First-Time Home Buyers Are Simply Walking Away | Hacker News Reader

First-Time Home Buyers Are Simply Walking Away

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32 pointsthrowoutway59 comments

I think I'd love for where I live to outlaw ownership of small-unit-count buildings by someone who doesn't live in the building.

Where is the social justice in letting investors outbid people who want to own their own bit of shelter?

(Existing homeowners might appreciate the gains to property values from investor bidding up, but I'd say the needs of another person to also become a homeowner trumps the needs of an existing homeowner to make greater profit on the investment aspect.)

If some parent get hired for a really good job and has to leave for 2 years, you'd require that family to sell their house?

At my institution (regional college in Western MA) we are having trouble hiring, except locally. People won't come, they cannot afford the cost of housing. It's that bad. Let them sell up. Homeowners have had it good the last 40 years, a policy change is needed because things that can't go on won't.

Yeah won’t go on forever but might go on for longer than a short human little would care

Have you tried increasing the salary on offer? I’m confident that there’s some level at which you’d have no trouble filling all open spots.

We can't afford higher salaries, and then there's the demographic cliff in 2025, because couples stopped having children in 2008, they couldn't afford it. (The upside is that our slim budget prevents us from getting into debt by engaging in stupid construction projects to attract students, we can award scholarships instead.) And we can still fill vacancies with locals who are living with roommates or their parents.

You can't fix a stuff shortage by throwing money at it, no matter what economists tell you. The housing shortage is the real-world equivalent of stock buybacks - in theory the increased stock price boosts investment and thus innovation, but in practice we get Boeing and Intel. Same with housing. The higher prices should in theory draw more suppliers in, but in practice the only supply that grows is the supply of NIMBYS wanting to "preserve home values" to profit from the intolerable status quo.

It sounds like you’re frustrated that the environment is becoming inhospitable for small colleges without a lot of money. That’s understandable, but are you perhaps saying that you all need to be looking at cutting down and getting lean, rather than hiring up?

From those NIMBYs’ points of view, as frustrating as I find them, they probably feel like they scrimped and sacrificed to get their little piece, so now they’re desperate to not let anyone mess it up, because they want to be able to get out the massive amount they put in. I’m guessing it’s more often loss aversion than trying to profit by cornering the market.

Renters are, as a class, poorer than homeowners. Where’s the social justice in requiring one to be a homeowner to live in a single family home?

The price of houses would come down real quick if landlordism was made illegal.

Are you suggesting public ownership of all land? How do you intend to police this and overcome the political economy of realtors, Biggerpockets, etc.? How would private single unit landowners improve upon modern building costs which are $800k+ a unit in expensive metros?

By "landlordism" do you mean owning a home and renting it out? Would you also include sub-letting and apartments in that prohibition? Or renting out U-haul trucks?

Renting is not a great long-term strategy but can certainly helpful when you're poor, or don't want to shell out $100K to buy a box truck for the weekend.

How would you enforce this? By having a list of all homeowners and checking that they live in the property they own? If they do not, then what? What if they own two homes?

Now there would be no middle-ground. Either you own 1 (one) building under four units, in one of which you live. If you want to move, you must find another individual who would take your place. They'd also have to give up their single building and move into yours, for which they must find another individual... Either that, or you're a multi-millionaire investor owning condominiums and living in a private mansion, banned from ever owning small-unit-count buildings.

I'd say, this would lead to the owner of the building on paper still owning a unit there, but putting their least socially protected tenants in it. Tell them that either they have an arrangement where they are not legally renting, but they still pay you money – and if law enforcement asks then tell that you're landlord's friends who are staying over long-term. Or they can go live in a cardboard box.

One solution is not to outlaw, but tax and redistribute to help others afford a primary residence.

That sounds like a better approach. Taxes are used to encourage some behaviors and discourage others.

If you want to have families own their detached homes, make it so that their self-declared primary residence is taxed very little. You can own as many houses as you wish – but the more you own, the higher the tax rate on all the extra ones which are considered “small”. Then families can have a house or two, or maybe even three – whatever you consider a “reasonable” amount. Then businesses can own as many 50-unit condominiums and office complexes as they want, without any diminishing returns. However, it could be economically impractical to own more than, say, two “small” homes – if you have to pay yearly homeownership tax on each “small” home that is not your primary residence, of 20% of the property value for each one that you own. You own five – you pay 100% of value of each of them every year. You own one extra house – you sponsor a new house for a new family once every five years.

But that would require some political will to screw over the rich people. And those are the people who are building the houses in the first place, so you'd also need to ensure that families can build a home for themselves if the businesses are not willing to build property they can't profit off by renting it out instead of selling.

NYC doesn’t allow you to lease a rent-stabilized apartment unless you live in it. There have certainly been cases of fraud, but on the whole it seems to be enforced well enough.

Ahh… a city famous for its reasonably priced housing.

You're joking, but actually, one thing I think people miss is that New York is significantly more affordable than San Francisco, Paris, Hong Kong, and other cities of its class. I think our housing policies deserve credit for that. There's tons of room for improvement, but we do some things right and you can see the results!

No it’s not? Rents are higher in New York than Paris or San Francisco. It’s hard to make the exact comparison because incomes are lower in Paris and San Francisco is a worse city, but New York’s affordable housing policy is 100% just the subway and Jersey City. Everything else should not be emulated at any cost.

Rather than make it a rule, tax it.

For example in Australia there is CGT on an investment property apportioned to the time it acted as such (as apposed to principle place of residence).

CGT is fairly lame in Australia with both a 50% discount and perhaps you need not pay it for 1000 years if you keep passing the property down through family.

Land tax and vacant property tax would help motivate thought!

> I think I'd love for where I live to outlaw ownership of small-unit-count buildings by someone who doesn't live in the building.

Economics will ultimately do this for you. As the economy deteriorates, the rate of return on rental properties will plunge, forcing sales by over-leveraged "investors."

If all your assumptions are true. OTOH, there’s a good chance the result would just be fewer rentals available with the same or higher pricing.

I guess we’ll just have to see what happens.

All that'll accomplish is developers becoming unwilling to build small-unit-count buildings. The price will go up anyway with the diminished supply.

Isn’t that the case already

Every restriction placed on a property will reduce the incentive for people to create more.

That’s a terrible idea.

So if I decide to build a new apartment building and cant sell all the units, you’ll do is me from renting them out in the mean time?

Sounds like building new buildings isn’t worth doing now.

An apartment building is not a single unit building.

What is a “single unit building”?

Anyways, OP proposed “I think I'd love for where I live to outlaw ownership of small-unit-count buildings by someone who doesn't live in the building.”

There are a lot of advantages to renting. You don’t need to secure a loan, you aren’t responsible when something breaks, and you don’t have to find a buyer when you leave. If you only plan to stay somewhere for a couple of years, renting is great.

How that makes you entitled to cheaply renting a single-family home? Go rent a condo, it would be easier to move in a couple of years too. Or if you insist on living in a single-family home, temporarily taking a place of a family who wants to own the property long-term, then you'd pay premium rent to the owner which they'd have to pay out in taxes.

Because doing your own work is significantly cheaper, especially on older (cheaper up-front) cars, which are psuedo-required in North America.

I used to think that...until my second no-fault eviction in two years...

I somewhat doubt your assumptions about what homeowners think.

The busybodies I observe definitely and loudly put their own needs first, but they predict the opposite effect of rental units from you - lower property values. Therefore, they would probably welcome outlawing investment properties, just as you desire.

This dislike of renters seems mixed up with class or race consciousness. I think it's pretty widespread.

I don't think it's possible to avoid the fact that people who can purchase a home are generally more privileged than renters, and so being against investment properties is not a simple matter of social justice.

Would you ban the construction of a home unless the builder lives in the home? Why not? And why wouldnt that apply to the first person that buys the home from the builder that doesn't build in it? And the second person in that chain?

How is this good? It does not even cover scenarios such as folks buying properties before they can move in (e.g., parents waiting for their kids to finish their school year before they can move; buying for parents who are retiring in a few months), people living in properties for a few months of the year and leaving them vacant, people pooling their money and buying as a corporation or partnership (small-scale investors who will only own a few properties at any given time, or people who want some sort of de-facto rent-control on shared rooms in the property), or people buying vacation homes that they will occupy for a few months in the year? Is it socially just to stop all these classes of property buyer?

>Is it socially just to stop all these classes of property buyer?

You don't have to stop them completely, they should just be deprioritized while there's a housing shortage.

My wife is a realtor and aside from the well-known market craziness going on right now the other problem she's been seeing for the past 10-15 years is today's idea of a "starter home" or "first home" is the kind of home people would have purchased previously when they reached their peak earning potential. The untold story is there's a lot of affordable housing but there isn't a much of a market for it. Everyone wants their "dream home" from day one. Those kinds of homes have always been expensive and that hasn't changed.

What people have yet to realize is you can't have it all. You wan to live in a cool, hip city with loads of high-paying jobs? You're going to pay for it. You want to live in the cool spot of that uber cool city? Now you're really going to pay for it! Want to move to a mid-size city in the U.S. Midwest? You have lots of affordable options. You want to buy a starter home in one of those mid-size cities in the Midwest? I guarantee you'll pay less than half for your mortgage than what you're currently paying in rent and you'll have a bigger house and a yard. But you can't have it all - you simply can't afford it.

Both the rental and home ownership markets are ossifying. Rents in some markets are +30% in past 2 years. If you're fortunate enough to be holding an old lease, you're quite likely paying below market rent. Likewise, homeowners with mortgages would be giving up their refinanced interest rate (70% have rates below 4%) if they were to sell and buy a new primary residence. It's a real mess.

Thought I'd point out it's quite risky to purchase something when you can't change jobs w/o moving. Yeah, in a hot market you might get away with it, but often downturns cause layoffs or other reasons to change job and you can end up eating the house. If you are near retirement or in a job-rich area, go for it if you can. But we've lost money on all houses but the current one over the decades.

They gave up after 8 offers? It took me 9 and more than 6 months. A lot of it is calibration to the market in order to estimate the winning bid and the rest is waiting for the chance. Eventually there is a house for sale that fits your needs more than most others.

The odd thing was this time even the rents increased substantially, so much that if you're moving to a new place it might be cheaper monthly to just buy instead of renting. Maybe now with interest rates near 5% and home prices still at its peak, it has shifted the short term advantage back to renting

"Cheaper" if you ignore the down payments that are approaching 30% of the house's total value.

Barring some massive recession you can expect your down payment to have an ROI like a bond when you sell so you can just assume it to be part of your bond allocation.

Obviously you'll lose a lot in transaction fees alone if you sell within a few years.

It was stressful enough before the bubble. Went through it twice, both times in a buyer's market and it was exhausting. I can't imagine what it would be like today, even if I could afford it.

It's so weird that supply and demand doesn't fix this. there's no real barrier to becoming a house builder other than learning the trade, but it's not rocket science.

You're basically correct about building homes (even with inflated wood prices), but when there's a housing boom (bubble?) land gets bid up like crazy as well.

And no, I'm not talking about Midtown Manhattan. Rural Maine, roughly 3 to 3.5 hours from Boston, is where I was looking and it wasn't easy to find the right spot.

I feel like the federal government needs some sort of mechanism to create new cities to add competition on this front…

How do I get more than a paragraph?

Paywalled.

Archive with full text of article: https://archive.ph/Ya1XT

bud, i've been waiting for the market to shit the bed for a decade.

Dude, with construction far below what was needed since 2008 and now with the supply chain troubles this won't happen. Concrete gold mustn't lose its value, Blackstone won't permit it.

Even if we have a downturn, rents tend to continue to rise and housing prices don’t tend to drop more than 8% avg. obviously local markets can vary.

My point is, these things can last 40 years. Human adulthood isn’t that long, you might not want to wait.

Having said that, we seem to be in a constant state of unpredictable events that may or may not have financial impact on our family. I’m continually feeling uneasy about paying for a house that was 3/4 less 6 months ago, but it’s been going that way for years.

We are renting, have been for a decade, but had we bought our net worth would probably be less. Housing in our area didn’t rise as much as stock did over the past few years.

If the house is important to you buy it, but financially there are other ways to become an owner of something valuable.

Leverage in housing means price changes are magnified as a when compared to your downpayment size.

If you put 20% down and the house goes up by 20%, your downpayment investment was doubled. Of course, if it went down by 20%, your downpayment was wiped out.

Considering we’ve had housing cycles since records have been kept and the last major price correction was 14 years ago I doubt “this will last 40 years”.

Those two statements don't conflict in any way. A more important question would be, when was the last major correction before the one 14 years ago?

(Did some quick searches and all I'm finding is rates over the past 5-10 years, rates over the past century grouped by decade that don't even register 2008, and articles talking about 2008)

2001, before that, 1990.

I met a couple early on in the pandemic who were waiting for the housing market to cool down before trying to buy a place. Prices have appreciated over 20% since they. From talking to my parents' generation, it seems like real estate seemed super expensive back then as well. I've come to the conclusion that real estate is always in such high demand that it always seems super expensive.

some un-solicited advise I got on house market (I have recently purchased after searching for 24+mths )

no one sells their house for less than they bought in unless they HAVE to. They just don't sell.

So for me, as a buyer potentially waiting for the market to correct, its not worth waiting, your life will have passed by in the meantime.

If they lose their job in San Francisco bay they just take a new job in San Francisco bay. This is, IMO, why housing essentially never goes down in the bay (until either Prop 13 is repealed or the big earthquake hits and a lot of people are scared out of town).

But there are plenty of areas in America where if you lose you're job you're moving, regardless of whether you particularly want to. No one wants to sell stocks at a loss either, and yet people do.

So my bet is that if there's a recession home prices will go down. Time will tell.

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