Perhaps better shown as a ratio or percent, since the lower limit is 40k. For instance, the current ratio is actually about the same as it was from 2005-2008.
And it seems most of this trend lines up with the pandemic, which has shifted a number of markets, likely permanently.
The “afford” threshold is bullshit. The advice that you spend no more than 30% of your income on housing is advice that goes back to the 1950’s. Meanwhile, the prices of housing relative to other expenses has steadily increased. Now one way you could interpret that information is “Housing is unaffordable”, but the correct way to interpret is, “Your expectations are delusional”.
Prices do not maintain proportionality with each other in a free market. They fluctuate freely, and that fluctuation is based on the cost of providing whatever good or service you are buying. So, as good like food, electronics, appliances, software and entertainment have plummeted in price, the price of things like housing, medical care, and education have maintained their cost, because they’re still expensive to supply.
This is a phenomenon which economists identified back in the 1960’s, called “[Baumol’s Cost Disease](https://en.wikipedia.org/wiki/Baumol_effect)”, named for one of the economists who documented it. If you actually look at the home ownership **[RATE](https://fred.stlouisfed.org/series/RHORUSQ156N)**, you will see that it’s about the same as it was in 1960, with a nice hill in the early 2000’s with the housing bubble, followed by a slightly more aggressive reversion to mean when the bubble popped. At the same time, the *size* of new single-family homes in the U.S. is about 60% larger than it was back in 1975. This is because the builders earn a bigger margin on larger homes, because the most expensive things in a house usually only have one of each, like the kitchen.
Isn’t this just reflecting the higher interest rates due to inflation?
I’m not generally a deregulation guy, but hearing the difficulty of getting a house built today vs 50 years ago is significant. You’re basically forced to do nothing yourself and hire ripoff artist for everything.
Simple. Vote younger representatives
Don’t worry it will be double that next year
As the kids would say, we appear to be cooked.
I’d like to see the graph zoomed out farther.
I’m not sure we haven’t returned to trend and it wasn’t that the decade of zero interest rates was the outlier.
8 comments
Perhaps better shown as a ratio or percent, since the lower limit is 40k. For instance, the current ratio is actually about the same as it was from 2005-2008.
And it seems most of this trend lines up with the pandemic, which has shifted a number of markets, likely permanently.
The “afford” threshold is bullshit. The advice that you spend no more than 30% of your income on housing is advice that goes back to the 1950’s. Meanwhile, the prices of housing relative to other expenses has steadily increased. Now one way you could interpret that information is “Housing is unaffordable”, but the correct way to interpret is, “Your expectations are delusional”.
Prices do not maintain proportionality with each other in a free market. They fluctuate freely, and that fluctuation is based on the cost of providing whatever good or service you are buying. So, as good like food, electronics, appliances, software and entertainment have plummeted in price, the price of things like housing, medical care, and education have maintained their cost, because they’re still expensive to supply.
This is a phenomenon which economists identified back in the 1960’s, called “[Baumol’s Cost Disease](https://en.wikipedia.org/wiki/Baumol_effect)”, named for one of the economists who documented it. If you actually look at the home ownership **[RATE](https://fred.stlouisfed.org/series/RHORUSQ156N)**, you will see that it’s about the same as it was in 1960, with a nice hill in the early 2000’s with the housing bubble, followed by a slightly more aggressive reversion to mean when the bubble popped. At the same time, the *size* of new single-family homes in the U.S. is about 60% larger than it was back in 1975. This is because the builders earn a bigger margin on larger homes, because the most expensive things in a house usually only have one of each, like the kitchen.
Isn’t this just reflecting the higher interest rates due to inflation?
I’m not generally a deregulation guy, but hearing the difficulty of getting a house built today vs 50 years ago is significant. You’re basically forced to do nothing yourself and hire ripoff artist for everything.
Simple. Vote younger representatives
Don’t worry it will be double that next year
As the kids would say, we appear to be cooked.
I’d like to see the graph zoomed out farther.
I’m not sure we haven’t returned to trend and it wasn’t that the decade of zero interest rates was the outlier.
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