CNN Story on Housing Affordability

[Richard C.]

I would be interested in the opinions of @dawn aceri, @James Wiseand other midwestern investors on this story:

http://money.cnn.com/2014/05/22/real_estate/home-buying-salary/index.html?iid=HP_LN

In theory, housing prices and incomes should reach an equilibrium, where no place remains consistently "affordable" or "unaffordable", relative to local wages.

But that is in a market that is not only free, but where all actors are both fully informed and rational.

And none of us, never mind all of us, are either fully-informed or fully rational in our economic activity.

So what do you guys think? Is the Midwestern norm (or is it, really, a norm?) of accessible, plentiful and therefore decent quality (true?) housing sustainable over the long term?

I have been thinking about investing in the mid-west, because I think it might be. But I realize that I HOPE that it might be, because I have that whole lingering, American-dream ideology and want to believe that a working family can buy and keep a decent house in a decent neighborhood (ideally on a single income, but that's a whole other discussion.) And I don't want that HOPE to cloud my judgement (that's the whole "rational actor" thing.)

And so that no one needs to feel shy or feels like they need to offer extensive full disclosures, I already know that if I look to buy something in the mid-west, I'll be contact both James and Dawn. I've been impressed.

Thanks for any input.

[Michael Seeker]

Originally posted by @Richard C.:

I would be interested in the opinions of @dawn aceri, @James Wiseand other midwestern investors on this story:

http://money.cnn.com/2014/05/22/real_estate/home-buying-salary/index.html?iid=HP_LN

In theory, housing prices and incomes should reach an equilibrium, where no place remains consistently "affordable" or "unaffordable", relative to local wages.

But that is in a market that is not only free, but where all actors are both fully informed and rational.

And none of us, never mind all of us, are either fully-informed or fully rational in our economic activity.

So what do you guys think? Is the Midwestern norm (or is it, really, a norm?) of accessible, plentiful and therefore decent quality (true?) housing sustainable over the long term?

I have been thinking about investing in the mid-west, because I think it might be. But I realize that I HOPE that it might be, because I have that whole lingering, American-dream ideology and want to believe that a working family can buy and keep a decent house in a decent neighborhood (ideally on a single income, but that's a whole other discussion.) And I don't want that HOPE to cloud my judgement (that's the whole "rational actor" thing.)

And so that no one needs to feel shy or feels like they need to offer extensive full disclosures, I already know that if I look to buy something in the mid-west, I'll be contact both James and Dawn. I've been impressed.

Thanks for any input.

I think you'll find a strong correlation between demand and pricing. Most of the midwest does not have much of a draw. In other words, few people ever say "Some day I wanna move there!". Most people will talk about moving to CA or NYC or FL or various other high dollar places. I've never heard anybody whose life goal is to up and move to Omaha.

Also most of the midwest is expandable. If you want a home on the beach in CA, you've got very limited options. It's either right on the beach or it's some distance to the west. In the midwest, if you want to live "downtown" or wherever the draw happens to be...you've got plenty of options. If housing is too expensive where you want to live, you can go a couple minutes north, south, east or west to a more affordable area.

The demand is much lower in most parts of the midwest so the affordability should remain as long as the demand remains the same. I don't see anything changing the desirability anytime soon, so I'd say you'll see similar levels of affordability (with fluctuations of course) for a very long time.