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What can be done about the cost of living?

There are places like that and lifestyle choices that can be made to do so. You have to go to those places and make those choices.

The thing is that this lifestyle was basically attainable anywhere. Why is it becoming more and more exclusive?

And not have kids until you can afford them.

So my grandfather could afford a home and many children on his income alone in his 20's. People my age can't afford a 1 bedroom apartment or any kids even with both spouses working.

Why do you refuse to admit that there's a problem?
 
The thing is that this lifestyle was basically attainable anywhere. Why is it becoming more and more exclusive?



So my grandfather could afford a home and many children on his income alone in his 20's. People my age can't afford a 1 bedroom apartment or any kids even with both spouses working.

Why do you refuse to admit that there's a problem?

THings change, economics change. They have all thru history. ALWAYS. Why do you think people migrated? Immigrated? Moved to new places, settled new lands?

For a better life, for more opportunities, to survive.

Why do you refuse to admit that adapting is the way to survive and prosper? Because IMO, you feel entitled to something and dont want to have to make the tough choices, sacrifices.
 
Undoubtedly, the cost of housing has been rising relative to incomes, especially for young and poor workers. There was a slight reprieve when the housing bubble collapsed, yet the unaffordability continued to climb quickly thereafter.

Given that people are now regularly spending 30-50%+ of their incomes on housing, what are we going to do about it? Clearly this isn't good for quality of life. How do we expect people who are spending this much just to live to pay down debts and save for retirement? What are your ideas on how to solve this problem?

Personally I'd like to see mortgage rates rise to temper demand for mortgage debt. While not perfect, there does seem to be a correlation between the ratio of mortgage debt/GDP and home prices/income.

When the prime lending rate goes up - and mortgage interest rates go up - it makes buying a house even less affordable, although it may discourage a few from buying, which could result in more houses on the market. The big winners, however, are those who are heavily invested -- because their rate of return also goes up.

I'd also like to see unearned income at least taxed at the same amount as wages, as this would decrease speculation in housing and drive down rents. Some may counter that this will decrease investment in new housing units. That may be, but this would also decrease the cost of land itself which would counteract that and also incite more people to buy land and build their own homes on it.

What are your thoughts? Criticisms of my ideas and ideas of your own are welcome!

I'm not sure what you mean by taxing unearned income would decrease speculation in houses. We're contractors and there is no unearned income in specs. It's all considered profit and taxed.

The problem is not that we need fewer spec houses -- just the opposite -- we need more. Nationwide, we're still short of houses on the market, which drives up competition for a house, and the result is higher prices. When contractors are building specs, they don't make money until the house sells. But contractors are skittish -- the housing burst made them that way and they're not putting up houses as quickly as they once were. I know we're not.

The other driver is material costs and regulation costs. Those have skyrocketed in the past five years. Contractors aren't making up the difference in profits -- their profits are staying relatively stable -- but they have to charge more for the high costs of building materials. And regulations are out of this world. If you buy a new home, easily 5% of the cost could be in permits and all the new precautions that must be taken while building. When we were building in Lake Tahoe, it was common to spend upwards of 10K just on earthquake ties (and it had to be the brand "Simpson"). When you add up all the costs, it gets quite high.

It's a game. But if you want to win -- you should probably buy a house. Owning a house is a great investment, especially when you can sell it for double the price in 15 years.

Some people are getting weeded out -- that's true -- and they ought to do as some here have suggested and move. There's nothing at all wrong with that.
 
So your solution to increased home prices is to increase leverage? This doesn't really seem to explain what's caused the problem in the first place: why have home prices risen faster than incomes over the past few decades?

There are multiple variables that contribute to rising prices and some of which are particular to certain areas. For instance, in LA you could point to regulations limiting the amount of housing created coupled with increases in population which is naturally going to dramatically increase the value of housing since the supply is artificially limited while demand is rising.
 
The thing is that this lifestyle was basically attainable anywhere. Why is it becoming more and more exclusive?



So my grandfather could afford a home and many children on his income alone in his 20's. People my age can't afford a 1 bedroom apartment or any kids even with both spouses working.

Why do you refuse to admit that there's a problem?


Yes, there's a problem, but it's not one any of us can fix. Another recession would drop the price of homes but that would also result in a loss of many jobs.

I would suggest that if you want a home and you can't afford one that you contact Habitat for Humanity. We volunteer with them often to build homes for folks. You'd have to pay for the materials but the labor (most of it) would be donated, as long as you put in a certain number of hours in labor helping as well.

Seriously, we run ads in our community to try and get folks to let us build for them -- and we rarely get takers. Try it.
 
Undoubtedly, the cost of housing has been rising relative to incomes, especially for young and poor workers. There was a slight reprieve when the housing bubble collapsed, yet the unaffordability continued to climb quickly thereafter.

Given US homeownership rates have hovered pretty consistently in the 63-65% for decades and decades (outside of bubbles) I question that they really are more unaffordable now than in the past. Sure some local markets are crazy but for the most part, no.

900px-Historic_U.S._Homeownership_Rate%2C_as_of_2014.svg.png
 
Given US homeownership rates have hovered pretty consistently in the 63-65% for decades and decades (outside of bubbles) I question that they really are more unaffordable now than in the past. Sure some local markets are crazy but for the most part, no.

900px-Historic_U.S._Homeownership_Rate%2C_as_of_2014.svg.png
That's a function of our aging population. Look at the breakdown by age:

US-homeownership-rate-2006-2015-Q2-by-age-group.png


Sent from my HTC phone. Instaurare omnia in Christo.
 
There are multiple variables that contribute to rising prices and some of which are particular to certain areas. For instance, in LA you could point to regulations limiting the amount of housing created coupled with increases in population which is naturally going to dramatically increase the value of housing since the supply is artificially limited while demand is rising.
Which would naturally lead to the conclusion that we ought to be limiting immigration when the cost of living is this high.

Sent from my HTC phone. Instaurare omnia in Christo.
 
When the prime lending rate goes up - and mortgage interest rates go up - it makes buying a house even less affordable, although it may discourage a few from buying, which could result in more houses on the market. The big winners, however, are those who are heavily invested -- because their rate of return also goes up.

This point is contradictory. Less demand and higher supply will lead to lower prices. How is that good for those who are heavily invested?

I'm not sure what you mean by taxing unearned income would decrease speculation in houses. We're contractors and there is no unearned income in specs. It's all considered profit and taxed.

Do you not take out loans to finance property purchases, labor, and supplies? What happens to your profits when the price of the loan goes up?

The problem is not that we need fewer spec houses -- just the opposite -- we need more. Nationwide, we're still short of houses on the market, which drives up competition for a house, and the result is higher prices. When contractors are building specs, they don't make money until the house sells. But contractors are skittish -- the housing burst made them that way and they're not putting up houses as quickly as they once were. I know we're not.

More supply would help, that is true, but how much building do you think would be going on if home prices were at levels that those under 35 could afford? You seem to know this market pretty well, so tell me, how much does the cost of property itself factor into the equation? Would you be able to build more properties if the land itself were cheaper?

The other driver is material costs and regulation costs. Those have skyrocketed in the past five years. Contractors aren't making up the difference in profits -- their profits are staying relatively stable -- but they have to charge more for the high costs of building materials. And regulations are out of this world. If you buy a new home, easily 5% of the cost could be in permits and all the new precautions that must be taken while building. When we were building in Lake Tahoe, it was common to spend upwards of 10K just on earthquake ties (and it had to be the brand "Simpson"). When you add up all the costs, it gets quite high.

If you're talking about the past year, sure, construction equipment has become much more expensive. Over the past decade, however, these costs have been inflating at about historically normal rates.

It's a game. But if you want to win -- you should probably buy a house. Owning a house is a great investment, especially when you can sell it for double the price in 15 years.

This mentality is what I see as the problem. We treat housing in this country as a commodity, as an asset that we expect to increase in value. But why? All other consumer goods we expect to go down in price over time (at least in real terms). Why is housing special? And doesn't viewing it this way lead to the problems we have now where young people cannot afford a place to live?

Some people are getting weeded out -- that's true -- and they ought to do as some here have suggested and move. There's nothing at all wrong with that.

You don't see anything wrong with young people not being able to continue to live in the town they grew up in? That they're forced out of their home?
 
THings change, economics change. They have all thru history. ALWAYS. Why do you think people migrated? Immigrated? Moved to new places, settled new lands?

For a better life, for more opportunities, to survive.

Why do you refuse to admit that adapting is the way to survive and prosper? Because IMO, you feel entitled to something and dont want to have to make the tough choices, sacrifices.

This isn't about entitlement. This is about structural issues in our economy where banks have assets equivalent to nearly 90% of our GDP where that used to be 50%, and now the cost of living is extraordinarily high. Does me moving to a cheaper city (where there aren't as many jobs) fix this problem?

fredgraph.png


Don't you think that there is something very wrong with this picture and the fact that real US household wages have stagnated over the past 20 years?

2081e2dcf11994e652238a3ca69cd05c--distribution-of-wealth-roaring-twenties.jpg
 
This isn't about entitlement. This is about structural issues in our economy where banks have assets equivalent to nearly 90% of our GDP where that used to be 50%, and now the cost of living is extraordinarily high. Does me moving to a cheaper city (where there aren't as many jobs) fix this problem?


Don't you think that there is something very wrong with this picture and the fact that real US household wages have stagnated over the past 20 years?

They are separate issues IMO ass they relate to individuals.

But if enough people relocate, housing prices change. If they change their lifestyles, economics change. If they borrow less money, banks profits change. Etc etc etc.

Human trends enabled the current status.
 
They are separate issues IMO.

But if enough people relocate, housing prices change. If they change their lifestyles, economics change. If they borrow less money, banks profits change. Etc etc etc.

Do you really think that me moving from Los Angeles is going to change the profits of property owners there? Because let me tell you, millions have moved away from the city in the past decades, yet it's still the most expensive city in the country (relative to incomes).
 
Which would naturally lead to the conclusion that we ought to be limiting immigration when the cost of living is this high.

Sent from my HTC phone. Instaurare omnia in Christo.

Or better yet get rid of prohibitive regulations and ordinances that stymie the creation of new housing.
 
I assume that factors in that they get paid more in those places? That's pretty unfortunate.

- address capitalism-driven wealth inequality. Remember, the wealthy can afford more and more every year...of lavish lifestyles that as you point out, don't really change quality of life. And 99% of that earning is on the back of the employee. Labor rights is how you solve that

- population growth...land is scarce. Not much to do about that, if you hold population in check, that has other bad consequences too...don't know about that one

- get a political party that is forward looking instead of backwards looking. For all their problems, many of the more nationalized nations invest billions into technology education/industry in an effort to have most of their future jobs be in something that will be driving the economy 10-20 years from now. Here we have a president pushing coal, polluting and big energy, and lower taxes for the wealthy/corporations.

That's just off the top.

But in generaly, people will probably just purchase less house/space to mitigate that cost, and as you note, spend more.
 
Or better yet get rid of prohibitive regulations and ordinances that stymie the creation of new housing.

Weird how the Chamber of Commerce pushes hard for amnesty and immigration reform, but not against regulations that stifle new housing construction. Why do you think that is?
 
- address capitalism-driven wealth inequality. Remember, the wealthy can afford more and more every year...of lavish lifestyles that as you point out, don't really change quality of life. And 99% of that earning is on the back of the employee. Labor rights is how you solve that

I totally agree here. So how do we start fixing this through policy? I've talked about raising taxes on unearned income, which is basically a wealth transfer from poor (those who pay interest) to rich (those who collect interest). Arguably limiting immigration would also help. This is the same principle as labor unions that set up a closed shop. If you limit the pool of labor, wages have to go up.

- population growth...land is scarce. Not much to do about that, if you hold population in check, that has other bad consequences too...don't know about that one

In this country that's not even close to true.

But in generaly, people will probably just purchase less house/space to mitigate that cost, and as you note, spend more.

Which is a travesty. People without a physical stake in their country are going to drop out of the management in the country, leading to a corrupt government that only serves the needs of the richest in the country.
 
That's a function of our aging population. Look at the breakdown by age:

US-homeownership-rate-2006-2015-Q2-by-age-group.png


Sent from my HTC phone. Instaurare omnia in Christo.

Get me a similar graph that doesn't start at 2006. The older folks weren't as affected by the bubble because more of them owned homes pre-bubble already, the younger folks were the ones that got hit hardest by it. I'd be willing to bet the ownership rates have trended down closer to the historical averages for all age groups.

Edit: There you go, found one for you.

MW-DN728_homeow_20150609165503_NS.png
 
Weird how the Chamber of Commerce pushes hard for amnesty and immigration reform, but not against regulations that stifle new housing construction. Why do you think that is?

They don't follow their ideas to the logical conclusion and believe ultimately that any problem can be solved simply by passing legislation and the force of government. It is the same people that think sticking a "no guns allowed" sticker on a window is going to prevent a criminal from entering an area without a weapon.
 
Reading this post, I come back to think of decades ago when families could buy a home with one income. Today we're in a situation where one income isn't even enough to rent a one bedroom apartment without creating financial stress. What's changed in those decades? I argue it's a massive increase in debt which, as you allude to, exacerbates inequality as the rich get richer and the poor get poorer. How do you see it?

IDK, I got 2 kids in their 20s who both bought homes on one income. They way underbought what they could afford too.
 
IDK, I got 2 kids in their 20s who both bought homes on one income. They way underbought what they could afford too.

Ya but their peers rather suck, people of that age who were well forged by their parents and their communities are really cleaning up....one of my daughters is already at 27 making over $140K a year, my son who just in the last year became an officer at the 101st Airborne jumped over 6 people to get a leadership spot on his current deployment to Afghanistan...they lack much competition.
 
Get me a similar graph that doesn't start at 2006. The older folks weren't as affected by the bubble because more of them owned homes pre-bubble already, the younger folks were the ones that got hit hardest by it. I'd be willing to bet the ownership rates have trended down closer to the historical averages for all age groups.

Edit: There you go, found one for you.

MW-DN728_homeow_20150609165503_NS.png
And it shows the same thing. We're better off than anyone prior to the 1950s, but we're worse off than anyone after that. And way more of our women are working! Something has gone wrong.

Sent from my HTC phone. Instaurare omnia in Christo.
 
Capitalism is antithetical to survival when it becomes an aristocratic tool to sequester wealth, which is what we're seeing now.

The middle class is effectively disappearing. We're seeing similar circumstances to the Great Depression, except on a much larger scale. The only thing that has staved it off has been immediate bailouts, the second that problems were observed. Really though, we have been seeing decades of gradual erosion of the very policies put into place after the Great Depression which were meant to stop it from happening again.

Wealth sequestration and corporate welfare are the biggest economic problems we face right now. We are gradually shifting back to a two tier system of rich and poor because the middle class are losing purchasing power more and more each year.
 
They don't follow their ideas to the logical conclusion and believe ultimately that any problem can be solved simply by passing legislation and the force of government. It is the same people that think sticking a "no guns allowed" sticker on a window is going to prevent a criminal from entering an area without a weapon.
You think the Chamber of Commerce doesn't know exactly what it's doing?

Sent from my HTC phone. Instaurare omnia in Christo.
 
IDK, I got 2 kids in their 20s who both bought homes on one income. They way underbought what they could afford too.
Did they buy them right after the collapse? Because if so, they had great timing.

Sent from my HTC phone. Instaurare omnia in Christo.
 
Do you really think that me moving from Los Angeles is going to change the profits of property owners there? Because let me tell you, millions have moved away from the city in the past decades, yet it's still the most expensive city in the country (relative to incomes).

Oh well. Then I wouldnt move there if I was you.

Btw, people have been moving there for decades as well. They're paying those prices.
 
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