5 ms·
Lenders were granting loans last year for 5% down at below 3% interest and prices went up accordingly. Homes were more affordable than ever from the perspective
by duped 5y ago
Lenders were granting loans last year for 5% down at below 3% interest and prices went up accordingly. Homes were more affordable than ever from the perspective of the cost of a mortgage per dollar. They became unaffordable due to the surge in demand because money was so cheap!
What do you want the Fed to do? If they make money more expensive then mortgages become less affordable and housing prices slump, but if they make money easier to get then housing prices go up. Meanwhile, the Fed's mandates are maximum employment at sustainable inflation - not home ownership. The cost of housing has been dominated by local and state regulations for quite some time, it's not something the Fed can or should fix.
What that means is that last year you could have bought a $300k home for $15k in cash and pay around $2k in mortgage/taxes/insurance. The real problems are that there were so few $300k homes and the vast majority of Americans don't have $15k for a downpayment. The Fed can't fix those problems.
If you want to point a finger, point it at municipalities and who don't care about home ownership rates. They could make holding single family homes as long term investment properties unaffordable tomorrow, but choose not to. They could encourage new home construction, but they don't.
(side note, "Fed" is not an acronym, it's an abbreviation for the Federal Reserve)
- treis 5y ago>Lenders were granting loans last year for 5% down at below 3% interest and prices went up accordingly. Homes were more affordable than ever from the perspective of the cost of a mortgage per dollar. They became unaffordable due to the surge in demand because money was so cheap I had to scroll distressingly far to see this post. The record set was going from ~13% investor bought to ~15%. It's a marginal change. Prices sky rocketed because, as you noted, (1) it was/is one of the best financial environments for home buying ever and (2) Covid accelerated timelines for home buying.
- duped 5y agoI think the point I'd like to harp on is that money was extremely cheap last year and it was the best time to buy a home - if you had the savings for a downpayment, that 30 year fixed rate mortgage was cheaper than rent! The problem is that half of Americans don't have more than a thousand dollars in the bank, and we need to focus less on the sheer cost of homes (when homes were incredibly affordable) and more on why Americans can't save for down payments.
- silicon2401 5y ago> last year you could have bought a $300k home for $15k in cash and pay around $2k in mortgage/taxes/insurance. How do I find these loans? My partner and I are looking to buy our first home soon and have been agonizing over whether or not to go for a lower down payment % at the cost of higher monthly payments, or a higher down payment % at the cost of not being able to afford much for our area (where 500k is about the minimum for a house)
- duped 5y agoMore debt is better when money is cheap, but money is getting more expensive the longer you put off making a decision. But I'm not a financial advisor so don't listen to me, I'm just some dude on the internet. Those loans are gone, since interest rates are continuing to climb and that trend will continue for years.
- selimthegrim 5y agoFHA loans should still be pretty close