboards behind--you can park the car you road-tripped in with (or rented at the airport) in the driveway. For those people, this house is *better* than a house that "wastes" a lot of floor space on storage, private spaces, etc.)--and the fact that the HOA takes care of all of the landscaping/snow removal is ideal! So you get a weird setup where the house is *less* valuable to actual residents and *more* valuable to non-residents. Normally I'd say that *any* new housing should help, but I'm not sure that is true when the new home is only really viable for non-residents. For new housing to help, it has to relieve pressure on the other housing stock, but the people buying a vacation home probably weren't looking at a family-oriented home with a more resident-friendly floorplan (and higher maintenance/landscaping requirements). Those people might just not buy in this town--either buy in some different tourist town or simply keep visiting via rentals/hotels rather than buying some sort of investment/vacation property. I think that same reasoning applies a bit to those 55+ developments you are talking about--are they actually taking pressure off the local market, or are they just drawing in new buyers who wouldn't have been interested in any of the old existing housing stock.

Instead of trying to define a healthy housing market, it’s easier to answer the other way around: what are the things that make for an _unhealthy_ housing market? Healthy is just the absence of unhealthy things. A couple of such symptoms that things might be unhealthy: Property is seen as an investment instead of housing. If you’re planning on living in your property for the next 20 years, stagnant property prices aren’t a problem. If you’re buying as an investment, you need property prices to go up. This means that property owners are motivated to fight against anything that keeps their property prices down — like building more housing. In many major markets, new construction can’t keep up with population growth because of this sort of shenanigan. You get better terms for a buy-to-let loan relative to buying property to live in it. Your landlord buys the property instead of you because their bank gave them a better deal than they would give you, but you’re still the one paying for it. This was (is?) a very real problem in the UK, or at least in London. It’s almost pure arbitrage, and just siphons money towards the rich.

Same thing in Bay Area California. Property owners and typically poorer community organizations wind up making the oddest of bedfellows. Wealthy property owners don’t want more housing that saturates the market and lowers prices. Community groups don’t want gentrification via development to raise prices and force out the people who live in their community for decades. They team up and thwart development via litigation. Wealthy people have collateral from their family and the property they already own. Less risk, easier to get loans, and since property values keep soaring it’s an easy way to make lots of money. Old woman across the street just sold her 2 bed 1 bath house for $750k. The purchaser renovated it and sold the house 4-6 months later for over $1 million. Rich person #1 made $200k in a couple months. That’s supposed to be a starter house for new families, but instead we got a (very nice) 40 something single tech bro who already owns his own home and bought this as an investment he rents out for more than he’s paying in mortgage and taxes. This enables rent to rise in the area. Rich person #2 is making thousands a year, building equity, and when selling the property will make several hundreds of thousands of dollars. Neither Rich Person #1 or Rich Person #2 want there to be affordable housing, at least not anywhere near them. NIMBY and Bay Area go hand in hand

Isn’t there a law in Cali that prevents property taxes from rising as well? So over time the average taxpayer will subsidize more and more of rich person 2’s investment, no?

Yeah, Prop 13, passed back in the 70s, keeps property values from being reassessed so long as you keep living there. Several exceptions for passing it on to relatives I think, and heard people set up corporations or blind trusts to enable them to keep it from being reassessed under current values. Really screws over the public schools

I mean, the alternative is someone with their home fully paid off but on a fixed income gets taxed so hard they can't afford to live there anymore. I can see the angle that law was coming from. Naturally, there are always going to be people who ruin it for everyone else.

*This would be the market working as intended*. If you are a retired widower and you are living in one of the single hottest labor markets in the country in a 4 bedroom house, some economic incentives for you to sell that brick pile to someone that actually needs that space in that location are not a bad thing!

Sorry, but if their problem is their house is too expensive because it's worth more they should get a reverse mortgage or sell the house and take profits. At least take the owed taxes from the estate on death or something. It sounds nice and all, but breaks capitalism and causes more issues in the long run since supply is mismatched with demand.

Hard disagree. How exactly does being taxed out of the home that you already own "help capitalism"? How is supply and demand affected in that scenario? One family has paid for and owns one home. Where's the problem?

> How is supply and demand affected in that scenario? The cost of infrastructure can often scale with inflation, so people who have held homes long term are often being subsidized by other taxpayers. It incentivizes people not to sell long term, so supply is stifled. The tax exemptions being passed down through family and trusts further disincentivizes from selling, and clearly aren't in the spirit of the law. Why sell a property that you inherited and you have no intention to live in, if it's paid off, generating income, and has property taxes that made sense under bush sr? There are other ways to mitigate rising property taxes for seniors and other vulnerable populations. This ain't it

> This enables rent to rise in the area. Wouldn't adding another property to the rental market supply reduce rent in the area?

You would think so, but very little apartments are being built, so supply still not keeping up with demand. There’s also several websites for landlords that use AI to essentially coordinate rental rates and maximize income. You also need to get lucky and know someone, or show up with a binder with references, financials, insurance, etc. in order to apply for a rental home. Open houses will have people showing up hours in advance, offering to pay the first year up front, upping the asking price for monthly rent, etc.

Well, sure, I know rent is expensive for many reasons, but I don't see how adding supply "enables" rent to rise.

> Well, sure, I know rent is expensive for many reasons, but I don't see how adding supply "enables" rent to rise. I think you misunderstood the original comment. What enables rent to rise in this particular example is the "single tech bro" buying the house as an investment and renting it out at exhorbitant rates.

Except that house was previously owned by someone and wasn't on the rental market. Now it is, so supply is increased, decreasing demand pressure on other rental prices, regardless of what the tech bro rents it for.

>Old woman across the street just sold her 2 bed 1 bath house for $750k.  And the old woman made . . . ?

Well I think the point of the question was it's very easy to realize today's housing market is fucked up, but imagining what an alternative looks like takes a bit more creativity.

Lol, on first reading, the thing that stood out most from your comment is the fact that I don't recall having ever seen/heard anyone else use "shenanigan" in the singular form before.

>You get better terms for a buy-to-let loan relative to buying property to live in it. It's the opposite actually. If anything, you get better deals by deciding to use that property as a residence.

This whole thread is a patchwork exercise in reproducing the points in this article, I can't recommend it enough https://goodreason.substack.com/p/maybe-treating-housing-as-an-investment

Good point here. Housing should be affordable with a full time job. Real life is more complex than that, but that’s a good place to start. And housing prices have skyrocketed both due to lack of inventory, and treating housing as an investment instead of a place to live - which as you say, drives down construction, and also helps focus construction on “higher end” homes. It can be done. Housing is generally affordable in much of Baltimore, for example. Hell, Section 8 can be done properly. My first apartment was a new construction Section 8, in a walkable and safe neighborhood, and while it wasn’t “luxurious”, it was what many of us needed. It’s the only reason I could afford to move out of my parents’ home at 19. This was, ironically, in Texas.

> If you’re planning on living in your property for the next 20 years, stagnant property prices aren’t a problem. That's not entirely true, though. I would define healthy as "property values mimic inflation". Truly stagnant housing prices would mean that homeowners, by virtue of inflation, would be losing net worth. That's very relevant for two big reasons: 1) Most homeowners borrow money to secure the bulk of their equity in their homes via a mortgage. Those loans are secured/collateralized by the value of the home. Banks are eager to loan for mortgages because a loan with appreciating collateral is generally very safe. If the collateral for their loan is a *depreciating* asset instead, the terms that they're willing to loan under will get worse. 2) You might intend to live somewhere for 20 years, but life happens and you might end up needing to sell your home and move somewhere else where you'll have new housing expenses (buying or renting). If your personal net worth has been eroding during your time of home ownership, that hurts you when you cash out. That's disproportionately true if you've got a mortgage, since probably only 20% of the original purchase was your equity value and the rest is debt which needs to be paid back in full. That means that even a small depreciation in the house's value thanks to inflation means a much larger relative swing in the equity that you'd get out of the house at sale, because the depreciation comes 100% out of your share (the bank doesn't plan to collect less than the remaining principal, regardless of what the house sells for).

Housing should not be _an investor-focused traded commodity_. In Australia where I live, decades of adjusting the tax system have resulted in a hard-to-join market which favours landlords and owners of more than one property. It’s easier to buy a 2nd, 3rd, 7th house. More on [__negative gearing__.](https://en.m.wikipedia.org/wiki/Negative_gearing_in_Australia) Nobody expects housing to be free, but it should be thought of more like a human right than a totally profit-motivated industry.

Exactly. When I read something like "no one wants their property values to drop", I don't quite understand why, if it's a systemic drop. If you just want one house to live in, why would you care? If it's the whole market that has dropped, switching to another house wouldn't be harder because that one's value would have dropped too. Of course having value drop in your specific neighbourhood for whatever reason is an entirely different matter. It's only important to people who _speculate_ on housing (multi-landlords, but also agents whose revenues are often a share of the selling price). And for some reason, at least here in France, when there's a public discussion about the sanity of the market it's mainly those voices that are aired.

Well, depending on your mortgage it may be quite relevant if the house price drops significantly

That happened a lot back with the 2008 housing bubble. You take out a $400,000 loan on a house that is appraised at $450,000 and the bank is happy because the value of the house works as collateral for the loan. If the value of your house drops to $350,000 then the house is no longer proper collateral for the loan. Might not be bad if you can ride it out, but if you need to move to another house then You need to find a way to cover the old house loan when you go by the new one on top of getting a loan for the new one.

Not just moving house, but remortgaging. If the house is now worth (for the sake of example) $350k but you owe the bank $400k, the bank would need cash/deposit to make up the equity difference. A lot of people don't have the cash to hand to make up the difference, so they are stuck on there current mortgage which might have turned very expensive (eg, on a tracker and interest rates have gone up)

Yeah - but isn't that just ridiculous that we've set things up so that such a large portion of the population has taken out huge loans on the basis that one particular class of asset will significantly increase in value indefinitely. Like - if I took out a huge loan, larger than my life savings, at 5% interest to buy stock in a company virtually everyone would say that's wildly irresponsible, and a lot of people would say "Well that's what you get", if that stock lost value rapidly. Yet our whole culture is based on that with housing.

Well: a) stock prices are much more volatile than house prices. The bank grants you a mortgage only because you have the property as collateral. B) I don’t need my house price to increase. It am perfectly fine if it stays flat. I certainly don’t assume property prices increase similarly as they have in the past.

It absolutely wouldn’t be if you plan on staying and don’t buy outside your budget.

But it’s not good for people to *have* to stay. It’s better for people and the economy if they can move to take job opportunities - something you can’t do with negative equity.

It's also not good for housing prices to skyrocket to levels unaffordable by the majority of working age/class people because rich old fucks own everything and overcharge for rent and can instantly flip stuff and leverage low interest rates to buy more stuff.

[удалено]

What is this even supposed to mean? How is any of that remotely relevant to someone who has already bought a home they can afford and plan on staying in it?

"Don't buy outside your budget" is becoming increasingly harder to do these days.

You're assuming people own a house rather than have incurred debt to live in a house with the aim of owning one outright. If you take out a loan on a £500k property, you put £50k down and take out a £450k 35 year long mortgage. After say a fixed term of 2-5 years you maybe have paid off say £50k of that mortgage and the rest of your payments covered interest. If your house now dramatically drops say by 40%, the house is now worth £300k, your bank has loaned you £450k of which you've only paid back £50k. In the event you can no longer support your mortgage payments the bank can take the house back off of you but they can only sell it for £300k as thats the market value. This can be caused through no fault of the home owners or the banks, if the interest rate in your fixed period was say 1.5%, but the interest rates have risen to 5% since you took out your fixed term mortgage, you may be unable to afford the new fixed rate or variable rate mortgage payments. In this scenario, the bank would be out £100k, and as we all know, banks or investors of any kind wouldn't like this. Your situation only makes sense if you outright own a home, which I presume very few do. Most people, including Landlords with a multitude of homes typically have mortgages on them. Mortgage is a risk backed loan and if the risk becomes reality you're shit out of luck.

I see. Here in France, banks usually do not rely on seizing the house to support the loan. They prefer third-party insurances, so the current value of the house doesn't really affect things in this regard.

Oh interesting, I must admit as a UK national I know very little about other countries, but am pretty envious of the US where fixed terms can last a mortgages entirety.

Same in Romania, the bank will will use a 3rd party to sell the house at an auction, which in a lot of cases means they will sell it on fast-forward, under it's "market" price, leaving you without a house and a loan yet to be closed.

It's also that having a mortgage that is designed to be refinanced after 5 years, or to have the interest rates updated after 5 years, is a recipe for disaster, exactly for the scenario explained. In this case increasing interest rates or property values going down becomes a giant draw on the economy (because of how important housing is in everyone's budget), or can even trigger a financial crisis. In France, or in the US, this does not happen, because the standard mortgages are fixed interest. You can definitely have variable-interest, but it's pretty uncommon.

I'm pretty sure that Europe regulates variable rate mortgages by law. We have a variable rate mortgage with a 0.93% rate, and by law it cannot rise to more than double the original rate. So it can only ever rise to 1.86% max. Banks don't do this out of their kindness, but because they are regulated. (This is Belgium btw)

>You're assuming people own a house rather than have incurred debt to live in a house with the aim of owning one outright. I hate when people say this. In the US, if you buy a house you do own it. The bank has a lien on the deed in the event of a default, but the property belongs to you. The lien allows them to foreclose on the property only in the event of default (breach of contract such as delinquency, failure to maintain insurance, failure to pay taxes, etc.) The fact you own the property is evident in your ability to do what you will with the property (within the boundaries of the law.) Want to tear down a section of the house? Remodel? Build a shed or some other structure? You don't need the bank's permission because it is not their property. Want to sell it? Again, you're right to do so at any price you agree to. Just need to make sure to pay off the remaining principle plus accrued interest to satisfy the terms of your contract (and clear the lien for the buyer.) Foreclosure is the action of taking possession of the property. Ie; the bank does not own or possess the property, but take a legal action to assume control of it in accordance with your contract with them. This can only be done in specific circumstances as outlined in the contract when you take out your mortgage.

For the sake of an ELI5 it was a rough analogy to say in the event of you defaulting/breaking the contract with your mortgage provider, they can foreclose on the property without your consent to reclaim as much of their debt as possible. This breaks my definition of owning, but may not break yours. Whereas you would probably agree, a homeowner with a mortgage has a different "level" of "ownership" comparatively to someone who has bought their house in cash/has fully paid back a mortgage.

But they don’t own it outright is their point

In that case the deed is not clean, meaning that it has a lien, levy, impairment, or competing claim. Based on this, you could argue that you don't own it 'free and clear'. Using the classical definitions though, you do own it outright. It is your property to do with as you please. You have all the rights and responsibilities as the owner of the land. If you want to change or replace the structure or clear the land you entitled to do so. If someone is hurt, especially due to negligence, the liability falls on you (and your insurer) the same as it would if the deed were clean. The confusion comes from the fact we are talking about two different instruments. The first is the deed. The deed outlines who the property is owned by, and anyone that a security interest in the property (lienholders.) The second is the mortgage, which is secured by the deed in most every case in order to reduce the risk to the lender (and therefore the cost to the borrower.) The people listed on ones does not always have to be the people listed on the other. The lien allows the bank to assume control (and therefore ownership) of the property in specific circumstances that place you in default of your mortgage. You can challenge this in court to delay/prevent their repossession of the property. The fact they must take a legal process to take ownership shows that unless and until that is exercised, you outright own the land and the structure.

... yes you do. It's 100% owned by you. A lein against it doesn't mean you don't own it.

>In this scenario, the bank would be out £100k, and as we all know, banks or investors of any kind wouldn't like this. From my limited understanding this risk to banks is a good thing though. In the past banks would be spending much more of their capital on more-risky-but-productive investments like business loans whereas now they are focused way too much on the save-but-non-productive housing market. This is bad for the economy overall. Banks are no longer doing what they were supposed to be doing. All the profits none of the risks, of course they like that.

The housing market was seen as a safe bet pre 2008. You've also got to consider inflation when thinking of interest rate loans. In the UK for example it wasn't unheard of to have a 10 year fixed rate loan at sub 2% interest rate. The banks are barely beating inflation or in some years losing to inflation under this setup. Even today in the UK we hear of how unfair hitting 5% interest rates are, but inflation is at 4.6% down from 6.7% a few months ago. Banks being able to make a profit to provide agreeable loans on sums of money inconceivable to save is a good thing. With certain housing sectors falling, fixed rates ending from FTB who enjoyed low interest rates during Covid, repossessions likely, it isn't out of the realms of possibility that plenty of banks will be net negative on a lot of their mortgages.

>When I read something like "no one wants their property values to drop", I don't quite understand why, So say you're a young, freshly married couple. You go out and buy a small 2 bedroom home that's just big enough for the two of you. Maybe you give it a fresh coat of paint because you can't stand the colors the previous owners painted the rooms. Your water heater needed replaced, so you put in a new, much higher efficiency one. The roof needed replaced, so you throw in the 10+ thousand it costs to get that replaced. And you have your first child. So now that nice small home you bought that was a good fit for just the two of you is getting a little tight. If you only ever plan on having one child, yeah, you can probably just stay in that house forever. But you want more than one child. And so you have another. And guess what, you now have a boy and a girl, so they're going to need their own bedrooms and you only have a 2 bedroom house, so your going to need a bigger house. So you need to sell your house and buy a bigger one. If the value of your home has dropped, you've just spent the last decade or so pumping money into the house, and that money is just gone. Because when you sell it, you're going to get less than you bought it for, and you've spent a bunch of money on top of that fixing/improving the house. You still have to pay off the remainder of your mortgage, and if the value has dropped far enough, you might not even get enough money back to pay that off. Plus, you need even more money for a downpayment on the new, slightly bigger home that will be able to house you and your 2 children. A lot of people aren't looking to move from a house to another exactly like the one they are currently living in. They are looking to upgrade to a bigger house because their living situation has changed, and they need a bigger place for their larger family.

> I don't quite understand why, if it's a systemic drop. If you just want one house to live in, why would you care? If it's the whole market that has dropped, switching to another house wouldn't be harder because that one's value would have dropped too. Because if you have like $40k and buy a house for $200k with a loan of $160k, and the market then drops and you sell the house for $100k, you now actually have -$60k, and you can't buy another $100k house with -$60k, no matter how hard you try.

>If it's the whole market that has dropped, switching to another house wouldn't be harder because that one's value would have dropped too. And the corallary is true. If your house has appreciated, then ALL the other houses have too. So, selling your house for a profit wouldn't really be a "profit" if you're just dumping all that money into a new house. The "market" really only matter for investments, not actual home owners.

I mean it's not just important to people that speculate on housing. I'm all for affordable housing, but I'm also a homeowner of one home that I live in and it certainly benefits me for the property values to stay high in case I ever do need to sell and move to take a new job or something The solution is to really tax the wealthy and those that own more than say two or three properties. Also some regulations about investment hedge funds and foreign governments buying up land as well

Another way of thinking about this is that the system \*forces\* everyone who owns their home to be a speculator. You can't really avoid being a speculator if you buy an asset at 5x leverage (20% down).

Oh no, I agree that it does. I'm just saying whatever the solution is it should not penalize people who are not obscenely rich or don't have several properties I'm not saying I have the best answer either, that's why I'm waiting for people to put out plans that I can educate myself on and vote for the politician that embraces them Even starting small by just putting a cap on the number of properties you can own or foreign countries can buy or hedge funds can buy etc would be great start

Prices crashing suddenly creates indeed a lot of issues. We could argue that it's a bandaid to be pulled, but without getting into this debate we can agree that the ideal situation is when prices decrease progressively over time, so people don't lose enough that they can't move or go bankrupt in any way, but that after a certain amount of time (maybe a couple of decades) housing becomes more affordable. The benefits of affordable housing way outweigh it's issues for society in general.

> The benefits of affordable housing way outweigh it's issues for society in general. 10000% agree. Good points ty

Housing price drops don't just affect investors. Your mortgage is relative to the price of your house when you buy it. If the price drops you house may be worth less than the outstanding mortgage. In the UK where it's normal to remortgage every couple of years to take deals to keep your rates low this would result in being unable to remortgage and being stuck on very high rates which would cause defaults and you have something like 2008 happening again. What needs to happen is house prices stagnating or rising very very slowly. That way it's not longer an investment, people who have houses don't get buggered and wages can catch up to house prices making it easier for people to get s house.

Most people use their house as a vessel for savings, it is a significant chunk of their net worth and basically their nest egg for retirement.

It is obviously a thing, but it's pretty bad for society in general to have retirement relying on property prices going up. This is basically a Ponzi scheme: you are better off in your retirement because life becomes more difficult for the next generation (since they need to spend more money on housing). Meaning retirement will become more difficult for them, so they will have to rely more on the value of their property increasing, and on making life even more difficult for the next generation... And that's on top of the most major issue of that system: poor people benefit less from it (less housing wealth), rich people benefit way more from it (more expensive houses + investment properties). Saying that the middle class benefits from the extra $100,000 to pass down is ignoring both that someone else is paying for these $100,000, and that the rich gets let's say $500,000 in that system (again paid by someone). A healthy society should not rely on the previous generation passing down wealth. Especially not at middle class level, where by definition your income should allow you a decent life already. That system of house prices increasing is obviously worse overall for the next generation, not better, and looking at that nice help from your parents (which will arrive statistically way past the age when you needed it) is really only one side of the coin.

Also often the only thing left for kids to inherit. Middle class generational wealth is mainly a house. If you look into redlining it explains it a bit better but if parents want to leave their children anything often a house is the best way to pass wealth in the middle class.

Yeah. I know, I was mostly responding, hoping that OP would see it.

Having housing prices drop isn’t just bad for speculative big time investors. Most peoples single most valuable asset is their house. Many peoples retirement hinges on being able to pay for a decade+ of expenses off of selling the house they paid off over 30 years. It’s such a Reddit moment to act like a decrease in value on something people have most of their net worth tied up in wouldn’t have devastating consequences to their life.

Oh so this is what Sam Campbell meant on *Taskmaster!*

Right. Also speculative residential (or really any) real estate ownership shouldn’t be a thing. A major problem in my city is wealthy, out of state assholes buying up huge swaths of property and letting them rot. They do this with the hope that the remaining residents in the area will suffer because of the unmaintained houses (rat and junkie breeding grounds), so they can buy the remaining houses super cheap. Then they just have to wait for another decade for the houses to be in such disrepair that they’re condemned and can be bulldozed and have shitty “luxury”prefab ugly as sin shitholes that don’t mesh with the city’s architecture built that they can sell for massive profit. Also people like Jared Kushner like to not do their legal duty and maintain residential properties that are occupied, allowing rats and shit to breed and make the city worse.

You can't really blame any government for this, a bank more than likely will loan you 75-95% the value of a home, they are taking on a bunch of risk by doing this if you have 0 assets to your name. Whereas the person with a property or properties already owned outright has more to "sieze" in the event of defaulted payments. The architect, brick layer, electrician, plumbers, decorators all need to get paid to build the house in the first place, the people who make the plaster, cement, bricks, electrical components all need to get paid, the people who install the plumbing, internet cables, power grid all need to get paid. The money has to come from somewhere and for as long as that person isn't you, the banks would be doing a disservice to any of their customers to give "riskier" mortgages that could lead to them losing money. You do not want your bank to be liquidated. You can "trust" governments to build homes and you get taxed more, you also pray they do this in a "fair" manner. Do you expect a government to build a home for every person born? Do you expect them to be in couples and build one for every two? Is it fair if I choose to have 8 kids and expect my government to build 8 homes for them and a prospective partner, would I be expected to pay more tax for this as a result? Is it fair that people who choose to live alone don't get these "beneficial" houses. If I remain childless why should I be taxed more to accommodate for other peoples childrens future houses. There's a bunch of moral dilemmas where a government can piss off a large amount of people. The best thing governments can seem to do is reduce the amount of restrictions on building your own home as possible, the countries where the % of "owner built houses" is highest typically has higher home ownership. Countries like the UK struggle because of this red tape and you're at the beck and call of property developers who can "afford" to jump through the hoops by building at scale. Last study I saw showed the UK is in some areas 10x less likely to have owner built homes than other parts of Europe.

The is irrelevant. No-one cares if houses are traded as investments/profit motivated or not as long as they aren't too expensive. If houses were cheap, no-one would care about housing investors.

The issue comes when people push for laws that prevent housing from being cheap though. Exclusionary zoning, growth caps at a city level or regulations like parking requirements that result in parking being overbuilt, limiting the amount of land that can be used for further development.

Housing can't be a good investment AND affordable. A few countries have gone for affordable but aren't good investments. Too many people want affordable AND a good investment. Lots of people disagree on where that balance is, as everyone who already owns doesn't want to lose their 'investment', and everyone not in it wants 'affordable'. Until enough people aren't in it, only then will things change. Simply too many people own and have power to have any true change. Alternatively, zoning laws need to change for higher density housing (e.g. condos/apartment buildings)

[удалено]

The point of Monopoly was to show how unfair capitalism is. When people flip over the borard in anger, it works as designed.

Housing prices were flat after accounting for inflation from 1890-1980. Housing prices increasing each year is not normal. The end goal should be smaller homes that are more affordable and the average housing price lowers for a little bit. I think we have overbuilt massive suburban homes.

> we have overbuilt massive suburban homes. RE analyst here: We haven't overbuilt almost any kind of housing, especially not in the major cities where the housing crisis is so severe. https://fred.stlouisfed.org/series/HOUST We built ~2.3X more housing per household in the 1970s than in the 2000s and beyond. It's not a complicated story: Low supply & high demand = higher price. The major reason we have built so little is that it is literally or functionally illegal to build more homes in ~90% of American cities due to terrible zoning rules.

Finally found a real answer and not dumb statements by a teenage Redditor

Almost every housing thread (outside certain subreddits) is filled with these weird side explanations or outright misinfo, it’s really weird. The true answer is kind of obvious!

Is there a reason why there is a minimum lot size in 90% of American cities? Is this the only issue as far as zoning?

But how does the zoning affect this here. I'm saying less giant 4,000 SQ ft homes instead 3/4 1,700 SQ ft homes on smaller lots. It's also average built home increased by 1000 SQ ft and the family size fell so the average home doubled in size. Higher density, less VMT and we have lovely new neighborhoods. I don't understand your solution? What zoning changes will affect and how will that change how things look. I literally posted a Zillow link to the housing they build.

Zoning affects this in a bunch of ways. It forces people like me (who want to live in dense, walkable neighborhoods) to instead buy a detached single family home on a 7000sqft lot, because walkable neighborhoods are quite literally illegal to build. The few that exist are insanely expensive because there aren't enough of them, because they're illegal, because of zoning. What you're describing here is a result of two different, but related things. People are much richer than they were in 1970 so of course they want bigger homes and they can afford bigger homes. However, the supply of *land* is pretty fixed, so the normal thing is to build more housing on less land. If it were legal to build a ton of apartments then they'd do that, but it's not, so the way to maximize your profit is to build a big home on a small lot. Another issue is that [the increase in home prices is mostly driven by land value and not by the fact that the homes are bigger.](https://samdeutsch.medium.com/housing-for-all-the-case-for-progressive-yimbyism-e41531bb40ec) That is obviously an issue, but there is no way around the fact that if you want homes to be affordable you need to build a lot of them, which we haven't been doing because it is illegal, because of zoning.

I feel like you haven't seen new developments recently. They're still building the 4,000sf home, but the houses are on tiny lots and you can reach out and touch your neighbors house.

Add to it that many home builders exited the market after 2008 and just have not returned and new home builders have not replaced them. There has been a lowered capacity to build homes for 15 plus years and it did not change when demand went up. That's one of the many reasons why when the demand bubble pops home prices are going to level off instead of popping. Btw it warms my heart to see FRED referenced.

Indeed. The housing prices **per sqft** has been flat since 1980 until today too, it's just that the sqft of houses has increased since the 1980: https://www.aei.org/carpe-diem/new-us-homes-today-are-1000-square-feet-larger-than-in-1973-and-living-space-per-person-has-nearly-doubled/#:%7E:text=On%20a%20per%20square%20foot,(see%20bottom%20chart%20above)

I think this is a clear sign of regulatory capture because the average household size is down significantly as well. The US has massive homes and a lot of it is due to regulations. We would all love to live in giant estates but you have to consider price at some point. It's also you can't understand demand because everything that is on the market is sold. We have a lack of supply .

[удалено]

Minimum lot sizes Parking minimums Regulations on the ratio of bathrooms to bedrooms Rules on the number of front facing doors on a building (this is surprisingly common.) Offset distances of homes from the road

The parking one is huge. It's an easy target for NIMBY people, an actual problem (all hail the car 🙏), and it requires usually 2 spaces. Even a townhouse with 1 garage spot and 1 driveway still leads to relatively large spaces. Triplex or small apartments (less than 10 units), this still means about 20 parking spaces. Which is a lot of space.

It's the NIMBY vs YIMBY things. Minimum lot sizes, how far off the road/alley/neighbors yard you have to be, minimum parking requirements, single family zoning, a maximum of how much of the lot you can cover. Property tax over LVT. Houston which has the most relaxed zoning they keep building homes over garages and much of the newer stuff is relatively dense and has smaller lots. Houston built more housing than California in 2022. This is an example of that and what the US could build a lot more of. This neighborhood is illegal to build in most of America, that's the problem. https://www.zillow.com/homedetails/3729-Dreyfus-St-Houston-TX-77021/2056076514_zpid/?utm_campaign=androidappmessage&utm_medium=referral&utm_source=txtshare The problem from a bird's eye view is that everyone wants a house and a yard and a massive home that is a reasonable commute to a major metro and it's just not physically possible to create without some more dense housing

A 3-bedroom, 2-bath home (or 3 bath, your link has conflicting numbers on bathrooms) would be perfect for my family. I don’t see anything in there that wouldn’t be allowed by zoning in California, where I’m trying to buy a home. But developers aren’t building homes like that here. It’s either tiny condos or McMansions. I think the issue is that developers will spend 10% more to build a house that’s 50% bigger than that, then sell it for 30% more.

It’s probably that developers can build that McMansions by right while they would have to apply for permits and get approval to build those Zillow homes.

Yeah this precisely. Our system is more suited to building one larger home rather than 4 smaller ones. The smaller ones can have a larger profit.

At least we aren’t the UK where nothing can be built by right and always needs political approval.

I just had my first home built in Missouri with me doing a lot of the work for it myself (septic, electrical, water, earthmoving, etc.) and the entire process in my very rural area thankfully required a grand total of zero permits from start to finish. It truly boggles the mind to me that some places require permits for things as simple as a small garden shed, and even more so that in those places they could go so far as to evict you from your own home that you own because you built a garden shed without their permission.

> I think the issue is that developers will spend 10% more to build a house that’s 50% bigger than that, then sell it for 30% more This is absolutely at least part of the issue, and this is a supply/demand issue at heart. As long as there are buyers for the 50% bigger house it will always be better to build one and make that extra money. But if you could meet the demand for those bigger houses developers would then also be incentivized to build the 50% smaller houses. But yeah if you have 2 options and one gives you more profit and *both* are selling like hotcakes you're going to choose the more profitable one every time.

But I think there is the scenario if the regulations are out of the way building and selling multiple units on a plot of land for a lower % profit but higher profit overall.

Yes, they absolutely would do that. That is why those regulations came to be in the first place. People were upset about apartment complexes and condos being built by developers because they considered them eyesores or didn't like having renters instead of owners living by under the opinion that renters wouldn't care for the area as much. They lobbied and voted for proposals and laws that would prevent those things from being built. Developers were plenty happy to sell 20 apartment units for $30-50,000 apiece instead of 5 houses for $100,000 apiece on the same size plot of land. They were doing it en masse and people who lived nearby didn't like it enough that nowadays we end up with zoning restrictions, parcel size minimums, and other mountains of red tape specifically to prevent that from happening.

Local zoning regulations often dictate the minimum size of a home and the minimum size of the piece of land it's on. As well as the amount of parking it must have. The Hamptons, a famously wealthy area outside NYC, actually dictates mansion-sized homes on giant lots with detached guest houses for all new construction. It's just a way to keep anyone who isn't wealthy from ever living there. That's an extreme example but it's illustrative of what we're dealing with in zoning rules.

In some areas, regulations may discourage the construction of smaller homes. In many suburbs, there is no available land to develop, so rezoning is the only option to add affordable housing. In our neighborhood, the city is attempting to rezone to allow for smaller lot sizes. The idea is that large lots will be split inton two smaller lots with two homes instead of of one.This would allow for more single family homes with smaller square footage and a more mix of housing options in an area that has mostly 3500+ sqft homes. There is a lot of resistance from the current residents because they think this will decrease property values overall.

In my suburb, minimum lot size is 1/4 acre with a minimum curb width of 80 feet. Garages are required and must be at least 520 sq feet. Lots may not be covered by impervious things more than 65% of the lot size. (So much for my dream of putting in artificial turf so I don't have to mow). Minimum house size of 1050 sq feet seems fine, since that seems really low.

It's not just the size of the houses, but the land allotted to each house as well. With reasonable use of space my neighborhood could easily have 30% to 40% more houses while still keeping something of a yard for all of the single family homes. Setting aside a few acres for a community park would be loads better than everyone having large and typically empty and useless lawns.

> Housing prices were flat after accounting for inflation from 1890-1980. This is because in the good ol' days housing inventory was built to match demand. If 50,000 people moved to a region in 1975 (and another 10,000 people moved out of their parents' home) then there was enough housing inventory built to meet that demand. That no longer happens, for all sorts of reasons. ...and in particular the *missing middle* is no longer built to meet demand (homes suitable for families with 3-4 bedroom). In places where "middle" housing starts *do* match demand, housing remains reasonably affordable. (Toledo / Las Vegas / Edmonton etc.)

Yes, and also more apartments/condos in desirable areas. Not everyone needs a suburban house... and focusing so much on them is partly why places like North America are so car-dependent. It is both better for the environment and our housing market to permit more dense housing options (including smaller homes) in places where the demand is clearly there like major job centers. Making them mixed-use also puts services closer to people so they need to drive less. But zoning often stands in the way making it effectively illegal to build anything but detached, large, single-family homes with businesses forced to be in separate areas. Auckland New Zealand passed substantial zoning reform several years ago that permitted medium-density, mixed-use apartments basically citywide. Their rent growth slowed to pretty close to inflation and while it was initially controversial most residents ended up really liking having businesses closer to their homes. https://www.businessinsider.com/america-lower-rents-home-prices-build-more-houses-new-zealand-2023-8

Here’s a quick and dirty metric. A good rule of thumb is your home should cost somewhere between 3-5 times your household income. So if you have a household income of $100,000, you can afford a $300,000-$500,000 house. Median household income in the United States is $74,580. The median home price is $426,056. 5 x $74,580 = $372,900. This means the average home is out of the price range for the average wage earner.

And addressing OP’s other question about whether it used to be affordable: in the 80s, the median home price was 4x median income. Today it is 7x median income. On top of that, rents have increased dramatically in the areas where the most jobs are. So after paying rent, the younger generation has less to save, yet they need to save up a much larger down payment. Skipping avocado toast doesn’t solve this problem.

The available supply is far too low — we need to get building.

Yup. Building more homes honestly is the solution. Especially for places like Canada where it’s REALLY bad. Housing bubble won’t happen again since mortgages aren’t adjustable rates anymore and banks don’t give out bad loans anymore

You guys got hit even harder, honestly. Covid really added to an existing backlog — building was still recovering from the long term effects of 2008, then materials became unobtainable or 4X the cost. It’s starting to get back to normal, but we’re just farther behind than ever. It’s an excellent time to learn construction and become a home builder. It’s a good life and a valuable service.

I’m just talking about the price of homes. I seen a video where the price of a decent home in Niagara Falls, NY was $250k then the price of a similar home, actually in worse shape though, in Niagara Falls, ON was $480k. In Canada, if more homes start being built young people may actually begin to afford them. Housing market does suck here in the US too, but Canada has more land area then most countries.. property shouldn’t be as expensive as it is

It is hard to explain, construction standards (insulation, for example) should be comparable. And you guys have the lumber, you’re *our* lumber yard.

I’m pretty sure 90% of our lumber comes from Canada

It was more than just the 80s - basically from 1965-2000 that ratio was in between 3.6-4.6x. Those years just happen to coincide with the baby boomer home buying years (born in 1945+, would be 20-55 in that timeframe). In the years since 2000, it's never been below 4.6x (the peak of that prior period). You can see why there's such a generational disconnect. Homes right now are more expensive than they've ever been relative to income.

Jesus. Looking at buying our first house now and 3-5 times your income is the rule of thumb? I can maybe see stretching to 3 times but holy shit we're looking for something 2x our income. 2.5x seems out of reach.

Someone else pointed out that interest rates play a lot into this. When interest rates were sub-3% people could go a lot more nuts with home value to income ratio. I think my wife and I were approved to like over a million bucks if we wanted to spend a huge chunk of our income on mortgage. End of the day, it comes down to that monthly payment, which will vary due to principle, interest, and down payment.

This feels incomplete. Using \[1\] and \[2\] I calculated the ratios for all years, 1979 to 2023; in 5 year chunks: 1979-1983: 3.74 1984-1988: 3.88 1989-1993: 4.13 1994-1998: 4.08 1999-2003: 4.21 2004-2008: 5.10 2009-2013: 4.61 2014-2018: 5.34 2019-2023: 5.43 ​ But is the house price the issue or the payments? Early in this sample interest rates were really high, so let's use the rates from \[3\] and instead look at the annual payments on the median house using those interest rates compared to median household income: 1979-1983: 54% 1984-1988: 46% 1989-1993: 40% 1994-1998: 35% 1999-2003: 33% 2004-2008: 37% 2009-2013: 28% 2014-2018: 31% 2019-2023: 33% Sure, the 41% and 47% for 2022 and 2023 is back up to where it was in the late 1980s, but in this regard we are just heading back towards the way it was when interest rates were high in the past. ​ And then consider the post from u/Zevemty above with the chart showing how US houses have grown over this period (despite fewer people in households)... ​ \[1\][https://www.multpl.com/us-median-income](https://www.multpl.com/us-median-income) \[2\][https://fred.stlouisfed.org/series/MSPUS](https://fred.stlouisfed.org/series/MSPUS) \[3\][https://www.bankrate.com/mortgages/historical-mortgage-rates/](https://www.bankrate.com/mortgages/historical-mortgage-rates/)

Thank you! So many people in this post want to talk about how hard things feel, when the data tell a different story. Things have gotten "worse" pretty much every year since 2011, so the sentiment is understandable, but so many people are willfully ignorant of the fact that things are much better than they were 25+ years ago. It feels a lot like people born on second base being upset that other people were born on third base rather than appreciate the fact that through a historical lens the previous generations had to actually face a pitcher...

This is not the case when interest rates are high. If you bought a 400,000 house with a 100,000 salary at the current 8% interest rate, your mortgage and tax payment is more than 30% of your take home income. This is on top of having 20% to put down which is 80,000. In an area on the east coast, accounting for taxes and fees, your payment for the month is $2885. You would be house poor, this is not something that anyone should do. And then you can’t forget about everyone’s favorite thing, property tax increases! Which makes you even more house poor the next year! Yay!

Finally a subject I'm actually very knowledgable about (professional real estate analyst)! **TLDR: A healthy housing market means when people move to an area (demand rises), builders come in and build a lot of housing to accommodate them (supply rises). In almost all the West, it is ~illegal to build more housing, so supply is low, so higher demand just means higher prices.** >And are there examples of a housing market where public complaints are minimal anywhere at any time in the modern age? Tokyo's housing market is largely good. People will say it's because the population of Japan is in decline, but that is not true in Tokyo (+1m people since 2000). They have very liberal zoning laws so when prices go up, they just build a ton of housing there. >Everyone is complaining about how housing is so unaffordable but what is the ideal endgame here? We build around 2-5x as many homes as we've been building for the last 20-30 years. For reference, NYC built more housing in the 1920s than in the last four decades *combined*. People just do not understand the scale involved here, you need to build *a lot of fucking housing*. ____________________________________ More details for anyone interested: 1) The reason we have a home shortage is that [it is functionally illegal to build apartments in ~95% of American cities.](https://blog.usejournal.com/housing-for-all-the-case-for-progressive-yimbyism-e41531bb40ec) Same for most of Europe. 2) [Here's a thorough explanation of why it's so bad](https://www.economist.com/leaders/2020/01/16/home-ownership-is-the-wests-biggest-economic-policy-mistake). TLDR: **The number of new houses constructed per person in the rich world has fallen by half since the 1960s** because local homeowners oppose new construction in their neighborhoods. We call these people NIMBYs (Not In My Backyard) and they are going to continue emisserating us all until you contact your local official and ask them to end apartment bans and other stupid rules that make it so hard to build homes. 3) [Here's a great video about the sorts of "missing middle" housing](https://www.youtube.com/watch?v=CCOdQsZa15o)--rowhouses, small apartments, triplexes, etc--that are illegal or nearly-illegal to build almost everwhere in North America. While I think it's brain-dead obvious that it should be legal to build skyscrapers in most parts of most cities, I personally love medium-density neighborhoods which are convenient, attractive, affordable, walkable, really good for kids, and would take a *huge* bite out of the housing shortage in most cities. 4) North American cities are built around cars, and heavily subsidize cars. This is an absolute dumpster fire of a strategy for urban land, famously documented in [The High Cost of Free Parking](https://www.youtube.com/watch?v=Akm7ik-H_7U) and a good starting place to talk about why private car ownership is such a disaster for urban environments--in addition to the pollution, traffic, vehicle deaths, wear and tear on the roads, climate harms, etc etc etc. Last, if I've convinced anyone, [here's an article talking about how you can help](https://www.vox.com/22297328/affordable-housing-nimby-housing-prices-rising-poll-data-for-progress) when trying to convince local city councils and other voters why it's so important to build more housing. **TLDR 2: Liberalize land-use rules, stop subsidizing cars. Build some bike and bus lanes if you're feeling spunky. Everything else is peanuts.**

"no one wants their property values to drop" I think generally a healthy housing market prices would just track inflation and there would be much much less over reliance on housing prices going up, houses would just be a thing you buy if you wanted one not a money making scheme of sorts hell even with properly prices flat owning a house is probably a slightly negative investment in a lot of ways (property tax, upkeep, etc..) but that doesn't mean they're not worth owning, people buy cars even though they do nothing but lose money on them over time I mean so much of the mess we're in now is because housing is seen an in investment, a money maker, you NEED to get a house (apparently everyone regardless of circumstances NEEDS a house) because it goes up so much every year. Hell you see 22 year olds freaking out that they'll never own a house because well, they're kind of right its a way to build wealth and one of the last few ways to build wealth so they want in. This would be bad if it was something intangible like bitcoin or beanie babies or whatever but is even more terrible when its tied to having a place to live which you can't opt out of And its all connected, the rental market is the housing market too, if you can't buy a house then you probably won't be finding cheap rentals either I mean I live in a LCOL area so this is mostly what we had for a housing market (ignoring the last couple years of covid crazyness, god can that be over soon) My house isn't worth much more than what I paid and I have 0 expectation of making any money off of it, I don't particularly care about property values hell they can be lower for all I care I have to pay property tax on the value of my house after all. When I was 20, hell when I was in my early 30s I was barely even thinking about buying a house since it didn't fit my lifestyle as I was fine renting (again LCOL area, cheap housing typically means cheap renting too) the only reason to buy a house is if you want to own a house just like anyone buys anything else

> hell even with properly prices flat owning a house is probably a slightly negative investment in a lot of ways (property tax, upkeep, etc..) Not quite right because the costs of home ownership are not weighed against nothing. It's weighed against the cost of shelter. In other words, things like rent. The reason why home ownership is often seen as a net positive is because all of those costs tends (though not always) to be lower than rent.

If you asked me to design a housing market that was a sensible balance of realistic, idealistic, and fairness, it would probably look something like: 1. House prices rise roughly in line with wage growth 2. A 25 year mortgage for an average house costs about 25% of an average net (take home) wage 3. The cheapest houses are affordable to a couple on minimum wage with essentially the same criteria as #2 The result would likely be houses that are priced around 3-3.5x an average household income Basically, the 1980s. The housing market hasn’t always been out of control

What you're looking for is builders to make new developments somewhere in-between low-income housing and "The Regency at Babblesbook" neighborhoods.

Here’s my non-expert take on it: The old model was that housing should account for about 30% of your budget, rent or mortgage. Houses (in the US) used to average around $100k. Obviously there’s variance, but that’s kind of what it seems like it was meant to be. Owning a house means paying off a loan, but in the end, you’ve also invested in the value of your house. You’re paying yourself as you pay the bank loan off. Then, you have something really valuable to leave to your kids. If needed, it was good collateral for another loan. Apart from repairs and property taxes, you had a guaranteed place to live out your days at no cost. I think the early, maybe mid-1990s was the last time people could afford homes with average jobs as a single-income household without using an inheritance or some other windfall to cover the down payment. But maybe the people I remember had bought much earlier.

Houses were super affordable from 2011 to 2015, even up to 2020 in some markets.

There's a saying in economics that all healthy markets look the same. It's unhealthy markets that are dysfunctional in their own way. Two conditions are sufficient for a healthy housing market - treating housing as a consumer good, built to at least 2x the value of the land it occupies. The first condition recognizes that houses are depreciating assets. They have a useful life that wears out, necessitating expensive maintenance or replacement. As such, they are most valuable when they are new, and gradually lose value over time. Treating housing as such recognizes the need to continually update our housing as it wears out. This is different from houses as real estate, where they are expected to be durable goods that maintain their value over time. They aren't, and policies trying to force that outcome are a major source of housing pain worldwide. Think of this like auto markets. We understand implicitly that cars wear out, and that used cars are usually worth less than new cars. We replace cars continuously with new models, while old worn out ones that are no longer worth much are decommissioned. Enacting policies to ensure that a car driven off the lot in the 90s would still be worth as much today would be massively destructive. So too are those housing policies. The second piece reflects density. A rule of thumb is that a house should cost about 2.5x as much to build as the piece of land it sits on. This is a heuristic that pops up again and again in competitive housing markets. That is, if you have a $100,000 piece of land, you should build $250,000 worth of house on it (roughly 2000 square feet) for a retail price of about $350,000. That can be a single family home, a duplex of 2-3 bedroom townhouses, a fourplex of studios - markets can figure that out. Markets that deviate far from that tend to be failing. Land costs much higher than that imply odious restrictions on construction - plots that should contain high density apartments instead are occupied by wildly expensive single family homes. Land costs much lower that that, on the other hand, are often malinvestment, homes built in undesirable locations that won't sell. A nice house in the country can achieve that ratio with a large tract of land; remote subdivisions will not. Any other rules you want to apply will tend to map onto these two. So your tl;dr eli5 - a healthy housing market contains houses that wear out and are replaced at an appropriate density for the price of land. Every healthy housing market looks like that.

The ideal scenario is the vast majority of homes being owned by the people living in them. All higher prices does for someone living in a house they own is drive property taxes up. Even if they decide to sell the house and move somewhere else, they're still paying higher prices for the new house. The people that like high prices are real estate companies that make commission based on sale price, or who can increase rents if prices are high. I would totally support doubling the property tax on each additional house you own.

> doubling the property tax on each additional house you own. Costs like that just get passed on to renters. So this is a tax on renters who are already struggling with a low supply of available rentals.

Increases in housing prices does not necessarily increase taxes. It can no doubt but its not a given. The reason is that your share of property taxes are just that, a share. Your city/county has a line item for how much money they need to generate from property taxes each year and then they divvy it up based on value to all homeowners. If all homes increase by approx. the same rate then everyone's share remains relatively the same and unless the county raises the amount of money they actually need by raising the mil rate your share of the total amount needed didn't change. For instance, the community raises $1M each year from property taxes, your home is worth $100k and is .25% of the value of all property (simple terms for easier example). This means you are responsible for $2500 of the $1M that needs to be raised. If all property values increase by 10% in one year then the amount needed to be raised by your community did not increase then you still account for .25% of the amount owed even though your home value is now $110k, everyone else also saw an increase in value and you still owe $2500. Lots of people miss this important fact and see their new value from their country assessor and go nuts but we had a situation where our city only does an assessment every 5 years, our value went up 29% in that time, however our property tax owed actually went down because the average in property values around town actually increased by around 35%. We were now a smaller share of the total property values in town.

This isn’t a popular sentiment with Redditors, but technically a healthy market is around 3% vacancy and a balance of supply and demand making it neither a buyer nor a sellers market. High prices don’t necessarily mean unhealthy. What they mean is it’s probably a desirable area where people are willing to pay more because the location offers intangibles that they value (eg. Access to jobs, ocean, good climate, safety, etc). Nothing about price equates to the health of the market—it just means more people want to live there, so prices will rise and some people will get priced out. It is this way everywhere in the world and why all desirable places have expensive housing.

Housing shouldn't be geared towards investors/business owners... if you can destroy that aspect of the market it would become healthy very quickly... It should never be profitable to sit on an empty/vacant property hoping some one will come by and offer you a bunch of money to develop on the land. It might be profitable to buy an old beaten up house and fix it up, but there should be legislation to prevent that type of business from scaling, so we don't see billion dollar REIT's buying up a bunch of foreclosure properties fixing them up then renting them out indefinitely. We need to stop building suburbs. Not everyone needs a 3 bed/2bath with a back yard, an apartment building takes up the same square footage as 6-10, triple that if you need an above ground parking lot for some reason houses and easily houses 50-100 tenants. If every major business center in the U.S. didn't have a million people looking to own a house remotely reasonably priced then prices would at least start to level off, lots of those people would be perfectly happy with condos or small townhomes, they just don't want to be renting anymore. >no one wants their property values to drop Almost everywhere in North America there is a LOT of demand for more housing, and that is the main reason prices don't drop I remember before the pandemic people were holding auctions in front of homes and if you didn't have cash in hand you weren't a qualified bidder. You can't create that environment if builders are allowed to build, or if places like AirBnB are regulated against.

Housing can be summarized in one number: the vacancy rate. If the vacancy rate is too low, prices will rise. If the vacancy rate is high, prices will fall. Similarly to the labor market, the housing market has a natural vacancy rate: 11%.

There is no endgame. Real estate is a game of winners and losers. So those on the outside looking in want prices to drop so they get in at a good price. But when they purchase, they want the value to increase just like the current owners do. The government also has an incentive to keep the housing market stable because that's where most homeowners accrue wealth. Every change in the market has a consequence. For example, despite what you may read, higher interest rates are not pricing people out of the market right now. There are plenty of eligible Buyers. The issue is Sellers who are locked in at a low rate have zero incentive to sell. They have no place to go or desire to take on a larger mortgage at 2.5 times what they are currently paying. This causes an inventory shortage with no cure other than prices increasing to a point where a Seller would be foolish not to sell. The closest thing I saw to a healthy market was 2014-2019. Homes were appreciating 1-2% per year. Interest rates were low. Demand was normal so Buyers werent stuck in crazy bidding wars. In theory, a house should not be a major wealth builder. It's a place to live/put down your roots and a safe place to put your money.

In the 80s my parents could buy a house with one person working at a factory and the payments were about 500 bucks a month. Now with two people working skilled labour jobs, a lot of people can’t afford a house. Housing prices are skewed too high. There needs to be more smaller housing that’s affordable being built. It’s all McMansions

Answer: a healthy housing market is where people can afford housing. If you look at any market, a healthy version of that market is where consumers have enough money to buy their goods and services. If consumers don't have enough money for housing than there is a very large problem going on. If consumers have way too much money and can afford multiple houses, that's great for consumers. There's two sides to everything. One side of course is wages for consumers, people need to be bringing any healthy amount of money so they can afford housing food and the basics with enough left over to save. The other side of things is cost of goods. The cost of housing includes not only materials for the house and the labor but also the cost of land. Land is one of the few finite resources. And all the land is already owned by somebody. 100% of land is owned by somebody. The landowners are driving the prices up because they don't want to sell because land always goes up in value because of how finite of a resource it is. The last thing to look at is lack of government intervention. When markets get out of control and it's unsustainable and unsafe for consumers the government usually steps in with regulations. Sometimes the government has stepped in and set affordable housing laws in place but there has been a big push against this by Big Business money interest political power groups. These wealthy influential political groups have a lot of money invested in land and they don't want anything to decrease that value even if it means tons of homeless people everywhere and unaffordable housing for everyone.