7k millennials will be happy to buy them up at affordable prices.
That is shockingly high, but definitely not close to the 1 million figure.
Mortgage rates are incredibly low and there are a number of options to reduce down payment requirements right now. Meanwhile, wages are up and better paying jobs are more common for young people. $400K isn’t out of reach at all for a lot of first-time home buyers in this economy.
Sure, I suppose someone earning a normal wage could scrounge together 20k in, let's say, 5-10 years, but then they would use *ALL* of their savings and have no emergency fund anymore, to use that 20k. Further, then you look at all the costs you get hit by when buying a house such as closing, etc, and that 20k turns out to be 28k, so they'll need to save for even more years.
And now the house isn't 400k, it's 450 or 500, so instead of 20k, they instead need 25k, and with closing costs, now it's 35k because those went up proportionally, as well.
5% is certainly better than 20%, but when you don't have the money, even 1% deposit is too much.
Source; I've refinanced three times based on rates going down. I dropped 10 years and 200/mo. off of my mortgage for the low, low price of $750 worth of appraisals.
Roughly the same here, and I had a very low mortgage from a small line of credit.
Between sticker price on a house and interest rates, prices tend to equalize-- people can always only afford $X/month, regardless of the proportion going to interest. This means that, all else being equal. the most fortunate time to buy is when slightly higher % rates have kept sticker prices down a bit. That way when rates inevitably go down at some point in the future you can refi at a lower rate, getting the benefit of having purchased a lower price and then dropping down to a lower interest rate as well. Certainly not something you can choose to do, given that trends often measure by a decade or two, so this is just an observation, not advice to wait for higher interest rates to suppress sticker prices.
I realize how fortunate we are. Timing is literally everything.
When we shopped to refinance, there were no adjustable rate mortgages to be found, only fixed rate.
Anyway, what we saw was that, depending on who you finance through, you can get a term anywhere from 5-50 years.
I live in the higher end of that range even though I'm in a modest home in a lower-middle class town, in an area where the median household income is about $50k. before taxes.
$400k on a house is simply impossible for many millennials, especially those born towards the end of the millennial generation that haven't had more time to establish themselves and work up the salary scale a bit.
A $400k home would be quite affordable if each of them were earning an average of $24/hr or more, which isn't too crazy.
$1500/month property taxes would be $18,000 per year. On a $400K home that would be 4.5%, which is significantly more than you'd find anywhere in the United States. The average property tax rate in the US is around 1.1%.
Moreover, most locations have an exclusion for the first $XXX,000 of home value. For example, a city might tax the first $100,000 of home value at 0% and then only apply the 1.1% rate (using the average here) to the remaining $300K.
Assuming a $100K home value exclusion and a 1.1% rate (average national rate), that comes to $275/month, which is about half of the lower end of the range you quoted and nowhere near the $1500/month upper end of your range.
Also, $400/month HOA fees would be several times higher than the average. HOAs aren't actually as common as the internet suggests, but when you get into an HOA in a neighborhood with $400K houses, you're probably going to be paying more like $100-150/month, not $400/month.
> $400k on a house is simply impossible for many millennials
Sure, but so is $2K/month rent. I never suggested that every millennial can afford a $400K house, but rather that it's not an impossible reach for many millennials.
This is especially true for married millennials who haven't had children yet. I think too many people focus on the idea of the single millennial purchasing a home on a single income and living there alone, but in practice it's usually people getting married and settling down somewhere together on two incomes.
There’s really no evidence that this is the cause of any of the housing bubble. Sure, it makes a good twitter thread, but institutional investors make up a tiny percentage (1%ish) of single family rentals…
[1] https://www.vox.com/22524829/wall-street-housing-market-blac...
You won't hear this at the cabinet level, because those are all political appointees, but when you get down to the career people, they have grave concern over institutional buyers.
This is what happens when real wages stagnate for 20 years but the economy keeps growing and consolidating. Eventually it catches up to you and you end up with a decade of stagflation while the imbalance corrects itself and a competitive market is re-established. Unchecked free-market capitalism has its drawbacks in the long term; we fucked around and we’re about to find out.
Or another way...a rise in house prices means a rise in rents which means rise in renter wages which means rise in prices. Over the course of some time, naturally.
A rise in the specific asset class of housing lowers the dollars ability to purchase housing, I'll give you that. But asset prices hiking in general are not inflationary. It could be because people are chasing yields (probably inflationary) or it could be that there is new information/discoveries making it so that the expected productivity of these assets is going to be much greater, which is not inflationary.
Invitation Homes was created after the last crash and currently owns ~80k [1] homes, so an additional 7k would represent ~10% more, and if the discount is right from Zillow they will do it. I'm speculating but I bet that's why Zillow is trying to do this in a bigger deal, they don't want to crash the housing market by actually selling these houses to individuals.