4 ms·

This seems to be a WSJ re-spin of some nice original research by Trulia[1]. I'd read it there. [1] http://trends.truliablog.com/2013/10/middle-class/ http://t

by aray 13y ago

This seems to be a WSJ re-spin of some nice original research by Trulia[1]. I'd read it there. [1] http://trends.truliablog.com/2013/10/middle-class/ http://trends.truliablog.com/2013/10/middle-class/

smellf 13y ago
Awesome, thanks. The whole time I was reading the WSJ piece thinking, "What's 'affordable'?"
- JPKab 13y ago
  What I would love to see would be an annual rent/house price ratio report. Anything below 6%, and buying is basically stupid. You are paying more in interest to borrow the money than you are to borrow the house each year. Hence one of the motivations that's making me want to leave the DC metro area. Here you are either stuck renting or having an ultra long commute from one of the shitty exurban communities. The Federal Gov't is a bubble that never really pops.
  - sugerman 13y ago
    That's ignoring the tax deductions for mortgage interest and property taxes as well as home value increase.
    - JPKab 13y ago
      Correct. The tax deductions make it so that more something over 3% is stupid. Here that's what I find in the communities that aren't exurbs. Home value increase is not something I count on anymore. The housing bubble was never allowed to fully deflate. The Fed has kept interest rates extremely low to ensure this. The recent home value increase (my father is a real estate broker, so I'm into this stuff) is mainly powered by an artificially low supply of houses for sale. The reason the supply is so much lower than it should be is due to a large percentage of owners who are waiting for further price inflation to put homes on the market. Many of them are currently underwater. I really don't like the mortgage interest tax deduction. Its nothing but a scheme to enrich banks by encouraging debt. All the other bullshit about home ownership is warm, fuzzy, and absolutely not connected to reality.
josephlord 13y ago
From that it seems to assume a four times salary purchase that is largely borrowed. The calculation is based on current borrowing cost and looking at historical interest rates a doubling of the current rate seems plausible in 5 to 10 years potentially putting those buying these currently affordable houses into trouble.
- Domenic_S 13y ago
  Which is why you get a fixed-rate loan...
  - josephlord 13y ago
    Can you get a multi-decade fixed rate mortgage in the US? I don't think that they are obtainable in the UK, most fixes only cover the first couple of years. Is it a two way commitment so that you are locked in for that time period and it makes it harder to move/downsize or can you pay it off early?
    - Domenic_S 13y ago
      Yes you can. The product most people get these days is the 30-year fixed rate. 15- and 10- year are also available; as you shorten the term, the APR decreases. They typically don't have any pre-payment penalty.
- runamok 13y ago
  I wonder about that too. The thing that seems to remain constant is your monthly payment which is of course influenced by the interest rate. So presumably a high interest rate would make a lot of home prices go down.

by aray 13y ago

smellf 13y ago

Awesome, thanks. The whole time I was reading the WSJ piece thinking, "What's 'affordable'?"

JPKab 13y ago
What I would love to see would be an annual rent/house price ratio report. Anything below 6%, and buying is basically stupid. You are paying more in interest to borrow the money than you are to borrow the house each year. Hence one of the motivations that's making me want to leave the DC metro area. Here you are either stuck renting or having an ultra long commute from one of the shitty exurban communities. The Federal Gov't is a bubble that never really pops.
- sugerman 13y ago
  That's ignoring the tax deductions for mortgage interest and property taxes as well as home value increase.
  - JPKab 13y ago
    Correct. The tax deductions make it so that more something over 3% is stupid. Here that's what I find in the communities that aren't exurbs. Home value increase is not something I count on anymore. The housing bubble was never allowed to fully deflate. The Fed has kept interest rates extremely low to ensure this. The recent home value increase (my father is a real estate broker, so I'm into this stuff) is mainly powered by an artificially low supply of houses for sale. The reason the supply is so much lower than it should be is due to a large percentage of owners who are waiting for further price inflation to put homes on the market. Many of them are currently underwater. I really don't like the mortgage interest tax deduction. Its nothing but a scheme to enrich banks by encouraging debt. All the other bullshit about home ownership is warm, fuzzy, and absolutely not connected to reality.

josephlord 13y ago

From that it seems to assume a four times salary purchase that is largely borrowed. The calculation is based on current borrowing cost and looking at historical interest rates a doubling of the current rate seems plausible in 5 to 10 years potentially putting those buying these currently affordable houses into trouble.

Domenic_S 13y ago
Which is why you get a fixed-rate loan...
- josephlord 13y ago
  Can you get a multi-decade fixed rate mortgage in the US? I don't think that they are obtainable in the UK, most fixes only cover the first couple of years. Is it a two way commitment so that you are locked in for that time period and it makes it harder to move/downsize or can you pay it off early?
  - Domenic_S 13y ago
    Yes you can. The product most people get these days is the 30-year fixed rate. 15- and 10- year are also available; as you shorten the term, the APR decreases. They typically don't have any pre-payment penalty.
runamok 13y ago
I wonder about that too. The thing that seems to remain constant is your monthly payment which is of course influenced by the interest rate. So presumably a high interest rate would make a lot of home prices go down.