311–320 of 1001 posts
> But now, if she buys a home, she needs housing prices to keep going up to make her decision financially sound. If you buy a home, you're living rent free, that's true regardless if the price goes up. If you live in it for 30 years and sell for exactly what you bought it for, you still made money because you lived rent free for 30 years. That's even including the cost of maintaining the home, roof replacement, HVAC,…
The type of "housing as investments" that are high risk is when you buy to let, using your home as a pure investment (which could have been an index fund instead). I know zero people who ever did that.
Also, whether the investment is sound depends on the interest rates. Mine is now a fixed 5yr at 1.5% which is pretty decent, but obviously when that's renegotiated in 3 years the rates will most likely be much higher. In any case, it's basically been a free ride to live with a 1-2% interest rates for the past decade.
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Downpayments need to be substantial because the owner needs to have skin in the game. Otherwise the borrower could walk away from the house and the mortgage with very little downside.
The whole point of interest is supposed to account for that risk. People buy cars all the time that cost a decent fraction of what a house does, and nobody bats an eye when they finance 100% (or more) of the value. And a car depreciates and moves . The bank knows where to find the collateral for a mortgage, and the value generally appreciates.
Yes, that's detrimental to those who already have homes (like me). But if I were a dispassionate judge-of-the-world, and I were weighing these two groups needs, I'd err on the side of supporting those without homes over those who have them.
Also, increase the supply of SMALL homes. Why is every new house a McMansion? Why do we have to buy 50+ year old homes to get something smaller? Those smaller homes are the entry to the market, and seemingly no one is making them, unless you count condos (which I do not).
Of course, I understand builders are building the homes that make them the most money. I'm not suggesting they're doing anything wrong.
But there is an underserved market for entry-level homes, and if the free market isn't going to solve the supply issue, it seems fair for governments to step in, build affordable homes, and sell them at a reasonable (10-20%) profit.
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There's a huge cultural difference there though -- people don't trust stocks, bonds, or bank accounts. Housing is the only investment most people will consider.
There are old men who still remember their neighbors being dragged out of those houses, tried, and executed by Mao's kangaroo courts. Most martial arts schools with ties to China have stories of expatriation or of practicing in the dark in basements. All those houses bought in Vancouver aren't just about financial investments, they're also a potential bolt-hole if things get ugly again.
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What sucks is a lot of young renters with steady jobs can afford to pay off a mortgage month to month, but they just can't afford that down payment (especially the 20% needed so as to not need to get mortgage insurance)! I was in that position for a while. Every time it seemed like I could afford to put that money down, the housing prices went up! It took a handful of years of renting cheap places (with roommates), l…
Wasn't that a part of the problem with the real estate meltdown back in 2008? We had people getting into loans with either zero down or far less than 20% paying only the interest and not the principal for the first 5 years. They were told that real estate value only ever increases and they'll be able to refinance the loan and put the new equity into a standard loan. That worked fine until it didn't and the whole thin…
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And here at the bottom of the see, there is no down payment (financing up to 100%), but young renters still can't get the a mortage of the same monthly amount as they pay rent, because of regulatory reasons -- mortage ceiling is defined as something like 5x gross yearly salary. Somehow it's fine to pay half the salary in rent, but not fine if it's financing the mortage.
That sort of makes sense. When you own a property, you have to maintain it and pay property taxes. When you add all that up, you either need a lot more than rent, or you need the mortgage to be lower than rent so you can afford those other expenses.
And I think we all saw why banks should be expected to be a lot more cautious in rating homebuyers' ability to pay than some individual landlords might be about their tenants in 2008
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This astonishes me about the US real estate market and is something I was only educated to on HN in the last week or so. I had absolutely no idea that 30 year fixed mortgages were not only widely available but the common standard there.
I can't think of another country that has anything like it, and it's largely because of the government market interference (via Fannie/Freddy especially) It's going to continue to have some weird knock on effects.
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What sucks is a lot of young renters with steady jobs can afford to pay off a mortgage month to month, but they just can't afford that down payment (especially the 20% needed so as to not need to get mortgage insurance)! I was in that position for a while. Every time it seemed like I could afford to put that money down, the housing prices went up! It took a handful of years of renting cheap places (with roommates), l…
Buy a "starter house" and begin to build equity. It's how people have always done it. You buy a really small house that isn't in the most desirable location and start making payments into it. Down the road you have built equity and you can sell your starter home and buy a nicer, larger house. You maybe have some family to support then and need more room. But you see young people renting for 15 years in expensive plac…
The fact is, in many areas, buying any house at all is not feasible for the vast majority of young adults.