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Interest rates are extremely relevant when institutional investors are such large players in the real estate market. Also, the original submission noted that m

by kolbe 5y ago

Interest rates are extremely relevant when institutional investors are such large players in the real estate market. Also, the original submission noted that median homes cost 7x median income right now. That does not equate to 10 years of savings from responsible people. Also, 5:1 leverage is extremely generous, and in a free market they would never happen because it’s insanely risky to the lender. That’s ignoring the fact that 20:1 is pretty common these days anyway. The only reason you can get such a generous loan is because the US government is responsible for it, and they’re the most inept financial institution on Earth.

nly 5y ago
Yes, you're absolutely right. People with big piles of capital have a great time during times of low rates, whereas the cash poor working class (even those on high incomes) still get squeezed out by lending criteria and price inflation. > That does not equate to 10 years of savings from responsible people. I don't agree with this. If you're putting 40% of your take home in to rent and property taxes then saving only 20% of your take home (say 12% of your gross) per year is a reasonable approximation. Saving a whole gross income (the 20% deposit if the remaining 80% equates to 4x income) is going to take you ~8 years. And most people suck at saving. And in 8 years property prices can easy go up 50-70%.
- kolbe 5y ago
  Only homeowners pay property taxes. Depending on your income and where you live, saving 50% is totally doable. And since you’re into fanatical scenarios where home prices go up 50-70%, you should also apply the appreciation of the stock market to your savings (usually double or triple real estate).
  - nly 5y ago
    You're out of touch if you think most, or even typical people, can save 50% of their take home pay. > Only homeowners pay property taxes. I pay almost $300 USD/mo in local taxes (for local services) here in the UK. This amount is linked directly to the value and occupancy of the home that I rent from my landlord. > since you’re into fanatical scenarios where home prices go up 50-70% The fantasy that just happened? The national average house price index in the UK is currently at 450. In 2013 it was ~280. That's a 60% increase over 8 years, which is exactly what I said. Regionally it's worse. London property prices have essentially matched the total return of the global stock market over the last 20 years. And the UK is NOT special. Property is up 150% over the last 10 years in the US as well: https://www.thisismoney.co.uk/money/mortgageshome/article-10001959/The-10-countries-seen-property-prices-rocket.html https://www.thisismoney.co.uk/money/mortgageshome/article-10...
    - kolbe 5y ago
      The US is not up 150% in the last 10 years. Look at real data, not clickfarm articles. From Sep 2011, it's up 85%. https://fred.stlouisfed.org/series/csushpinsa https://fred.stlouisfed.org/series/csushpinsa So, sure during the greatest bull run in home price history, prices have gone up significantly over 10 years. But it is fanatical to quote the largest bull run in history as a thing that will likely happen in the future. And I said if you wanted to quote the fanatical scenario, then you needed to apply the equally fanatical scenario that your saving will appreciate with the market appreciation of said fanatical scenario. On Sep 1 2011, the SPY ETF adjusted for dividends was 92.69. Right now, it is 444. That's a 379% increase. 17% annually. That compares to the 6% annual appreciation of homes. https://finance.yahoo.com/quote/SPY/history?period1=728265600&period2=1632355200&interval=1mo&filter=history&frequency=1mo&includeAdjustedClose=true https://finance.yahoo.com/quote/SPY/history?period1=72826560... Now, I don't know about the UK for property taxes. In the US, it's charged to the owner. Fine. But you can always choose to live inexpensively. I know people who earn six figures and spend $700/mo on rent because they live with roommates in unfashionable areas. These people save upwards of 75% of their take home. But if you insist it's impossible to save 50% of take home, then I don't know what to tell you. My friends must not exist. But I'll give you some benefit of the doubt and assume 30% is the absolute most you can save. Then if you earn 100k and want to buy a 700k house, if you put away 30k each year, it will appreciate to 154k in 4 years. The house that increases at 6% will now be 833k, and you damn near have a down payment (18.5%) in 4 years. This scales to any income, so don't tell me I'm out of touch with my income assumptions.

by kolbe 5y ago

nly 5y ago

Yes, you're absolutely right. People with big piles of capital have a great time during times of low rates, whereas the cash poor working class (even those on high incomes) still get squeezed out by lending criteria and price inflation. > That does not equate to 10 years of savings from responsible people. I don't agree with this. If you're putting 40% of your take home in to rent and property taxes then saving only 20% of your take home (say 12% of your gross) per year is a reasonable approximation. Saving a whole gross income (the 20% deposit if the remaining 80% equates to 4x income) is going to take you ~8 years. And most people suck at saving. And in 8 years property prices can easy go up 50-70%.

kolbe 5y ago
Only homeowners pay property taxes. Depending on your income and where you live, saving 50% is totally doable. And since you’re into fanatical scenarios where home prices go up 50-70%, you should also apply the appreciation of the stock market to your savings (usually double or triple real estate).
- nly 5y ago
  You're out of touch if you think most, or even typical people, can save 50% of their take home pay. > Only homeowners pay property taxes. I pay almost $300 USD/mo in local taxes (for local services) here in the UK. This amount is linked directly to the value and occupancy of the home that I rent from my landlord. > since you’re into fanatical scenarios where home prices go up 50-70% The fantasy that just happened? The national average house price index in the UK is currently at 450. In 2013 it was ~280. That's a 60% increase over 8 years, which is exactly what I said. Regionally it's worse. London property prices have essentially matched the total return of the global stock market over the last 20 years. And the UK is NOT special. Property is up 150% over the last 10 years in the US as well: https://www.thisismoney.co.uk/money/mortgageshome/article-10001959/The-10-countries-seen-property-prices-rocket.html https://www.thisismoney.co.uk/money/mortgageshome/article-10...
  - kolbe 5y ago
    The US is not up 150% in the last 10 years. Look at real data, not clickfarm articles. From Sep 2011, it's up 85%. https://fred.stlouisfed.org/series/csushpinsa https://fred.stlouisfed.org/series/csushpinsa So, sure during the greatest bull run in home price history, prices have gone up significantly over 10 years. But it is fanatical to quote the largest bull run in history as a thing that will likely happen in the future. And I said if you wanted to quote the fanatical scenario, then you needed to apply the equally fanatical scenario that your saving will appreciate with the market appreciation of said fanatical scenario. On Sep 1 2011, the SPY ETF adjusted for dividends was 92.69. Right now, it is 444. That's a 379% increase. 17% annually. That compares to the 6% annual appreciation of homes. https://finance.yahoo.com/quote/SPY/history?period1=728265600&period2=1632355200&interval=1mo&filter=history&frequency=1mo&includeAdjustedClose=true https://finance.yahoo.com/quote/SPY/history?period1=72826560... Now, I don't know about the UK for property taxes. In the US, it's charged to the owner. Fine. But you can always choose to live inexpensively. I know people who earn six figures and spend $700/mo on rent because they live with roommates in unfashionable areas. These people save upwards of 75% of their take home. But if you insist it's impossible to save 50% of take home, then I don't know what to tell you. My friends must not exist. But I'll give you some benefit of the doubt and assume 30% is the absolute most you can save. Then if you earn 100k and want to buy a 700k house, if you put away 30k each year, it will appreciate to 154k in 4 years. The house that increases at 6% will now be 833k, and you damn near have a down payment (18.5%) in 4 years. This scales to any income, so don't tell me I'm out of touch with my income assumptions.