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Comment by ajmurmann | Hacker News Reader

AFAIK the higher interest rates led to less inventory on the market because people who sell and night buy elsewhere would also be getting higher interest rates. So they don't sell. I also bhave friends who actually bought a new home, but are renting out the previous one because the mortgage is so good. That said, I've not seen actual numbers on this.

Demand also can't really go down. What option do people have? Become homeless or move a 4-hourb flight away from work?

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Just a couple days ago I was walking behind a couple here in NYC, probably in their mid-50s, talking about how they really couldn't justify moving because they'd have to ditch their 2%-ish interest rate for a much higher one. I definitely have friends in the same situation.

Must have been nice to get all that nearly free money when they were passing it out!

This is also really bad for the economy because it reduces mobility. It drastically raises the barrier for relocating for a better job. It makes our job-to-worker mappings much worse.

There was a sweet spot about 10 years ago when mortgage rates hit bottom but people were still afraid to buy and house prices were affordable. Mortgage rates today are still extremely low by historical standards, but unfortunately at the same time that mortgage rates have been rising, so have house prices (somewhat oddly), so affordability is horrible.

I think the comment you overheard is pretty typical - people are stuck in houses since if they sold and moved elsewhere their monthly payment would be double or more. People retiring and wanting to move from good job locations to cheaper retirement ones are not able to do so.

When you're in a situation where you incur heavy charges for "selling your house and buying it back" (or selling it and buying the identical one next door) beyond the 5-10% you lose in transaction costs, you're basically going to stay put.

There are ways to avoid some of the downsides, but they involve additional risks many are not willing to take. The most common is to rent out the house you're living in (the "good location" one) and use the proceeds from the rental to both pay the mortgage and help with a new purchase elsewhere. Then you're effectively running arbitrage on your low rate loan.

I'm in that situation. We bought a starter home not knowing we'd get priced out of ever upgrading. If I knew then what I know now we would have bought the biggest house we could possible have gotten a mortgage on. But like you said the economy was shaky and we were afraid to overextend.

To upgrade would mean paying more than double what we pay now per month and starting a new 30 year mortgage in my 40's, which I'm just not going to do.

Such a short-sighted comment. In 1995, when these mid-50s people were considering making their first home purchase, mortgage rates were around 7.93%, higher than today.

https://www.bankrate.com/mortgages/historical-mortgage-rates...

I'm not understanding, can you elaborate on your thought here? What makes you think these people were considering buying a home in 1995? They clearly were talking about their 2% interest rate loan they got during the pandemic. Just because they're in their mid-50s doesn't mean they were trying to buy a home in the 90s.

Also, in the 90s in Brooklyn you could get a condo for quite a lot cheaper -- the building I live in in Williamsburg was built a couple years before 1995 and the condos sold for $40k then (about $80k with inflation). Today they go for about $1.2 million. A 7.93% loan on $40k is quite a lot more affordable than on $1.2 million.

What makes you think they weren't trying to buy a home when they were younger? You clearly want to own, why do you think they didn't?

Williamsburg (and most of Brooklyn besides Park Slope and Brooklyn Heights) was cheap because it was pretty much a hellhole in the early 90s. Starbucks? Lol. Quality restaurants or cool nightlife? Train to Manhattan. Professional jobs? None. Murder & crime rates at their peaks. Williamsburg costs a lot because current residents benefit greatly from 30+ years of gentrification, community building and services.

Exactly, we can't speculate on what they did in their 20s. All we can do is go from what they said, which was basically "We can't justify moving because we'd have to get a mortgage at a much higher rate". I don't think that's uncommon. I have plenty of friends that bought with 2% interest rates, and they wouldn't be able to afford the places they got with 7% rates. It's also not uncommon for people to be in their 40s and 50s without owning a place in NYC, I have plenty of friends also in that boat.

And yeah I've been in BK for almost 20 years now, I remember hanging out in Williamsburg in 2000 when I was in college, it wasn't that bad. I actually prefer the old version of it to what it is now. Sure, it wasn't the Los Sures of the 80s by the time I got here, but it was a lot more fun. I only had my life threatened once and we deescalated quickly!

Wait, so you're in your 40s? What was the point of mentioning that the people you overheard were in their 50s?

You've spent your entire adult life, 20 years, living in one of the most "cool, hip, upscale" neighborhoods in the world, obviously that location and lifestyle comes with a high price tag. If somebody repeatedly bought brand-new Ferraris for 20 years, you'd shake your head if they started complaining about money.

Adjusted for inflation, housing was significantly cheaper in 1990 than it is today.

Not the point. OP was jealous of the "nearly free money," i.e the low interest rate, not the amount borrowed.

I'm actually not jealous, I'm happy for my friends that were able to buy. I just think it was a silly, shortsighted policy move. The 2% rate that people are locked into is only part of the problem of course. There's just not much inventory in NYC or in many other cities.

Sure, but in 1995 you could also get a nice house for like 40k. An equivalent home today costs about 400k.

8% interest on 40k is only $63k interest paid (A 1995 home had a total cost of $123k)

8% interest on 400k is $633k (that same home in 2024 has a total cost of $1.2 million dollars)

You wouldn't expect to get a nice house for $40,000 in 1995 in the United States. The median sale price for a house was $133,000 in Q1 1995:

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

> in 1995 you could also get a nice house for like 40k

Ummm, where?

And the parent comment was about the low interest rate ("nearly free money") not the amount.

What I do know is that many professional-class students can start their careers, i.e. first-year salary, at $100k and often significantly more. In 1995 nobody earned even $50k straight out of school. Economy-wide inflation numbers are weighed down by low-paying jobs, therefore greatly under-estimate how much professional (i.e. most likely to be home buyers) salaries and early earning potential has grown over the past 30 years.

The subprime crisis is why there is a lack of supply. Home construction cratered for years after the 2007-8 shock. When recovery took hold, we had a enormous deficit in available supply and are nowhere near closing it.

Figure 3 tells the tale: https://cre.moodysanalytics.com/insights/cre-news/one-good-y...

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