Florida's fastest dying suburb

[crisp444]

I am not a proponent of segregating people by income; I just disagree that a household with the median income should necessarily be able to afford to buy the median-priced property. Socioeconomic integration seems more possible through a mix of owners (middle and upper class) and renters (working and lower class).

I used to live in an area of Madrid that had lots of students, young people, wealthy businesspeople, immigrants, and regular middle class Spaniards. However, the upper middle class and wealthy owned while the middle class, working class, and students rented. The median price of a flat was far, far higher than three times the median household income not only in this neighborhood but also in most other central-city neighborhoods. I make this point because you did clarify that the "three times annual household income" rule applies best to entire metropolitan areas instead of to individual neighborhoods.

I have two major problems with the "three times annual household income" rule. I will not discuss the first any further (international versus local market) because we have already discussed it. My second issue with this guideline is the principle that a household with the median income should be able to afford the median-value property. I guess it is the "American dream" that "everyone should have a piece of the pie." This would be nice, but why is this necessary to sustain a healthy real estate market? Historically, people that can be classified as working-class or as lower-income tend to rent as opposed to buy. Many of these people may choose renting over buying even if they could afford a modest property. Not everyone wants to deal with maintenance, property taxes, and institutional lenders. Middle and upper-income landlords will buy housing in working-class and lower-income neighborhoods and rent it to people of those income levels. Due to this, why must we say that the median property should be affordable to the median household, based on income? If the lower third or lower quarter of the income spectrum probably isn't going to buy anyway, why even include them in the calculation of who should be able to afford the median property? If we, by a liberal measure, exclude the lower third from this calculation, we now can say that the household in the 67th percentile - not the 50th percentile - of annual household income should be able to afford the median property.

I realize that many people will not agree with me on this. However, it just seems like a much more realistic way to measure what someone living in Western society "should be able to" afford. I have ALWAYS lived in properties that myself and my roommate(s) combined would not have been able to afford had we gotten financing to purchase the same property... I see nothing wrong with this; the cost of renting has historically been lower than the cost of purchasing; owning is a privilege, is it not?

[Wild Style]

Originally Posted by crisp444

I am not a proponent of segregating people by income; I just disagree that a household with the median income should necessarily be able to afford to buy the median-priced property. Socioeconomic integration seems more possible through a mix of owners (middle and upper class) and renters (working and lower class).

I used to live in an area of Madrid that had lots of students, young people, wealthy businesspeople, immigrants, and regular middle class Spaniards. However, the upper middle class and wealthy owned while the middle class, working class, and students rented. The median price of a flat was far, far higher than three times the median household income not only in this neighborhood but also in most other central-city neighborhoods. I make this point because you did clarify that the "three times annual household income" rule applies best to entire metropolitan areas instead of to individual neighborhoods.

I have two major problems with the "three times annual household income" rule. I will not discuss the first any further (international versus local market) because we have already discussed it. My second issue with this guideline is the principle that a household with the median income should be able to afford the median-value property. I guess it is the "American dream" that "everyone should have a piece of the pie." This would be nice, but why is this necessary to sustain a healthy real estate market? Historically, people that can be classified as working-class or as lower-income tend to rent as opposed to buy. Many of these people may choose renting over buying even if they could afford a modest property. Not everyone wants to deal with maintenance, property taxes, and institutional lenders. Middle and upper-income landlords will buy housing in working-class and lower-income neighborhoods and rent it to people of those income levels. Due to this, why must we say that the median property should be affordable to the median household, based on income? If the lower third or lower quarter of the income spectrum probably isn't going to buy anyway, why even include them in the calculation of who should be able to afford the median property? If we, by a liberal measure, exclude the lower third from this calculation, we now can say that the household in the 67th percentile - not the 50th percentile - of annual household income should be able to afford the median property.

I realize that many people will not agree with me on this. However, it just seems like a much more realistic way to measure what someone living in Western society "should be able to" afford. I have ALWAYS lived in properties that myself and my roommate(s) combined would not have been able to afford had we gotten financing to purchase the same property... I see nothing wrong with this; the cost of renting has historically been lower than the cost of purchasing; owning is a privilege, is it not?

ummm you do realize spain had a housing bubble right?

link

The rest I can not debate with you because you need to first get a understanding of real estate and market fundamentals.

[crisp444]

Originally Posted by Wild Style

ummm you do realize spain had a housing bubble right?

link

The rest I can not debate with you because you need to first get a understanding of real estate and market fundamentals.

Yes, I realize that Spain had a real estate bubble. I also realized the United Stated had a housing bubble and am not disagreeing with you on that.

I have not only rented residential real estate but I have also taken graduate-level classes in real estate practice, finance, and development. I admit that I haven't taken an economics course for years and that I know a lot more about legal issues surrounding real estate and also about financing and developing than about economics in general. For this reason, if you know more about economics than I do you should share your knowledge. I'm not a dummie, and it may be that I'm just missing one idea or concept that could resolve my doubts...

[Cougar Beach]

If people are renting out real estate, they are running a business. They need to take in enough in rent to cover their mortgage, or make it worthwhile to to invest a large chunk of cash in the property, taking into account the risk of assets like Florida condos. When the value of real estate suddenly starts increasing well beyond the normal rent/cost-of-property multiple, you have a bubble, unless there's some compelling reason for real estate to go so high (for instance, Waxahatchie, Texas, before the Superconducting Supercollider project was canceled.

There may be some people who just don't want to sell a property (e.g., it's been in the family for a long time), and they may choose to rent it out at a price low enough that they'd be better off selling the property and putting the money in the bank, but not a lot of people will do that. I don't see any rational reason that they would.

[Wild Style]

Originally Posted by crisp444

Yes, I realize that Spain had a real estate bubble. I also realized the United Stated had a housing bubble and am not disagreeing with you on that.

I do have a fundamental understanding of the real estate market; I have not only rented residential real estate but I have also taken graduate-level classes in real estate practice, finance, and development. I think it is awfully rude of you to presume that I lack this understanding after I wrote such a detailed response questioning why a standard guideline might not be the best one to use. If you really know as much about the economy and real estate market as you claim (and I don't doubt you), you should share your knowledge instead of dismissing people who put out valid criticisms. It's not like we've ever talked about this before...

well considering historically 3 to 3.5 has been the norm since the 70s and before that it was 2.5. So how could I not question you? Your opinions don't vibe well with historical facts.

As for me sharing what I know. That is what those two links were for

[crisp444]

^^ Thanks for the response.