4 ms·

This is a timebomb though - how is a generation that hasn't been able to buy a house and accumulate equity/wealth, meant to be able to retire?

JMTQp8lwXL 7y ago
Compare the delta between what you'd spend on rent versus a mortgage (all in costs-- principal, interest, taxes, and insurance. "PITI", they are collectively called). Take the difference and invest it. I'll admit this won't work for everybody, since behaviorally most people spend their whole paycheck (without saving any of it), but there are plenty of low-cost index fund providers that have minimum investment requirements far below the cost of putting 20% down on a house.
- asdff 7y ago
  There is no house in LA where you can't take an arbitrary 10 year period and make money even if you bought in 2007 on the eve of the recession. We've reached the point where even putting 5% down on the median house is unaffordable to massive swaths of the population in southern california. The median is 600k now, who the hell can afford to drop 30k in a world where the median student loan debt is 40k? Not to mention something like 40% of americans can't come up with $400 cash without selling something or taking out a loan. Of course you save on a mortgage, in LA you profit on nearly every mortgage no matter what. But that benefit is limited to the class of people who can afford to put money down, and that class is a minority in CA.
  - alexgmcm 7y ago
    Exactly, in my European city that delta he talks about would be negative. Plus since the crisis the banks will only lend with 20% deposit, plus 10% taxes - so you need a 30% downpayment. Given a flat will cost you around 180k euros you can see why home ownership is in decline, because no-one has 60k euros lying around when the average tech salary is 30-40k euros and the average normal salary around 20k.

4 ms·

This is a timebomb though - how is a generation that hasn't been able to buy a house and accumulate equity/wealth, meant to be able to retire?

by alexgmcm 7y ago

JMTQp8lwXL 7y ago
Compare the delta between what you'd spend on rent versus a mortgage (all in costs-- principal, interest, taxes, and insurance. "PITI", they are collectively called). Take the difference and invest it. I'll admit this won't work for everybody, since behaviorally most people spend their whole paycheck (without saving any of it), but there are plenty of low-cost index fund providers that have minimum investment requirements far below the cost of putting 20% down on a house.
- asdff 7y ago
  There is no house in LA where you can't take an arbitrary 10 year period and make money even if you bought in 2007 on the eve of the recession. We've reached the point where even putting 5% down on the median house is unaffordable to massive swaths of the population in southern california. The median is 600k now, who the hell can afford to drop 30k in a world where the median student loan debt is 40k? Not to mention something like 40% of americans can't come up with $400 cash without selling something or taking out a loan. Of course you save on a mortgage, in LA you profit on nearly every mortgage no matter what. But that benefit is limited to the class of people who can afford to put money down, and that class is a minority in CA.
  - alexgmcm 7y ago
    Exactly, in my European city that delta he talks about would be negative. Plus since the crisis the banks will only lend with 20% deposit, plus 10% taxes - so you need a 30% downpayment. Given a flat will cost you around 180k euros you can see why home ownership is in decline, because no-one has 60k euros lying around when the average tech salary is 30-40k euros and the average normal salary around 20k.