Home Buying Is Becoming ‘Unaffordable for Most Americans’ | Hacker News Reader

Home Buying Is Becoming ‘Unaffordable for Most Americans’

forbes.com

56 pointspaulpauper21 comments

I make an amount of money that I could not have ever imagined making growing up. Multiples of what I thought my best case would be. I save almost every penny of that that doesn't go into housing or food. Over 70% marginal savings after tax.

I'm still struggling to find a house in Washington that I like that I can afford. It's fine for me, I'll be able make it work after saving a bit but it definitely made me realize how screwed the average person is. It's an impossible task if you don't already have hundreds of thousands saved and well into a six figure salary.

You've got to realize that the Puget Sound region is an absolute outlier in every way, the perfect storm of restrictive geography with a high concentration of very successful companies. The only options are:

-- Reach a point in your career where you have the money to play the game.

-- Move farther and farther out from Seattle, somehow finding a way to put up with the commute.

-- Go full on remote. There are puddle jumper flights to lots of small towns in eastern Washington. You could buy a place here for half (or less) the cost of Seattle, hop a plane when needed (shorter flight than your Puget Sound commute), and otherwise work remotely. Not an option for everyone, I know, but for some it could be a real win (It worked for me when I decided Seattle was too expensive 12 years ago)

Sort of, but I was living in Asheville NC before this. It was absolutely much less expensive but it was still becoming legitimately expensive. No shortage of 1 and 2 million dollar houses.

And that's Appalachia.

I had looked at a farmhouse for sale. Bought for $250k in 2019. Probably spent $200k on a rehab. Selling for 1.4 million.

So yeah, I do acknowledge that I'm choosing an expensive area but it doesn't feel like that's the core of the issue.

It’s been interesting from a middle-class seller’s side as well. Most people planning to sell in the Puget Sound area can only afford to downsize to a much, much smaller home after paying off their mortgage.

The issue for most younger people is standard of living that they are used to. Their parents bought houses in rural suburbia. Now that area is part of the bigger metropolitan area, and is getting gentrified.

Go on Zillow and look at actual rural America and you will find houses in the 100-130k range.

On the flip side, having a good standard of living != owning a house. I think that most people don't actually understand how the finances work out, and are just hoping that 30 years down the line their house is going to be worth more, without actually realizing the amount of money they "threw away" in interest.

True in so many cities, especially Toronto. So many people grew up in Toronto now upset they can't afford a single family home and are "stuck" with condos. But isn't this how urbanization works? How are detached SFHs sustainable in an urban environment?

> Their parents bought houses in rural suburbia.

I bought a 3,000+ sqft house in a desirable part of my city 5 years ago. My friends spent 10% more money 1 year ago and got a 1,800 sqft house that's newer, recently renovated. It's a few blocks away.

This is not an issue of generational expectations. Prices for the same type of house with the same standard of living have skyrocketed compared to real income.

Has the all in cost actually changed much? If someone bought a house 6 months ago, they could lock in high 2's for 30 years.

Quite right. And also I know multiple people from the (now) older generation who are sitting on large amounts of property and renting it out for correspondingly huge amounts of income. Once into one property .. it was possible for a person to essentially chain from one mortgage to another (using the proceeds from the previous rental as collateral). The person in question now owns 5 houses -all accomplished bootstrapped on a school salary, starting in the early 70's. Utterly impossible now IMO, unless you win at the tech work lottery :) - it is of course impressively entrepreneurial, but also she wonders why her daughter has not settled down and purchased a house ..

I think that's probably a big part of it.

There's also that growing up I was taught anybody who didn't own a house was a failure. And a condo wasn't yours.

I can't be the only one.

As an adult, I think it's a strange way of looking at it.

Yes, it only feels like life sucks, but if you just change the way you look at it, it’s actually quite good. For example you don’t need to own a house. Or if you do, what’s wrong with Flint, MI? You can drink bottled Fiji water.

My personal opinion is that renting vs. buying is a lifestyle choice with financial implications. Owning and renting each have risks and rewards. When I was younger and wanted to live in a city and have that lifestyle, renting was the only way that was possible. I enjoyed that life, but also made sure to save for retirement. Now that I'm older and want massive TVs and audio systems w/out annoying neighbors, a house in a suburb allows that.

A big problem, though, is that for many people, appreciation of their home was the primary means to build a nest egg for retirement. Sell the expensive home, buy a cheaper home somewhere warm, and let the different fund your retirement along with your pension and social security.

My big worry for people who are getting priced out of markets, is that rents are also increasing dramatically, and that people are going to be left without home appreciation AND without savings.

Is not a choice anymore. In my place it takes 27years to save just for a deposit, assuming no price change…

I felt that it was a lifestyle choice too until I saw some of my co-workers who make 120k/yr salary realizing 400k/yr in home appreciation between 2010 and 2020.

Mortgages just provide an astounding amount of leverage and tax advantage compared to renting and investing in stocks.

You get to invest 5X the purchasing power

You don't have to pay capital gains when you sell

You can realize your gains at any time and reinvest again with a new 5X leverage

All the while, you are getting an income TAX deduction

Ownership related costs are significant as well. 1% of the price annually for maintenance is what I've seen as a guideline and that's a lot of money for young people in particular.

Personally I never got the appeal of home ownership (context maybe that here in Germany rent protection is strong and HO rate is low in general), you can build wealth by putting the equivalent of money in index funds, never pay attention to it, can move easily, have no debt, high fixed costs, or significant risk of losing your home like people did in 08-09, and so on.

As a counterpoint there also used to be jobs and careers in other places that have largely been centralized into bigger metropolitan areas I do agree somewhat though.

Be interesting to see how remote work shakes out in the long run. I think people are hesitant to buy and be stuck somewhere with no jobs.

Even in rural areas you can no longer get the same house that your parents had for the equivalent money.

My parents have an extremely nice house on a beautiful 60 acre piece of land. My dad did water & sewer work and my mom worked part time when we were young and later worked as a postmaster.

My wife and I both have degrees and jobs that pay way better after accounting for inflation, and our house is absolute shit by comparison. My parent’s house and land is worth millions. My wife’s parents did what is pretty standard around here and built on a lake, also with low paying jobs. Their home is probably worth close to a million or so as well.

Exactly. There's so many stories from earlier generations about working their way through college and a family home. My partner and I make three what my parents did, and while we're comfortable, we're nowhere near what my parents were at 20-30 years ago because of inflation.

There's no chance I'm able to buy a home within an hour of the Metro I'm living in within Texas. I'm really hoping working from home sticks around as most major cities are quickly becoming so costly to live in.

It's so bad I've been talking to some family about going in together on some rural land to split and create a family commune type thing to share infrastructure while living rural. A number of us can work fully remote as long as we have solid online connectivity.

You have to live somewhere. The model I used for homeownership is you are paying to play: you lock up some capital for your down, and you are able to save the difference in principal from your mortgage. If things go well, you are leveraging your down and principal.

Oh also, you get to write off your mortgage interest via taxes which is a nice tax fence if you're in a techbro tax bracket. Welfare for middle classesque people.

There are tons of small benefits that come with home owning that are often ignored: rent never goes up if you didn't get an ARM, and you never have to leave because a landlord says so. Also you don't have to go to war with a landlord every year while they decide your fate (raise the rent? sell the place? change policy?). Don't like a wall? Blow it up. Want a pet? Go for it. Get five dogs whatever.

Not moving every year to surf rental costs is pretty good. Appliance quality on a non-flipped property is WAY better than any rental.

Negatives include: everything is now your fault/problem, and you have to be willing to sit still for a few years. Property tax sucks, but if you think you're not paying the property tax on a rental you may be bad at math. No landlord is renting AT A LOSS.

All of this is of course, assuming you can afford the down in the first place and that you're not buying something that is a jumbo mortgage.

NYC, SF, sorry dudes. Those places are not meant to be owned in imo. Everyone I know that lived in those places has a timer on their head, and they eventually bail to somewhere else.

My track record is bought with a partner, broke up, sold, did well, rented for 2y, bought again.

Your mileage may vary of course, there are no universals etc.

You know, it's kind of amusing to see people shout inflation inflation but really, the only things that are consistently getting more expensive are monopolies or pseudo monopolies (tuition, healthcare). Instead of everything falling apart, I my opinion we are very close, so incredibly close to getting everything right and everything working out in the end.

Imagine if housing wasn't such a drag. Would there be so much to complain about?

Healthcare? It's a nonissue in Germany. People get a perfectly reasonable amount of healthcare. Americans might insist that doctors shouldn't be overbooked or something but arguing how the boomers had better healthcare is ridiculous.

Tuition? It's only a problem if you want it to be. If the degree gets you a job it's worth it, if not then seek a cheaper college.

Yeah that's the thing. So America, for various reasons, hates giving out handouts. They have the money for the most part, and there is the need, and taxes are low when they could be high...but they just can't. The national DNA is allergic to it. So if you're smart and can work the system you know the actual handouts are say federal students loans, like the terms are so so favorable and despite my objections mine will probably be forgiven. In general that's how the system works, public services and public assistance are tied to education. Especially college. While this is highly beneficial for me in particular, star student, merit scholarship to Caltech, later free ride in Stanford...you know it's unfair. But it makes sense for society, good investment.

There's also Social Security and WIC, and welfare for mothers. I think welfare for men is designed to be more expensive than what you can get from it, salty peanuts basically. That's the vibe I got when it was recommended I apply, no interest in attempting to get it. Same is basically true of the food thing...the...the food thing. So in fact California's app for what the fuck is the food thing called? the food thing, is great, they really made a great app. But the problems are the latency is way too high, it's $150 per person if you have no income but $15 if you get something, per month...so just a fucking waste of time. And people cheat them, too. Like they hinted I was supposed to lie and pretend I had no job. So the real help is in...well it's huge, Medical, best insurance available in California, OK that's a huge thing. Goes completely against my argument but I will undermine my argument anyway, it's that good, and I won't deny it recognition. This is not an exception that proves the rule. It is simply an exception.

Continuing.

There is one other way: homeownership. So this is how welfare is distributed in US: you pay less taxes because mortgage interest is tax-deductible (restrictions apply). California: Prop 13, if you stay put your taxes become negligible due to inflation. Then, it's a financial instrument to borrow against that has much better terms than commercially available (second mortgage or HELOC). Also, college financial aid offices leave that asset alone. Plus, it's savings from the Home-ec point of view, generally houses are larger than rentals so more space for stuff that's needed less frequently, like tools and documents (especially receipts for mortgage payments, check the footnote) and you can invest in white goods longer term, benefit from repairs for longer periods of time, no landlord trying to read you like a poker player to see how much to raise your rent[1]. No landlord trying sneaky shit that the Tenant Manual of San Francisco talks about, like saying his mother is moving in so the tenant has to leave (but not then restricting the rental sale terms), or removing the door[2], or having a cozy relationship with police (landlords generally have no other job so they have all the time in the world for distorting the market, this is one way) so that police doesn't recognize citizen's arrests against them (the measure of last resort the Tenant's Manual talks about, because from what I gather police will frequently say "eh...fuck the law" when a tenant calls them on their landlord). And landlords behaving like terrorists (though not always) promotes homeownership! The government loves it when people say "I'll do anything to stop dealing with these landlords, I hate them so much, so I'll buy a home." So maybe they get a bit of a...pass! Yeah, hey thanks for getting people to buy a house! Thinking back landlords have been much better than the incentives lead to...well I can't say that universally, it's been a mix of a lot of good and a lot of bad. And some of the bad landlords were subletting, and said worse than what I've said about their landlords. Much worse than anything here.

Well to sum it up, for this handout there needs to be appreciation, meaning houses have to get less affordable. That's what home appreciation means. Less affordable. Synonyms. Shitty handout if you ask me, but there has to be a handout, and this is the worst one, very little goes to the middle-class homeowner in fact. Oh well sometimes a system is much better than what can reasonably be expected (Medical) and sometimes way worse than you thought possible (home appreciation as a form of government handouts).

[1] there is the bank, you don't interact with them as much unless they're foreclosing, and many try sneaky little things to fuck the debtor spesh at the beginning spesh when the contracts are getting signed. Have them over a barrel, say the "interest came back at just 1% more than we were expecting" which means comish [EDIT: comish is commission]. One house I lived in, the bank wanted to pretend several months of mortgage payments didn't take place, so then the debtors had to show their receipts and the bank cut the shit...should have gotten punished instead, forfeit the debt, should have had to pay for that gamble instead of getting a mulligan...Chilean bank, what do you expect.

[2] In my book if he removes the door he demolished the rental, making the tenant a squatter out of the landlord's own volition, which means there's no fifteen-year delay before it becomes the squatter's property (for that delay it needs to be against the owner's wishes), so now the tenant is the owner, and can place a new door on his property and if the landlord comes back it's breaking and entering. The former tenant, now landlord, can treat this former landlord, now trespasser, like any other burglar. Although usually the virtual landlord will time things with eg the tenant getting fired to keep him from getting to the courtroom before getting victimized by a long string of victimizers. Several landlords talked to my employers a lot. So for that reason, the law ought to recognize it very rapidly, like there has to be a number you call. That's what evicteds (what you might call homeless, they had a home just got kicked out) I talk to tell me. I actually talked to them, go figure! After being extorted with the threat of instant eviction continually for years I actually talked to a few of them, just to know what was up with eviction straight from the horse's mouth. No 501.3c intermediating, no priest translating, no social worker softening the narrative, screw that, Jonathan Rámoz spoke Spanish and so did I, I just talked to him.

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