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Housing prices are high due to several reasons, but one is the average size of homes increasing over the years: it was about 1200 sf in 1920; 1500 sf in 1960; now its 2200 sf+.
Add to that increased infrastructure to support the house. Where I live older ranches built in the 1950's and earlier were simply on cinder block foundations; there were no curbs, only ditches. Asphalt driveways were put down over dirt with no gavel bedding. A new home today is totally different.
Bigger house, larger lots, more things in the house to support modern life means a more expensive home.
A lot of homeowners who bought 5-10 or more years ago are completely ignorant of how impossible it is to get into owning a property within 1-2 hours of most major metro areas right now. They’ll talk about how interest rates were higher when they bought, but ignore how the first starter home they bought is worth 5X what they paid for it now.
If many people took every penny they paid on their mortgage over the entire time they’ve been homeowners and added it all up, it still wouldn’t be enough for a down payment on the first property they bought and they wouldn’t qualify for that mortgage at all. Young people earning six figure incomes can’t even buy 1 bedroom condos in Ontario, Canada right now. The only people in their 20s and 30s buying right now are getting 200, 300, 400k from their parents for a down payment.
A lot of homeowners who bought 5-10 or more years ago are completely ignorant of how impossible it is to get into owning a property within 1-2 hours of most major metro areas right now. They’ll talk about how interest rates were higher when they bought, but ignore how the first starter home they bought is worth 5X what they paid for it now.
If many people took every penny they paid on their mortgage over the entire time they’ve been homeowners and added it all up, it still wouldn’t be enough for a down payment on the first property they bought and they wouldn’t qualify for that mortgage at all. Young people earning six figure incomes can’t even buy 1 bedroom condos in Ontario, Canada right now. The only people in their 20s and 30s buying right now are getting 200, 300, 400k from their parents for a down payment.
Prices in Ontario are insane. My late bf's house, where his 30-something sons live and now own as their inheritance, is about 40 miles outside Toronto. It's a split level, three beds, 1 full bath and 2 half baths, family room, partially finished basement, badly in need of updating, smallish yard, but across the street from a conservation park that will never be developed. Easily worth one million CDN.
Methinks Canada will eventually morph into New China.
I guess Dallas, Texas and Miami, Florida are New China too since housing prices are insane there as well. I feel like it’s a global issue that comes from how our financial systems have pivoted as the world has transitioned to a service based economy
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Originally Posted by Mightyqueen801
Prices in Ontario are insane. My late bf's house, where his 30-something sons live and now own as their inheritance, is about 40 miles outside Toronto. It's a split level, three beds, 1 full bath and 2 half baths, family room, partially finished basement, badly in need of updating, smallish yard, but across the street from a conservation park that will never be developed. Easily worth one million CDN.
That’s nice they still live there. The economy has scattered a lot of friends and family around the country for me, it’s a nice thing to live close to your siblings and friends
I guess Dallas, Texas and Miami, Florida are New China too since housing prices are insane there as well. I feel like it’s a global issue that comes from how our financial systems have pivoted as the world has transitioned to a service based economy
Not sure that I follow. Why would an economy more dependent on manufacturing or agriculture, somehow lead to more modest growth in housing prices?
An alternative explanation - not necessarily correct, yet alone complete, but I propose it for purposes of discussion - is that the world's affluent people, of which there are hundreds of millions, tend to shift their affinity between paper assets (stocks and bonds) and real estate. We saw this in the first housing bubble, starting in 2002 or so, when investor interest in stocks wavered, and all of that money had to go somewhere... so it went into real estate. The result was the housing market peak in 2006-2007. After the crash both in stocks and real estate - stocks recovered first. Money came out of real estate and back into stocks. In the next wave, starting maybe just before the pandemic, but accelerate by it, money flowed from stocks into real estate... inflating (if that's the correct term) housing prices. Where will the money go next?
We have to remember, that there are tens of millions of millionaires, in the US alone. Then there's Europe and Asia. Sure, many people are struggling... but quite a few, aren't. Housing prices aren't falling, despite the "high" interest rates. Somebody can afford to buy, and does.
I guess Dallas, Texas and Miami, Florida are New China too since housing prices are insane there as well. I feel like it’s a global issue that comes from how our financial systems have pivoted as the world has transitioned to a service based economy
That’s nice they still live there. The economy has scattered a lot of friends and family around the country for me, it’s a nice thing to live close to your siblings and friends
Yes, my bf wanted his sons to remain close to his family after he was gone, and they are all in that same general area. In fact, one of the sons wished me a merry today and said they had dinner with aunts, uncles, and cousins on Christmas Eve. I am glad to know that.
Why would an economy more dependent on manufacturing or agriculture,
somehow lead to more modest growth in housing prices?
Why? I'll stick to how it c/should do so: Better paid jobs held by a smaller (raw number) population.
Lower the DEMAND for bedrooms and increase the avg household ability to build them.
It really isn't all that complicated.
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Housing prices aren't falling, despite the "high" interest rates. Somebody can afford to buy, and does.
In nearly every instance those somebody people already have equity to buy with.
That available equity (cash of course but schools and contacts too) extends down to their grandchildren.
As to the rest, in short, if they don't already own a home now and don't come from such a family...
they'll probably never be able to accumulate enough to make up the difference.
It'll take another generation for the pain to trickle down to the children of professionals.
Japan at one time was talking about a 100 years mortgage.
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