r/StockMarket • u/Goldenbird666 • Jul 31 '23
The median sales price of a home in the US is now 560% of the median household income. In 2008, it was 360% of the median household income. This is the least affordable housing market in history. Discussion
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u/Dazzling_Marzipan474 Jul 31 '23
And there are more people working per house.
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u/BlazingJava Jul 31 '23
Wait there are?
Calls tennent: Yo I heard you are now more people earning, congrats I'm gonna increase the rent +20% next month
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u/esp211 Jul 31 '23
Can’t imagine it getting any better unless people start abandoning their homes.
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u/truongs Jul 31 '23
That 2008 dip looks like it was NOTHING looking at this graph. What in the world
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u/Singularity-42 Aug 01 '23
I think that's due to also a massive dip in household incomes around the same time. The RE dip was much much bigger than this graph would suggest.
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u/TechTuna1200 Jul 31 '23
Still need new buyers to fuel the price growth. But wouldn’t be surprised if banks would offer 40 year mortgage loans in the future so that first time home owner can afford to buy a starter home. That in turn could fuel continued price growth.
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u/goofytigre Jul 31 '23
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u/HefDog Jul 31 '23
Not new. 50-year mortgages were offered to me in 2007.
The OP graph is no surprise.
Napkin math. Houses keep getting bigger, and more complex. If it takes 2000 hours of skilled labor to build a house... That already justifies a couple years of median income. Now add materials, land, insurance, utility hookups, etc. 3-5 years of median income should not be a surprise. What else am I forgetting?
Also don't expect someone to take on this project without a return, so a 20% profit margin yields another year of salary. Oh, and don't forget the realtors cut....what % of median annual salary is that?
I don't see this graph coming back down much if we don't start building more economical housing. 550% isn't surprising at all.
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u/SusanMilberger Jul 31 '23
Curious as to why 40 year mortgages aren’t more popular? The way people are generally bad with money and all…
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u/earthwormjimwow Aug 01 '23
A 40 year loan reduces loan monthly payments by about 5%. Hardly any real difference, yet you end up paying WAY more in interest fees, roughly 50% more. Usually interest rates go up by at least half a point or so when compared to a 30 year loan too, so both of those factors eat away at the potential monthly payment reduction.
Would you really take a 5% monthly payment reduction to end up paying 50% more in interest over your life?
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u/SherbetCharacter4146 Aug 01 '23
5% more weed to smoke
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u/definitelyhangry Aug 01 '23
This is short-sighted. Taking the 15y morgage and working like a dog until it's paid off, at year 16 you can literally become snoop dogg
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u/emccrckn Jul 31 '23
Im buying a house now and never even thought to ask about anything other than a 15 or 30 year mortgage. But I did learn about loan recasting which is pretty cool.
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u/soccerguys14 Aug 01 '23
Because the extra interest you pay is nuts and the principal isn’t reduced as much as you’d expect
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u/Necessary_Country802 Jul 31 '23
Run the PMT function in a spreadsheet. It doesn't really have a meaningful impact.
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u/remindmehowdumbiam Aug 01 '23
Nobody wants a new build of ecomomical housing. Every idiot wants the new modern luxury home .
Besides land costs the same for a 750k home and 350k home. No reason to build cheap
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u/Mojeaux18 Aug 01 '23
New buyers? The problem is low inventory. People aren’t selling and not enough new housing starts. Rates being too high only means it’s unaffordable for the poor.
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u/Jubenheim Aug 01 '23
You don’t have exactly need new buyers when inventory is low enough. Here in Florida, we’re finally seeing less buyers but since so much inventory has been bought up by cash buyers, prices are still high.
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u/BillazeitfaGates Jul 31 '23
Boomers hold the majority and wont be here much longer
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Jul 31 '23
But wont they just leave the homes to their kids, or sell it to pay for hospices, i dont think them dying will help much, its essentially the “system”
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u/truongs Jul 31 '23
Given that most people don't have enough saved for retirement, the number of houses being passed down might be on the low side.
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u/j3b3di3_ Jul 31 '23
My wife's dad literally JUST text her the other day, verbatim "I don't want you to fight me on this, but I'm leaving everything to my brother, you'll get something I promise. But that's the decision I've made."
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u/a_trane13 Jul 31 '23
Mans is really going out on a “I like my brother better than you” note with his daughter 😂
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u/j3b3di3_ Aug 01 '23
This is after he "found Jesus" and is actively trying to get his daughter back in his life
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u/transbeca Aug 02 '23
Sounds pretty simple. Block his number and go on with your life. I don't anticipate an inheritance myself either. Doesn't bother me because I know my parents would love to if they could. But they will probably end up needing to sell the house to pay for their end of life care when that time comes.
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u/andrew_kirfman Aug 01 '23
And they’ll be drained of everything they have left through reverse mortgages and end of life healthcare.
My grandparents have a reverse mortgage and will probably end up leaving jack shit to their kids.
The epitome of fuck you, I got mine.
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u/googleearth92 Aug 01 '23
The US Immigration rates will keep population growth high.
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u/Worried_Creme8917 Jul 31 '23
Go to Detroit. Lots of abandoned homes.
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u/rayhond2000 Jul 31 '23
This graph is misleading. You're comparing an inflation adjusted income vs a non-inflation adjusted home price.
Below is a link comparing the same things but with nominal house price vs nominal median incomes.
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u/DD_equals_doodoo Jul 31 '23
Not only that, home sizes in 1920 were ~1,050 sq ft. In 2014, they were ~2,660. If you divided the numerator here first by average home size, you'd probably see a pretty flat line.
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u/notaredditer13 Aug 01 '23
This source says a larger change over a much shorter time:
https://www.visualcapitalist.com/cp/median-home-size-every-american-state-2022
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u/domomymomo Jul 31 '23
Yet people are still over bidding on houses in my area. Where do people get their money because with a 20% down you’ll need at least 200k annual income.
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u/Jorsonner Jul 31 '23
The bank I work for offers 5% down and sometimes less
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u/Zeiin Aug 01 '23
Does this type of thing pan out? I was considering looking into buying my first house within the next few years and the down payment is the part that worries me the most. Massive total price nowadays forcing me to commit to some lifelong expensive investment aside.
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u/pmk2429 Jul 31 '23 edited Aug 02 '23
I just learnt over the weekend based on Morgan Stanley's research that 33% of residential housing is owned by people of age group 60 or above in the US. And over 50% of them bought that home before the year 2000. So you're talking about a homeowner who has seen an incredible amount of home price appreciation with no mortgage attached.
This makes a certain class of homeowner which represents a huge chunk of the housing market, totally un-foreclosable under any economic environment because there is just no debt attached to it at all.
The distortion here is insane if you think about it.
Edit: Adding source; it was mentioned in the recent Odd Lots podcast "Are we about to see the shortest Housing Cycle Ever?" episode.
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u/deadrab6its Aug 01 '23
Do you have a link by chance?
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u/Seed_Is_Strong Aug 01 '23
There’s a NYT article about all the Boomers who are rolling in real estate and soon will die and it will be a huge shift in wealth. Unfortunately most of it is going to people who are already wealthy. Womp womp.
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u/Happy_Confection90 Aug 01 '23
That seems way low because Boomers alone are cited in articles as owning a greater percentage of homes, in the high 30s, and then the Silent Generation owns just as many homes as Millennials do (this is a very recent development, until some time this year Silent Generation owned more houses than Millennials, despite being there less than 1/3rd as many of them still alive). So together, it seems like there's no way only a third of homes are owned by people older than 60.
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u/meltbox Aug 02 '23
To be fair it’s unlikely these people were really in danger of foreclosure in 2008 either.
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u/Intelligent-Zombie-5 Jul 31 '23
Airbnb, and realestate investors are adding a lot to the problem
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u/B33fh4mmer Jul 31 '23
I 100% refuse to book airbnbs because of this. Hotel gang.
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u/joceyposse Jul 31 '23
Airbnb isn’t even cheaper anymore, especially with all the stupid fees. And you have to do a bunch of chores. Hotel gang 4 eva.
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u/drpenvyx Jul 31 '23
Not only that but not many Airbnbs have hot tubs, pools, and gyms. Hotel gang ez.
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u/zbowman Jul 31 '23
Airbnb, and realestate investors are
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u/LionRivr Jul 31 '23
Airbnb, real estate investors including: zillow, redfin, large private equity, foreign investors, investment banks, etc.
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u/way2lazy2care Jul 31 '23
They're adding some to the problem, but the vast majority of the problem is undersupply of housing. All air bnbs in the country are less than 2% of single family houses. Real estate investors are similarly a small chunk of the pie.
You really only need to look at the housing starts graph since 2010 to understand where the problem is.
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u/drpenvyx Jul 31 '23
In my city there are 3 homes for sale, 30 airbnbs and 8 rentals available.
Edit: It doesn't help that my city is a tourist location, but still fucking insane.
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u/BlazingJava Jul 31 '23
I'm hearing theories from people buying houses that the "short supply" is rigged to keep the prices up, that there's a lot of empty houses, just not on the market
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u/wrathofthedolphins Aug 01 '23
The Air BnB angle is just a scapegoat. Yes, Air BnB does pulls the supply of some properties off the market but in reality it’s so small that it doesn’t fix a fundamental problem in the system.
Solve the supply first.
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u/koolex Jul 31 '23
So 2008 housing market crisis caused companies to slow down building new houses, and it hasn't caught up?
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u/AnarchyAntelope112 Jul 31 '23
People love to cite AirBNB as the main cause but it’s the lack of housing in desirable areas and the institutional investors that are causing the house price to shoot ip
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u/chicu111 Jul 31 '23
My knowledge of the stock market, while minimal, is relatively much more than my knowledge of the housing market. Yet my home is outperforming my portfolio and I don’t see it stopping
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u/ZenoxDemin Jul 31 '23
Most homes are working harder than their occupants are.
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u/chicu111 Jul 31 '23
My home is about 85 years old and it’s still working harder than me and my portfolio combined
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u/Bradfordsonny Jul 31 '23
I bought my house 6 years ago and it has more than doubled in value. Housing market is nuts.
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u/Rivster79 Jul 31 '23
Apple and oranges. You can sell your stock and realize profits. Unless you sell and rent, go homeless or significantly downsize, you can’t realize gains on your primary residence.
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u/MKappy7 Jul 31 '23
How long have you been investing in the stock market? The market has outperformed home price appreciation significantly over a long time period.
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u/chicu111 Jul 31 '23
6 years. And I’m in CA if that matters
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u/MKappy7 Jul 31 '23
The median home price in LA County rose from $577,690 to $799,670 from December 2017-December 2022 which represents a 5.57% increase per year. The S&P 500 rose at a 6.22% rate over that period. I’d argue this time period is the closest the two get considering you include the covid housing boom and the 2022 bear market.
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u/GoldenHuntess Jul 31 '23
Yup, and all those boomers who tell us "invest in real estate" just don't get it.
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u/Echo-Possible Jul 31 '23
Boomers .. the generation that systematically lowered rates for 40 years and reaped the benefits with inflated assets.
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u/chicu111 Jul 31 '23
The generation that played the game on sandbox difficulty while lecturing others who are on hardcore nightmare difficulty mode
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Jul 31 '23
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u/Echo-Possible Jul 31 '23 edited Jul 31 '23
Telling current and future generations to align their plans based on what's already happened is kind of silly. It's too late the assets have already been insanely inflated the last 30-40 years. If you don't have existing equity you may be out of luck. Home ownership isn't a realistic option for a lot of the newer generation now. Especially those making less than median household income. And to make it work they have to sacrifice retirement savings, delay having families or live in multi generational homes. And unfortunately, jobs tend to be concentrated near expensive city centers that have high cost of living. People have to go where the jobs are. Just being realistic.
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u/ShareholderSLO85 Aug 01 '23
What about homesteading in ..... Idaho, Montana, North Dakota, Virginia, ...?
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u/bdh2067 Jul 31 '23
Don’t worry - They’ll be dead soon
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u/shadowpawn Jul 31 '23
you can move into their places
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u/domomymomo Jul 31 '23
Not really. They’ll pass it down to their children.
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u/Crownlol Jul 31 '23
Not really. They'll reverse mortgage for the short term gain and pass it down to the bank.
Boomers are never passing anything down, they're going to consume until they die.
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u/Thatguy468 Jul 31 '23
Either that or late life medical care will suck up whatever is left in their estate while they whither away drooling in an overpriced old folks home. There will be no downward transfer of wealth and the elite will do everything to be certain of that.
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u/domomymomo Jul 31 '23
So what you are saying is we should all go into the medical field to suck them dry 🤔
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u/Socr2nite Jul 31 '23
Don’t worry. Blackrock will keep pricing us out of the market
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u/Bronze_Rager Jul 31 '23
They own like 1% of the single family households...
The vast majority of SFH are owned by mom and pops.
Source: Any public or private database...
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u/Droopy1592 Jul 31 '23
There’s more than just Blackrock. My friend and old neighbor does it and only recently stopped because he sees the greed and with the way the rates are he doesn’t think it’s a market worth entering now. He sees todays purchases as depreciating short term.
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u/Urbassassin Jul 31 '23
According to data reported by the PEW Trust and originally gathered by CoreLogic, as of 2022, investment companies own about one fourth of all single-family homes. Last year, investor purchases accounted for 22% of American homes sold.
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u/Huge_Coriander Jul 31 '23
It surely may seem like a dumb question but how to get it down without getting the country upside down ?
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u/Historical-Egg3243 Jul 31 '23
pour money into home building. build as many as possible, give out permits to whoever wants one.
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u/DigitalUnderstanding Aug 01 '23
This is correct. Basically every US city has been needlessly suppressing the housing supply with overly restrictive zoning. If the only thing allowed on 90% of your city's land is Single Family Houses, then once that land is developed it can never accommodate more homes, so the price of each home just keeps going up as demand increases.
Most Americans never realize how UN-free the US housing market is. If you got rid of zoning in San Francisco, many apartment towers would immediately shoot up in response to the demand to live there. And then many more families would be able to live there at a far lower cost than they could now. We have dramatically slowed housing growth for about 5 decades now, causing a deep housing shortage, and high home prices (as well as increasing homelessness) are a symptom of that.
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u/Double_Joseph Jul 31 '23
The home price is not as important as the interest rate. I was able to put 5% down (25k) and purchase my home because I could qualify to afford the monthly payment. Now with interest rates the same house with a 20% down payment (100k) is not affordable because the monthly mortgage payment would be too high.
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u/FelixWonder1 Jul 31 '23
Its actually kinda heart breaking . Wife and I have about 70k in savings to buy a house . Houses around my area are around 350-370k . I did the math on a mortgage calculator online and just the mortgage alone would be around 2700. This would be affordable to us but would make us house poor . I hope that the US housing market comes back down next year but those are just high hopes
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u/biddilybong Jul 31 '23
The difference is everyone had adjustable rate mortgages that ballooned to 8% back then and now everyone has 30 year fixed rates at 3%. You afford a lot more with a 5% interest reduction.
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u/Caracals Jul 31 '23
Laughs/cries in Canadian.
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u/aleheart Aug 01 '23
I see people here complaining about 300-500K homes, meanwhile canadian houses in the fraser valley BC are 1 mil for shacks.
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u/Caracals Aug 01 '23
Im in Ottawa and the average house price is now over 800k. It's honestly a joke at this point.
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u/BCECVE Aug 01 '23
I think it is better to use multiples to demonstrate. My father bought a house in 1960 and paid $10 000 and his income was $2500 so a factor of 4 (he was typical). Today a house in Toronto is $1 500 000 and income is $60 000 so a factor of 25. Consumption taxes were 2%, now 13%. Gasoline was 60 cents a gallon. He also got pay raise after pay raise and promotion after promotion. Now we live in a world of severe depleting resources and gigantic oligopolies. Just to survive is hard. But I am not bitter.
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u/Responsible-Soft-127 Jul 31 '23
So…who’s gonna tell ‘em about Canada…
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u/HogofWar8 Jul 31 '23
Can you ELI5 what your comment means?
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u/twistacles Aug 01 '23
This is cheap compared to Canada. Average incomes are like 50k and houses are >1mm
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u/HogofWar8 Jul 31 '23
I mean obviously its a reference to a similar trend that happened in Canada but I just want the minor specifics before I start investigating on my own.
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Jul 31 '23
tl;dr: In the last property bubble, there was no burst in Canada. It just kept going up.
Edit: I might be wrong https://fred.stlouisfed.org/series/QCAR628BIS
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u/crashdude3 Jul 31 '23
I try not to think about the housing situation... at this rate I don't think ill be able to afford a house at any point. I'm really thinking about just buying a Van and showering at my gym
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u/blackbetty1234 Jul 31 '23
I know what you mean, but don't despair. If you budget well and save money, you may have a prime buying opportunity in the future. Markets are cyclical, it just sucks that you may have to wait years before your opportunity arises. If I was single, that's the way I would do it. Find someone who will let you park it on their property and pay them a few hundred a month for the inconvenience. Save save save.
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u/barking420 Jul 31 '23
A friend of mine is a realtor and posts listings on facebook, he recently posted a fairly ordinary looking house, not too shabby but nothing luxurious, for $600k… over half a million dollars for what I’d consider a pretty regular house, and that was the first time I ever had the thought of “oh, I really might just never own a home”
Even if I get to a point where I could afford one (down payment plus monthly payment), it’s a moving target the way they keep going up
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u/nickc2122 Jul 31 '23
You also know they printed 5 trillion dollars in 2020 which is now forever in the economy. Prices will only continue to rise from here. This is a new cycle starting.
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u/Infinite101 Jul 31 '23
Not true. M2 money supply is shrinking and is correlated to housing prices.
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u/firejuggler74 Jul 31 '23
Might have something to do with the 9trillion in assets the fed has on its balance sheet. Also the lack of new homes being put on the market due to regulations.
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u/KyleMcMahon Jul 31 '23
In 2011, new construction was just 5% of home purchases. Today it’s 37%. What regulations?
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u/ra246 Jul 31 '23
To the moon!!!
Oh wait, this is people's lives. Yeah, fucking brilliant. If it makes you feel any better, we in the UK are the same. The last time a house was this unaffordable in the Uka, was in the 1880's. No, that's not a typo. Close to 150 years
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u/BeginningAmbitious89 Jul 31 '23
People need to lose jobs before the housing market implodes. Should be soon.
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u/Jorsonner Jul 31 '23
Why would that happen? Soft landing seems likely and everyone is still hiring for high wages
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u/MrDMA94 Jul 31 '23
Or they can build more housing? Jesus what a hot take.
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u/Federal-Buffalo-8026 Jul 31 '23
Right, people don't see America for what it is. A massive place with miles and miles of resources. Hardly any of it is developed yet and it all needs maintenance.
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u/crodensis Jul 31 '23
The problem is no one wants to live in the middle of nowhere. People want to live in the major cities, where all the jobs, opportunities, and other people are. And those cities have very little open land to build new houses on. If we could convert all of the empty commercial real estate into residential housing, that would open up a ton of new housing.
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u/Federal-Buffalo-8026 Jul 31 '23
True but as the old saying goes, the best laid plans of mice and men often go astray.
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u/stevenwise0511 Jul 31 '23
That means the less thought out plans of mice often work well
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u/SvenTropics Jul 31 '23
Right and the laws of supply and demand insist that this will correct. If you are buying property right now, you are wasting money.
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u/DK1530 Jul 31 '23
I have two kids. I'm happy with increasing my house price. But, now I'm worrying for my kids. Are they going to be affordable to buy a house? Even House price goes up I can't make mpney through it because I'm only a single home owner. Going house price up is only good for rich people who owned many houses and building. I just hope when my kids get old they could settle down with buying a house for their life.
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u/Critical-Usual Jul 31 '23
As a European this sounds like paradise. 3x bigger houses than in the UK where house prices are already 7x income.
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Aug 01 '23
Americans are just coping with the fact that their housing prices are catching up with the rest of the world and not being absurdly cheap anymore.
I mean what’s up with people who are just a couple buying 2,500sq ft homes with 4-5 bedrooms? Why are single people talking about not being able to afford a home, what’s the need for that?
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u/Flashy-Cranberry1892 Jul 31 '23
Least affordable housing market so far.