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Not really. Mortgage rates are so low that even with only 5% down the monthly mortgage payments on a $400K house are similar to what someone would be paying for

Not really. Mortgage rates are so low that even with only 5% down the monthly mortgage payments on a $400K house are similar to what someone would be paying for monthly rent in these cities. Mortgage rates are incredibly low and there are a number of options to reduce down payment requirements right now. Meanwhile, wages are up and better paying jobs are more common for young people. $400K isn’t out of reach at all for a lot of first-time home buyers in this economy.

whimsicalism 5y ago
I doubt they are $400k in the city.
gizdan 5y ago
5% is still $20k. When you're living payslip to payslip, even $5k is too much as a deposit is too much.
- ct0 5y ago
  But 5% is better than 20% down. Most have the capacity to save but choose not to.
  - t-writescode 5y ago
    5% down on a 400k place is 20k. Sure, I suppose someone earning a normal wage could scrounge together 20k in, let's say, 5-10 years, but then they would use *ALL* of their savings and have no emergency fund anymore, to use that 20k. Further, then you look at all the costs you get hit by when buying a house such as closing, etc, and that 20k turns out to be 28k, so they'll need to save for even more years. And now the house isn't 400k, it's 450 or 500, so instead of 20k, they instead need 25k, and with closing costs, now it's 35k because those went up proportionally, as well.
  - gizdan 5y ago
    At current minimum wage, saving 20k will take years and years. Most non-tech folks just do not earn enough to save. It's not that they don't want to, or choose not to. It's that they don't have disposible income. 5% is certainly better than 20%, but when you don't have the money, even 1% deposit is too much.
barbazoo 5y ago
But will they stay low for the next 30 years? Probably not. It's not a good idea to justify ones house buying decision with an all time low interest rate.
- whimsicalism 5y ago
  ? No, it's a great idea if we are talking a standard fixed rate
- Loughla 5y ago
  In the US, fixed interest mortgage rates are sort of the standard. So, the decision to buy now based on interest rates is a keen driver of many buyers. Source; I've refinanced three times based on rates going down. I dropped 10 years and 200/mo. off of my mortgage for the low, low price of $750 worth of appraisals.
  - ineedasername 5y ago
    I dropped 10 years and 200/mo. off of my mortgage Roughly the same here, and I had a very low mortgage from a small line of credit. Between sticker price on a house and interest rates, prices tend to equalize-- people can always only afford $X/month, regardless of the proportion going to interest. This means that, all else being equal. the most fortunate time to buy is when slightly higher % rates have kept sticker prices down a bit. That way when rates inevitably go down at some point in the future you can refi at a lower rate, getting the benefit of having purchased a lower price and then dropping down to a lower interest rate as well. Certainly not something you can choose to do, given that trends often measure by a decade or two, so this is just an observation, not advice to wait for higher interest rates to suppress sticker prices.
    - Loughla 5y ago
      That is 100% my experience. We bought when interest was still relatively high compared to today (5-7% I think). Prices for homes were still being suppressed by the crash of 2008. Then the whole world went to pot and interest bottomed out for a decade. It just kept going down. I realize how fortunate we are. Timing is literally everything.
ineedasername 5y ago
I'm not so sure: At current rates, assuming excellent credit, that's about $1700/month. If you're anywhere near the suburbs of a city, you can add another $500 to $1500/month in property taxes, and sometimes another $100 to $400/month in HOA fees. on that for a total pre-utility rate of ~$2400-$3600/month or roughly $30k to $43/ year. I live in the higher end of that range even though I'm in a modest home in a lower-middle class town, in an area where the median household income is about $50k. before taxes. $400k on a house is simply impossible for many millennials, especially those born towards the end of the millennial generation that haven't had more time to establish themselves and work up the salary scale a bit.
- BizarroLand 5y ago
  I think you're overlooking married millennials, many of whom are in their late 20's-late 30's and many of whom have no children, and many of whom are two-income families. A $400k home would be quite affordable if each of them were earning an average of $24/hr or more, which isn't too crazy.
  - gizdan 5y ago
    What the sibling comment said, but also, the minimum wage is still $7.25, with some companies only now pushing this up to ~$15. For many, including married couples, $24 an hour is a pipedream.
  - t-writescode 5y ago
    I, singularly, make far more than $48/hour ( which is 96k / year ); and, a 400k home is barely in _my_ price range, with the HOA and property taxes included.
- PragmaticPulp 5y ago
  > If you're anywhere near the suburbs of a city, you can add another $500 to $1500/month in property taxes, $1500/month property taxes would be $18,000 per year. On a $400K home that would be 4.5%, which is significantly more than you'd find anywhere in the United States. The average property tax rate in the US is around 1.1%. Moreover, most locations have an exclusion for the first $XXX,000 of home value. For example, a city might tax the first $100,000 of home value at 0% and then only apply the 1.1% rate (using the average here) to the remaining $300K. Assuming a $100K home value exclusion and a 1.1% rate (average national rate), that comes to $275/month, which is about half of the lower end of the range you quoted and nowhere near the $1500/month upper end of your range. Also, $400/month HOA fees would be several times higher than the average. HOAs aren't actually as common as the internet suggests, but when you get into an HOA in a neighborhood with $400K houses, you're probably going to be paying more like $100-150/month, not $400/month. > $400k on a house is simply impossible for many millennials Sure, but so is $2K/month rent. I never suggested that every millennial can afford a $400K house, but rather that it's not an impossible reach for many millennials. This is especially true for married millennials who haven't had children yet. I think too many people focus on the idea of the single millennial purchasing a home on a single income and living there alone, but in practice it's usually people getting married and settling down somewhere together on two incomes.

whimsicalism 5y ago

I doubt they are $400k in the city.

gizdan 5y ago

5% is still $20k. When you're living payslip to payslip, even $5k is too much as a deposit is too much.

ct0 5y ago
But 5% is better than 20% down. Most have the capacity to save but choose not to.
- t-writescode 5y ago
  5% down on a 400k place is 20k. Sure, I suppose someone earning a normal wage could scrounge together 20k in, let's say, 5-10 years, but then they would use *ALL* of their savings and have no emergency fund anymore, to use that 20k. Further, then you look at all the costs you get hit by when buying a house such as closing, etc, and that 20k turns out to be 28k, so they'll need to save for even more years. And now the house isn't 400k, it's 450 or 500, so instead of 20k, they instead need 25k, and with closing costs, now it's 35k because those went up proportionally, as well.
- gizdan 5y ago
  At current minimum wage, saving 20k will take years and years. Most non-tech folks just do not earn enough to save. It's not that they don't want to, or choose not to. It's that they don't have disposible income. 5% is certainly better than 20%, but when you don't have the money, even 1% deposit is too much.

barbazoo 5y ago

But will they stay low for the next 30 years? Probably not. It's not a good idea to justify ones house buying decision with an all time low interest rate.

whimsicalism 5y ago
? No, it's a great idea if we are talking a standard fixed rate
Loughla 5y ago
In the US, fixed interest mortgage rates are sort of the standard. So, the decision to buy now based on interest rates is a keen driver of many buyers. Source; I've refinanced three times based on rates going down. I dropped 10 years and 200/mo. off of my mortgage for the low, low price of $750 worth of appraisals.
- ineedasername 5y ago
  I dropped 10 years and 200/mo. off of my mortgage Roughly the same here, and I had a very low mortgage from a small line of credit. Between sticker price on a house and interest rates, prices tend to equalize-- people can always only afford $X/month, regardless of the proportion going to interest. This means that, all else being equal. the most fortunate time to buy is when slightly higher % rates have kept sticker prices down a bit. That way when rates inevitably go down at some point in the future you can refi at a lower rate, getting the benefit of having purchased a lower price and then dropping down to a lower interest rate as well. Certainly not something you can choose to do, given that trends often measure by a decade or two, so this is just an observation, not advice to wait for higher interest rates to suppress sticker prices.
  - Loughla 5y ago
    That is 100% my experience. We bought when interest was still relatively high compared to today (5-7% I think). Prices for homes were still being suppressed by the crash of 2008. Then the whole world went to pot and interest bottomed out for a decade. It just kept going down. I realize how fortunate we are. Timing is literally everything.

ineedasername 5y ago

I'm not so sure: At current rates, assuming excellent credit, that's about $1700/month. If you're anywhere near the suburbs of a city, you can add another $500 to $1500/month in property taxes, and sometimes another $100 to $400/month in HOA fees. on that for a total pre-utility rate of ~$2400-$3600/month or roughly $30k to $43/ year. I live in the higher end of that range even though I'm in a modest home in a lower-middle class town, in an area where the median household income is about $50k. before taxes. $400k on a house is simply impossible for many millennials, especially those born towards the end of the millennial generation that haven't had more time to establish themselves and work up the salary scale a bit.

BizarroLand 5y ago
I think you're overlooking married millennials, many of whom are in their late 20's-late 30's and many of whom have no children, and many of whom are two-income families. A $400k home would be quite affordable if each of them were earning an average of $24/hr or more, which isn't too crazy.
- gizdan 5y ago
  What the sibling comment said, but also, the minimum wage is still $7.25, with some companies only now pushing this up to ~$15. For many, including married couples, $24 an hour is a pipedream.
- t-writescode 5y ago
  I, singularly, make far more than $48/hour ( which is 96k / year ); and, a 400k home is barely in _my_ price range, with the HOA and property taxes included.
PragmaticPulp 5y ago
> If you're anywhere near the suburbs of a city, you can add another $500 to $1500/month in property taxes, $1500/month property taxes would be $18,000 per year. On a $400K home that would be 4.5%, which is significantly more than you'd find anywhere in the United States. The average property tax rate in the US is around 1.1%. Moreover, most locations have an exclusion for the first $XXX,000 of home value. For example, a city might tax the first $100,000 of home value at 0% and then only apply the 1.1% rate (using the average here) to the remaining $300K. Assuming a $100K home value exclusion and a 1.1% rate (average national rate), that comes to $275/month, which is about half of the lower end of the range you quoted and nowhere near the $1500/month upper end of your range. Also, $400/month HOA fees would be several times higher than the average. HOAs aren't actually as common as the internet suggests, but when you get into an HOA in a neighborhood with $400K houses, you're probably going to be paying more like $100-150/month, not $400/month. > $400k on a house is simply impossible for many millennials Sure, but so is $2K/month rent. I never suggested that every millennial can afford a $400K house, but rather that it's not an impossible reach for many millennials. This is especially true for married millennials who haven't had children yet. I think too many people focus on the idea of the single millennial purchasing a home on a single income and living there alone, but in practice it's usually people getting married and settling down somewhere together on two incomes.