Housing Affordability...

@dodoguy (1297)
Australia
March 26, 2008 10:29pm CST
Hello Citizens, You might have seen some of the fuss lately over the cost of housing in the USA and other countries (including Australia) where the issue has been labeled as a "crisis" because so many people are suffering. Lots of people have been kicked out of their rental accommodation because the rents keep going up. Lots of people have been kicked out of their homes because they couldn't keep paying the interest on the mortgage. In general, the price of land, houses and rental has become ridiculously high - way too high for many people, and very puzzling when you consider that places like the USA and most especially Australia have a super-abundance of land! So how's the housing situation in your neck of the woods? What's the situation where you live - are house prices and rents skyrocketing? Have things gotten out of hand for you too? Are people struggling to keep a roof over their heads? Just as importantly, can anyone offer a suggestion or two as to WHY this nonsense has gotten to the insane proportions that it has? Just why has housing become so expensive?
3 people like this
6 responses
@mari61960 (4895)
• United States
27 Mar 08
It seems to be totally out of hand where I am. I live in SE Mass, usa in a small college town. You can't find anything in my town to rent for under 1,000 a month for one bedroom. Houses...omg our house is valued at over 300,000 and it is small shabby and 3 bedrooms. Even the forclosed homes for sale are over 200,000 to me that is rediculous. How the heck are you supposed to pay those prices making around 1,200 a month..what about food and car, gas, insurance and all that other stuff you have to pay...I am living with my mother, thank the gods or I would be on the street trying to live on 900.00 a month disability insurance....It is totally insane.
@dodoguy (1297)
• Australia
27 Mar 08
Hi mari61960, I can relate to your view here. If I had a house valued at $300,000, I'd sell up immediately and go and rent a room from my parents. I agree with you, the house prices and rents have gone nuts. I'm suspicious as to the causes, but it seems plain enough that something is seriously broken somewhere. For me, it's sort of like standing on a hilltop and watching from a distance as the hordes of stampeding lemmings are racing towards the cliff's edge, but haven't quite got there just yet. And we all know what comes next...
2 people like this
• Australia
27 Mar 08
I am fortunate enough to own my own house. It's worth around 320,000 and I owe 150,000 on it. This is actually a very LOW house value for Melbourne... I think the median house value now is around 500,000. Interest rates are over 8.0% and I'm really struggling to meet the financial burden. So much so that I may have to sell my home and purchase a unit/apartment to reduce the payments and pay off my credit card debt. it really sux.
1 person likes this
@dodoguy (1297)
• Australia
27 Mar 08
Hi jewelenterprises, I can honestly say to you, if someone offered me $300,000 for my house (which I've owned outright for years now) I'd accept it without a second thought, and I'd be out of the place in a day. Those figures get quoted for median house prices, but I suspect it still depends on location. All part of the game - keep the spin going, keep the party rolling, keep the Real Estate agent commissions coming in. But it can't last - just lately, I've heard or read (can't remember which) that house prices in the USA have actually FALLEN 10% over the last year or so. It's not my place, but if I was your advisor, I'd say sell your house immediately, bank the profit, and rent a room with a friend or relative for a couple years and then maybe consider buying something a lot cheaper (after everything has turned to crapola and the Depression has started to bite). I sincerely hope you get past the financial risk. I can't see interest rates going any other direction than up for the forseeable future. These things do all seem to go in cycles, unfortunately, and we might have crested sometime around now.
1 person likes this
• Australia
27 Mar 08
Yes, it still very much depends on location. The $500,000 is the average for the whole of Melbourne but I'm in a crappy suburb. Even so, many houses in this area are selling for well over $350,000. My other option would be to sell my house as an investment property and rent it back from the new owner (would save me having to move) and using the extra money I have left over after paying all debts to either invest in a high interest bearing account (which would be ideal if I wanted to do as you say and buy AFTER the market collapses) or just purchase a unit or flat that I could rent out for about $150 a week... If I did that I'd only have a mortgage of about $60,000 and the rent would more than cover it so I'd be having extra money coming in. We can only hope that the interest rates start dropping soon. The reserve bank here in Australia has increased the rate EVERY month for the last 12 months.
@dodoguy (1297)
• Australia
28 Mar 08
Hi jewelenterprises, That sounds like a good plan - it's so crazy, it just might work... Except... I believe the latest news has the Australian Reserve Bank raising interest rates by another 50 basis points before the end of 2008 - partly because agencies like BIS Shrapnel (whatever the hell THAT is?) are predicting Australian urban house prices to go UP by 40% over the next year (!?!). And all of THAT is based on the statistics that Australian incomes are outpacing inflation, ie, going UP faster than inflation (!?!). This worries me somewhat. I know for a fact that a LOT of Oz citizens are going hungry even though they're desperately working two or more jobs. So who IS it that is putting all these glowing economic reports together? (That's a rhetorical question - the answer, of course, is that the clowns running the show really have no clue about how the common folk live, because it's a very comfy and sheltered life for the public service bureaucrats and politicians, whose big fat salaries and bloated pensions are guaranteed by the Australian taxpayer, whether the taxpayer likes it or not). Another interesting snippet - a news report just out today stated that only a third of the Australian population have mortgages, so it's only a third of them that are at risk of "mortgage stress" (ONLY one third?). But wait - what about the poor sods that have to RENT a place to live in? No mention of THEM in that news report, but by my way of thinking, that probably makes TWO THIRDS of the Australian population at risk of housing "stress" as land prices, interest rates and rents continue to soar. I'm starting to believe that the solution to this apparently entrenched and structural problem is to TAX the living daylights out of rental income. There'd be lots of squeals and cries of dismay from all sorts of benevolent-sounding organizations (who, strangely enough, ALL stand to lose out if the real-estate pyramid scheme ever comes to a screaming halt), but that would sure put a dent in the spiraling house prices, as "investors" abandon the real estate market in droves and people who need a house to actually LIVE in can pick them up for a song. And that's the way it SHOULD be - but it won't ever happen, because money (ie, rich b*stards) control most of the Western world, and they won't LET that happen. It's much more appealing for the mega-rich elite to have the teeming masses of workers held down in a prone position with their soft underbellies exposed, all the better to slowly squeeze the life out of them. Oh, the joys of rampant capitalism, the delights of benign fascism... It's not too hard to understand how the disorder and mayhem leading to Communism can sprout and flourish, when so many seeds are being planted all around us. It seems to me that there's two basic extremes to the political order of things - the Fascist extreme, where corporate interests run the government, and the Socialist extreme, where the government interests run the corporations. Either way, the little guy gets screwed. We're probably heading towards the Fascist end of the cycle lately. It won't be over until the Fat Lady sings, and that doesn't happen until AFTER the big money has so much control that it starts using the military to enforce its corporate objectives - and then everything turns to poo-poo. A bit like where George Dubya and his oil-rich buddies have already taken the USA. As John Conner instructed Kyle Reece to tell Sarah Conner, the future is not written. But the script so far suggests an entertaining climax.
1 person likes this
• United States
27 Mar 08
See that is a prime example why I say that the economy is hectic. It is like every since the 9/11 the economy has been so hectic. But I heard the US we are also in debt, a whole lot of money. But the world we all need to get it together. I know that GOD is definitely not happy with what is going on between these different countries you know.
@dodoguy (1297)
• Australia
27 Mar 08
Hi DESMASTER2007, I reckon you've pinpointed a turning point with the mention of 11 September 2001. I'm personally quite convinced that the events of that date were an "inside job", orchestrated by elements within the US elite for the "greater good" of the nation (ie, in the best interests of the mega-rich people who actually control the country). Similar in many respects to another "inside job", namely the attack on Pearl Harbor, in which even the body count was ironically almost identical. In that context, the current problems with housing affordability would have to be classed as just one piece in a larger rolling ball of economic mayhem. It's a complicated world, and I wonder just what the "end game" to all this will be? At least for the time being, it appears to me that the common folk are heading for a world of pain, what with keeping a roof over the family's head becoming ever more difficult as food and fuel and energy prices skyrocket in tandem with rent and mortgage costs.
1 person likes this
@miller1978 (1104)
• United States
27 Mar 08
In my area it depends on the type of house, the location, and how big it is. We have houses constantly going up for sale around here. Some are priced as cheap as $15,000 and some are priced at almost $300,000. For rent there are a few places that I know recently went up. One is a pretty big house, 4 bedrooms. The rent WAS $800 per month and now went up to $1000 per month. The family living in that home was receiving HUD assistance to live there and told the renters that they would not be able to help with the rent increase. I have been looking for a house to move into for the last 6 months and have not found one that would fit in our budget and we don't want to get a home loan to add more bills to the single income of the household as it would put to much stress on the housing necessities.
1 person likes this
@dodoguy (1297)
• Australia
27 Mar 08
Hi miller1978, Thanks for your comments. You're not alone, what you say here is a mirror image of the current situation in Australia. We have our pollies still reassuring us that our economy is "fundamentally sound" and able to withstand shocks in the global economy, but that's easy for someone on a couple hundred grand salary and another couple hundred grand of taxpayer-funded perks to say. Try asking the average guy on the street. Something's broken somewhere, and the ones who have the responsibility for fixing it apparently don't give a rat's behind because they're too busy living the high life while the rest of us slowly get ground into the dirt. I just cannot see this all ending well. This is the stuff that revolutions are made of - or Depressions. And the American experience with Exercise Katrina doesn't bode well for the treatment of the average citizen if / when the wheels come off. I have to say, at least across the English-speaking world, there's a pattern of oppression slowly emerging - where the rich get richer, and the poor get the picture (thanks to Midnight Oil for the verse).
1 person likes this
@subha12 (18462)
• India
27 Mar 08
It is true everywhere. even in India, which is generally considered as cheap country, the rents are sky high. also the main problem is the growing cost to buy apartments. it is problem for all levels.
1 person likes this
@dodoguy (1297)
• Australia
27 Mar 08
Hi subha12, (You look just so CUTE there in your pink stuff)... Thanks for adding your views here. I was actually hoping to get some idea about the situation in India - seeing as it's about 25% of the world (and China is another 25%). It's a bit of a surprise to know you're having similar problems there too. I wonder if this isn't symptomatic of something larger going on - even an insidious global conspiracy of some sort? The sense I'm getting here in Australia is that we've been overtaken by a stealth feudal system, without anyone noticing. That is, the common folk have become the enslaved servants of the rich minority who have control of the land - just like back in middle-ages Europe. AND it's the truth - it really is true, most people here in Australia now have a much LOWER standard of living than they had a few decades ago, and have to work twice as hard just to keep food on the table and a roof over their heads (and a lot of people just can't do it, so they end up starving in the streets). Disregard all the propaganda and hype coming from public service bureaucrats and politicians, none of whom actually live in the real world. They just don't "get it" - in fact, in my estimation, they don't WANT to see the truth, and they don't really care, because all that motivates them is their big fat salaries and enormous taxpayer-subsidized pensions. And the rest of the population has been enslaved to sustain the lifestyles of the elite. I've read that history doesn't repeat, but it rhymes a lot. Seems to be a pattern of sorts emerging here.
1 person likes this
@Foxfire1875 (2011)
27 Mar 08
It's completely insane in the UK as house prices are well out of the reach of first time buyers. Rents are rising as well because of the house prices as everybody that can afford to is buy to letting. We don't have the space to build more and with a rising population fueled by immigration, I can't see the situation improving. This situation is all down to greed as the banks have offered 100% mortgages of 6-7 times someones salary. This is all very well if you can guarantee a low mortgage rate and permanent employment. That is changing and everyone is feeling it now, not just the low income earners but middle income earners too.
@dodoguy (1297)
• Australia
27 Mar 08
Hi Foxfire1875, I agree completely with your assessment. Greed seems to be at the core of the problem. I've recently read some assessments of the Australian experience which suggest that the fundamental problem here is the level of tax relief given to income earned from land rents. In the long term, that causes a flow of investment capital away from other more productive options and into the real estate market instead, which places upward pressure on land prices and rents. Which causes house prices to rise, and the productivity of the economy overall to fall. In fact, the figures that I read indicated that, if income from land rental had been taxed at the same level as wages and business income since the 1970's, Australia's standard of living would have increased rather than dropped precipitously as it actually has done, housing and rental accommodation would still be quite affordable for everyone, and the gross national product would be double what it is right now. That last sentence is important. Have you noticed how back in the 1970's, a single income was sufficient to raise a family, yet now we need TWO incomes (or more) to do the same thing? That's because the share of the national income going to wage earners (and businesses too) has HALVED since the 1970's. So the average wage earner has to work his or her butt off, TWICE as hard, to achieve what a single wage accomplished back in the 1970's. So where is all the wealth going now that wage earners (and businesses) are now missing out on? Why, into real estate, of course, because the Australian taxation framework makes it so much more attractive as an investment proposition than other productive business investments. And our standard of living has pretty much HALVED, as has our real gross national product, since the 1970's. And we have powerful vested-interest lobby-groups entrenched into our political systems which will fight tooth and nail to PREVENT any change in the real-estate-friendly taxation regime, because it's just too lucrative for those vested interests to lose. It makes pretty good sense to me. It's ugly, and a disaster, but it actually makes sense. It sounds to me like you have a similar thing going on over there in the UK. In fact, from what I can see, this insanity appears to be international in it's scope, perhaps even global. A realist might regard the economics of the situation as being an economic maladjustment of intergenerational magnitude, meaning it will take maybe a generation or two to correct itself and get things back to some sort of rational balance. With a few major economic disasters, including a Depression and a few good wars, along the way to sorting it all out. In the meantime, in my opinion, things are broken, and broken badly, and the common folk (ie, NOT the big-time real estate millionaires and the greed-crazed banks) are the ones who have to wear the pain. Just watch as the governments use taxpayer funds to bail out any bank that gets itself into strife - while the banks screw the life out of anyone who can't pay their rent or can't pay their mortgage.
1 person likes this
27 Mar 08
I couldn't have put it better myself and governments have already bailed out banks - Northern Rock in the UK and Bear Sterns in USA - with taxpayers money so that the fat cats don't suffer. It makes me so mad as it is ordinary people struggling to get by that are bearing the brunt of this, while the billionaires continue to drink champagne.