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Comment by phkahler | Hacker News Reader

The answer is in the first paragraph:

>> "Most new homebuyers will pay around 30% of their income on their mortgage"

You go to the bank looking for a loan. They use that exact sentence to determine your monthly payment. Lower interest rates mean you can borrow more for a given payment. Then they tell you how much you can borrow. Everyone involved - banker, agents, seller, neighbors - wants you to spend as much as possible. Even if you don't, prices are set by "the market" where people do. Hence prices are determined by interest rates.

That first statement has been fairly constant for a very long time.

There are exceptions in areas where other factors distort the market.

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Yes - normal people normally pay everything they can afford on their house, so it's peoples' income that determines house prices.

Interesting that almost everyone is happy to drive around in a mass produced car, precisely the same as 10,000 other vehicles. And cars, although much more capable, cost (relatively) much less than decades ago.

But almost everyone wants their house to be special and unique, and pays whatever they can to that end. I don't see it as housing supply driving costs, so much as money supply.

Builder are very good at making you think you’re getting a custom house as you build out a mass produced one.

But even manufactured homes are expensive.

A colleague of mine tried to apply for a mortgage in the UK. He had good savings, enough to cover 20% deposit (the lenders officially accepted 10% deposits) and there would be enough left to pay mortgage for a year. Good, steady income to allow him to comfortable pay the mortgage and put aside some money for savings/investments. One bank after another refused him a mortgage unless he'd agree to put all of his savings into the deposit, essentially forcing him into a precarious situation where any adverse event (loss of job, health problems, etc.) would jeopardise his ability to pay off his debt. Each bank he spoke to massively increased (doubled+) the interest rates way above what was advertised even if he'd put all of his savings into the deposit. He walked away and is still renting.

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