Housing Prices

[dgreco]

i don't think many of the people in olneyville are charging much for rent for their extended families. and remember, immigrant families have a much different family life than we do. they actually like their extended families and generally they lived with them before they came here.

[DaveRPI]

Explain to me the surging demand in housing because of echo boomers, do they need more than one house, or are they currently homeless?

The first part I didn't get at all so I won't ask, but the trend you speak of is actually going the other way sales volume is way down.

[Divot]

Read the first sentance of your article. Why are you posting an article that agrees with me? What we are talking about is long term trends that have impacted housing prices not three year blips... Remember how you kept saying to compare now to the 1950s? Over the long term real wages have been positive. You can find periods where they go negative but overall they have outpaced inflation by a large amount.

Do you understand the difference between median and average? I think you might want to reconsider not wanting to spend $150K on an education. I used the word median because it is not impacted by the tails of the curve. If you use the mean then the very rich can skew the data. This is the opposite of what you were saying to try to prove how smart you are.

http://www.investopedia.com/terms/m/median.asp

I prefer to be original, but since you like "hard facts", here you go:

http://money.cnn.com/2006/08/28/news/economy/real_wages/

Not only did the bottom 4 quintiles not keep pace the last 3 years, that huge mass of people getting worse every year now reaches all the way up to individuals earning $80k.. The percent has now went from 80% to 90%..

Does "most workers" inculde the mythical Mr. Median?

You will find that this term is greatly flawed, especially in this instance. Which is why I don't see you use "mean" or "average".. Median is used perfectly to distort the facts of a population where the richest 1% owns half the wealth..

TheAnk:

The sad thing is, in about 50 yeahs you might staht doin some thinkin on youh own and by then you'll realize theyah ah only two certainties in life.

Divot:

Yeah? What are those?

TheAnk:

One, inflation. Two-- you dropped a hundred and fifty grand on an education you coulda' picked up for a dollah fifty in late chahges at the Public Library or free lesson from TheAnk.

[Cotuit]

I'm sure I have no idea what anyone is talking about in this thread, I just hope everyone is remaining civil and polite.

And if anyone would like to buy me a house, I'd like two bedrooms within a 10 minute walk of Downcity, preferably west or south of Downcity.

[TheAnk]

This is painful:

I cannot find wage by percentile for long term charts.. So all I can say is.. The income disparity is widening..

And unrelated, regaring civility:

[TheAnk]

And:

As you can see, I just figured out how to post images.. Took me from December 2004 to now.. My dog says hello..

[Divot]

I can't view picutres from this board at work for some reason... I hope that they aren't an attempt to show that "income disparity is widening" because that once again has nothing to do with what I'm talking about: median real wages (as can be seen as the numbers I posted from the actual sources) have been positive thus leading housing prices to increase at a rate greater than inflation.

This is painful:

I cannot find wage by percentile for long term charts.. So all I can say is.. The income disparity is widening..

And unrelated, regaring civility:

[TheAnk]

Some are.. You need to stop hiding behind terms and textbook nonsense.. The truth is, people are worse off every day... Ask anyone you meet.. Does it cost more now? Anything, you pick it.. Then ask some people, real people, not the "median person", if life is harder to afford now than in the past.. You need some field research.. Anyone under 80k, will say its harder..

[TheAnk]

Some are.. You need to stop hiding behind terms and textbook nonsense.. The truth is, people are worse off every day... Ask anyone you meet.. Does it cost more now? Anything, you pick it.. Then ask some people, real people, not the "median person", if life is harder to afford now than in the past.. You need some field research.. Anyone under 80k, will say its harder..

[Divot]

By definition the median represents the middle person in the country. Have the people are better off then

[TheAnk]

By definition the median represents the middle person in the country. Have the people are better off then

[runawayjim]

By definition the median represents the middle person in the country. Have the people are better off then “him” half are worse off. If you are trying to explain housing prices it’s the perfect thing to look at.

[Divot]

The Ark was confused by this as well. Read the link from investorpedia. Median does not work like that. If you have these numbers 1 2 100 the median is 2 not 34.

that's not how it works though. median is average. you can have the top be that much higher than the bottom and the median falls somewhere in between. there are probably less median people out there than people below the median. and there's a whole lot more people below the median than above it.

[runawayjim]

The Ark was confused by this as well. Read the link from investorpedia. Median does not work like that. If you have these numbers 1 2 100 the median is 2 not 34.

[TheAnk]

that's not how it works though. median is average. you can have the top be that much higher than the bottom and the median falls somewhere in between. there are probably less median people out there than people below the median. and there's a whole lot more people below the median than above it.

i don't know anything about finance except that having a good quality of life for me means dealing with debt.

[Divot]

The point that was originally made was that housing prices can't grow faster then inflation. Clearly they can and they have. This is due to wages growing faster then inflation. Over the past several years prices have gotten out of line and will likely stagnant in certain markets but over the long run housing prices can and have outpaced inflation.

I don't understand how you define worse off, what metrics you are using and how it impacts my argument above. Do people have more debt? Of course. Do they have more and bigger possessions? Yes. Is their life expectancy higher? much.

I think you are trying to turn this into a class warfare argument. I understand people struggle to make ends meet. I wish it wasn't the case... I also think that it really has nothing to do with what I'm trying to discuss. 68% of the population "owns" their home compared with 54% in 1950. It's this population and their income which drives housing prices not low income people. The median income earner (which would be directly at the 50% mark) has seen real wage increases over the long run. He and the top half of income earners (which is half the working population) make up the overwhelming majority of the homeowners in the country and their incomes drive home prices which is what I

[eltron]

And:

As you can see, I just figured out how to post images.. Took me from December 2004 to now.. My dog says hello..

[TheAnk]

The point that was originally made was that housing prices can't grow faster then inflation. Clearly they can and they have. This is due to wages growing faster then inflation.

I don't understand how you define worse off, what metrics you are using and how it impacts my argument above. Do people have more debt? Of course.

I think you are trying to turn this into a class warfare argument. I understand people struggle to make ends meet. I wish it wasn't the case... I also think that it really has nothing to do with what I'm trying to discuss. 68% of the population "owns" their home compared with 54% in 1950. It's this population and their income which drives housing prices not low income people. The median income earner (which would be directly at the 50% mark) has seen real wage increases over the long run. He and the top half of income earners (which is half the working population) make up the overwhelming majority of the homeowners in the country and their incomes drive home prices which is what I

[pete11]

1. At points in time, things can beat or lag inflation.. I didn't take place in your previous discussion.. Housing is a good that can be inflated, dollars are a currency that is constantly deflated.. So no matter what, these two revert to means.. Which is why housing at a national level, will either stay stagnant as the dollar deflates, or fall while the dollar deflates.. It will meet historic norms, and this is inevitable.. But since our currency is being debased at an alarming rate, it will be quick and painless for most, except the "ARM army"..

2. I define worse off as not being able to make ends meet or being more difficult to do so than it was previously.. When people carry debt, its because they cannot afford the goods they need/want.. This is due to increased money supply, flowing into prices of goods, because it has no where else to go.. People, real not median, get worse off when their goods, the actual goods they buy, not a "consumer basket of goods est by the gov for median american", go up in price relative to the post tax income that they have to spend.. You say "debt? of course." Because you don't know that there was a time when people did not have to carry debt.. The concept is insane.. Because of inflation outpacing wages..

http://www.aier.org/2006pubs/rr01.pdf

3. Since you are new here, you don't yet know that I am the hated evil non-liberal villain of UP PVD; I do not turn things into class warfare, believe me.. Generally, people will get mad at me for playing the role I see you taking over from me.. We discussed your points.. I asked you new questions, which you reverted to an old discussion.. The one thing I disagree with is the CPI and median income showing people getting better, when people are clearly struggling more every day..

[urbie]

OK Divots point is over the long term, housing prices have risen slightly above inflation due to many factors (Divot if I'm misrepresenting your point please correct me) Ank you are saying housing prices are not tied to wages.

I agree with Divot, and wholeheartedly disagree with you.

This debt level is unprecedented in WORLD history. I am slowly coming to the belief that lending standards were intentionally ridiculously relaxed in late '03 So housing prices would increase parabolically, so the crash would also be parabolic, as to avoid a Japan style 10 year deflationary period.

[pete11]

Crash is not happening. The housing market has become like Chrysler or GM -- too big to fail. Whether the landing is "hard" or "soft" depends on which local markets you're looking at, but you will not see a crash like that of Nasdaq after the bubble -- the Fed will lower interest rates if things start to look too bad.

What's more likely -- and, in fact, what is actually happening -- is that houses are staying on the market for a long time. In a few markets (e.g., parts of NY, DC), some people are having to sell houses for less than they paid, but that's the exception, not the rule. Part of that is because unlike stocks, real-estate has intrinsic value. It doesn't usually go to zero, although there are some pieces of real-estate that actually have zero value, e.g., a few parts of Cleveland. Ray Suarez (the News Hour guy) wrote a book called The Old Neighborhood that gave a few examples.

But a parabolic crash in real-estate? No worries -- it won't happen. You're giving the evil, diabolical, capitalist-pig lending industry far too much credit! They're a bunch of thieves, true -- but they don't want to foreclose on people any more than the people want it. They're in the banking business, not the real-estate business.

Urb

[pete11]

generally, when "buying" a property [condo in your case] becomes less attractive, "renting" some apt or property becomes more attractive or atleast the alternative to buying for a period of time

essentially, echo boomers would be the main renters in this case

[pete11]

How many 300k single families or condos are in The O? I'm just curious.. In fact, how many single family houses are in The O whatsoever???

For a finance guy, you sure like to play with funny numbers.. So follow me here... The 300k house you mentioned, would be the respective price for a 3 fam in O'ville.. Adding in the two rents, lets say for discussion purposes, 850 per unit.. How much would someone need to make to afford a house of this cost? For your FHA affordability thingie:

Tax & Int + P&I = $2100 -850, -850 = $400 x 12 = 4800 divided by .28% = a whopping $17,142*

Below the much ballyhooed $19,000..

So before you try to explain apples using oranges, think about the housing stock involved, the income derived, and come up with a true argument.. Instead of regurgitating The Economist or CNN.com bubble stories about affordibility models derived on non-income producing properties..

*Personal anguish, pain of being a landlord, and the resulting general maliase towards people in general resluting from landlording not included in figures..

[runawayjim]

There should be very few over 100k. Is this Onleyville a magical place where rents aren't taxed as income, and there is no upkeep per year for rentals?

Oh and what kind of mortgage PITI. that gets you to $2100 on $300k?

[brick]

I think the truth lies somehwere between TheAnk and pete11. I'm not sure if I should even interject, but let's just use some numbers and explain where they come from.

First, $300K house with 5% down and a 6.25% interest rate. This would be an assisted loan. No PMI. Not being low income myself I don't know what the actual numbers are, but I imagine there are programs for low income buyers that are along these lines.

P&I - $1775

RE Tax with homestead ($15/1000 or so I think), $375

Insurance - $120

Total Monthly Payment - $2270

2 Rents @$750/mo - ($1500)

Payment basis - $770

/.28 = $33,000 income

Not quite below the $19K average.

Maintanence - $500 (although in lumps. This assumes 2% home value for yearly maintanence cost)

Monthly Expenditure - $1270 (again averaged over a long time)

AGI Adjustments:

Maintanence (2%) - ($6000)

Total Tax Exemption for year (R.E. Tax + Interest) - ($22000)

2 apartments @$750/mo. Income for year - 18000

Net profit from home: ($10000)

Taxable income - $23000, which means no income tax paid assuming some dependents.

Even if the tax basis for the house stays the same, rents would have to increase to about $1200/mo before it would be a positive impact on AGI. Again, on average. Maintanence will likely not be 2% as the family would not have the income to support it. It would be zero until something needed to be done. I also think the 2% guideline is a bit out of date since homes have appreciated ahead of even the inflation in the cost of building materials