Math Doesn’t Lie, Even For Housing

House prices as listed by Realtors are now OBSCENE. I mean that. Outright Psychopathic – not merely Psychotic, but Evil, Cruel, Insane, Brutal, Psychopathic.

You are told that every house sells fast. You are told that they sell for outrageous prices (and they do, but not what you think). You are told there are no affordable rentals or sales.

You are being lied to. We are seeing for sale signs for YEARS in front of houses. Outrageous prices are 1/5 of the list price, NOT the list price. There ARE affordable houses, but no way to find them.

There are metrics that EVERY community has to have. If they do not have them, the community COLLAPSES.

The Median Household Income in MOST areas of the US is around $50k. The Census Bureau reports it at $74k and DECLINING. But they SKEW the number to make it higher, by eliminating everyone on Public Assistance (this eliminates about 3/5 of people who are under the Poverty Level, and this accounts for the adjustment). Other experts insist that the Median Household Income for the US is actually closer to $41.5k if you adjust for some housing issues (basement rented to family, two families, two households, counted as one), and some additional income issues (counting earnings from outside the US while residing outside, counting some kinds of savings payouts as income, etc).

So the metric is this:

MEDIAN housing prices (for a basic, comfortable 3 br house) HAVE to be available at 1/100 of TWICE the Median Household Income. That means $1000 per month. For a 3 BR.

Currently they tell you you cannot even get a shabby 2 BR for that,  and many places want you to believe this will get you a Studio apartment (often a remodeled strip motel room). They’ve been pushing this one for a LONG LONG time, and we are too used to rents hurting.

Median Single Earner Household Income is the next lynchpin. That runs at 3/5 of general Median Household Income – or $30k. That works out to $600 per month for a 2 br. Normal, average, sorta comfortable 2 br in liveable condition.

Now, this HAS TO EXIST. If it does not, you have NO minimum wage workers in your communities! You have no earners for less than about $20 per hour – they MOVE OUT because they cannot afford to live in the community.

MORE SO in College Towns, because young families with parent in school CANNOT AFFORD high priced housing, and in fact, Financial Aid just CANNOT go far enough EVEN WITH part time or even full time jobs! School is EXPENSIVE.

If you have no workers in this category, you lose EVERYTHING.

• You lose hotels.
• You lose Fast Food.
• You lose Grocery Stores.
• You lose gas stations and convenience stores.
• You lose local delivery.
• You lose carpentry, framers, roofers, home repair.
• You lose classroom aids, and MANY teachers.
• You lose DAYCARE ENTIRELY.
• You lose production line manufacturing workers.
• You lose road construction laborers – a few make more, but most not.
• You lose phone call centers ENTIRELY, and they move out.
• You lose ALL cashiers, bank tellers, and clerks.
• You lose office workers of all kinds.
• You lose lower to mid level government and corporate workers.
• You lose part time artisans and crafters.
• You lose agriculture – land prices skyrocket and they move on because they can’t earn enough to cover it. (Industry analysts say this one goes early.)
• You lose mechanics – most do NOT make big bucks, and those who DO make more than $20 per hour are the exception, and have worked their way up for a LONG time.

Once this begins, it CASCADES. You don’t just lose workers, you lose the BUSINESSES that depend upon them. First, they raise wages, and then, they close their doors.

It does not stop with low bar earners. It reaches into higher tiers because they OFTEN reside with a lower income earner, and they BOTH move out.

The next phase is that Services that a community NEEDS are no longer there.

Wealthy people leave first on the receiving end of things. They just WON’T stay in an area that does not offer conveniences.

The upper middle income leaves next. And once they go, EVERYTHING collapses.

This process rarely completes fully, usually a correction occurs, and housing opens up again. But in the mean time, it can get VERY ugly.

Now, there are various lies out there to “explain” this. It is different in every area, but here are two that we have heard:

1. Rich people from Salt Lake and California are moving in here and paying half a million for a vacation property.
2. Rich people are tired of Vegas and L.A (Houston, New York City, Miami, Chicago, Boston, DC, etc)., and are paying half a million for a property to relocate to. This one is regional, with a different city listed for each region.
3. They are selling for AirBNB.
4. There’s a factory coming in that is taking up all the housing for employees.
5. Refugees are taking all the cheap properties.
6. We are also told that houses “appraise” for ten times their value.
7. That high interest rates are skewing the markets.

Lies. PROVABLE lies.

First off, there AREN’T ENOUGH RICH PEOPLE IN SALT LAKE AND CALIFORNIA to buy THAT MANY houses at THOSE PRICES. There aren’t even enough of them in the entire US to create a housing crunch in even a single community, let alone in the entire country. (And before we hear the myth that rich foreigners are buying them, you need to understand that rich foreigners don’t exist… Incomes in Europe average FAR lower than the average inside the US, and there are FEWER people living above what we class as poverty level, and FAR fewer living above OUR median income levels. When they buy outside of EU, they buy cheap condos or cabins, but mostly they rent hotel rooms for short vacations because they can’t afford to maintain a second house full time. There are not NEARLY enough of them to affect the housing prices here.)

Second, there aren’t ENOUGH RICH PEOPLE WHO WILL PUT UP WITH SMALL TOWN LIMITATIONS to relocate to the places in question here. They want a CITY. A BIG ONE. Not enough jobs in small towns and small cities to absorb THAT MUCH. Especially AT THOSE INCOMES. And there aren’t enough of them to affect a large town either.

Third, the incomes required here are ENORMOUS. They are in the top 0.000034% of earners in the US. Incomes over $2m per year are RARE, and that is what it takes to keep selling million dollar homes, and it works out to less than 500 people in the US who can afford them. Incomes of $1m per year are a 0.0026% factor. That works out to about 8666 people in the US with that kind of income, and that works out to about 173 per state, only 2% of whom WANT a second home, and even if you tip MOST of them over into a single location, it still is NOT ENOUGH to have more than a MINIMAL effect on a single location. There are not enough rich people to cause this in all the areas it is claimed for. There are even too few who make over $100k to have THAT KIND of effect nationwide, as is claimed, and there is NO WAY they are all going to go to the same place.

Fourth, they don’t buy an EXPENSIVE vacation property. They buy a CHEAP ONE. You can’t AFFORD two huge mortgages, you can only afford one, IF you can afford one.

Fifth, retirees also do not buy expensive. They buy cheap.

Sixth, AirBNB is NEVER a big thing, and it is NEVER lucrative. People don’t generally stay in private rented vacation homes, they stay in hotels. They are suspicious of private rentals for vacations, and they tend to NEVER pay for an entire house unless they overload it with extended friends and family, and leave it a mess. Owners of AirBNB (and former owners) tell terrible stories, and a very high percentage go into foreclosure or they either rent by the year or sell out entirely within 6 months. It just isn’t a way that you CAN make money due to how it operates and how people think about vacations and overnight or temporary rentals. Would you rent a house for $600 per night when you can get a clean hotel room for less than $100? Statistically, only ONE vacation house rents for every 300 hotel rooms. The market would be saturated in this valley with six rented homes, yet people say they are all selling for that… that half the homes here are AirBNB. Not possible.

Factories being talked about, moving into LARGE cities (they won’t locate elsewhere), only need an average of 40 employees. A few larger need as many as 200. NOT ENOUGH to even make a DENT in a fair sized city. 200 employees in a town of 100,000 are lost in the crowd. Heck, that many will have moved out as the new ones move in.

Refugees are the same as rich people. There just aren’t enough of them, and they are not living in low income properties, they are living in flop houses and shelters, and other places while they try to find someone to hire them. The life of a refugee is horrendous, and they lose sponsors as fast as they gain them. There just aren’t enough of them to affect the housing markets anyway, especially in cities  that are not landing zones. This isn’t even an issue in Miami except in about three very small districts, and they are OBVIOUSLY racial communities.

Houses do not appraise for 10 times what the populace can afford to pay for them. They just can’t. Houses don’t sell when people make half the amount of the payment due on the mortgage. Crooked appraisers puff prices to keep the idea of high prices in play.

High interest rates do NOT increase prices of houses. In fact, they DECREASE them, because when interest rates are high, monthly payments and loan costs go UP. They go WAY up. An $800 payment can go to $1100 just from a significant change in interest rates. That means people HAVE to have LOWER housing prices to afford to live.

Even if ALL OF THE LIES WERE TRUE, it still is NOT ENOUGH to affect the entire nation, and we find that these lies are being told in EVERY CITY, and even in the small rural towns. It can’t be true everywhere.

Let’s do some of the math.

A half a million dollar home costs UPWARD of $5000 per month for the payments. We know this.

A $100k home is MEDIAN for a $50k income. And that is a $1000 per month payment.

Landlords and banks BOTH just won’t qualify someone on LESS INCOME for that payment. They REQUIRE $50k to get a $100k loan. If there are variances they are SMALL ONES, not huge ones, so you might get a $100k loan on $42k, but you WON’T get a $200k loan on $50k.

Now, let’s examine the meaning of Median.

It means the MIDDLE OF THE AVERAGE. That means SOME will be higher, and SOME will be lower, but the spread is NOT EVEN. Higher incomes disperse more, and the very high incomes are VERY INFREQUENT. The lower ones cluster in the survivable ranges, and about ONE THIRD have LOWER incomes than median, and about ONE THIRD have CLOSE to Median on either side.

People, there just AREN’T enough RICH PEOPLE in the WORLD to skew housing like you are being told.

So what IS happening?

I can identify only TWO  factors that are not being talked about. And they are big.

1. The internet is broken. Craigslist is broken, Etsy is broken, Ebay is scary twisted, Google is outright fraudulent and broken (search results are screwy messed up and way incomplete), online real estate listings are outdated and fraudulent, online rental listings are even worse. In short, you cannot look up ANYTHING accurate online for housing, especially rentals. The days of finding a house online are long gone.
2. Print is broken. There are NO LISTINGS in newspaper classifieds for rentals. There are only puffed and outrageous pie in the sky real estate listings – the majority, by the way, WITHOUT PRICES (always an indication of a con).

This means that DEALS ARE THERE. But nobody knows where. Landlords have forgotten how to promote an available rental. You CAN’T find it except word of mouth, and even THAT is mostly broken. People have forgotten how to personally network.

What we get are Property Management Companies, and Realtors, both of whom are so screwy insane with greed and avarice right now that they JUST WON’T let you rent ANYTHING under “their pricepoint”. And that can be ANYTHING crazy high.

Some of the tricks they try:

1. They will discount your income – eliminate many legit types of income from consideration as earnings, so you can’t qualify even for a low pricepoint.
2. They charge an “application fee”, and that can be anywhere from $40 to CRAZY HIGH. We encountered one at $80, when they quoted $40 (then they tell us that it is for EACH ADULT). Non refundable. They disqualify you, sucks to be you, you just gambled $40 or more, and lost. And they KNOW they can just yank you and you will never know the truth of whether they already rented the place and just disqualified you to keep the fee. Yeah, it’s a thing. A BIG one. We consider application fees to be a scam, NO MATTER WHO CHARGES THEM (Yes, you, Century 21, and other major Real Estate companies.) This is also done by companies that HAVE NO RENTALS, they just make them up, and charge fees and disqualify. This is also done by Banks and Realtors for housing purchases, with the same spread of fraud and extortion.
3. They bait and switch. $975 says the listing on their website. “Oh, that one is $1200.” they tell you. (True story.)
4. They maintain OUTDATED listings. Everything affordable is still listed, but no longer available.
5. They want you to fill out the application, but they are REALLY BACKWARD about scheduling a viewing of a rental. Sometimes happens with purchase, but tends to be “look at the outside we can’t let you in” version. Can we say, “Con”?
6. They LIST the property at one price, and SELL it at another, and then report that it “SOLD” as a $— listing. The sale price is generally LESS THAN HALF of the listing price if it is one of those outrageously high priced listings. You think that you KNOW, because someone at the courthouse who files deeds says this is what is selling and they see it every day. But DEEDS NEVER LIST THE SALE PRICE. Neither does the purchase notice (essentially a bill of sale but without the price listed). It says, “for $10 plus other considerations”, rather than a full price listed. So “comps” you see are ALWAYS on LIST PRICE, and NEVER on SALE PRICE.
7. Corruption is Rife. Realtors have been taken over by greedy leeches who believe that if they PRICE it high, they can FORCE YOU to pay more, whether you can afford it or not (with the irony that they won’t approve you anyway because your income is not high enough). Once one company starts it, the rest fold and go all in. The world is being run by people who disconnect their “neat idea” from the dysfunction it causes (how else can we explain Colorado’s current love affair with Roundabouts – I mean, we expect this kind of dysfunction in Great Britain, but NOT in America). Get a clue Realtors – you are NOT selling puffed properties like you think you can, and for many of you, NOTHING is moving. We are NEVER prepared to suffer THAT MUCH, to try to make an extortionate payment every month with eviction hanging over our heads if we fail, just so you can scrape 200% of a reasonable sale price. (Many versions of the high price scams, going from crooked breach of contract on sales where the owner gets ripped off, the buyer gets ripped off, and the realtor takes it out of the middle, all the way to involvement of crooked banks or bank loan officers. LOTS of criminal behavior, as well as just merely dishonest, as though there is something such as merely dishonest).

Work it out. The math HAS to work, or it is DECEPTION.

What we are being told is NOT TRUE, no matter who insists that it is.

But I suppose the high prices do have more gossip value than the real world. I am ever shocked at how many people would rather believe the lie than to apply some common sense and math to see the truth and possibly see a solution.