The Home Ownership Thread

[jbarwick]

Y'all are forgetting how mortgage rates affect how much home you can buy. I can't find the chart but it is something like a $500K house in 2000 has the same payment as a $750K house now due to rates. People still look at if they can afford the payment, not how much the house cost. They back into how much house they can afford. Also, if they were renting before, a lot of people have the mentality of, my rent was $1,850 and I can buy a house and pay $2,000 a month with struggle. Why not?

 

[SixOhNine]

Good luck finding homes in SoCal for 1.5x income

 

[otc]

Y'all are forgetting how mortgage rates affect how much home you can buy. I can't find the chart but it is something like a $500K house in 2000 has the same payment as a $750K house now due to rates. People still look at if they can afford the payment, not how much the house cost. They back into how much house they can afford. Also, if they were renting before, a lot of people have the mentality of, my rent was $1,850 and I can buy a house and pay $2,000 a month with struggle. Why not?

Also the ability to attain financing has changed.

In the 1930s, you probably had to struggle to come up with a big down payment--even if you could afford the payments, buying a more expensive house might mean delaying the purchase for years while you save. Now there are many ways to pay a tiny amount and for better or worse, it has become much easier to get approved for financing. (Pros include being able to get a mortgage while having darker skin tones...Cons include whatever the **** happened in the 2000s).

Home size and quality has also obviously increased as well. You get some of that for "free" as a result of technological advancement, but a lot of features and finishes that people expect these days are additional expenses.

 

[ValidusLA]

Good luck finding homes in SoCal for 1.5x income

Seriously. 1.5x is a joke. Considering my house has increased value by 50% in 3.5 years, I couldn't afford it now even though I've had significant income increase since then.

No one is buying at 1.5x here.

 

[Michigan Planner]

the real scary thing #1 with gas is when it builds up in a confined space. that's when it goes boom.

it actually can be bad to open a window in that situation (say, you've been away for weeks and come back to the strong smell of gas in your house) because gas can only ignite w/ the proper mix of gas to oxygen. if the gas concentration is too high (or low, obviously) it won't ignite.

When I was about 8 or 9 years old I was woken up around 2:00 a.m. one day to a large boom and our entire house shaking. The neighbors two houses down came home after being in Florida for a couple of weeks and the dad took something down to the basement to plug in and the house exploded. Everybody made it out but the boy who lived there (he was a grade ahead of me) was with his dad in the basement when the house exploded and he and his dad suffered some pretty serious burns over most of their bodies.

IIRC from what my dad found out through the neighborhood gossip, the pilot light in the furnace and/or the hot water heater had gone out while they were gone and the gas had built up in their basement. Flipping a light switch or plugging something in generated an electric spark and the house went up. They did get a large insurance settlement, so at least there's that...

 

[Fueco]

Y'all are forgetting how mortgage rates affect how much home you can buy. I can't find the chart but it is something like a $500K house in 2000 has the same payment as a $750K house now due to rates. People still look at if they can afford the payment, not how much the house cost. They back into how much house they can afford. Also, if they were renting before, a lot of people have the mentality of, my rent was $1,850 and I can buy a house and pay $2,000 a month with struggle. Why not?

Before we moved out of California, we were renting a 4bed/2bath home in Cupertino for $3500/month (we moved in August 2015). Our rental in Boulder was $3100/month for a similar home. Our mortgage now is a little less than $3000/month. Our income has finally caught back up to California, but we’d still be hard pressed to afford to live in the Bay Area now. That house in Cupertino sold for $2.8million last year.

 

[brokencycle]

Y'all are forgetting how mortgage rates affect how much home you can buy. I can't find the chart but it is something like a $500K house in 2000 has the same payment as a $750K house now due to rates. People still look at if they can afford the payment, not how much the house cost. They back into how much house they can afford. Also, if they were renting before, a lot of people have the mentality of, my rent was $1,850 and I can buy a house and pay $2,000 a month with struggle. Why not?

This right here is the answer. Mortgages. Back when fueco's grandparents were buying there was no 30 year loan for 80%+ of the value.

Rate history below, but using a few points in time to illustrate the effect, here's what a $100k mortgage would like like (P&I only):
1981, the peak, 18.53%: $1,550
1987, when I was born, 10.61%: $923
2000, new century, 8.15%: $744
2010, my first morgage, 4.25%: $492
2021, my current rate, 2.75%: $408

Income to house price only matters if all other things remain equal.

 

[Texasmade]

That really is crazy to me. My wife and I spent 1.37x combined annual income on our current home in summer of 2019. We were certainly prepared to spend more, but found a great deal and offered asking (after 2 prior deals fell through during the inspection phase). We weren't going to spend 3x+, that's for sure.

Okay boomer. Stop bragging.

When I bought my house back in 2013, it was over 4x. With my current income, the price would be like just over 2x.

 

[NakedYoga]

Okay boomer. Stop bragging.

I'm in my mid/late-30's

But really, it's just surprising to see those kinds of ratios. Of course, I understand the housing market varies wildly.

 

[Omega Male]

Better to look at payments as a share of income although it gets us to the same place -- multi-decade lows.

 

[Piobaire]

Has anyone shared this data with AOC? Asking for a friend (@Jr Mouse.)

 

[double00]

income also varies wildly and is like a giant variable in this ratio-scenario , prob far more variable than housing prices .

i think NY mentioned 2 incomes ?

 

[brokencycle]

Better to look at payments as a share of income although it gets us to the same place -- multi-decade lows.

View attachment 1740612

This goes back to an article you posted a month or two ago: disposable income in the US is rising faster than housing prices which is unique among the G7.

Edit: what will be interesting is how house prices will react as interest rates climb. Historically they have stagnated but not gone down.

 

[Omega Male]

This goes back to an article you posted a month or two ago: disposable income in the US is rising faster than housing prices which is unique among the G7.

Yup. Obviously the distribution of that income matters too. If 90% of the increase went to the top 10% of earners, housing didn't get any more attainable for the other 90% of the population.

 

[brokencycle]

Yup. Obviously the distribution of that income matters too. If 90% of the increase went to the top 10% of earners, housing didn't get any more attainable for the other 90% of the population.

That's true. Good thing that isn't happening: