4 ms·

I'm in my mid 30s and have always had a decent job with relatively decent income, but the cost of living has always made it impossible to save enough fast enoug

I'm in my mid 30s and have always had a decent job with relatively decent income, but the cost of living has always made it impossible to save enough fast enough to get a down payment on a home. Now I finally have one, but with interest rates it seems like a poor financial decision to buy a home when I can rent the same quality of home for half the price. I feel for kids starting out today, I can't see how they will ever thrive in this world unless they work in big tech and have a really high income. Inflation has crushed everyone but the most elite workers.

gustavus 3y ago
This study was also done during 2020 which may have had some other confounding factors with it, of course I can't think of what that could be. Part of the squeeze is that we have the largest age demographic, the boomers, in a stage of life in which they are highly unlikely to move, whilst still living in their homes. This issue will sort itself out shortly. At the same time you had incredibly low interest rates which led to many people who already had established credit and assets the ability to borrow against it and move it to real estate in order to find a stable vehicle that would hedge against inflation. The final, and I consider biggest, factor is the fact that the government start indirectly subsidizing housing, which means there was now a massive pool of money that could only be spent on housing available, and the economically predictable thing happened, which was the price of the thing increased substantially because now there was a large portion of money that could only be spent on that thing. As evidence of this the 3 things that seem to be increasing in cost the fastest, and that people complain about the most, Healthcare, Education & Housing are all heavily subsidized by the government. My point being that people have short memories, this housing crises, will eventually pass given time, as long as we don't do anything stupid to make it last longer.
- jeffbee 3y ago
  > the largest age demographic, the boomers Millenials are a larger generation than Boomers.
  - lostlogin 3y ago
    But in terms of wealth and power, the boomers dominate.
    - ejb999 3y ago
      isn't it almost always true that older people - people who have been working for 30-40-50 years will have more money, on average, than people that have just entered the workforce? Once the boomers are all gone, will we just start blaming the next oldest generation for all of societies problems?
      - lostlogin 3y ago
        Oh for sure.
- WalterBright 3y ago
  > Part of the squeeze is that we have the largest age demographic, the boomers, in a stage of life in which they are highly unlikely to move, whilst still living in their homes. These days we have the millions of people crossing the border into the US. They'll all want houses, too.
  - ejb999 3y ago
    Many border-crossers can't afford to buy houses - probably most of them - but they do put pressure on the lower cost apartments and are competing with low-income citizens, which drives up the price of the lower cost apartments, which has the effect of increases demand and prices all-the-way up the food chain.
    - WalterBright 3y ago
      That's true. It also happens the other way. Building more luxury homes will reduce the price for non-luxury homes. This is because the wealthy will not be bidding up the prices of the non-luxury homes because there will be luxury homes available. This effect is not recognized by people who decry the building of luxury homes.
- itake 3y ago
  I initially wanted to disagree with you, but I think you're right. One unmentioned consideration is why the gov wants people to own their home: Put simply: homeownership (and home value appreciation) results in better end-of-life outcomes compared to self-managed cash. People are bad at saving, but they understand if they don't pay their mortgage, they will lose their home. Tapping into that equity isn't as easy as accessing money from a savings account.
itake 3y ago
My prediction is N-plexes will be built, allowing homeowners to rent out portions of their property, but still give them privacy and flexibility in the future.
WalterBright 3y ago
You never actually own a home anyway. The property taxes rise relentlessly every year (the rent you pay the government). Then there's all the code and zoning laws to greatly restrict what you can do with it.
- dukeyukey 3y ago
  Ownership is a legal fiction. You "own" something as long as you can stop other people from using it. Property taxes are just what you pay the government to enforce your claim.
  - WalterBright 3y ago
    > Property taxes are just what you pay the government to enforce your claim. Around here the endless new levies have nothing to do with enforcing the claim. They're all for various social programs. I think the latest one was to fund free dance classes and other art projects.
- peter422 3y ago
  “Ownership” is a spectrum obviously but owning a home still gives you a hell of a lot more control than renting. Source: used to rent, now own
  - standardUser 3y ago
    That depends almost entirely on local ordinances and, if you have one, your HOA. The far side of the spectrum where you actually have significant control over your own property is great, I'm just not sure it's very common.
    - philwelch 3y ago
      All those things stack up though; if you rent a house in an HOA neighborhood you’re still accountable to the local government and the HOA, it’s just that you’re also accountable to your landlord on top of that.
philwelch 3y ago
Is this a local or a national problem? Homes are a lot more affordable outside of the inflated West Coast metros.
- notaustinpowers 3y ago
  That's true, but jobs outside of metro areas are nearly non-existent, or pay peanuts. Moving out of a metro area typically puts you in, maybe, a bigger home, but the pay is drastically lower. Food costs, internet, phone, vehicle, etc all cost nearly the same (if not more expensive), so you're probably doing even worse moving out of a metro area.
  - philwelch 3y ago
    I didn’t say outside of a metro area, I said outside of the West Coast metros. The rest of the country does exist and many of us own homes and have jobs. If you live in San Francisco it’s probably easy to get the impression that everyone who isn’t a multimillionaire either pays $6000 a month to rent a studio apartment or lives in a tent and poops on the sidewalk, but that’s not what the rest of the country is like.
    - notaustinpowers 3y ago
      It's a situation that is affecting all metro areas, both West and East Coast. For sure, the West Coast is on a whole other level. But I live an hour and a half outside of a southeastern metro area where the average salary is $17/hr with 1-bedroom apartments going for $1,400/month and minimum wage is still $7.25/hr. Which $17/hr doesn't even qualify for. Just stating that this is heavily affecting East Coast non-metro areas, largely due to a fear of change in these communities and a refusal for any local or state governments to take any actions.
      - deleted 3y ago
        [deleted]
  - nradov 3y ago
intrasight 3y ago
Renting makes sense for many reasons. Sounds like it makes sense in your situation. Some people are too quick to buy a house for the wrong reasons. Also. remember that you can refinance if the rates drop.
- ejb999 3y ago
  you might be able to refinance if rates drop - it is not a guarantee. If you overpay for a house, and then you owe more than it appraises for around the time you want to refinance, you are going to have a very hard time taking advantage of lower interest rates, unless you are also in a position to also pay down the mortgage as part of the re-fi.
  - intrasight 3y ago
    Of course don't overpay. The goal is to underpay.
PM_me_your_math 3y ago
[dead]
nradov 3y ago
Saving for a down payment is largely a fool's game, at least in many areas of the country. Prices tend to rise faster than you can save thus putting you further and further behind. If you want to own your own home (and not everyone does or should) then a better approach is to take advantage of one of the various low down payment mortgage programs. Focus on credit score and cashflow rather than down payment. This is somewhat risky in that a temporary reduction in income can quickly put you into a foreclosure and bankruptcy situation, but it works out in the end for most consumers. I understand that from a social policy standpoint it doesn't make sense for governments to encourage rapid residential real estate price inflation or high levels of leverage. But from a personal finance standpoint we have to work with the system as it exists rather than expecting it to change.
- diogenescynic 3y ago
  If I had done that in 2015, sure. Doing it now when the Case Schiller index is at an all time high seems like a bad idea. I just don't know how many years it's going to take for things to correct--so it might end up being a waste of years I could have been building equity if prices don't drop more than the amount of equity I could have built in that time.

gustavus 3y ago

This study was also done during 2020 which may have had some other confounding factors with it, of course I can't think of what that could be. Part of the squeeze is that we have the largest age demographic, the boomers, in a stage of life in which they are highly unlikely to move, whilst still living in their homes. This issue will sort itself out shortly. At the same time you had incredibly low interest rates which led to many people who already had established credit and assets the ability to borrow against it and move it to real estate in order to find a stable vehicle that would hedge against inflation. The final, and I consider biggest, factor is the fact that the government start indirectly subsidizing housing, which means there was now a massive pool of money that could only be spent on housing available, and the economically predictable thing happened, which was the price of the thing increased substantially because now there was a large portion of money that could only be spent on that thing. As evidence of this the 3 things that seem to be increasing in cost the fastest, and that people complain about the most, Healthcare, Education & Housing are all heavily subsidized by the government. My point being that people have short memories, this housing crises, will eventually pass given time, as long as we don't do anything stupid to make it last longer.

jeffbee 3y ago
> the largest age demographic, the boomers Millenials are a larger generation than Boomers.
- lostlogin 3y ago
  But in terms of wealth and power, the boomers dominate.
  - ejb999 3y ago
    isn't it almost always true that older people - people who have been working for 30-40-50 years will have more money, on average, than people that have just entered the workforce? Once the boomers are all gone, will we just start blaming the next oldest generation for all of societies problems?
    - lostlogin 3y ago
      Oh for sure.
WalterBright 3y ago
> Part of the squeeze is that we have the largest age demographic, the boomers, in a stage of life in which they are highly unlikely to move, whilst still living in their homes. These days we have the millions of people crossing the border into the US. They'll all want houses, too.
- ejb999 3y ago
  Many border-crossers can't afford to buy houses - probably most of them - but they do put pressure on the lower cost apartments and are competing with low-income citizens, which drives up the price of the lower cost apartments, which has the effect of increases demand and prices all-the-way up the food chain.
  - WalterBright 3y ago
    That's true. It also happens the other way. Building more luxury homes will reduce the price for non-luxury homes. This is because the wealthy will not be bidding up the prices of the non-luxury homes because there will be luxury homes available. This effect is not recognized by people who decry the building of luxury homes.
itake 3y ago
I initially wanted to disagree with you, but I think you're right. One unmentioned consideration is why the gov wants people to own their home: Put simply: homeownership (and home value appreciation) results in better end-of-life outcomes compared to self-managed cash. People are bad at saving, but they understand if they don't pay their mortgage, they will lose their home. Tapping into that equity isn't as easy as accessing money from a savings account.

itake 3y ago

My prediction is N-plexes will be built, allowing homeowners to rent out portions of their property, but still give them privacy and flexibility in the future.

WalterBright 3y ago

You never actually own a home anyway. The property taxes rise relentlessly every year (the rent you pay the government). Then there's all the code and zoning laws to greatly restrict what you can do with it.

dukeyukey 3y ago
Ownership is a legal fiction. You "own" something as long as you can stop other people from using it. Property taxes are just what you pay the government to enforce your claim.
- WalterBright 3y ago
  > Property taxes are just what you pay the government to enforce your claim. Around here the endless new levies have nothing to do with enforcing the claim. They're all for various social programs. I think the latest one was to fund free dance classes and other art projects.
peter422 3y ago
“Ownership” is a spectrum obviously but owning a home still gives you a hell of a lot more control than renting. Source: used to rent, now own
- standardUser 3y ago
  That depends almost entirely on local ordinances and, if you have one, your HOA. The far side of the spectrum where you actually have significant control over your own property is great, I'm just not sure it's very common.
  - philwelch 3y ago
    All those things stack up though; if you rent a house in an HOA neighborhood you’re still accountable to the local government and the HOA, it’s just that you’re also accountable to your landlord on top of that.

philwelch 3y ago

Is this a local or a national problem? Homes are a lot more affordable outside of the inflated West Coast metros.

notaustinpowers 3y ago
That's true, but jobs outside of metro areas are nearly non-existent, or pay peanuts. Moving out of a metro area typically puts you in, maybe, a bigger home, but the pay is drastically lower. Food costs, internet, phone, vehicle, etc all cost nearly the same (if not more expensive), so you're probably doing even worse moving out of a metro area.
- philwelch 3y ago
  I didn’t say outside of a metro area, I said outside of the West Coast metros. The rest of the country does exist and many of us own homes and have jobs. If you live in San Francisco it’s probably easy to get the impression that everyone who isn’t a multimillionaire either pays $6000 a month to rent a studio apartment or lives in a tent and poops on the sidewalk, but that’s not what the rest of the country is like.
  - notaustinpowers 3y ago
    It's a situation that is affecting all metro areas, both West and East Coast. For sure, the West Coast is on a whole other level. But I live an hour and a half outside of a southeastern metro area where the average salary is $17/hr with 1-bedroom apartments going for $1,400/month and minimum wage is still $7.25/hr. Which $17/hr doesn't even qualify for. Just stating that this is heavily affecting East Coast non-metro areas, largely due to a fear of change in these communities and a refusal for any local or state governments to take any actions.
    - deleted 3y ago
      [deleted]
- nradov 3y ago

intrasight 3y ago

Renting makes sense for many reasons. Sounds like it makes sense in your situation. Some people are too quick to buy a house for the wrong reasons. Also. remember that you can refinance if the rates drop.

ejb999 3y ago
you might be able to refinance if rates drop - it is not a guarantee. If you overpay for a house, and then you owe more than it appraises for around the time you want to refinance, you are going to have a very hard time taking advantage of lower interest rates, unless you are also in a position to also pay down the mortgage as part of the re-fi.
- intrasight 3y ago
  Of course don't overpay. The goal is to underpay.

PM_me_your_math 3y ago

[dead]

nradov 3y ago

Saving for a down payment is largely a fool's game, at least in many areas of the country. Prices tend to rise faster than you can save thus putting you further and further behind. If you want to own your own home (and not everyone does or should) then a better approach is to take advantage of one of the various low down payment mortgage programs. Focus on credit score and cashflow rather than down payment. This is somewhat risky in that a temporary reduction in income can quickly put you into a foreclosure and bankruptcy situation, but it works out in the end for most consumers. I understand that from a social policy standpoint it doesn't make sense for governments to encourage rapid residential real estate price inflation or high levels of leverage. But from a personal finance standpoint we have to work with the system as it exists rather than expecting it to change.

diogenescynic 3y ago
If I had done that in 2015, sure. Doing it now when the Case Schiller index is at an all time high seems like a bad idea. I just don't know how many years it's going to take for things to correct--so it might end up being a waste of years I could have been building equity if prices don't drop more than the amount of equity I could have built in that time.