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> excluding down payment Therein lies the rub. It’s true that inflation adjusted average monthly mortgage payments have remained surprisingly constant over the

> excluding down payment Therein lies the rub. It’s true that inflation adjusted average monthly mortgage payments have remained surprisingly constant over the last 40 years [*], since as you point out, low interest rates generally offset high home values (and vice versa). However, accruing enough cash in the first place to afford huge down payments keeps a lot of people out of the market who could otherwise afford the monthly payment. As an aside, the quality of housing stock has improved dramatically over the last few decades, so that roughly constant average monthly payment actually buys a much better quality product today than in years past. I’m not sure how much of this is accounted for in hedonic adjustments. [*] with the exception of the early 80s with its super high interest rates, and the housing bubble of the mid 2000s, with its super inflated home values without a commensurate drop in interest rates

PragmaticPulp 5y ago
The down payment hurdle is indeed a problem. However, if we took steps to make down payments easier (by lowering down payment requirements or through something like Biden's first-time homebuyer credit) then we're also pumping more money into the housing market. That will drive prices up again, further raising prices and making it even harder for future buyers to enter the market. The only real way to push affordability down, long-term, is to build more. I'd personally like to see incentives targeted toward something like all-new construction (no tear-down rebuilds, only new houses where previous houses didn't exist). Give people money to spend on new construction and the new construction will follow.
- MontyCarloHall 5y ago
  While I 100% agree with you that matching demand with a commensurate increase in supply is the only true fix to the problem of housing costs, in practice I don’t see it happening for a couple main reasons: Firstly, the people with the most political power are not coincidentally those who would lose the most if housing prices decrease. NIMBYism therefore inevitably wins. Secondly, building additional housing in regions that need it most (i.e. dense urban areas) would require dramatically improving public transit in those areas. The transportation networks of e.g. San Francisco, Boston, or even New York (which has by far the best public transit in the country) are already at a breaking point and simply cannot tolerate the influx of people more housing stock would bring. Sadly, I don’t think the US has the ability anymore to build large infrastructure projects at reasonable prices.
- fartcannon 5y ago
  Build more and ban investment properties. No more AirBnB, no more rentals. Prices will come down and those people who previously had to rent, will now be able to own and life will be better for everyone except the poor souls who bought in the last 20 years.
  - ffggvv 5y ago
    im choosing to rent a house.. so now am forced to rent an apartment or buy a house?
  - jliptzin 5y ago
    A lot of people prefer renting though, even if they can afford to buy a home. Many don’t want to be homeowners, or enjoy the flexibility of being able to move at any time without the hassle and expense of selling a home.
  - MontyCarloHall 5y ago
    I wouldn’t go as far as to ban rentals outright (people moving to a new city can’t be expected to buy a property before moving), but I would certainly support steep taxes on non-owner occupied properties, with deductions available for maintenance/upgrades (thus making rental businesses de facto non-profits). I would also add deductions for developers building new rental housing stock to encourage new construction.
  - imtringued 5y ago
    Add a progresssive tax on land. The more land you own, the more you pay. This forces developers to focus on denser housing while the average home owner can be left alone. The tricky part is that home owners will knowingly defend the interests of real estate corporations because they want their own tax bill to be low.
    - IkmoIkmo 5y ago
      This is pretty damn hard to do. Any legal entity owning land could split it into multiple entities, who're avoiding the progressive tax. There'll probably be a million loopholes for that. Changing zoning is politically difficult, but a much more simple and effective policy approach if you can get it through.
- alistairSH 5y ago
  no tear-down rebuilds, only new houses where previous houses didn't exist I assume "tear down 1 unit, build 5-10 units" is OK? Otherwise, what you're suggesting just leads to more suburban sprawl. There isn't room in SF, NYC, etc for infill development (from vacant lots) at the scale necessary to make a dent in housing prices.
kjkjadksj 5y ago
A lot of people still buy with like 5% down and pay pmi even in hot markets. There are also first time homeowner benefits. My city offers a down payment loan where you can pay 1% down up to like a 750k home if you are lower income. I think that not a lot of people are well educated on homeownership and think that you need to have a huge down payment or an all cash offer, when thats just not true, and often don’t know about the benefits offered to first time homeowners by multiple levels of government.
- ffggvv 5y ago
  if you have a jumbo loan you need a much larger downpayment. which is basically required in any state on the coasts.
  - anotherman554 5y ago
    If you think most people in coastal states are getting jumbo loans you are out of touch.
  - hadlock 5y ago
    Loan originators who specialize in west coast markets can get qualified buyers a 15% down payment + 5% HELOC for Jumbo Loans, up to at least $2mm, which covers most comfortable condos in San Francisco and even some smaller single family homes.
  - plorkyeran 5y ago
    The threshold for loan size which requires a jumbo loan is set per county and is much higher in the expensive coastal states. In California it's $548,250 in the rural counties where homes are around $250/square foot, so the vast majority of homes will qualify for conforming loans. In the sf bay area it's $822,375, which is well below the average price in some but not all cities.
amznthrwaway 5y ago
The median down payment is only 8%, and the median first time home buyers puts down only 5%.
nly 5y ago
> inflation adjusted average monthly mortgage payments have remained surprisingly constant over the last 40 years Not sure why this is surprising. You can only afford a certain % of your income on housing, and if it gets too high you simply don't participate in the housing market

PragmaticPulp 5y ago

The down payment hurdle is indeed a problem. However, if we took steps to make down payments easier (by lowering down payment requirements or through something like Biden's first-time homebuyer credit) then we're also pumping more money into the housing market. That will drive prices up again, further raising prices and making it even harder for future buyers to enter the market. The only real way to push affordability down, long-term, is to build more. I'd personally like to see incentives targeted toward something like all-new construction (no tear-down rebuilds, only new houses where previous houses didn't exist). Give people money to spend on new construction and the new construction will follow.

MontyCarloHall 5y ago
While I 100% agree with you that matching demand with a commensurate increase in supply is the only true fix to the problem of housing costs, in practice I don’t see it happening for a couple main reasons: Firstly, the people with the most political power are not coincidentally those who would lose the most if housing prices decrease. NIMBYism therefore inevitably wins. Secondly, building additional housing in regions that need it most (i.e. dense urban areas) would require dramatically improving public transit in those areas. The transportation networks of e.g. San Francisco, Boston, or even New York (which has by far the best public transit in the country) are already at a breaking point and simply cannot tolerate the influx of people more housing stock would bring. Sadly, I don’t think the US has the ability anymore to build large infrastructure projects at reasonable prices.
fartcannon 5y ago
Build more and ban investment properties. No more AirBnB, no more rentals. Prices will come down and those people who previously had to rent, will now be able to own and life will be better for everyone except the poor souls who bought in the last 20 years.
- ffggvv 5y ago
  im choosing to rent a house.. so now am forced to rent an apartment or buy a house?
- jliptzin 5y ago
  A lot of people prefer renting though, even if they can afford to buy a home. Many don’t want to be homeowners, or enjoy the flexibility of being able to move at any time without the hassle and expense of selling a home.
- MontyCarloHall 5y ago
  I wouldn’t go as far as to ban rentals outright (people moving to a new city can’t be expected to buy a property before moving), but I would certainly support steep taxes on non-owner occupied properties, with deductions available for maintenance/upgrades (thus making rental businesses de facto non-profits). I would also add deductions for developers building new rental housing stock to encourage new construction.
- imtringued 5y ago
  Add a progresssive tax on land. The more land you own, the more you pay. This forces developers to focus on denser housing while the average home owner can be left alone. The tricky part is that home owners will knowingly defend the interests of real estate corporations because they want their own tax bill to be low.
  - IkmoIkmo 5y ago
    This is pretty damn hard to do. Any legal entity owning land could split it into multiple entities, who're avoiding the progressive tax. There'll probably be a million loopholes for that. Changing zoning is politically difficult, but a much more simple and effective policy approach if you can get it through.
alistairSH 5y ago
no tear-down rebuilds, only new houses where previous houses didn't exist I assume "tear down 1 unit, build 5-10 units" is OK? Otherwise, what you're suggesting just leads to more suburban sprawl. There isn't room in SF, NYC, etc for infill development (from vacant lots) at the scale necessary to make a dent in housing prices.

kjkjadksj 5y ago

A lot of people still buy with like 5% down and pay pmi even in hot markets. There are also first time homeowner benefits. My city offers a down payment loan where you can pay 1% down up to like a 750k home if you are lower income. I think that not a lot of people are well educated on homeownership and think that you need to have a huge down payment or an all cash offer, when thats just not true, and often don’t know about the benefits offered to first time homeowners by multiple levels of government.

ffggvv 5y ago
if you have a jumbo loan you need a much larger downpayment. which is basically required in any state on the coasts.
- anotherman554 5y ago
  If you think most people in coastal states are getting jumbo loans you are out of touch.
- hadlock 5y ago
  Loan originators who specialize in west coast markets can get qualified buyers a 15% down payment + 5% HELOC for Jumbo Loans, up to at least $2mm, which covers most comfortable condos in San Francisco and even some smaller single family homes.
- plorkyeran 5y ago
  The threshold for loan size which requires a jumbo loan is set per county and is much higher in the expensive coastal states. In California it's $548,250 in the rural counties where homes are around $250/square foot, so the vast majority of homes will qualify for conforming loans. In the sf bay area it's $822,375, which is well below the average price in some but not all cities.

amznthrwaway 5y ago

The median down payment is only 8%, and the median first time home buyers puts down only 5%.

nly 5y ago

> inflation adjusted average monthly mortgage payments have remained surprisingly constant over the last 40 years Not sure why this is surprising. You can only afford a certain % of your income on housing, and if it gets too high you simply don't participate in the housing market