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Comment by tricksforfree | Hacker News Reader

Lower home price means 20% down is feasible.

You're still competing against the other people who are in your similar economic circumstances. The reasons that you got outbid today aren't going to get dramatically better when you and millions of other people now have a 20% downpayment instead of a 16% downpayment.

(This is the general you, not the specific you, of course.)

Higher interest rates will discourage the investor class from snatching up homes they don't intend to live in though. Not all of them of course, but the demand for living in homes is far less elastic than that of those using them to make money

Agreed; that's got about epsilon-squared to do with achieving the 20% down payment threshold, though.

Only if you kept the down payment in cash. All other asset prices are crashing as well, so if your savings are in stocks, bonds, crypto, etc your down payment has probably shrunk by more than home prices.

The general advice is that if you're actively shopping for a home most or all of your down payment should be in cash or very low-risk securities.

and we'd likely have a healthy housing market if more people were rational like this.

But no, let's take a loan out against our RSU's so we can get a $1M bi-level because the schools in this district are amazing /s. Now a house in North Carolina is worth as much as one in New Jersey.

Given the choice, I would much rather live in North Carolina than New Jersey so that makes sense. Everyone I know who lived in Jersey at any point lived there because they had to, or because they were already established. Not because all things being equal they would choose to be there.

Sure, but "actively shopping for a home" is different from "waiting for prices to fall so you can afford one". If you'd kept your down payment in cash since the last housing bottom a decade ago, you'd have missed out on ~3x appreciation vs. putting it in an index fund.

From another comment:

> $1M home at 3% interest(30year) = ~$4200 monthly payment. $800k home at 6% interest = $4800 monthly payment.

Over a 30 year term, your interest rate has much more impact on affordability than the purchase price does. 20% down is a drop in the bucket when your rate necessitates paying 1.5-2x the purchase price in interest because it's spread out over 30 years, especially at higher price points and at the edges of people's budgets.

You can refinance in a few years, however you cannot change what the house price was when purchased.

If the house prices is lower, every extra payment to the principal will drastically decrease the interest over the entire term, much more-so than the initial larger loan/principal.

if you have 20% now, you had 16% before and 3% mortgage rates. Now you have 20% and 5% mortgage rates or an ARM. ARM might work to lower monthly if you think Fed will chicken out and you are happy to pay refi cost.

Higher rates mean that the interest on that 20% cash that you would to give up is higher, so you are giving up the opportunity cost of having a a cash flow.

People need to live somewhere, you’re applying an efficient financial model mindset to someone who needs a roof and four walls. First time and new home buyers don’t care about the spread, they want a home.

Irrelevant. I'm just saying that interest rates determine the cost of borrowing money and the interest you can earn by having money, it does not really matter what you are borrowing money to buy.

Why are we supposed to care about people who actively make irrational decisions?

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