Social Mobility May Suffer as Income Fails to Keep Pace with Housing Costs

http://www.zillow.com/research/social-mobility-housing-costs-12138/

by uptown • 10 years ago

58 69 10 years ago

zillow.com

oftenwrong• 10 years ago

...in the US

jacobush• 10 years ago

... and in Sweden

djb_hackernews2• 10 years ago

Housing, Education and Health Care are all insanely unaffordable for the middle class. Eventually the home equity of their parents that has been floating the millennial generation will run out and what happens then?

wrong_variable• 10 years ago

wouldn't that be transferred to the kids ?

hardcandy3• 10 years ago

There is a growing theory that the majority of working middle class retirees will reverse mortgage their homes in retirement in order to supplement their cost of living (and pay inflated nursing home, health care, and end of life costs), leaving their kids with much less than expected inheritance. This would also exacerbate the inequality gap as wealthier families would have no need to go into debt and would rather continue to accumulate assets. Watch for Wall Street and associated marketing channels to put out financial products that make it ''stupid simple'' to qualify for and execute on a reverse mortgage as the start of this trend.

djb_hackernews2• 10 years ago

Tapping in to a homes equity requires a loan, and yes, those loans will be transferred to their children.

EDIT: Yes I meant the loans stay with the estate which services the debtors. The house that is typically handed down to the next generation is now sold to make whole the debt.

swsieber3• 10 years ago

Are they though? Defining middle-class might be good as well. A decent home in some parts of Utah is 150-200K. Granted some parts are more expensive. And for a college, BYU runs at about 2.5-3.5K a semester, not all that bad. I managed to work my way through most of college.

api3• 10 years ago

But Utah is not on the coast, therefore "nothing happens there" and you can't advance your career (supposedly).

The mega-prestige city where you "must be" phenomenon is a major driver here. It's really exploded since roughly 2000.

Edit: I think the best way of seeing it is to look at where early PCs came from:

MITS Altair: Albuquerque, NM

Commodore 64: Philadelphia (metro), PA

IBM PC: Miami / Boca Raton, FL

CompuColor II (first color home PC): Norcross, GA

TRS-80: Fort Worth, TX

Apple II: Cupertino, CA

Today every single one of those would be from San Francisco or Silicon Valley, because that's where You Have To Be. Seattle I suppose gets an honorary mention, but the rest of the world doesn't exist.

The same thing has happened to varying degrees in other industries. Everything has super-concentrated in a handful of super-expensive mostly coastal cities. The rest of the country is a backwater falling into permanent depression.

ksenzee2• 10 years ago

We BYU alumni have the advantage of an education that was massively subsidized, down to the point where you can actually afford to work your way through. State schools are supposed to do that too, but they don't anymore. That's why BYU is now near the top of the Forbes list of "Best Value Colleges" or whatever it is.

maxerickson5• 10 years ago

For healthcare I think the circulation definition applies; that is, if you can't afford healthcare, you probably aren't middle class.

hardcandy3• 10 years ago

Either laundered foreign money continues to flow into the country and the bubble sustains itself, or the spigot is closed and there is a correction.

ktRolster3• 10 years ago

Housing costs are easy to fix.....it's just a matter of building more housing. Current residents don't want to do that though, so it's just a typical case of entrenched interests against newcomers: story as old as time.

HarryHirsch• 10 years ago

No need to build more housing. Everybody who is priced out of their favourite market, move to Detroit!

graeme2• 10 years ago

This seems naive. There's only so much land in urban areas, and everyone wants to live there.

As population expands, isn't there some kind of mathematical constraint on total possible hoising within a circular area? City centres radiate outwards roughly circularly.

More NYC like areas would help, but we can't seem to build those anymore. When existing cities grow they just sort of spread outwards.

Edit: Per my comment below, my argument is that as long as we build the way we do, we can't really build our way out of this. Even our "dense" construction isn't really dense once you consider total land use including businesses, offices, etc

ghaff7• 10 years ago

it's just a matter of building more housing

Not really. It's a matter of building more housing, more schools, more infrastructure to move people around (by whatever combination of public transit and cars), etc. You can't just pop a few big towers of apartment buildings down and call it a day.

codeddesign2• 10 years ago

If you live in the middle of NY or San Francisco maybe, but if you actually look at the map it is the Midwest and south that are having issues. The problem isn't housing..there are enough houses. The problem is that people don't have blue-collar jobs and the housing that is being built is geared towards higher wealth brackets. The carolinas for example: with limits on zoning permits and fees, it's more cost effective to build high-end homes. No one wants to build low end homes...it all really comes down to income inequality. If anyone actually read the article, it's not about homes but about the blue collar work force not having enough income to live where they live.

jrnichols• 10 years ago

My health care costs were almost 50% of what my rent was recently. Seriously.. rent was $590/mo, my ACA plan (with fairly lousy coverage and few doctors that would take it - I lost my original doc) was $290/mo.

You're absolutely right. Those three things are spiraling out of control in price. The place I moved out of is now renting for $700.

AdmiralAsshat• 10 years ago

I've been trying to buy a place for awhile now. On Zillow, as a matter of fact. I can attest to the fact that it seems bloody impossible to find a place. I've had people in my neighborhood tell me that they bought their townhouse for $200k or so ten years ago and putting it up for sale now at rates of $350k or higher.

The nice thing about Zillow is being able to see the pricing history. The vast majority of houses I have looked at are approaching their 2005/2006 prices, before the last bubble popped.

I'd say we're due for another one soon. I will begrudgingly bide my time until then.

ohgreat• 10 years ago

Same here. Zillow made me realize I should wait too.

I've been following the development of a new area that's going to open up later in the year, but the surrounding neighborhoods are priced at least in the $500k. The likelihood of getting into the new area is not looking good for me. There's affordable housing, but I definitely don't qualify.

talmand3• 10 years ago

What I find interesting in my area is that many houses are being sold for a high price above the listed tax assessment from the previous year. Then once it gets appraised during the sale process it is valued close to the tax assessment, which is much less than the agreed upon price. Which means the new owner will have to pay much of that difference out of pocket since a mortgage may not be allowed to go that high above appraisal. The current owner likely won't renegotiate because they know they can put back up on the market and somebody else will make an offer.

I looked at buying a house during the last bubble in Vegas and once I heard the overly obvious BS from everyone involved I decided not to bother. Once again we are looking at houses in a new state and hearing much the same BS as before. Unless we see a deal, we'll likely wait again.

gdilla• 10 years ago

I think it depends on the location. During the last bubble-burst(?) housing in Santa Monica didn't really fall. Activity just kind of slowed down. Also, the last bubble was partially fueled by bad loans to unworthy borrowers. They were leveraged to the hilt, and when their rates reset on their teaser loans, foreclosures went up. This is happening less now because easy mortgages aren't as rampant. I bought a house in LA as a 20 year old with 0 downpayment and 'stated income' in 2002! That doesn't happen anymore.

ghaff7• 10 years ago

Much of the Boston area didn't really drop much either. Certainly a much different situation from, say, Las Vegas where there was a huge amount of speculative building and bad loans going on.

CalRobert• 10 years ago

While supply and demand affect Santa Monica as much as anywhere else, there are probably a _lot_ of people in the LA area who would like to be in SM but instead are living elsewhere, so if prices ever drop they will be sure to swoop in and grab a spot.

Santa Monica also has rent control, which increases pricing friction and raises prices (fewer people willingly moving = fewer vacancies = more competition for the few places that do come on the market = higher prices). This means that if housing drops at all people will be enticed to become buyers instead of renters.

I was lucky to get a spot in Santa Monica, but mostly because the landlord wasn't too concerned about maximizing rent, and we were the very first people to show up and look at the place. It was listed on a Sunday night and we were signing papers Monday at 9 AM. And this was in 2011!

maxxxxx• 10 years ago

Things have to get really bad for Santa Monica prices to fall. It's probably one of the most desirable places to live in the US so there will always be people willing to move in as soon as prices fall even a little.

pc863• 10 years ago

Here's a hypothetical: housing prices stagnate at 30% higher than they are now and don't move much for decades once they reach that. You'll spend quite a bit of money waiting for a correction that never comes.

Timing the market is a losing strategy. So is banking on the cost of housing appreciating during the period of time you own a home.

Buy a house when you want to buy a house. Anything more complicated than that is a waste of time.

nugget• 10 years ago

Timing the market is usually but not always a losing strategy. The best variables to watch are the cost of renting versus the cost of owning. I remember by 2006 these costs had diverged in certain markets to the point where CAP rates were negative (you couldn't make money buying and renting 80% LTV property out). That was a pretty definitive sign that there was turmoil in the market. If renting is or becomes much cheaper than owning, then don't be afraid to keep renting and don't panic buy just to feel like an owner.

wheaties• 10 years ago

I would say that basic economics should have predicted this. I mean, if there's an area where your children can escape poverty with a higher chance, isn't that area more desireable to live? And if so, wouldn't you pay a premium to allow your children the opportunity?

I would. My parents did. I'm a child of the lowest 25% who now am a developer living in the highest 25%.

pc863• 10 years ago

I think by definition if you live in poverty you probably don't have the luxury of "paying a premium" to live in a different school district.

TulliusCicero2• 10 years ago

A certain amount of price increase for a desirable area is expected, of course. It's just gotten out of control in certain areas due to highly restrictive regulations around building more.

Like, the bay area should be more expensive than normal because of the booming economy. But should housing in otherwise-normal suburbs like Sunnyvale or Santa Clara cost 3-4x as much as normal? No; that's the result of onerous regulations.

cherry_su• 10 years ago

Figure 1's concentration of orange and yellow areas looks moderately correlated with the Bible Belt (https://en.wikipedia.org/wiki/Bible_Belt), in which socially conservative evangelical Protestantism plays a strong role in society and politics, and Christian church attendance across the denominations is generally higher than the nation's average. It would be interesting to explore this relationship further.

Social Mobility May Suffer as Income Fails to Keep Pace with Housing Costs

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