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Old 08-23-2019, 08:08 AM
 
1,876 posts, read 632,023 times
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Quote:
Originally Posted by TimtheGuy View Post


Market forces drive the price of housing, not some theoretical benchmark.

Secondly, if most people thought the cost of their primary residence should be minimized, the average home size would be 1,000 square feet or less.
Of course "market forces" drive the prices of everything. The benchmark was a reflection and summation of market forces, not the driver.

Were "market forces" not driving the price of housing before 2000 when things seemed to be steady for decades?

Most people do not know that housing prices have only beat inflation by 1% for a century, and therefore a primary residence is a poor investment vehicle. It is a shame. However this ignorance was present before and after 2000.

The change in house price behavior after 2000 relative to before is mostly a story of changes in financing standards and behaviors, with some knock-on manias ensuing.
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Old 08-23-2019, 08:20 AM
 
Location: The Triad (NC)
28,843 posts, read 62,924,916 times
Reputation: 32858
Quote:
Originally Posted by Avondalist View Post
The change in house price behavior after 2000 relative to before is mostly a story of changes
in financing standards and behaviors, with some knock-on manias ensuing.
Correct. One of the most critical is the willingness, even enthusiasm, to sign up for excessive debt
because the transaction is shifting from the 2-3X home purchase to an investment vehicle
that will return the difference to the speculator on the back end when they sell.

Don't confuse what a mortgage broker (or LL) is willing to sign a buyer up for
with what is in their best financial interest.
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Old 08-23-2019, 08:20 AM
 
Location: A safe distance from San Francisco
8,742 posts, read 6,241,413 times
Reputation: 8770
Quote:
Originally Posted by JonathanLB View Post
Yeah sorry but lol @ a house being 3x your income average. That would be like $100-150K houses in tons of markets and that ainít happening. Especially not when first time home buyers only need to put down 3% and thereís a ton of generational wealth.

Some people need to climb out of their bubble because itís killing their understanding of the local housing market. The Vegas forum has this issue, people whining that the average wage earner canít afford a house therefore itís overpriced. Maybe if it was somewhere in the Midwest, ok, but take a world class city with world class dining and entertainment and great weather, next to a state with horribly overpriced real estate, and it doesnít matter at all what the average wage is there, has nothing to do with housing prices especially at the high end. Two of my relatives have retirement money from a more expensive state, a pension from there too, another friend bought a million dollar house and works remotely / online business, I also donít care or rely on the local economy, and plenty of retirees think houses are cheap just like I do because they are cheap by any West Coast standard.

I feel sorry for the locals who find the houses expensive but thereís a bigger world out there with a lot more money than they realize and the simple reality is how cheap or expensive a house is doesnít depend on the local economy but the global economy. As long as people come from places where the market is far more expensive, than the area will be seen as cheap to enough people to lift housing prices. Itís irrelevant that $500K is a lot to an employee on the Strip. Itís entirely relevant that $500K is a bargain for anyone coming from CA right next door. Maybe it matters to young people that the local economy canít support that house, but it sure doesnít matter to middle aged and older people who are selling a much more expensive house and may be able to pay cash for a house in a cheaper area and may have enough passive income sources elsewhere to shrug off the local economy.
Pretty good summary of the fundamental immorality which pervades the modern US housing market.
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Old 08-23-2019, 08:33 AM
 
4,834 posts, read 12,046,261 times
Reputation: 3519
.....
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Old 08-23-2019, 08:55 AM
 
1,876 posts, read 632,023 times
Reputation: 1469
Quote:
Originally Posted by TimtheGuy View Post
.....
We're all guilty of this: https://www.thoughtco.com/verbal-hed...cation-1692585

Frankly I'm posting to a discussion forum, not writing a dissertation, so I don't have the time and inclination to demonstrate everything. Maybe my assumptions are wrong; I'm open to challenge and discussion.

I am counting on shared assumptions and understandings between others and myself much more so than I would in another venue. It's the nature of the beast, or rather it's the nature of debating macroeconomics while commuting on the train...
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Old 08-23-2019, 10:10 AM
 
1,694 posts, read 1,519,603 times
Reputation: 4812
I do think there was an interesting observation here about people working remotely, therefore the local economy is not a limiting or deciding factor in their home buying power. That is true for us. Our home was purchased for about 1.5x our income, but my husband works remotely for a company based in France, and we choose to live in a relatively inexpensive area of the US. There are many people trying to move to across county lines to our area every year because of the school cluster here (No 1 in the state for 2019 based on scores), so it's very desirable, but difficult for many to afford. I wonder what percentage of people work remotely in the US and how or if this affects housing. I am sure the numbers are going up, but is it really enough to affect housing pricing in all but a few areas of the country at the present time?
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Old 08-23-2019, 10:11 AM
 
Location: Vienna, VA
298 posts, read 159,330 times
Reputation: 352
Quote:
Originally Posted by Avondalist View Post
Most people do not know that housing prices have only beat inflation by 1% for a century, and therefore a primary residence is a poor investment vehicle. It is a shame. However this ignorance was present before and after 2000.
.
It all depends on your location, in most major coastal areas it has done a lot better than that. Even in 08 home prices were hardly affected where I live. Add cheap leverage to that and your returns start to look pretty decent, even beating the major indexes with less volatility. Once they are rentals it's way way ahead of the market but that's a whole different topic.
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Old 08-23-2019, 10:18 AM
 
73,032 posts, read 72,816,997 times
Reputation: 50566
Quote:
Originally Posted by 22003yo View Post
It all depends on your location, in most major coastal areas it has done a lot better than that. Even in 08 home prices were hardly affected where I live. Add cheap leverage to that and your returns start to look pretty decent, even beating the major indexes with less volatility. Once they are rentals it's way way ahead of the market but that's a whole different topic.
Homes where we had ours in Pa never went up during the boom so they never really fell either from it ....when some local tourist attractions went belly up like a very popular ski area then the local economy took a hit .

We bought in 2007 for the same price we sold in 2012 and prices are still below today
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Old 08-23-2019, 10:20 AM
 
Location: East Coast of the United States
17,541 posts, read 19,791,181 times
Reputation: 13435
Quote:
Originally Posted by k374 View Post
I find this laughable as well.. 2007 was the peak of the greatest Real Estate bubble of all time and it's widely acknowledged as so but now that we're back at those same crazy bubble valuations people and the news media refer to it as a "recovery".. if it was a bubble then, it's the same bubble now.. nothing has fundamentally changed.
This is not true. What has changed is that we are 13 years past that bubble.

The passage of time changes everything.
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Old 08-23-2019, 10:33 AM
 
Location: Vienna, VA
298 posts, read 159,330 times
Reputation: 352
Quote:
Originally Posted by BigCityDreamer View Post
This is not true. What has changed is that we are 13 years past that bubble.

The passage of time changes everything.
Exactly. Nasdaq hit it's bubble highs 15 years later. That did not mean it was in a bubble again, if so I would have loved to buy into that bubble in 2015.
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