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Prices for starter homes are crowding out millennials
- Retric 11y agoWhere I live the choice is renting for 1600/month or 'buying' a similar play for 300k + Appliances with a 800$/mo amenity fee AND property taxes AND Maintenance. The only way buying works out is if there is some greater fool out there willing to play the sucker in a few years. PS: Looks like 150$ of that amenity fee is a special assessment for the next 8 years. But, new condo's are notorious for artificially lowering condo fees for a few years and then bumping things when they need to fix something major.
- nahname 11y agoI would be buying a home (or two) if 300k was the price tag.
- nkrisc 11y agoWhere I live (very large US city) buying actually works out better than renting IF you can afford a substantial down payment, which I imagine most millennials can not. My wife and I ('88-'89 born millennials) were able to and are saving money every month on the bottom line while living in a condo larger and nicer than our previous apartment. Given the generally anemic savings and salaries/wages of most millennials, I think being able to qualify for a good mortgage is a major hurdle.
- mikeryan 11y ago800 bucks a month or a year? 300k place with 20% down should be about $1500 a month ($1600 a month at 10%) for mortgage + property taxes. Am I missing something?
- deleted 11y ago[deleted]
- nkrisc 11y ago$800/mo for an HOA fee is crazy. I recently purchased a condo for $330k at 20% down and I'm saving $200/mo over renting a smaller place.
- mikeryan 11y agoAgreed thats why it should make sense to buy.
- akcreek 11y agoWhat about the opportunity cost of the $66,000 you put down? You could likely earn more than $200/mo pretty easily with $66,000 in cash to utilize. It is too simplistic to say you are saving $200/mo just because the monthly P&I payment is $200 less than a rent payment. That doesn't take into account what you could have done with the cash, property tax, maintenance, etc... Of course the big unknown is the future value of the property, which makes this very difficult to calculate accurately. I've looked at this several times and renting typically comes out on top for me. I still decided to own though because I couldn't find what I wanted to rent and I care more about where I live than making sure it is the smartest purchase I can make.
- jameshart 11y ago"You could likely earn more than $200/mo pretty easily with $66,000 in cash to utilize" How? That's more than a 3% return.
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- jluxenberg 11y agoIs the $800 amenity fee monthly? If not, you're probably better off buying (see http://nyti.ms/1han05C http://nyti.ms/1han05C ; plug $300k in for the "price of home")
- Retric 11y agoYea per month, plugging in numbers I could including a lower property tax rate buying is a bad deal with that calculator even if you stay 15 years before moving and investment returns stay at the inflation rate.
- snowwrestler 11y agoThis is a temporary consequence of the 2008-2009 housing crash. Housing construction is a lagging indicator because of the regulatory and capital requirements to build a whole bunch of homes. So what we see right now is that demand is growing because the economy is growing again, but supply has not yet caught up. Result: fewer affordable houses. In my neighborhood a new row house development was just breaking ground when the shit hit the fan in 2008, and of course they stopped. Well, they're building fast today, and selling every unit, but they're still not done. It just takes a while to build houses. The only connection is Millenials is that they are the youngest generation currently looking to buy a home, so they are more price-sensitive than Gen Xers or Boomers.
- toomuchtodo 11y agoI'm curious if we're going to see a glut in housing with so many Boomers entering retirement, wanting to downsize or needing to extract their equity to live on. Also, economics for Millennials have been terrible. They're of course going to have a terrible time trying to get a down payment together as well as afford a reasonable mortgage payment. Even assuming they use a 3% down mortgage program, they then have no equity, and are locked to the property if they need to move/relocate unless they're willing to default on the property (which then keeps them out of buying again for 3 years). EDIT: As someone who has seen deep into the real estate market, the game is rigged.
- XorNot 11y agoHasn't happened in Sydney yet. I think we're still beating out SF in real estate prices.
- toomuchtodo 11y agoIt'll happen first in the US. We're not known for a big influx of foreign money except in SF, NY, and parts of Texas. I could see Chinese money picking Australian cities over second-tier US cities.
- ak217 11y ago
- arielweisberg 11y agoI wish we were back in the days of 20% down. Seems like that would ground the market properly and make people more price sensitive, but I am not an economist. Turning the spigot off is harder than turning it on. My beef is that easy credit isn't just driving up the price of housing it's driving up the size of housing which is connected to the price.
- toomuchtodo 11y agoIndeed. Unfortunately, so much of the US economy rides on the housing market, you'll never see sane policies such as this enacted.
- somedudethere 11y agoIs it really "easy credit"? My coworker just got done with getting a mortgage in San Mateo and it really seemed like a long drawn out processes with significant hurdles in terms of paperwork and documentation along with a requirement to put down $300k on a $1mil house. I've been told by several people that it is significantly harder to get a mortgage today than in 2007/2008. Perhaps he was making it harder than it really is but a mortgage is the hardest consumer credit to get.
- toomuchtodo 11y agoIt's a bit harder, but not significantly. (Source: both my parents are mortgage underwriters). Getting a mortgage is not terribly difficult. Both child support and unemployment income can be used to obtain a mortgage. It really depends who is going to buy the loan. If its Fannie or Freddie (government sponsored entities), you have to meet their criteria if they're to buy the loan from you after you've made it. If you're a lending institution who is going to hold and service the loan (local banks or credit unions) you have a lot more leeway in what your criteria is.
- SHIT_TALKER 11y agoYou are right, it is definitely harder than it was during the mid 2000s free-for-all. People are conflating "cheaper" with "easier" in this case. Just because rates are suppressed doesn't mean anyone can get a loan.
- strathmeyer 11y agoI'm thirty four and nobody has ever suggested to me that I am supposed to buy a home. How on earth are we supposed to figure out what is going on in the world when everyone lies to us about society?
- arenaninja 11y agoI'm very confused by your comment. Is there some context that I'm missing? What does > How on earth are we supposed to figure out what is going on in the world when everyone lies to us about society? have to do with > I'm thirty four and nobody has ever suggested to me that I am supposed to buy a home ???
- lfowles 11y agoI think they are snarkily trying to suggest that home ownership isn't something everyone must aspire to.
- aschearer 11y agoGuess we'll just have to think for ourselves
- Mikeb85 11y agoIt's even more depressing in the larger Canadian cities. In Greater Vancouver the average price is 1.47M, in Calgary (which is in the midst of a recession) the average price is still 457000 (and good luck finding a decent job), in the GTA it's 602000 and over a million in Toronto proper. The only affordable 'big' city is Montreal, and even smaller markets with few jobs are far more expensive than an equivalent sized market in the US.
- api 11y agoI don't understand how present housing prices are possible. Don't markets require buyers? Look at prices in most cities vs. the average family income and it's beyond insane. Who is actually able to buy at these prices and where are they coming from? IMHO it's much crazier than the "unicorn" phenomenon, since that can be explained by crazy term sheets and a lot of private investor cash sloshing around. I can't understand how present housing prices are even possible.
- seiji 11y agoPopular city housing prices are global markets, not local markets. Turns out foreigners have lots of money to burn that locals can't match. Things like http://sanfrancisco.cbslocal.com/2015/04/28/realtors-printing-brochures-for-silicon-valley-homes-in-mandarin-to-attract-chinese-buyers/ http://sanfrancisco.cbslocal.com/2015/04/28/realtors-printin... and http://www.sfgate.com/business/networth/article/How-and-why-buyers-from-China-are-snatching-up-5924991.php http://www.sfgate.com/business/networth/article/How-and-why-... and http://www.bloomberg.com/news/articles/2015-10-14/nyc-s-luxury-condo-king-shifts-gears-in-bid-for-chinese-buyers http://www.bloomberg.com/news/articles/2015-10-14/nyc-s-luxu... and http://www.nytimes.com/2015/02/12/nyregion/russia-time-warner-center-andrey-vavilov.html http://www.nytimes.com/2015/02/12/nyregion/russia-time-warne... and http://www.nytimes.com/2015/02/08/nyregion/stream-of-foreign-wealth-flows-to-time-warner-condos.html?_r=0 http://www.nytimes.com/2015/02/08/nyregion/stream-of-foreign... and http://www.theguardian.com/business/2015/jul/12/chinas-rich-seek-shelter-from-stock-market-storm-in-foreign-property http://www.theguardian.com/business/2015/jul/12/chinas-rich-... etc
- api 11y agoSo basically we're paying feudal land dues to Russian oligarchs?
- hdctambien 11y agoIn my neighborhood all the houses going up for sale are being bought sight unseen, over asking price, by investors who replace the carpet, paint the walls, then rent them out.
- ChuckMcM 11y agoReally? Since millenials are going to be buying most of the houses over the next 15 years this suggests that housing starts will go up dramatically. Look at previous housing shortages, people returning from WWII, baby boomers entering the market, and now millenials. So demand goes up, clearly a lot of them are unserved by current prices, so developers figure out how to make houses they can afford to capture that demand. A more interesting question is whether or not they want houses. It seems that with work mobility its simpler to just rent for a lot of folks. That drives interesting price inversions where it becomes cheaper to buy than to rent because people don't want to be "tied down" to a particular place.
- cpursley 11y agoI can't stand this term - "Starter Home". Not everyone, even those who can afford it, wants a McMansion.
- deleted 11y ago[deleted]
- lfowles 11y agoDisregard my previous comment, I thought you were saying Starter Home == McMansion :)
- cpursley 11y agoAh, after rereading it does come across like that. :)
- allencoin 11y agoI would like a small, maybe 2-bedroom house, in a cool neighborhood in a cool medium-sized city. That's my dream.
- irishcoffee 11y agoYou basically described Baltimore. Just be careful, 2 blocks outside of that 'cool neighborhood' is a very 'un-cool' area.
- tcbawo 11y agoFor some people, bigger is always better. I like having a yard and not a cavernous home.
- VLM 11y agoReal estate ownership for the young is obsolete. Total deja vous its just like people lecturing my parents generation about why they don't get a job for life which would be easy if they really wanted one, ditto pension and gold watch. Its not coming back any more likely than I'm buying a horse or a record player.
- peapicker 11y agoPretty sure this is because many people, with the economic instability of the last five years, are deciding not to by the big McMansions anymore and don't want to take care of them... unfortunately, this means that those with more money that millennials also want the same "starter" houses. The real problem: too many builders built big-ass houses no one wants to pay for and take care of anymore.