4 ms·

It's because housing costs have exploded in the last 2 years. That's it. It's not because of low pay, or noncompetitive benefits, or the strain of moving. All

It's because housing costs have exploded in the last 2 years. That's it. It's not because of low pay, or noncompetitive benefits, or the strain of moving. All those things are relatively constant. It's because tons of people either have a 2% mortgage that they will death grip to maturity, are in a rent controlled apartment (many places have ~5% raise caps that fall way short of the 20-50% rent increases seen), or just have a kind landlord that has kept rent stable. Housing is severely fucked right now, and we're gonna be stuck like this until either more homes are built or people lose their jobs (forcing relocation to another house/rental).

jeffwask 3y ago
I have a death grip on my 3% mortgage and thank the stars I got in just before things went more to shit.
- LeifCarrotson 3y ago
  In 2015, I bought a 2500 sqft home in a great school district on 1.5 acres. Zillow says it's now worth $330k, and would need a mortgage of roughly $2800/mo. Six doors down, a neighbor is renting for $2100/mo. I'm at 2.8%, paying $1100/mo on a 15-year $130k mortgage. I got lucky. I feel bad for my friends and relatives who did not join the market at the right time.
  - jeffwask 3y ago
    I got burned on my first house and ended up short selling in 13-14 after the first collapse when I moved. I was gun shy about buying when I moved to Texas and missed the really cheap houses. My initial plan was buying in 2022 but I am so glad my wife pushed us to go for it in 2021 or I would be paying at least a grand a month more in interest or be in a less ideal home.
- SoftTalker 3y ago
  I think my first mortgage in the mid 1990s was around 7%. I remember double-digit rates in the late 70s/early 80s though I was too young to really care about it then. Home prices didn't inflate so crazily then either. Rates are still low, historically. But as they are moving up from very low, the increases are huge, percentage-wise. Most of the reason home prices have inflated so much in the last decade or two is that borrowing has been very cheap. https://finance.yahoo.com/news/tracking-mortgage-rates-1970s-now-180019176.html https://finance.yahoo.com/news/tracking-mortgage-rates-1970s... If rates return to their historical averages, we may see home prices deflating or at least not increasing for a while.
  - dh2022 3y ago
    For home prices to deflate people would have to sell at lower prices - in some cases below their home equity. In these cases sellers would have to basically pay the bank the difference. Given how affordable 3% rates are, I think people would not sell.
    - bequanna 3y ago
      What you’re referring to is called a “short sale” and they are not uncommon during recessionary periods.
    - aidenn0 3y ago
      > In these cases sellers would have to basically pay the bank the difference Or they can default. Mortgages in the US are typically limited recourse, not full recourse. Of course that makes you a pariah to lenders for the next several years...
hn_throwaway_99 3y ago
Totally agree. The housing market is simply in a state of stasis right now. Sellers are loath to sell at a loss, and buyers can't afford these prices because interest rates have gone up so much. While I'm sympathetic to many of the other arguments that "moving is hard while firing you is easy", that dynamic has existed for at least 25 years. The total insanity of the current housing market is the thing that is relatively new.
- MisterBastahrd 3y ago
  Most homeowners would make a profit, but any of them who have bought or refinanced a house in the past few years would be idiots to sell now because of the interest rates.
lastofthemojito 3y ago
Yep. If I were to move to a comparably-priced house with an otherwise comparable mortgage at today's rates, my costs would go up $1650/month. That's 20 grand a year. So before a company could even begin to entice me with a raise, they need to increase my salary by about $30k (accounting for taxes) for me to feel like I'm breaking even.
- dh2022 3y ago
  And that assumes comparably-priced house are of the same quality (neighborhood, size, etc...)
- 88913527 3y ago
  Practically, for your average well-to-do white collar worker, the additional $20k in interest payments might equate to 10% of gross income. The pain of the additional expense is certainly non-zero, but it isn't necessarily prohibitive. Especially if that $20k is going into savings or investments anyways, it's not coming at the cost of foregoing some other current consumption. Many people could afford it, but have some hesitation. The declining transaction volume is more likely due to forward-looking expectations on prices. People can afford it, they're simply opting out of eating the additional costs.
greenie_beans 3y ago
ya, i only want to move to places where housing doesn't make sense financially. anecdotal but still
davidw 3y ago
Housing was messed up even without the mortgage thing. This trend has been clear for a few years: https://www.nytimes.com/2023/05/16/briefing/cities-yimby-exodus-college-graduates.html https://www.nytimes.com/2023/05/16/briefing/cities-yimby-exo...
bonestamp2 3y ago
Yes, and not just housing costs... all costs. The general cost of living has gone way up everywhere (some places more than others of course).
youainti 3y ago
I'm surprised you're the only one saying this. Being locked into a good mortgage or rental situation requires a significant increase in pay (with some job security) to offset the risk of moving.
Tangurena2 3y ago
Additionally, there are many hedge funds purchasing houses to rent. This has priced so many young people out of the market that the media has finally noticed the younger generation is skipping children because they can't afford kids.

jeffwask 3y ago

I have a death grip on my 3% mortgage and thank the stars I got in just before things went more to shit.

LeifCarrotson 3y ago
In 2015, I bought a 2500 sqft home in a great school district on 1.5 acres. Zillow says it's now worth $330k, and would need a mortgage of roughly $2800/mo. Six doors down, a neighbor is renting for $2100/mo. I'm at 2.8%, paying $1100/mo on a 15-year $130k mortgage. I got lucky. I feel bad for my friends and relatives who did not join the market at the right time.
- jeffwask 3y ago
  I got burned on my first house and ended up short selling in 13-14 after the first collapse when I moved. I was gun shy about buying when I moved to Texas and missed the really cheap houses. My initial plan was buying in 2022 but I am so glad my wife pushed us to go for it in 2021 or I would be paying at least a grand a month more in interest or be in a less ideal home.
SoftTalker 3y ago
I think my first mortgage in the mid 1990s was around 7%. I remember double-digit rates in the late 70s/early 80s though I was too young to really care about it then. Home prices didn't inflate so crazily then either. Rates are still low, historically. But as they are moving up from very low, the increases are huge, percentage-wise. Most of the reason home prices have inflated so much in the last decade or two is that borrowing has been very cheap. https://finance.yahoo.com/news/tracking-mortgage-rates-1970s-now-180019176.html https://finance.yahoo.com/news/tracking-mortgage-rates-1970s... If rates return to their historical averages, we may see home prices deflating or at least not increasing for a while.
- dh2022 3y ago
  For home prices to deflate people would have to sell at lower prices - in some cases below their home equity. In these cases sellers would have to basically pay the bank the difference. Given how affordable 3% rates are, I think people would not sell.
  - bequanna 3y ago
    What you’re referring to is called a “short sale” and they are not uncommon during recessionary periods.
  - aidenn0 3y ago
    > In these cases sellers would have to basically pay the bank the difference Or they can default. Mortgages in the US are typically limited recourse, not full recourse. Of course that makes you a pariah to lenders for the next several years...

hn_throwaway_99 3y ago

Totally agree. The housing market is simply in a state of stasis right now. Sellers are loath to sell at a loss, and buyers can't afford these prices because interest rates have gone up so much. While I'm sympathetic to many of the other arguments that "moving is hard while firing you is easy", that dynamic has existed for at least 25 years. The total insanity of the current housing market is the thing that is relatively new.

MisterBastahrd 3y ago
Most homeowners would make a profit, but any of them who have bought or refinanced a house in the past few years would be idiots to sell now because of the interest rates.

lastofthemojito 3y ago

Yep. If I were to move to a comparably-priced house with an otherwise comparable mortgage at today's rates, my costs would go up $1650/month. That's 20 grand a year. So before a company could even begin to entice me with a raise, they need to increase my salary by about $30k (accounting for taxes) for me to feel like I'm breaking even.

dh2022 3y ago
And that assumes comparably-priced house are of the same quality (neighborhood, size, etc...)
88913527 3y ago
Practically, for your average well-to-do white collar worker, the additional $20k in interest payments might equate to 10% of gross income. The pain of the additional expense is certainly non-zero, but it isn't necessarily prohibitive. Especially if that $20k is going into savings or investments anyways, it's not coming at the cost of foregoing some other current consumption. Many people could afford it, but have some hesitation. The declining transaction volume is more likely due to forward-looking expectations on prices. People can afford it, they're simply opting out of eating the additional costs.

greenie_beans 3y ago

ya, i only want to move to places where housing doesn't make sense financially. anecdotal but still

davidw 3y ago

Housing was messed up even without the mortgage thing. This trend has been clear for a few years: https://www.nytimes.com/2023/05/16/briefing/cities-yimby-exodus-college-graduates.html https://www.nytimes.com/2023/05/16/briefing/cities-yimby-exo...

bonestamp2 3y ago

Yes, and not just housing costs... all costs. The general cost of living has gone way up everywhere (some places more than others of course).

youainti 3y ago

I'm surprised you're the only one saying this. Being locked into a good mortgage or rental situation requires a significant increase in pay (with some job security) to offset the risk of moving.

Tangurena2 3y ago

Additionally, there are many hedge funds purchasing houses to rent. This has priced so many young people out of the market that the media has finally noticed the younger generation is skipping children because they can't afford kids.