UAD 3.6 discussion

[Non Sequitur]

I see the major players like class valuation and clear capital post **** daily on LinkedIn that should get them reprimanded by states.

Yeah, and they aren't shy about any of it. That's the power of REVAA and years of the musical chairs between gubmint, regulator, GSE, and corporate positions.

 

[timd354]

In the 1950s homes cost around 2.2 times the median household income.

In 2024, it is 5.1%.

That is the issue. The upper middle class will not be affected. Most couples are both college educated and both are making four figures.

It is the first time homebuyer and the working class that purchased homes in 2021-2025 that will be affected.

When they get foreclosed, private equity will be there, so no 2008 REO market. We will probably never notice it.

I'm in one of the hottest markets in the country and things are starting to stabilize and decline. The high end homes are even starting to slow, but they have so much purchasing power and are still paying cash for million dollar homes


Tim is dead on. The only thing that I might disagree is the overall economy. One blip in the economy and the first time buyers and the middle class will see a foreclosure boom.

It doesn't matter about how qualified you were. Home affordability is at the all time low. It takes two incomes to buy a home (or one stretched borrower) . If one gets laid off it's over for them. All the covid money is gone. The covid job boom is over.


Then you have the investor thanks to easy money loans. They are partly to blame for the undersupply of homes. They will not get foreclosed, but prices may decline if rents decline. Most are high income borrowers...that can weather the storm.

In the 1950s it took one income. Today it takes two incomes. What's next? Put grandma or the kids to work? We are at a reflection point.

Here is a "chicken or egg" question for you.....does it take dual incomes for many pople to buy a home because home prices are so high or are home prices so high because many households are now 2-income households and the real (adjusted for inflation) median household income in the U.S. has increased by about 2.5X since the early 1950's? Curiously, the median real (adjusted for inflation) home price in the US increased by about 2x from the early 1950's until the present time (CPI Prices in second chart below are expressed in constant 2025 dollars), which means that affordability now is slightly better than it was in the early 1950's, based on overall household income (which now often includes dual incomes).

 

[NC Appraising]

While it’s true that median real household income in the U.S. has increased by approximately 2.5x since the early 1950s and median real home prices have risen by about 2x, attributing the rise in home prices solely to the prevalence of dual-income households oversimplifies a complex issue and ignores several critical factors.

The argument that dual incomes drive higher home prices assumes that increased household income directly translates to proportional increases in housing demand and prices. However, this overlooks the role of supply constraints, such as rising construction costs, which have significantly driven up home prices independent of income trends. Additionally, the affordability comparison to the 1950s fails to account for changes in financing costs mortgage interest rates, which were lower in the 1950s (around 4-5%), compared to recent peaks near 7-8% and the increased burden of other household expenses like healthcare, education, and childcare, which consume a larger share of income today. Furthermore, the reliance on dual incomes to achieve affordability highlights a structural issue: single-income households, which were more common in the 1950s, now face significantly worse affordability, as median home prices relative to single incomes are far less favorable. Regional disparities also muddy the waters, as high-demand urban markets have seen price increases far exceeding the national median, driven by speculative investment and limited inventory rather than just dual-income purchasing power. Thus, while dual incomes contribute to demand, they are more a response to rising home prices and broader economic pressures than the primary cause, and affordability remains strained for many despite the slight improvement in nominal metrics since the 1950s.

Then you have to factor in the China high that we have been in since the 2000s that we did not have in the 1950s.

 

[Essexfenwick]

1950s were on the gold standard with no money printing. No welfare. Minimal entitlements. The discipline of the economy and market were from another dimension compared to todays slovenly, sloppy and somewhat stinky inflationary affair.


Inflation is a product of monetary policy 100 percent. The Inflation term refers to inflation of the money supply not price increases which is a consequence of money supply.

 

[timd354]

While it’s true that median real household income in the U.S. has increased by approximately 2.5x since the early 1950s and median real home prices have risen by about 2x, attributing the rise in home prices solely to the prevalence of dual-income households oversimplifies a complex issue and ignores several critical factors.

The argument that dual incomes drive higher home prices assumes that increased household income directly translates to proportional increases in housing demand and prices. However, this overlooks the role of supply constraints, such as rising construction costs, which have significantly driven up home prices independent of income trends. Additionally, the affordability comparison to the 1950s fails to account for changes in financing costs mortgage interest rates, which were lower in the 1950s (around 4-5%), compared to recent peaks near 7-8% and the increased burden of other household expenses like healthcare, education, and childcare, which consume a larger share of income today. Furthermore, the reliance on dual incomes to achieve affordability highlights a structural issue: single-income households, which were more common in the 1950s, now face significantly worse affordability, as median home prices relative to single incomes are far less favorable. Regional disparities also muddy the waters, as high-demand urban markets have seen price increases far exceeding the national median, driven by speculative investment and limited inventory rather than just dual-income purchasing power. Thus, while dual incomes contribute to demand, they are more a response to rising home prices and broader economic pressures than the primary cause, and affordability remains strained for many despite the slight improvement in nominal metrics since the 1950s.

Then you have to factor in the China high that we have been in since the 2000s that we did not have in the 1950s.

Yes, there are a lot of factors aside from increased household incomes that have driven home prices higher over the past several decades, including the factors you cite and additional factors such as a doubling of population since the 1950's, onerous land use and development restraints in many markets (especially in much of California and the the Northeast).

Another factor is that homes constructed today are much larger homes with many more features than homes than homes built in the 1950's. In 1950, the average new home was about 1,000-sf with 8-foot ceilings, no A/C, a single bathroom and small kitchen with only a few cabinets (often metal) and a single, formica counter. New homes built today are typically over 2,000-sf, often with higher ceilings, multiple bathrooms, CAC and large kitchens with loads more feautures.

 

[NC Appraising]

Can we atleast agree on the below data and something is out of wack?

Current data:

• Median household income: ~$80,610
• Home price a median income can afford: ~$294,000
• Median home price: ~$430,000

2005 data:

In 2005, with a median household income of $46,326, a household could afford a home priced at approximately $253,879, assuming a 20% down payment and a 30-year fixed-rate mortgage at 5.8%. This is slightly higher than the median sale price of $238,000

 

[Non Sequitur]

Another factor is that homes constructed today are much larger homes with many more features than homes than homes built in the 1950's. In 1950, the average new home was about 1,000-sf with 8-foot ceilings, no A/C, a single bathroom and small kitchen with only a few cabinets (often metal) and a single, formica counter. New homes built today are typically over 2,000-sf, often with higher ceilings, multiple bathrooms, CAC and large kitchens with loads more feautures.

I was talking to an appraiser about this the other day, the post WWII housing market was not only physically different but housing now is more about "wants" than "needs." The typical middle class family does not need a 2,000 7/3/2.1 home with amenities that are common now. And that's not mentioning no one thought of housing as piggy banks in the 50-70s. It's the same with automobiles now, no one needs an $80k vehicle with an 8 year note but many have two parked in their driveways, and that doesn't help anyone in the market for housing. Sure is a different world now.

 

[J Grant]

There is no relief in sight and many Americans will live in a permanent state of instability. Prices outstrip income for working Americans, and it is due to a number of factors, but like nearly everything else, we are seeing a split between the wealthier and the working - because nearly a third of home sales now in many markets are to investors, not owner occupants. I see many LLC sales and cash sales ( even if they finance with a loan, the Sale contract is cash terms ) I get a rental income form asked for on nearly half the appraisal orders in some weeks.

When I say no relief, I mean that the alternative of rentals is just as bad or worse - no chance to build equity, and rents are sky high.

 

[chad hampton]

I work closely with builders and developers in my full-time job, Land is so expensive now that they can’t make the numbers work if they just build a 1200 square-foot starter home. They would love to do it, but they have to build up on the smallest lot allowed. Between land and construction costs, they have to get a higher square footage on the smallest lot. that is definitely contributing to the problem.

The days of a young couple buying a 1200 square-foot house then starting a family and moving into a 2400 square-foot house, then after a few years in elementary school moving up to a 3000 square-foot house are over. If you can’t get into that 2400 square-foot house at the start, you’re in for a lifetime of renting.

Housing is a ****ing mess. Regardless of what some say.

 

[chad hampton]

And I would say 80% plus of the $2 million and up purchases I see in my market or foreign, primarily Indian. And $2M buys a very nice home here.