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Comment by jandrese | Hacker News Reader

If you are a homeowner it is almost insane to move. Most people I know could not afford their house if they were buying it today. Often by a huge margin. Moving would mean becoming a renter again and losing a much larger chunk of their paycheck every month to housing. It’s too late to start a whole new 30 year mortgage, even when you account for the proceeds from selling their existing house. Prices are insane. This is a natural consequence of home prices doubling or tripling over the past 10 years.

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If this is a homeowners perspective, imagine how the current renting class feels. Something will boil over eventually.

People can't afford to move because higher interest rates decreased the value of their home, so especially if they bought recently, a lot of their down payment is gone.

This is actually advantageous to first-time buyers since higher interest rates (and lower prices) mean their down payments go further.

But that makes the assumption that the higher interest rates aren’t lowering supply by keeping homes off the market. I have a decently sized home (2300 sq ft) but had wanted to move onto something around 3500 sq ft and pay a new mortgage in proportion to the bigger home. Of course the interest rates increase would have been paying like 2.5 times what I’m currently paying so it is a no brained for me to stay put. On the other hand, no one in my neighborhood is moving anymore so nothing is available and prices remain pretty close to their peak. So at least where I am, we now have high purchase prices and even much higher monthly mortgages.

I'm curious as a non-American.

How big is your family? I can't fathom needing a 360 sqm house except if I had 3+ kids.

Also... how do you clean it all? How much is heating, cooling, etc?

Generally, heating and cooling are a lot cheaper in USA (thank you cheap natgas, and solar if you can do it).

Cleaning… a lot of the space goes unused or just stores stuff so it doesn’t get too dirty or people don’t care as much outside core areas. Central HVAC helps keep the dust down a bit vs. dead air and radiators.

Speaking for myself, the primary draw of larger houses are more spaces dedicated to particular tasks/hobbies/etc. So it might not be square footage that's the goal but the higher number of rooms that usually comes with that.

For example my house is ~1800sqft which is very comfortable and a massive upgrade over the apartments I used to live in that were half as large, but as someone who works from home it'd be nice to have one more room than my house has to use exclusively as an office to maintain mental partitioning between work and downtime. Similarly it might be nice for my garage to be a bit bigger so I could better fit in a "workshop corner".

Is that sort of thing needed? Absolutely not and many get along just fine with far less, but it'd still be a welcome quality of life upgrade.

The average size of a new build in the US is almost 2600 square feet.

https://www.nahb.org/blog/2022/03/new-single-family-home-siz...

The smallest home my builder was building when we were looking was 3100 square feet. It was $335K in 2016.

As far as what a family did with a 5 bedroom 3.5 bath house. Bedroom for me and my wife, bedroom for my son, guest bedroom with a bath, office, and gym. There was another room that was converted to a dance studio for my wife.

We did downsize late last year and now we stay in a 1300 square foot condo.

I don’t understand why anyone needs 3000sf unless they have 3+ kids. That’s a lot of maintenance on space you don’t use

What “maintenance” do you think is more for a 3000 square foot house than a 1500 square foot house?

I just mentioned it.

1. Master bedroom

2. Son’s bedroom

3. Gym with three pieces of cardio equipment and weights

4. Office

5. Guest bedroom

The 6th room was a dance studio for my wife. She taught online fitness classes during Covid.

It’s not like we paid millions of dollars. I qualified for it when I was only making $115K and put 3.5% down - less than $12K. In 2016.

It’s now worth twice that (we rent it out to our son and two of his friends at a discount).

My wife and I have since moved to a condo in a resort area where one fee ($650) pays all utilities, access to a decent gym, 3 pools, a running trail, three restaurants on site and a lake. It’s the same price that our house was in 2016.

Do you pay someone from cleaning or do you clean it yourself?

That looks like a lot of work, probably 1 full day per week (probably more) to:

- vacuum everything (including the skirting boards)

- mop the floors

- dust everything else

- clean all the windows

- change/wash/dry the linens/towels

- clean the kitchen

- clean the toilets

- most of the carpet is covered by “stuff” and doesn’t get vacuumed,

- it took maybe an hour to take care of the hardwood.

- having a larger house doesn’t mean you have more to wash. How much you have to wash is a function of how many people live there.

- you would have a kitchen either way

- one bathroom only got used when guests come, one was our sons (and his responsibility). That left only two - the one in attached to our room and the half bath.

The gym got sanitized with everything being wiped down and air freshener after every use.

> - you would have a kitchen either way

I'm fairly sure your kitchen in the 360sqm house is bigger than my kitchen in the 90 sqm apartment :-)

It’s a kitchen with a stove, a sink, a microwave and a dishwasher. What does the size of the kitchen have to do with how hard is to clean? That’s a function of how much you cook and what you use to cook.

> vacuum everything (including the skirting boards)

My house is mostly wood floors but I maybe Swiffer and vacuum once a week (probably a lot less) for about 15-20 minutes. I run Roomba once or twice a week to take care of the rest.

> mop the floors

I can count on one hand how many times I mop floors per year in any size house.

> dust everything else

I definitely don't do the blinds/baseboards/etc enough. Wife usually does the furniture once a week and the rest is on demand.

> clean all the windows

Only when I get a wild hair.

> change/wash/dry the linens/towels

Size of house doesn't change this. See above.

> clean the kitchen

Still only one kitchen.

> clean the toilets

Same number of people

My home is 3300 sq ft/306 sqm on 2.5 acres or 10,000 sqm.

My kids each have their own space. My wife has her own space. I have an office/space for myself. We have a guest bedroom (well 2, if we pick up the playroom).

It keeps the kids clutter out of the common areas. Gives us each a place to escape to.

For example I play music a lot. That would be obnoxious in the living room all the time. Though I do play in common areas here and there.

Utilities cost about 200-300 USD month. Repairs we keep stashed away as they can cost more. For example our well pump died and it was 3k. Our ac died before that and it was 8k to replace. We live well below our means though and pay cash for stuff like that.

Except that there are far fewer houses to buy because nobody who already has one is willing to sell it for such a loss.

And the problem for that is most people can only have "wealth" if they have a home. Because the salaries have been stagnant since the 70s and the cost of living/existing has sky rocketed. So for most people they only way/dream they have to at least maintain the standard of living is to either inherit their parents home or sell it.

And all this is sponsored by the banks and governments because of interest payments and money from taxes.

It's absolutely ridiculous some 80yo shack costs half a million dollars/pounds/euros. There is no justification for it from a technical perspective.

A lot of the value is tied up in the land, because they aren’t really making any more of it, and location is everything. You could maybe move out to the middle of the desert surrounded by miles of nothing and get cheaper property, but then you have to figure out where you get the basics of life, like food, water, electric.

Remote work has disrupted countryside housing markets too, since workers moving in make much higher salaries than locals, who often lack the skills for picking up those jobs. A trickle out of metro areas in the millions is a tsunami for towns with population in the thousands.

> Because the salaries have been stagnant since the 70s and the cost of living/existing has sky rocketed.

I couldn't find info about salaries per se, but average hourly wage in the US increased by around 800% since 1970.

and the median nominal US home value is up 1728% since 1970[1].

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

does that count for inflation?

according to below, its gone up by 2 inflation adjusted dollars compared to 1979...

https://www.statista.com/statistics/185369/median-hourly-ear...

With how easy investing in index funds is these days, that's no longer true.

You can build wealth more reliably and cheaply with automatic transfers to a target date fund than hoping any given real estate market takes off.

Automatic transfers of what?

I think you misunderstood my point, I was talking about most people barely keeping it together most months and not having income to ever afford buying a home and have a “comfortable” life. It’s not about investing in real estate but inheritance of a house when their parents die.

A percentage of every pay check.

Investing into index funds regularly is pretty much always gonna be a better investment strategy with higher returns and lower risk than hoping for an inheritance.

Also, local zoning and permitting in most big cities in the US keeps the supply of new homes at a tiny trickle, so there's no chance for prices to go down from increased supply.

Except the prices haven't actually lowered meaningfully. They're sitting at March 2022 levels, which is still way, way up from Jan 2020.

Homeowners significantly outnumber renters among regular voters. Until and unless that changes policy is going to be by and for incumbent homeowners.

One solution to this that’s being explored in several states is to move that policy to the state level, where the effect is less pronounced. (Participation rates are higher the higher-level an election is.)

Hat tip to this post. Google tells me from searching "us percentage of home ownership":

    In 2022, the proportion of households which are occupied by owners stood at 65.9 percent.

Source: https://www.statista.com/statistics/184902/homeownership-rat...

Renters are politically invisible in the United States due to the economic situation. Rent will continue to rise to unsustainable levels and nothing will done. As Charlie Munger (Berkshire Hathaway #2) says: "Show me the incentive and I'll show you the outcome."

> Renters are politically invisible in the United States due to the economic situation.

Given how razor thin election margins are, ~33% of the population is far from a invisible class.

> ~33% of the population is far from a invisible class

For a variety of reasons, "buying a home leads individuals to participate substantially more in local elections, on average" [1]. Outside New York City, which unsurprisingly has solid tenant protections, American renters do not vote as frequently.

[1] https://andrewbenjaminhall.com/homeowner.pdf

However, they are a class that is relatively easy to disenfranchise. In fact many already are since minorities who live in cities are far more likely to rent than the average suburban or rural voter and we already have plenty of systems in place to disenfranchise them.

> they are a class that is relatively easy to disenfranchise

Correct. Dated, but related and a classic: "We find that neither demographic nor attitudinal attributes explain [people who have recently moved's] lower turnout. Instead, the requirement that citizens must register anew after each change in residence constitutes the key stumbling block in the trip to the polls. Since nearly one-third of the nation moves every two years, moving has a large impact on national turnout rates."

The authors suggested "linking the maintenance of registration to an action that is usually an intrinsic part of moving" such as the "change-of-address notice at a local post office." Interestingly, "holding elections on Sunday, making election day a holiday, or extending the hours that the polls are open...are designed to facilitate people who are registered" and would thus "do little to improve turnout."

https://www.cambridge.org/core/journals/american-political-s...

> In 2022, the proportion of households which are occupied by owners stood at 65.9 percent.

This is different from the proportion of adults in the US that own a home. Many non-homeowners live in an owner occupied residence.

It is boiling over already in the form of newly emergent populism. Easy to ignore if you don't personally feel the pain, but many out there are very angry with the system.

We are in that boat now, Wife has an offer to move to San Diego area. We are homeowners in a 30 year fixed at 3.75% and moving back there is almost impossible due to rates being at > 6% and barely any houses on the market and prices which are close to what they were in 2022(we moved from that area in 2022). We are very close to saying F - it with her rescinding her offer, this economy and housing market is beyond bad.

Counter offer. Ask for a sufficiently large consternation and a 2 year severance should it not work out. Just like executives. They get a lot more.

What is "a consternation"? I've never heard this term and can't find it referenced anywhere.

I think it's autocorrect for compensation.

I'm ready for some FAANG total consternation.

Thank you! Yes, I meant compensation :).

Sorry about that. Typo. I meant, "compensation".

If their 3.75% mortgage was originally for $1M and has 25 years left, just the cost of giving that up is about $250k. I don't think anyone's giving out a $250k sign-on bonus for a non-executive.

As the great one said, "You miss 100% of the shots you don't take".

considered renting down there and renting out your owned home?

Signing a lease is a new, expensive obligation, and being a landlord is a second job. That approach might be right for some people, but it's definitely not the same as just selling your old house and buying a new one somewhere else.

Letting a property management company take care of things mitigates a lot (but not all) of that. They'll take a huge cut of the income, of course.

Obviously this depends on the location and the management company. Mine takes 50% of the first month's rent for finding & qualifying a new tenant, then 8% of the following rent payments. So far they have done a decent enough job - I just have to prod them on repairs to not use the absolute cheapest approach (my theory is a nicer house can justify a higher rent, vs. all the ones in the market that are run by corporate landlords and look like it)

> to not use the absolute cheapest approach

Can I just say -- you rock. I've been a renter my whole life (I prefer it that way), and I appreciate when the property owner steps in to keep property management companies from being total cheapskates with repairs. It makes sense -- it's the owner's investment, after all, and I don't mind paying a bit of a premium for a place that is well maintained.

It's common for property management companies to arrange for kickbacks with certain repair contractors. I'm not claiming that any particular management company is corrupt but I know of cases where this has happened and it's tough for absentee landlords to detect.

And that still doesn’t take care of vacancies and long eviction processes.

"being a landlord is a second job" is something I hear a lot from renters, I've never heard this from an actual small time landlord who has two or less rental properties. And yeah, if you have 30%+ equity in your house you can generally have a property management company handle everything for perpetual 10% of the rent + first month's rent and come out even, in most competitive markets. Being a landlord in a low cost of living area, more than an hour from a major city is probably a losing proposition for most people under 50.

My parents, others in my family, and a couple former co-workers have had a rental unit or two at one time or another. Exactly one of those didn't strongly advise against it, and that one said his situation was good only because he'd been careful to buy units where they were almost certainly going to go to nursing school students, who are likely to be relatively-stable, stick around for at least a couple years, leave before long if they can't pay anymore for some reason, and extremely unlikely to trash the place or try to run a meth lab out of it or anything like that. In all other cases the complaints are similar: the return on time and money invested is just way, way too low to be worth the risk & frustration.

But, none of those engaged a property management company. Maybe that makes the difference.

I had two properties. It was a second job.

I did exactly this. After a period of initial search I got some good tenants, and my only interaction with them is calling the plumber or something on their behalf every other month.

My parents were landlords for almost 20 years. They owned a six family that we also lived in most of the time. It was a ton of work and they didn't make hardly anything after expenses. We had several cleanups that could be on the Hoarders TV show.

My grandparents were landlords for like 50 years. They said they wouldn't be worth it if their children weren't doing all the work for free.

The reason I don’t have rental property as investment is from seeing how much work it was for my parents to rent out half a duplex and, later, a 3 BR SFR. Both places were completely trashed at least once by tenants and even the “good” tenants were frequently late with the rent or had other drama for them to deal with.

The idea that a typical small landlord sits on their ass and cashes fat checks is not matched by what I’ve seen not anything I’ve heard from friends who wouldn’t take my advice to stay away.

This is the real-economy, human tragedy routinely overlooked within the Fed's policy mistake of unsustainably forcing down long interest rates.

https://fred.stlouisfed.org/graph/?g=14ImM

Holders of big mortgages taken out at low rates are trapped in them, so they will continue to suffer in quality of life, and the economy will continue to suffer sub-optimal output as they try to adapt to work in captivity.

this is (no joke) why The Fed wants to engineer a recession

job losses will trigger home sales by necessity, and the great mass of people with 3% mortgages will be unwedged by force

same thing happened after 2008...the recession pushed people out of the best mortgages they ever had

> this is (no joke) why The Fed wants to engineer a recession

No it doesn’t. The Fed wants home values to go down. That can occur without job losses. (Which even now, largely aren’t occurring outside tech.)

connect the dots...and the people holding up the jobs numbers (Target, Costco, Chiptole) don't own homes, even in Kentucky

While I’m sure it’s less than ideal, I would not describe the temporary inability to swap out a valuable asset for an equivalently valued asset as a tragedy.

I bought a home specifically so I don't have to deal with landlords and their own level of bullshit.

Rental prices in San Diego are almost as high as Fremont/San Jose (5th most expensive rental city in CA). Also, considering it has one of the highest electricity rates in the country, it makes renting even more expensive than just the monthly rate.

How much electricity does one need in San Diego?

Temperature highs are 19-25C year round and winter lows are around 10C.

Barely need heating or cooling, just need to bump up the indoor average by a few degrees and that seems to be it.

Other big loads would be a fridge and hot water, but those are getting pretty efficient.

I would rather have an anal probe with a cactus than ever be a landlord again. Vacancy, slow payers, maintenance, evictions that take forever, etc.

Being a distant landlord is even worse. Yes you can get a property manager. But, then you have to pay them.

If your home you bought 10 years ago doubled or tripped, why can't you move? You pocket the difference, put that down on the next over priced house, bringing your mortgage principal back down to the small mortgage you were paying 10 years ago on a cheap house. Ya, the rate is higher... But if you just made $600k on your $300k house, that you've paid down to $200k hopefully atleast... And you move and buy a house for the same $900k you just sold yours for, you only have a mortgage on $200k. Yes at a higher rate. And yes with higher property taxes. But hey, that's life. Don't move if it's not worth it. But it's not as impossible as you make it seem.

[removed by commenter due to incorrect information]

apologies, I was misinformed. consider this comment retracted

that's incorrect. Generally speaking you don't pay capital gains on the first $250k ($500k if filing jointly) under IRS rules. You can also adjust the cost basis of your home by adding in any improvements you may have made to the house, so assuming you made any improvements at all, you can potentially make that exemption even higher.

See https://www.irs.gov/taxtopics/tc701.

> Moving would mean becoming a renter again and losing a much larger chunk of their paycheck every month to housing

The problem isn't that you're an existing homeowner. The problem is housing is exorbitant.

Everyone has to pay out of the nose for housing. The only difference is that you have an asset that has appreciated significantly, and in a way you're indirectly receiving dividends from it in the form of affordable mortgage payments.

But if you didn't have that house, you'd be in an even worse spot.

>If you are a homeowner it is almost insane to move.

I own a home and moved. I rent in the new city and let my mother live in the house I own, that way I don't have to sell it. If I ever want to go back I won't have any issues doing so.

Would she pay rent?

Depending how many siblings one has, it may be a matter of pay now or pay later.

Yes, she's paying a small amount of rent every month to cover basics. As much as I'd like to just give her the house and have her live there for free, that's not in the cards right now given the state of Canadian salaries.

She doesn't mind as it's much, much better than the income assistance apartments she lived in before and I'm asking for a lot less than they did, which helps her too.

Ultimately I'd like to buy another house and let her have that one, because she'll never be able to afford a house again on her own, but that's an aspirational goal at the moment.

Yes and that’s very anecdotal. I also moved a rented out my home to my son and two of his friends we trust. If he comes up on hard times for a month or two, I don’t have an emotional issue with covering his rent. If it was a stranger, I would.

If he gets to a point where he couldn’t pay rent because of a systemic problem, I trust him well enough to know that he wouldn’t make me go through a long eviction process. He would have to move. But we would help him find sone place cheaper. No for logistical reasons, he couldn’t stay with us.

But my wife and I said, that once they move, we are selling the house. We do not want to be landlords.

Guess it’s the culture divide, but it stood out to me that your description makes it sound like it’s second nature to charge immediate family rent on a property you own. Quite bizarre.

Why is that “bizarre”? I have a $2600 a month mortgage and another $3K-$4K a year of fixed expenses on it. Am I suppose to let family stay there for free and just spend $40K+ a year on a place where I am not living?

I could sell it now and net $300K.

This is me. House is paid off, and has appreciated, so I can move to...where exactly? The only place with affordable housing is Dystopia US.

You should do a roadtrip! Dystopia US has some nice pockets. Affordable is all relative, of course.

It's pretty much impossible to "win" in housing unless you're investing major sweat equity, or factoring-in intangibles like satisfaction with a like-minded community or peace of mind.

I'm starting to realize housing is unwinnable. I'm lucky to have a house at all, given the US just decided "lets not build" was a good policy apparently. But like a lot of aging people I can't afford to keep it. So yeah a roadtrip is in my future, and maybe a yurt out there somewhere.

There's two sides to the coin of recognizing "un-winnability".

One is frustration, the other is a sense of peace that comes with recognizing that there's no marginal reward to trying so hard. Just avoid the obvious scams, which isn't too hard.

A third option to skirts the coin, is to really embed yourself in a local community, renting in the meanwhile. There actually are "winner" situations and good deals if you go this way, but they generally come on the back of who you know and are friendly with – variously referred to as cronyism and nepotism, but it's how humans work.

This is entirely dependent on which market you are moving from and to. Within the same market it's a wash on average. From a more expensive market to a cheaper market you are coming out ahead. Your conundrum really only applies when going from a cheaper market to a more expensive market.

> Most people I know could not afford their house if they were buying it today

How is that true if you moved to a place with an equivalent cost of living?

I had my house built in the suburbs of Atlanta for $350K in metro Atlanta. It’s now worth $650K. If I wanted to buy another house for $650K, I would sell my house. Get $300K in cash, use it for a down payment, and still have a $350K mortgage.

Of course I’m ignoring selling costs, interest rate differences etc.

I have a friend who located from Seattle to Atlanta. He also had a home in Seattle, he had $600K in equity that he was able to use to get a $900K house in Atlanta and have a $300K mortgage.

I find it hilarious when HN threads go deep, and commenters forget the actual point.

This post and thread are talking about moving due to losing a job. Not about a calculated move done for financial gain.

That’s just it. My friend from Seattle did move for a job.

The other poster said that because of rising home prices, someone who owned a home couldn’t afford an equivalent home. My argument is that their current home probably also went up in value and they could use the equity to pay a large down payment to make a new home affordable.

Alternatively, pocket the equity and rent instead of making a commitment to buy.

That is what is commonly called an anecdote.

Most people who are fired do not end up winning the housing profit lottery.

> becoming a renter again and losing a much larger chunk of their paycheck every month to housing

Except it is now cheaper to rent than to own[1].

If you have to move for a job, you rent for at least a year if not a few years as you get a feeling your job stability. Of course, the main point stands that you can be fired at any time, which is why you never buy a house when affordability is at an all-time low since the crash[2].

[1] https://jbrec.com/insights/demand-shifting-from-owning-to-re...

[2] https://www.atlantafed.org/center-for-housing-and-policy/dat...

> Except it is now cheaper to rent than to own

I've noticed that over the long haul (in my area, anyway), it's neither cheaper nor more expensive to rent vs own. In the short term, one can be more expensive than the other, though.

But the big difference is that you're building equity if you're buying, and you're not if you're renting. So which is better, financially speaking, depends a lot on what you're trying to accomplish.

> But the big difference is that you're building equity if you're buying, and you're not if you're renting.

You build equity when you are renting, just not in the housing market.

>Except it is now cheaper to rent than to own[1].

Real estate is entirely local, such that making broad generalizations like this is detrimental. In some markets it may be better to rent, in others it is better to buy. Regardless of the cost, availability is also a factor - in my market, you might as well buy if you are qualified, as the market for rental properties is even tighter than buying and rents have increased faster than home prices.

You don’t start from scratch. You sell your existing house, which has benefited from inflation, then buy somewhere with the same mortgage payment over the same remaining duration you had if you choose not to trade up.

Yes there are significant transaction costs but it isn’t as though you are starting again with your housing equity.

Interest rates.

Interest rates doubling over the past year change the math on this. For instance, to keep my same mortgage payment, even with significant equity, i could only afford what I paid for the house originally, which would be a significant downgrade in today's market.

> even with significant equity

Yep, and if you fell for one of your lender's incessant pitches on borrowing on your equity or refinancing and taking equity out, you're really locked in to your situation. I'm very convinced that most people doing home equity loans or refis with cash out don't understand how much they are backsliding when they do that.

I think that depends on what they did with the cash. If they invested it in the S&P 500, that was generally a very good trade. If they turned it into new cars and expensive vacations, well, that was hopefully something that they really enjoyed, because those are things that are even more expensive when financed.

agree, what really makes me upset is how housing prices in certain areas has not gone down at all given that rates are double what they were a year or 2 ago. The un-affordability is beyond reason.

It is just supply and demand. Supply is half of what it used to be.

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg...

https://www.calculatedriskblog.com/2023/05/housing-may-15th-...

The supply demand situation is probably even worse in high demand areas.

Prices are sticky and people are way more emotional when it comes pricing their home than other things.

Those who refuse to sell now are just keeping up the price for the ones who do sell. If the price is not sustainable ot will go down.

Lots of people have made that point, but I’ll respond here.

Yes this is true, but only at this point in time when interest rates have shot up from historically low. Most of the time this won’t be the case, and soon this effect could work in the other way in that you could move to a house of similar value for a lower cost if interest rates come down.

And the 30 year fixed rate mortgage is unique to the US. Here in the UK, we only fix for 2-5 years typically.

So easy on the downvotes!

Do people expect interest rates to lower again any time soon? Inflation just recently started trending down.

Right now US supply has shrunk so prices don’t seem to be declining enough to offset the rise in interest rates; the monthly payments for anything in the market are still eye-watering even factoring in price declines.

Well if you expect them to rise or stay the same for a while then now is actually not a bad time to buy.

It is actually pretty much the case for most US homeowners. Everyone I know refinanced their mortgages when interest rates were lower. I got a 2.874% 30 year fixed rate mortgage in 2021 which was a great deal, but now I am essentially stuck here. There's no way I can afford to move. Existing home sales volume is way down.

https://www.wsj.com/articles/low-mortgage-rates-home-sales-l...

https://ycharts.com/indicators/us_existing_home_sales

The situation may be different in other countries.

You wrote:

    There's no way I can afford to move.

You are lucky to win the housing lottery. Congrats! Can you imagine being a young couple (20s 30s) trying to buy your first home the US right now? Hopeless. Wait a few years as an oppressed renter!

Yes, I am lucky in many ways. But the US home ownership rate is 65%, so it's hardly a lottery. Many young couples are buying homes in lower cost states like Utah, Minnesota, and Ohio. HN users focusing on California often have a distorted perspective on the situation out in the real world.

California is home to more people than those three states combined.

I am very symphathetic to this issue for UK borrowers. They face way too much interest rate volatility. There is a gambling effect in the UK about housing.

Are you aware that 30-fixed in the US is essentially gov't backed via three mega pseudo-gov't guaranteed orgs called Fannie, Freddie, Ginnie Mae? It is great for increasing home ownership and utterly oppressive to low income people renting. It is tough.

I cannot believe that more countries do not (politically) prioritise a similar system: Cheap, fixed 30-year'ish home mortgages. To be clear, I'm not saying this is economically ideal, but it is great for your political party!

That assumes you started your mortgage in roughly the last 10-15 years in the US or somewhere else with the same rate history. Average rates before then were consistently higher. https://fred.stlouisfed.org/series/MORTGAGE30US

If you started your mortgage before then its a neutral to positive rate-wise.

Many holders of higher rate mortgages refinanced during the last 10-15 years, too.

You are generally right, but currently most homeowners have mortgage debt at rates far below market, so they could afford much less house than before (if they need financing).

If you move from not-so-prosperous place to where its booming, there is no way you get equivalent home for the same price

If the prices have significantly risen since you purchased (as they have for most buyers) then moving even to the same quality of house makes you a net buyer because you need to take on more financing.

Remember, the day you buy a house, you are no richer. This is because the asset (house) is offset by the liability (the mortgage).

I don’t understand.

I buy a house with a $300k mortgage. The price rises to $500k. I then sell the house and buy another for $500k, rolling my $200k equity and $300k mortgage for no net change.

If you are trading up then yes, the more expensive house rose faster than your house. But that’s the case anytime you move and not unique to a job relocation.

Nope, there is a huge net change because interest rates have increased. Mortgage rates bottomed out in 2020 at about 2.65%, so the monthly payment on a $300K mortgage was only $1209. Now at 5.87% the payment would be $1774.

https://fred.stlouisfed.org/series/MORTGAGE30US

Why are you comparing to the absolute minimum? Didn't people use to have mortgages before 2020? My first house was close to $300K, mortgage was 6.5%. No one was crying about this back then.

I am comparing to the absolute minimum because most homeowners with decent credit ratings refinanced their loans a couple years ago near the minimum. Now they can't afford to sell their current homes and buy in a different area because the monthly payments would be unaffordable (unless they buy in a much cheaper area or a much smaller home).

I don't think anyone is crying about it but this is reducing labor mobility and slowing down economic growth. It's one of the unintended consequences of the Federal Reserve raising interest rates due to inflation.

Wait a second. They were able to pay that mortgage before they refinanced, right? And the rates 5 years ago were close to 5% (according to your chart). Suddenly rate get close to what was normal just five years ago and we are talking about most people not able to move.

The 2023 house they’re looking to buy costs more than the 2018 house they could afford at 5%.

We bought in 2007. Our house more than doubled in price since then. I’m not sure I could afford to buy it now if I was a typical 20% down buyer.

I will not argue about someone's ability to buy a new house in the current environment. But in this thread discussion is focused on existing homeowners moving to a new house.

In your case (assuming $300K original house price) you will sell it for $600K, net $264K profits after commissions. Use profits plus $60K of original downpayment and any additional equity in the old house as a downpayment for a similar house at $600K. The new mortgage will be similar to one you had in 2007. Same rate and most likely smaller principal. Not a big difference.

All true (except multiply all those dollar figures by a factor of 4).

The problem is that I'd be taking on a new 30-year mortgage while being about 10 years away from retirement rather than ~26 years away from retirement, which has certain implications on my ability to afford that mortgage over its full term.

When you are retired you don't need to live at the same place. World is your oyster. The capital gains from your house ($1.2M already, more in 10 years) will allow you to pick new house almost anywhere without worrying about mortgagees. You won't care about schools or extra bedrooms for kids, for instance.

Statistically very few people stay at the same house for 30+ years, most move within eight.

Why didn't you refinance in 2020-2022 when interest rates were so much lower? If the prevailing rate is 3%, you're leaving money on the table by sticking with your original mortgage (unless it's almost paid off)

My point was that paying 6.5% on a $300K mortgage was a normal thing just 15 years ago. In fact it did not stop anyone from buying in the run to the great recession (aka "subprime mortgage crisis").

I don't have mortgage now, so no, I am not leaving money on the table.

In addition to the other great comment about rates affecting prices, don't forget deep cleaning the house, staging it, paying a 'licensed professional' to fix what the buyer inspection may find, then 6% in realtor fees, then taxes, potentially a lot if you haven't been there two years. In no event will you be rolling $200k equity over in that scenario.

What if you bought a the peak and the house price falls? Negative equity, right?

What you're missing is that the after (optimistically) netting 200k from a 300k house, is that the next house is really a lateral move to another 300k house being sold for 500k, but with higher property taxes (At least in states like CA).

This would only theoretically work going from a HCOL area to a lower one, and then moving again becomes even harder.

That isn't even remotely true here in the Seattle area.

Even if you have significant equity in your house, the supply of "better" comparable homes is sparse at best.

And likely your existing mortgage is at a rate 1/2 of the current rates.

> You don’t start from scratch. You sell your existing house, which has benefited from inflation, then buy somewhere with the same mortgage payment over the same remaining duration you had if you choose not to trade up.

In California, Prop 13 means that property taxes are essentially fixed and nonincreasing at the time you purchase your house.

This is sometimes used as a defense of Prop 13, but all it really means is that any increase in total tax burden has to fall disproportionately (in fact, almost exclusively) on new purchasers and their tenants.

Forcing someone to relocate means giving up that privileged tax status and starting over "from scratch".

There is one limited exception: once you’re 55, you can transfer your existing property tax base (but only if the county you’re moving to allows it), but only once.

This is a ridiculous system, and there really needs to be property tax reform in CA, but it needs to be done in such a way that it doesn’t fuck over existing property owners, which is really difficult.

> but it needs to be done in such a way that it doesn’t fuck over existing property owners

This is impossible. The current system is such an extreme and unsustainable transfer of wealth towards property owners that there's no way to create a sustainable (let alone equitable) system that doesn't involve current property owners giving something up.

End Prop 13 protections for all property purchases. Stop grandfathering in existing property when it's inherited. It'll really fuck over new buyers in the short-term. But it's one way to get less resistance from existing owners - who are largely voters. And the skyrocketing property taxes on new purchases might put a damper on prices.

One of the main reasons behind Proposition 13 was to constrain rapid growth of local government expenses, and it has been effective in that. We do need to reform it so that the tax burden is distributed more fairly, but I won't vote for ending it without some guarantees on limiting government spending.

How do places without something like Prop 13 constrain the rapid growth of local government expenses?

Why is limiting government expenditure a goal in and of itself? If the government is able to raise enough tax money to support that spending, and voters agree with it, why shouldn't the government spend more?

Wouldn't that be priced into the relocation package you negotiate? It is a problem but no different than buying a home in a flood plain, if it's something you have to do.

Or maybe not, I have never negotiated relocation and the only industry I have to base an example off of is oil and gas and they pay ridiculous amounts of money so you get a comparable house/mortgage to your old one

> Wouldn't that be priced into the relocation package you negotiate? It is a problem but no different than buying a home in a flood plain, if it's something you have to do.

I can't imagine a relocation package pricing in foregone tax benefits.

But even if it did, that's a one-time payment in exchange for giving up a benefit that exists in perpetuity. There are ways in accounting to discount the benefit of indefinite/perpetual annuities and compare them against current cash value, and in practice they almost always undervalue the former, often by limiting the future time window.

California is only one state, I would also be upset to lose my 3% interest rate. Oil and gas companies will price that in and goes 1-2% over what you would lose. So maybe I just have a skewed perspective of relocation packages since I only have o&g to compare to

> You sell your existing house, which has benefited from inflation, then buy somewhere with the same mortgage payment over the same remaining duration you had if you choose not to trade up

Are you living under a rock? Mortgage rates going up make that impossible.

> You sell your existing house, which has benefited from inflation

Your new interest rate is going to absolutely demolish any inflation benefit your current house has. I don't think people really understand how bad higher interest rates are when there's a housing shortage.

- A $500k house at 3% is $2,100/month.

- A $500k house at 7.5% is $3,500/month

- That's a difference of nearly $17,000/year

The house that was $500k at 3% in 2021 is still $500k at 7.5% in 2023. Housing prices haven't budged. We'd need to see a 20-40% reduction in prices across the board to stabilize affordability, but that won't happen because there's too much demand.

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