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The only sensible financial reaction is to save, save, save for a down payment well in excess of 20%. Just an extra 5% will save you roughly $150k On a 600k hom

The only sensible financial reaction is to save, save, save for a down payment well in excess of 20%. Just an extra 5% will save you roughly $150k On a 600k home over the course of a 30-yr 6.9% mortgage (the current rate). Problem is that most people will never be able to achieve this - the average down payment for first home buyers is less than 10%. Truly hate to say it but people will need to get used to buying homes much later in life.

pixl97 3y ago
With more collusion occurring in rental markets, home owners are able to extract more wealth from those that do not own homes. Unless something changes in supply (of which current owners will not want) then 'get used to not buying homes' is really what's being said.
- spacemark 3y ago
  I hear you, it's not a good place to be in (I've been renting my whole adult life). If people can't or are unwilling to swallow that bitter pill, perhaps major shifts are coming.
  - jorvi 3y ago
    You can get there with social housing through either: - the Singapore model, rent-to-own via the government - the Japanese model, housing is a depreciating asset - the Vienna model, ubiquitous social housing up to mid-tier of the market Personally I feel like renting or owning a house should be a choice of features, not of financial benefit. Buying a house should be about being able to make it your own (moving walls, redoing the garden, building a shed). On a 5, 15, 30, 60 year timeline, owning and renting a house should come out to the same financial net outcome. The way to get there is murky to me. I have far too little understanding of the deeper effects government policies have on the real estate market to make even the roughest guess.
s1artibartfast 3y ago
>The only sensible financial reaction is to save, save, save for a down payment well in excess of 20% Perhaps at todays rate, but this is not always the case and depends on the relative rates. We did the opposite, Maxed out our loan and kept cash on hand.
- spacemark 3y ago
  Of course, if rates are low and money is cheap, max out the loan. But one of the key points of the article was that interest rates are not going to fall for a long time and when they do, house prices will resume their ascent.
jwells89 3y ago
If that’s true it’s truly unfortunate the because there’s a sense of stability and security that comes with buying, and younger people tend to be among those who need that most. I bought right before the interest rate shot back up with a ~5% down payment, and the past few years of ownership have improved my mental state substantially. You don’t know how much stress is caused by having that potential rent hike (and associated potential apartment hunt and move required to keep housing costs within reason) that comes with lease renewal looming on the horizon until it’s not there anymore.
- hotpotamus 3y ago
  It's vexing to me that so many seem to refuse to believe that stability is important to mental health (for at least some of us), and then wonder why young people are exhibiting ever greater mental health issues. I think only psychopaths are "happy" with the current state of things. Sadly, our institutions seem purpose-built to select them as our leaders.
Guvante 3y ago
Depends on how much renting is. Waiting for a higher down payment while paying more to rent doesn't necessarily work out better. Additionally having an emergency fund afterwards is super important. Finally since prepayment penalties aren't a thing the difference between paying extra principal early on and a bigger down payment is mostly PMI. (And the interest on the payments until you make them)
lumost 3y ago
We have finite lifetimes. If it takes until I'm 60 to afford a home, the reality is that it may no longer make sense to buy. At some point, we’re just describing a landed aristocracy alongside a rent to own scheme.
Sander3Utile 3y ago
The alternative is to pay as little as you can, while diversifying the remaining cash elsewhere. For example, an ETF tracking the S&P500
nunez 3y ago
Gonna have to disagree with you. Here in Houston, a city with a medium cost-of-living, the cheapest house that you can get that's in livable condition and isn't outrageously far from where the jobs are is something like $300k. 20% of that is $60k. For us techies or others with a Well-Paying Job™, saving $60k is not a big deal. For pretty much everyone else, saving $60k is a huge feat, even after removing all unnecessary expenses. (Why should "they" have to ride the struggle bus when we techies can blow $18 on lattes and avo toast or whatever's hype these days while still hitting these savings goals?) And when they finally do that 15 years later or whatever, they're competing against the Well-Paying Job™ folks who are rolling equity from the sale of their starter home and putting down all-cash offers. By saying "people will need to get used to buying homes much later in life," what you're essentially proposing is class-redlining the poors (many of whom come from families that were historically-discriminated against home ownership, either directly or indirectly) out of home ownership. I'm going to assume that this isn't what you intended by writing that, but that's how it comes off.
- lotsofpulp 3y ago
  > (Why should "they" have to ride the struggle bus when we techies can blow $18 on lattes and avo toast or whatever's hype these days while still hitting these savings goals?) Can you define what techies should be able to buy compared to “them”?
whatindaheck 3y ago
> Truly hate to say it but people will need to get used to buying homes much later in life. This just makes renting seem like a better option. If I won’t pay off my home until I’m dead what’s the point?

pixl97 3y ago

With more collusion occurring in rental markets, home owners are able to extract more wealth from those that do not own homes. Unless something changes in supply (of which current owners will not want) then 'get used to not buying homes' is really what's being said.

spacemark 3y ago
I hear you, it's not a good place to be in (I've been renting my whole adult life). If people can't or are unwilling to swallow that bitter pill, perhaps major shifts are coming.
- jorvi 3y ago
  You can get there with social housing through either: - the Singapore model, rent-to-own via the government - the Japanese model, housing is a depreciating asset - the Vienna model, ubiquitous social housing up to mid-tier of the market Personally I feel like renting or owning a house should be a choice of features, not of financial benefit. Buying a house should be about being able to make it your own (moving walls, redoing the garden, building a shed). On a 5, 15, 30, 60 year timeline, owning and renting a house should come out to the same financial net outcome. The way to get there is murky to me. I have far too little understanding of the deeper effects government policies have on the real estate market to make even the roughest guess.

s1artibartfast 3y ago

>The only sensible financial reaction is to save, save, save for a down payment well in excess of 20% Perhaps at todays rate, but this is not always the case and depends on the relative rates. We did the opposite, Maxed out our loan and kept cash on hand.

spacemark 3y ago
Of course, if rates are low and money is cheap, max out the loan. But one of the key points of the article was that interest rates are not going to fall for a long time and when they do, house prices will resume their ascent.

jwells89 3y ago

If that’s true it’s truly unfortunate the because there’s a sense of stability and security that comes with buying, and younger people tend to be among those who need that most. I bought right before the interest rate shot back up with a ~5% down payment, and the past few years of ownership have improved my mental state substantially. You don’t know how much stress is caused by having that potential rent hike (and associated potential apartment hunt and move required to keep housing costs within reason) that comes with lease renewal looming on the horizon until it’s not there anymore.

hotpotamus 3y ago
It's vexing to me that so many seem to refuse to believe that stability is important to mental health (for at least some of us), and then wonder why young people are exhibiting ever greater mental health issues. I think only psychopaths are "happy" with the current state of things. Sadly, our institutions seem purpose-built to select them as our leaders.

Guvante 3y ago

Depends on how much renting is. Waiting for a higher down payment while paying more to rent doesn't necessarily work out better. Additionally having an emergency fund afterwards is super important. Finally since prepayment penalties aren't a thing the difference between paying extra principal early on and a bigger down payment is mostly PMI. (And the interest on the payments until you make them)

lumost 3y ago

We have finite lifetimes. If it takes until I'm 60 to afford a home, the reality is that it may no longer make sense to buy. At some point, we’re just describing a landed aristocracy alongside a rent to own scheme.

Sander3Utile 3y ago

The alternative is to pay as little as you can, while diversifying the remaining cash elsewhere. For example, an ETF tracking the S&P500

nunez 3y ago

Gonna have to disagree with you. Here in Houston, a city with a medium cost-of-living, the cheapest house that you can get that's in livable condition and isn't outrageously far from where the jobs are is something like $300k. 20% of that is $60k. For us techies or others with a Well-Paying Job™, saving $60k is not a big deal. For pretty much everyone else, saving $60k is a huge feat, even after removing all unnecessary expenses. (Why should "they" have to ride the struggle bus when we techies can blow $18 on lattes and avo toast or whatever's hype these days while still hitting these savings goals?) And when they finally do that 15 years later or whatever, they're competing against the Well-Paying Job™ folks who are rolling equity from the sale of their starter home and putting down all-cash offers. By saying "people will need to get used to buying homes much later in life," what you're essentially proposing is class-redlining the poors (many of whom come from families that were historically-discriminated against home ownership, either directly or indirectly) out of home ownership. I'm going to assume that this isn't what you intended by writing that, but that's how it comes off.

lotsofpulp 3y ago
> (Why should "they" have to ride the struggle bus when we techies can blow $18 on lattes and avo toast or whatever's hype these days while still hitting these savings goals?) Can you define what techies should be able to buy compared to “them”?

whatindaheck 3y ago

> Truly hate to say it but people will need to get used to buying homes much later in life. This just makes renting seem like a better option. If I won’t pay off my home until I’m dead what’s the point?