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> The price alone is mostly irrelevant for the buyer. Sorry but wow. This is not the kind of comment I expect on HN, but rather from my uncle: “We got this ne

> The price alone is mostly irrelevant for the buyer. Sorry but wow. This is not the kind of comment I expect on HN, but rather from my uncle: “We got this new Lexus, it’s only $500/month!” “Yes, for 200 years”

matwood 6y ago
People think of houses in 15/20/30 year loans, so yeah payment is what matters. Few people are fortunate enough to be able to buy their first house with a 15 year loan. Interest rates moving are big drivers on house prices because long loans are greatly impacted by small moves. Houses are nothing like cars. I haven't had a car payment in many years. I'm still a long ways from never having a house payment.
dschuler 6y ago
OP is describing how incentives cause people to behave, not suggesting you do the same.
AnimalMuppet 6y ago
But it is in fact how the majority of home buyers operate. "Can I afford it" translates into "can I afford the monthly payments", not "can I afford the total purchase price". I saw this vividly when I bought my first house. It cost $61,000. My mortgage was at 9%. Two years later, mortgage rates had dropped to 7%, and my house was worth 90,000 (state appraised value). If I had bought the exact same house two years later than I did, I would have had the same monthly payment. That stayed constant, and the interest rate change drove a change in total price. Part of the reason is: What is your alternative? Typically, renting. What's rent? A monthly payment. So if you're looking at a buy vs. rent decision, a big part of the decision is monthly expense of renting vs monthly expense of buying.
- yazaddaruvala 6y ago
  I'm sure most of you are well aware, but for anyone reading that isn't aware of the nuance: > is monthly expense of renting vs monthly expense of buying Note: "monthly expense of buying" is very different than "monthly cash flow of buying". The "monthly expense of buying" is the monthly interest paid, taxes, and maintenance. The "monthly cash flow of buying" is the monthly mortgage paid (principal and interest), taxes, and maintenance. When deciding to buy a space, you need to use the "monthly cash flow" to ensure you don't default on the loan. When comparing buying vs renting a space, you need to use the "monthly expense".
  - icedchai 6y ago
    Yep. That rent you pay is money you'll never get back. At least when buying you have a decent shot of someday recovering the principal (unless you bought at the peak and there's another housing crisis.)
stevehawk 6y ago
You expect people on HackerNews to not accurately represent how society views something? There's a reason why the phrase "what's my monthly?" is a thing. Car dealers pushing 7 to 8 year loans is because people are worried about their "monthly." Same for rent-to-own places, mobile companies, and everyone else in the lending business.
- adewinter 6y ago
  When I decide to buy a $25k car because that's as much as I'm willing to spend I still need to determine what my "monthly" is. It matters what my monthly is because it is _a loan_ that I need to pay back every month. If I didn't need to think about what the monthly payment was I wouldn't need to take out a loan (unless I guess you got a magical loan that could only be paid off as a lump sum?). You're implying "worrying about" or wanting to know what the monthly payment is on a loan is a bad thing and I don't understand why.
  - deleted 6y ago
    [deleted]
  - ZephyrBlu 6y ago
    > You're implying "worrying about" or wanting to know what the monthly payment is on a loan is a bad thing and I don't understand why I believe what he is actually saying is that most people _only_ care about their monthly payment.
    - ncallaway 6y ago
      Yes, this seems like the critical distinction. Caring about the monthly repayment is important. But so is caring about the interest rate and the principal.
  - DavidPeiffer 6y ago
    >You're implying "worrying about" or wanting to know what the monthly payment is on a loan is a bad thing and I don't understand why. I stopped into a car dealer to look at a vehicle a couple years ago. I liked how it drove, could pay cash, but wasn't opposed to taking out a loan if I could get a better price overall (sometimes possible with fees banks pay to used dealers for getting a loan originated). In my experience, they brought out a sheet of paper with a range of what the monthly payment would be. I asked about interest rate, and the sales guy had no idea what interest rates the payments equated to - but he could get me an exact payment after doing a hard pull on my credit. They resisted negotiating on the total cost of the vehicle, but were very willing to extend the loan out to make the payment exactly what I wanted/could afford. I could see it wasn't going anywhere, told them to call me if they get serious about reducing the price, and left. I found a great car on the private market a short time later.
Shivetya 6y ago
One of the biggest financial issues facing this and other countries is people are conditioned to base affordability on the monthly payment. From cars and homes to every day subscription type services like Netflix to your cell bill. Salesmen, well auto sales, are trained on the four square method to get you to buy. You could attribute the mortgage crisis a decade back as falling into this situation. The barrier to buying a home used to be the down payment but creative financing is what got a lot of people in over their heads. It all about that cost per month. Now people who over reach tend to forget all the other costs that come with auto and home ownership, namely insurance but owning a home has long term costs too. https://www.consumerreports.org/consumerist/dealerships-rip-you-off-with-the-four-square-heres-how-to-beat-it/ https://www.consumerreports.org/consumerist/dealerships-rip-...
renewiltord 6y ago
I wonder whether the ability to discern description and justification is correlated with other abilities. I suspect it is, but if anyone is aware of studies I'd be interested.
loosescrews 6y ago
An important difference is that cars are a purchase with an expected eventual value of close to zero where as houses are typically seen as an investment with a goal of being to eventually sell it for more than you paid for it. This means that car payments are more of a cost of ownership and house payments are more of a reoccurring investment. As long as the house is actually a good investment, being able to afford the down and monthly payments is the most important thing. Rather than spending vs saving/investing, the trade-off becomes more of investing in real estate vs investing in something else.
xyzzy123 6y ago
When you're in a bidding war with people who reason this way, your only option is to do the same or stop playing the game. Where "stop playing the game" means get out of hot housing markets :/
- nicbou 6y ago
  You're still not out of the game, since those insane prices are reflected in the rent prices.
mFixman 6y ago
Most of a car's price is decided by its company before it's even assembled. If I'm buying a car with cash it's irrelevant how other people pay. House prices are defined by demand. If your uncle wants to buy a house with a 40 year mortgage of half his salary, then I'll have to pay more to match it.
patrickthebold 6y ago
Assume a 30 year fixed mortgage. Say the buyer pays $1 million total, the interest rate determines the purchase price. But why do you care? Either the seller or the lender will get the money.
deleted 6y ago
[deleted]

matwood 6y ago

People think of houses in 15/20/30 year loans, so yeah payment is what matters. Few people are fortunate enough to be able to buy their first house with a 15 year loan. Interest rates moving are big drivers on house prices because long loans are greatly impacted by small moves. Houses are nothing like cars. I haven't had a car payment in many years. I'm still a long ways from never having a house payment.

dschuler 6y ago

OP is describing how incentives cause people to behave, not suggesting you do the same.

AnimalMuppet 6y ago

But it is in fact how the majority of home buyers operate. "Can I afford it" translates into "can I afford the monthly payments", not "can I afford the total purchase price". I saw this vividly when I bought my first house. It cost $61,000. My mortgage was at 9%. Two years later, mortgage rates had dropped to 7%, and my house was worth 90,000 (state appraised value). If I had bought the exact same house two years later than I did, I would have had the same monthly payment. That stayed constant, and the interest rate change drove a change in total price. Part of the reason is: What is your alternative? Typically, renting. What's rent? A monthly payment. So if you're looking at a buy vs. rent decision, a big part of the decision is monthly expense of renting vs monthly expense of buying.

yazaddaruvala 6y ago
I'm sure most of you are well aware, but for anyone reading that isn't aware of the nuance: > is monthly expense of renting vs monthly expense of buying Note: "monthly expense of buying" is very different than "monthly cash flow of buying". The "monthly expense of buying" is the monthly interest paid, taxes, and maintenance. The "monthly cash flow of buying" is the monthly mortgage paid (principal and interest), taxes, and maintenance. When deciding to buy a space, you need to use the "monthly cash flow" to ensure you don't default on the loan. When comparing buying vs renting a space, you need to use the "monthly expense".
- icedchai 6y ago
  Yep. That rent you pay is money you'll never get back. At least when buying you have a decent shot of someday recovering the principal (unless you bought at the peak and there's another housing crisis.)

stevehawk 6y ago

You expect people on HackerNews to not accurately represent how society views something? There's a reason why the phrase "what's my monthly?" is a thing. Car dealers pushing 7 to 8 year loans is because people are worried about their "monthly." Same for rent-to-own places, mobile companies, and everyone else in the lending business.

adewinter 6y ago
When I decide to buy a $25k car because that's as much as I'm willing to spend I still need to determine what my "monthly" is. It matters what my monthly is because it is _a loan_ that I need to pay back every month. If I didn't need to think about what the monthly payment was I wouldn't need to take out a loan (unless I guess you got a magical loan that could only be paid off as a lump sum?). You're implying "worrying about" or wanting to know what the monthly payment is on a loan is a bad thing and I don't understand why.
- deleted 6y ago
  [deleted]
- ZephyrBlu 6y ago
  > You're implying "worrying about" or wanting to know what the monthly payment is on a loan is a bad thing and I don't understand why I believe what he is actually saying is that most people _only_ care about their monthly payment.
  - ncallaway 6y ago
    Yes, this seems like the critical distinction. Caring about the monthly repayment is important. But so is caring about the interest rate and the principal.
- DavidPeiffer 6y ago
  >You're implying "worrying about" or wanting to know what the monthly payment is on a loan is a bad thing and I don't understand why. I stopped into a car dealer to look at a vehicle a couple years ago. I liked how it drove, could pay cash, but wasn't opposed to taking out a loan if I could get a better price overall (sometimes possible with fees banks pay to used dealers for getting a loan originated). In my experience, they brought out a sheet of paper with a range of what the monthly payment would be. I asked about interest rate, and the sales guy had no idea what interest rates the payments equated to - but he could get me an exact payment after doing a hard pull on my credit. They resisted negotiating on the total cost of the vehicle, but were very willing to extend the loan out to make the payment exactly what I wanted/could afford. I could see it wasn't going anywhere, told them to call me if they get serious about reducing the price, and left. I found a great car on the private market a short time later.

Shivetya 6y ago

One of the biggest financial issues facing this and other countries is people are conditioned to base affordability on the monthly payment. From cars and homes to every day subscription type services like Netflix to your cell bill. Salesmen, well auto sales, are trained on the four square method to get you to buy. You could attribute the mortgage crisis a decade back as falling into this situation. The barrier to buying a home used to be the down payment but creative financing is what got a lot of people in over their heads. It all about that cost per month. Now people who over reach tend to forget all the other costs that come with auto and home ownership, namely insurance but owning a home has long term costs too. https://www.consumerreports.org/consumerist/dealerships-rip-you-off-with-the-four-square-heres-how-to-beat-it/ https://www.consumerreports.org/consumerist/dealerships-rip-...

renewiltord 6y ago

I wonder whether the ability to discern description and justification is correlated with other abilities. I suspect it is, but if anyone is aware of studies I'd be interested.

loosescrews 6y ago

An important difference is that cars are a purchase with an expected eventual value of close to zero where as houses are typically seen as an investment with a goal of being to eventually sell it for more than you paid for it. This means that car payments are more of a cost of ownership and house payments are more of a reoccurring investment. As long as the house is actually a good investment, being able to afford the down and monthly payments is the most important thing. Rather than spending vs saving/investing, the trade-off becomes more of investing in real estate vs investing in something else.

xyzzy123 6y ago

When you're in a bidding war with people who reason this way, your only option is to do the same or stop playing the game. Where "stop playing the game" means get out of hot housing markets :/

nicbou 6y ago
You're still not out of the game, since those insane prices are reflected in the rent prices.

mFixman 6y ago

Most of a car's price is decided by its company before it's even assembled. If I'm buying a car with cash it's irrelevant how other people pay. House prices are defined by demand. If your uncle wants to buy a house with a 40 year mortgage of half his salary, then I'll have to pay more to match it.

patrickthebold 6y ago

Assume a 30 year fixed mortgage. Say the buyer pays $1 million total, the interest rate determines the purchase price. But why do you care? Either the seller or the lender will get the money.

deleted 6y ago

[deleted]