Excessive housing costs

How to avoid signing your life over to a mortgage
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thrifty++
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Excessive housing costs

Post by thrifty++ » Fri Aug 16, 2019 12:52 pm

Excessive housing costs to me seems the biggest hurdle in the way of achieving financial independence. EVen though I keep growing wealth the ever escalating costs of housing makes it seem like I am pedalling a race on a stationary bicycle.

NZ has been ranked as having the most unaffordable housing in the developed world for the last 3 years. Also it has very low quality housing with one or all of: a lack of proper insulation, damp, mould, cold, no central heating, no air con, leaky building problems, insufficient earthquake strengthening.

But when I look around the world excessive housing costs don't seem limited to NZ. It seems a global phenomenon. Most cities around the world are now unaffordable.

How has this changed so radically? What are the causes? It seems that housing was affordable - being up to three times the average income from the 50s through to the 80s. Holy shit that's mouth watering stuff. Financial independence would be so fucking easy for a frugal person. Would a been there 8 years ago.

How do you actually hack this? I want to try living in a van but I have a health problem causing sleeping disorders. Until I find a way to fix it that wont be viable. Still, that doesn't really seem all that viable as a long term option. So.. how do you hack the housing crisis?

In NZ rent is very expensive, but its much more expensive to buy. So... I am grappling with the issue sometimes as to whether just to buy a property and suck up the enormous costs of it for a while to avoid getting locked out and stuck with ever escalating rents. BUT. How do you know if the property prices will keep escalating? I would rather not buy if it is likely that housing wont continue to escalate? What do people think? Is it like that housing costs will keep increasing? How can it continue this way when things are so out of kilter with the past now? How will ordinary people afford to live?

Do people think housing costs will ever go back to like they were from the 50s to the 80s? When it was up to 3 times income to buy a house?

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Ego
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Re: Excessive housing costs

Post by Ego » Fri Aug 16, 2019 1:19 pm

thrifty++ wrote:
Fri Aug 16, 2019 12:52 pm
So.. how do you hack the housing crisis?
We stumbled upon a hack by dumb luck....
viewtopic.php?t=1869

Soon we will be returning for another stint.

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Dream of Freedom
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Re: Excessive housing costs

Post by Dream of Freedom » Fri Aug 16, 2019 1:27 pm

There was a good article I read a while back showing how we've been under investing in new housing for quite some time.
Looking at this data through another lens, we see that residential fixed investment as a share of GDP remains well below the pre-recession period. Apart from a five-year period between 2000-2005 that saw a surge in single-family homebuilding activity, the United States has been under-building and under-investing in existing homes since the early 1990s, and that trend of underbuilding has intensified dramatically since the housing bubble burst in 2008. On a rolling 10-year average, residential fixed investment as a share of GDP is the lowest since the end of WWII, a function of underinvestment in both new home construction and existing home repair and renovation activity. The surge in residential investment fueled the housing bubble in the mid-2000s and was responsible for 6.6% of GDP in 2005. Residential fixed investment now makes up just 3.7% of GDP while business non-residential investment in structures makes up 3.0% of GDP
https://seekingalpha.com/article/427838 ... ting-worse

thrifty++
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Re: Excessive housing costs

Post by thrifty++ » Fri Aug 16, 2019 1:52 pm

@ego that's a good idea. I have thought of that a few times previously but didn't really have any follow through. The extent of my efforts was passive online searches which was never going to go anywhere.

I think I should do a more active method of searching. I think direct email is often the best method. That's how I have picked up many other things business related. But any idea who you might email? Most places here in NZ do not have a reception unless they are huge hotel/apartment complexes which is not what I would want. But I also think that emailing the building manager would not be great as you are trying to take their job. I might actually try emailing my old building manager telling him what I am looking for and seeking his ideas on who to contact or if he knows of anywhere wanting a manager. I do find here that often building managers look after a number of smaller buildings. So I am not sure how likely it will be I can get something like you have but its worth a shot.

Also ego, I have to go away for my work on average about one week out of 5. Do you see that as a major impediment to being likely to get a gig like yours?

bigato
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Re: Excessive housing costs

Post by bigato » Fri Aug 16, 2019 1:55 pm

Where do low income people live in NZ?

thrifty++
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Re: Excessive housing costs

Post by thrifty++ » Fri Aug 16, 2019 2:05 pm

bigato wrote:
Fri Aug 16, 2019 1:55 pm
Where do low income people live in NZ?
They live all over NZ. In the bigger cities they tend to live in the more remote suburbs which is farther from downtown. Still very expensive though in those remote poor suburbs. But generally people tend to reduce their quality of housing. So there will be more people per home, more per bedroom, lower quality housing (eg mould and cold and damp). The rate of homelessness is very high (It was ranked highest percentage in developed world in 2017 but haven't noticed anything more recent). Some people rent garages. Or a lot of low income live downtown so that they have no transport costs. Then they just pay a very large portion of their income on rent and live in very small and/or run down apartments shared with other people.

Some small cold cities are cheaper. Like Invercargill down the bottom of the South Island. Or Timaru and Whanganui. They are options I guess. But would be a pretty miserable existence.
Last edited by thrifty++ on Fri Aug 16, 2019 2:17 pm, edited 1 time in total.

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Ego
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Re: Excessive housing costs

Post by Ego » Fri Aug 16, 2019 2:16 pm

@Thrifty, I mentioned a few ideas in that thread. It is probably best to contact the management companies directly. The manager of your previous building may have a suggestion. Typically the deal with resident managers is that they are reachable and available to deal with problems. How much you must actually be at the property varies by company. The one we work for is pretty hands off as long as things are going smoothly. Since writing that thread I've gotten better at setting up systems so that the contractors can access the apartments and deal with the situation without me being involved.

bigato
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Re: Excessive housing costs

Post by bigato » Fri Aug 16, 2019 3:08 pm

Why would live in those cities be a miserable existence for you? Do you consider everybody there to be living a miserable experience? Are you willing to live on less space? How small? Would you share? Have a roomate? Live in a hostel? Would you move elsewhere? How far?

Riggerjack
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Re: Excessive housing costs

Post by Riggerjack » Fri Aug 16, 2019 3:25 pm

So is buying land and building your own place, an option for you? At least that way, you have some control over what kind of house you get.

FWIW, I expect housing costs to continue to rise up until the next recession, at which point, we'll see what kind of magic is next from our central banks.

Current housing costs are part of the general asset appreciation caused by QE, working through the economy. That will change in the next recession, or it won't.

The only thing I am sure of, is central banks are playing this game at least one level of complexity above what I was using when I was worried about hyperinflation... :oops:

GandK
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Re: Excessive housing costs

Post by GandK » Fri Aug 16, 2019 3:44 pm

We just moved into an RV. Is that an option for you?

Campitor
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Re: Excessive housing costs

Post by Campitor » Fri Aug 16, 2019 4:06 pm

I think there is a demand and need for allowing people to live in tiny homes - mobile or otherwise. Whether you're an empty nester or single person wanting to reduce costs, there should be provisions for allowing the building of tiny homes on small plots regardless if the tiny home has wheels or not. Ditto for small apartments. The minimum requirement for lot and building size balloons the cost of homes. Not everyone needs or wants a huge house with a massive yard.

Here are some tiny homes that I think most people would live in:

2Birds1Stone
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Re: Excessive housing costs

Post by 2Birds1Stone » Fri Aug 16, 2019 4:29 pm

Hmmm, I don't think this is true for many parts of the world.

We live in a relatively HCOL area (Long Island, NY), and spend ~10% of net income on housing (w/ utilities included).

This is done by renting a 1 bedroom apartment, and staying here for 6 years with a good relationship to owner who we rent from.

Rents in most of the USA are relatively cheap, same with most of eastern and southern Europe. Maybe you need to leave NZ?

Seppia
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Re: Excessive housing costs

Post by Seppia » Fri Aug 16, 2019 4:39 pm

You could consider moving out of NZ- currently one of the most unaffordable housing markets in the planet.
There was an article recently focusing on RE bubbles, and NZ was among the top countries.

Another option would be to move to a smaller town such as Huntly (where I spent a full 6 months of my life and all the kiwis I spoke to made fun of me because of that lol)

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Ego
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Re: Excessive housing costs

Post by Ego » Sat Aug 17, 2019 3:00 am

2Birds1Stone wrote:
Fri Aug 16, 2019 4:29 pm
We live in a relatively HCOL area (Long Island, NY), and spend ~10% of net income on housing (w/ utilities included).

This is done by renting a 1 bedroom apartment, and staying here for 6 years with a good relationship to owner who we rent from.
This. I have a two friends who own homes with granny flats in a desirable location. They rent them to friends (or friends of friends) because 1) they want to be sure the renter will not disturb them or cause problems 2) they are not technically legal rentals and want cash. They are willing to accept much less than market rent to get what they want.

You might start by asking friends if they know anyone who is looking for a good, responsible tenant willing to pay in cash.

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unemployable
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Re: Excessive housing costs

Post by unemployable » Sat Aug 17, 2019 5:10 pm

I have a lot to say about this... hell I have said a lot about this... but right now my internet time is limited as I am in the middle of looking for a cheaper place to live. Actually I'm in the middle of some hiking right now, because apparently no one in the western half of Colorado deals in real estate on weekends.

Until then, check out rents in downstate Illinois or house prices in central Pennsylvania. (See, I don't have to mention Arkansas. It's a big country.)
Riggerjack wrote:
Fri Aug 16, 2019 3:25 pm
FWIW, I expect housing costs to continue to rise up until the next recession, at which point, we'll see what kind of magic is next from our central banks.
The sequel to negative bond rates... wait for it... negative mortgage rates! Apparently one bank in Europe is offering them. This is what I'll ponder tonight when I'm laying in my car unable to sleep because the moon is too bright.

classical_Liberal
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Re: Excessive housing costs

Post by classical_Liberal » Sat Aug 17, 2019 7:25 pm

The solution to housing costs, as well as the solution to healthcare costs (another current thread), and probably many other things is completely dependant on preferences.

There was a thread several years ago about "preppers". In it, I stated my belief that there are two effective strategies that run along a continuum. "Hunker down ----------- Be mobile". Where you sit on this continuum very much defines strategy. I think we can even take it a step further and equate this continuum to preference for breadth vs depth. I think each offers advantages and effective systems can be designed around either/or and potentially even both if dealing in different realms.

Therefore, in my humble opinion, before a solution can be designed for housing, one must make a decision which direction to go. Are you going to "hunker down" or "be mobile" in this realm. In a hunker down situation for OP, finding an income producing/cost offseting ownership situation (ie ideas in this thread) is ideal. In the be mobile option, the skill set needed is the ability to become more location independent (ie suggestions like leaving new zealand temporarily or buying an RV). A hybrid approach is to maybe purchase land now for future building and put an RV/travel trailer pad on it for present needs.

thrifty++
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Re: Excessive housing costs

Post by thrifty++ » Sun Aug 18, 2019 12:41 am

Yes it might be an idea to leave NZ.
Or maybe there are ways to hack things while here. hmmm.

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unemployable
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Re: Excessive housing costs

Post by unemployable » Mon Aug 19, 2019 2:10 pm

How do you hack the housing crisis... you live somewhere cheap. Does this need to be explained further?

I don't really see a housing "crisis" anywhere, speaking as someone who rents in Colorado ski country. What I see mostly is economics at work. A 1br in Aspen goes for $2500/month because people want to live in Aspen. Where you live is mostly a choice -- there's an element to being able to do your job only in certain places, but location demand is never 100% inelastic. If your life skills enable you to only operate a chairlift (meaning sitting in a shack and pressing a button to stop the thing if someone falls trying to get on or off), you should still be able to transfer that skill, such as it is, to a place where rents are closer to $500/month.

That's the demand-side answer. The supply-side answer is to encourage more building and better market liquidity. This encompasses more permissive building codes and zoning laws, regulations that encourage people to rent out property that would otherwise go vacant and tenant laws that aren't overly restrictive to landlording. The so-called "tenant-friendly" states and cities have the highest rents -- if it takes six months to evict a deadbeat you have to make honest tenants pay for it.

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