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Comment by diogenescynic | Hacker News Reader

I'm in my mid 30s and have always had a decent job with relatively decent income, but the cost of living has always made it impossible to save enough fast enough to get a down payment on a home. Now I finally have one, but with interest rates it seems like a poor financial decision to buy a home when I can rent the same quality of home for half the price. I feel for kids starting out today, I can't see how they will ever thrive in this world unless they work in big tech and have a really high income. Inflation has crushed everyone but the most elite workers.

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Renting makes sense for many reasons. Sounds like it makes sense in your situation. Some people are too quick to buy a house for the wrong reasons. Also. remember that you can refinance if the rates drop.

you might be able to refinance if rates drop - it is not a guarantee.

If you overpay for a house, and then you owe more than it appraises for around the time you want to refinance, you are going to have a very hard time taking advantage of lower interest rates, unless you are also in a position to also pay down the mortgage as part of the re-fi.

Of course don't overpay. The goal is to underpay.

You never actually own a home anyway. The property taxes rise relentlessly every year (the rent you pay the government). Then there's all the code and zoning laws to greatly restrict what you can do with it.

Ownership is a legal fiction. You "own" something as long as you can stop other people from using it. Property taxes are just what you pay the government to enforce your claim.

> Property taxes are just what you pay the government to enforce your claim.

Around here the endless new levies have nothing to do with enforcing the claim. They're all for various social programs. I think the latest one was to fund free dance classes and other art projects.

“Ownership” is a spectrum obviously but owning a home still gives you a hell of a lot more control than renting.

Source: used to rent, now own

That depends almost entirely on local ordinances and, if you have one, your HOA. The far side of the spectrum where you actually have significant control over your own property is great, I'm just not sure it's very common.

All those things stack up though; if you rent a house in an HOA neighborhood you’re still accountable to the local government and the HOA, it’s just that you’re also accountable to your landlord on top of that.

I've never seen a house as restricted by HOA or local ordinances as the Internet would lead me to believe, so I'm on the side that it very common to have a lot of control over your house.

The relentless rise of property tax has to do with the unsustainable municipal financials of low density suburbs.

https://m.youtube.com/watch?v=7Nw6qyyrTeI

Property tax is something you have leverage with the government on. You don't have to just deal with what they say you owe them.

You can sue the county to get your fair assessed value lower, in order to lower your property taxes. The HOA of a condo I once owned had to do this, because values plummeted, and the county just insisted values kept going up and we owed them more and more tax.

I know a guy who somehow pays 0 property tax on a $500k USD house (don't ask me how he finagled that, but he comes from a rich family, married into a richer family and is quite shysty).

There's also more esoteric techniques like getting some parcels rezoned as farmland (which carries little to no tax burden).

But to your point (and another commenter's), there's a variety of ways a government can assume ownership of your land, even if you own everything free and clear of any debts or owed taxes. (See: Imminent Domain) In this world, you only really own something if you have the might to defend that ownership.

My prediction is N-plexes will be built, allowing homeowners to rent out portions of their property, but still give them privacy and flexibility in the future.

Is this a local or a national problem? Homes are a lot more affordable outside of the inflated West Coast metros.

That's true, but jobs outside of metro areas are nearly non-existent, or pay peanuts. Moving out of a metro area typically puts you in, maybe, a bigger home, but the pay is drastically lower. Food costs, internet, phone, vehicle, etc all cost nearly the same (if not more expensive), so you're probably doing even worse moving out of a metro area.

I didn’t say outside of a metro area, I said outside of the West Coast metros. The rest of the country does exist and many of us own homes and have jobs. If you live in San Francisco it’s probably easy to get the impression that everyone who isn’t a multimillionaire either pays $6000 a month to rent a studio apartment or lives in a tent and poops on the sidewalk, but that’s not what the rest of the country is like.

It's a situation that is affecting all metro areas, both West and East Coast. For sure, the West Coast is on a whole other level. But I live an hour and a half outside of a southeastern metro area where the average salary is $17/hr with 1-bedroom apartments going for $1,400/month and minimum wage is still $7.25/hr. Which $17/hr doesn't even qualify for.

Just stating that this is heavily affecting East Coast non-metro areas, largely due to a fear of change in these communities and a refusal for any local or state governments to take any actions.

Home ownership rates and price to income ratios are doing well in many states.

https://www.fatherly.com/news/map-cheapest-state-buy-house

https://ipropertymanagement.com/research/homeownership-rate-...

Beginning with the first setence on your first link: "Over the past several years, the housing market has become increasingly unaffordable to families. Mortgage rates have skyrocketed while wages have remained flat, and then sprinkle in supply shortages, the pandemic, and inflation."

I was in SF until the pandemic and now live in another area of Northern California, but it's now just as expensive as SF was when I left in 2020. The catch 22 is that remote jobs may not last forever and the trade off is the cities near jobs have high cost of living and the cities with low cost of living have no/low paying jobs. Hard to know what the right thing to do is. Do my wife and I buy a house in a lower cost of living area and hope our jobs stays remote permanently? It's really just hard to know since there's no precedent for this. And if in 5 years everyone is now back in the office either full-time or part time, doesn't that mean prices will crash in those towns that went up in the pandemic?

This study was also done during 2020 which may have had some other confounding factors with it, of course I can't think of what that could be.

Part of the squeeze is that we have the largest age demographic, the boomers, in a stage of life in which they are highly unlikely to move, whilst still living in their homes. This issue will sort itself out shortly.

At the same time you had incredibly low interest rates which led to many people who already had established credit and assets the ability to borrow against it and move it to real estate in order to find a stable vehicle that would hedge against inflation.

The final, and I consider biggest, factor is the fact that the government start indirectly subsidizing housing, which means there was now a massive pool of money that could only be spent on housing available, and the economically predictable thing happened, which was the price of the thing increased substantially because now there was a large portion of money that could only be spent on that thing. As evidence of this the 3 things that seem to be increasing in cost the fastest, and that people complain about the most, Healthcare, Education & Housing are all heavily subsidized by the government.

My point being that people have short memories, this housing crises, will eventually pass given time, as long as we don't do anything stupid to make it last longer.

> the largest age demographic, the boomers

Millenials are a larger generation than Boomers.

But in terms of wealth and power, the boomers dominate.

isn't it almost always true that older people - people who have been working for 30-40-50 years will have more money, on average, than people that have just entered the workforce?

Once the boomers are all gone, will we just start blaming the next oldest generation for all of societies problems?

Oh for sure.

> Part of the squeeze is that we have the largest age demographic, the boomers, in a stage of life in which they are highly unlikely to move, whilst still living in their homes.

These days we have the millions of people crossing the border into the US. They'll all want houses, too.

Many border-crossers can't afford to buy houses - probably most of them - but they do put pressure on the lower cost apartments and are competing with low-income citizens, which drives up the price of the lower cost apartments, which has the effect of increases demand and prices all-the-way up the food chain.

That's true. It also happens the other way. Building more luxury homes will reduce the price for non-luxury homes. This is because the wealthy will not be bidding up the prices of the non-luxury homes because there will be luxury homes available.

This effect is not recognized by people who decry the building of luxury homes.

I initially wanted to disagree with you, but I think you're right.

One unmentioned consideration is why the gov wants people to own their home:

Put simply: homeownership (and home value appreciation) results in better end-of-life outcomes compared to self-managed cash.

People are bad at saving, but they understand if they don't pay their mortgage, they will lose their home. Tapping into that equity isn't as easy as accessing money from a savings account.

Saving for a down payment is largely a fool's game, at least in many areas of the country. Prices tend to rise faster than you can save thus putting you further and further behind.

If you want to own your own home (and not everyone does or should) then a better approach is to take advantage of one of the various low down payment mortgage programs. Focus on credit score and cashflow rather than down payment. This is somewhat risky in that a temporary reduction in income can quickly put you into a foreclosure and bankruptcy situation, but it works out in the end for most consumers.

I understand that from a social policy standpoint it doesn't make sense for governments to encourage rapid residential real estate price inflation or high levels of leverage. But from a personal finance standpoint we have to work with the system as it exists rather than expecting it to change.

If I had done that in 2015, sure. Doing it now when the Case Schiller index is at an all time high seems like a bad idea. I just don't know how many years it's going to take for things to correct--so it might end up being a waste of years I could have been building equity if prices don't drop more than the amount of equity I could have built in that time.

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