Key observations:

* All else being equal, we would expect 50% of homes to be unaffordable to a median buyer. This is the reasonable base figure (not zero). We would expect 2 in 5 if everyone were buying homes they could properly afford.

* But they're comparing median county incomes to homes in a metro area. For example they call out Boise, ID but use income from Ada county (already 20% lower!). This issue alone could account for the difference.

* There is also an issue of counting homes for sale, vs homes in general. If more expensive homes are sold more often (or, are listed for sale longer - say years - because they're unique) then we will see a skew towards more expensive homes being listed more frequently. It won't accurately represent the actual underlying home inventory.

I recommend not reading too much into these numbers.

It’s a Redfin blog post addressed at people looking to buy a home, not a think tank study of home ownership.

It’s putting numbers, accurate and meaningful ones, to the experience a prospective buyer has when looking for a home right now.

For buyer’s with a median income, only 21% of listings satisfy traditional standards of affordability and it’s worse now than in recent years. No wonder it’s so frustrating when you’re looking for a house lately!

That’s literally all this is saying. And it’s no lie.

I think parent is disagreeing - they point out that 21% of listings in a metro area meet the standards of affordability for everyone in the county. But not everyone in the county has a city job that pays more, and not everyone in the city is willing to live out of town. Thus, more than 21% of city folks can afford a house in the city, and more than 21% of folks living in the country can afford a home in the country. Parent is arguing insufficient granularity, and that's a fair criticism.

I argue of course that everyone should be able to afford a place in town, thats a function of zoning. Federalize zoning, let anyone build whatever they want on their land without asinine parking minimums and setback rules - and years of prostrating yourself in front of council only for them to tell you to get stuffed - and watch the problem sort itself out.

The builder's remedy should just be the status quo and then we could finally stop talking about this.

It’s saying only 21% of listings meet the standards of affordability for that county.

That could easily be simply because houses that don’t meet that standard are on the market 5x as long, and you’d see this effect even if the median buyer could afford the median home overall.

You probably want to have some planning.

But in any case this is all solved by Tokyo minimum nuisance zoning. In short, what that means is you can't build your seedy business in your school zone but you can put your school in your seedy business zone. The zones don't directly prescribe how land can be used, only limits the amount of tolerable disturbance allowed per neighborhood. Things get built where they otherwise wouldn't, but no one has to deal with more annoyance than they bought into.

The implication if 21% of listings satisfy traditional standards of affordability for the median buyer is that the supply of homes is 1.21 * 0.50 = 60.5% of the homebuying population. That's low, but not too far off of historical norms [1].

Apartments are a thing. Historically (post-baby-boom) about 35% of the U.S. population has been renters, unable to afford a house at all. For some reason close to 100% of the population believes they are not going to be in that 35% when they grow up.

[1] https://www.statista.com/statistics/184902/homeownership-rat...

Because that is addressed by the comment you're replying to.

> If more expensive homes are sold more often (or, are listed for sale longer - say years - because they're unique) then we will see a skew towards more expensive homes being listed more frequently

I think this is an interesting fact about how we communicate. You can be 100% factually correct and yet most of your readers will reach a conclusion that you may have not written explicitly. Not always the author intentionally misleads; perhaps the author themselves are mislead. Often the title itself primes the interpretation of everything else (and often authors don't chose the title!).

The article clearly explained their faulty methodologies and this is precisely what I've pointed out. In fact, you are tilting at a windmill, reading more into my comments than what I've written. Projection, much?

I see him as trying to get out ahead of conclusions the author had too much professional integrity to draw but that the internet peanut gallery will draw after speed reading (if that) TFA in search of numbers and then irresponsibly mix and matching those numbers as if such behavior will yield insights.

Yet there are other facts/statistics that show, the reason home prices are elevated (in some areas) is demand

Therefore, somebody is affording them?

All demand is derived from households living in homes, regardless of whether the households are purchasing them directly or renting through an intermediary (long or short term).

There are no other uses for a home. No other source of demand across the market.

Other times houses are used by rich mostly-foreigners as places to stash cash. And not all of these investors care whether the house is occupied by a renter.

These aren't large uses of houses, but they are some.

Sounded reasonable on first and second reading. But now I question why. Would 50% of avocados be unaffordable to the median buyer? Would 50% of private jets?

Of course, there's also a large set of people who cannot afford to be buyers [in areas suitable for them to live] for various reasons and this median income dataset includes them. Not entirely sure they've used median household income and not median individual income either

Houses are probably more like a car market - it's designed to cover everyone, and so there is a percentage that is unaffordable - and that I think is the real point - the orignal article kind of assumes all houses should be affordable - but that's not true. The OP argues that only 50 % are affordable - that's kind of a guesstimate and think the percentage is more likely similar for cars - not sure what it is but let's guess 80%.

Add in fact that affordability is defined so ways - percentage of incame and will someone give you mortgage and most of the disagreements go away

Designed by whom, Government? Someone else?

If it is designed, is it designed correctly?

I am concerned that pro market position wants to have it both ways, sometimes claims its designed and sometimes that invisible hand knows best.

They seem to be unwilling to examine market failure and fix prohlem before they result in disasters like 2008 did

How did this figure get picked and what does it really mean? In a wealthy district where people are saving a lot of money, obviously they can afford, in the literal sense, interest payments that are higher than that.

The 30% thing is completely arbitrary and a massive distortion of reality.

It would be more correct to use actual living costs in a given area (food, transport, etc.).

Avocados are homogenous. One is generally as good as another. It's hard to convince someone to pay significantly more for an identical product (although- it's possible through marketing and there are boutique produce suppliers with wildly unaffordable prices. Specially imported/handled fruits and the like which aren't found in grocery stores)

Homes are not homogenous. Real estate values vary wildly in value based on location, size, and other characteristics. This will always be true because real estate is inherently a zero-sum system. A skyscraper will have drastically different prices for units along the side of the building with the best view - or near the top, etc.

The product is inherently unequal with large differences in demand between each type of unit, so prices will always be unequal as a result. People with more money will always be able to bid higher than people without. This dynamic exists no matter how many homes are built.

Where did you get the %50 figure from?

"Where did you get the %50 figure from?"

It's literally the definition of a median.

You have not explained how you've connected the 50th percentile wage earner to "50% of homes".

Bringing up other unrelated items which obviously don't have a %50 <-> %50 mapping should have made that clear.

Yes I did. It's the second paragraph of this post. You may want to read it again keeping in mind your question has already been answered: https://news.ycombinator.com/item?id=35041925

"Bringing up other unrelated items which obviously don't have a %50 <-> %50 mapping should have made that clear. "

Incorrect, as I've already explained in the above post. Eggs are a fungible commodity, homes aren't.

> as I've already explained in the above post. Eggs are a fungible commodity, homes aren't.

So all I have to do is find a non-fungible commodity X (which is not as "silly" as private jet), and it will follow that 50% of X will be unaffordable to the median buyer?

No, that's a contradiction in terms. Homes are non-fungible, non-commodities. You'll also need something in broad demand with a fixed supply.

Housing is viewed as an investment, not an expense.

People generally buy the most house they can afford - but not the biggest avocado they can afford.

People buy house for a plethora of reason, walkability, school district, commute, safety, etc. and that's not even getting into anything about the actual house! square footage, back yard, front yard, garage, bathrooms, bedrooms, etc.

People want the most of what they value but two different people with the exact amount of money to spend on a house would likely choose different houses that they both consider the "most". And if you give those people the same amount of money and tell them they must buy a house but they can keep any money they don't spend, they'd probably make a different choice, buying "less" house than the can afford.

People generally buy the house that the like the most that also fits their needs/wants, same with avocados. Sometimes I buy them ripe because I want to eat them today, sometimes I buy want them for a few days in the future for a specific occasion but not more than I can use. Sometimes I just buy them because they're on sale and I like them.

Not so. In a market where new homes are produced until prices fall below the construction cost and construction costs are modest, it's possible that a large majority or even 100% of local homes could be affordable to the median buyer.

And even if you saw uniformity in the housing stock going in, the existing housing stock is going to vary. My parents just moved from a small city with a super depressed housing market. Current listings range from $90k to $900k- even in bad markets there are pockets high prices.

Suppose the median home buyer could afford a $300,000 house, but the construction cost for the median existing house is $50,000. $200,000 houses then might exist and the median buyer could afford them, but maybe they have better uses for $150,000 than to buy a house with twelve bedrooms when they only need three.

Especially when a proportion of households are older people who are downsizing. This isn't the Baby boom era anymore when the vast bulk of the home buying population is going after houses based on location to schools or jobs. The locations important for older people aren't exactly the same as for younger people.

2. Different houses will be different sizes, made with different materials. This will create variance in price.

3. This market is oversimplified. Construction costs can rise if too much construction is happening (competition for labor and materials). Lower housing costs would attract buyers into the market that don't currently exist, driving up demand. Affordability is impacted by the cost of financing, which is rising.

4. New construction housing prices are actually really close to land value + construction costs. If you can find a way to make construction costs more modest then you have a fantastic future in real estate development.

Prices can vary and still all be affordable. Everyone isn't required to buy the most expensive thing they can possibly afford.

> New construction housing prices are actually really close to land value + construction costs. If you can find a way to make construction costs more modest then you have a fantastic future in real estate development.

Zoning and regulatory changes.

> This market is oversimplified. Construction costs can rise if too much construction is happening (competition for labor and materials). Lower housing costs would attract buyers into the market that don't currently exist, driving up demand. Affordability is impacted by the cost of financing, which is rising.

Lowering the cost of new construction is the premise. Ramping up construction capacity is a short-term issue, after which costs may decline further from economies of scale.

"Lower prices increase demand" doesn't result in high prices because if the price remained high there would be no increase in demand. What it causes is an increase in supply, since suppliers can profitably build even more housing at that price and will continue to do so until that is no longer true.

Higher interest rates have a largely neutral effect on affordability because they cause sale prices to decline.

Some percentage of the top of the range will always be unaffordable to the median income. Whatever a high-floor apartment overlooking Central Park costs is something that a median income won’t be able to afford. (IMO, that’s totally fine/normal.)

Maybe not in Manhattan, but you can certainly imagine some more modest town where the median house and the highest priced house are priced within the same order of magnitude and the latter is still affordable to the median buyer.

And you're writing "median buyer", when the article is talking about "typical household".

The rest of what you wrote are good points. I would like to highlight the article headline: "There Were Half as Many Affordable Homes for Sale in 2022 as There Were in 2021". Hopefully this is temporary.

Redfin defines affordable as

> We define an “affordable” listing as one where the monthly mortgage payment would be no more than 30% of the county’s median income. We estimated the monthly mortgage payment for each listing using the average 30-year-fixed mortgage rate during the month the home hit the market, according to Freddie Mac’s Primary Mortgage Market Survey. We assumed a 5% down payment, private mortgage insurance of 0.75% of the list price and homeowner’s insurance of $70 per month. We also factored in property tax data, assuming a tax rate of 1.25% of the list price if no record was available. We restricted our analysis to single-family homes, condos and townhomes with two bedrooms or more.

Many households are in a position to put more than 5% down or pay more than 30% of their household income in a mortgage. This is far from "maxing out"

So even if a household “could” afford increased payments, good luck getting something as risk-averse as a bank to fund you.

Maybe if banks started offering 40 year (or even 99 year) mortgages, like they do in some EU countries, that would push the DTI threshold lower (though of course, you end up paying much more interest in the end)? But right now the US Government/Fannie Mae won’t underwrite loans which offer those terms, so here we are.

Unaffordable? Why? There is a difference between "dislike" and "unaffordable." I'd expect the median buyer to want a house that is better than what 50% of buyers will settle for, but that is not the same as "unaffordable."

If a society does a good job of providing housing then 100% of housing should be affordable.

Put differently, if housing is affordable for the poorest citizens, then it is affordable for 100% of the population.

You hint at something here that I see a lot of in my market... lots of other agents will talk about "inventory" and will push for more construction, but they are using that as a short hand for the real problem. The problem at least in my market is that there are a lot of houses that are obsolete in some way, or quite simply undesirable in a way that has made them obsolete. Unfortunately, I see a lot of new construction that I'd also call undesirable - people will buy them because they don't have anther option, not because the houses actually have desirable amenities. Case in point - an idiot builder is putting in a new development in which all the houses are pointed the wrong direction, IE: they don't have views to the mountains because the developer was stupid. Additionally, the houses are priced $100K above anything else in the community but the build quality is very low. Brilliant, right? Point being - this leaves me as a real estate agent with a bunch of useless crap that buyers don't want.

This can never be true, it's a mathematical impossibility.

Housing is not equal. There are always preferred units. A skyscraper will have a side with a better view, people will prefer to live near the top rather than the bottom, people will prefer bigger units with better amenities, etc. It's impossible to solve this by "providing housing" because no matter how much you build it cannot solve the issue of relative value.

So no, housing cannot ever be 100% affordable under any kind of market economy system. People with money will always be able to out-bid people without. People will always be able to construct homes which are better than others -- and this is a very good thing!

Mmm, nope. I've said that 50% of homes would be affordable (or unaffordable) to the median, which was true then and is still true now.

You're the one with a not only historically inaccurate but also mathematically impossible theory, that 100% affordability might be possible. This has never, ever been the case -- nor can it ever be.

"Most of the West was able to offer society affordable housing for much of the post-war period. "

And at that time, pray tell, could median wage earners afford to live in any home they wished? Were median wage earners able to live in mansions? Anywhere they wished?

Of course not. Because it has never, ever been the case in American history that "100% of housing" were affordable to someone with median income.

"And you are, again, confusing a preference "

No, I am not. You, however, seem to be confused as to your own claims. Why don't you slow down and re-read what you wrote -- it's completely ridiculous.

For an exaggerated example, what percentage of a dozen chickens eggs are unaffordable? Probably the top 0.00001% - some kind of rare egg.

What percentage of private jets are affordable to buy outright?

Even with houses: what percentage in SF vs Detroit?

Point is there is no base figure, there is just the figure.

If there is a value gradient, people will be willing to pay more for the more valuable units, raising their price relative to less desirable units.

This same question was asked and answered above in more detail: https://news.ycombinator.com/item?id=35041925

Assuming everyone is buying the maximum they can afford.

Anecdotal of course, but jives with conversations I've had with other agents.

In terms of "where this ends", that graph actually made me more hopeful, because it highlights the transitory nature of the current situation. The reason for-sale inventory is currently so unaffordable is you had a ton of people who paid top dollar for houses in the past few years, but at rock bottom rates. Now rates have skyrocketed, but unemployment is also really low, so at present few people are forced to sell. So you have a ton of people who just refuse to sell right now, because the price would be drastically lower than what they paid when they bought, and they're sitting on long-term mortgages with rates that they'll never see again in their lifetimes.

At some point, either inflation will catch up with home prices, or people will eventually be forced to sell (not just due to job loss but for tons of other reasons that people are putting off right now because they don't want to sell at a loss). The overhang could easily last years, though.

That's part of it. The other part is that builders stopped building enough to keep up with population growth over the last decade, which contributed to the massive inventory shortage. Couple that with the supply side crunch of the pandemic, which made it more expensive than ever to build, and we have a perfect storm.

See, for example, Santa Monica, which allowed a total of 225 new housing units per year for the past twenty years, and where there are now thousands of new units in planning this year because of California's builder's remedy rules bypassing local refusal.

the other essential layer is why? because America is spoilt at utilizing their homesteads as their largest wealth generation asset, even supported by the Federal Reserve that consistently chooses to harm stocks and bonds. never meant to be sustainable with those incentives in place.

The first, where we don’t make substantial change and renting for life becomes a norm for all but the wealthiest of the wealthiest. First in the large coastal cities then in more and more American cities over time.

The second, where we rezone our cities and orient them around robust mass transit systems. We build tons of infill housing to keep up with demand and reduce our reliance on private transportation to accommodate the influx of people.

If I was betting I’d bet on #1, but I hope we can do #2.

Despite what the news tells, we don't have a shortage of housing. We have an abundance of rent seekers.

Single family homes should be required to be owner occupied, end of story. People in the US and abroad are instead treating them like Pokemon cards.

Although I do agree we would be better off with fewer single family rentals, that number is definitely not zero.

You've used this term several times in this thread, but it does not mean what you seem to think it means.

Are you sure [1]?

[1] https://www.investopedia.com/terms/r/rentseeking.asp

> My line of thinking is around Rent seeking (or rent-seeking) is an economic concept that occurs when an entity seeks to gain added wealth without any reciprocal contribution of productivity.

and

> That said, it’s possible for landlords to engage in rent-seeking behavior.

So, I understand that rent in rent seeking is not and nothing to do with 'rent payments', so to speak.

It's more a question of are landlords trying to extract value without producing anything. My opinion is, in many cases, yes.

Especially someone like Invitation Homes, who essentially aim to corner a particular housing market for the sole purpose of extracting additional money from said units.

If this is not considered rent seeking behavior, I'll cede that point.

We have an abundance of landlords. Landlords provide lots of value. I own a house and when I tell my friends about all the shit that I have to do to maintain my house, a common refrain is, "that's why we rent."

A lot of people are intimidated by replaced a furnace that just broke and having their kitchen destroyed by a water leak.

Another factor is home owner's insurance. Home owner's insurance is far more likely to cover high cost replacements than renter's insurance, and often is far more comprehensive in coverage. Renter's insurance might only cover up to $50,000 depending on your policy and exclude things like vehicles or special equipment like HAM radios. It also often doesn't cover certain natural disasters like earthquakes or tornadoes, which makes it harder for people in places like Memphis Tennessee to recover after those events.

Providing value, in a broader sense, would be paying a specialist to come in and fix the furnace. Something a modern homeowner would likely do anyways due to either the mechanical complexity, time involved, or level of skill required. That's money going to a dedicated job that's likely from a local business since HVAC and plumbing tend to be trades. The homeowner's upfront expense is more, but ignoring things like regional wealth extraction the local economy is strengthened because of it.

That's because I'm not a landlord.

Finding reliable professionals is difficult. They're also expensive.

Homeowners insurance is great. I've used it on a few occasions. Unfortunately, it doesn't cover expensive things that break at full cost. So if something breaks and it was older, you're on the hook.

You don't have to convince me renting is a bad financial move, that's why I don't rent, but you can't pretend like there is no benefit to renting.

After the things I've already mentioned, renting gives you much more freedom to move. That's a big deal if you're looking for work, for example.

Some people like to move around and experience different places before settling down. Renting provides value to those people.

Renting is definitely more expensive. You're paying for more. Free maintenance, no concern for depreciation, mobility and whatever other other things I don't consider.

Home ownership has been stressful. I think it's a better move, that's why I do it but I also know people who prefer not to.

Also I think your scenarios accurately describe the options for the ~5-10 year future, but if you're talking the 50+ year future, I think that will involve depopulation. Either fast (famines, plagues, and wars kill everyone off), medium (global warming steadily makes more areas uninhabitable and increases the rate of natural disasters) or slow (people stop having kids because it's too damn expensive and housing is too damn crowded). The future there is like Detroit but worldwide: lots of urban prairie, decrepit old homes that people can't afford to maintain, people clustering together in wealthier enclaves, rampant crime in the hinterlands where people on the margin live. On the plus side, houses will be super cheap: just pick one and move in.

In eastern europe you own your apartment. The owners form a housing Association that own ms the building as a whole and the land.

It's an ownership structure where you own the insides of your unit and can do what you want with it, but everything outside the walls (shared building, common areas, lawn, parking lots/garages, etc.) is owned by a homeowner's association (HOA). You pay the HOA monthly dues - sometimes small ones, sometimes large ones, depending on what they do for you - which are set by the HOA themselves, and the HOA can have rules on what you're allowed to do on the outside of your unit. Repairs to common building infrastructure is the HOA's responsibility, repairs to your unit is your responsibility. The HOA is controlled by a board of directors that are elected from the set of homeowners. You own the equity in your own unit and can resell it for a profit.

If anything it's the places unreachable by anything but a car that remained affordable.

Case in point: one couple I know bought an apartment(so not even a detached house) in a place without any public transport whatsoever because it was roughly half the price per unit area comparing to the equivalent in the city. They now need a car to do even the most basic things, but at least they have their own place to live.

As long as real estate is seen as an investment opportunity, this will continue.

The cost per square foot of standard construction (wood frame, slab foundation, nothing fancy in terms of doors and windows) is about $450-$550 per square foot. This sets a real hard lower bound on the price of net-new housing. If you're talking larger buildings (more concrete, steel frame, drilled pier foundations in consideration of soil conditions and structural weight) the costs start sky rocketing to unbelievable numbers. Sure we can point at bureaucracy and the permitting process, but when we're talking about large scale construction of SFH and multi-unit residential buildings, the permitting and legal barriers are a small slice of the overall cost pie.

In the Bay Area, and I suspect soon in various geo areas, labor is simply too expensive. (And labor is an input to a lot of costs along the supply chain as well, like wood, concrete, steel, and glass.) In a culture where we all strive to be white collar workers abstracted away from the real physical reality that our world still runs on physical objects, most importantly housing, perhaps "learn to code" is not the universal answer and there needs to be just as much "learn to plumb" or "learn to concrete". And I know this last point is politically touchy, but big buildings housing hundreds and thousands of residents simply don't get built by an all-middle-class society. You need cheap labor (or better yet cheap automation?) so that this housing problem is tractable at an economic level.

Construction costs are a thing, but the blocking of new construction is absolutely real.

[0]: https://smdp.com/2022/11/07/santa-monicas-builders-remedy-ex...

We had easily affordable housing in California, including in Silicon Valley, until probably the 1990s. NIMBYism and property taxes (including Prop 13) have existed since the 1970s at least, zoning hasn't changed much since then, and geographical constraints are eternal. We also didn't have a Georgist land-value tax or any other nonsense; housing was affordable without all that stuff.

So why was housing cheaper then?

Well, consider the case of a friend of mine who recently built an ADU and was told it had to have solar panels because of a new state law. At least $25-30k is added to the cost of any residential construction just because of that one thing. That is only one of the many things that new buildings need that were not required in the past.

When you try to provide housing to other people the government makes you suffer for it.

We are regulating ourselves into this corner. Quite a lot of the building codes have nothing to do with safety or habitability.

Parking requirements are a big cost I've read.

There are a ton of other silly requirements that get piled on top of each other and burden all new construction.

For example, if your house in California needs a new electrical panel to charge an electric car? $700+ permit for the panel, plus parts and labor. Adds up to several thousand.

There are definitely building codes that should exist -- earthquake safety, fire safety, etc. But quite a lot of them are just the state interfering in things it has no business dealing with, like the solar panel requirement that lets politicians feel better about themselves while making homes more expensive.

Nothing. That's exactly what I mean when I say the cost is labor. The quoted price $450-$550 per square foot does not include land, permitting, soft costs, etc. That's just labor and materials.

For a 2BR apartment at 850 sqft, that's $425,000. In the Bay Area I presume,

Anecdotally, from memory, the price of high quality apartment, globally, varies around the $125,000 to $200,000 USD mark. Depending as you say, on materials. The interesting fact I was told is this price scales linearly with high rise, for quite a long time.

85 stories can and will average out to the magic $200,000.

Even presumably adding a Bay Area markup, a $300,000 cost of construction is eminently affordable.

For 2BR apartments for childless couples, $300,000 is a excellent.

To me, the obstacle is purely zoning and supply side constraints for large high rises. Singapore style high rises given proper zoning would provide umpteenth $250,000 two bedroom apartments, on Singapore sized parcels of land.

Providing sufficient land, construction of high rise units would grossly improve the housing affordability situation.

It's purely a zoning/public services provisioning issue.

That 2BR apartment for $300,000 can't happen because the land and soft costs, as well as considerations like developer margin are additive to that.

All I'll say is that, yes labor's an input. You have to quantify that cost per square foot.

But, given the number of property developments that have been attempted in the Bay Area and blocked, my (guess) is the economics stack up. Otherwise, developers wouldn't have attempted it.

I was not able to convince a plumber to visit my house in the bay area last year, even after offering several hundred dollars.

2. They assume a 5% down payment and a PMI in their affordability calculation, when it's common for households to make a larger downpayment. Even though they looked at single individuals when making their income calculations they did not factor in single bedroom condos/townhouses/houses as part of the housing supply. Anything with an estimated cost over 30% income is calculated as unaffordable, which is a bit low. All of these factors conspire to push the percentage high.

3. I'm actually much more interested in different numbers when looking at affordable housing. Numbers such as what percentage of household budgets are spent on housing. What is the size and quality of the average house. What is the median age of a first time home buyer. What is the rate of home ownership. The numbers aren't great there either, but they are more relevant numbers.

4. I suspect Redfin is trying to stir up a bit of FOMO. Redfin makes commission on house sales. If they can make someone feel like their opportunity window to own a home is closing they might be able to generate more sales. Maybe this is actually the case for some folk, but the economic incentive should be acknowledged.

I know many people do it, but it seems like a pretty fair place to cut off if you’re being somewhat careful financially

2. It feels acceptable to spend a larger percentage of your income on a new mortgage. That mortgage will stay constant as rents rise around you. That mortgage will stay constant as your household income hopefully increases as you advance in your career.

3. Personally I've never spent more than 22% of my income on housing.

After 2008 how can you possibly believe this?

In addition to this excellent point, you'd also expect a larger number of homes to be unaffordable to the typical household given some realistic assumptions (eg, housing is a major expense in the modern West) - and it doesn't appear they are correcting income for regions in the same way they are only selecting real estate.

So they are taking the more expensive regions comparing to the country-wide income and not pointing out that we;d expect maybe up to 50% of homes to be unaffordable anyway.

Right now inventory is extremely low even though prices are high, because everyone was told that prices would crash as interest rates rose, so prices basically didn't go down at all or even continued to increase. I suppose Redfin is financially interested in reminding sellers that prices are actually just as high this year as they were last year.

I think they might also offer some kind of paid/pro tools for individual owner-sellers and agents who might want to use them.

They also do business on the buyer side too, where they connect you with local buying agents (in a kind of misleading way, making you think you're booking an offer) and presumably impose some kind of commission for that.

And who knows who they're selling aggregated user data to.

My first home was about 45% of my income. 15 years later (I rent it out now) it’s absurdly affordable for the area. Combined with workers’ natural tendency to increase their income as years of experience increase, what is unaffordable at the time of purchase easily becomes more affordable when given time.

To be fair, this also occurred with variable rate mortgages (I'm in Canada, so we don't have the long term fixed rate mortgages you get in the US anyways). But in a condo with variable mortgage + counting the building maintenance fee's, I'm paying something like 30% of what it would take to make the same purchase today at last known prices and current interest rates.

In my case, this is more related to an average of 20% appreciation YoY since I bought it, and never having to increase my payments. And this is for a condo in a high rise building... not many folks preferred place to live.

I think you're referring to the tax credit for mortgage interest payments?

If so ... this subsidy ironically only applies to those carrying the largest mortgages. During the Trump administration, the standard deduction was doubled, which means that (a) many, many people who used to itemize (and thus include mortgage interest payments) would no longer do so (b) this deduction somewhat levelled the playing field between median renters and median mortgage holders.

To have enough mortgage interest payments that you can itemize deductions implies a very substantial mortgage. $500,000 @ 4% only gets you to $20k of mortgage interest in a year, not enough (by itself) to make you itemize.

So yeah, but no, except sort of.

In Canada, and other G7 countries, the rate cannot be typically fixed beyond a 3 or 5 year period. The rate is then renegotiated at the end of that term.

That said, our housing markets don't look that different from the US. In fact it's worse in Canada, with housing prices escalating far beyond the affordability graph without correction, in metro areas it looks worse than many places in the US. A minor correction may be happening now, but nothing drastic.

So I don't think the rate structure of US mortgages is implicated in price inflation. It's deeper structural aspects of western economies right now.

The complaint doesnt make sence. 'Free market' does not set fiscal policy or manage base interest rates at all.

There is no subsidy - If you take a 2% mortgage and suddenly base rate goes up to 20%, the taxpayer does not pay 18%. The government would be paying itself.

The things that make housing affordable here are the zoning codes and laws which basically prevent neighbors from restricting development. Lack of stupid laws dictating how development must be done help a lot too: things like setbacks, parking requirements, etc.

Of course, there's significant survivor bias here, because there were plenty of shoddy older buildings that have been torn down.

Brick buildings don't exist in Japan. Any such structure would quickly collapse in an earthquake. Any older buildings that still exist were either exceptionally well-built for the time, and/or were retrofitted to meet modern earthquake standards. So some historic buildings are still around because they're valuable for cultural or historic reasons, but this doesn't include housing built in the last century.

I'd take modern wood frame construction or aerated concrete with insulation and a brick veneer over a cavity wall or a full brick wall any day.

Because new buildings these days are invariably the same boring gray dull shit that robs any place of its identity?

It's a tough one, breaking against most economic dogmas: foreigners and second home owners would be severely limited to stop them from abusing the system, while existing mortgages would need to be taken as a shared loss between the banks and the homeowners.

The alternative seems to be a broken society, and sadly that might be more probable.

If I owned a property outright, and rented it out at market rates at a decent yield, is it not both?

The problem is property exists in a debt market. Mortgage pricing basically determines property prices.

For you yes, but if everyone does it, then the market is priced on the "market rates" which have now become much higher than your initial price due to market capture.

The problem with private land ownership is that land is a natural monopoly and as such has very actual market conditions. You could theoretically have a functioning one as long as you build way more than people need, housing then becomes elastic despite the land below being non elastic but the math quickly breaks down.

For the conditions to be met where housing "always goes up", and "housing is a basic need" someone is gotta give. And power wise, homeowners wreck non homeowners and have for 70 years hence, they always win. Now with the rush of institutional house buyers and the rush of big corps buying entire house blocks, the problem is gonna become much worse, and quickly.

If you wanna see alternatives to fix the problem, Singapore nationalised all land and has no private landlords and Austria has about 50% of the houses in Vienna to be non market rates (so the price is dictated by construction costs plus a percentage not on how much you can charge for rent). Both models heavily bring down rent/ mortgage costs and yield better results for people, the only ones who lose out are IRA's tied to housing and large landlord conglomerates.

My father has owned a house for 29 years and when he’s gone I don’t care about cashing out or making a profit. Its just great to have a literal home base to rely on in case things get rough.

Too bad, I have bought every house around and put them on the market for 1000% what your dad bought it for. Your taxes are calculated based on market rates, and therefore your housing tax is now completely unaffordable to you. You gotta sell the house you grew up in because I decided to fuck the market in your area.

Also because I own 30 houses and you only own one, I can dictate the price, doing things like marking 28 above you and one below you so yours doesn't get sold. Then 27 above you and 1 below you, and keep doing that while you pay taxes on a house you can no longer afford nor sell.

Welcome to your new nightmare of having me as a neighbour maximising my investment, meanwhile 27 people are homeless because the houses are not on the market despite the demand being there, but if I make them desperate first my return will be higher.

Even people like you, with the right idea, to use housing as a house, can be caught up in the never ending bullshit that is the current housing model.

For a well-financed developer it's a much better deal to drip-feed some 30 renovated apartments at 1x over 1-3 years than sell a chunk of 30 renovated apartments at once and at 0.8x due to the increased supply. If they wait they know the demand will still be there to sell at their full 1x.

And this is what causes things like Prop13, when people revolt against being pushed out of their homes by taxes.

Is there any reason why we can't ban institutional investors from the personal housing market? Seems unfair that a family who wants shelter should compete with giant faceless piles of money which only wants to make a profit at the cost of fucking those who want shelter. Let them chase other investments instead (stocks, crypto, bonds, whatever).

The same reason Corporations have personhood, it makes investors money.

> Let them chase other investments instead (stocks, crypto, bonds, whatever).

All of those are down, but housing isn't, thats why they are chasing it like crazy.

If I am not wrong, in London the most prevalent number fo homes owned was 1, then 2 and then it was like 7. Because 3-6 was expensive but not maximising yield, by 7 your investment pays for itself plus then you can accrue value to buy more property. So landlords get as many as possible. In the early 2010s when I was renting there a landlady asked us to pay rent on direct debit every 1st of the month because she had 42 properties and couldn't afford all the mortages if everyone didn't pay at once. An 82 year old lady, with 42 properties. This was not uncommon when meeting landlords at the time (maybe not as crazy as 42 but still higher than 5 was commmon).

Yeah obviously, but it doesn't answer my question of why can't we regulate them out of the housing market?

"It makes investors money" is not a good answer because a lot of nefarious things used make investors money, like slavery, child labor, 16h workdays, warmongering, snake oil, using asbestos or other toxic substances that kill you, building shoddy buildings that can collapse on you, drugs, polluting cars, alcohol, opioids, tobacco, fossil fuels, dumping toxic chemicals in rivers, deforestation, Ponzi schemes, and yet in most of the west we have regulated a lot of them or even outlawed some of them completely for the greater good because what's good for the investors isn't always good for humanity or for the environment.

So why can't we do the same with housing? Tell institutional investors to fuck off with their bags of money somewhere else. Let them speculate on NFTs, famous paintings or Pokémon cards for all I care.

>An 82 year old lady, with 42 properties.

My point exactly. It's obvious that for basic human necessities like water, shelter and healthcare we can't just leave it to the free market competition to sort itself out, since over time it creates a system of winners and losers, where few who lucked out end up monopolizing the majority of the market share and defaulting to rentseeking, while the rest are left out completely, with no hope of ever being able to jump on board and forced to rent their whole lives.

This rampant inequality is what led to the communists seizing power ~100 years ago, and despite being only ~30 years since communism collapsed in Europe, communism is on the rise again in elections in some EU countries especially among young people because the last 20-30 years of deregulated globalized capitalism has seen the biggest and quickest wealth transfer from the working class to the upper class ever seen.

Sorry I misunderstod your question. Well the main reason I would argue is the disconnect between politicians and general people. The examples you gave, like asbestos or child in mines do not benefit politicians directly. However most politicians are house owners, most own multiple properties, those laws affect them directly. The fact many of their constituents do not own a home is irrelevant because signing those laws affect them.

> This rampant inequality is what led to the communists seizing power ~100 years ago, and despite being only ~30 years since communism collapsed in Europe, communism is on the rise again in elections in some EU countries especially among young people because the last 20-30 years of deregulated globalized capitalism has seen the biggest and quickest wealth transfer from the working class to the upper class ever seen.

I think whatever is coming is gonna be inevitable, there has been an economic capture of levels unseen, coomers owned 30% of the gdp when they were the age millenials are now. Millenials own like 7%. It is unsusteinable and things like AI, the Internet, Globalisation have not yet been integrated properly into the economic model.

I think the prefered solution is more horizontal models, unions are coming back, cooperatives are having a resurgance. Ideas like digital money can be terrible but could also reduce lending barriers. We are at a point where it seems to be more than enough for everyone its a matter of logistics. Green energy and 4 day weeks seem atteinable goals

Uhm, coomers?

>Millenials own like 7%

Luckily GenZ won't own anything, they will only have subscriptions for everything. /s

I doubt this would ever work out, as a high availability elsewhere won't help here. People pick a place to large parts due to job availability, social factors (close to friends/family), infrastructure (shops, restaurants, sports, schools, cultural activity) which is hard to replicate to some scale.

On a very narrow scale there can be an effect, say in Tokyo, where JR builds some railway station and develops that into a new urban center with lots of local infrastructure and connection to job, school, friends, but that is still benefiting to proximity to the other.

Think about how cars generally depreciate over time such that a used car becomes more affordable. During the pandemic, this trend broke to supply side disruptions and used cars actually started to appreciate. Housing always has supply side constraints to zoning regulations to guard the entrenched interests of existing homeowners, and thereby housing generally appreciates in value.

The closest that we can come to balancing both affordability and investment interests in a growing area is to constantly increase housing density. Then the land itself can appreciate in value as larger buildings are built in a fixed footprint. Yet the price of an individual unit of housing can stay roughly constant in real terms due to the ever increasing supply.

This is precisely why a house is different. You can't live in a stock certificate but you live in a home. If you buy a stock at $10 and sell it for $10 ten years later you lost money. If you buy a house and sell it ten years later at exactly the same price it was still good value because you got to live in it for a decade.

No, since parent said "lucrative investment". Key word: lucrative.

If housing was cheap enough to be affordable, not only a house wouldn't be a lucrative investment, but rent wouldn't be that good of a return either.

Most people who currently rent don't want landlord. You already make that point yourself: the alternative for them is being homeless, because they are unable to buy due to high housing prices and restrictions on getting mortgages.

In many cases the landlord are making boatloads of money, simply by being the middleman between tenant and bank. They are not the selfless charities you are making them out to be.

Property developers only build things because they know they can rent them out directly or sell them to landlords who will. None of this exists without a market that will demand it.

Why is housing different in your mind? Or is this an American view that everything must be a "free" market? Note that the government doesn't need to be the sole provider of housing, but allowing the government to compete with private industry hardly seems unreasonable.

Is that really preferable to your landlord being an individual you can sue in court?

There is no world without landlords.

> Is that really preferable to your landlord being an individual you can sue in court?

Yes, in the country I live in that's much more preferable than to have an individual I can sue. Public housing was the scheme that afforded most people in this country with their first dwelling, and the government in the 1950-1960s publicly incentivised the construction of 1 million dwellings.

So yes to your question, I prefer if I have the option to rent an apartment from my government than from an individual, thank you very much.

They're also there to provide housing services to all including the most needy that many landlords might reject.

See (for example): https://www.housing.wa.gov.au

Do you really want to be a slave, and for all of your descendants to be slaves?

Government ownership of housing is the worst solution.

It's a smart investment that saves on policing costs and reduces crime .. that other wise the same citizens would have to pay for and live with.

Do try and think more broadly and out of the box. The slavery stuff is just ridiculous (you're US, right?).

With rare exceptions, developers want nothing to do with owning the properties they build. They want to finish the build and get those properties off their books and close the contruction loans and move on.

So somone has to own the property after build is complete.

If a tenants rent only covered the the monthly mortgage, that's still a 5.5% ROI assuming 20% down, 30 year mortgage. Accounting for interest rates, then the ROI is 5.5-(R*0.8)% returns.

But rents go up yearly to match market rents so the actual returns are closer to 15-22% (though it tends to scale poorly which is why REITs pay so little IMO). Even after accounting for loan interest & costs, real estate is a very attractive 8%-15% investment with very favorable tax incentives. E.g. gains gan be deferred as long as they are invested in other real estate, positive cash flow is typically tax free due to depreciation of property - despite it's market value going up!.

Possibly to the point where a mortgage would be cheaper and easier than a rental is currently.

Governments could set themselves up as a monopoly landlord for those people unable to afford even cheap homes.

If you wanted to make the current situation worse, congratulations, you have found a solution! Now you can't get out of your rent because your landlord is the damn government!

I don't believe they exist.

If you are referring to corporate owners of apartment buildings, that's one thing. But to say there is a huge class of people who are landlords is just unrealistic. Very few people own more than one home, and even fewer people own more than two.

In a population of 330 million. That's ~1.8% of the population. Hardly a "huge class".

To be a good investment, housing must appreciate faster than the rate of inflation.

The politics of the last two decades have overwhelmingly produced the latter.

Why should I be celebrating my landlord (who bought this house outright in 1995 for $86,000AUD) putting up our rent by $210 (24%) per week just because he can? My partner and I are both pretty decent earners but because of the amount of money we have to pay in rent (for a not even that great place) we will never be able to own a house in the city my partner was born in because we simply can’t save enough for a deposit in a period of time where the house prices wont rise out of reach.

Greed-driven housing policy is ruining communities for a lot of people. All but a small handful of politicians in Australia own multiple investment properties. It is in their interest for the current system to continue as is.

You should be glad that success is not punished, because if that was the case, nobody would try to succeed and your society would suffer tremendously as a result -- and when the economy suffers it always hurts the poor more than it hurts the rich.

By renting you are getting a place to live, you are benefitting from the success of others who were able to afford housing, and you are buying time for yourself be successful. It's how healthy markets work.

Our definitions of success are obviously very different.

"The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread."

An investment which increases its value at the rate of inflation or worse is a pretty poor investment. After all, you could probably make more money by simply buying government bonds.

If the housing price increases more than the rate of inflation, it will eventually become unaffordable. After all, salary increases at the rate of inflation - if the housing price increased faster it'd take up an ever-increasing portion of your salary, meaning it'd become less affordable.

Housing was affordable, but its price increased in such a way that it is now unaffordable. This made it a great investment for the people who already owned housing, but newer generations no longer have access to housing and can't invest in it.

That's quite an assumption there. Specifically, it assumes no increases in per-worker productivity.

By your logic, housing never would have been affordable. But we know that it was!

> This made it a great investment for the people who already owned housing, but newer generations no longer have access to housing and can't invest in it.

Actually about 43% of new homebuyers are millennials, and that could not happen if new generations could not afford housing. https://www.nar.realtor/newsroom/nar-report-shows-share-of-m...

It's just a bit less immediately tangible than it used to be. It's still there, and the market still ebbs and flows.

In America almost all of the homes sold today are purchased with money from income, rather than being inherited.

Almost all of the people who are buying homes today can afford them by themselves, based on their income. They aren't "landed gentry", they are just successful people. To demean them by implying they don't deserve their success is insulting and wrong.

That is very different than being angry that the Compte du Whatevertheheck inherited a chateau from his parents. And it requires a different response than fulminating about how the "landed gentry will have to be brought to heel" which is total nonsense.

Almost 30% of all houses sold last year on Texas was to LCC and institutional investors. You can keep the myth going of people without help buying their house and being succesful but the reality is most people report having help from friends or family for the deposit, that most mortgages are sold with criminal variable interest rates and that the corp mass buying of houses has been growing year after year since 2016.

https://localprofile.com/2022/06/07/investors-bought-texas-h...

People love to blame corporations and "foreign investors" for bidding up the price of housing. Canada has banned that in various ways multiple times in the past few years and it has had no noticeable impact on the price of housing. It turns out that institutional and "foreign" investors, just like anyone else who has their heads screwed on straight, don't overpay -- the price of housing is what it is no matter who the buyer is.

what can one do but suppose this is true, wonderful.

Ok, you just don't understand how mortgages work in the US.

Fixed-rate mortgages, which represent 91% of the mortgage market, can be had for terms of 15 or 30 years.

This is not like Europe where you have to re-mortgage every two years. You can, right now, lock in a rate for the next 30 years in the US.

This isn't strictly true - 2 years tends to be the shortest (with the lowest rates) you can get, but longer terms are very common.

In the UK, 2/3/5/10 year fixed rates are common. Many people used to go with 2 year fixed rate (for the lowest interest rates), then at the end of the term, switch to another fixed rate for the next N years. Now people are opting for 5/10 year fixed rate a lot more than they used to, especially if they can lock in to a low interest rate deal.

In France you can get a fixed rate mortgage for the entire term of the mortgage. In Germany, I've seen fixed rate mortgages for 10/20/30 years advertised.

Those are the only countries I'm familiar with though, not sure how other European countries differ.

We also had the good fortune to have done this in 2015, when you could still occasionally find a rowhouse in a close-in suburb near transit for a non-insane amount of money.

I feel for my younger colleagues.

The Bennets and Darcys from Pride and Prejudice were the landed gentry, with the Bennets being in the middle of it, albeit very precariously for the Bennet women, as Mr. Bennet failed to father a son.

Their interests very famously clashed with those of the up-and-coming merchant class, and of course, those of the tenant farmers and hired laborers.

(Charles Bingley, son of a very prosperous merchant, was not yet part of the landed gentry, but would be as soon as he used his cash to buy an estate and started receiving that sweet sweet land rent from his new tenants.)

We certainly have "landed gentry" in the US - have you ever noticed that auto dealerships tend to be handed down from father to son? It's a good deal of why Tesla can't sell direct in a lot of states.

Also: family farms. Most agricultural workers worked land they didn't own, both now and in the previous two centuries.

How would you even had stats like that and what is that supposed to mean? How would you distinguish money from "income"?

> That is very different than being angry that the Compte du Whatevertheheck inherited a chateau from his parents.

Afaik, America has currently low movement between social classes - rich people are the ones who had rich parents and poor people had poor parents. The issue with landed gentry was not that they inherited stuff, it was disproportional power these people had combined with fixed social classes where your fait was pre-determined.

It's not exactly a counter point, but there have been lots of new millionaires lately:

> People got richer last year, with Americans making up nearly half of the new millionaires across the globe. According to Credit Suisse's annual wealth report, as many as 5.2 million people became millionaires in 2021; 2.5 million of those people were in the U.S.

> "This is the largest increase in millionaire numbers recorded for any country in any year this century and reinforces the rapid rise in millionaire numbers seen in the United States since 2016," the report stated.

https://www.entrepreneur.com/business-news/us-gains-25-milli...

Mortgage underwriters are very good at doing that.

hold up. take a moment to consider that "landed gentry" might change as a demographic and we're suddenly allies.

My rent has normally been just following the advice of my agent, in turn following market trends. But the most recent update from them was recommending a rent increase, which I rejected because of the news from the UK containing many references to a cost of living crisis. (The property is in the UK, if that wasn't clear).

"Following the market" isn't a crime, but the market is not kind or generous.

The phrase "without a fight" can be legal or physical; the former is a foregone conclusion, the latter would be undesirable.

You'd be surprised.

Large land ownership is a huge deal regarding money, status, and influence, without even going into readings of the situation like Georgism.

House prices didn't appreciate faster, mortgage rates went up. A great transfer of wealth from the property tax man to the banker is afoot.

>Only 9% of homes for sale last year were affordable for the typical Black household, compared with 28% for the typical white household and the lowest share of any race in this analysis.

That seems expected when you account for the fact that blacks have larger families. I don't know why every article on housing has to bring in identity politics when it's clear that having more children raises your housing cost, independent of race.

"Table AVG1. Average Number Of People Per Household, By Race And Hispanic Origin, Marital Status, Age, And Education Of Householder: 2016"

Looks like 2.50 for white- and black-led households and doesn't change enough to account for the difference any way you slice it. Of course, that doesn't say anything about composition, especially with younger families now that the demographic effects of America's long history of segregation and ongoing redlining are just barely starting to fade. Where did you get your stat from?

They sure would struggle if all their staff had to commute from rural homesteads in Wyoming.

especially since there are people with questionable sources of income buying up property (speaking about EU) further propagating this issue...

It's happening in China, too.

I got caught up in the middle of the massive rise in rates. I had a lock at 3.25, but documentation requirements that were a bit onerous forced me to shop. I found a decent alternative but by that time the rates were sitting at 5.25, which would have represented a $400 payment increase for the exact same house. Fortunately I was able to get things worked out with the original lender, but $400 is a significant difference. I could have done it with a developer income, but not everyone can. Takeaway: An affordable house 2 years ago isn't the same thing as an affordable house now, even at the same price.

Likely they were bought by people who already have houses, as investments.

Your logic, that over-expensive housing won't sell at all, only holds if people are only buying houses that they will live in: to a first approximation, people generally live in just one house.

It wouldn't be unordinary for a rich person to own 3 unaffordable homes for the typical household, whereas the typical household will only own 1 affordable home.

Seems clear that the US is simply not building nearly enough homes in places where people want to live, and therefore what is being put up for sale fetches a huge premium. That works out great for home builders and people who are already homeowners and are seeing their homes appreciate in value, and since people who are truly wealthy willing pay a premium to buy property in locations with restrictive housing laws, there's a disincentive to alter the status quo.

Maybe people who have more money move in from elsewhere. Or else the seller drops the price, or pulls it off the market.

One last possibility: someone buys it who can't really afford it. In that case, either they eventually can make it, or they give up and sell or get foreclosed.