Housing is Unaffordable for Young People

[CGinMN]

Rates are 100% market driven.

Have you seen this chart? Eye opener for sure.

 

[alebrewer]

Erath County is center of dairy in Texas I am told. Big fiberglass cow in the middle of Stephensville on a sign I believe. I have some ancestors buried west of Stephensville and was down there about 20 years ago.

Makes sense. Tarleton is one of the biggest AG colleges in Texas.

 

[Surf Cat]

Housing is Unaffordable for Young People....

Forget buying.....Rent here in So.Cal. is astronomical. Our 26 year old son lives with us and he has a city job. The wife and I tell him just stay here and save for a house. When we tell him how much we paid for rent when we were single...he gets all pissed off....Lol

I would rather rent a 1000sf 2 bedroom in the city for $1800-$2000

That would be our son's "half" for an 800 square foot apartment with a roommate here.

 

[Joe Flacco]

Have you seen this chart? Eye opener for sure.
View attachment 97769

I have not. I am so bad with colors that I am having trouble understanding what this is.

Is it just showing how low rates have been over the last two centuries?

 

[Joe Flacco]

Back then Simon van Halen probably let Edward III borrow 100 cows and required him to return him 35 cows per year.

 

[CGinMN]

I have not. I am so bad with colors that I am having trouble understanding what this is.

Is it just showing how low rates have been over the last two centuries?

It shows 700 year of declining long term rates. Each century interest rates go down 1-2 basis points.

https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018.pdf

 

[TerryRohrer]

Did you ever do any P&L analysis WRT dairies? If so, at what price per acre does dairy farming become impractical?

Dairy profitability is more about herd size. Farmland prices likely have little bearing, except that those pasturing cows likely have half the productivity compared to intensively managed herds.

Loading…

www.dairyherd.com

 

[Mark K]

I don't believe that rates were artificially low. So I disagree with you.

If you look at history of rates and history of median home prices, prices went up the most when rates were high and increasing. The reason for that is because the rate depends on what is going on with prices. Not the other way around.

Maybe in a perfect economic model, but not when the Fed is manipulating rates. The outside forces will distort the supply/demand curve.

Before the current increases, the previous 10 yrs. or so had artificially low rates due to the meddling of the FED. That started after 9-11 when Helicopter Ben threatened 'dump dollars out of helicopters' to keep the economy rolling. They should have slowly increased rates once the economy started roaring but they did not. They kept the rates too low for too long and buyers were bidding up prices because at 2-3% mortgage rates, why not. We're now seeing the effects.

Rates are not too high currently but the prices are compared to income levels. The prices got bid up during the low rates but the asking prices aren't coming down as quickly as the rates increased.

You have to wonder if many of the sales at elevated prices met the definition of MV due to the buyer's motivation often being higher than the sellers, FOMO, in many cases. I think that a lot of comps used in appraisals a couple of years back that helped facilitate the current almost-bubble were not MV sales.

 

[Terrel L. Shields]

Housing is Unaffordable for Young People....

Forget buying.....Rent here in So.Cal. is astronomical. Our 26 year old son lives with us and he has a city job. The wife and I tell him just stay here and save for a house. When we tell him how much we paid for rent when we were single...he gets all pissed off....Lol

That would be our son's "half" for an 800 square foot apartment with a roommate here.

White County, AR has a nice college, small town and average rents are $720 a month. Average home prices under $200k.

Dairy profitability is more about herd size.

alternative cost plays in. Reminds me of the Moron Watermelon Company. They bought melons on the Red River for $1 and sold them in Tulsa for $1 and couldn't figure out why they were losing money so they bought a bigger truck.

 

[Joe Flacco]

Maybe in a perfect economic model, but not when the Fed is manipulating rates. The outside forces will distort the supply/demand curve.

Before the current increases, the previous 10 yrs. or so had artificially low rates due to the meddling of the FED. That started after 9-11 when Helicopter Ben threatened 'dump dollars out of helicopters' to keep the economy rolling. They should have slowly increased rates once the economy started roaring but they did not. They kept the rates too low for too long and buyers were bidding up prices because at 2-3% mortgage rates, why not. We're now seeing the effects.

Rates are not too high currently but the prices are compared to income levels. The prices got bid up during the low rates but the asking prices aren't coming down as quickly as the rates increased.

You have to wonder if many of the sales at elevated prices met the definition of MV due to the buyer's motivation often being higher than the sellers, FOMO, in many cases. I think that a lot of comps used in appraisals a couple of years back that helped facilitate the current almost-bubble were not MV sales.


View attachment 97770

I think you and I have a different definition of the economy "roaring".

With rates where they were between 2010 and 2019, the GDP growth rate ranged from 1.56% to 2.97% per year. The decade averaged about 2.25% GDP growth rate per year. At the same time, inflation ranged from 1.12% to 3.16% per year, averaging about 1.9% per year.

What about that scenario makes you think that rates should have been higher than where it was during that time?

The data says that the rate was exactly where it should be for a stable economy and stable inflation.