Bay 12 Games Forum
Finally... => General Discussion => Topic started by: EuchreJack on August 24, 2022, 11:54:35 pm
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What is the crisis? What are the factors going into it? How does rentals vs. owned properties factor into this?
The biggest factors today are:
1) Homes are not affordable for people.
2) Everyone that was going to consolidate has done so.
3) Interest rates are increasing.
4) Due to supply shortages, new building is down.
...there, I contributed something maybe worth reading.
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Like all things real-estate, the housing "crisis" is specific to location, location, location.
Push your local areas to allow high-density housing. Push local areas to frown upon national or regional developers/builders (Pulte, Singh, Toll Brothers etc.) from throwing up their cookie-cutter subdivisions with starting prices over half a million dollars.
I have my own personal bias against not liking high-density housing, but I also recognize that high-density housing is way more efficient in terms of resource usage than single-family homes. And all-else equal, if you can make the same profit building a 20-unit apartment or condo you could as building 5 homes, each apartment/condo unit should be priced way less than the 5 homes and improve affordability.
That's not even getting into predatory practices and regulatory capture.
EDIT: I do question the complaints about "affordability" though; but this is me and my bias against people who refuse to budget and make long term plans, including potential short-term sacrifices like living with roommates to pool resources and cut costs to start building savings. I think hyper-individualism is a large contributor to make things "impossible" for so many people. Sure, if you give yourself unworkable constraints, it's going to be difficult... only very rarely are people legitimately stuck in situations where there is no way out.
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The US also has the whole missing middle issue, which leads to enormous suburbs and heavily built up urban centres with no in between and exacerbates the housing pressure in urbanised areas.
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EDIT: I do question the complaints about "affordability" though; but this is me and my bias against people who refuse to budget and make long term plans, including potential short-term sacrifices like living with roommates to pool resources and cut costs to start building savings. I think hyper-individualism is a large contributor to make things "impossible" for so many people. Sure, if you give yourself unworkable constraints, it's going to be difficult... only very rarely are people legitimately stuck in situations where there is no way out.
It's probably true that people could do more like this, but I also don't blame people for being bitter that they have to do it so much more than previous generations. There's probably a big psychological discussion to be had here that I don't know enough about to contribute to, but I wouldn't be surprised if the situation is functionally impossible for a lot people even if it's not literally so.
On the other side, housing prices really have skyrocketed for no good reason. I get mail and spam calls constantly from different real estate firms wanting to buy my house regardless of its current state because they can flip it for even more money. The value has gone up like 30% in the past few years and it sure isn't because my house is 30% better than it was before.
Does 30% make a real difference on something like a mortgage? Maybe not as much as it sounds like since you can probably get loans for 50+ years these days to deal with the insanity, but it's going to feel like a big obstacle.
But I don't know. I do think that individualism is an issue in general for the US, but that's again a big discussion that goes well beyond just this.
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It's not just an American problem. The two-bedroom terraced house I grew up in as a child in the UK in 1993 cost my mother £20,000 to buy. We moved out and upsized when my sister was born, and that same house nowadays is on the market for £200,000.
Shit be fucked.
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Roommates worked out horribly for me in college. It's not an option.
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A house near me recently went on sale for £250,000 with it's description as "a perfect first time buyer home".
First time buyer. Quarter of a million pounds.
Yeah, nooooooo.
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The thing about affordability is people have gotten slammed by the inflation train. Someone saving for a home purchase had the goalposts moved on them due to inflation.
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General inflation (also wages, basically fucking everything, etc.) has been wildly outpaced by housing cost increases, last I noticed. Whatever effect it's having on the housing situation is minor, and far, far less impactful than... all the other horseshit going on.
Also it's not really a "location, location, location" thing. Housing costs are up basically everywhere in excess of other cost increases, wages, again more or less everything, location just effects how badly. Shitholes that literally don't have utility services are somehow managing to price people out that used to live there, from what I understand. It's pretty messed up.
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I had to look at the data in my locale:
My house price has appreciated about 66% in 8 years; that works out to a little over 6% a year. My household income has increased by about 75% in those same 8 years. So "location location location" does indeed matter, when you include personal situation as part of "location".
Now minimum wage - I think that has not fared as well. Let me check... 8 years ago federal minimum wage was $7.25. It's now $15, so just over doubling (!) in the past 8 years, which is more than my local housing cost increases! I'm surprised by this actually, I didn't realize that was the case.
So I'm guessing perhaps people are either in non-average scenarios or they are not actually looking at the real numbers and are just "feeling" their way through situations. I mean yeah it sucks when gasoline and food prices go up... I think it's also the psychological phenomenon that we don't remember when our income went up 10% as "strongly" as we remember prices going up 10%.
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I think you need to go back to pre-2008 for the idea of what people are comparing now against in terms of expectations from what they should be able to get in purchasing power from a housing market. That's 'parents' vs current 'young' people looking to buy homes in terms of purchasing ages. Housing markets have been an ever growing shitshow for first-time buyers for awhile now.
So looking at the numbers in the USA, in 2000 the median house price in the USA was $119,600, now it's $428,700. Minimum wage then was $5.15, so that's a 3x increase in MW and a 4x increase in House Price. Not factoring in that in 2000 0% deposits on a mortgage were much more commonly accepted by banks, so you didn't need to save what in the USA is on average a 6% deposit ($25,722) saved up to even get your foot in the door. But even then a 6% deposit on is $7,176 vs $25,722.
Also MW may have risen, but when you look at average gross salary in the USA that has risen a much less impressive-seeming $42,148 in 2000 to $53,490 in 2022.
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Stop making suburbs.
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Also MW may have risen, but when you look at average gross salary in the USA that has risen a much less impressive-seeming $42,148 in 2000 to $53,490 in 2022.
I.e the shrinking middle.
I think it's just the conglomerates buying up properties. Whether to rent rather than sell, or just to control the supply. I wouldn't doubt there's plenty of collusion to further drive up prices. And then you have the second tier of individuals or small groups doing the same in their local areas. The value of homes have shot up because there's more money to be made, not because the homes are better. Two different groups of friends of mine both started getting into realestate at the same time, looking at properties to buy, renovate and rent. One of them followed through.
EDIT: I do question the complaints about "affordability" though; but this is me and my bias against people who refuse to budget and make long term plans, including potential short-term sacrifices like living with roommates to pool resources and cut costs to start building savings. I think hyper-individualism is a large contributor to make things "impossible" for so many people. Sure, if you give yourself unworkable constraints, it's going to be difficult... only very rarely are people legitimately stuck in situations where there is no way out.
One reason people say affordability is an issue is the reality of being house-poor. Yeah, you own a house. And it takes most of your money and budgeting just to afford to live there. And that leaves you vulnerable to house repairs, catastrophes, rising property taxes, etc....Is a house worth having if you can't actually live comfortably there? "oh well you should just budget better or live within your means." I.e, you're too poor to live comfortably if you want to own a home.
I have my own personal bias against not liking high-density housing, but I also recognize that high-density housing is way more efficient in terms of resource usage than single-family homes. And all-else equal, if you can make the same profit building a 20-unit apartment or condo you could as building 5 homes, each apartment/condo unit should be priced way less than the 5 homes and improve affordability.
I think it's easy to say once you're out. I'm at the stage in my life where I'm ready for no more high density housing, and some privacy and space. My situation isn't like most people's and I'm just hesitant to move because the market is so hot and I don't feel like being knifed in the kidneys by interest rates. But if someone was like "hey, you should just live in an apartment for the rest of your life because it's more efficient" I wouldn't take it kindly.
Yeah, in a perfect world we'd live in super efficient Dwarf Fortress dormitories. But no one actually wants that unless its a necessity. (I'm thinking of Japan.) People tend to associate MUDs (Multi-Unit Dwellings) or MUHs (Multi-Unit Housing) with poverty. (MUDs run the gamut from massive slum buildings to fancy condos with a small number of units.) Privacy and space is associated with privilege.
I agree with the sentiment ("Gee it'd be nice if people stopped driving gas-guzzling, vision-obscuring mega trucks.") but that ain't gonna happen until necessity makes it happen. I'd rather wonder what % of what first time home owners are seeing is due to just naked, unrestrained greed and collusion. I'd like to know what reality looks like with that reduced in the equation. Because just gobbling up property to sit on just drives everyone else's prices up as they look at home sale data and go "the market's hot!" But it's kind of a paper tiger. A lot of those isn't reflecting American home ownership, it's reflecting American resource consolidation.
But ya know. As was just shown, when Mitch McConnell went to college it cost him $2500 of today's dollars. Everything isn't just more expensive, it's unreasonably expensive.
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This conversation has a decidedly negative tone.
What positive actions can be made here? Does it have to rely on government action ("external force") or is there any opportunity for community-building grass-roots action? Complaining never helped solve a situation, unless it's complaining to people in power so much they take action just to get the complaints to stop.
I'm pretty sure nobody here is a policy maker, so complaining here is... not fruitful once we get past the venting stage.
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Do More Habitat for Humanity?
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There's a few options I can think of:
Build affordable houses through setting a regulated maximum sales price, subsidizing construction to ensure quality, and prohibiting buy-to-rent or multiple ownership, and constraining reselling prices on those builds.
Introduce/expand 'council housing' schemes for low income earners (I'm British so not sure what USA term equivalent would be for welfare-backed housing).
Eat the landlords.
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Sounds good except for regulated maximum sales price. That never works well...I'd do something a bit softer like you can sell for whatever you want, but make the tax on gain much more progressive. So instead of tiers, do something like the tax is such that profit after tax is capped at something like a multiple of inflation. So if you sell 1 year later and inflation was 9%, maybe you start getting taxed heavily at sale price more than 9% such that max return is 15% or something. I'd pick a formula like... allowed profit after tax scales like 1-e^(-saleprice/(interest_factor_based_on_years_held*buyprice)).
I do like the idea of penalizing buy-to-rent, etc. Devil's going to be in the details though; some folks are what I would call "reluctant landlords." I'm in that category because my wife owned a condo that was terribly underwater in 2012, so we have been renting it out and haven't seen a reasonable opportunity to sell it yet.
Maybe you do the same thing - you set taxes such that they are based on gain relative to inflation, not some numeric value.
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Now minimum wage - I think that has not fared as well. Let me check... 8 years ago federal minimum wage was $7.25. It's now $15, so just over doubling (!) in the past 8 years, which is more than my local housing cost increases! I'm surprised by this actually, I didn't realize that was the case.
Hold on a sec, where did you get that federal minimum wage is $15? It's still $7.25, as it has been since 2009. Some states have gone higher, and Biden did some EO stuff to try and encourage higher pay in niche circumstances, but it's still $7.25 when all is said and done. (And then there's tipped wage, which is even lower.)
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My thought behind the regulated sales price on new builds targetted at 'affordable builds' (not all house sales) is that the current investment/price/profit balance for new builds is such that, in my experience, new builds are not what a reasonable person would describe as 'affordable'. Instead, they are often hundreds of thousands more expensive than the housing they are built near (looking at the new builds down the road from me and sighing). So there needs to be added pressure on developers to not build nothing but detached three story 6 bedroom houses, call it 'affordable housing', then sell it to buy-to-leters who split it into three flats and rent those out.
Contracting them to explicitly build housing within a set price range would mean that they have to publically agree to and meet a definition of 'affordable'.
But then there's still a need to shut down loopholes like stopping those houses being simply purchased and immediately resold at a higher price, so some extra constraints on the purchase/sale snowballs from there.
Hold on a sec, where did you get that federal minimum wage is $15? It's still $7.25, as it has been since 2009. Some states have gone higher, and Biden did some EO stuff to try and encourage higher pay in niche circumstances, but it's still $7.25 when all is said and done. (And then there's tipped wage, which is even lower.)
I should have double checked his claim! Not being American don't know your mw off top of my head.
Redo:
2000 minimum wage: $7.15 | 2022 minimum wage: $7.25 | Growth: 1.41x
2000 average wage: $42,148 | 2022 average wage: $53,480 | Growth: 1.27x
2000 median house price in the USA: $119,600 | 2022 median house price in the USA: $428,700 | Growth: 3.58x
2000 price of Gallon of Whole Milk: $2.78 | 2022 gallon of whole milk: $4.40 | Growth: 1.58x
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This conversation has a decidedly negative tone.
What positive actions can be made here? Does it have to rely on government action ("external force") or is there any opportunity for community-building grass-roots action? Complaining never helped solve a situation, unless it's complaining to people in power so much they take action just to get the complaints to stop.
I'm pretty sure nobody here is a policy maker, so complaining here is... not fruitful once we get past the venting stage.
Nobody here is a policy maker so "plans" are about as much use as complaining. Sorry, I didn't realize there's a threshold for how much we're allowed to vent. Did I miss a forum rule somewhere?
Here's my plan: actually regulate the housing market instead of letting it continue to be a free-for-all.
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Ok weird, my brain must've been more disengaged than I thought last night when I saw something about minimum wage being $15 effective Jan 2022... which I should've realized couldn't be right since places in my town have non-tipped wages posted for less than that.
I'd actually be interested in looking at housing breakdowns by percentile; I don't think comparing median house prices to minimum wage is meaningful. A more meaningful breakdown would be something like compare each percentile of housing - so how does the bottom 10% income compare to bottom 10% housing, how does next 20% compare, etc.
I think there are systematic adverse incentives though. Consider "the government" contracts a builder to build some houses at a given price. But what do you do when people start bidding more than that to make a purchase? If you disallow overbidding, how do you decide which of 30 offers gets selected for a given property? If you say "first-come, first-serve", how do you prevent swooping in by people who are more advantaged by having transportation or online access to get in the queue first? This at least was part of the thought I had related to taxing gains, because that should discourage people just buying stuff as an asset with no intent to live in a property.
@nenjin I'm all for "plans" but simply saying "regulate the market" is too vague for me. What does that mean, specifically? What are the goals, and can you show the regulation would actually satisfy that goal without having even worse unintended consequences?
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Depends on whose consequences you care about.
Regulation means conglomerates and banks can't control the supply as much and therefore make less money.
Setting caps on the yearly growth of housing prices, taxing unutilized properties so they're are incentivized to sell. There are many ways the government could exercise some basic control over the housing market instead of just "letting the housing market figure it out."
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I think there are systematic adverse incentives though. Consider "the government" contracts a builder to build some houses at a given price. But what do you do when people start bidding more than that to make a purchase? If you disallow overbidding, how do you decide which of 30 offers gets selected for a given property?
Those with the greatest need get greatest priority. If it's regulated and integrated with a welfare system, you can have welfare people appointed to make the judgement call as to who is highest need based on criteria. So things like single parents, people from abusive householes etc, get given higher priority than someone whose parents can support them. Same as how other needs-based queues work.
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I like the idea of heavily taxing un-utilized units. Have to figure out how to make it work without causing undue burden relative to natural vacancy rates.
I don't like caps on prices, because what happens if you get things like pandemics or wars that really *do* affect supply, like what if cost of materials goes up by more than that amount? Then you'd need all kind of "special measures" to make exceptions, and that's just wasteful busywork.
@MorleyDev thanks for that insight into needs-based queues. I have a big blind spot there. I suppose part of the issue there is the idea of waiting in line for a house, letting someone else say it's now your turn, is very anathema to US culture.
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I mean, it may be anathema but it's also inflicted, sometimes violently, on our poorest demographics. The wait lists and related hoop jumping horseshit for assisted housing can take sometimes take over a fucking decade to navigate (and you're probably going to be waiting years at a minimum regardless, which helps exactly as much as you'd think for someone facing immediate eviction or somethin'), and far as I'm aware this goddamned country still has a moratorium on just straight up government constructed housing.
Part of the reason you don't see as much "just bloody build the damn things" is because some pile of gigantic assholes put a legislative block on it some decades ago, so the supply of genuinely public housing has somewhere between held steady and outright shrunk since, even as demand has steadily increased.
It's just one facet of the colossal block of shit that is the US housing situation, especially for the poor.
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One vector of the housing problem is the hidden "taxes" of local politics...
So, your state is going to receive federal funding for housing... Who chooses who receives the project work? Who chooses what businesses will be allowed nearby? Who chooses the access roadways available for the housing?
By the time the local politicians are done in the backrooms, it may seem like they are not profiting greatly, but they have chosen who will get paid for the project work and they have chosen who will have economic control over those being housed (by controlling their access to food sources and roadways). This is how a system of economic slavery is constructed.
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4) Due to supply shortages, new building is down.
This is not the cause of shortages of new-construction single-family starter homes, at least where I live.
The reason there isn't much new construction of single-family homes on the market is because almost all of the new construction is of apartment blocks, townhouse blocks, condos, &c. which all fall into some category of occupation more predatory than direct ownership. It's exacerbated by the way most existing construction homes of the same type are being bought massively over market value by rich people and property holding companies to convert into rentals, which not only blocks sale to owner-occupants but also semi-permanently reduces the pool of available houses.
I gave up on finding a house for the time being because of my experiences along those lines. I'd go in offering 10-15% over the asking price, 20% cash, and the sale would close almost instantly because some company made an all-cash offer for 50%+ the asking price (which in most cases was already inflated up to 2-3x the real value prior to the bubble). Give it a few weeks and the house would show up... in rental listings, for $1200-1500/mo in an area where average home rentals were <$750/mo before the bubble.
At this point I have a hard time convincing myself it's not a deliberate attack on the middle class by forcing current and future generations to settle for predatory situations like condos, HOA townhouses, lifelong rental, &c.
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...I moved back home with my mother, so fuck the housing market. :P
I'd basically just say duck this housing market as much as possible. Like half those "Corporations" are just semi-rich individuals. And they are not all going to be successful with these strategies, since they're mistiming the market.
So there will be supply once they start folding.
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I'd go in offering 10-15% over the asking price
Unless you are desperate for a house, this is part of the problem. Why, as a buyer, would you ever overbid for something? Note this isn't directed at Flying Dice in particular - but in aggregate. Why are people over-bidding for these items? I think it's because there is speculation, not because there is desperate need and there really is no other choice. Or some kind of strange cultural affectation to "oh we've lived here for X years already, time for a change!"
While the cyclic nature of housing markets is true - I would rather not have periods of boom and bust, but a nice sustained growth. Sadly such stability is not rewarded...
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Under the current housing market, going in over asking price is just where the market is at.
We're at the high end of the curve, but that bubble is going to burst eventually.
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I'd basically just say duck this housing market as much as possible. Like half those "Corporations" are just semi-rich individuals. And they are not all going to be successful with these strategies, since they're mistiming the market.
So there will be supply once they start folding.
I have zero hope of it getting better. Hasn't my entire life.
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...there is the problem of inflation not going away, but generally you save up cash and purchase a property just as the economy leaves a recession.
During a recession, you can't get a mortgage from a bank
During a boom, you can't afford the house.
It's all about timing.
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First rule of moving house: only move if you can afford it*.
Second rule of moving house: only move if you can't afford to stay where you are**.
*Probably worth the added clause "within your current means." Basically, don't move to an expensive place hoping your means will catch up.
**This can (and should) include non-monetary costs like your house is dangerous/condemned, housemates are abusive, etc.
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...those rules tend to fuck with lots of people.
1) I'm unemployed
2) My housemates beat me
= FUCKED
Ideally, you got a car you can sleep in while you try desperately to find an employer that will hire you, even though many employers would rather not hire someone sleeping in their car.
It is also quite valuable to have family that will put up with you, and much rarer than I think many of us with this resource realize.