Ethics of Real Estate Investment, NIMYism and the Housing Crisis

SV reX said:

 

This is a really stupid graph. 
 

How about comparing the income to home cost ratios when boomers were in their 30's??

The only thing that graph proves to me is that 1-millennials are choosing to buy more house than they can afford (just like their predecessors), and 2- Everybody's income to house price ratio is bad when they are young, and gets better as they get older.
 

Sounds pretty normal to me. 

That is what the graph is showing from what I understand, stats for each generation when they were 30-34. Otherwise the boomers would have the highest home values and incomes  on the charts. Do you really think the average Millennial was buying a house worth over 2x the average Boomer's?

In reply to GameboyRMH :

Interesting interpretation... Where does it say THAT?

In reply to GameboyRMH :

I disagree that boomers would have the highest income and home values. 
 

The vast majority of Boomers are retired, and have NO income, and many live in houses that fit 1980's standards  

They may have wealth, but they don't have big incomes any more (on average)

In reply to SV reX :

Check the description at the top of the graph, also the source:

https://www150.statcan.gc.ca/n1/pub/11-626-x/11-626-x2019006-eng.htm

In reply to GameboyRMH :

Maybe they shouldn't be buying $600K houses, and should focus on building more to solve their housing shortage problem.

In reply to SV reX :

Paul, Canadian mortgages are amortized over 30 years , but the interest rate is only set for 5 years, then you re-sign for another five at the prevailing interest rate. If you started out living on the edge and rates rise you're screwed. No one is paying off 600k notes on a five year term.

This isn't a random terrible thing that has happened to millennials, or something that has been forced on them by big bad developers. 
 

These are CHOICES. Bad choices. 
 

The average salary in Canada is $61K. The average house cost is $600K.  That math don't work. 
 

The average housing price in Atlanta GA is $399K.  My son bought a house there for $110K.  Because his income is not average.  But the house was there, and he was able to buy it.

I just don't see this as a problem of the big bad "man" sticking it to young people   .  I see it as really dumb choices on the part of a large group of people.

People aren't statistics.  

In reply to DeadSkunk (Warren) :

Gotcha

I think it's clear by now that the shortage is just a fraction of the problem, an at least equally large part of the problem, perhaps the biggest part, is that houses are selling for whatever buyers can finance with little regard to their material value, and whenever that happens with a good or service it's a symptom of a problem on the finance side. It also happened with student loans and pickups, and there are no shortages there (or at least there wasn't during most of the time new pickup prices drifted closer to the 6-digit mark with stupendously long auto loans).

The houses also need to be cheaper to build using more prefab techniques, which would mean less jobs building the houses. I think that's an aspect of too many higher-end houses and not enough low-end houses being built, high-end home buyers are more likely to look down their noses at prefabs, so artisanally handcrafting each one is the preferred construction technique (even if they're for a neighborhood made up of 1-3 house designs, hilariously enough).

In reply to GameboyRMH :

There are low end houses around, the people that qualify to buy them, want something better vs starting there as "the boomers" did. You can't try to start on 2nd base and complain the game is rigged. 

Are we including townhomes and condos in this 600k number? Seems false even if it is CAD.

GameboyRMH said:

I think it's clear by now that the shortage is just a fraction of the problem, an at least equally large part of the problem, perhaps the biggest part, is that houses are selling for whatever buyers can finance with little regard to their material value, and whenever that happens with a good or service it's a symptom of a problem on the finance side. It also happened with student loans and pickups, and there are no shortages there (or at least there wasn't during most of the time new pickup prices drifted closer to the 6-digit mark with stupendously long auto loans).

The houses also need to be cheaper to build using more prefab techniques, which would mean less jobs building the houses. I think that's an aspect of too many higher-end houses and not enough low-end houses being built, high-end home buyers are more likely to look down their noses at prefabs, so artisanally handcrafting each one is the preferred construction technique (even if they're for a neighborhood made up of 1-3 house designs, hilariously enough).

I believe it's poor planning on the part of people.   Ordinary people.   The myth that attending college is good for everyone.  That young people should burden themselves seeking a diploma of dubious value, delays the acquisition of. Something of real lifetime value. The home.   
       If more people graduate from college that simply degrade the college diploma. Then a Masters degree is required,  a doctorate  a doctorate from Ivy League  schools. And suddenly much of your life is academic based.  
     Electricians make what a dentist makes. Mechanics earn what a college professor earns.   Carpenters make more than a middle manager does. 
      Plus the trades don't start their adult life with a big debt.     Yet every parent feels they failed their kid if they aren't in college. 
      Homes are the real financial success. 30 years of steady payments and the rest of your life to enjoy your home.   
    Houses are too expensive?   Says who?   Maybe it's incomes are too low debts are too high.  And something that solves those issues was destroyed by greedy bankers. 
  Zero down worked for veterans because banks had skin in the game.  They  verified earnings and qualified loans because it was their money.  
   Where to put those new homes?  How about back in the rust belt?   All those solar panels, wind generators,  etc have to be built someplace.  Why tear up good farm land? Just tear down the unwanted homes of auto workers.  Iron foundries, appliance factories. Etc.  Build a factory and they will come.  
     

In reply to RX Reven' :

Yeah, but Prop 13 is an incredibly bad law.  Do you think that being able to freeze property values from 40+ years ago is sustainable?  Yeah, I get that the new Prop 19 is screwing with your plans but that had to change at some point.  California's financial woes are directly tied to Prop 13....

In reply to GameboyRMH :

The data says it's a real problem:

https://www.ipsos.com/sites/default/files/migrations/en-uk/files/Assets/Docs/Polls/generations-and-housing.pdf

And that no amount of budgeting or downsizing or avocado toast abstaining are going to close a modern income to home cost gap:

That is some very oddly chosen and presented data. It doesn't really tell us anything. It could be interpreted 100 different ways. I could take that same data and conclude that millennials and gen Y didn't work as hard as gen X. I could conclude that they got later starts in life because the chose to live with their parents for longer, so they were older when they bought their first houses. I wouldn't be surprised if they were older when they got married and had children too. That might be due to financial considerations, or it might just be changes in behaviors. Nothing in that "data" ties the home ownership rates to housing prices. In fact- I would have expected the rates to climb around 2010. That was a terrific time to buy a first home, prices had plummeted and rates were very low. The graphs seem to have very little corelation with home prices over the years. 

In reply to docwyte :

In reply to RX Reven' :

Yeah, but Prop 13 is an incredibly bad law.  Do you think that being able to freeze property values from 40+ years ago is sustainable?  Yeah, I get that the new Prop 19 is screwing with your plans but that had to change at some point.  California's financial woes are directly tied to Prop 13....

It's not frozen. It just grows at a slower rate. And a very small percentage is anywhere near 40 years. The highest averages in some CA cities is 14 years. In those cities, houses are worth many times what the sane house is worth in most of the country. California is not afraid to tax it's residents. It doesn't have a revenue problem, it has a spending problem, but that is for another tread. 
 

I find it interesting that in a thread debating whether housing costs are too high, you are advocating taxing elderly people out of their homes. People think I'm harsh for saying that people don't deserve homes that they haven't earned. You want to take it a step farther and tax people out of homes that they already paid for. 

SV reX said:

This isn't a random terrible thing that has happened to millennials, or something that has been forced on them by big bad developers. 
 

These are CHOICES. Bad choices. 
 

The average salary in Canada is $61K. The average house cost is $600K.  That math don't work. 
 

The average housing price in Atlanta GA is $399K.  My son bought a house there for $110K.  Because his income is not average.  But the house was there, and he was able to buy it.

I just don't see this as a problem of the big bad "man" sticking it to young people   .  I see it as really dumb choices on the part of a large group of people.

People aren't statistics. 

Bad choices by who? The first-world countries we're discussing are all democracies or at least vaguely democratic so voters created or at least contributed to the conditions that led to this. If the choices were made by voters before you could legally vote, or even before you were born, how is that functionally different from a random bad thing happening to you? Whether a kid lives to see Earth destroyed by a fast-moving asteroid that wasn't spotted in time, or destroyed by an artificial asteroid their parents voted to build and launch into the Earth, the end result and the amount of control that kid had over it was the same.

Or are you suggesting that people could do something to escape this situation right now? Mass migration perhaps? Young Canadians building new arctic towns deep in the frozen tundra to escape high real estate costs? Homes in the most rural backwaters and swamps of the south for Americans, the outback for Australians, and...some kind of seasteading for Brits and Kiwis?

Boost_Crazy said:

That is some very oddly chosen and presented data. It doesn't really tell us anything. It could be interpreted 100 different ways. I could take that same data and conclude that millennials and gen Y didn't work as hard as gen X. I could conclude that they got later starts in life because the chose to live with their parents for longer, so they were older when they bought their first houses. I wouldn't be surprised if they were older when they got married and had children too. That might be due to financial considerations, or it might just be changes in behaviors. Nothing in that "data" ties the home ownership rates to housing prices. In fact- I would have expected the rates to climb around 2010. That was a terrific time to buy a first home, prices had plummeted and rates were very low. The graphs seem to have very little corelation with home prices over the years. 

Instead of brushing off new information after guessing at a set of potential rationalizations, you can do some research and test your theories.

Did Gen. Y not work as hard as Gen. X? If they did, it's not reflected in their paychecks or education levels or overall productivity:

https://www.americanprogress.org/article/when-i-was-your-age/

Did they buy their first houses later? All indications are they did. Because they didn't feel like it? No, 83% say mostly because of student debt:

https://www.homecity.com/blog/the-average-age-to-buy-a-house/

Is later marriage a factor? Yes, and also spending too much on rent:

https://www.cnbc.com/2018/07/09/these-are-the-reasons-why-millions-of-millennials-cant-buy-houses.html

In reply to GameboyRMH :

Poor choices by the people whining.... er "complaining" that they aren't being treated fair. How much is tha latest phone? How about the plan that goes with it? Or leasing a car they couldn't normally afford to purchase and spending $600/mo. Choosing to live in more expensive areas (down town, affluent neighborhoods etc) even though they don' have the income for it. Or just living in Canada alone. You pay more in taxes and duties than most US states (there are the exceptions on the coasts) and income rates are higher. Don't start with the "free healthcare" because anyone with more than 2 brain cells knows you're paying for it (see the higher taxes and duties). 

Why do city dwellers always look down their noses on rural life? Is it a complete lack of understanding? Is it that feeling of superiority over "those dumb hicks"? Something else? Pride maybe? OR is it fear that they may have chosen a harder way to do things and maybe, just maybe, you really don't have it all figured out.

bobzilla said:

In reply to GameboyRMH :

Poor choices by the people whining.... er "complaining" that they aren't being treated fair. How much is tha latest phone? How about the plan that goes with it? Or leasing a car they couldn't normally afford to purchase and spending $600/mo. Choosing to live in more expensive areas (down town, affluent neighborhoods etc) even though they don' have the income for it. Or just living in Canada alone. You pay more in taxes and duties than most US states (there are the exceptions on the coasts) and income rates are higher. Don't start with the "free healthcare" because anyone with more than 2 brain cells knows you're paying for it (see the higher taxes and duties). 

Why do city dwellers always look down their noses on rural life? Is it a complete lack of understanding? Is it that feeling of superiority over "those dumb hicks"? Something else? Pride maybe? OR is it fear that they may have chosen a harder way to do things and maybe, just maybe, you really don't have it all figured out.

For me personally, it was about $700 when I bought it back in 2019 (I tend to keep phones for at least 5 years) and my plan is currently $20CAD per month. I don't live downtown, in fact the area I live in was the butt of hillbilly jokes from the city folk a decade ago, and if you drive further from the city you'll be seeing farmland within 10 minutes. No current car payments, I have spent a good amount on cars but likely a fairly average number. As for living in Canada, we don't all get free citizenship to anywhere we want on a whim so emigration isn't a practical solution, we do pay more in taxes for the healthcare but it largely pays off for most of us - it's like having health insurance vs. paying for everything out of pocket.

I don't hold anything against people who live a rural life and I'd dread living in a city at least as much as living in the middle of nowhere, but both are living situations I personally wouldn't prefer. Obviously the world has a good amount of urbanist pride/snobbery going on, but there are more practical reasons for not wanting to migrate to sparsely populated frontiers because you've been priced out of anywhere close to the areas you've grown up in and have family in and can get a job in, for on-site work.

In reply to Boost_Crazy :

That's a ridiculous leap you just made.  Taxing people out out of their homes, where did I  say that?   Anyone who's owned a home long enough to have paid it off understands property taxes, how they're linked to assessed values etc.  If they don't have enough to pay their property taxes, they don't have enough money to maintain the property to begin with. 

I just don't understand where you're coming from.  Things cost money.  There are always going to be taxes.  Taxes and the cost of goods/services will go up over time.  If you don't anticipate that, it's not anyone's fault but your own.

We spent over 75 pages arguing over anecdotal evidence, posting statistics that support our views, and telling others why they are in the situation that they're in and what they should've done,  and calling people whiners.

There are victors and victims of current and past economic and social policies. Its unfair for some and overly fair for others. Most people are just stuck in the middle.

Okay

/thread.

In reply to yupididit :

They are here for the abuse. They enjoy it. Let them beat each other up. Keeps it from tainting good threads.

docwyte said:

In reply to RX Reven' :

Yeah, but Prop 13 is an incredibly bad law.  Do you think that being able to freeze property values from 40+ years ago is sustainable?  Yeah, I get that the new Prop 19 is screwing with your plans but that had to change at some point.  California's financial woes are directly tied to Prop 13....

Our property taxes aren't frozen, they're just limited to a 2% annual increase which, over time, does cause them to be low relative to the property's value.  I acknowledge that this causes distortions such as low home availability due to people clinging onto their properties but overall, California has among the highest taxes in the nation.  Specifically, we have by far the highest capital gains tax rate in the country (you know, the source of income retired people use to live on).

Look, I know better than to worry about something I have no control over - what's done is done.

Proposition 19 was funded by the California Realtors Association - they're the winners as they'll be getting more sales commissions.  The California voters fell for the trick and will now be paying even higher taxes.

In reply to Boost_Crazy :

Yep...between the elimination of the SALT (state and local tax) deduction and California's insanely high capital gains tax rate, I'd be spending $16,724 per year in gross dollars just on property tax.

I'd be OK with raising the annual property tax increase to 3% to more closely match the long term rate of inflation and I'd be OK with indexing the increase to whatever the annual Social Security increase is IF we took California's capital gains tax rate down proportionally.  Hahaha, like that's going to happen.

Obviously if our regulations weren't so restrictive construction costs would be reasonable and young people could just have their own houses built rather than devising ways to kick old people out of their houses.    

GameboyRMH said:

SV reX said:

This isn't a random terrible thing that has happened to millennials, or something that has been forced on them by big bad developers. 
 

These are CHOICES. Bad choices. 
 

The average salary in Canada is $61K. The average house cost is $600K.  That math don't work. 
 

The average housing price in Atlanta GA is $399K.  My son bought a house there for $110K.  Because his income is not average.  But the house was there, and he was able to buy it.

I just don't see this as a problem of the big bad "man" sticking it to young people   .  I see it as really dumb choices on the part of a large group of people.

People aren't statistics. 

Bad choices by who? The first-world countries we're discussing are all democracies or at least vaguely democratic so voters created or at least contributed to the conditions that led to this. If the choices were made by voters before you could legally vote, or even before you were born, how is that functionally different from a random bad thing happening to you? Whether a kid lives to see Earth destroyed by a fast-moving asteroid that wasn't spotted in time, or destroyed by an artificial asteroid their parents voted to build and launch into the Earth, the end result and the amount of control that kid had over it was the same.

Or are you suggesting that people could do something to escape this situation right now? Mass migration perhaps? Young Canadians building new arctic towns deep in the frozen tundra to escape high real estate costs? Homes in the most rural backwaters and swamps of the south for Americans, the outback for Australians, and...some kind of seasteading for Brits and Kiwis?

Bad choices by people who chose to take on mortgages that were way beyond what they could afford. 
 

How the hell did you get on asteroids and the destruction of the planet??  Are you just looking for random things to argue about?  I was responding specifically to the examples YOU posted about home price to income ratios.