Why are housing prices so expensive?

Question

For me the biggest example that something is very fundamentally wrong with the housing market is the history of the PC market.

In 1980 IBM released its first home PC retailing for $1565 and included only a keyboard. You can now buy a PC with monitor and sometime printer for as low as $400-$500 sometimes with deals as low as $300.

Yes the cost of houses throughout our country's history has usually been 3x the median income but with greater efficiency in manufacturing building materials and putting the materials together this number should have gotten smaller.

BUT now the median home price is roughly 5x the median income! So high that most people can't afford a home anymore.

It doesn't add up.

Its not supply and demand, look at Google Maps and view your state and look at all the undeveloped land our government could open for developers.

Answer 1

You are so right prices should be coming down. So one would think , this is in fact a red flag that some one is lying or not being honest.

Any good investor that see record profits should be alerted to why and if there is not a sound business reason then this could be a sign of fraud. Just look at who els had record profits, Enron, worldcom and all the over night crashes and in one word "fraud".

This web site tell how they made the housing bubble and it was not done honestly.

http://www.breakingbubble.com/index.htm

Best of luck.

Answer 2

Housing prices spiked because rates were so low, expanding people's buying power. The low rates also encouraged millions of people to buy homes while the getting was good. This created a surge in demand, not enough houses were for sale, so prices rose.

Now, rates have gone up, values have dropped (in many areas at least), but wages have gone nowhere. In fact, even with nominal annual cost of living raises, people are taking home less money than 3-5 years ago, because they are paying a higher share of their medical expenses.

Ultimately, home values will probably stagnate for a while, possibly years, until wages have risen enough to again be able to reasonably afford a home.

Over the past 60 years, the highest average annual appreciation rate is only about 5%, in San Francisco. A few other areas were close. Nationwide, it's about 3%. Considering that we've had a few years of 8-15% appreciation growth almost all over the country, that must mean that these homes spent decades moving at VERY slow appreciation rates, and probably didn't budge at all from 1979-1986, when rates were in the double-digits.

It can't be sustained unless incomes rise accordingly, which they haven't. Even the past 2 years, corporations are booking record profits and none of it is going back into paying their employees.

Answer 3

First

When they make your house in China and ship it to you ... then you can expect to see those savings!


Second

Have you seen houses lately. What your parents thought was a house would be a nice coach house today! I grew up in an enormous house, over 3000 sq. ft. My buddy has 11,000 sq ft and 7.5 bathrooms!!!! for 5 people (well 4 -- one of his kids is in college now and the next goes later this year.) It's probably all his fault; he's screwing up the averages!


Finally

Money is cheap! Most people don't care about the price. They care about the payments! Price as a multiple of income may be up, but payments as a percent of income isn't. Plus people in general have more disposable and investable income that they CHOOSE to spend on upgrading their houses.



Would you also say there is something fundamentally wrong with the car market too because you can't buy a brand new totally safe, 100mpg, alternative fuel, zero emission, computer guided automobile for about $1,000. Flying and that fold up into a brief case thing would be extra cost options****


You can use statistics to make the case for virtually anything you want.

Answer 4

Location is a big factor, like the first responder said. The reason is, you have to be within commuting distance of your job. In past decades jobs were more spread out (factories, fields, etc.). Now they're clustered into neighboring skyscrapers full of offices and cubicles. Everyone has to commute to the same place to work those jobs, so it places land at a premium.

And interest rates are a big factor, as the 2nd responder said. The monthly mortgage debt servicing cost will be as much as the average person working in the locale can afford to pay, and the house price will move inversely with interest rates.

Answer 5

It's all about location. The closer you are to cities and highways the more expensive the property. The rise in houses isn't due to material, it's due to the location of the land. To build a house it still cost the same amount (disregarding inflation) as it did a few years ago. The fact that gas prices are rising and traffic is always increasing leads to people willing to pay top dollar for good property location.

Answer 6

cutlery??? ok in spite of. 3 causes: (a million) custom of independence - we favor to sense that we've skill over our own area names. That makes us better likely to purchase stuff. throughout the time of something of Europe, renting is a concepts better straightforward (2) Overpopulation - huge swathes of britain are heavily overpopulated. not real of maximum of Scoland or Wales, yet there are about 5 conurbations in England which have grown way too massive. a lot less of an issue elsewhere in ecu. (3) Urbanisation - cultural shift far flung from communities, partly because countless small communities were depending round coal that's not mined. No mine, no paintings, no community - head for the city. That drives up homestead expenditures contained in the centres of inhabitants. relax of ecu did not distribute its inhabitants in accordance with coal source, so did not by marvel ought to face what might want to take position at the same time as coal went bust. I reckon that the television shows are followers, not leaders, of this way.

Answer 7

Fresno, CA saw home prices skyrocket when Bay Area residents and Los Angeles natives figured out you could buy a brand new home for under $100K. The commute was 3 hours, but it saved them a TON of money on housing and made many of them rich so it's worth the commute to them. Now that same house in Fresno that was under $100K is now worth 4 times that....why, because the number of people relocating to Fresno from Southern & Northern California sparked a level of greed in people I have never seen before in my life! They were snatching up houses left & right and forced the market to move upward.

Answer 8

It is supply & demand. Unlike the PC, or a car, or another durable good, land is in limited supply. Furthermore, there's so mcuh demand for certain areas, like NYC, LA and San Fran, that prices will continue to escalate in those areas. Other places, you'll find homes to be relatively cheap.

Answer 9

The truth is Supply and Demand for raising home cost..

people are only willing to drive so far from work, and the further you go out of town, the less of a community it is. which means less high paying jobs, infostructure is just not their,

usally it takes years to build a new community , you see the low paying jobs come in at frist, like food industry

Answer 10

baby boomers. they own most of the homes and want top dollar for thier investment. most are ready to retire and move to condo's located in warmer climates. baby boomers account for such a large percentage of the population and hold most of the countries wealth in savings, they control many aspects of the economy.