Economist explains why you can’t afford a house anymore
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SOURCES:
I’ve linked my sources in the blog that goes along with this video. Links are in the text.
https://www.moneymacro.rocks/2024-05-01-Housing-Crisis/
Timestamps:
0:00 – introduction
2:11- housing consumption
9:03 – Backblaze
10:22 – housing investment
16:11 – mortgage affordability
19:21 – discussion
Attribution:
Some of the more creative images were generated with chatGPT
Narrated and produced by Dr. Joeri Schasfoort
26 Comments
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Claimed that IF NO bank ever loaned on any house all the prices would go to HALF.
The super rich on a global scale are buying houses as investment all over the world so as long as countries fail to protect locals by restricting sale of homes to foreign buyers we get this hi price increase
NZ definitely has constrained supply with lots of resistance to densfication. Kiwis also focus on amassing property to grow weath rather than the stock market. We also have no capital gains tax.
In Texas we don’t have a state income tax, so we make it up (in part) with property taxes. While interest rates may have come down, the higher home prices mean much higher property taxes. That makes home much less affordable.
Oh yeah, lets completely ignore 530,000 new permanent migrants to Australia last year. Demand is sky high, while supply has been crushed by higher interest rates and input costs. Not rocket science.
Got expensive because of private bank profit maximisation and lobbyists owning our so called democratic governments. Systemic corruption is the name of the game.
Here comes another savior.. helping by showing a complex chart for two seconds.
I think there's a glaring omission in this report. Since neo-liberal economics took hold in the 80's, the "trickle-down effect" has proven to be false. The resulting upward shift in wealth has led to a stagnant middle class income at best and a growing homeless class everywhere. And it's getting worse. Where does the median income of today's citizens factor into housing affordability?
Where I live, a real estate tychoon wants to buy our city government with political campaign donations so he can build some residential towers on city-owned former park land. Is it any wonder he faces opposition? I think you were pretty hasty dismissing the legitimate concerns of those you call NIMBYs. As others have commented, single family homes aren't really a problem where there's land, and there's little or no opposition to those most of the time. Of course, those don't net massive campaign contributions.
Nope, none of these are the primary reason for the rise in property prices. In fact, over the long term, the trend over centuries is declining prices.
And the bank is more likely to lend money to rich people is making the situation worse.
Rich people can sell their houses in a better prices in order to get even more loans to buy more houses
and the new generation without rich parents can just wait and die.
Funny thing is the government in my country is trying to save new generations by giving them better loan deals.
How is that goint to help long term? Evne you get a decent loan, you still need to work 12 hours a day or even more to pay for it.
is that AI art?
It would be far better to reshape the economy so that most people live with their extended family on a self-sufficient homestead, a farm or a ranch, from cradle to grave.
Office work needs to be wholly remote; there is no need to be in a separate location for anything currently being done in an office. Doing this flushes out most city residents overnight. Then tie city residency to being directly employed in one of the few organizations whose existence requires the use of a city to fulfill its function (and no, most government and corporate functions _do not)_.
Restrict purchase and transfer to only that extended family; formalize this in law as it once was in the ancient world. You don't need to spend money on schools, groceries, transit, most everyday commerce, etc. when you can handle all of that in-house at home because you're sharing a massive homestead with upwards of a few hundred people- all of whom you are related to by blood or marriage.
This entire issue is a stupid self-inflicted problem of Modernity, and like most such issues it is solved BY GOING BACK TO HOW THINGS WERE BEFORE!
This video was just amazing! It summed up a problem that “experts” talk about for hours and hours to finally say nothing.
Hi, I live in Canada and I’ve noticed a lot of older neighborhoods are being town down to build new housing. So my question is ; if an old single family house is demolished and a new one built in its place, does that still count as new supply?
Another factor contributing to unaffordability is the recent insurance crisis, esp. in California and Florida due to risk of natural disasters. The cancellation of housing insurance in some areas will reduce the number of insurable properties available for purchase also causing some housing to become unaffordable. In California this has combined with NIMBYism and unabated demand to make where I am in Silicon Valley the most expensive housing market, maybe, in the world. This maybe too recent to fully work its way into all of our markets, but likely will do so in the near future.
There is also a migrant crisis on our southern border and in the EU with many new immigrant peoples needing low cost housing. So many such factors now combine to make a perfect storm in the most desirable areas.
You cannot compare mortgages on a property at two different times without adjusting the amount! In your example, you compared a $100K mortgage for 30 years with different interest rates. But the average mortgage you need to take now can be 3-5 times that. For example, in Israel, it has almost gone up by 4-7 times compared to 20 years ago! Our parents got a mortgage of around $50K and paid it off in 10 years. Now we need to take a minimum of $250K mortgage for a two-bedroom apartment for 30+ years (based on average family income).
You can't afford a home to rent or buy because your government is full of Traitors and have bought millions of foreign immigrants in to your country and they have taken your home off you
Thats why you can't afford somewhere to live anymore…..
This guy is forgetting that, for almost two years during the "pandemic", landlords couldn't collect rent or evict. The Courts didn't stop this. Landlords were never compensated, and it looks like Government can force landlords to provide free housing any time they please.
After that a lot of people stopped renting. And those that still do now price the rental according to the increased risk.
I think there is a simple solution to housing crisis-
George tax (for clarification, I do not believe Land-value tax should be one single tax but could be the most crucial tax).
Those who can afford single zone housing at a very high tax rate- can keep their houses, and their money can be used to subsidize other project- that can make housing more affordable.
As we slowly increase the tax rate- many ‘nimby’ will themselves sell their houses and move to apartments as to avoid paying hefty tax which they can’t afford.
Excessive speculation will diminish- as keeping an empty house will no longer be profitable. Its like paying a renting an empty house; while hoping that the price may increase a little- too much risk for little profit. Plus there is no point holding land for long time because- as they keep the hold of land for very long- hoping the price will eventually go up- the expense of land is constantly draining the investment- so better to sell than to hold.
People’s groceries get cheaper as the government can substantially decrease taxes on commodity item and improve infrastructure that make other items more accessible and cheaper.
Lower mortgage rate that has made investment easier will also have less impact- as people will not take houses at low interest rate to keep it empty and pay high taxes. Rather this will increase the supply of houses as people who need houses have ability to buy houses and who does not need houses can also easily sell the houses.
If you look carefully, the cause for every economy related issue is always corporate greed and big money buying the politicians fir that. If there's an opportunity to make money, they will try and find a way. This goes all the way back to ending gold reserve policies and freeing banks to create money out of thin air, creating asset inflation and turning working class to mortgage slaves. People are very stupid to be happy when their house market value goes up while their kids will never be able to buy one in the future.
for anyone who's watched, does this video mention mass immigration?
Because they cost too much. Why did you need an economist to explain???
Great video but the use of A.I. art is jarring.
There’s a nuanced issue to NIMBYism, in that municipalities want to be able to charge higher taxes on land that is highly desirable. They can’t draw in the same margins to support burgeoning bureaucracy without highly taxing single family homes in upper middle class neighbourhoods. When the neighbourhoods go downhill, the tax rate declines in line with home values. It means that municipalities are often aligned with NIMBY ideals all the way down the chain.