Why are there so many expensive homes?

I see a lot of expensive houses being built in my area. A LOT. And the weird thing is that they’re being bought pretty quickly. Are these people just making more money than me? If so, what are they doing for a living? Or are they just living house poor? How exactly are they affording these places?

Edit: For reference, my neighborhood is starting to become popular (because the other popular neighborhoods have priced most people out of affording places there). The normal price of newer homes here is $700k. My home, built in 1965, which is 2500sq ft on a quarter acre of land, is $500k.

Blaze,
@Blaze@discuss.tchncs.de avatar

What is the price compared to the local average salary? How long does it take someone to afford that house with two salaries?

sam,
@sam@lemmy.ca avatar

Remote work means a lot of well paid individuals are able to move to less expensive areas, assuming internet is decent.

TitanLaGrange,

That’s me! Moved to a very small town with fast internet so I could have a house for about 0.75x my annual salary. It’s great, now we can almost afford to pay for student loans!

Mothra,
@Mothra@mander.xyz avatar

Perhaps foreign investors. It’s not uncommon for rich people to buy several houses, rent them, resell them once the prices go up in a few years, repeat.

ryathal,

You need a lot more info. Are these retirement condos, older people downsizing after kids, California migrants, a popular or quickly growing neighborhood, vacation rentals, corporate speculation, or just normal cost housing for your area.

TheGiantKorean,
@TheGiantKorean@lemmy.world avatar

Edited my post to provide some more info. I have no idea what the average salary is here.

2d,
@2d@kbin.social avatar

information is readily available on this thing we call the internet

BadAdvice,

It’s the chineses. Buying real estate is kind of their thing, and since their home grown real estate ventures aren’t maturing well (check out evergrande), they’re out in other ponds buying up what they can. Down here in sunny California, we’ve got entire neighborhoods bought out by Chinese investors before ground is even broken. Then, when it’s time to actually sell, they crank up the price of everything by 60-100%. That’s how you get a shitty stucco condominium going for $2m+ in South city. It’s all a scam.

brambledog,

I don’t think you can or should blame immigrants for America being a playground for the rich where the citizens are just a servicing class.

BadAdvice,

I’m not blaming immigrants at all. I’m blaming chineses. It’s their culture bud. There are thousands of years of written records for that country, and buying/stealing land is pretty much the only cultural constant over every dynasty, warlord, or ruler you care to read about. Mao, despite killing millions with ballslapping ignorance, was one of the first to seriously go after landlords. Unfortunately, money always wins so now they’re back to everybody gotta get theirs first. The world is a zero sum rock as far as most people are concerned, there and here.

brambledog,

That’s pure racism.

But I get it, you aren’t allowed to be angry at the actual people responsible for your lack of ability of to afford housing, because if you did, you would have to acknowledge that you helped put the people in place who screwed you.

So instead, we will pretend our problems are the fault of other people. Because we are cowards. Yes?

BadAdvice,

There is no fault. Lmao It’s about money. It’s always about money. And it turns out chineses are real good, culturally, at making money. Something about having few qualms about where it comes from. Its almost funny being able to see a 100 story high-rise from a village that would be third world by any standard, but its actually sad. But that’s just the chineses, doing China things. It’s only been that way since the Han dynasty, if not longer.

brambledog,

Every large city in the US has tent cities within yards of a skyscraper.

Your criticism of the Chinese in this response is that they are an unbalanced mix of too rich and too poor. Kind of sounds like our country, huh?

Your racism doesn’t appear to be based in logic here. Is that on oversight on your part or was it a conscious decision?

wildbus8979, (edited )

All this talk of foreign investors. But the reality is they represent a small proportion of single family homes[1]. It’s easy to blame foreigners, but the real problem is domestic. It’s corporations. Corporations are being all the housing[2]. And they don’t mind sitting on their invest, even vacant, for years. So yeah, y’all keep the bigotery going and blame foreing investors, you’re playing right into capitalism’s hand.

  1. aljazeera.com/…/why-is-canada-banning-foreign-hom…

Foreign owners only account for a small share of the Canadian real estate market. According to Statistics Canada, a government website, non-residents owned 2.2 percent of residential properties in Ontario and 3.1 percent in British Columbia in 2020. The percentages were 2.7 and 4.2 in the Toronto and Vancouver metropolitan areas, respectively.

  1. todayshomeowner.com/…/are-big-companies-buying-up…

According to data reported by the PEW Trust and originally gathered by CoreLogic, as of 2022, investment companies take up about **a quarter [25%]**of the single-family home market.

Retiring,
@Retiring@lemmy.ml avatar

Whether the investors are foreign or domestic, doesn’t matter, as long as governments allow living space to be gambled with, people like OP (I assume OP is working class) are very unlikely to ever own their house/apartment.

wildbus8979,

It matters because blaming foreign investors is a diversion used to avoid bringing forth actual solutions.

Lemmylaugh,

Another take is that it’s the developers who is to blame for the high prices. What would happen if they stopped buying land? Short term? Disaster, no new houses, prices sky rocket. Long term? With no new supply investors and foreign buyers will just leave the market since it’s not making money. As they leave, more supply will be available for the normal people.

RickRussell_CA,
@RickRussell_CA@lemmy.world avatar

todayshomeowner.com/…/are-big-companies-buying-up…

I feel like this article didn’t do a great job of answering the question. They didn’t really determine whether big corporations are buying homes, they determined that investors are buying homes. The actual text:

According to data reported by the PEW Trust and originally gathered by CoreLogic, as of 2022, investment companies take up about a quarter of the single-family home market. Specifically,investor purchases accounted for 22% of all American homes in 2022.

Those two statements are not equivalent. “Investor” could be a single individual buying a home with the intent of offering it as a vacation rental when not in use. It could be somebody who bought a duplex and rents the other unit out until their parents retire. It could be a house flipper who does 1 house at a time – each time registering an “investor purchase”.

Even “corporation” doesn’t really mean anything; a “corporation” could be an LLC with one employee, the owner.

And even when big corporations buy single-family homes, it’s not clear to me that this has a lasting economic impact. It sounds like a lot of these investment companies are renting the the homes or flipping them. Ultimately, demand is still demand. Somebody has to be there to buy or rent the home for these investments to make sense, so any price increase resulting from this investment activity is not an external, artificial pressure. It’s a real representation of economic value, it is a price that the next occupants are willing to pay.

NielsBohron, (edited )

I have a very specific viewpoint on this issue, as I live in a vacation destination. Various investors are buying up every property that comes up for sale in my community (large corporations, small companies, wealthy individuals looking for vacation homes, etc.)

Every single property that gets bought, gets renovated or otherwise improved to the point that there’s no chance in hell anyone living and working in the community full-time can afford to buy, unless they bought their first property before 2016. Since then, home ownership among my colleagues has become a pipe dream (and without giving away too many personal details, let me just say my colleagues and I are well-educated professionals making way above the median income for jobs in the area).

As I type this out, I’m listening to a million-dollar house being built in the lot behind me (which will almost certainly sit vacant >80% of the time), a shit rental being turned over next door (which charges $3k/mo for a 3/1.5), and two short-term vacation rentals partying across the street (which usually charge at least $300-$400/night).

Regardless of who it is, investors buying up housing is a huge problem for people that are trying to own their own home, especially first-time buyers.

RickRussell_CA,
@RickRussell_CA@lemmy.world avatar

With respect, you’re missing the point.

Sellers don’t determine price. Buyers do. “Investors” (big, small, whatever) are selling homes at those prices (or renting, or VRBOing) because there are customers ready to buy the next available unit. If customers aren’t willing to buy at that price, then the seller will lower the price. Or never build the big house in the first place. Or never renovate. Who would spend money on an investment when nobody will buy it?

They can only sell for those prices because buyers are ready to buy.

Economists have a concept of “economic value”. Regardless of price, “economic value” it what the next buyer is willing to pay for an item RIGHT NOW. People have a lot of weird ideas about what the “value” of something is, and they’ll include all sorts of non-monetary factors because they think value is a feeling or concept of utility that particularly applies to them. They value “walkability” or “views” or “quaint antique design”, or whatever.

But inasmuch as “value” has any objective meaning, the best one economists have managed to come up with is economic value – the price that a unit of something will sell for at this very moment. And I humbly suggest that the economic value of housing in your area something is determined entirely by the buyer: the person or entity that is willing to buy the next available unit of housing.

investors buying up housing is a huge problem for people that are trying to own their own home, especially first-time buyers

If those buyers can’t outbid all the other buyers, then they weren’t going to get a home anyway. This has nothing to do with the seller.

Devi,

You and the other guy are talking about two different things. You're trying to explain supply and demand in a very factual way, the other guy is explaining to you how this is hurting actual people who need somewhere to live.

They haven't missed the point at all but are talking about the human element here.

Blaidd,

They can only sell for those prices because buyers are ready to buy

Because the alternative is to be homeless.

RickRussell_CA,
@RickRussell_CA@lemmy.world avatar

Or leave the area for lower prices somewhere else.

Blaidd,

So quit your job and pay hundreds, maybe even thousands, of dollars to move somewhere different where you no longer have a source of income and don’t know anyone?

RickRussell_CA,
@RickRussell_CA@lemmy.world avatar

I’m not saying I like it, that’s just how it is. As a consumer of housing, like anything else, when you can’t afford what you want you have to get something less.

Blaidd,

No, this is not how it is. In order to rent an apartment you have to show proof of income, and people who can’t afford a studio apartment where they live also cannot afford to move. What you are suggesting is literally not possible. You might as well tell someone to grow wings and make a nest in the clouds.

RickRussell_CA,
@RickRussell_CA@lemmy.world avatar

You can’t afford steak, you eat chicken, you can’t afford that, you eat beans. You can’t afford that, you’re in trouble.

I didn’t create the system, man. I get it, it’s hell to be poor. But corporations buying and flipping homes doesn’t have much to do with the plight of people who can’t afford studio apartments. If somebody else is ready to pay a higher rent than you are for the same apartment, they’re gonna get it. Doesn’t matter whether the landlord is a friendly grandma or a faceless megacorp, nobody is gonna willingly sell something for less.

leadore,
@leadore@kbin.social avatar

“Investors” (big, small, whatever) are selling homes at those prices (or renting, or VRBOing) because there are customers ready to buy the next available unit.

The "investors" are the buyers/customers, and they aren't reselling these houses--they're renting them out. It's mostly corporations increasingly doing over the last 15 years or so (I think it started around the 2008 financial crisis). They have the capital to do it and so regular people are being priced out more and more as this practice keeps driving up prices.

It didn't used to be this way. Even in my "cheap" area, when I bought my house back in 2005 all but one house on my block were owner-occupied. Now, more than half the houses are rentals because whenever one came up for sale it was bought by a rental company. This is a serious crisis that needs to be addressed.

RickRussell_CA,
@RickRussell_CA@lemmy.world avatar

The “investors” are the buyers/customers, and they aren’t reselling these houses–they’re renting them out.

Renting them out is still selling them, just another kind of selling. The company can only charge rent if there is a renter willing to pay. Again, the buyer determines price – if rent is too high, there will be no renters.

leadore,
@leadore@kbin.social avatar

Renting them out is not selling, it's an ongoing income source for the owner. The renter does not determine the price when the alternative is to move elsewhere or live out of your car. There's simply not enough housing--supply is limited. It's not a simple equation like a factory adjusting the output and price of its widgets. If things were as simple as you say, there wouldn't be such a severe housing crisis in the US. Just search for US housing crisis, there are thousands of articles explaining what's going on.

RickRussell_CA,
@RickRussell_CA@lemmy.world avatar

The renter does not determine the price when the alternative is to move elsewhere or live out of your car.

The renter is the person who pays the rent, not the person who can’t afford it. If someone gets evicted because they can’t pay rent, they are replaced with someone who will.

You’re on the right track, though. Over-regulation, opposition to new construction, and opposition to multi-family construction are the reason buyers are willing to pay more and more in HCOL areas.

ChonkyOwlbear,

Part of the problem is it’s still more profitable to build an expensive property and wait a couple years to find a buyer who can afford it than to build an affordable property which will sell right away.

RickRussell_CA,
@RickRussell_CA@lemmy.world avatar

True, there is a “frictional” effect on occupancy rate, that causes property to be idle for some time. I’m about to buy a house that was built by somebody else, but they decided they couldn’t afford it, and backed out, so it’s been sitting there new & idle for a couple of months.

When there is a lot of economic dislocation, or major demographic changes, that frictional rate of idle property may spike up (e.g. in the wake of the 2008 recession/real estate bubble, when some owners decided they would rather wait for recovery than find a buyer at a huge discount), but it’s a transient effect.

maporita,

Buying as an investment, whether by foreigners, corporations or whatever, is a symptom not a cause of the housing shortage. The cause of the housing shortage is that we’re not building enough houses. That’s it. Supply and demand, same as it’s always been. The solution is to reduce demand or increase supply.

NielsBohron, (edited )

That doesn’t mean “is a symptom, not a cause.” If it’s actually supply and demand, then the investors buying the housing is part of the problem, not just a symptom. The investors are decreasing supply and increasing demand, so it’s really two sides of the same coin.

Personally, I think that just building more houses isn’t the answer, because the corporations can just keep buying them up. This will continue to artificially decrease supply and increase demand, which keeps them making a profit. And as long as corporations can make a profit with this model, they will (and people will continue to suffer).

VelociCatTurd,

Yes let me buy a house on someone else’s land I’m sure they won’t mind. And if there’s not enough land left in America, we just need to increase the supply of land.

the free market won’t fix this because it’s not a bug, it’s a feature.

maporita,

If the owner of the land is selling it then they obviously don’t mind. Or do you believe that no-one should own land?

VelociCatTurd,

Actually, I’ve never thought about it, but the concept of “owning” land is pretty absurd tbh. There are people born everyday, beholden to imaginary lines drawn by dead fuckers hundreds or thousands of years ago.

maporita,

Abolishing land ownership sounds like an attractive idea, the problem is that it doesn’t work well in practice. Ownership of land, and a legal system to protect it, brings remarkable economic benefits. It allows owners to raise capital using the land as collateral and then to develop the land. A free market ensures that land is correctly valued. When values are as by government they tend to be incorrect or, worse, deliberately distorted by corruption. A quick look around the world shows that the richest countries all allow private ownership of land. China is the notable exception. It’s true that productivity in China has increased dramatically over the past few decades but this has been driven by urban centers and manufacturing… rural areas, where land remains under state control remain poor and impoverished.

Lemmylaugh,

That’s short sighted. Developers collude with each other and investors. There is serious conflict of interest since everyone on the supply side has lots to gain in ever rising house prices.

Ironically getting rid or severely limiting these developers to reduce supply is what’s needed to reduce prices. Not short term, but the long hard way until you take away the “investment “ side of real estate. Lower supply until it’s not profitable for these developers and investors.

downpunxx,
@downpunxx@kbin.social avatar

yes, there are a great deal of people that are making far more than you do. foreign and corporate investment snap up a great many private homes. short term rental investments have exploded so people with credit can buy homes, rent them out in the long or short term, and pay off the mortgages. the american dream centered around owning your own home, since the turn of the century has receded further and further away, where it was once the norm for the post ware middle class, doesn't really exist any longer. it's the haves and have nots in the united states.

satanmat,

I’ll add a “Yes and…”

Don’t underestimate people’s willingness to go into debt, for a bigger house because it will “look good”

Gotta keep up on the pretense of being successful.

souma,

They’re being built cheap by large corporations

Potatos_are_not_friends, (edited )

It’s about perspective.

I have tech coworkers who make about $250k in California take a pay cut to work remotely, so they can move someplace affordable. And they’ve said things like “This house is 800k for 1200 sqft?! What a steal!” Because their prior baseline in CA was it being $1.2million.

Izzy,
@Izzy@lemmy.world avatar

Meanwhile I bought my 1200 sqft house for $128k in the midwest. I suppose it has doubled in value since 2016, but still.

Rooki,
@Rooki@lemmy.world avatar

@TheGiantKorean please make your title a question.

Its our Rule no. 1!

TheGiantKorean,
@TheGiantKorean@lemmy.world avatar

Sorry! Fixed it.

starlinguk,
@starlinguk@kbin.social avatar

Where I live they're all bought by investors/landlords.

Blamemeta,

Investors, rich immigrants, just a lot of rich people in general. Sucks, and I would blame the government.

Semi-Hemi-Demigod,
@Semi-Hemi-Demigod@kbin.social avatar

The profit margin per square foot on a large "luxury" housing unit is a lot higher than on a smaller, cheaper unit. Plus you won't get people upset that you're eroding the price of their homes by building cheaper ones, so NIMBYs won't stop you.

marcos,

The profit margin per square foot on a large “luxury” housing unit is a lot higher than on a smaller, cheaper unit.

This is the weird part. It’s not normal by any means, and there must be something causing it to happen.

The normal situation is that cheaper homes are more profitable by area.

Semi-Hemi-Demigod,
@Semi-Hemi-Demigod@kbin.social avatar

It’s pretty simple: The cost to make the structure of a house is pretty much the same for luxury or basic models: Framing, electrical, foundation, etc.

But if you throw in some cheap granite countertops, a fancy tub, and up-market flooring suddenly it’s a luxury house and you can charge twice as much, despite it not costing nearly twice as much to build.

Same thing goes for cars: A luxury car just has different fabric and some badges, but they charge way more than a comparable econobox because it’s “luxury.”

fhqwgads,

From what I’ve seen this has been turned upside down by… well essentially automation, just not the kind everyone is afraid of.

Between better techniques and tools, a lot of construction is significantly faster than it used to be, to the point that a job that’s smaller has enough… I guess “opportunity” cost that it can be significantly less profitable.

Let’s say I’m a plumber. In the 80s, I would use copper pipe and have to solder all the connections - even a small job would take a long time - on the order of days. If I do a small house it takes way less time than a big house.

But now instead I would put in long lines of PEX with crimp on connectors. It’s like 4x as fast so it should be 4x cheaper right? Except now I have to drive to 4 different jobs to work all day, set up and tear down 4 times, deal with 4 different customers and invoices, etc. OR I can do 1 big house and make essentially the same money since I cut out all the extra work.

Add to that that most people are going to use more expensive finishes on larger houses that I basically just take a percentage of, and they might request something specialty and working on small affordable houses seems like a terrible business plan.

fhqwgads,

As someone who works with people in residential construction fairly often, this is the answer - and it’s why they don’t build new “starter” homes anymore. It’s very difficult to turn a profit on a single family home that would be considered affordable most places.

Basically, its very little extra effort and expense to build a luxury house compared to an inexpensive one, and your profit margin goes from very thin to decent.

Anecdotally in my area, most residential new construction is going to retirees who have a nest egg and the sale now very expensive house, or couples who sold an inherited house. Occasionally there are people who are remotely working or people building as an investment property, but they’re in the minority.

Smokeydope, (edited )
@Smokeydope@lemmy.world avatar

Because the system is rigged, the wet dream of the people who own america is a purely subscription/rent based economy where you own nothing and they own everything. Wake up, move somewhere more rural, or live out of a converted van/box truck. Otherwise sign the dotted line on half a million in mortgage debt and work the rest of your life to MAYBE pay it off before you die or your life burns down from a failed marriage or some other BS. I have no sympathy for grown ass adults who knowingly sign up for decades if indentured wagie slavery just so they can live in a suburbanite hellhole. “B-b-but I want a faaamilllyyy!” Good. Before you plop out some kids save up enough money to buy land and build a homestead out of pocket. DO NOT GET INTO DEBT IF YOU CAN HELP IT. DO NOT PAY A LANDLORD ALMOST ALL OF YOUR PAY. Other choices exist.

Vlyn,

Yeah, show me how to not get into debt and be able to afford both land and a house. People usually don’t have half a million+ lying around burning a hole in their pockets.

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