Are house prices to high?

the cost of houses are too high the first time buyers can't afford to buy

They are too high for anybody. We have a serious asset bubble, brought about by a seemingly endless supply of cheap money.
Added to the fact, that many people today are not afraid of debt, don't care whether they are getting value for money, as long as they think that they can make the repayments in the short/medium term. In fact, the economy has been running on the back of house price increases, and the money borrowed against them, to feed the consumer boom.

A collapse in prices would be so devastating for the world economy, that we are in a state of denial. Almost everyone has a vested interest in talking them up, the government, the lending agencies, estate agents, architects and house owners. It is a fools paradise: Against all historical measures, they are far too high, and this, against a backdrop of several years of low inflation and modest wage rises. Also, it should be remembered, that houses, whilst soaking up enormous amounts of savers money, produce no economic returns. This money, therefore, is not available for investment in industry. The west has been borrowing money from savers in the east.

YES!!! Here in California, a simple 2bdrm house will run you about $400G's

yes!!! $100,000 for 4 walls and a roof! gosh!... just kidding

YES YES YES. My yardstick- how easy is it to find profitable real estate for renting purposes? In the UK it's getting more difficult so you have to really know what you are doing to make a profit. It is dangerous to rely on a rising market to rescue you so if the rental yields are not good & investors are barely covering their expenses (mortage etc.) then prices are too high.

There is no "too high or too low". housing prices are set be supply and demand, as it should be. There is no God goiven right to buy a home. Years ago a very small percentage of the population actually owned homes while the majority were renters. These days people believe that they have a right to own a home and that the government must do something about home prices. If you can afford, you buy. If you cannot, you rent.

Yep !!! even in iraq

The housing market goes in 4 year intervals of high and low and we are just entering the down swing so in about 2 years housing is going to be super cheap again and everyone will want to start jumping on all the available houses.

I like Veritas' answer, but it's incomplete, because it ignores a fundamental fact. Housing exists within a largely unregulated market in which the price of the produce is determined by factors of supply and demand. Governments largely leave the market alone and have by and large shied away from the levels of intervention that exist in other areas such as for example education or healthcare provision.

Whichever side of the pond you are, there are demographic factors, such as the changes in family composition, the increase in people setting up home alone, the increase in marriage breakdowns etc, which mean our population density has actually declined - so we need more buildings to house the same number of people. That socio-demographic shift increases demand, and without any corresponding supply increase causes prices to rise.

From the government's point of view, that can be a good thing, because there's a strong link between consumer spending patterns and consumers perceptions of the their housing wealth expressed in the amount of equity tied up in their home. High house prices increase consumer confidence, keeping the economy ticking over nicely - much to the government's comfort. Monetarist economists understand this link, hence why in the UK at least, such enormous concern exists about the setting of the base rate of interest by the Bank of England Monetary Policy Committee.

However, housing re-distributes wealth. Those who acquire it manage to generate equity from the increase in value without needing to amend, improve, or alter their home in any way. In the UK for example, the 30-year average has been for a 3% increase in house prices in real terms, each year, every year. That makes property both a product that is consumed to provide utility in the form of shelter AND an investment good which is used to save for old age, to release equity in times of unemployment, etc. Those who do not acquire property however are locked out of such equity increase, and are denied the investment opportunity, the tax breaks which governments have over many years granted to home owners, and the favourable borrowing rates from financial institutions that secured borrowing attracts.

The question of first time buyers is interesting, because ultimately, given long enough, if a large enough number of people cannot get a foot at the bottom of the housing ladder, then theoretically the entire market fails. However, housing markets are enormously segmented, by type, by geographic housing market area, etc etc etc so the failure of first time buyers to achieve their aspiration only immediately impacts those who currently occupy homes that they would wish to sell to first time buyers.

Is there a justification for government to intervene? Yes, there is if you view that the market is failing to provide a product at a price first time buyers can afford and the wider social impact of this in respect of labour mobility, labour market vacancies in certain public sector jobs etc is sufficiently important to justify intervention. However, the opposite argument is that the market is working correctly in that it's setting a price for the product of housing, but it's an affordability problem that's being played out across both sides of the pond. Affordability can, theoretically in the short term at least, be addressed through subsidy, whereas the longer term solution would be to intervene on the supply side and increase the numbers of properties coming onto the market. However, the difficulty with this is that the level of increase in housing supply necessary would, in the UK at least, reflect an almost doubling in output just to achieve a 1% reduction or thereabouts in the rate of house price increases.

With so many vested interests at stake, including every current homeowner who wishes to protect their current asset value, government's face a virtual no-win situation in attempting to intervene in the housing market. There are economic reasons however why they do need to do so, as housing market failure imposes costs on the whole economy.

yes they are here in Az.

yes they are. give it two more years and the bottoms going to fall out of the market and prices will drop.

Yes they are in SoCal thats why I am glad I bought my house back in 2000, low rates! Now my house is worth 3 times more. Too Awesome!

Are you in California? If so, that's very true. What happens though in todays market, these houses will be on the market for quite some time because buyers wont pay that much for them. Selling agents are now taking offers under the listed price just to get the sale done. Don't shy away from high prices, contact a real estate agent and under bid on a house. There's a good chance that your offer will be accepted. Or what you can do is contact me, if you're in California.

depends on where ya live
just bought a 4 bed 2 bath home for 40,000 in missouri huge yard 2 car garage.. house in perfect condition.. yeah missouri is cheap
my parents just bought a 3 bed 1 bath house for 99,000 they live i Indiana..
so just depends where ya live!

Yes I think they are. We bought our house four years ago in the UK and struggled to buy even then. WE bought our house with Annington Homes. They sell ex military properties to anyone and have a good incentive package. The houses are basic but solid. One incentive that they have is they pay your 5% deposit for a ВЈ99 move in fee. There are a lot more too. Have a look at their website if you live in the UK.

House prices are great. That's Bush's answer.

Don't worry about an 800 sq ft house costing 850K...soon it will be worth 1.3 million. That's California's answer.

Someone will be on the hook for that money when it all falls in...look at what happened in Asia more than 10 years ago. This is not some made up phenomenon that will never happen.

People have lost their freaking minds.

yes, you know they are way too high when the people who grew up in an area can't afford to live there.

Not in Texas. You can get a house in Texas for $150,000. The same house in California costs $500,000. In Baltimore, the same house would cost close to $1,000,000. Cost of living is so much better here in Texas.

Yeah the prices are high, but I guess it also depends on where you wana live too.

If you cannot afford to buy, maybe you are looking nito the wrong area. Being a first time buyer, at times you can get a lower interest rate purchasing a new home than going with Pre-existing. The builder finances the home through their company and can normally give you a great interest rate if your credit is good. Keep looking you will find something.

It many areas they are, but in a lot they aren't. For example, unless you're very wealthy you're never going to be able to afford a home in Santa Monica, CA or a sprawiling apartment in Midtown Manhattan, but if you go to other areas of the country you can afford the home with a small down payment and a 30 year loan. Give it 2-4 more years and the bottom will drop out and prices will start to go down again.

Move to Denver, CO.

Other than that, the median income cannot support a median house payment anywhere that I know of in the US

it depend how reach you are.

Absolutely we are looking to buy right now and prices are twice waht they were just from 4 years ago!

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