7 ms·

>One is because homes today are substantially larger and have more amenities than they did in previous generations. I have noticed that most of my fellow mille

>One is because homes today are substantially larger and have more amenities than they did in previous generations. I have noticed that most of my fellow millennials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc. Among my friends that have bought houses, many of them have gone into significant debt just to buy a 3-4 bedroom house, even though they have no kids and only use one of the bedrooms, because they think that at some point in their life they will put them to use. The extra rooms go completely unused (other than the extra furniture which they also went into debt for). It's like they see the house that their parents own and assume that their house also needs to be that, and ignore the fact that their parents probably started out in a much smaller home and then moved into a big one once necessary. >Two is that we're highly skewed to a handful of elite metros I contend that it's not even just this, but also that within metros millenials are highly skewed to a handful of elite neighborhoods. I live in a medium COL metro, and all of my friends constantly lament the "high" cost of houses and how they will never be able to afford a house. But when I ask what houses they are looking at, it's always the nicest, premiere neighborhoods that have McMansions with huge yards, white picket fences, hip restaurants within walking distance, etc. Not a single one of them even considers living in the many much cheaper neighborhoods. There certainly are issues with prices in some areas (cough SF cough) but at least in my metro and in my friend group, the "houses cost too much" meme seems to be a scapegoat for what is really just an inflated sense of what housing they are entitled to.

mywittyname 6y ago
> I have noticed that most millenials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc. "Starter homes" for young people is the stuff that was built 30-40 years ago that hasn't been updated. So they are buying those mcmansions because that's what was built in the 80s-90s-00s. The really nice, older urban areas with housing built before that is way more expensive in absolute dollars. Smaller is not cheaper in most cases. Smaller is "established" and everyone with money wants to live in those established neighborhoods, not the suburban sprawl 50m from the city center.
- ethbr0 6y ago
  Single point of reference, but my 1985-built house was constructed at a much higher standard than my 2010-built house. The properties of wood and physics have remained surprisingly constant over the decades.
  - kevin_thibedeau 6y ago
    It's not a single point. Builders are cutting corners any way they can. Interior trim is expensive to install so they just declare that the modern trend is bare walls, floor to ceiling that you can bang up easily. Tract home inspectors will skip over most units so you can leave out flashing around windows and doors. This is their mentality.
- tidepod12 6y ago
  >"Starter homes" for young people is the stuff that was built 30-40 years ago that hasn't been updated. So they are buying those mcmansions because that's what was built in the 80s-90s-00s. The really nice, older urban areas with housing built before that is way more expensive in absolute dollars. In my metro (DFW), the neighborhoods of houses built in the 60s/70s/80s are dwindling because nobody will buy them. There are neighborhoods of perfectly fine ~200k houses just sitting on the market for months because "ewww, I don't want to live in Grand Prairie/Garland/Irving". Then those same people pine over the newly built $500k mcmansions in Frisco or the $2m mansions in Highland Park and lament about how they'll never be able to afford being a homeowner. Do you see the disconnect? >Smaller is "established" and everyone with money wants to live in those established neighborhoods, not the suburban sprawl 50m from the city center. It's not some secret that desirable location is a huge driver of property prices, and being closer to a city center is more desirable. My parents knew this 50 years ago, which is why even though they loved living downtown in an apartment, when it came time to buy a house they moved out to the suburbs because that's where the affordable starter homes are. Then, when they became more established in their career and built up some wealth, we moved a little bit closer to the urban center. That's just how it works. But these days, millennials seem to think that they are automatically entitled to live downtown in a 4 bedroom, newly renovated/constructed house with full amenities next to the main park and hip shopping center and zero crime while on an entry level salary. I understand that, and I wish I could have that too, but that's just not how the world works (nor how it has ever worked).
Shivetya 6y ago
it isn't just homes. there is no starter car, no starter tv, no started anything. I regularly work with tech support persons who are spending more than I am on a wide range of goods and services. It is mind boggling to me. Yes some have trade offs but that seems to be either they are house poor or car poor but mostly the latter. What catches them as with those who do have the money is all those monthly bills can add up really quickly. Adding twenty to thirty to your monthly phone bill for a new phone doesn't sound bad until they add in other similar arrangements. Sadly far too many seem to think they are just free this or free that away from having it all. (as in if healthcare were only free or college was only free they would not have such problems - welcome to the poison of politicians and mass merchandise marketing combined)
- OJFord 6y ago
  I don't think anyone that says it intends it this way, but this is how I read 'generation rent'. Not 'forced into renting instead of buying property' but 'subscription over ownership for everything'. No money left, lots of stuff, as little of it as possible actually bought and owned. Lease car, rented flat, rented furniture, takeaways and meal box kits, craft beer / organic veg boxes, etc. In many cases it's a reversion rather than a new idea, and fine, it's not wrong, just different. Very different though, and largely not for me (though I fall in the generation described).
  - throwaway0a5e 6y ago
    And the question is whether it's better to: Incur cost being an outlier and then hope it all comes crashing down and you're left standing. I.e. do everything right and be financially prudent. Or: Just do what everybody else is doing and hope that you'll get bailed out eventually at the expense of the group that chose the other option.
- stan_rogers 6y ago
  "Starter TVs" are certainly still a thing. And it's not just inflation-adjusted; you can get a 24" LED for about the same dollar price that a 15" B&W CRT TV would have been when I left high school. And there are used units out there as well.
Retric 6y ago
Have you ever actually look for small living spaces in the US? I would be perfectly fine with a 450sf apartment in northern VA, but their almost impossible to find in desirable locations. A large reason for this is the actual cost to construct a building doesn’t increase linearly with apartment square footage. Simply having a smaller apartment doesn’t reduce the amount of space needed for hallways, elevators, or parking spaces. Kitchen’s and bathrooms similarly cost a lot more than large carpeted areas. This ends up being reflected in renal prices. My building has a 578 sf studio @ 1515$/month where a 751 sf 1br is running $1,625/month. Add in parking and your talking 30% more space for 7% more rent. It’s not that the actual cost per SF is equivalent, it’s that housing got upsized without much input from consumers.
- nubbins 6y ago
  Maybe people in middle America already have enough space to not feel pinched so that extra space is viewed as an amenity not a huge factor that they demand? In my experience in denser high COL areas space is priced basically linearly on the margin. In NYC going from 1 br to 2 br can significantly affect your quality of life so people are willing to pay an extra $1000.
  - Retric 6y ago
    You see the same thing in NYC: https://www.apartments.com/295j-jersey-city-nj/dspz8fj/ https://www.apartments.com/295j-jersey-city-nj/dspz8fj/ 457 sf @ $2,245, vs 636 Sq Ft @ $2,405. That’s 40% more space for 7% more per month.
- loblollyboy 6y ago
  >nova >desirable location Lol
Shalle135 6y ago
Fact is though, it doesn’t matter much where in the world you’re looking to buy. If it’s a capital you’re expected to pay close to $1m or more for a house, even in places like Beirut where the houses don’t have central water, electricity/internet infrastructure is extremely poor. Prices are the same. This in a moment in time when the majority of people barely can afford food due to the pandemic and financial meltdown that has occurred. The main reason behind it all is the low costs of taking on debt, which in some scenarios is totally insane. Italy for example that has been bailed out several times can get rates around 1%. What kind of entity would accept the risk of default when the profit is close to none after inflation? The world is obviously in a debt bubble - the question is only when it will pop & how dramatically it will happen.
- ethbr0 6y ago
  When the world is awash in debt, pricing turns into a game of future-mortgaging chicken. Who's willing to promise more of their future to buy an asset?
  - 317070 6y ago
    That is actually really insightful! I cannot believe this is the first time I see the issue stated so clearly. So the whole thing comes down when you run out of other chickens.
    - ethbr0 6y ago
      It's essentially a distillation of underwriting standards, low/zero central bank interest rates, and consumer behavior. Underwriting standards for mortgages are typically based on loan to value (LTV) and debt to income. In that calculating, value is traditionally defined as "what the market currently values comparable assets at" (aka comps). For debt, providers of credit (banks and the central mortgage agencies) are more concerned with ability to repay, rather than absolute debt. Consequently, monthly payment >> total price. Therefore, in business as usual (moderate to high interest rates), there are caps on how much individuals can leverage with mortgages (i.e. eventually their LTV or debt to income will exceed standard limits and they'll be denied a mortgage). Unfortunately, both of those key components are heavily influenced by central bank interest rates. If the Fed decides to plunk the rate at 0%, mortgage rates decrease as well. Because mortgage rates have decreased, my resulting monthly payment for the same total loan value decreases. Or, conversely, the total loan value I can assume for a given monthly payment increases. Because it increases, I can pay more for a house. And either I, or someone else does! Now, a few months later, someone else wants to buy the 2nd house on the block. They call out an appraiser, who turns the crank on their standard process, looks at comps in the neighborhood, and values the 2nd house in light of the 1st home sale. Because that 1st sale was inflated (inasmuch as we can judge), the valuation on the 2nd house is likewise inflated. Ultimately, both of these have the end result of raising the cap on how much borrowers can "afford" to pay (assuming static income) for the same asset. Whereby the financial system previously capped their effective leverage at one level, now it's allowing greater leverage (albeit greater leverage that "looks" like the same value, because the underlying inputs have changed). Tl;dr - The financial system used to impose a cap on how much I could pay and qualify for a standard mortgage. Because of actions taken by central banks and consumer behavior, that financial system-imposed cap has effectively been lifted. Now, the consumer themselves is the primary brake on overpaying. And average consumers? They don't math too good.
dcdevthrowaway 6y ago
> Among my friends that have bought houses, many of them have gone into significant debt just to buy a 3-4 bedroom house, even though they have no kids and only use one of the bedrooms, because they think that at some point in their life they will put them to use. Are you sure your friends aren't just being rational? I thought about the rent vs buy thing pretty constantly in my 20s and always came down on the rent side. Not because renting Dwelling A would be cheaper than buying Dwelling A, but because I was happy living in Dwelling A (a nice-ish 1-bedroom apartment) but if I were to commit to ownership I'd want Dwelling B (at least 3 bedrooms). Life can change fast - you're not sure which fling will turn into a spouse or when a little one will come along or when you'll really need a home office. Selling a one-bedroom condo is obviously doable, but transaction costs are fairly insane on real estate, and it seems like low-end places (like 1-bed condos) haven't historically experienced the same appreciation as standard houses. It sounds like your friends could get by with a Smart car but bought a Toyota RAV4 instead. And when they decide to trade up to a Tesla in a few years, they might find that the RAV4 retained value better than the Smart car, because that's what "everyone" wants!
- tidepod12 6y ago
  Sure. If you're being rational, it would possibly make sense to buy a 2 bedroom house or even a 3 bedroom if you think you might need an extra room for a kid plus a home office. But it's not as rational to insist that you need 4 bedroom house with a three car garage inside a top school district when you aren't even married/pregnant yet. Yes, life can change fast, but paying a premium mortgage for a top school district that you won't even use for 6 years minimum (if you suddenly got pregnant today) and an extra bedroom that is going to go unused for at least several years (second pregnancy, perhaps)? I can't see how that's rational.
  - nrmitchi 6y ago
    With real estate prices in some of those areas going up %10+ per year, and the 6-8% transaction cost of selling a property, buying something that you may not need for 10 years starts seeming more rational. It's a risk, because things change, but if you know you're going to be somewhere long-term, it's a rational decision in a irrational game.
echlebek 6y ago
Millenial here, looking to buy my first house in the next couple of years. My budget will be $1.5M to $2M for my "starter" home in Vancouver, Canada.
- otoburb 6y ago
  It's been a few years since we left, but those prices are generally for Vancouver specials because the land is more valuable than the old frame. I know PoCo has risen in price, but not near $1.5M-$2M CAD for a starter. Many friends bit the bullet and struck outward in the quest for affordability (Langley, Abbortsford) while still being within the Vancouver area.
larrik 6y ago
I did the "starter home" thing in 2006 and then the market crashed and I was under water until 2019... I would never recommend the idea of a "starter home" to anyone, ever. It only works when housing prices are on the rise and continue that way the entire time you live there.
- chasd00 6y ago
  is there such a thing as non-survivor bias? You perfectly timed the most dramatic fall in home prices in maybe a 100 years. The subprime collapse aside, a home purchase is usually a safe investment.
Hoenoe 6y ago
> I have noticed that most millenials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc I don't know where you live but I almost find this insulting. I'm from Amsterdam my self and friends of my are being forced out the city because of the high rent prices. I'm 32 year now and because of some shitty new rent laws that says every tenant needs to have an individual rent contract which our landlord refuses to give I'm also being pushed out of my home. I tried to find something for my self just anything would do, but I'm kinda skewed because I just earn above social housing and here in Amsterdam there is not really a market anymore for middle incomes. So yeah I'm being pushed to either live in a room or move out of the city. But I also couldn't find a room in time so now I'm going back to my parent. So yeah your comment kinda hits a nerve for me.
- lowdose 6y ago
  Housing in the Netherlands is really awful, in the '90 the boomers have build smaller apartments for their parents to move in and actually profit in an illicit way 2x of their real estate gains of sometimes 6x. No boomer is living smaller to make room for the next generation. I think the best way to combat current shortage in housing is putting up a limit on m2 that an individual could claim. 300m2 for a single person in a metro area while being on a pension is not sustainable in current conditions.
  - sokoloff 6y ago
    So, someone who worked their entire life and paid off their house should be forced out of that house and made to move in retirement because...you'd rather be able to live there with a roommate?
    - lowdose 6y ago
      They did that to their parents, and on top of that advantage they systematically didn't build enough houses for the projected population growth. I think it is reasonable to ask if you set up a whole generation for failure yourself. Millennial choices are severely handicapt considering how we inherit the world versus how the boomer in the 90ties got it.
ransom1538 6y ago
"just to buy a 3-4 bedroom" It should be noted, they don't build 2 bedroom homes anymore. I was talking to a real estate developer in Sacramento about this. New 3 bedrooms do exist, however, they would rather cram out the lot with a 5 bedroom since the cost to add on another few hundred square feet is nothing if you have the equipment and material right there. PLUS! People will go ahead and take on huge loans with that low interest rate. It is win win (unless you don't want huge crushing loans).
- tidepod12 6y ago
  >It should be noted, they don't build 2 bedroom homes anymore I don't know if this is what you meant by this, but I do see this same argument come up a lot, and it's a great example of the "entitlement" I'm referring to. The only reason it would be relevant that they don't build 2 bedroom houses anymore is if you for some reason think you must have a newly built houses. The old 2 bedroom houses didn't suddenly disappear. They are there in abundance for great prices (at least in my metro), but my extended circle (close friends plus people I know from childhood/high school/etc) won't buy them because they insist on new builds or new renovations.
  - ransom1538 6y ago
    "The only reason it would be relevant that they don't build 2 bedroom houses anymore is if you for some reason think you must have a newly built houses." Yep. Hence "they don't build 2 bedroom homes anymore" "The old 2 bedroom houses didn't suddenly disappear." They didn't. But the population is growing.
    - tidepod12 6y ago
      >They didn't. But the population is growing. The population of Americans in their 20s/30s (typically the age of first time home buyers) has remained mostly static since 2000. But hell, let's go ahead and assume that the population has grown in some unknown way. Why is my metro awash with perfectly fine $200k 2bedroom homes? The supply is there. It's the demand that has dwindled.
    - 6y ago
dionidium 6y ago
> I contend that it's not even just this, but also that within metros millenials are highly skewed to a handful of elite neighborhoods. In St. Louis there's a small but frothy back-to-the-city movement that's driving prices up to new highs in a handful of trendy neighborhoods. And it's all anybody can talk about. It's a kind of synecdoche for "the housing market" to reference these tiny neighborhoods while using cargo-cult language about "gentrification" that people learned on twitter. Make no mistake: prices are way up in those neighborhoods. But they're walking distance to far more affordable housing. It's really bizarre.
- neutronicus 6y ago
  Having just been in a similar market (Baltimore): There was gorgeous old architecture to be had on the cheap, if you were okay with a couple crumbling vacants on the block, trash everywhere, poorly rated public schools, overflowing weeds, and frustratingly difficult access to the ostensibly adjoining trendy neighborhood (the ones I was looking at were separated by a half mile with a single cross street, where blocks in each of the neighborhoods are probably 4-500 feet long). When you're shopping for ten years (and not just yourself) you get gun shy about stuff like that
  - dionidium 6y ago
    > There was gorgeous old architecture to be had on the cheap, if... St. Louis really punches above its weight in gorgeous old architecture, so there are well-maintained, affordable neighborhoods with pretty old red-brick houses, too, but the real value is to be found in plain working-class neighborhoods where the houses never show up on Instagram. That housing for actual working-class people is unsurprisingly where most working-class St. Louisans live. Of course, nobody who has ever used the word "gentrification" on twitter has any interest in living in any of those neighborhoods, so their existence is rounded down to zero in the discourse. It wasn't that long ago that even the coolest neighborhoods with the best housing stock were wildly undervalued against their fundamentals. And hipster St. Louis isn't thrilled that the secret is out.
wavefunction 6y ago
"Starter homes" were bought up by wealthier older people or businesses to turn into AirBnBs or rentals. https://www.bobvila.com/slideshow/7-signs-starter-homes-may-be-a-thing-of-the-past-51817 https://www.bobvila.com/slideshow/7-signs-starter-homes-may-... I don't know if you talk to any "millenials" but most of them are _extremely pragmatic_ by necessity.
x87678r 6y ago
> Among my friends that have bought houses, many of them have gone into significant debt just to buy a 3-4 bedroom house, even though they have no kids and only use one of the bedrooms, because they think that at some point in their life they will put them to use. I was one of these people who was conservative and bought a small cheap apt starter home instead of a 3-4 bedroom house. 10 years later I can't afford a 3-4 bedroom house because they've gone up in value so much so I'm still in my apt and its crowded. Looking back and what would have been optimal I should have bought a huge house as soon as possible, probably a couple of them. That way I could retire by now.
- ballenf 6y ago
  If you're going to analyze things that way, you should have rented and bought some Facebook, Apple, Google, and Amazon stock.
  - x87678r 6y ago
    I can't borrow money with 5% down to buy stocks. (OK you can but you'll get closed out with normal volatility)
watwut 6y ago
People I know buy smaller flats if childless, rent with roommates and have three kids in one room. And cant afford large houses, not even with debt. Cause no bank will borrow them. If your friends could get that much money, they are likely well off and see the house as investnent. Which is how we bought put flat - rent was only slightly cheaper then mortgage.
refurb 6y ago
I have noticed that most of my fellow millennials seem to have completely forgotten the concept of "starter home" I've noticed this too, but obviously it's not universal (lest someone accuse me of bashing millennials). And with regards to houses getting bigger, I keep hearing about the "golden years" when you could buy a home on a single income. Sure, but those homes were similar to what my parents starter home was - 1000 sq ft, 2 bed, 1 bath with a family of 5 living in them (siblings sharing rooms).
liveoneggs 6y ago
millenial users of twitter, you mean?
lordnacho 6y ago
> Among my friends that have bought houses, many of them have gone into significant debt just to buy a 3-4 bedroom house, even though they have no kids and only use one of the bedrooms, because they think that at some point in their life they will put them to use. The problem is they think they might not be able to afford it once they have enough kids to need it. Ironically lots of people thinking that way reinforces the problem.
klmadfejno 6y ago
> I have noticed that most of my fellow millennials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc. Then you've got a non representative sample. This claim is outrageous, and it's not true. Honestly it pisses me off how casually you just assert that most millenials think this way. A very simple search for millenial home buyers surveys will show this is not the case. https://listwithclever.com/research/millennial-home-buyer-report/ https://listwithclever.com/research/millennial-home-buyer-re... Median price range is below 300k. Biggest desires are safety and good schools, likely driven by the fact that the ones buying properties are couples looking to start a family.
- chasd00 6y ago
  "Honestly it pisses me off how casually you just assert that most millenials think this way". I totally get that, imagine how baby-boomers feel.
- prewett 6y ago
  > Honestly it pisses me off how casually you just assert that most millenials think this way. He never asserted anything about "most millenials" and specifically talked about his friends. If someone talking about their personal experience with their owns friends pisses you off, then you're reacting to something else.
  - klmadfejno 6y ago
    > most of my fellow millennials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc. and elsewhere downthread > But these days, millennials seem to think that they are automatically entitled to live downtown in a 4 bedroom, newly renovated/constructed house with full amenities next to the main park and hip shopping center and zero crime while on an entry level salary. Sometimes one reads things and thinks it worthy of telling the other to fuck off. Do what you want.
gdyuytgh 6y ago
What are those starter homes? I've got 500k in liquid assets, a respectable salary and no debts. I'm looking at the housing market and see two options: a junk house in a sketchy area for 600k or a decent house for 1.2M, but I'd have to give up financial security and live pay check to pay check. If there was a smallish decent condo for 200k, I'd write a check today.
danans 6y ago
> I have noticed that most of my fellow millennials seem to have completely forgotten the concept of "starter home" "Starter homes" tend to be fewer these days, especially in desirable areas. Much of the old "starter home" inventory has been upgraded and made much larger over the years, making them not really starter homes anymore, and very few builders build small houses these days, since profits for building larger homes are higher. The closest thing to starter homes being built today are condos, but those are usually in high cost areas, so again not terribly accessible. This is why it would be good to change zoning to allow existing single family zoned lots to be subdivided or turned into multi-dwelling lots, which can accommodate a main home and a separate "starter home". This is starting to be done in places like Toronto with "Laneway houses" > McMansions with huge yards, white picket fences, hip restaurants within walking distance, etc. Huge yards, white picket fences, absolutely, but where are you finding "McMansions" with hip restaurants within walking distance? Usually "McMansions" are synonymous with totally un-walkable and car-bound developments.

mywittyname 6y ago

> I have noticed that most millenials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc. "Starter homes" for young people is the stuff that was built 30-40 years ago that hasn't been updated. So they are buying those mcmansions because that's what was built in the 80s-90s-00s. The really nice, older urban areas with housing built before that is way more expensive in absolute dollars. Smaller is not cheaper in most cases. Smaller is "established" and everyone with money wants to live in those established neighborhoods, not the suburban sprawl 50m from the city center.

ethbr0 6y ago
Single point of reference, but my 1985-built house was constructed at a much higher standard than my 2010-built house. The properties of wood and physics have remained surprisingly constant over the decades.
- kevin_thibedeau 6y ago
  It's not a single point. Builders are cutting corners any way they can. Interior trim is expensive to install so they just declare that the modern trend is bare walls, floor to ceiling that you can bang up easily. Tract home inspectors will skip over most units so you can leave out flashing around windows and doors. This is their mentality.
tidepod12 6y ago
>"Starter homes" for young people is the stuff that was built 30-40 years ago that hasn't been updated. So they are buying those mcmansions because that's what was built in the 80s-90s-00s. The really nice, older urban areas with housing built before that is way more expensive in absolute dollars. In my metro (DFW), the neighborhoods of houses built in the 60s/70s/80s are dwindling because nobody will buy them. There are neighborhoods of perfectly fine ~200k houses just sitting on the market for months because "ewww, I don't want to live in Grand Prairie/Garland/Irving". Then those same people pine over the newly built $500k mcmansions in Frisco or the $2m mansions in Highland Park and lament about how they'll never be able to afford being a homeowner. Do you see the disconnect? >Smaller is "established" and everyone with money wants to live in those established neighborhoods, not the suburban sprawl 50m from the city center. It's not some secret that desirable location is a huge driver of property prices, and being closer to a city center is more desirable. My parents knew this 50 years ago, which is why even though they loved living downtown in an apartment, when it came time to buy a house they moved out to the suburbs because that's where the affordable starter homes are. Then, when they became more established in their career and built up some wealth, we moved a little bit closer to the urban center. That's just how it works. But these days, millennials seem to think that they are automatically entitled to live downtown in a 4 bedroom, newly renovated/constructed house with full amenities next to the main park and hip shopping center and zero crime while on an entry level salary. I understand that, and I wish I could have that too, but that's just not how the world works (nor how it has ever worked).

Shivetya 6y ago

it isn't just homes. there is no starter car, no starter tv, no started anything. I regularly work with tech support persons who are spending more than I am on a wide range of goods and services. It is mind boggling to me. Yes some have trade offs but that seems to be either they are house poor or car poor but mostly the latter. What catches them as with those who do have the money is all those monthly bills can add up really quickly. Adding twenty to thirty to your monthly phone bill for a new phone doesn't sound bad until they add in other similar arrangements. Sadly far too many seem to think they are just free this or free that away from having it all. (as in if healthcare were only free or college was only free they would not have such problems - welcome to the poison of politicians and mass merchandise marketing combined)

OJFord 6y ago
I don't think anyone that says it intends it this way, but this is how I read 'generation rent'. Not 'forced into renting instead of buying property' but 'subscription over ownership for everything'. No money left, lots of stuff, as little of it as possible actually bought and owned. Lease car, rented flat, rented furniture, takeaways and meal box kits, craft beer / organic veg boxes, etc. In many cases it's a reversion rather than a new idea, and fine, it's not wrong, just different. Very different though, and largely not for me (though I fall in the generation described).
- throwaway0a5e 6y ago
  And the question is whether it's better to: Incur cost being an outlier and then hope it all comes crashing down and you're left standing. I.e. do everything right and be financially prudent. Or: Just do what everybody else is doing and hope that you'll get bailed out eventually at the expense of the group that chose the other option.
stan_rogers 6y ago
"Starter TVs" are certainly still a thing. And it's not just inflation-adjusted; you can get a 24" LED for about the same dollar price that a 15" B&W CRT TV would have been when I left high school. And there are used units out there as well.

Retric 6y ago

Have you ever actually look for small living spaces in the US? I would be perfectly fine with a 450sf apartment in northern VA, but their almost impossible to find in desirable locations. A large reason for this is the actual cost to construct a building doesn’t increase linearly with apartment square footage. Simply having a smaller apartment doesn’t reduce the amount of space needed for hallways, elevators, or parking spaces. Kitchen’s and bathrooms similarly cost a lot more than large carpeted areas. This ends up being reflected in renal prices. My building has a 578 sf studio @ 1515$/month where a 751 sf 1br is running $1,625/month. Add in parking and your talking 30% more space for 7% more rent. It’s not that the actual cost per SF is equivalent, it’s that housing got upsized without much input from consumers.

nubbins 6y ago
Maybe people in middle America already have enough space to not feel pinched so that extra space is viewed as an amenity not a huge factor that they demand? In my experience in denser high COL areas space is priced basically linearly on the margin. In NYC going from 1 br to 2 br can significantly affect your quality of life so people are willing to pay an extra $1000.
- Retric 6y ago
  You see the same thing in NYC: https://www.apartments.com/295j-jersey-city-nj/dspz8fj/ https://www.apartments.com/295j-jersey-city-nj/dspz8fj/ 457 sf @ $2,245, vs 636 Sq Ft @ $2,405. That’s 40% more space for 7% more per month.
loblollyboy 6y ago
>nova >desirable location Lol

Shalle135 6y ago

Fact is though, it doesn’t matter much where in the world you’re looking to buy. If it’s a capital you’re expected to pay close to $1m or more for a house, even in places like Beirut where the houses don’t have central water, electricity/internet infrastructure is extremely poor. Prices are the same. This in a moment in time when the majority of people barely can afford food due to the pandemic and financial meltdown that has occurred. The main reason behind it all is the low costs of taking on debt, which in some scenarios is totally insane. Italy for example that has been bailed out several times can get rates around 1%. What kind of entity would accept the risk of default when the profit is close to none after inflation? The world is obviously in a debt bubble - the question is only when it will pop & how dramatically it will happen.

ethbr0 6y ago
When the world is awash in debt, pricing turns into a game of future-mortgaging chicken. Who's willing to promise more of their future to buy an asset?
- 317070 6y ago
  That is actually really insightful! I cannot believe this is the first time I see the issue stated so clearly. So the whole thing comes down when you run out of other chickens.
  - ethbr0 6y ago
    It's essentially a distillation of underwriting standards, low/zero central bank interest rates, and consumer behavior. Underwriting standards for mortgages are typically based on loan to value (LTV) and debt to income. In that calculating, value is traditionally defined as "what the market currently values comparable assets at" (aka comps). For debt, providers of credit (banks and the central mortgage agencies) are more concerned with ability to repay, rather than absolute debt. Consequently, monthly payment >> total price. Therefore, in business as usual (moderate to high interest rates), there are caps on how much individuals can leverage with mortgages (i.e. eventually their LTV or debt to income will exceed standard limits and they'll be denied a mortgage). Unfortunately, both of those key components are heavily influenced by central bank interest rates. If the Fed decides to plunk the rate at 0%, mortgage rates decrease as well. Because mortgage rates have decreased, my resulting monthly payment for the same total loan value decreases. Or, conversely, the total loan value I can assume for a given monthly payment increases. Because it increases, I can pay more for a house. And either I, or someone else does! Now, a few months later, someone else wants to buy the 2nd house on the block. They call out an appraiser, who turns the crank on their standard process, looks at comps in the neighborhood, and values the 2nd house in light of the 1st home sale. Because that 1st sale was inflated (inasmuch as we can judge), the valuation on the 2nd house is likewise inflated. Ultimately, both of these have the end result of raising the cap on how much borrowers can "afford" to pay (assuming static income) for the same asset. Whereby the financial system previously capped their effective leverage at one level, now it's allowing greater leverage (albeit greater leverage that "looks" like the same value, because the underlying inputs have changed). Tl;dr - The financial system used to impose a cap on how much I could pay and qualify for a standard mortgage. Because of actions taken by central banks and consumer behavior, that financial system-imposed cap has effectively been lifted. Now, the consumer themselves is the primary brake on overpaying. And average consumers? They don't math too good.

dcdevthrowaway 6y ago

> Among my friends that have bought houses, many of them have gone into significant debt just to buy a 3-4 bedroom house, even though they have no kids and only use one of the bedrooms, because they think that at some point in their life they will put them to use. Are you sure your friends aren't just being rational? I thought about the rent vs buy thing pretty constantly in my 20s and always came down on the rent side. Not because renting Dwelling A would be cheaper than buying Dwelling A, but because I was happy living in Dwelling A (a nice-ish 1-bedroom apartment) but if I were to commit to ownership I'd want Dwelling B (at least 3 bedrooms). Life can change fast - you're not sure which fling will turn into a spouse or when a little one will come along or when you'll really need a home office. Selling a one-bedroom condo is obviously doable, but transaction costs are fairly insane on real estate, and it seems like low-end places (like 1-bed condos) haven't historically experienced the same appreciation as standard houses. It sounds like your friends could get by with a Smart car but bought a Toyota RAV4 instead. And when they decide to trade up to a Tesla in a few years, they might find that the RAV4 retained value better than the Smart car, because that's what "everyone" wants!

tidepod12 6y ago
Sure. If you're being rational, it would possibly make sense to buy a 2 bedroom house or even a 3 bedroom if you think you might need an extra room for a kid plus a home office. But it's not as rational to insist that you need 4 bedroom house with a three car garage inside a top school district when you aren't even married/pregnant yet. Yes, life can change fast, but paying a premium mortgage for a top school district that you won't even use for 6 years minimum (if you suddenly got pregnant today) and an extra bedroom that is going to go unused for at least several years (second pregnancy, perhaps)? I can't see how that's rational.
- nrmitchi 6y ago
  With real estate prices in some of those areas going up %10+ per year, and the 6-8% transaction cost of selling a property, buying something that you may not need for 10 years starts seeming more rational. It's a risk, because things change, but if you know you're going to be somewhere long-term, it's a rational decision in a irrational game.

echlebek 6y ago

Millenial here, looking to buy my first house in the next couple of years. My budget will be $1.5M to $2M for my "starter" home in Vancouver, Canada.

otoburb 6y ago
It's been a few years since we left, but those prices are generally for Vancouver specials because the land is more valuable than the old frame. I know PoCo has risen in price, but not near $1.5M-$2M CAD for a starter. Many friends bit the bullet and struck outward in the quest for affordability (Langley, Abbortsford) while still being within the Vancouver area.

larrik 6y ago

I did the "starter home" thing in 2006 and then the market crashed and I was under water until 2019... I would never recommend the idea of a "starter home" to anyone, ever. It only works when housing prices are on the rise and continue that way the entire time you live there.

chasd00 6y ago
is there such a thing as non-survivor bias? You perfectly timed the most dramatic fall in home prices in maybe a 100 years. The subprime collapse aside, a home purchase is usually a safe investment.

Hoenoe 6y ago

> I have noticed that most millenials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc I don't know where you live but I almost find this insulting. I'm from Amsterdam my self and friends of my are being forced out the city because of the high rent prices. I'm 32 year now and because of some shitty new rent laws that says every tenant needs to have an individual rent contract which our landlord refuses to give I'm also being pushed out of my home. I tried to find something for my self just anything would do, but I'm kinda skewed because I just earn above social housing and here in Amsterdam there is not really a market anymore for middle incomes. So yeah I'm being pushed to either live in a room or move out of the city. But I also couldn't find a room in time so now I'm going back to my parent. So yeah your comment kinda hits a nerve for me.

lowdose 6y ago
Housing in the Netherlands is really awful, in the '90 the boomers have build smaller apartments for their parents to move in and actually profit in an illicit way 2x of their real estate gains of sometimes 6x. No boomer is living smaller to make room for the next generation. I think the best way to combat current shortage in housing is putting up a limit on m2 that an individual could claim. 300m2 for a single person in a metro area while being on a pension is not sustainable in current conditions.
- sokoloff 6y ago
  So, someone who worked their entire life and paid off their house should be forced out of that house and made to move in retirement because...you'd rather be able to live there with a roommate?
  - lowdose 6y ago
    They did that to their parents, and on top of that advantage they systematically didn't build enough houses for the projected population growth. I think it is reasonable to ask if you set up a whole generation for failure yourself. Millennial choices are severely handicapt considering how we inherit the world versus how the boomer in the 90ties got it.

ransom1538 6y ago

"just to buy a 3-4 bedroom" It should be noted, they don't build 2 bedroom homes anymore. I was talking to a real estate developer in Sacramento about this. New 3 bedrooms do exist, however, they would rather cram out the lot with a 5 bedroom since the cost to add on another few hundred square feet is nothing if you have the equipment and material right there. PLUS! People will go ahead and take on huge loans with that low interest rate. It is win win (unless you don't want huge crushing loans).

tidepod12 6y ago
>It should be noted, they don't build 2 bedroom homes anymore I don't know if this is what you meant by this, but I do see this same argument come up a lot, and it's a great example of the "entitlement" I'm referring to. The only reason it would be relevant that they don't build 2 bedroom houses anymore is if you for some reason think you must have a newly built houses. The old 2 bedroom houses didn't suddenly disappear. They are there in abundance for great prices (at least in my metro), but my extended circle (close friends plus people I know from childhood/high school/etc) won't buy them because they insist on new builds or new renovations.
- ransom1538 6y ago
  "The only reason it would be relevant that they don't build 2 bedroom houses anymore is if you for some reason think you must have a newly built houses." Yep. Hence "they don't build 2 bedroom homes anymore" "The old 2 bedroom houses didn't suddenly disappear." They didn't. But the population is growing.
  - tidepod12 6y ago
    >They didn't. But the population is growing. The population of Americans in their 20s/30s (typically the age of first time home buyers) has remained mostly static since 2000. But hell, let's go ahead and assume that the population has grown in some unknown way. Why is my metro awash with perfectly fine $200k 2bedroom homes? The supply is there. It's the demand that has dwindled.
  - 6y ago

dionidium 6y ago

> I contend that it's not even just this, but also that within metros millenials are highly skewed to a handful of elite neighborhoods. In St. Louis there's a small but frothy back-to-the-city movement that's driving prices up to new highs in a handful of trendy neighborhoods. And it's all anybody can talk about. It's a kind of synecdoche for "the housing market" to reference these tiny neighborhoods while using cargo-cult language about "gentrification" that people learned on twitter. Make no mistake: prices are way up in those neighborhoods. But they're walking distance to far more affordable housing. It's really bizarre.

neutronicus 6y ago
Having just been in a similar market (Baltimore): There was gorgeous old architecture to be had on the cheap, if you were okay with a couple crumbling vacants on the block, trash everywhere, poorly rated public schools, overflowing weeds, and frustratingly difficult access to the ostensibly adjoining trendy neighborhood (the ones I was looking at were separated by a half mile with a single cross street, where blocks in each of the neighborhoods are probably 4-500 feet long). When you're shopping for ten years (and not just yourself) you get gun shy about stuff like that
- dionidium 6y ago
  > There was gorgeous old architecture to be had on the cheap, if... St. Louis really punches above its weight in gorgeous old architecture, so there are well-maintained, affordable neighborhoods with pretty old red-brick houses, too, but the real value is to be found in plain working-class neighborhoods where the houses never show up on Instagram. That housing for actual working-class people is unsurprisingly where most working-class St. Louisans live. Of course, nobody who has ever used the word "gentrification" on twitter has any interest in living in any of those neighborhoods, so their existence is rounded down to zero in the discourse. It wasn't that long ago that even the coolest neighborhoods with the best housing stock were wildly undervalued against their fundamentals. And hipster St. Louis isn't thrilled that the secret is out.

wavefunction 6y ago

"Starter homes" were bought up by wealthier older people or businesses to turn into AirBnBs or rentals. https://www.bobvila.com/slideshow/7-signs-starter-homes-may-be-a-thing-of-the-past-51817 https://www.bobvila.com/slideshow/7-signs-starter-homes-may-... I don't know if you talk to any "millenials" but most of them are _extremely pragmatic_ by necessity.

x87678r 6y ago

ballenf 6y ago
If you're going to analyze things that way, you should have rented and bought some Facebook, Apple, Google, and Amazon stock.
- x87678r 6y ago
  I can't borrow money with 5% down to buy stocks. (OK you can but you'll get closed out with normal volatility)

watwut 6y ago

People I know buy smaller flats if childless, rent with roommates and have three kids in one room. And cant afford large houses, not even with debt. Cause no bank will borrow them. If your friends could get that much money, they are likely well off and see the house as investnent. Which is how we bought put flat - rent was only slightly cheaper then mortgage.

refurb 6y ago

I have noticed that most of my fellow millennials seem to have completely forgotten the concept of "starter home" I've noticed this too, but obviously it's not universal (lest someone accuse me of bashing millennials). And with regards to houses getting bigger, I keep hearing about the "golden years" when you could buy a home on a single income. Sure, but those homes were similar to what my parents starter home was - 1000 sq ft, 2 bed, 1 bath with a family of 5 living in them (siblings sharing rooms).

liveoneggs 6y ago

millenial users of twitter, you mean?

lordnacho 6y ago

klmadfejno 6y ago

> I have noticed that most of my fellow millennials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc. Then you've got a non representative sample. This claim is outrageous, and it's not true. Honestly it pisses me off how casually you just assert that most millenials think this way. A very simple search for millenial home buyers surveys will show this is not the case. https://listwithclever.com/research/millennial-home-buyer-report/ https://listwithclever.com/research/millennial-home-buyer-re... Median price range is below 300k. Biggest desires are safety and good schools, likely driven by the fact that the ones buying properties are couples looking to start a family.

chasd00 6y ago
"Honestly it pisses me off how casually you just assert that most millenials think this way". I totally get that, imagine how baby-boomers feel.
prewett 6y ago
> Honestly it pisses me off how casually you just assert that most millenials think this way. He never asserted anything about "most millenials" and specifically talked about his friends. If someone talking about their personal experience with their owns friends pisses you off, then you're reacting to something else.
- klmadfejno 6y ago
  > most of my fellow millennials seem to have completely forgotten the concept of "starter home" and assume that as soon as you turn 25 you should be entitled to a 4 bedroom house with a pool, huge yard, wonderful neighborhood, three-car garage, etc. and elsewhere downthread > But these days, millennials seem to think that they are automatically entitled to live downtown in a 4 bedroom, newly renovated/constructed house with full amenities next to the main park and hip shopping center and zero crime while on an entry level salary. Sometimes one reads things and thinks it worthy of telling the other to fuck off. Do what you want.

gdyuytgh 6y ago

What are those starter homes? I've got 500k in liquid assets, a respectable salary and no debts. I'm looking at the housing market and see two options: a junk house in a sketchy area for 600k or a decent house for 1.2M, but I'd have to give up financial security and live pay check to pay check. If there was a smallish decent condo for 200k, I'd write a check today.

danans 6y ago

> I have noticed that most of my fellow millennials seem to have completely forgotten the concept of "starter home" "Starter homes" tend to be fewer these days, especially in desirable areas. Much of the old "starter home" inventory has been upgraded and made much larger over the years, making them not really starter homes anymore, and very few builders build small houses these days, since profits for building larger homes are higher. The closest thing to starter homes being built today are condos, but those are usually in high cost areas, so again not terribly accessible. This is why it would be good to change zoning to allow existing single family zoned lots to be subdivided or turned into multi-dwelling lots, which can accommodate a main home and a separate "starter home". This is starting to be done in places like Toronto with "Laneway houses" > McMansions with huge yards, white picket fences, hip restaurants within walking distance, etc. Huge yards, white picket fences, absolutely, but where are you finding "McMansions" with hip restaurants within walking distance? Usually "McMansions" are synonymous with totally un-walkable and car-bound developments.