For most Americans, owning a home is now a distant dream | Hacker News Reader

For most Americans, owning a home is now a distant dream

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57 pointspaulpauper70 comments

When you build your society around making sure that housing will appreciate ("be a good investment") and point a firehose of cheap money at corporations, can you really be surprised that they use it to buy up the federally assured good investment?

I think you've hit the nail on the head. If housing is both a safe and high-returning investment, why wouldn't corporations literally buy up as much as possible? Nobody expects retail stock investors to beat professional stock investment corporations at their own game, why is housing different?

Especially when the stock market is inflated as fuck (companies with nearly no YoY revenue are being evaluated at millions/billions of dollars).

We need heavy taxation on investment/vacation property. Exception being if you've built it yourself on unimproved land.

>We need heavy taxation on investment/vacation property.

This sounds like a mess. Everyone builds larger houses because you have to keep all your tax-advantaged housing under one roof? Stickplex apartments, the seemingly only affordable new housing stock, get more expensive? I'm sure the negative consequences are endless.

It's grim/worse in the UK:

- Median individual income: £31,000 (£598/week[0]) - $40K USD

- Average house asking price £360,000 [1] - $450K USD

- For a couple both on a dual median income that means the national average house price is 5.8x typical household income.

- Banks aren't allowed to offer mortgages of more than 4.5x income to more than 85% of their clients, which means such a couple are tasked at finding 1.3x their joint income (£80K or $100K USD) to get started

- Affordability isn't bad if you can cobble together the equity/deposit. An 85% LTV mortgage on a 5 year fix is around ~2.4% right now, so a £360K average home will have a mortgage of ~£1,200/mo ($1,500/mo USD, which is around 30% of such a couples take home pay).

- The bad news is interest rates are currently rising, at the same time as house prices, and the cost of living

- Worse news is if this fictional couple want kids they're likely going down to a single income, which puts it out of reach completely.

[0] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwor... [1] https://www.rightmove.co.uk/news/house-price-index/

Here's something that I perceive the UK has going for it that the US doesn't - health care and child care. In the US, you could easily be spending > $1000/mo on child care, and for those families of child rearing age, a health insurance bill > $500/mo is pretty normal. So there's basically a mortgage into just those costs. Plus, with the design of US cities a car or two are practically a necessity, so there goes another > $500/mo too where in much of the UK you might get away with only one car or no car in a household depending on your location.

Child care isn't free in the UK. At all. And while it's true we have free nationalized healthcare, people in professional roles in the US will take home way higher salaries (50-100% more in tech), with slightly (~5%) lower income taxes. Not to mention the cost of living in many categories, like fuel and food, are cheaper in the US.

I hate articles like this.

-- It paints the entire country as one real estate market, but real estate is local.

-- Interest rates are still super low by historic standards. If we have a small recession this spring it will likely benefit buyers. If interest rates go up, suddenly seller carry contracts and private lending becomes attractive again (IE: buyers have even more options to attain capital)

-- Cities aren't the entire country. If you want to buy a house and you can work remotely, there are a whole lot of very nice small towns and cities around the US where the quality of life is surprisingly high, they are great places to raise a family, and real estate is still very affordable.

-- Inventory - again, totally depends on your market. Locally everybody says there aren't any houses, but what they really mean is that there aren't any turn key houses that have all the amenities they want. Builders are building a lot of crap that isn't what buyers want - that is a problem. But there are a lot of older homes that someone could put in some sweat equity and have a great home at a reasonable price - but nobody wants to be first into those neighborhoods or to do the work.

-- First time buyers have more support than they realize. Not only are there FHA and USDA programs to help them, but states also have down payment assistance and various first time buyer programs.

Low interest rates seem to have made housing more unaffordable. Instead of enabling low capital intensive personal loans, they have enabled high capital intensive investment banking. This is because the marginal cost of investment was budged a few tens of thousands of dollars for households, but millions or even billions of dollars for investment banks and private equity firms. Less capital was available for personal mortgages as a share of the total capital market.

Anything built in the last 10 years is going to be skyhigh, even when considering the different markets. The strategy for a first time buyer is the same as the last 50 years. Buy a mobile home or an older starter home.

In many markets, all older starter homes and even tear downs are impossible to finance for the median resident. By a large margin.

The increase in flipping means that there are no starter homes. All the starter homes got renovated and relisted at much higher prices

Relisted at a much higher price from a low price is still ok:

https://www.zillow.com/homedetails/318-1st-Ave-E-West-Fargo-...

with 30k down, you can have a mortgage around 750$ mo, which is about the same as a single room rent in the area. Yeah, it probably needs more work than what the flipper put on it, but they are out there.

The amount of money you need to get an first time FHA loan is relatively low. You can easily get a 250k loan for about 11k down, and your mortgage payment is gonna be about the same as your rent payment. (except you at least have something building equity now). Yeah the PMI sucks, but current interest rates are so low that even with PMI your rate is probably pretty favorable.

My nephew did exactly what I talked about 2 years ago and is already sitting on 50k of equity. Rent for a 2 bedroom in his area is more than his mortgage......

Where can you get a house for $250k?

Zillow seems to think there are more than 500 in California:

https://www.zillow.com/ca/?searchQueryState=%7B%22pagination...

These are mostly trailers and condos or far away from population centers (jobs and other resources).

Many places, especially American Southeast or Midwest.

Choosing to live in California or New York is a poor choice for many people.

Or get a 600k house for 25k down like me! I don't understand why FHA is ignored so much in housing policy discussion..

> Interest rates are still super low by historic standards.

This is disingenuous when interest rates are literally only a portion of the problem. The cost of houses are way up, which means those interest rates are now __far more painful__.

The other part of this is, we were in infinite growth/consume mindset when interest rates were that high. We now know that is not sustainable, and interest rates may in fact out run how fast the economy is growing compared to "when the interest rates were high". So, no, historical lenses don't really put anything into perspective here except make you realize the situation is far far worse.

> -- Cities aren't the entire country. If you want to buy a house and you can work remotely, there are a whole lot of very nice small towns and cities around the US where the quality of life is surprisingly high, they are great places to raise a family, and real estate is still very affordable.

Except cost of houses are up nearly everywhere. Not everyone can work remotely. And what you end up doing with this is just increase the price of housing in that one area. For example, the entirety of the north east rural areas. Also, people live within a community, and these "cheap affordable areas" have no diversity and most of the time no tolerance for "others".

> -- First time buyers have more support than they realize. Not only are there FHA and USDA programs to help them, but states also have down payment assistance and various first time buyer programs.

You use this and your offer is going to be rejected. These programs HAVE to be disclosed when buying a house, and the second a seller sees it they're going to take a lower offer that doesn't have these. It's far more likely to close with a normal loan.

It's like 50 years of holding back the housing market and denying people the right to build on their land has had the intended impact https://pubs.aeaweb.org/doi/pdfplus/10.1257/mac.20170388

The outcome is sad but also consistent with limiting the supply of any good or service.

https://www.slowboring.com/p/homeowner-nimby

Most Americans (67% of adults) are already homeowners.

https://policyadvice.net/insurance/insights/home-ownership-s...

The title would be more accurate as “For most Americans who don’t yet own, owning a home is a distant dream”.

in other words, the next generation is totally screwed.

American are aging. When the boomers start dying, many of the younger generations will start inheriting houses

Not with reverse mortgages. Many of the baby boomers I know are looking to spend as much money as they can while they’re alive.

Reverse mortgages don't prevent death. In my market, we have a lot of people of advanced age, and when they are gone entire neighborhoods will suddenly be available. From what I can tell, this is true in a surprising number of areas around the country.

They don't prevent death, they sell your house bit by bit back to the bank, until there is nothing left to inherit. And the trend these days is for financial institutions to hold housing stock as rental properties, not to put it on the market.

> Reverse mortgages don't prevent death

Except in this case: https://www.chicagotribune.com/news/ct-xpm-1995-12-27-951228...

A reverse or lifetime mortgage means there's a reduced inheritance for the next generation. It's also a steady process meaning there's no sudden surge in supply.

"Equity release" here in the UK is how many people in my parents generation are funding their retirements.

While true, there are far more young people than old people dying at least in the US: https://www.census.gov/newsroom/blogs/random-samplings/2016/...), and in general there have never before been as many humans on earth.

US homeownership rates from 1965-2021:

https://fred.stlouisfed.org/series/RHORUSQ156N

Wish I could gift you an award. This should be the top comment. Start with this chart, then make your comment.

No worries, it's what Klaus Schwab wants; by 2030 you will own nothing and be happy

In major cities.

So, live outside the city. Or in a smaller city.

No, it's affecting smaller cities too, as the article explicitly addresses.

Yes so live outside a smaller city

Housing prices are up in counties in West Virginia where the population is down since the pandemic and still continuing down.

Land prices are up in the absolute middle of nowhere Ocotillo Wells desert where it's unimaginably hot much of the year and the only reason anyone has heard of it is dirtbiking.

In short, it's up everywhere. Some places more extreme (Phoenix, Boise, Nashville, Austin) than other places.

Interesting. What would cause demand to increase literally everywhere?

Btw, respect to your username.

Prices are set by the relatively small number of houses that are traded at any one time. This can be either demand or supply driven.

Realistically, what’s causing this increase is the large amount of cheap money floating around in the economy at the moment. Something that should change in the near further assuming the Fed stays it’s course in tightening the money supply this year.

The other factor at play that should be noted is the shift to WFH, the vast majority of the US population lives within major metro areas, even a small shift to rural areas creates huge spikes in demand. Housing isn’t something that can be scaled up in a small town quickly.

Population growth, nimbys everywhere.

Ocotillo Wells may be a bad example, because it is adjacent to the Salton Sea. There is an ongoing conversation about building the world's largest lithium extraction plant at the Salton Sea, which would massively increase development in tbe surrounding area, and permanently raise land values in Ocotillo Wells (among other towns).

I'm not saying you're wrong, just that OW may be a bad example because there is a separate local phenomenon going on.

yes everyone needs a 1.25 hour commute to work

That's a myth. Mine is 15 minutes. All cities are not New York or LA

You have to realize that most people's commutes are 30+ mins though, right?

> most peoples commutes are 30+ mins

Average commute time is 28 minutes [1] and if I didn't just mess it up from the raw data [2] the median is about 24.5 mins.

EDIT: median of the state level means. So it's still possible that "most" people are above these numbers, although it seems unlikely given the outlier bias can be stronger in the high direction.

[1] https://getjerry.com/newsroom/how-american-commute-has-chang...

[2] https://www.indexmundi.com/facts/united-states/quick-facts/a...

If your idea of 'major cities' is the top 500 cities in the country, I think we need a redefinition to just 'cities'.

I’m in what most on HN would consider to be a very rural area, with the closest town having a population of 1,000 and a bigger town of 20,000 30 minutes away.

Home prices are completely out of whack here too - I would guess they’ve gone up 50% in the past few years. Good luck getting anything like what you want either. I bought my home back in 2011 and my one big thing was that I wanted at least 5 acres, but preferably more. I ended up getting a home in desperate need of updates on 15 acres for 180,000. At the time places fitting that criteria in my budget popped up pretty often.

I just did a search in Zillow for anything with more than 5 acres, and all I could find is some farmland, a 40 acre lot that’s mostly swamp for 800,000, and a 12 acre lot that’s somehow split in to 3 pieces for 140,000.

Relatively crappy homes in town that were 100k back when I was looking are now north of 250k.

Just to compare, my parents bought an amazingly beautiful 60 acre lot back in the late 80s on a truck driver and school bus driver’s salary. They then built a huge brick house on it, though to be fair my dad did a lot of the work himself.

My wife and I both have degrees with good paying jobs and there’s no way we’d ever be able to afford anything approaching what they have.

It sounds like you're not really buying a house, but you're buying space. Acreage is expensive and it will only get more so because it's literally impossible to create more of it. You can build housing vertically and put them as close together as possible. You can't magically make more land.

The vast majority of people won't be buying acres of land. Nor should they, it's not sustainable.

Sure, but there's still plenty of space in the area. We're nowhere close to building vertically.

The homes without acreage have all gotten significantly more expensive too. I just looked at a random house in town with a normal sized lot for the area. It's selling for 250k, was last sold in 2020 for 212k, and was sold before that in 2016 for 163k. The listing says it's back on the market with "new kitchen hardware and fresh paint on walls and trim," so no significant updates.

A nicer home on the most desired lake in the area - 1.3 million. It last sold in 2007 for 410k. A less nice home on the same lake sold for 730k. In 2011 it sold for 335k.

I know all those prices (save the million dollar home) are definitely cheap compared to cities, but the point was that the price increase has been stupid everywhere. There are so few homes on the market in the area it's ridiculous - they're gone instantly.

>Relatively crappy homes in town that were 100k back when I was looking are now north of 250k.

We'd need to know more about your area to really assess this... $250K really isn't very much money. In my area, you could afford that house on our minimum wage, even as just a single-income household. In fact, the mortgage on it would be less than our typical area rent.

I hear a lot of stories like what you are sharing about the beautiful 60 acres back in the 80s... let's just say that baby boomers for all their complaining about 18% interest rates actually had a whole lot of things working for them that we don't today. Competition is different because capital moves around the world easily.

It's a town of 1,000 where everyone with money lives out of town either on a lake or on a piece of land. Kids that lived in town were looked down upon a bit in school because it usually meant they were poor.

That's somewhat changed as that town has had a bit of a resurgence with touristy shops. The biggest lake in the area is a popular tourist destination, and plenty of rich people own "cabins" on other lakes as well.

The point was the homes were dirty cheap, and now they're significantly more than what I paid for a much nicer house on what most would consider a ton of land.

Why do you want 5 acres? What are you doing with it?

I grew up on 60 acres. My best memories from my childhood are of me exploring our woods with our dogs and I wanted the same for my children.

The privacy is nice, too. My wife and I regularly go in our hot tub naked and have only been surprised by a hunter tracking a deer once ;)

More accurately, houses are expensive in places where many people want to live. The recommendation would be to buy a house where people dont want to live, which is kinda lame.

It is lame at first. But then eventually people in a similar situations move in, and you are surrounded by people who wanted to live in major league city, but settled for a minor league city. Then you make friends and your situation is not so bad.

Thank you, the suggestions of "Just move" are wild to me. People create a whole life with friends, kids, family in a location and saying "Just move" to afford a house is ridiculous.

"Just move" is what humans have done since time immemorial. There are folks who complain and those who act.

"Reduce your quality of life and distance yourself from your friends and family, it's cheaper."

You can thank all the billionaires that's sucked up all the wealth for this. Nice going, Bezos, Gates, Musk and all the rest of them. The trickle down economy is a myth.

Will the fed raising interest rates fix it?

Yes generally an increase in interest rates results in a decline of RE prices.

Moving up 1mil and going down 100k doesn't count.

I would imagine it ends up with a similar monthly payment overall though. If I'm home buying and not paying cash (Almost everyone), then I'm looking at the monthly payment at X%. So if mortgage rates go 3% -> 5% I would guess that what people are willing to pay drops a bit as well. BUT I'm not sure that has happened in practice yet.

Do people actually want to maintain a home or is it an idealism of financial security. Homes and handy work are getting very expensive. Are there unfair externalities for people to try and maintain homes far from cities? Especially the ones that sit unused most of the year.

So blaming boomers is partly a lie from this generation.

Yes, there are corporations buying houses en masse, but the video mentions how millennials and gen Z are owning homes short term and treating them as investment products (quick money), a behavior which concords with current trends: meme stocks, crypto, FIRE, influencers, etc.

Don't just downvote for presenting contradictory evidence to the general sentiment.

Please provide proof to refute the argument and create constructive discourse & criticism to discover the truth.

We can blame boomers for owning 2+ properties and their NIMBYism

Which Gen Z people are doing this? The oldest of them are 26 and don’t exactly have a lot of capital to spend on houses.

Your explanation for why millennials can’t afford homes is that… other millennials are buying all of them up?

Gen Z, not sure...maybe crypto.

Millennials partly yes, especially the high earners who can afford it and therefore treat them as investments instead of homes, not for living, but for profit (flipping, renting, etc.).

And coincidentally, this demographic shapes the narrative, employed by big tech's ad industry...

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