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House prices

Discussion in 'Alley of Dangerous Angles' started by Harbourboy, Apr 26, 2005.

  1. Harbourboy

    Harbourboy Take thy form from off my door! Veteran Pillars of Eternity SP Immortalizer (for helping immortalize Sorcerer's Place in the game!)

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    [​IMG] Are house prices spiralling out of control where you live?

    In my local area, houses that cost $250,000 5 years ago are now selling for $400,000. People keep talking about how they are making so much money on their houses. I hear that there are similar things going on in the USA and UK.

    How can house prices keep going up so high? Surely, they can't keep going up this fast for too long otherwise nobody will be able to afford to buy a house.

    Is this all just like 2000 over again when everyone was buying over-priced tech and dot.com shares as if that was a sure path to wealth?
     
  2. dmc

    dmc Speak softly and carry a big briefcase Staff Member Distinguished Member ★ SPS Account Holder Resourceful Adored Veteran New Server Contributor [2012] (for helping Sorcerer's Place lease a new, more powerful server!)

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    HB - I am, right now, literally in the middle of a trial for specific performance of a purchase contract on a house. My clients are the buyers and the defendant is the seller, who is also the builder. The house was to be built in 2003 (the closing date varied and got dragged out). My clients agreed to pay $1.66 million for it. The case is going on because the seller refused to sell. Turns out the house will probably fetch somewhere around $2.5 million in today's market. I think that answers your question.
     
  3. Harbourboy

    Harbourboy Take thy form from off my door! Veteran Pillars of Eternity SP Immortalizer (for helping immortalize Sorcerer's Place in the game!)

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    Unbelievable. Well, actually, quite believable, but still crazy!
     
  4. JSBB Gems: 31/31
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    House prices around here have been going up about 8% per year over the last five years.

    As far as how can the prices keep going up - the answer is pretty much that they can't.

    Low interest rates and a lack of profitable investment alternatives as the stock markets have stumbled has made sinking money into real estate attractive but as with all such bubbles what goes up will invariably either level off or crash back down depending upon how much the price has become over-inflated.

    There is currently a lot of debate as to whether North American real estate prices are sustainable but only time will tell. Personally, I suspect that prices will probably have a mini-crash but nothing like the last two where a lot of people around here were almost completely wiped out.
     
  5. Blackthorne TA

    Blackthorne TA Master in his Own Mind Staff Member ★ SPS Account Holder Adored Veteran Pillars of Eternity SP Immortalizer (for helping immortalize Sorcerer's Place in the game!) New Server Contributor [2012] (for helping Sorcerer's Place lease a new, more powerful server!) Torment: Tides of Numenera SP Immortalizer (for helping immortalize Sorcerer's Place in the game!)

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    I paid 270K for my house 6 years ago. Prices for the same model in the same complex have been selling for over $500K.

    Unbelievable is right.
     
  6. Harbourboy

    Harbourboy Take thy form from off my door! Veteran Pillars of Eternity SP Immortalizer (for helping immortalize Sorcerer's Place in the game!)

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    JSBB, what you say makes some sense. One problem I have with this is that, unlike a stock market bubble, inflated property prices are more likely to be propped up by loans. And these loans have been secured by properties based on independent valuations. But property valuations are often based on what other similar houses have sold for in the same area, i.e. other inflated values. What will happen if house prices fall, even slightly, such that the houses become valued at less than the value of the outstanding mortgages?

    I must confess that I find this whole thing a little baffling.
     
  7. Blackthorne TA

    Blackthorne TA Master in his Own Mind Staff Member ★ SPS Account Holder Adored Veteran Pillars of Eternity SP Immortalizer (for helping immortalize Sorcerer's Place in the game!) New Server Contributor [2012] (for helping Sorcerer's Place lease a new, more powerful server!) Torment: Tides of Numenera SP Immortalizer (for helping immortalize Sorcerer's Place in the game!)

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    That happens all the time. I've had friends whose houses were worth less than their mortgage.
     
  8. Chandos the Red

    Chandos the Red This Wheel's on Fire

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    California and New York are exceptions; real estate is very different in those markets. Housing is much cheaper in Houston.
     
  9. Harbourboy

    Harbourboy Take thy form from off my door! Veteran Pillars of Eternity SP Immortalizer (for helping immortalize Sorcerer's Place in the game!)

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    Are you saying that in Houston house prices have not been rising notably in the last few years?
     
  10. Cúchulainn Gems: 28/31
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    A small terraced 3 bedroom house in the roughest areas possible are going for £60K plus! Now thats out of control.

    To live in a decent area even with a substandard house you must be prepared to spend £150K plus. Take into account that wages are lower here and the cost of living is higher than the rest of the UK.
     
  11. Tap Dancing Oyster Gems: 7/31
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    It varies from area to area but the average house price in England is about £160k. In London you would be lucky to get a half decent 1 bedroom flat for that much. My younger brother is attempting to get a 2 bedroom apartment for about £250k. Were I live you can get a nice house in one of the best areas for that.
    We brought our house for £125k over 4 years ago - I reckon we have more than doubled our money since then. But unless I decide to live in a tent or emigrate the increase is not really worth thinking about.
     
  12. Taluntain

    Taluntain Resident Alpha and Omega Staff Member ★ SPS Account Holder Resourceful Adored Veteran Pillars of Eternity SP Immortalizer (for helping immortalize Sorcerer's Place in the game!) New Server Contributor [2012] (for helping Sorcerer's Place lease a new, more powerful server!) Torment: Tides of Numenera SP Immortalizer (for helping immortalize Sorcerer's Place in the game!) BoM XenForo Migration Contributor [2015] (for helping support the migration to new forum software!)

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    [​IMG] I'm moving this to AoDA, it's a pretty serious topic.
     
  13. Pac man Gems: 25/31
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    I don't think you find a place in Europe where the houses are more expensive than in the Netherlands. That's why more and more Dutch people with a well filled wallet move just across the border to buy a house in Belgium or Germany. That way they no longer have to pay our ricidulously high taxes, PLUS they can buy a house for a price which won't even buy you a wooden toolshed downhere.
     
  14. Rallymama Gems: 31/31
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    Real estate in my area has been absolutely soaring for about 10 years, and the only thing slowing the trend is that we're running out of places to put more houses. Most of the new construction around here is $600k+ (4BR+den, 3-car garage, 3500 sqft or more). A 20-yo house is $425k (4BR, 2-car garage, 2800 sqft). And these houses sell quickly, too! Sometimes there are bidders even as the sign is being pounded into the front yard. Sometimes you have to bid OVER the seller's asking price to get the house. Nuts, I tell ya, it's NUTS!

    Chandos is right in saying that geography makes a huge difference. The house we left behind in Oregon costs almost twice as much in New Jersey.

    We've been hearing for at least five years now that "the bubble can't last" but I'll believe it when I see it.
     
  15. Darkwolf Gems: 18/31
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    You also have to take into account the cost of building. Lumber and concrete costs have gone up significantly in recent years. So much so that builders are looking for alternative materials (such as metal studs for internal walls in houses). I disagree with the statement that the price of housing is not sustainable. Low interest rates are partially responsible for the increase in the price of houses, as people buy what they can afford on a monthly basis, so they are willing to pay more for a house if interest rates are lower (not smart, but human nature), and the current trend of rising on interest rates will have a short term impact on the price of houses, but I do not believe that it will be major, and I believe that unless we see marked increases in interest rates, without increases in inflation, the housing market will quickly recover (especially existing homes) as the cost of materials continues to climb.
     
  16. Aldeth the Foppish Idiot

    Aldeth the Foppish Idiot Armed with My Mallet O' Thinking Veteran

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    Well, I think that the prices of houses will continue to climb for points DW brings up, but not at the rate that they are currently going.

    Houses in many places of the U.S. have been increasing by a rate of 8%-12% annually. Simply put, that is higher than inflation and higher than the typical wage increases you see. Over time, if it continues at this rate, it will become impossible for people to afford a house, even with lower interest rates. Yes, lower interest rates reduce payments, but higher selling prices raise payments. If prices rise too high, what is it that you can do?
     
  17. Bion Gems: 21/31
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    I read something in the economist a little while ago (sorry, couldn't find it) that seemed to say that housing prices have gone up much more in Australia, New Zealand, the UK, and parts of Europe than they have in the US, which I find surprising. However, as Chandos points out, the rise in real estate costs hasn't hit the US equally. IMHO, this is a classic bubble, a disaster waiting to happen, fueled by the huge post 9/11 post Nasdaq liquidity and credit glut. When it bursts, things will be very ugly.

    Re: the Netherlands, I recently saw a Dutch urban planning guy talk about Amsterdam, where about 55% of the housing is social housing, and where the social housing is super desirable: nice apartments at about 1/3 market price. Any comments on how this works in practice?
     
  18. joacqin

    joacqin Confused Jerk Adored Veteran Pillars of Eternity SP Immortalizer (for helping immortalize Sorcerer's Place in the game!)

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    It is the same around where I live, all types of housing has skyrocketed. I bought my little one room apartment for around 3000€ in 1998 and it is worth around 20000€ today. It is, as I think it is everywhere a provinciall phenomenon. Just a few tens of kilometres east the prices havent soared nearly as much. Some areas just get incredibly attractive for some reason.
     
  19. Barmy Army

    Barmy Army Simple mind, simple pleasures... Adored Veteran

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    They are ridiculous here. First time buyers just get forced into renting. Just increasing the wealth of multiple house owners. Houses are often bought as a way to make money, rather than a place to live. I know someone who has 6 houses. He lives in 1, and rents 5 out. He's proper minted.
    It's unfortunate, but I can't see the prices of houses dropping. They might level out, but not drop. I'm dreading getting a house...
     
  20. Harbourboy

    Harbourboy Take thy form from off my door! Veteran Pillars of Eternity SP Immortalizer (for helping immortalize Sorcerer's Place in the game!)

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    Hmm, I'm still confused. OK, even if the costs of certain materials are increasing, that is only half the picture when it comes to determining the price of a house. Ultimately, a house will only sell for what someone is prepared to (or can afford to) pay for it, regardless of what it cost to build. And the cost of materials only impacts the price of new houses.

    Also, I'm trying to understand why, as evidenced by responses here, this is such an international phenomenon. It can't be just be low interest rates - floating mortgage rates in New Zealand are around 9.0% which is hardly low.

    The scariest thing I hear is when people talk about whether it is worth buying a house as an investment. Usually, you would work out the rental yield and see if the numbers stack up to earn you a profit. Nowadays, people are buying houses with tiny rental yields. When challenged about why you buy something that does not make you much of a profit, they reply by saying "You don't understand - that was how you used to analyse a property investment - these days it's DIFFERENT".

    Call me an idiot, but that sounds to me like exactly what people were saying in 2000 when challenged as to why they were buying shares in dot.com companies that had never made a profit or were selling at 100s of times the price of a comparable non-tech company.
     
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