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The biggest barrier to entry for first time home buyers is by far mortgage rates. Low mortgage rates cause house values to go up because value is based on what

The biggest barrier to entry for first time home buyers is by far mortgage rates. Low mortgage rates cause house values to go up because value is based on what an affordable monthly payment for that house. Low rates means value goes up to equalize payments which is mostly superfluous for people with only one home and good for anyone with investment property but it causes a 20% down payment to be an unsurmountable barrier to entry for those looking to enter the market. Home ownership is one if not the best way for families to generationally escape poverty.

imtringued 4y ago
How would you value a perpetuity? If the present and future are worth the same, then the value of land is practically infinite because millions of generations of humans can use it. The obvious problem in this case is that nobody should own land forever.
- parineum 4y ago
  Unless you know someone that lives forever, nobody does.
999900000999 4y ago
If we're talking California, I'd argue a 200k down payment on a million dollar house is a bigger barrier.
- parineum 4y ago
  That's exactly my point. If a house is a million dollars with a 3% loan, that house will be significantly cheaper with a 15% loan but the payments will remain relatively static making a 20% down payment significantly easier for those who are trying to get in the market for the first time. When people bring up the prices of houses for baby boomers they totally overlook the interest rates and monthly payments. The price of a house doesn't really matter. The payment and the down payment are what matter and the volatility of those isn't based on the piece of land changing value (in the shorter term). In the last 6 years, my house doubled in value. Also, I recently refinanced for less than half the rate. When borrowing money is cheap, there's a lot more competition for things bought with loans. On the other hand, the market rates for rent don't really change because the people don't suddenly have more disposable income.

imtringued 4y ago

How would you value a perpetuity? If the present and future are worth the same, then the value of land is practically infinite because millions of generations of humans can use it. The obvious problem in this case is that nobody should own land forever.

parineum 4y ago
Unless you know someone that lives forever, nobody does.

999900000999 4y ago

If we're talking California, I'd argue a 200k down payment on a million dollar house is a bigger barrier.

parineum 4y ago
That's exactly my point. If a house is a million dollars with a 3% loan, that house will be significantly cheaper with a 15% loan but the payments will remain relatively static making a 20% down payment significantly easier for those who are trying to get in the market for the first time. When people bring up the prices of houses for baby boomers they totally overlook the interest rates and monthly payments. The price of a house doesn't really matter. The payment and the down payment are what matter and the volatility of those isn't based on the piece of land changing value (in the shorter term). In the last 6 years, my house doubled in value. Also, I recently refinanced for less than half the rate. When borrowing money is cheap, there's a lot more competition for things bought with loans. On the other hand, the market rates for rent don't really change because the people don't suddenly have more disposable income.