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Americans don't believe middle class can afford homes

73 points by safaa1993 3y ago

SubiculumCode 3y ago
Well...they are kinda right. 3k a month mortgage when the interest rate was low, now I imagine it would be closer to 4k per month. Housing prices might not be growing as fast but I haven't seen them dropping.
- alephnerd 3y ago
  > closer to 4k per month Think $5-7k/mo.
- rco8786 3y ago
  A 4k payment is a ~$580k house at 7.5%. Median home price is $387,600 as of November '23, for a payment of $2716. Not to say things aren't tough out there. Just that a $4k mortgage is still 30%+ more than what people can expect to pay at the median. This ignores taxes and insurance of course.
  - darth_avocado 3y ago
    $2716 is still 40% of your pretax household income at the median household income of $78k annually. Post tax, if you include all the other home ownership costs (taxes, insurance, upkeep), this comfortably exceeds 50% of your income, which is unaffordable at that income levels.
    - rco8786 3y ago
      Totally agree - just think it's important to work with statistically realistic figures when discussing these sorts of things.
  - kube-system 3y ago
    > Median home price is $387,600 as of November '23, for a payment of $2716. An actual mortgage payment would probably be closer to 3,000-3,200 after escrowed PMI, taxes, insurance, on a typical loan.
    - rco8786 3y ago
      As mentioned in my post "this ignores taxes and insurance". OP just said mortgage payment so I was only looking at that specifically. Taxes and insurance varies wildly by location.
  - lcfcjs 3y ago
    [dead]
  - willis936 3y ago
    I pay more than $4000 / month in rent. In order to reduce this my SO or I would have to leave a respective dream job or spend 3-4 hours a day commuting. Even if we thought ditching dream jobs was something worth doing, we would only be trading into lower income / less fulfilling jobs to enter a historically awful housing market.
  - SubiculumCode 3y ago
    not in Cali
    - rco8786 3y ago
      This is simple math that is true in every state. The median price is of course different in Cali. And different in Montana. And different in every state. We're discussing "Americans" as a whole here.
NDizzle 3y ago
With sliding definitions of both "middle class" and "afford" I believe this answer will always be "no".
- Dylan16807 3y ago
  You can always pick a median income. What's sliding with the definition of "afford"? I thought there was broad agreement that housing should be no more than 30% of your gross income, give or take a couple percent based on who you ask.
  - geodel 3y ago
    Sliding because features of housing keep increasing. Things that were luxury few decades back and still in most parts of the world are part of an economy house in US.
    - Dylan16807 3y ago
      Okay, but I'd say that's the definition of housing changing, not the definition of afford. But there's a lot of places where you can't even get an affordable apartment. And it's hard to get a smaller house at a proportionally smaller price.
  - NDizzle 3y ago
    Dot com boom and 2008, moreso 2008, that 30% slid up to around 50%. People justified it to themselves because, as mentioned elsewhere, "Real estate always goes up!"
burlesona 3y ago
We spent 40 years believing that house prices were fine because the debt load didn't matter because interest rates would go down forever. Prices are based on the seller extracting the maximum ability to pay from the buyer, so payments were effectively fixed, and every drop in interest rates was perfectly offset by an increase in the purchase price. Then we hit interest zero, there was nowhere left to go. Now we're finally back to more historically normal and healthy interest rates, and it has broken the housing market. We're going to have to have a cultural shift towards housing as shelter, not investment. We have to increase supply to meet demand. And we're going to have to pay more attention to driving down the actual dollar cost of homes, not just the monthly payment.
- spywaregorilla 3y ago
  > Then we hit interest zero, there was nowhere left to go. Not really. We just had impetus to raise them.
- Analemma_ 3y ago
  > We're going to have to have a cultural shift towards housing as shelter, not investment. We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people. To be clear, I completely agree with you that this system has to be dismantled before it gets worse, and a lot of this supposed wealth is illusory anyway: if your house has a "market value" of $750K but no millennial or zoomer can ever possibly pay that, it's not actually worth $750K. But making it actually happen is going to involve a huge, ugly political fight which you can't just handwave away with "we need to have a cultural shift". There are real material considerations at play here, not just culture.
  - dragontamer 3y ago
    > We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people. So the question is if the wealthy can remain wealthy, or if the poor can get houses? I'm sorry, but... as a Catholic the choice is obvious to me. Blessed are the poor, etc. etc. We should favor those who don't have wealth yet. ---------- There's other investments, and any such large-scale buildup of houses will take place over a long-enough time period that investors can reallocate wealth appropriately (reverse mortgages and then move the money to the stock market or something). Talk to a financial advisor if you need help moving wealth out of your house and dumping that onto someone else. Meanwhile, there's no actual solution to the young couple who needs a house for their next baby to raise their family. Get them a damn house. Period.
betterprojects 3y ago
We can barely agree on what the definition of middle class is. A quick search shows one source quoting anywhere between $48,500 to $145,500 a year which is a very broad range. Part of this is cost of living varies significantly in different parts of the US. With the current average salary, average home price, and current interest rates, people aren't wrong that housing is very unaffordable in most places.
- genman 3y ago
  Middle class is anybody who is not poor and not rich. So it is clear from this definition that the lower bound for it is income of $48,500 from what you are not considered poor anymore and upper bound is income of $145,500 from what you are considered rich. Now the most important consideration is - if a person can't afford a home, then can they really considered to be not poor?
- skywhopper 3y ago
  Those numbers are probably the 2nd, 3rd, and 4th quintiles of household income. ie, the middle 60%, so that’s a large swath but it seems reasonable to me.
- wesselbindt 3y ago
  The notion of "middle class" is a convenient propaganda piece. Turns out most folks consider themselves middle class. So as a politician, you can score easy points by saying scary stuff like "the middle class is disappearing" or "I'm here to help the middle class". The moment you start using more meaningful classifications (for example proletariat, which has a precise definition), you alienate some part of your voterbase. I guess with a term like proletariat there's also the fact that it's one of the scary words that the bad people use, which might turn off voters.
  - Sohcahtoa82 3y ago
    > The notion of "middle class" is a convenient propaganda piece. Turns out most folks consider themselves middle class. Yup. I've met people living paycheck-to-paycheck, never having much more than 1 paycheck's worth of money in their bank account, that think they're middle class. Shit, I've seen people that are on food stamps that think they're middle class. The worst part is that so many of them will vote against their own best interests because they think they'll be millionaires one day.
nine_zeros 3y ago
When assets make more money than labor, the "middle class" that is dependent on labor is really the poor class.
skepticATX 3y ago
In most ways the lives of middle class Americans are better than that of their counterparts 30 years. We have an idealized view of what prior generations’ middle class looked like. Home ownership is the one exception. We need to build denser, and we need to build actual communities that are livable without needing to drive 30 minutes to go to the grocery store. The middle class of today has every right to be infuriated at our housing inaction.
- hasty_pudding 3y ago
  Health care, automobile price, groceries, education . we can buy a TV cheaper than ever but anything important has massive inflation
  - ryandrake 3y ago
    Yea, well... but besides the costs of health care, automobiles, groceries, education, and homes (I'd also add gas and energy), things are totally better than 30 years ago! In other words, I'd trade lifestyles with my "parents of 30 years ago" any day.
    - willis936 3y ago
      I would not. This is the first time a generation has been able to say this in 400 years. I would much rather have no cell phones or big TVs if it meant I could have a place of my own.
- floxy 3y ago
  >needing to drive 30 minutes to go to the grocery store. I understand that this is hyperbole, but in this age-of-big-data, is there a way to quantify this? I'd like to see a histogram of miles from nearest grocery store vs. number of homes/apartments.
atourgates 3y ago
They're not wrong. Check out the graphs on this page: https://www.longtermtrends.net/home-price-median-annual-income-ratio/ https://www.longtermtrends.net/home-price-median-annual-inco... The Home Price to Median Household Income Ratio is higher than it's been in 70 years. Between 1965 and the year 2000, it fluctuated between 3.5 and 4.5. At the top of the housing bubble in 2008, it hit 6.8. Right now it's at 7.6. And I don't believe the housing price data this index uses (from S&P CoreLogic Case-Shiller U.S. National Home Price Index) considers the cost mortgage interest rates, so the actual cost of ownership is even higher (relative to a low interest rate environment) than this data shows. The Home Price to Personal Average Income Ratio is a bit different, but tells the same broad picture.
- brianwawok 3y ago
  Also look at these graphs https://www.statista.com/statistics/529371/floor-area-size-new-single-family-homes-usa/ https://www.statista.com/statistics/529371/floor-area-size-n... The average new construction house size changes from 1500 square feet in 1975 to 2500 square feet in 2022. So yes, some of the higher cost of housing is simply that buyers want more house. I know my personal house is nearly double the size of house I grew up with, despite only having 3 kids vs my parents 2.
  - beisner 3y ago
    This doesn’t necessarily follow - it may be that the average potential buyer wants the same amount of house as before, but due to supply issues the lower end of potential buyers can’t afford to buy anything at all. And size doesn’t scale linearly with price - it’s usually sublinear. So it could be that the only homes that get built/sold are larger because nobody is building homes for middle-lower income price ranges.
    - atourgates 3y ago
      I can't find it at the moment, but in the last year or so there was a really informative "why aren't developers building more affordable housing" article on (I believe) NPR. There were lots of factors, but basically it comes down to the fact that it's significantly more profitable for builders to build bigger, more expensive houses than smaller, more affordable houses. AKA, a builder will make much more profit on a single $750K house, than building 3x $250k houses. So I'm sure the reason houses are getting bigger is some combination of consumers wanting bigger houses, and bigger houses being what's available.
sokoloff 3y ago
If 66% of households are in owner-occupied housing, how small is this middle class that can’t afford homes? Is the median (or even 40th percentile) household not middle class? https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N
- jeffbee 3y ago
  There is one rather large and serious problem with this statistic: it censors suppressed household formation. Because it is the tenure of households, there is no consideration for the households that aren't being formed, for example because an adult still lives with their parents. That person is counted under "homeowner" which is deeply misleading. The worse the housing crisis gets, the better this statistic looks.
- weberer 3y ago
  Note that the survey is about perception, not whether or not they actually can afford it.
  - sokoloff 3y ago
    Sure. If we surveyed a bunch of Americans who perceived the world was flat, I expect that we'd augment that perceptual survey with additional data and context.
    - deleted 3y ago
      [deleted]
- rockinghigh 3y ago
  Someone may live in an owner-occupied home and not own it--e.g.: adult children living with their parents, cohabitating adults. > The share of young adults ages 18 to 34 who have formed an independent household has declined since 2010, while the share living with their parents has increased sharply. In 2010, less than one-third (32 percent) of young adults ages 18 to 34 were living with their parent(s), but this share jumped to 35 percent by 2017. The increase was sharpest among 25- to 29-year-olds, rising from 21 percent in 2010 to 26 percent in 2017. The share of 30- to 34-year-olds living with their parent(s) also increased by 4 percentage points across this period. https://www.prb.org/resources/u-s-household-composition-shifts-as-the-population-grows-older-more-young-adults-live-with-parents/ https://www.prb.org/resources/u-s-household-composition-shif...
lucidguppy 3y ago
Feedback systems with long delays are going to be easier to destabilize than systems with short feedback cycles. There's a lot of "memory" in housing prices. Houses are just about the hardest item to build in America today. You need land, and you cannot make them in a factory. All cost cutting measures have been in materials (to the point where quality is degrading). Regulations push new players out of the market - increasing prices. Housing is a social prestige item like health care and education - so that will drive costs up too. The US will have 100m more people in the coming decades no matter what - so demand will always be high. Solution? There is none. It's how the power elite want it.
- soco 3y ago
  Healthcare and education are prestige items around there? Did I get this correctly?
  - skywhopper 3y ago
    Education is for sure. Where do you live that it isn’t?
  - lucidguppy 3y ago
    Yep: Read it in here https://en.wikipedia.org/wiki/The_Elephant_in_the_Brain https://en.wikipedia.org/wiki/The_Elephant_in_the_Brain Medicine shows that others are going to bat for you to keep you alive.
- vidanay 3y ago
  > you cannot make them in a factory You most certainly can build 80% of a house in a factory.
- curun1r 3y ago
  > You need land, and you cannot make them in a factory The land part is true, but there are people working on the second part. One of the more exciting ones I’ve seen recently is Cover [0]. They do the majority of building in their factory and only the foundation work and assembly is done onsite. But they’ve got enough flexibility to adapt their designs to the lot and they help buyers with the permitting hassles, so it’s a lot more appealing than some of the other kit home options. And, more importantly, their product has a luxury feel, so it doesn’t feel like you’re compromising. They’re focused on the LA area and the ADU market right now, but if that works out, it’s easy to see them getting a lot of funding to scale out their efforts to other markets. I’m hopeful that an approach like this can drive down the cost of new construction, especially when combined with streamlined permitting in places with housing crises where the political motivation will be there to adopt more a more builder-friendly environment. If anyone is interested in seeing an actual finished project, a luxury real estate YouTuber did a tour [1] of one of their houses recently. [0] https://buildcover.com/ https://buildcover.com/ [1] https://youtu.be/h2_CcNuNgXw https://youtu.be/h2_CcNuNgXw
iancmceachern 3y ago
It's because they can't, the value has been extracted up
soggybread 3y ago
I've been saving up for the past 8 years and have got a pretty decent deposit built up but the costs of houses in my area are just so expensive that the deposit barely makes a scratch in the overall mortgage costs and I wouldn't be able to afford the mortgage, seems like the more I save up the higher the housing prices go. It absolutely amazes (and infuriates) me that some of the houses I see going for 400-500k now went for 150-200k 10 years ago.
- tyleo 3y ago
  I was in the same situation and the solution is to just get a worse home than you want :( I just purchased my first home because I could finally afford it after a few lucky cash windfalls. I spent the last 5 years in a 700 sq ft apartment. What I learned: I would have been much better off buying a worse home 5 years ago that was at least better than the 700 sq ft apartment. I don’t think saving up that down payment makes as much sense any more. I felt like I was chasing a target which was moving faster than I was.
- chmod600 3y ago
  Doubling or even tripling in ten years is not a ridiculous rate of growth.
  - skywhopper 3y ago
    That’s 7-10% price growth per year. How is that not ridiculous?
    - asadotzler 3y ago
      Bay Area housing has been increasing at about 7% per year for about 40 or 50 years.
      - cykros 3y ago
        And the Bay Area is the outlier everyone points to when talking about absurd housing markets. So, you know, ridiculous. It also seems to be finally hitting a wall post COVID.
monological 3y ago
Because they can't as a result of private equity firms and hedge funds buying houses for investment purposes. Without legislation, people are going to be renting for the rest of their lives like modern day serfs.
- hasty_pudding 3y ago
  You will own nothing and be happy
the_gastropod 3y ago
There's a recent Redfin analysis on this. On average, only 16% of homes were affordable for households earning a median income [1]. It's wild how broadly these affordability numbers vary, and just how much less affordable homes are today than they were just 2 years ago. Ohio must either be a very undesirable state to live in, or they're doing something right to keep house prices relatively reasonable: 3 of the top 5 most affordable cities are in Ohio! [1] https://www.redfin.com/news/share-of-homes-affordable-new-2023/ https://www.redfin.com/news/share-of-homes-affordable-new-20...
- blastro 3y ago
  Can confirm on Ohio being a very undesirable state to live in.
  - floxy 3y ago
    Here's an interesting house: https://www.zillow.com/homedetails/336-N-Bridge-St-Gettysburg-OH-45328/107215896_zpid/ https://www.zillow.com/homedetails/336-N-Bridge-St-Gettysbur...
- alephnerd 3y ago
  > Ohio must either be a very undesirable state to live in The 3 metros mentioned (Akron, Dayton, and Cleveland) collapsed economically in the 1990s. Columbus has been growing, but that's also why unaffordability has grown by 46.7% from 2022 to 2023 in the same dataset. A better model would be Lake County, IL - that's a suburb of Chicago, and Chicagoland is very construction friendly.
hasty_pudding 3y ago
People jump to interest rates but also forget to include skyrocketing property tax and insurance rates. You need at least another 200k on top of the home value to have recurring income to pay those bills annually.
zwieback 3y ago
If you use the metric "price per square foot per person adjusted for inflation" it's not as bad. Part of the problem: household size has been shrinking and house size has been increasing steadily. That effect combined with the decrease of "good blue collar jobs" causes the crunch.
dsr_ 3y ago
Median household income (https://www.census.gov/library/publications/2023/demo/p60-279.html https://www.census.gov/library/publications/2023/demo/p60-27...): $74580 Median house price, per article: $388,000. Today's average 30 year fixed mortgage rate is 7%. Assuming a 10% down payment, 0.5% to private mortgage insurance, and the usual bits and bobs, that approximates a $2800/month payment, or $33600 per year, which is 45% of that median income. That's not affordable, by anyone's definition.
bovermyer 3y ago
I can afford to buy a house, and I'm middle class. The trouble is, that house would be in the middle of nowhere, with Starlink being the only viable internet option. Nowhere else is going to have house prices under $200k for something family-livable.
- skywhopper 3y ago
  Not true at all, there are plenty of small-to-mid-sized cities with good Internet (fiber even!) where you can buy a 3 bedroom home in good shape for well than that. Topeka, Dayton, Peoria, Paducah...
  - bovermyer 3y ago
    That's fair. I have cultural requirements in mind that would preclude those particular cities, but I should have done more research prior to posting.
deleted 3y ago
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dsaavy 3y ago
"believe" is a funny word to use for a mathematical equation
- cykros 3y ago
  What you can afford is based on what you've modeled based on assumptions about your future cash flow, unless you're talking about what you can afford to pay out of pocket, without taking on any debt in the process. Which isn't how people talk about buying houses. Any time credit is involved, belief in one's assumptions is absolutely part of the equation.
- AnimalMuppet 3y ago
  People have perceptions that may or may not correspond to mathematical reality. The perceptions also matter, though (politically, if nothing else).
deleted 3y ago
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firefoxd 3y ago
I can't afford a home, even though I'm considered a high earner. But always ask, how much is an affordable house? In California the answer can vary between 200k to a million dollars. Travel across the states and the range continues to stretch. I can't afford a decent house in California without disrupting my children schooling and schedule. But then you may ask, what is a decent house?
karaterobot 3y ago
Well, yeah. I live in Seattle, where the median household income is $115k, which would mean a home would have to cost around $350k to be affordable, given the 30% of income rule of thumb. The median home price in Seattle is $816k. Hmm, now that I think about it, that's still affordable if you can afford a modest $500k down payment. Most couples I know who both make around $60k a year have at least that much in the bank. Never mind please disregard, everything is actually fine.
xnx 3y ago
How do we make sense of less being spent on mortgage as a percent of income than has been historically? https://fred.stlouisfed.org/series/MDSP https://fred.stlouisfed.org/series/MDSP If you financed during low rates, you're OK, but if you're trying to buy a house now, you're it is hard?
- rawgabbit 3y ago
  Instead of buying, people are now renting?
whatindaheck 3y ago
I just turned 30. If I can’t afford a house in the next 10 years I’m going to be a lifelong renter. Why get a 30 year mortgage at 40, to only pay it off at 70 and then die in two decades? It feels like the wrong thing to do but…I really don’t know how else to look at it. Sure. I could afford a house today where I grew up. But I’d have to surround myself with the highly undesirable culture (in my opinion) in those places. To put it nicely.
- cykros 3y ago
  Most people don't take 30 years to pay off their mortgage, which is why mortgage rates tend to move with the 10 year treasury rather than say, the 30 year rate. The investors generally assume the average prepayment results in them being paid off in about 10 years, and since they're the ones the mortgage lender is offloading to, it's what your rate is determined by. You buy a house, service the mortgage while you're there, then sell it (using the proceeds to pay off the mortgage), and if you've not made a bad investment, you come out with more money than you went in with, which presumably, you put toward a down payment on your next home. If you're downsizing, it may mean you're buying your next home outright, or with very little of the capital borrowed. Unless, of course, your property value declines. Watch out for bubbles, and get sensible insurance to mitigate the risks.
- NDizzle 3y ago
  > Why get a 30 year mortgage at 40, to only pay it off at 70 and then die in two decades? 1) Inflation hedge. 2) At some point in the next 30 years, you will be able to sell your home at / above what you paid for it, just due to the cyclical nature of things. I'm not saying real estate always goes up... but for example, I bought at age 41. $515k. Current estimated value, $900k. When the kids are all graduated and out of the house (when I'm 53-54ish) I can sell this, buy something outright in cash, and increase my saving rate from ~35% to about 60% without any change in my current standard of living.
  - ryandrake 3y ago
    There's also the tax benefit of mortgage interest vs. rent payments. Granted, not everyone itemizes, but it's there.
game_the0ry 3y ago
(I posted this before -- https://news.ycombinator.com/item?id=36961000 https://news.ycombinator.com/item?id=36961000) I grew in upper middle class southern California. I work in tech for the last 7 years. My parents house went from $500K when they bought in 1995 to +$3M today. If my math is right, that would mean the all-in payment (principal, interest, taxes) would be around $20,000/month at today's rate. Assume you do not want to spend more than 1/3 of your income on housing, your household would need to make $720,000/year. Nominally, I make a lot more than my parents did at their peak, but in real terms, I can't afford a home in the neighborhood I grew up in. Anecdotally, the only people I know that can afford to live in my old neighborhood are young people who get help from their parents or people who bought way before covid and rolled up their existing equity into their new home purchases. Among the upper middle class people I know, no one can afford that area or they are not interested bc they think the cost is not worth it. What's going to happen to the firefighters, cops, and teachers in that area?
- deleted 3y ago
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floxy 3y ago
So are high prices not an incentive for house builders to ramp up and build more houses? What is the breakdown of costs to building a new house between labor, materials, land, permits/inspections, construction loan burden, etc.? Is anyone working on tech to reduce construction costs of new houses? There are more out-there things like 3D-printing structures. But how about more conventional/mundane things. How hard would it be to have a robot that could lay asphalt shingles and staple them in place? Maybe mudding/taping sheetrock would be not-too-difficult to automate? I'm assuming the raw materials are pretty well automated at the factory (things like sheet rock, 2x4's at the saw mill, plywood, etc.)
tennisflyi 3y ago
Why would they?
cykros 3y ago
What defines them as middle class then? It seems more like "Americans believe middle class has shrunk, drastically."

73 points by safaa1993 3y ago

Well...they are kinda right. 3k a month mortgage when the interest rate was low, now I imagine it would be closer to 4k per month. Housing prices might not be growing as fast but I haven't seen them dropping.

alephnerd 3y ago
> closer to 4k per month Think $5-7k/mo.
rco8786 3y ago
A 4k payment is a ~$580k house at 7.5%. Median home price is $387,600 as of November '23, for a payment of $2716. Not to say things aren't tough out there. Just that a $4k mortgage is still 30%+ more than what people can expect to pay at the median. This ignores taxes and insurance of course.
- darth_avocado 3y ago
  $2716 is still 40% of your pretax household income at the median household income of $78k annually. Post tax, if you include all the other home ownership costs (taxes, insurance, upkeep), this comfortably exceeds 50% of your income, which is unaffordable at that income levels.
  - rco8786 3y ago
    Totally agree - just think it's important to work with statistically realistic figures when discussing these sorts of things.
- kube-system 3y ago
  > Median home price is $387,600 as of November '23, for a payment of $2716. An actual mortgage payment would probably be closer to 3,000-3,200 after escrowed PMI, taxes, insurance, on a typical loan.
  - rco8786 3y ago
    As mentioned in my post "this ignores taxes and insurance". OP just said mortgage payment so I was only looking at that specifically. Taxes and insurance varies wildly by location.
- lcfcjs 3y ago
  [dead]
- willis936 3y ago
  I pay more than $4000 / month in rent. In order to reduce this my SO or I would have to leave a respective dream job or spend 3-4 hours a day commuting. Even if we thought ditching dream jobs was something worth doing, we would only be trading into lower income / less fulfilling jobs to enter a historically awful housing market.
- SubiculumCode 3y ago
  not in Cali
  - rco8786 3y ago
    This is simple math that is true in every state. The median price is of course different in Cali. And different in Montana. And different in every state. We're discussing "Americans" as a whole here.

NDizzle 3y ago

With sliding definitions of both "middle class" and "afford" I believe this answer will always be "no".

Dylan16807 3y ago
You can always pick a median income. What's sliding with the definition of "afford"? I thought there was broad agreement that housing should be no more than 30% of your gross income, give or take a couple percent based on who you ask.
- geodel 3y ago
  Sliding because features of housing keep increasing. Things that were luxury few decades back and still in most parts of the world are part of an economy house in US.
  - Dylan16807 3y ago
    Okay, but I'd say that's the definition of housing changing, not the definition of afford. But there's a lot of places where you can't even get an affordable apartment. And it's hard to get a smaller house at a proportionally smaller price.
- NDizzle 3y ago
  Dot com boom and 2008, moreso 2008, that 30% slid up to around 50%. People justified it to themselves because, as mentioned elsewhere, "Real estate always goes up!"

burlesona 3y ago

We spent 40 years believing that house prices were fine because the debt load didn't matter because interest rates would go down forever. Prices are based on the seller extracting the maximum ability to pay from the buyer, so payments were effectively fixed, and every drop in interest rates was perfectly offset by an increase in the purchase price. Then we hit interest zero, there was nowhere left to go. Now we're finally back to more historically normal and healthy interest rates, and it has broken the housing market. We're going to have to have a cultural shift towards housing as shelter, not investment. We have to increase supply to meet demand. And we're going to have to pay more attention to driving down the actual dollar cost of homes, not just the monthly payment.

spywaregorilla 3y ago
> Then we hit interest zero, there was nowhere left to go. Not really. We just had impetus to raise them.
Analemma_ 3y ago
> We're going to have to have a cultural shift towards housing as shelter, not investment. We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people. To be clear, I completely agree with you that this system has to be dismantled before it gets worse, and a lot of this supposed wealth is illusory anyway: if your house has a "market value" of $750K but no millennial or zoomer can ever possibly pay that, it's not actually worth $750K. But making it actually happen is going to involve a huge, ugly political fight which you can't just handwave away with "we need to have a cultural shift". There are real material considerations at play here, not just culture.
- dragontamer 3y ago
  > We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people. So the question is if the wealthy can remain wealthy, or if the poor can get houses? I'm sorry, but... as a Catholic the choice is obvious to me. Blessed are the poor, etc. etc. We should favor those who don't have wealth yet. ---------- There's other investments, and any such large-scale buildup of houses will take place over a long-enough time period that investors can reallocate wealth appropriately (reverse mortgages and then move the money to the stock market or something). Talk to a financial advisor if you need help moving wealth out of your house and dumping that onto someone else. Meanwhile, there's no actual solution to the young couple who needs a house for their next baby to raise their family. Get them a damn house. Period.

betterprojects 3y ago

We can barely agree on what the definition of middle class is. A quick search shows one source quoting anywhere between $48,500 to $145,500 a year which is a very broad range. Part of this is cost of living varies significantly in different parts of the US. With the current average salary, average home price, and current interest rates, people aren't wrong that housing is very unaffordable in most places.

genman 3y ago
Middle class is anybody who is not poor and not rich. So it is clear from this definition that the lower bound for it is income of $48,500 from what you are not considered poor anymore and upper bound is income of $145,500 from what you are considered rich. Now the most important consideration is - if a person can't afford a home, then can they really considered to be not poor?
skywhopper 3y ago
Those numbers are probably the 2nd, 3rd, and 4th quintiles of household income. ie, the middle 60%, so that’s a large swath but it seems reasonable to me.
wesselbindt 3y ago
The notion of "middle class" is a convenient propaganda piece. Turns out most folks consider themselves middle class. So as a politician, you can score easy points by saying scary stuff like "the middle class is disappearing" or "I'm here to help the middle class". The moment you start using more meaningful classifications (for example proletariat, which has a precise definition), you alienate some part of your voterbase. I guess with a term like proletariat there's also the fact that it's one of the scary words that the bad people use, which might turn off voters.
- Sohcahtoa82 3y ago
  > The notion of "middle class" is a convenient propaganda piece. Turns out most folks consider themselves middle class. Yup. I've met people living paycheck-to-paycheck, never having much more than 1 paycheck's worth of money in their bank account, that think they're middle class. Shit, I've seen people that are on food stamps that think they're middle class. The worst part is that so many of them will vote against their own best interests because they think they'll be millionaires one day.

nine_zeros 3y ago

When assets make more money than labor, the "middle class" that is dependent on labor is really the poor class.

skepticATX 3y ago

In most ways the lives of middle class Americans are better than that of their counterparts 30 years. We have an idealized view of what prior generations’ middle class looked like. Home ownership is the one exception. We need to build denser, and we need to build actual communities that are livable without needing to drive 30 minutes to go to the grocery store. The middle class of today has every right to be infuriated at our housing inaction.

hasty_pudding 3y ago
Health care, automobile price, groceries, education . we can buy a TV cheaper than ever but anything important has massive inflation
- ryandrake 3y ago
  Yea, well... but besides the costs of health care, automobiles, groceries, education, and homes (I'd also add gas and energy), things are totally better than 30 years ago! In other words, I'd trade lifestyles with my "parents of 30 years ago" any day.
  - willis936 3y ago
    I would not. This is the first time a generation has been able to say this in 400 years. I would much rather have no cell phones or big TVs if it meant I could have a place of my own.
floxy 3y ago
>needing to drive 30 minutes to go to the grocery store. I understand that this is hyperbole, but in this age-of-big-data, is there a way to quantify this? I'd like to see a histogram of miles from nearest grocery store vs. number of homes/apartments.

atourgates 3y ago

They're not wrong. Check out the graphs on this page: https://www.longtermtrends.net/home-price-median-annual-income-ratio/ https://www.longtermtrends.net/home-price-median-annual-inco... The Home Price to Median Household Income Ratio is higher than it's been in 70 years. Between 1965 and the year 2000, it fluctuated between 3.5 and 4.5. At the top of the housing bubble in 2008, it hit 6.8. Right now it's at 7.6. And I don't believe the housing price data this index uses (from S&P CoreLogic Case-Shiller U.S. National Home Price Index) considers the cost mortgage interest rates, so the actual cost of ownership is even higher (relative to a low interest rate environment) than this data shows. The Home Price to Personal Average Income Ratio is a bit different, but tells the same broad picture.

brianwawok 3y ago
Also look at these graphs https://www.statista.com/statistics/529371/floor-area-size-new-single-family-homes-usa/ https://www.statista.com/statistics/529371/floor-area-size-n... The average new construction house size changes from 1500 square feet in 1975 to 2500 square feet in 2022. So yes, some of the higher cost of housing is simply that buyers want more house. I know my personal house is nearly double the size of house I grew up with, despite only having 3 kids vs my parents 2.
- beisner 3y ago
  This doesn’t necessarily follow - it may be that the average potential buyer wants the same amount of house as before, but due to supply issues the lower end of potential buyers can’t afford to buy anything at all. And size doesn’t scale linearly with price - it’s usually sublinear. So it could be that the only homes that get built/sold are larger because nobody is building homes for middle-lower income price ranges.
  - atourgates 3y ago
    I can't find it at the moment, but in the last year or so there was a really informative "why aren't developers building more affordable housing" article on (I believe) NPR. There were lots of factors, but basically it comes down to the fact that it's significantly more profitable for builders to build bigger, more expensive houses than smaller, more affordable houses. AKA, a builder will make much more profit on a single $750K house, than building 3x $250k houses. So I'm sure the reason houses are getting bigger is some combination of consumers wanting bigger houses, and bigger houses being what's available.

sokoloff 3y ago

If 66% of households are in owner-occupied housing, how small is this middle class that can’t afford homes? Is the median (or even 40th percentile) household not middle class? https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N

jeffbee 3y ago
There is one rather large and serious problem with this statistic: it censors suppressed household formation. Because it is the tenure of households, there is no consideration for the households that aren't being formed, for example because an adult still lives with their parents. That person is counted under "homeowner" which is deeply misleading. The worse the housing crisis gets, the better this statistic looks.
weberer 3y ago
Note that the survey is about perception, not whether or not they actually can afford it.
- sokoloff 3y ago
  Sure. If we surveyed a bunch of Americans who perceived the world was flat, I expect that we'd augment that perceptual survey with additional data and context.
  - deleted 3y ago
    [deleted]
rockinghigh 3y ago
Someone may live in an owner-occupied home and not own it--e.g.: adult children living with their parents, cohabitating adults. > The share of young adults ages 18 to 34 who have formed an independent household has declined since 2010, while the share living with their parents has increased sharply. In 2010, less than one-third (32 percent) of young adults ages 18 to 34 were living with their parent(s), but this share jumped to 35 percent by 2017. The increase was sharpest among 25- to 29-year-olds, rising from 21 percent in 2010 to 26 percent in 2017. The share of 30- to 34-year-olds living with their parent(s) also increased by 4 percentage points across this period. https://www.prb.org/resources/u-s-household-composition-shifts-as-the-population-grows-older-more-young-adults-live-with-parents/ https://www.prb.org/resources/u-s-household-composition-shif...

lucidguppy 3y ago

Feedback systems with long delays are going to be easier to destabilize than systems with short feedback cycles. There's a lot of "memory" in housing prices. Houses are just about the hardest item to build in America today. You need land, and you cannot make them in a factory. All cost cutting measures have been in materials (to the point where quality is degrading). Regulations push new players out of the market - increasing prices. Housing is a social prestige item like health care and education - so that will drive costs up too. The US will have 100m more people in the coming decades no matter what - so demand will always be high. Solution? There is none. It's how the power elite want it.

soco 3y ago
Healthcare and education are prestige items around there? Did I get this correctly?
- skywhopper 3y ago
  Education is for sure. Where do you live that it isn’t?
- lucidguppy 3y ago
  Yep: Read it in here https://en.wikipedia.org/wiki/The_Elephant_in_the_Brain https://en.wikipedia.org/wiki/The_Elephant_in_the_Brain Medicine shows that others are going to bat for you to keep you alive.
vidanay 3y ago
> you cannot make them in a factory You most certainly can build 80% of a house in a factory.
curun1r 3y ago
> You need land, and you cannot make them in a factory The land part is true, but there are people working on the second part. One of the more exciting ones I’ve seen recently is Cover [0]. They do the majority of building in their factory and only the foundation work and assembly is done onsite. But they’ve got enough flexibility to adapt their designs to the lot and they help buyers with the permitting hassles, so it’s a lot more appealing than some of the other kit home options. And, more importantly, their product has a luxury feel, so it doesn’t feel like you’re compromising. They’re focused on the LA area and the ADU market right now, but if that works out, it’s easy to see them getting a lot of funding to scale out their efforts to other markets. I’m hopeful that an approach like this can drive down the cost of new construction, especially when combined with streamlined permitting in places with housing crises where the political motivation will be there to adopt more a more builder-friendly environment. If anyone is interested in seeing an actual finished project, a luxury real estate YouTuber did a tour [1] of one of their houses recently. [0] https://buildcover.com/ https://buildcover.com/ [1] https://youtu.be/h2_CcNuNgXw https://youtu.be/h2_CcNuNgXw

iancmceachern 3y ago

It's because they can't, the value has been extracted up

soggybread 3y ago

I've been saving up for the past 8 years and have got a pretty decent deposit built up but the costs of houses in my area are just so expensive that the deposit barely makes a scratch in the overall mortgage costs and I wouldn't be able to afford the mortgage, seems like the more I save up the higher the housing prices go. It absolutely amazes (and infuriates) me that some of the houses I see going for 400-500k now went for 150-200k 10 years ago.

tyleo 3y ago
I was in the same situation and the solution is to just get a worse home than you want :( I just purchased my first home because I could finally afford it after a few lucky cash windfalls. I spent the last 5 years in a 700 sq ft apartment. What I learned: I would have been much better off buying a worse home 5 years ago that was at least better than the 700 sq ft apartment. I don’t think saving up that down payment makes as much sense any more. I felt like I was chasing a target which was moving faster than I was.
chmod600 3y ago
Doubling or even tripling in ten years is not a ridiculous rate of growth.
- skywhopper 3y ago
  That’s 7-10% price growth per year. How is that not ridiculous?
  - asadotzler 3y ago
    Bay Area housing has been increasing at about 7% per year for about 40 or 50 years.
    - cykros 3y ago
      And the Bay Area is the outlier everyone points to when talking about absurd housing markets. So, you know, ridiculous. It also seems to be finally hitting a wall post COVID.

monological 3y ago

Because they can't as a result of private equity firms and hedge funds buying houses for investment purposes. Without legislation, people are going to be renting for the rest of their lives like modern day serfs.

hasty_pudding 3y ago
You will own nothing and be happy

the_gastropod 3y ago

There's a recent Redfin analysis on this. On average, only 16% of homes were affordable for households earning a median income [1]. It's wild how broadly these affordability numbers vary, and just how much less affordable homes are today than they were just 2 years ago. Ohio must either be a very undesirable state to live in, or they're doing something right to keep house prices relatively reasonable: 3 of the top 5 most affordable cities are in Ohio! [1] https://www.redfin.com/news/share-of-homes-affordable-new-2023/ https://www.redfin.com/news/share-of-homes-affordable-new-20...

blastro 3y ago
Can confirm on Ohio being a very undesirable state to live in.
- floxy 3y ago
  Here's an interesting house: https://www.zillow.com/homedetails/336-N-Bridge-St-Gettysburg-OH-45328/107215896_zpid/ https://www.zillow.com/homedetails/336-N-Bridge-St-Gettysbur...
alephnerd 3y ago
> Ohio must either be a very undesirable state to live in The 3 metros mentioned (Akron, Dayton, and Cleveland) collapsed economically in the 1990s. Columbus has been growing, but that's also why unaffordability has grown by 46.7% from 2022 to 2023 in the same dataset. A better model would be Lake County, IL - that's a suburb of Chicago, and Chicagoland is very construction friendly.

hasty_pudding 3y ago

People jump to interest rates but also forget to include skyrocketing property tax and insurance rates. You need at least another 200k on top of the home value to have recurring income to pay those bills annually.

zwieback 3y ago

If you use the metric "price per square foot per person adjusted for inflation" it's not as bad. Part of the problem: household size has been shrinking and house size has been increasing steadily. That effect combined with the decrease of "good blue collar jobs" causes the crunch.

dsr_ 3y ago

Median household income (https://www.census.gov/library/publications/2023/demo/p60-279.html https://www.census.gov/library/publications/2023/demo/p60-27...): $74580 Median house price, per article: $388,000. Today's average 30 year fixed mortgage rate is 7%. Assuming a 10% down payment, 0.5% to private mortgage insurance, and the usual bits and bobs, that approximates a $2800/month payment, or $33600 per year, which is 45% of that median income. That's not affordable, by anyone's definition.

bovermyer 3y ago

I can afford to buy a house, and I'm middle class. The trouble is, that house would be in the middle of nowhere, with Starlink being the only viable internet option. Nowhere else is going to have house prices under $200k for something family-livable.

skywhopper 3y ago
Not true at all, there are plenty of small-to-mid-sized cities with good Internet (fiber even!) where you can buy a 3 bedroom home in good shape for well than that. Topeka, Dayton, Peoria, Paducah...
- bovermyer 3y ago
  That's fair. I have cultural requirements in mind that would preclude those particular cities, but I should have done more research prior to posting.

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dsaavy 3y ago

"believe" is a funny word to use for a mathematical equation

cykros 3y ago
What you can afford is based on what you've modeled based on assumptions about your future cash flow, unless you're talking about what you can afford to pay out of pocket, without taking on any debt in the process. Which isn't how people talk about buying houses. Any time credit is involved, belief in one's assumptions is absolutely part of the equation.
AnimalMuppet 3y ago
People have perceptions that may or may not correspond to mathematical reality. The perceptions also matter, though (politically, if nothing else).

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firefoxd 3y ago

I can't afford a home, even though I'm considered a high earner. But always ask, how much is an affordable house? In California the answer can vary between 200k to a million dollars. Travel across the states and the range continues to stretch. I can't afford a decent house in California without disrupting my children schooling and schedule. But then you may ask, what is a decent house?

karaterobot 3y ago

Well, yeah. I live in Seattle, where the median household income is $115k, which would mean a home would have to cost around $350k to be affordable, given the 30% of income rule of thumb. The median home price in Seattle is $816k. Hmm, now that I think about it, that's still affordable if you can afford a modest $500k down payment. Most couples I know who both make around $60k a year have at least that much in the bank. Never mind please disregard, everything is actually fine.

xnx 3y ago

How do we make sense of less being spent on mortgage as a percent of income than has been historically? https://fred.stlouisfed.org/series/MDSP https://fred.stlouisfed.org/series/MDSP If you financed during low rates, you're OK, but if you're trying to buy a house now, you're it is hard?

rawgabbit 3y ago
Instead of buying, people are now renting?

whatindaheck 3y ago

I just turned 30. If I can’t afford a house in the next 10 years I’m going to be a lifelong renter. Why get a 30 year mortgage at 40, to only pay it off at 70 and then die in two decades? It feels like the wrong thing to do but…I really don’t know how else to look at it. Sure. I could afford a house today where I grew up. But I’d have to surround myself with the highly undesirable culture (in my opinion) in those places. To put it nicely.

cykros 3y ago
Most people don't take 30 years to pay off their mortgage, which is why mortgage rates tend to move with the 10 year treasury rather than say, the 30 year rate. The investors generally assume the average prepayment results in them being paid off in about 10 years, and since they're the ones the mortgage lender is offloading to, it's what your rate is determined by. You buy a house, service the mortgage while you're there, then sell it (using the proceeds to pay off the mortgage), and if you've not made a bad investment, you come out with more money than you went in with, which presumably, you put toward a down payment on your next home. If you're downsizing, it may mean you're buying your next home outright, or with very little of the capital borrowed. Unless, of course, your property value declines. Watch out for bubbles, and get sensible insurance to mitigate the risks.
NDizzle 3y ago
> Why get a 30 year mortgage at 40, to only pay it off at 70 and then die in two decades? 1) Inflation hedge. 2) At some point in the next 30 years, you will be able to sell your home at / above what you paid for it, just due to the cyclical nature of things. I'm not saying real estate always goes up... but for example, I bought at age 41. $515k. Current estimated value, $900k. When the kids are all graduated and out of the house (when I'm 53-54ish) I can sell this, buy something outright in cash, and increase my saving rate from ~35% to about 60% without any change in my current standard of living.
- ryandrake 3y ago
  There's also the tax benefit of mortgage interest vs. rent payments. Granted, not everyone itemizes, but it's there.

game_the0ry 3y ago

(I posted this before -- https://news.ycombinator.com/item?id=36961000 https://news.ycombinator.com/item?id=36961000) I grew in upper middle class southern California. I work in tech for the last 7 years. My parents house went from $500K when they bought in 1995 to +$3M today. If my math is right, that would mean the all-in payment (principal, interest, taxes) would be around $20,000/month at today's rate. Assume you do not want to spend more than 1/3 of your income on housing, your household would need to make $720,000/year. Nominally, I make a lot more than my parents did at their peak, but in real terms, I can't afford a home in the neighborhood I grew up in. Anecdotally, the only people I know that can afford to live in my old neighborhood are young people who get help from their parents or people who bought way before covid and rolled up their existing equity into their new home purchases. Among the upper middle class people I know, no one can afford that area or they are not interested bc they think the cost is not worth it. What's going to happen to the firefighters, cops, and teachers in that area?

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floxy 3y ago

So are high prices not an incentive for house builders to ramp up and build more houses? What is the breakdown of costs to building a new house between labor, materials, land, permits/inspections, construction loan burden, etc.? Is anyone working on tech to reduce construction costs of new houses? There are more out-there things like 3D-printing structures. But how about more conventional/mundane things. How hard would it be to have a robot that could lay asphalt shingles and staple them in place? Maybe mudding/taping sheetrock would be not-too-difficult to automate? I'm assuming the raw materials are pretty well automated at the factory (things like sheet rock, 2x4's at the saw mill, plywood, etc.)

tennisflyi 3y ago

Why would they?

cykros 3y ago

What defines them as middle class then? It seems more like "Americans believe middle class has shrunk, drastically."