Soaring lumber prices add to the cost of a new home • Hacker News Board

Re: Soaring lumber prices add to the cost of a new home

#101

Post by Ancalagon » Fri, Apr 30, 2021, 9:13 PM UTC

busterarm wrote: post #65

andrewmcwatters wrote: post #51

Earlier quoted context omitted.

People have different definitions of "affordable." To me, a gross $65,000 household income, less after taxes, is not enough to be able to afford a home within that price range. It's probably closer to below $275,000. I do agree with you regarding location, though.

You should never buy a home that costs more than 2x your yearly income. So yeah, you should make at least $137,500 if you want to buy a $275k house.

by this logic like 99% of people would be priced out of purchasing houses in most of california...

Re: Soaring lumber prices add to the cost of a new home

#102

Post by reader_mode » Fri, Apr 30, 2021, 9:16 PM UTC

Der_Einzige wrote: post #81

toomuchtodo wrote: post #41

Earlier quoted context omitted.

A fun question we kick around and model in a financial forum I participate in is, “How much insolvency occurs economy wide for every 100 basis points (1%) the Fed increases their interest rate target?” If interest rates go up, real estate and equities prices come down, and US gov borrowing costs increase. Borrowing costs go up for zombie firms and they fail. How much appetite is there for any of that? The same as lon…

No, if interest rates go up, the acceleration of real estate and equities prices will slow. There are too many real factors which are causing the acceleration of housing prices for interest rates hikes to totally cancel it out.

Interest rate hike would probably cascade to a recession blowing up realestate in the process

Re: Soaring lumber prices add to the cost of a new home

#103

Post by idiotsecant » Fri, Apr 30, 2021, 9:16 PM UTC

dcolkitt wrote: post #72

A lot more builders should be looking into steel framing. Light gauge steel has also gone up, but nowhere near as much as lumber. For the typical project, it's probably cheaper now than wood framing. Especially when you take into account that steel framing can be pre-cut at a factory with CAD software, requiring much less skilled labor onsite. And steel makes a much better frame. Fire resistant, termite free, mold fr…

Steel framing also has a tiny fraction of the r-value of wood. It might seem like the framing element is irrelevant but it adds up quickly. A layer of R-19 batt insulation is 63% less restive to heat transfer (effectively R-7.1) when installed in an assembly of 2x6 metal studs on 16" centers, compared with R16 in the same assembly in wood.

Re: Soaring lumber prices add to the cost of a new home

#104

Post by ineedasername » Fri, Apr 30, 2021, 9:23 PM UTC

busterarm wrote: post #65

andrewmcwatters wrote: post #51

Earlier quoted context omitted.

People have different definitions of "affordable." To me, a gross $65,000 household income, less after taxes, is not enough to be able to afford a home within that price range. It's probably closer to below $275,000. I do agree with you regarding location, though.

You should never buy a home that costs more than 2x your yearly income. So yeah, you should make at least $137,500 if you want to buy a $275k house.

You can easily spend more than the equivalent of 2x your annual income by renting, in terms of higher monthly cost, than by purchasing a home.

Take for example a $300,000 house w/ 4% mortgage. That works out to roughly $1,400/month. Even if you only make $75,000/year, it makes perfect sense to buy that house even if rents are a little lower than $1,400/month. (and current 30yr average rates bring that down to about $1225/month)

In my area, a small 2 bedroom house in a reasonably nice area will cost about $300,000, so the $1225 to $1,400/month rate applies. Renting a 2 bedroom apartment with less sqft for common spaces, in a similar area, will cost about $1800 to $2000. This is significantly more than is required to make up for property taxes levied on top of the mortgage when actually purchasing.

So I'm really not sure where you're getting your 2x figure. That's the sort of statement, absent context & explanation, that really doesn't add much to the conversation.

(On top of this, apartment complexes in my area have been nominally keeping monthly rates the same, but disaggregating utility costs from the rent, charging separately for heating, water, sewage, and garbage collection... at least for a year or two. After people get used to those additional fees, the complexes begin raising rents again too. I don't blame them too much, there's plenty of rental demand, but it changes the balance between renting & purchasing even more)

Re: Soaring lumber prices add to the cost of a new home

#105

Post by ineedasername » Fri, Apr 30, 2021, 10:02 PM UTC

isbvhodnvemrwvn wrote: post #71

smabie wrote: post #68

Earlier quoted context omitted.

I mean that feels pretty simplistic. Like most things, it depends. There are many things that I could know or believe that affect the calculus. For example I might get promoted next year and make more money or whatever.

Or laid off, or get into an accident.

In which case the equity you've built up in a house can help serve as a cushion, either by obtaining a home equity loan or if circumstances don't allow that because you don't have a paycheck you can cash out the equity by selling the home. Absent on economic downturn, even if you sell within the first 1-2 years you should be able to roughly break even and then downsize to a cheaper apartment.

The only times I see renting as a better economic option is when the monthly mortgage + property & utility costs are significantly more expensive than renting, AND there's an excellent chance of needing to relocate within the next 3-5 years before much equity is built up.

At earlier stages in a career, somewhat frequent relocations are common. But for a large part of the population who, especially as they age into their 30's+, want to stabilize such things in the interest of staying close to family, or make their own family, a greater level of geographic stability is very desirable and can be achieved without much if any career sacrifice if the location is strategically chosen, and buying a house at that stage almost always makes economic sense in the long term.

Of course there are some people who will always want to periodically uproot themselves every few years to new locales, and there's nothing wrong with that either, but I guess my point is that these differences in lifestyle choices significantly change where the economic balance falls.

Re: Soaring lumber prices add to the cost of a new home

#106

Post by ineedasername » Fri, Apr 30, 2021, 10:06 PM UTC

adrr wrote: post #30

Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.

Precisely... my loan was actually too small to qualify for the lowest rates, according to research & some friends in the business, rates like 1.75% were mostly for $250k+ loans, but I was still able to refinance a line of credit we'd used to expand out house years earlier to such a lower interest rate that we're saving more than 20% off our previous monthly payment & about $50k off the total life of the loan (assuming we do an extra payment toward the principal every once & a while, which we were doing anyway).

Basically if you have a home loan from 2+ years ago & still have the same level of steady income, it probably makes sense to refinance.

Re: Soaring lumber prices add to the cost of a new home

#107

Post by ryanianian » Fri, Apr 30, 2021, 10:21 PM UTC

ineedasername wrote: post #106

adrr wrote: post #30

Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.

Precisely... my loan was actually too small to qualify for the lowest rates, according to research & some friends in the business, rates like 1.75% were mostly for $250k+ loans, but I was still able to refinance a line of credit we'd used to expand out house years earlier to such a lower interest rate that we're saving more than 20% off our previous monthly payment & about $50k off the total life of the loan (assumin…

> assuming we do an extra payment toward the principal every once & a while

At the risk of veering into financial advice, paying extra principle early is almost never a good idea. Instead, put that money aside into an investment account and use it to pay off the mortgage once the sum is greater than the balance.

Assuming markets beat your interest rate, you'll have a higher return and you have the emergency fund in case something catastrophic happens. If you pay that to the bank you can't get it back in an emergency, and you will only cut down on the front-loaded interest--which will likely be under market returns.

Re: Soaring lumber prices add to the cost of a new home

#108

Post by MeinBlutIstBlau » Fri, Apr 30, 2021, 10:23 PM UTC

ineedasername wrote: post #106

adrr wrote: post #30

Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.

Precisely... my loan was actually too small to qualify for the lowest rates, according to research & some friends in the business, rates like 1.75% were mostly for $250k+ loans, but I was still able to refinance a line of credit we'd used to expand out house years earlier to such a lower interest rate that we're saving more than 20% off our previous monthly payment & about $50k off the total life of the loan (assumin…

Line of Credits typically go off of prime which is why you didn't get the lowest rate. Most institutions do something like prime + x%. If it was a 15 year fixed or 3 year ARM, then you most likely would've gotten an awesome rate.

Re: Soaring lumber prices add to the cost of a new home

#109

Post by agogdog » Fri, Apr 30, 2021, 10:36 PM UTC

qeternity wrote: post #95

Morvan wrote: post #78

Earlier quoted context omitted.

>The universe That's a funny way to spell government appointed central bankers who fix the price of money.

You cannot blame CBs. I despise the current monetary policy as much as the next person but this is a function of society. We have stopped believing in “no pain no gain”. We think that everyone should be gifted a painless utopian existence in which nothing bad ever happens. Darwinian forces always win.

In 1963 my grandparents bought a house on a single salary. They started saving when my grandmother gave birth at 16 (she was also disowned by her family).

So sure, that's anecdotal... but a 19 year old buying a house with 3 years of savings from an apprenticeship and without any credit or collateral seems impossible to me today?

I'm not sure there's an amount of pain available today to gain that much. If there is it seems like it would be dramatically more painful for the same level of gain?

Re: Soaring lumber prices add to the cost of a new home

#110

Post by adrr » Fri, Apr 30, 2021, 10:41 PM UTC

ineedasername wrote: post #106

adrr wrote: post #30

Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.

Precisely... my loan was actually too small to qualify for the lowest rates, according to research & some friends in the business, rates like 1.75% were mostly for $250k+ loans, but I was still able to refinance a line of credit we'd used to expand out house years earlier to such a lower interest rate that we're saving more than 20% off our previous monthly payment & about $50k off the total life of the loan (assumin…

Why pay off the principle when there are investment grade assets that pay higher return than the interest you’re paying. Not sure what they are now but municipal bonds were paying between 3% and 4% last year which is tax free. Interest rates being so low is just crazy.