Why is US housing more affordable than ROW?

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Submitted by carlsbadworker on July 18, 2021 - 5:59pm

HomePriceHomePrice

https://www.numbeo.com/property-investme...

While home price has risen a lot in the past year. Why is US home price to income consistently lower than the rest of the world?

What makes US home cheaper?

Submitted by XBoxBoy on July 18, 2021 - 6:29pm.

Looking at the site where you got this chart, it looks like they are using price to income to determine their price index. If income is low, then the Price to Income Ratio will be higher. Thus poor countries will have the highest ratios.

Submitted by carlsbadworker on July 18, 2021 - 8:40pm.

XBoxBoy wrote:
Looking at the site where you got this chart, it looks like they are using price to income to determine their price index. If income is low, then the Price to Income Ratio will be higher. Thus poor countries will have the highest ratios.

Right. But US income range is similar to European country, Australia or our neighbor Canada. But its price to income ratio is almost half of those countries.

Submitted by XBoxBoy on July 19, 2021 - 7:09am.

carlsbadworker wrote:

Right. But US income range is similar to European country, Australia or our neighbor Canada. But its price to income ratio is almost half of those countries.

Income is higher in USA I would think. (though not double.) But ease of getting home loans and lower interest rates could be a big factor.

Submitted by barnaby33 on July 19, 2021 - 7:36am.

Labor is often cheaper around the world, but construction materials are expensive. In addition in many of the countries I've been to outside the developed Anglo world, all wealth and power is basically concentrated in the capital. This means competition for real estate in the capital is often quite fierce.
Josh

Submitted by barnaby33 on July 19, 2021 - 7:38am.

Labor is often cheaper around the world, but construction materials are expensive. In addition in many of the countries I've been to outside the developed Anglo world, all wealth and power is basically concentrated in the capital. This means competition for real estate in the capital is often quite fierce.

Plus this chart is dumb. It's averaging price to income in the de-populating mid west with high cost coastal CA. That's like conflating the cost in Miraflores (Lima) with rural Peru. In this case all real estate is truly local-ish.
Josh

Submitted by gzz on July 19, 2021 - 9:22am.

The chart is crap for many reasons. It even uses the stupid Mercator projection.

The USA does have cheap housing relative to income, especially outside the big coastal markets and a few other hotspots like Denver and Austin.

For example, incomes are about 4 times higher in suburban Ohio compared to Slovakia, but the housing is somewhat more expensive in Slovakia.

Europe has high costs because cars and gas are expensive so people don't want to live far from work and drive. Europe also generally refuses to change the ag zoning right outside of its cities. My summer working in Europe, I lived at the very edge of where development was allowed. There was an 8-floor apartment tower and a bunch of townhouses or large expensive homes on small lots on one side of the zoning line, then cow pastures and forest on the other. It was charming, but increased housing costs. You generally won't ever see in California a cow so close to an apartment tower you could hear it moo and toss it half your pain au chocolat, which I did.

Eastern Europe also suffered from little and low quality housing development during the communist era.

Submitted by barnaby33 on July 19, 2021 - 4:02pm.

You generally won't ever see in California a cow so close to an apartment tower you could hear it moo and toss it half your pain au chocolat, which I did.

Oregon does this. The fights over moving the urban/rural development lines are worse than a knife fight. A good friend of mine's wife is / was a civil planner in Eugene.

As to costs of housing that would explain Europe where they have zoning laws. What about South America which is much more, "flexible?" I say the unifying costs are that energy and materials are generally much more expensive in both nominal and real terms. I think that's the underlying reason why on avg housing is cheaper in 'murica.
Josh

Submitted by gzz on July 19, 2021 - 4:32pm.

Mexico has pretty cheap housing costs, even accounting for their lower income.

Even Mexico City isn't too expensive, I'd guess the percentage of people living in 1000sf+ homes they or their family own is higher than metro NYC or Boston.

The construction quality is iffy and a lot of people will die in the next big earthquake. People might have a 4000sf lot they use as a family compound that has 2 small complete houses and a third under very slow unpermitted construction.

The weather is very mild year round like SD, so you have a lot of semi-outdoor setups, like a tiled second kitchen that has a roof over it but no walls on two sides.

Submitted by sdrealtor on July 19, 2021 - 4:37pm.

barnaby33 wrote:

You generally won't ever see in California a cow so close to an apartment tower you could hear it moo and toss it half your pain au chocolat, which I did.

Oregon does this. The fights over moving the urban/rural development lines are worse than a knife fight. A good friend of mine's wife is / was a civil planner in Eugene.

As to costs of housing that would explain Europe where they have zoning laws. What about South America which is much more, "flexible?" I say the unifying costs are that energy and materials are generally much more expensive in both nominal and real terms. I think that's the underlying reason why on avg housing is cheaper in 'murica.
Josh

Welcome to San Marcos where you can find new urban construction next to cows

Submitted by barnaby33 on July 20, 2021 - 1:11pm.

Welcome to San Marcos where you can find new urban construction next to cows

I would never qualify San Marcos as welcoming, not ever.

Submitted by gzz on July 20, 2021 - 2:23pm.

I was there once around 2011. A young employee of mine lived with his parents there and we picked him up there on the way to a trip north to LA. I was impressed at the sheer size of the place, like 5500sf on a nice big lot and still pretty cheap.

It was also pretty far. His father commuted to point loma by driving to the coaster and taking the train down to old town. Can't remember how he did the last leg, but old town train station is very close to the edge of point loma.

Submitted by gzz on July 20, 2021 - 2:32pm.

Besides my comment, there's a lot of Luxembourgish cow content out there on the web.

46 cows stolen overnight:

https://www.brusselstimes.com/news/belgi...

Wild cows return to Lux City:

https://wurst.lu/wild-cows-return-to-lux...

Luxemburger cow video uploaded 10 days ago, already has 675 views:

https://www.youtube.com/watch?v=xDQ5FPqSHCE

A public domain photo:

Submitted by sdrealtor on July 20, 2021 - 2:34pm.

That sounds like a story my father in law used to tell me. Scratching my head? Is there any point?

Submitted by gzz on July 20, 2021 - 2:48pm.

Is there any point?

The point of the cows is milk and (luxem)burgers. They are the richest in Europe, on a per capita basis.

Submitted by barnaby33 on July 20, 2021 - 3:41pm.

And now for something completely different, returning to the subject of the thread. My wife is always trying to get me to buy real estate in her country of Origin, Peru. Strangely enough real estate in an of the barrios where a gringo can even live is just as or more expensive as real estate here in most middle class areas. Worse still it's almost all condos. I scratch my head every time I see asking prices; knowing nobody in the local economy can afford that. Certain areas it's just gringos and Peruvians who emigrated returning with USD. Other more natively populated areas are cheaper but still ridiculous when you start looking at income to price ratios.

Partly as I said before I think it's because of demand for land in the capital. Partly I think materials are more expensive. Partly I think that when your currency is really unstable you invest in real estate as a hedge and families seldom let things go. Inherently that creates a supply problem which would tend to drive prices up.

Josh

Submitted by sdrealtor on July 20, 2021 - 4:01pm.

gzz wrote:

Is there any point?

The point of the cows is milk and (luxem)burgers. They are the richest in Europe, on a per capita basis.

I was referring to the prior comment. Reminded me of a BG comment that she went there once years ago to get her old lexus repaired and the road was unpaved. Its a completely different place now. Homes in SEH are about the same price as those on the coast now. Its high end now

Submitted by sdrealtor on July 20, 2021 - 4:03pm.

barnaby33 wrote:
And now for something completely different, returning to the subject of the thread. My wife is always trying to get me to buy real estate in her country of Origin, Peru. Strangely enough real estate in an of the barrios where a gringo can even live is just as or more expensive as real estate here in most middle class areas. Worse still it's almost all condos. I scratch my head every time I see asking prices; knowing nobody in the local economy can afford that. Certain areas it's just gringos and Peruvians who emigrated returning with USD. Other more natively populated areas are cheaper but still ridiculous when you start looking at income to price ratios.

Partly as I said before I think it's because of demand for land in the capital. Partly I think materials are more expensive. Partly I think that when your currency is really unstable you invest in real estate as a hedge and families seldom let things go. Inherently that creates a supply problem which would tend to drive prices up.

Josh

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