3.6 Crunch Time

[Airstream]

Did you also walk 5 miles in the snow, uphill both ways, to go to school?

I also see part of the problem in that not too many true starter homes being built. HBU says build what ever gives the most return. But smaller/less expensive homes are probably the ones that are needed the most. The immigrant impact is more strongly felt in the rental market, not the purchase market. Ironically, many of the immigrants who are higher earners and buying homes are the ones that are being sent home at a pretty good rate, or net getting their visas renewed.

The reason starter homes aren't being built is that there is no money in them for builders. Limited builders, and they are going to focus on the most profitable homes. I used to be a general contractor with a home building business. And I can tell you that I would rather build one large home and make twice the profit, then to build one small home and make practically no profit. When I sold real estate it was always the cheaper sales that caused me the most headaches. And when I built homes it was kind the same thing.

In my area right now builders are building twin homes by the boatload. Reason: Maximizes land use. And maximizes profit.

 

[chad hampton]

Everything the government touches gets propped up and inflated. Think about it, everything the government provides loans for is all out of whack, cost wise.

 

[Sadie]

Reason for inflated home prices. Not one single factor, but a congruence of many.
1) Illegal immigration. With 12 million plus coming into country that is a pressure on just about everything, including home values, food, etc.
2) Cheap money. We had incredibly cheap money for a long time. This resulted in people being able to afford more expensive homes. It also locked up the market for people reselling their homes or downsizing due to higher mortgages, the capital gains taxes, and cost of construction. It was just cheaper to stay put.
3) Zoning laws and fewer builders. Many builders got out of the market due to the Great Recession. They have never come back. And zoning regulations and the entire regulatory framework has added lots of money to the cost of building.
4) Cost of construction. Labor costs, materials, regulations, etc have gone up considerably.
We have to remember that today's mortgage rates are not historically excessive, but are the historical norm.

I just want to add something regarding affordability. There has been a lot of nonsense in the blogosphere about how unaffordable things are. It is a lot of nonsense, and it is propagated by an incredibly naive generation. Yes things are expensive, but that is more because wants have increased immensely. I grew up in a 920sf house with 2 bedrooms and 1.5 baths and a one car garage. I slept in the basement which was a room with a closet, but not a legal bedroom. We had only one car without AC by the way. We didn't eat out. We didn't go on expensive vacations. We didn't go on vacations!! I can remember maybe 4 or 5 my entire childhood. Both of my parents worked for most of my childhood. And that was true for just about every one on my street. I worked from the time I was 10 years old mowing lawns, etc. Got my first job at 14 and worked during school, etc while playing 3 sports. If I wanted something I had to pay for it. No freebies.

What is left out of your bullet point presentation is that wages have not kept up with inflation. the original minimum wage was the hourly wage someone had to earn to support a family of 4. Minimum wage has lost 30% of its purchasing power since 2009. Federal minimum wage is $7.25/hour. 2 people working that could not support a family. And forget if they are in one of those goofy states that has an incredibly low minimum wage for tipped jobs, like being wait staff.

 

[Airstream]

What is left out of your bullet point presentation is that wages have not kept up with inflation. the original minimum wage was the hourly wage someone had to earn to support a family of 4. Minimum wage has lost 30% of its purchasing power since 2009. Federal minimum wage is $7.25/hour. 2 people working that could not support a family. And forget if they are in one of those goofy states that has an incredibly low minimum wage for tipped jobs, like being wait staff.

THAT IS SIMPLY NOT TRUE!! Who works for minimum wage? Teenagers. A useful long-term measure from Pew's analysis of BLS data finds that median weekly wages increased about 8.1% in real terms from December 2015 to December 2025 when adjusted using the standard CPI. In other words, the typical worker's purchasing power was roughly 8% higher after inflation at the end of 2025 than at the end of 2015.

Over 25 years:

Paychecks: ↑ ~100%
Prices: ↑ ~80–100%
Real wages: ↑ ~15–20%

 

[Airstream]

What is left out of your bullet point presentation is that wages have not kept up with inflation. the original minimum wage was the hourly wage someone had to earn to support a family of 4. Minimum wage has lost 30% of its purchasing power since 2009. Federal minimum wage is $7.25/hour. 2 people working that could not support a family. And forget if they are in one of those goofy states that has an incredibly low minimum wage for tipped jobs, like being wait staff.

And by the way, NO ONE in my area works for minimum wage. I mean no one. Even at our fast food places they pay 15 to 20 an hour. And please stop using the minimum wage argument. It doesn't hold up. PERIOD. Minimum wages were NEVER considered to be living wages. And even when I was graduating from college no one could live on the minimum wage and that was in 1977.

 

[glenn walker]

And by the way, NO ONE in my area works for minimum wage. I mean no one. Even at our fast food places they pay 15 to 20 an hour. And please stop using the minimum wage argument. It doesn't hold up. PERIOD. Minimum wages were NEVER considered to be living wages. And even when I was graduating from college no one could live on the minimum wage and that was in 1977.

There are almost no minimum wage jobs in LA most start at $20.00 to $22.00 per hour. But unlike years ago few teenagers work at all even at fast food, now it's adult's and even seniors at so called minimum wage jobs.

 

[Sadie]

THAT IS SIMPLY NOT TRUE!! Who works for minimum wage? Teenagers. A useful long-term measure from Pew's analysis of BLS data finds that median weekly wages increased about 8.1% in real terms from December 2015 to December 2025 when adjusted using the standard CPI. In other words, the typical worker's purchasing power was roughly 8% higher after inflation at the end of 2025 than at the end of 2015.

Over 25 years:

Paychecks: ↑ ~100%
Prices: ↑ ~80–100%
Real wages: ↑ ~15–20%

There are plenty of adults who work for minimum wage, or less if they are tipped. The purchasing power of the U.S. federal minimum wage has declined by roughly over the past 15 years due to inflation and a stagnant nominal rate. A little under half the minimum wage workers are under 25, that leaves an awful lot over 25. These are service workers, the janitorial staff, food prep, entry level positions, day care workers.

BTW, where did you get your data? I was unable to find the same information.

 

[Sandra Koutsopoulos]

The reason starter homes aren't being built is that there is no money in them for builders. Limited builders, and they are going to focus on the most profitable homes. I used to be a general contractor with a home building business. And I can tell you that I would rather build one large home and make twice the profit, then to build one small home and make practically no profit. When I sold real estate it was always the cheaper sales that caused me the most headaches. And when I built homes it was kind the same thing.

In my area right now builders are building twin homes by the boatload. Reason: Maximizes land use. And maximizes profit.

I had my own real estate brokerage in WI for over 20 years and sold a BUNCH of duplexes, which are plentiful in the Milwaukee area. I'm sure getting a start in an owner-occupied duplex helped a BUNCH of my clients get a good start in homeownership. the fact that you are mentioning twin homes now reflects the benefits to the community, to contractors, and to renter/owners who can make their ownership more affordable. There are just a few builders building like that out here, and people MARVEL at what a good idea it is! New homes near me are typically in the $600s-$700s, and what young family can afford that? But if there is a built in subsidy (ie tenant in a portion of that big house), suddenly people CAN realize their goal of home ownership. And that style is conducive to taking over the entire house if their family grows or they become more financially secure, and also is a great idea for downsizing without leaving "home". Who ever though it up out here was ACES in my book. Typically, builders show that additional space with its own private entrance, noting the rooms as larger rec room with kitchenette, bathroom & bedroom, with hallway and connecting door to the main 2-story residence. All the space is GLA, and still is zoned and shown as SFR here, which solves a bunch of other problems, since SoCAL hasn't been particularly duplex friendly in the newer developing areas. Some towns have NO duplex zoning in the entire town! But these 'multigenerational' houses will work.

 

[Sandra Koutsopoulos]

I actually grew up in South Dakota. And yes, I had to walk home from school. No buses. It was a mile walk from Jr. High. And in the winter it was miserably cold with the wind blowing 20 mph. I can't remember one day where we called off school because of the cold. And we had some brutally cold days.

But that's far afield from the point of this thread. The 3.6 crunch is coming. Talked to a lender they other day and they are losing appraisers left and right.

Congratulations! You put a smile on my face and forced me to actually giggle a bit! I feel that the consensus is that the majority of appraisers don't like it, don't want to do it, consider the whole premise does not enhance the mortgage security of the collateral, with many of us, perhaps just for the first time, seriously considering actually RETIRING and doing our own enjoyable stuff we've been too busy earning a living to take seriously in the past. I think if we actually saw a useful purpose for it in valuing real estate, we might be more on board. But all those pull-down menus, disconnected and disjointed details, doesn't give us the warm fuzzies.

 

[Airstream]

A

There are plenty of adults who work for minimum wage, or less if they are tipped. The purchasing power of the U.S. federal minimum wage has declined by roughly over the past 15 years due to inflation and a stagnant nominal rate. A little under half the minimum wage workers are under 25, that leaves an awful lot over 25. These are service workers, the janitorial staff, food prep, entry level positions, day care workers.

BTW, where did you get your data? I was unable to find the same information.

ChatGPt.

1) Half of the minimum wage workers under 25 are teenagers on their first job.
2) Those people that work for minimum wage and get tips do so because they can often make more money. Especially in restaurants where they often make 150 to 400 a night in tips!!
3) The median wage in the country is about $38 per hour.
4) Just because half the minimum wage workers are under 25 doesn’t mean anything as to the total number. For example if there are a total of 100 minimum wage workers and half are of them are under 25, that leave 50. The question is half of what!!
5) There are a total of 843,000 minimum wage workers as far as 2024 data. That is out of a labor force of 162.9 million people!!! That is .5% of the work force. Please do the math.
6) 3 of 4 that work for minimum wage work in the service industry where they get tips. So are they really just working for minimum wage? i doubt it. The average service person working for tips makes $16.73 per hour. You can now deduct 25,000 a year from your wage for Federal taxes if you work for tips.

The point is very little of the work force works for minimum wage or less. But people throw around numbers without really doing the research. They say HALF of all minimum wage workers are over 25!! But anyone with a stats background will go “half of what!” And many of those that work for minimum wage work in the service industry that get substantial tips and make more.