With the rent being too damn high, many Americans are now opting to live with a roommate (or two or three in the case of San Francisco and Los Angeles). We now have a record number of adult Americans living with roommates. This coincides with a stagnant growth in the homeownership rate especially in crap shack intensive areas like SoCal. The market continues to be constrained by low supply and Taco Tuesday baby boomers living in properties that they would not be able to purchase today at current price levels. Many older home owners bought during an era where one income (even one blue collar income) was enough to purchase a home. That is no longer the case in many metro areas where dual income professionals and all cash buyers are the dominant buying force. So how many adult Americans are now living with roommates?
The Canadian housing market is entering into a “housing correction†courtesy of the mega debt our neighbors to the north have taken on. The bubble grew and grew and like most real estate bubbles, they can go on for years beyond what most would expect. Canada’s housing market is deep in a bubble. You have households deeply in debt and many taking on wild loans secured to the value of their real estate. It has been a few months but key markets are now seeing noticeable changes. The online news feed no longer reads like a cryptocurrency surge where everyone has to get in before missing the party. Canadians went full USA in their housing bubble. Should you expect a different outcome?
You constantly hear that owning a home is a no brainer in California because you will always get major tax benefits. Well the new GOP tax plan is actually going to benefit California renters while California homeowners in crap shacks will see higher tax bills. It is an interesting tax proposal because the typical US household owning a typical $200,000 home is going to come out ahead. This is your bread and butter “American†family. However, Taco Tuesday Baby Boomers and Gen X’rs in California have been getting mega subsidies for buying hyper expensive crap shacks. Every tax bill that comes out seems to favor homeowners. In fact, I haven’t seen one that hasn’t favored homeownership. But the way the tax bill is setup, crap shack owners are going to actually have to pay more and renters are going to benefit nicely from the much larger standard deduction. We are now seeing some scenarios where this is playing out.
It seems like a lot of people are tripping over themselves regarding the GOP tax plan. For California, the housing cheerleaders always trumpeted the massive amount of tax deductions you got when buying a ridiculous crap shack. I always found this to be absurd. You usually got “free market†thinkers on the economy but then suddenly, wanted massive government support when they bought their expensive home. In the Bay Area a crap shack will cost you $1.5 million if you even want to have a parking spot within walkable distance. So it is no surprise that the GOP tax plan doesn’t give two seconds of thought as to what is good for California. And good just means on what side of the dinner table you are sitting at. Frankly, the rest of the country subsidizes the crazy housing market in California and other expensive states so it never made sense to have a mortgage interest deduction of up to $1,000,000 when the typical house in the U.S. costs $200,000. In regards to housing, the GOP tax plan will not help California housing values.
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