Hacker News Reader

Comment by dragonwriter | Hacker News Reader

> As a side effect of historically cheap money, house prices have risen so high that entire younger generations are locked out of home ownership in quite a few areas.

If it is a side effect of cheap money, how is it pricing people out of the market? The rising sticker price of the property should be offset by the lower price of money which is driving it, so that the actual total real cost of the purchase (including the financing cost) is the same.

Only if something other than the general price of money (an increasing spread between the price of money for favored debtors and disfavored ones, presumably including the young people priced out of the market) is driving real estate prices should someone be priced out of the market.

View on HN

I live in Toronto, 10 years ago a house in the suburbs may have been affordable for someone like me, now they are hugely over priced. I could make a 5% downpayment and have a mortgage till the day I die, but that doesn't seem reasonable to me.

Maybe rational buyers have been priced out of the market?

I'm not saying that people aren't priced out of the market, I'm saying that decreases to the general price of money cannot explain people being priced out of the market.

> I could make a 5% downpayment and have a mortgage till the day I die, but that doesn't seem reasonable to me.

Right, but if the only price increase was attributable to the lower price of money, you'd have a mortgage just as long and with just as much burden now as before the decrease in the price of money -- you'd just pay a higher nominal purchase price on the house, and lower interest and fees associated with the loan.

If, instead, you've been priced out of the market, that means something other than a general decrease in the price of money is involved, because the increase in the prices is out of line with the decrease in the price you would pay for financing. If it is cheaper money driving the price, its money that has gotten cheaper for some other class of potential buyers than it has for you.

I agree that there is something more beyond the cheap money, however it is possible that the cheap money, combined with a few bad actors has driven up the prices.

Say one or two houses sell way over market value, that drives up the price of all the houses in the neighbourhood. If that happens a few times you have massive price increases fueled by easy access to money.

Everything is rising but wages, due mostly to overseas wage arbitrage.

Reply on news.ycombinator.com