Americans need to be richer than ever to buy their first home | Hacker News Reader

Americans need to be richer than ever to buy their first home

bloomberg.com

42 pointswhack62 comments

I think this is only half of the story. There are still lots of affordable houses - in parts of the country that no one wants to live anymore. The value of my sibling's property in Illinois has barely kept up with inflation.

So I think some of the national statistics about house prices vs number of units are a bit misleading. We're increasingly paying a premium because we are increasingly concentrating where we want to/need to live.

People go where the jobs are. That’s increasingly in urban areas. It’s also where amenities like good hospitals and schools are located.

One of the most eye opening books on this topic was "Order without Design" by Alain Bertaud.

Essentially, cities exist entirely as job markets - where individuals make tradeoffs to handle geographic constraints.

It will be interesting to see if the WFH shift changes this dynamic.

‘Order without Design’ is one of my favorite books on the topic.

Even with working from home, some people have certain needs that are easier to fulfill in/near cities. For example, people with chronic medical conditions may have an easier time finding quality health care resources if they are closer to a metro area. Another consideration in America is being a member of an ethnic, religious, or sexual minority and how accepting each community is. It's sad that I have to bring this up in 2023, but it's reality.

Anecdotally, as a remote worker, I have little interest in leaving the urban core I live in. I rarely drive and walk most places I need to go. That quality of life makes a huge difference.

I grew up in a suburban bedroom community where everything involved driving in a car and there were few places you could reasonably walk to.

Regardless of my freedom to live where I want, I have little interest to move to low density suburbs or rural areas because the convenience of urban areas is just too nice for me.

Very much this.

Many of my friends in Southern California lament that they'll never be able to buy a home because in their minds houses _start_ at $750k. I bought a house for roughly one-third of that in a place that none of them would be caught dead so much as visiting. It's almost as though areas that are nice to live in are consequently in high demand which drives property values up... obviously NIMBYism, Prop 13, and a host of perverse incentives are also at play here but it doesn't change the fact that you gotta pay to play.

If anybody's interested I just found this handy map [1] that illustrates precisely what I'm talking about, and since it's adjusted for income it paints a decent picture of why things are the way that they are.

[1] https://abag.ca.gov/tools-resources/maps/map-month/how-large...

That map could almost be an electoral one if you flipped the red and blue.

Which should tell you something about why your friends in SoCal don’t want to live in those cheaper places.

The kind of houses that could be bought for that starting value in South Africa, in beautiful, safe neighourhoods, with 1gb/s internet connections...

But also the places people want/need to live are generally not building housing. The town next to mine has actually lost population since the year 2000 despite being in a very attractive location. Incidentally, most of the town is zoned exclusively for single family houses despite there being lots of duplexes there already. You can probably see how these two things might be related. :)

> in parts of the country that no one wants to live anymore. The value of my sibling's property in Illinois has barely kept up with inflation.

It reminds me of some politician in the south whining about people leaving the state (to get to the coast). And he wished silicon valley would "come to real America to create jobs here too".

Of course, as you guessed it, it was one of the deep red states and we all can guess why people were leaving.

“Real America” tells you everything you need to know.

This is something I hope the government can step in and help with. Maybe really low/no interest loans for first time home buyers so they can at least get into the market. Maybe that exists? Income limits need to account for up to date salaries. I'm not rich or wealthy just because I had a couple years of making 250k. I still have loans and im still burning up cash on renting. Taxes take away a ton of that income. Some guy making 70k making these rules probably thinks im rubbing shoulders with Leonardo Deicaprio at parties because making more then 200k is so unfathomable to the average person, it seems like wealth.

Rent situation needs help to. Were just throwing away cash on low quality rentals. A 2br in my complex over the last year is now listed at 1.5k more then a year and half ago. 3k to 4.5k. "Thats what the market wants" or something stupid is the reason, but these are not 1.5k better then it was before. How is this not price gouging? If i want to move I have to burn even more cash? Rent control keeps give me a rate under market now so there is no reason to move. Even that was some how allowed to be nearly a 10% increase. The only option is to buy to get away from this crazyness. Falling behind no matter what.

I don't get how these insane markets are allowed to exist with no regulation on necessary needs for people. IDK what else to do besides take my american cash somewhere where I am extremely ahead settle down there and chill.

> Maybe really low/no interest loans for first time home buyers so they can at least get into the market.

One big reason homes are priced so high in places like the USA is because home loans are already government subsidized. When people think of what they can afford, they look at their net monthly mortgage payment less the income tax break. And prices seem to rise to meet whatever monthly payment buyers can afford.

> because home loans are already government subsidized.

Are they? Maybe Im more ignorant then I thought? Im still stuck looking at high intrest loans as a first time buyer who works in tech though?

Do you itemize your taxes? If so, your mortgage is being subsidized by the government.

no im single and rent (idk how to affordably buy a home, thats what my rant was about), i use standard deduction.

30 year fixed rate mortgages really aren't a market thing. They largely exist due to government support.

If you are getting a conforming loan in the US - chances are the federal government is buying that note via fannie or freddie and the bank simply services the loan for a fixed fee.

If we don't expand the housing supply dramatically, additional subsidies to home buyers will lead to even more inflated housing prices, and transferring even more money from the working class (who pay taxes and want to buy houses) to old rich people (who own most of the desirable property).

If we were to expand the housing supply by 20% over the next 5 years I would expect to see house prices and rent crash to a more sustainable level.

The problem would be building 20%. That is a lot of housing. I’m not sure that even 5% would be possible with low interest rates. With interest rates where they are now, builders are going to be very conservative.

Maybe it’s time to admit that more entities besides private ones need to be building and supplying housing then? Maybe some things just aren’t well suited for market driven development.

There are far more empty houses in the US than there are homeless people. We do not need more houses, we need to stop allowing parasites to hold houses hostage for personal profit.

There are almost no empty homes anywhere near good jobs. Demand far outstrips supply, and putting all the greedy landlords in prison won't fix the imbalance.

I never said we should put them in prison

> Maybe really low/no interest loans for first time home buyers so they can at least get into the market.

These already exist. There are downpayment assistance programs that go as low as 0% down. We ourselves took advantage of FHA loans twice to buy homes.

If anything, they exacerbate the problem by throwing cheap money at a supply problem.

> downpayment assistance programs that go as low as 0% down.

I never understood these, you still have to make payments on the total loan though? 0% on a million dollar loan at 6% is a ton of money to pay every month. on top of taxes and expenses of owning a home.

You only pay the higher percentage on the amount of loan principle below 20%. So for 80% of our loan the interest rate is 2.25%, and then a few points on top of that for what we still own below the 20%.

Still a screaming deal - but a lot of restrictions on how big of a loan you can get and what kind of property you can buy with it.

ill dig into this. thanks! see theres a reason to rant on the comment section haha

Haha! Once in a million!

The advice I give all my friends - talk to a decent loan officer as soon as possible. Perhaps even years before you think you are ready!

The amount of knowledge you will get by Googling these topics is like looking through a straw. But a professional can lay out a bunch of options you never would have known you had.

it's obviously a huge help for people who can't easily fork out $200k in cash after tax for a downpayment. Which is only the majority of the population, even in the richest metros (e.g. SFBay has most families making less than $120k/year).

As to addressing the recently raised interest rate or not flooding the demand side with cheaper loans, I have no idea how to tackle all the evil in the world at once, but this particular form of help clearly addresses the barrier to entry in form of a downpayment, which is real.

Banging your head against an over-constrained problem is a exercise in futility. I found it easy to fall into the Trap of stubbornly doing it myself. If housing is a top priority for you like it was for me, I recommend doing exactly what you're considering. Move somewhere where you can get what you want. I moved off the peninsula and haven't regretted it for a minute

> Maybe really low/no interest loans for first time home buyers so they can at least get into the market.

These sort of "fixes" make the problem worse rather than better. By making it easier for people to buy high priced houses, it increases demand for high priced houses, and increases house prices.

Exactly what happened with college education expenses in the US.

And with subprime lending. The government force the banks to give those subprime loans, and that led to the housing crisis.

It's completely insane. I bought my house in Austin in 2013 for $245k (I thought it was already hilariously overpriced) and last year during Peak Hype a house sold on my street for almost a million.

Like I guess I'm staying here until I die?

Speaking as a fellow Texan (though I don't know about Austin specifics), I'd say you're there until you can no longer afford the wealth/property taxes.

It seems the true, deciding factor is good credit and able to pay your bills. You still only need to put down closing cost, and the federal government will cosign your loan. I don't understand this idea that only the wealthy can have homes. Perhaps it is that some people want certain homes, in certain locations, and can't afford them. That's not a problem, indicative of the market, they just can't afford it.

Or they just need to have parents who will help with down payment. Estimates are that over half of first time buyers get family assistance. It’s the new feudalism.

Yeah that’s what I’ve started doing for my kids in addition to college savings. I just haven’t figured out what the best type of account is if I want the money available in 15 years if I’m not 59 1/2 yet.

You don't need a down payment anymore to buy a house… If you have decent credit, and can pay the closing costs, you can get a loan back by the federal housing administration.

This whole "downpayment" nonsense is a myth to scare people away.

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