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Old 07-04-2022, 05:13 PM   #85
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Originally Posted by Irace86.2.0 View Post
We could start with the concept that owning should be an available option in the market. If we ask ourselves why are affordable homes not available in our market, and if we ask ourselves if we are fine with the market moving further and further away from home ownership to home renting, as it moves further into the hands of the few,
What seems to be described in the USA is happening here is Aus too. That is, wages haven't kept up with rising home prices. In Aus it used to be that owning one's home was an achievable goal for most. Not any more.

Having said that in Western Europe a very large percentage of people rent all their lives but the difference is the market caters to this demographic and renters have a lot more rights than in Aus and I'm guessing in the USA too.
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Old 07-05-2022, 01:49 AM   #86
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I wonder how the issue of commuting will develop. Historically it was the inner city that became a less desirable place and the suburbs gained value. My friend is single and has a tenure track position at our university but can’t afford to buy in the neighborhood she lives and neither can I with a double income no kids lifestyle.

I commute and she does not. She also doesn’t want to live in a lower income spot and commute out.


A market correction is something people talk about in regards to a bubble bursting or whatever. I don’t put much confidence in that. How this continues? I don’t fuckin know.

Is the answer diversifying neighborhoods? There’s no way in hell that’s working. I live in a pretty low income already. Some of the properties here and there were subdivided and have multi family housing interspersed throughout the blocks. If you think someone wants improves their property and live next to a driveway with 10 cars w trash in their yard you’re not being realistic.

What reason do I have to improve my home, yard, etc when the other 66% of the street is performing basic survival? Altruism? I want to move to an area my efforts in keeping up w the Jones’ is not unrewarded. I don’t have any solutions that I think the rest of the populace would buy into.

This doesn’t have a simple solution though. There’s a complex number of players in all of this and condensing it all into a rule is an equally complex problem. Rent somewhere cheap and invest. Buy out properties to make a diverse block and let us know how it goes.
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Old 07-05-2022, 05:37 PM   #87
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I wonder how the issue of commuting will develop. Historically it was the inner city that became a less desirable place and the suburbs gained value. My friend is single and has a tenure track position at our university but can’t afford to buy in the neighborhood she lives and neither can I with a double income no kids lifestyle.

I commute and she does not. She also doesn’t want to live in a lower income spot and commute out.


A market correction is something people talk about in regards to a bubble bursting or whatever. I don’t put much confidence in that. How this continues? I don’t fuckin know.

Is the answer diversifying neighborhoods? There’s no way in hell that’s working. I live in a pretty low income already. Some of the properties here and there were subdivided and have multi family housing interspersed throughout the blocks. If you think someone wants improves their property and live next to a driveway with 10 cars w trash in their yard you’re not being realistic.

What reason do I have to improve my home, yard, etc when the other 66% of the street is performing basic survival? Altruism? I want to move to an area my efforts in keeping up w the Jones’ is not unrewarded. I don’t have any solutions that I think the rest of the populace would buy into.

This doesn’t have a simple solution though. There’s a complex number of players in all of this and condensing it all into a rule is an equally complex problem. Rent somewhere cheap and invest. Buy out properties to make a diverse block and let us know how it goes.
The more expensive gas is the greater the interest will to be close to work, so that may be a factor.

With interest rates going up, home values should drop to compensate to make homes more affordable, but rents will probably go up, as more people are forced out of buying until prices drop, which may ultimately push people to buy anyways or pay more for a property if they can, so it is a crap shoot how things could go.

Where I live, there is a huge deficit in affordable housing and in entry level homes. My wife and I make decent money, and when I finish nursing school next year, my salary will go up significantly, so we would be capable of buying a decent sized house in the North Bay, but we don’t have or want kids, so all we need is a 2 bed 1.5 bath at 1250-1750 sqft, and we would love to have some yard space. Those homes are not new homes. New homes are all big and tall and crowded to the edges of their lots and expensive because of their size, or they are townhouses that have high HOAs and no yards, so they are affordable, but not matching our needs and the HOAs make them expensive as moving slightly up market into a single-family home. The only homes that match what we would want are old homes in established neighborhoods that have character and variety to the houses, which don’t look like identical cookie-cutter homes, but alas, these are not only entry level homes for many people because of their size and price, but they are also very desirable because of the characteristics I described, yet zero builders are building these homes in our area. This will force us to spend more for something desirable, or to upsize into a larger home than we want. Our area is also low on city-style, condos that are flats, which tend to be good for small families, couples and bachelors who may not want to have to maintain a yard or roof or whatever. Most people would need to move to a larger city or inside the core of a city to find such dwellings, even ones that are only five or less stories. The zoning issue is probably killing the variety, killing the supply, and partially responsible for the shortage.

You say no one wants to live or improve an area with people who don’t take care of their property, but isn’t that exactly what people do when they gentrify an area? Multifamily buildings can have million dollar flats that occupy entire floors or multiple floors, or they can be HUD housing. We just don’t have a lot of in between. We tend to have apartments, townhouses and variable sized single family homes. New duplexes or other multifamily structures are impossible to find. New multistory buildings with apartment like condos at a variety of price levels just doesn’t really exist. A single person should be able to buy a one bedroom and not just be forced to rent an apartment. A small family should be able to buy something cheap and save for retirement and have money to travel and not be forced to buy big house. Everyone should have the option for affordable options, while not necessarily needing to make HUD or ugly buildings that are bland and lack thought or community features. The is not the case in many places. Cheaper doesn’t always mean worse or a slum. A four-plex, townhouse or condo in San Francisco may be cheaper than a single family home, but is probably still gentrified with affluent people. I am not suggesting there is “affordable” housing in San Francisco. What I’m saying is there should be stratified homes, and not just having a dichotomy of cheap townhouses and expensive/large single family homes and different prices due to age. It plays out as rent the apartment to own a townhouse to eventually upgrade to a single family house only to downgrade to an assisted living facility or 55+ community. Why not fill the middle of this dichotomy with more multifamily options, and why not have stratified sizes and prices for these different structure types? If we stratified and diversified the building types and had mixed zoning, seeing a townhouse or multi story condominium mixed between single family homes wouldn’t be alarming or make us think of these structures as poor houses when they could exist in affluent and poorer areas just the same with different amenities and quality to their interiors. The Singapore buildings are cheap and gorgeous and attractive. Modern buildings with pretty and green structures and common areas can be affordable.
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Old 07-06-2022, 01:36 AM   #88
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I don’t disagree with any of those points. My wife and I didn’t want a new home that had that same as the next house next to it look. Established neighborhoods aren’t all gentrified. Any nicely landscaped yard is an anomaly on my street. Maybe it’s going to wayy off gentrification? Dude a couple houses down that rents and is an alright dude but has a shitty front yard and a bunch of cars on the street is having his rental sold. I don’t know if he’s lost his lease or whatever but it’s 100k under what I bought June 2020.

As people in their 30s we peruse Redfin for leisure. Sure, there’s some apartments for 1m+ but I wouldn’t have lived there when I was renting. It sucks to say, but I don’t want to live next to a multi family spot because it’s my backyard. They fucking suck. They throw shit over my fence. Have loud parties past 12 and generally don’t give a shit. I don’t blame them. What benefit are they deriving from this neighborhood? Or even their places in society?
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Old 07-06-2022, 03:05 AM   #89
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None of this happens in a vacuum and it is not the result of natural forces like the weather or the movement of tectonic plates. It is caused by the people in positions of power by intention or by incompetence. Currently here in the U.S. I believe it is a mix of both. Since the current administration took over, my investments lost about a million bucks. Am I going hungry? Hardly, but my charitable contributions have been cut back in favor of family and friends in need. However, the house we bought in 2019 for just under $500,000 can fetch about $680,000 in 24 hours. Because of inflation, the real value did not increase, but that did not stop the tax assessor from raising our property taxes. Around the corner from me there is a house that was bought for $620,000 two years ago. They did a 'What if' estimate that came in at over $1,000,000. This is nuts. In 1981, we bought a new house for $50,000 and the interest rate was 14.5% bought down from 16.5%. I had to work all the overtime I could get for about 18 months. In 1971 while working for a new car dealer, the shop flat-rate was $9.00/hr. I got to keep half of that and made a pretty good income by beating flat-rate on big jobs. Made bank on Jaguars. What was a dollar worth then? Some close friends bought a new house for $17,000. In 1973 I bought my first new car, a Honda Civic for $2,250. Up until now and allowing for inflation, earning power kept up with the cost of everything. But, something is totally screwed right now. Some things are still a good value; my Subaru cars for instance and more recent purchases in camera equipment and home HiFi gear are really no more expensive. I just looked up the cost of the HiFi equipment we had looking at a photo taken in 1957. Adjusting for inflation, the relative cost is about the same as today. Here is an interesting perspective that I use on my friends when we bitch about the high cost of stuff. Back in the mid 1950s there was a TV show called The Millionaire. Some rich dude as a hobby would give one million dollars, tax free, to a random person just to see how it would change their lives. Michael Anthony, the personal secretary to John Beresford Tipton, was the delivery guy. He never came to our house. Anyway, I calculated how much that check would have to be in today's dollars: approximately $11,000,000 and that does not count the gross-up the rich guy would have to do to make the gift tax-free. In the late 1950s, Perry Mason's retainer fee was about $5,000. That would be about $50,000 today. Wow! Even my lawyers don't cost that much, but then again, I have not been indicted for murder. One more comparison: I used to work on the Datsun 240Z when it was first introduced. In today's dollars it would be about $27,000. That does not include the add-on AC. Believe me, having first hand experience, the BRZ/86 is ten times the car for not much more. Enjoy.
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Old 07-06-2022, 09:52 AM   #90
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Originally Posted by dpfarr View Post
Is the answer diversifying neighborhoods? There’s no way in hell that’s working. I live in a pretty low income already. Some of the properties here and there were subdivided and have multi family housing interspersed throughout the blocks. If you think someone wants improves their property and live next to a driveway with 10 cars w trash in their yard you’re not being realistic.

What reason do I have to improve my home, yard, etc when the other 66% of the street is performing basic survival? Altruism? I want to move to an area my efforts in keeping up w the Jones’ is not unrewarded. I don’t have any solutions that I think the rest of the populace would buy into.

This doesn’t have a simple solution though. There’s a complex number of players in all of this and condensing it all into a rule is an equally complex problem. Rent somewhere cheap and invest. Buy out properties to make a diverse block and let us know how it goes.
That's just shitty neighbors. A diverse neighborhood can work. Though I do think the terrible urban sprawl design in much of the US makes it harder. Fundamentally though, keeping up with the Jones' is a huge part of our problem. If not all of it.
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Old 07-06-2022, 11:40 AM   #91
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I'm a guy who lived through the 80's and bought my first house with a 'special' 12 3/8% interest rate in 1982. I lost money on that place. To the OP's point, and generally speaking, I didn't make much money on any home until 2008,, although I did build some equity. I was lucky on that one as I caught the end of the lending craziness of the 2000's where if you were alive you could get a mortgage with no credit/income check. Now keep in mind in 2008 I was chasing a downward market but still made more money than I had in the past. Then the market drove off a cliff in Oct of 2008.

I've made money since then (although not realized in my current home) as the market has been going nowhere but up. I think a lot fueled by super low interest rates.

It'll be interesting to see what happens in the coming months. Would 8%-10% interest cool inflation as well as the housing market?? One might think so. I do feel for all the folks that bought these last few months at the (IMO) inflated prices,, they could be in trouble.

The one big benefit in ownership is with a little luck it'll get paid off. I can't imagine trying to retire without a paid off home.
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Old 07-06-2022, 12:13 PM   #92
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@gtpvette, I'm with you. First house I bought in the early '80s what a 15.4% loan and mortgage insurance. Sold it in three years (divorce sale) and basically broke even. Rented for a while, bought a house in Florida, owned it 8 years until the mid 90's and basically broke even after sales fees.

Current house is paid off. We'll either live there through retirement or sell it and pay cash for a "retirement" house. Haven't had a mortage in almost ten years and will not go back.
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Old 07-06-2022, 12:14 PM   #93
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That's just shitty neighbors. A diverse neighborhood can work. Though I do think the terrible urban sprawl design in much of the US makes it harder. Fundamentally though, keeping up with the Jones' is a huge part of our problem. If not all of it.
Not that I want this to be the hill I die on but increase person density and the frequency of shitty people increases. In higher income areas the tree canopies cover streets and it’s beautiful. I want to live there. I can’t and really don’t want to afford a 7500 sq ft home though. That goes to the point of diverse neighborhoods. Even if there was this great equalizer street, capitalism says if there’s something worth less we’re going to exploit it. The worth in this situation is people. You pay for your neighbors right? Push out the lower income and pull the higher income. I don’t know lower or mid low have that power to name the Jones’.
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Old 07-06-2022, 01:31 PM   #94
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Climate slant on why R1 housing is bad for the environment.

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Old 07-06-2022, 02:40 PM   #95
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This one is good. It talks about how new home lending is risky in a different way than before the 2008 recession, and it really drives the point home that wages aren’t matching appreciation and how this can be bad for the economy when consumer spending is tied up into a single asset class that doesn’t actually produce anything.

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Old 07-06-2022, 05:05 PM   #96
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Your analysis is very nice, but I think it might be incomplete. Your analysis looks at the US housing market as a closed system. But this isn't the first law of thermodynamics. The US real estate market is an open system, with constant input from foreign sources, which is what drives much of what we see as "crazy" trends in the market. Afterall, US consumer interest in home ownership has hardly changed much for 100 years. The American dream hasn't budged much, and the dream has always been below the 50% mark, with fluctuations coming in response to what is perceived as being achievable.

Somewhere in the mid-90s, the US real estate market really opened to foreign investors and govt entities, which changed the entire landscape of, well, everything.

Back then and through the 2000s you could hear people talk about the wealthy middle easterners inputting large money into the NY, specifically Manhattan real estate market. More recently, if you talk to Californians you hear all about wealthy Chinese buying homes in cash (and to a lesser extend Russian).

But you have to get very granular to get a better perspective on this, as all investment is not the same.

In the 90s-2000, the mid east investors perspective was fairly predictable and traditional. The idea was to buy distressed marquee properties, improve the property to ultimately improve their investment and wealth.
This was generally considered very good and healthy for the market. They end up buoying the NY real estate market and to many peoples surprise, actually had secondary and tertiary effects and was part of a general uplifting of all of the NY (and later entire NE seaboard). Their relatively small investment helped us significantly grow, far outpacing their investment, and if they benefited in the process, thats fine. It became a generally unexpected win-win. Many of those properties have been sold or retained, almost all have been significantly improved and in many cases are landmark properties in NY.

The trend more recently has been the complete opposite. The new wave of investors (mainly from China, but also from other places), see the US real estate market as a monetary shelter against their own inflation or other socio-political factors that might affect their wealth. In contradistinction to the 90s-2000s market, their focus has been on single family homes and smaller more discreet purchases. Many of these homes are purchased and subsequently left vacant or rented. With only basic maintenance, but no effort at all to improve the home or surrounding area.

This is essentially a safe deposit box, one which has the effect of draining the surrounding area.

Why should it be considered a drain on the surrounding area? Because this type of investing takes a SFH off the market, reducing supply. Assuming demand remains constant, then prices of the remaining homes inflate, generally reducing buying power of americans. But actually accruing more relative wealth for the foreign investor. So the investors wins at the expense of the people who live in the town or city. This is not a win-win, it is a win-loss 0 sum game. A very different game indeed.

Again, to reiterate its a safe deposit that drains the surrounding economy. Lets not even consider the heart broken people who can't afford a home, and the dramatic societal effects (nope, none of that happening right now...)

Now our current policy is to counteract this by increasing interest rates. Of course that has and will continue to have the opposite effect, by locking more Americans out of homes, because do not forget, the foreign investors are not at all bound by interest rates.

That keeps more people renting, which actually further benefits the speculative buyers. A win-lose situation, exacerbated.

This type of investment is the primary driver of what we are seeing now, and should be considered the single primary threat to our "way of life". But mass distraction is looking at a different direction while this happens. To be fair, we are a relatively market based economy, so its hard to counteract this type of speculative investing other then by theoretically making some strict laws on foreign investment in SFH, which would undoubtedly be labelled as anti-foreigner or possibly even racist and would likely collapse many markets beyond real estate, who are also heavily dependent on foreign investment. Its to crazy of a strategy, for now.

So far the softball approach is being taken to reign things in, but I for one see that it will fail, forcing us into a more extreme position. 5% interest will be considered cheap for some time.
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Old 07-06-2022, 06:47 PM   #97
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Old 07-06-2022, 08:37 PM   #98
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@vertigo It is foreign and domestic. As long as firms and people see real estate as investments or even as assets that are guaranteed to appreciate, they will invest in them, whether it is to make money or to hold onto money. I agree that Chinese investors are probably just looking for a way to shell their money from their own government, but I don't know if they would if it meant less or no appreciation, or if there were laws against investors like ones that tax house flippers, or prevent investors from selling in bulk, or prevent investors from buying until a home had a chance to sell on the market for 45 days or something. Maybe that will help.

https://www.gov.ca.gov/2021/09/28/go...ousing-crisis/

Quote:
But their share is growing: Real estate investors bought a record 18.4 percent of the homes that were sold in the United States in the fourth quarter of 2021, up from 12.6 percent a year earlier, according to the realty company Redfin.

And in some markets, especially in the relatively affordable Sun Belt metro areas, their share is far higher.

In Charlotte and Atlanta, investors purchased more than 30 percent of the homes sold in the fourth quarter of 2021, according to Redfin. In Jacksonville, Fla., Las Vegas, and Phoenix, they bought just under 30 percent.
https://www.nytimes.com/2022/04/23/u...ng-market.html

The number of entry level homes that were under 1400sqft dropped from 40% to 7% in the US, as seen below. Part of that is R1 housing. Part of that is because lower interest rates meant people could afford larger homes. Part of that is because it is more lucrative to build the biggest home on the smallest lot than building a small home on the same size lot.

We are in a huge supply problem. Much of that problem could be fixed by making more multifamily complexes, but we have zoning issues with most land set aside for R1 housing. Many people consider the type of multifamily homes that are historically built in low income areas unappealing and unlikely to appreciate well. Attractive, modern, green, social, multifamily buildings in affluent areas are often appealing, and yet, most people often think of the negatives more than the positives of these types of structures, so they often plead to government boards to put them on the outskirts of towns or away from suburban areas. Multifamily complexes are easier to build than a single family home. The building uses less materials for the same number of occupants, so we could meet the demand needs at a time when building supplies are limited by building better. Plus they are greener in heating and AC, and in reducing traveling, and in reducing the area that humans occupy.

In my area, there are laws to prevent urban sprawl. The limit was 3000 new housing units per year, but even when housing was at a height, there was only 1500 units/year, which dropped to 850 units/year after the crash and never recovered. When the fires hit the area, they lifted the cap, but much of the building was to rebuild and not to build more than prior to the fires to meet demand, so we are still in a housing deficit, besides being in an affordable housing deficit. Hopefully it will change.

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