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Yes, I see the Great Divide in this country not as liberal and conservative or even rich and poor (sorry John Edwards) but owners and rent slaves. (Many renters are merely "passing through" in transition or a life phase, as opposed to rent slaves who never have and never will be able to own a home.)
What is good for homeowners is usually bad for renters. And note how our society, culture, and politics are biased in favor of homeowners. When the "housing market" is good, it is good for homeowners, no matter how bad it is for renters.
p.s. as for Prop 13, many 1978 homeowners are still in their nominally-taxed homes, or their homes are still protected under family ownership (e.g. their grown kids now own the home).
The great divide besides the conservatives and liberals, are urban vs suburban vs rural. In some metropolitan areas, housing is cheaper the further you drive out from the city core. Inner ring suburbs costing more than middle ring suburbs due to gentrification and outer ring suburbs being cheaper than the urban areas. Basically, the liberals live in the urban, high density expensive areas and middle class to poor conservatives live in the suburbs and rural housing.
In his estimation, higher mortgage/interest rates would not only kill the banks but also the real estate industry.
In his opinion, the FED will simply not allow this to happen...so we may have to endure skyrocketing home prices for awhile longer
Just FYI, the blog owner is definitely not a "gloom-and-doomer"; in fact, he is usually the opposite. However, even he is becoming more sanguine about the housing market and economy in general...
The article is correct. Additionally, banks have tremendous exposure to interest rate derivatives, holding short positions, worth roughly 5 times the entire fixed-income market or approximately $500 Trillion.
Interest rates will not go up anytime in the near future, but that doesn't mean prices won't reduce. That depends on economic conditions.
In his estimation, higher mortgage/interest rates would not only kill the banks but also the real estate industry.
In his opinion, the FED will simply not allow this to happen...so we may have to endure skyrocketing home prices for awhile longer
Just FYI, the blog owner is definitely not a "gloom-and-doomer"; in fact, he is usually the opposite. However, even he is becoming more sanguine about the housing market and economy in general...
The article is correct. Additionally, banks have tremendous exposure to interest rate derivatives, holding short positions, worth roughly 5 times the entire fixed-income market or approximately $500 Trillion.
Interest rates will not go up anytime in the near future, but that doesn't mean prices won't reduce. That depends on economic conditions.
Here is the reality with homeownership.
Outside of a minority of higher cost of living cities, most cities are affordable for home ownership. Not everbody can buy a home in SF, NYC, DC, Boston, LA, or Seattle. Big deal, living in these cities and owning a home there, even a condo, is what will be a luxury.
But these cities are the exception, not the rule. Go 45 minutes north of DC, in the Baltimore area, homes there can be very cheap, same goes for Philly.
The high COL, expensive cities are the exceptions, not the rule. This is a big reason I don't have much sympathy when people complain about housing costs in these areas whether it is to rent or buy. If you cannot afford it, move.
Yes it's a big deal because not being able to buy a home increases wealth inequality, which is much greater than income inequality. It also has intergenerational consequences, as in parents who never own a home obviously are unable to leave homes to their children and the cycle repeats, i.e. if your parents did not own a home, probably you won't own a home either.
(Like 99.9% of your posts) this is complete BS.
My parents still live in their home, I have my own home (built for cash)
Here is the reality with homeownership.
Outside of a minority of higher cost of living cities, most cities are affordable for home ownership. Not everbody can buy a home in SF, NYC, DC, Boston, LA, or Seattle. Big deal, living in these cities and owning a home there, even a condo, is what will be a luxury.
But these cities are the exception, not the rule. Go 45 minutes north of DC, in the Baltimore area, homes there can be very cheap, same goes for Philly.
The high COL, expensive cities are the exceptions, not the rule. This is a big reason I don't have much sympathy when people complain about housing costs in these areas whether it is to rent or buy. If you cannot afford it, move.
the beauty of these high cost areas and owning is they generally result in a windfall when folks retire and decide to relocate to cheapsville .
home prices are high and areas are high cost because they are desirable and they usually are desirable because the higher paying jobs are there .
the compounding over decades on a 600k or more home even at the same rate as cheapsvilles 150k home results in a huge difference .
400,000 baby boomers and millennials in long island said eventually their plan will be to sell , reap the gains over the decades from either trading up or paying off the original mortgage and have a lot of money to live on in cheapsville .
over decades you would be surprised how much equity you can end up with in a high cost area . because it is a forced savings which folks otherwise would not do they tend to do far better then the locals do who live in cheapsville their whole lives .
we saw this first hand when we had a home in pa. the tristate transplants from high cost of living areas were far wealthier then the locals were .
the transplants tended to live in beautiful hoa developments while many locals lived in smaller single family homes with not much savings according to the demographic info ,
the higher salary's in high cost of living areas also have you paying more in to social security reaping a higher ss benefit too . you may get that higher benefit possibly for more years in retirement then your working years . you can relocate with those higher payments down the road . a couple earning the capped amount in social security in a high cost of living area can see as much as 80k in benefits at age 70 in today's dollars .
but regardless if you max or not , higher salary's give you higher benefits later .
while folks like to find fault with high cost areas there are also a lot of positives to them . if you failed financially then yeah , a high cost area will hurt , but if you are doing fine then a high cost area can be a nice advantage at the end of the day if you relocate .
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Last edited by mathjak107; 03-27-2016 at 04:55 AM..
the beauty of these high cost areas and owning is they generally result in a windfall when folks retire and decide to relocate to cheapsville .
home prices are high and areas are high cost because they are desirable and they usually are desirable because the higher paying jobs are there .
the compounding over decades on a 600k or more home even at the same rate as cheapsvilles 150k home results in a huge difference .
400,000 baby boomers and millennials in long island said eventually their plan will be to sell , reap the gains over the decades from either trading up or paying off the original mortgage and have a lot of money to live on in cheapsville .
over decades you would be surprised how much equity you can end up with in a high cost area . because it is a forced savings which folks otherwise would not do they tend to do far better then the locals do who live in cheapsville their whole lives .
we saw this first hand when we had a home in pa. the tristate transplants from high cost of living areas were far wealthier then the locals were .
the transplants tended to live in beautiful hoa developments while many locals lived in smaller single family homes with not much savings according to the demographic info ,
the higher salary's in high cost of living areas also have you paying more in to social security reaping a higher ss benefit too . you may get that higher benefit possibly for more years in retirement then your working years . you can relocate with those higher payments down the road . a couple earning the capped amount in social security in a high cost of living area can see as much as 80k in benefits at age 70 in today's dollars .
but regardless if you max or not , higher salary's give you higher benefits later .
while folks like to find fault with high cost areas there are also a lot of positives to them . if you failed financially then yeah , a high cost area will hurt , but if you are doing fine then a high cost area can be a nice advantage at the end of the day if you relocate .
.
The only flaw in this line of reasoning is that the massive housing appreciation in those parts of the country are not likely going to happen again. If you bought a home after the S&L housing meltdown in 1990, you've easily seen an inflation-adjusted 3x appreciation in Boston, NYC tri-state, DC, LA, and Seattle. The Bay Area is more like 5x. For the most part, the best you could hope for now is to slightly beat inflation for appreciation as you pay down the mortgage on your very expensive home. With rising interest rates and the perpetual tax increases in those parts of the country, it's not clear that even that will happen. There will always be big demand for Central Park view apartments, waterfront, and gold-plated suburbs with a good school system and an easy commute but that doesn't necessarily translate to the rest of the real estate market where the non-1%ers are buying.
The home ownership rate is down to levels last seen 30 years ago...
Most existing homeowners bought at times when housing prices were much cheaper than they are now. Certainly is the case in SoCal...
A lot of homeowners wouldn't be able to afford the house they currently live in on their incomes if they had to buy today...
Housing all over this country is still way to expensive for the average American.
The general rule of thumb going back for a 100 years is to only purchase a house that is 2 times your yearly income. There are graphs that match that exact trend until the banking lobbyists with the help of their politicians gave out loans to anyone that could fog a mirror so that they could keep the Toxic Derivatives scam going.
Wages and Income have been stagnate or dropping for the majority of Americans thanks to Globalist Policies so it goes without saying that housing prices should be dropping as well.
That is not happening though because the banks are still keeping many properties off the market and also the door has been thrown wide open to allow wealthy foreigners to come and buy as well.
We need some Pro American politicians in power instead of the sell outs we currently have.
Here is the reality with homeownership.
Outside of a minority of higher cost of living cities, most cities are affordable for home ownership. Not everbody can buy a home in SF, NYC, DC, Boston, LA, or Seattle. Big deal, living in these cities and owning a home there, even a condo, is what will be a luxury.
But these cities are the exception, not the rule. Go 45 minutes north of DC, in the Baltimore area, homes there can be very cheap, same goes for Philly.
The high COL, expensive cities are the exceptions, not the rule. This is a big reason I don't have much sympathy when people complain about housing costs in these areas whether it is to rent or buy. If you cannot afford it, move.
Those cities are exceptional, true. However, you have mini versions of the housing cost problem across the country. HUD put out a report last year that showed about half of the country's metro areas are experiencing some kind of rent/price escalating spiral.
The other half is not. I'd argue that is the half where there are no jobs, or more accurately, no job growth. In my state, there is one major city that has jobs. The rest of them don't. Seriously, the rest of the state is a jobs wasteland. I know people that have searched for years to find decent jobs in the smaller towns.
Commuting 45-60 minutes out is not a solution to that problem.
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