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Post by Born2BBruin on Apr 24, 2022 13:52:30 GMT -8
Very interesting video from "Economics Explained" on the history of housing prices both globally and in the US.
Did you know the relative cost of a house after WW2 was only 2 or 3 years' salary? I didn't. It also seems my dad and his parents were in the vanguard of buying rental property, in the 60s and 70s, before it was popular.
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Post by sagobob on Apr 24, 2022 19:27:03 GMT -8
Very interesting video from "Economics Explained" on the history of housing prices both globally and in the US. Did you know the relative cost of a house after WW2 was only 2 or 3 years' salary? I didn't. It also seems my dad and his parents were in the vanguard of buying rental property, in the 60s and 70s, before it was popular. |
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Post by sagobob on Apr 24, 2022 19:45:35 GMT -8
Very interesting video from "Economics Explained" on the history of housing prices both globally and in the US. Did you know the relative cost of a house after WW2 was only 2 or 3 years' salary? I didn't. It also seems my dad and his parents were in the vanguard of buying rental property, in the 60s and 70s, before it was popular. The narrator completely overlooked the elephant in the room. The GI Bill of Rights, a transformative piece of legislation which kick started the boom in education and housing. www.centreforpublicimpact.org/case-study/us-gi-bill-new-deal-veterans |
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Post by Born2BBruin on Apr 25, 2022 8:34:39 GMT -8
Good point. But I don't think GI Bill is central to the point of how the housing market changed after the 50's, or the question the video asks about affordable housing. The GI Bill certainly help my parents buy their first house, but not their second, nor the rental property they bought next to my grandparents' property, who weren't helped by the GI Bill either. It certainly got the ball rolling with respect to home ownership, and may have been the seed from which a house being part of the American Dream took root. |
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Post by Born2BBruin on Apr 25, 2022 8:36:47 GMT -8
Also, we can't forget the GI Bill was inherently racist, and is a lasting force racial wealth inequality to this day.
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Post by mhbruin on Apr 25, 2022 13:02:04 GMT -8
Very interesting video from "Economics Explained" on the history of housing prices both globally and in the US. Did you know the relative cost of a house after WW2 was only 2 or 3 years' salary? I didn't. It also seems my dad and his parents were in the vanguard of buying rental property, in the 60s and 70s, before it was popular. Good stuff. It's not often I watch 23 minute videos any more. I learned quite a bit. |
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Post by mhbruin on Apr 25, 2022 17:56:18 GMT -8
After more thought, I think he ignores some of the problems of high home prices.
Rising prices reinforce the wealth inequality between those who already own homes and those who don't. As the prices rise, those who own homes see their wealth increase. Those who don't own homes do not. And home ownership has been one of the primary ways wealth gets accumulated and passed on to the next generation.
After WWII, white people got to own homes and build wealth. Black people were systematically denied home ownership. Thus a white middle class grew, while most Blacks, including veterans, were left behind. (If you are interested in how this worked The Color of Law by Richard Rothstein goes into it in detail.)
However, it is even worse for those who are not part of the home-owner class. As the price of buying a home has gone up, so have rents. The renters are not only denied an appreciating asset. The cost of housing is consuming a bigger and bigger part of their income, in many cases driving them to poverty or homelessness.
Rising property values mean the rich get richer and the poor get poorer.
Is rising property values good for America? It depends on which America you live in.
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Post by Born2BBruin on Apr 25, 2022 18:53:40 GMT -8
After more thought, I think he ignores some of the problems of high home prices. Rising prices reinforce the wealth inequality between those who already own homes and those who don't. As the prices rise, those who own homes see their wealth increase. Those who don't own homes do not. And home ownership has been one of the primary ways wealth gets accumulated and passed on to the next generation. After WWII, white people got to own homes and build wealth. Black people were systematically denied home ownership. Thus a white middle class grew, while most Blacks, including veterans, were left behind. (If you are interested in how this worked The Color of Law by Richard Rothstein goes into it in detail.) However, it is even worse for those who are not part of the home-owner class. As the price of buying a home has gone up, so have rents. The renters are not only denied an appreciating asset. The cost of housing is consuming a bigger and bigger part of their income, in many cases driving them to poverty or homelessness. Rising property values mean the rich get richer and the poor get poorer. Is rising property values good for America? It depends on which America you live in. These are good points. I addressed the racist aspects of the GI Bill in my addendum post above. My one question is what does building wealth via buying a home get you? My parents build a few million dollars worth of real estate wealth that my brother and I will eventually inherit but we'll be pretty close to retirement age ourselves by then. After we split the properties, my kids will eventually inherit some of that, plus our home, so they end up with the equivalent of a house apiece, which is nice, but I don't see it changing any of their lives. Yes, it's most likely better than spending the money on rent and then having nothing to show for it, but it's hard for me to quantify how much better. As you pointed out previously, the stock market provides better returns; only slightly better over the long run in Southern California but still better. My other question (OK, I lied; I have two questions, not one) is how much higher can home prices go before the bubble bursts and some homeowners, or banks, are left holding the bag and wishing they were renting? |
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Post by mhbruin on Apr 26, 2022 6:19:23 GMT -8
>>My other question (OK, I lied; I have two questions, not one) is how much higher can home prices go before the bubble bursts and some homeowners, or banks, are left holding the bag and wishing they were renting?
Years ago I didn't think housing prices could get might higher. I didn't think that there were enough people who could afford $1 million homes to support those values.
Now those homes are $2-3 million, and $250K houses are over $1 million, at least in SoCal.
I think the obvious problem is supply and demand. The population is growing faster than the supply of housing (just as the number of cars is growing faster than the supply of streets and roads.) To make things worse, hedge funds are now buying up houses, adding to the demand and pushing up prices.
It seems pretty clear that the Fed is going to raise interest rates, slowing down the market. Will it look like a bubble bursting? I don't know.
I know I own my house, free and clear, and I have a ton of equity. However, I have no idea what to do with the equity, other than help my kids buy a house.
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Post by sagobob on Apr 27, 2022 11:43:08 GMT -8
>>My other question (OK, I lied; I have two questions, not one) is how much higher can home prices go before the bubble bursts and some homeowners, or banks, are left holding the bag and wishing they were renting? Years ago I didn't think housing prices could get might higher. I didn't think that there were enough people who could afford $1 million homes to support those values. Now those homes are $2-3 million, and $250K houses are over $1 million, at least in SoCal. I think the obvious problem is supply and demand. The population is growing faster than the supply of housing (just as the number of cars is growing faster than the supply of streets and roads.) To make things worse, hedge funds are now buying up houses, adding to the demand and pushing up prices. It seems pretty clear that the Fed is going to raise interest rates, slowing down the market. Will it look like a bubble bursting? I don't know. I know I own my house, free and clear, and I have a ton of equity. However, I have no idea what to do with the equity, other than help my kids buy a house. I'd like to redefine the problem by changing "supply and demand" to read: demand + ability to finance - supply = rapid increase in home prices. Locally, I've heard stories about competing cash offers and bidding wars. A real estate sign for a house in our immediate neighborhood just went up, with "in escrow" added. I guess it sold before it hit the open market? Where is all this cash coming from? Generational wealth being passed on in the form of down payment assistance or for full purchase price? Lenders being willing to stretch buyer qualifications? We haven't bought a home that required a loan since 1968, so I have no clue. Like you, we live in the same bubble. I sure as heck hope it doesn't burst. The problem as I see it is what might happen if we ventured too far outside of this bubble. My parents lived through the Great Depression. They never talked about it, but it affected them. They never made a major purchase until they could pay cash. They had their savings in five different banks. Growing up in that environment meant it rubbed off on me. I'm glad that it did. |
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