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Americans don't believe middle class can afford homes

newsweek.com

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Re: Americans don't believe middle class can afford homes

#31

Post by kube-system »

rco8786 wrote: post #8
SubiculumCode wrote: post #2

Well...they are kinda right. 3k a month mortgage when the interest rate was low, now I imagine it would be closer to 4k per month. Housing prices might not be growing as fast but I haven't seen them dropping.

A 4k payment is a ~$580k house at 7.5%. Median home price is $387,600 as of November '23, for a payment of $2716. Not to say things aren't tough out there. Just that a $4k mortgage is still 30%+ more than what people can expect to pay at the median. This ignores taxes and insurance of course.

> Median home price is $387,600 as of November '23, for a payment of $2716.

An actual mortgage payment would probably be closer to 3,000-3,200 after escrowed PMI, taxes, insurance, on a typical loan.

Re: Americans don't believe middle class can afford homes

#32

Post by skywhopper »

betterprojects wrote: post #4

We can barely agree on what the definition of middle class is. A quick search shows one source quoting anywhere between $48,500 to $145,500 a year which is a very broad range. Part of this is cost of living varies significantly in different parts of the US. With the current average salary, average home price, and current interest rates, people aren't wrong that housing is very unaffordable in most places.

Those numbers are probably the 2nd, 3rd, and 4th quintiles of household income. ie, the middle 60%, so that’s a large swath but it seems reasonable to me.

Re: Americans don't believe middle class can afford homes

#33

Post by hasty_pudding »

skepticATX wrote: post #9

In most ways the lives of middle class Americans are better than that of their counterparts 30 years. We have an idealized view of what prior generations’ middle class looked like. Home ownership is the one exception. We need to build denser, and we need to build actual communities that are livable without needing to drive 30 minutes to go to the grocery store. The middle class of today has every right to be infuriat…

Health care, automobile price, groceries, education .

we can buy a TV cheaper than ever but anything important has massive inflation

Re: Americans don't believe middle class can afford homes

#34

Post by brianwawok »

atourgates wrote: post #10

They're not wrong. Check out the graphs on this page: https://www.longtermtrends.net/home-price-median-annual-inco... The Home Price to Median Household Income Ratio is higher than it's been in 70 years. Between 1965 and the year 2000, it fluctuated between 3.5 and 4.5. At the top of the housing bubble in 2008, it hit 6.8. Right now it's at 7.6. And I don't believe the housing price data this index uses (from S&P Cor…

Also look at these graphs

https://www.statista.com/statistics/529371/floor-area-size-n...

The average new construction house size changes from 1500 square feet in 1975 to 2500 square feet in 2022.

So yes, some of the higher cost of housing is simply that buyers want more house. I know my personal house is nearly double the size of house I grew up with, despite only having 3 kids vs my parents 2.

Re: Americans don't believe middle class can afford homes

#35

Post by Dylan16807 »

NDizzle wrote: post #3

With sliding definitions of both "middle class" and "afford" I believe this answer will always be "no".

You can always pick a median income.

What's sliding with the definition of "afford"? I thought there was broad agreement that housing should be no more than 30% of your gross income, give or take a couple percent based on who you ask.

Re: Americans don't believe middle class can afford homes

#37

Post by bugglebeetle »

burlesona wrote: post #6

We spent 40 years believing that house prices were fine because the debt load didn't matter because interest rates would go down forever. Prices are based on the seller extracting the maximum ability to pay from the buyer, so payments were effectively fixed, and every drop in interest rates was perfectly offset by an increase in the purchase price. Then we hit interest zero, there was nowhere left to go. Now we're fi…

> We're going to have to have a cultural shift towards housing as shelter, not investment.

Good luck with that one. We’ve been dealing with this since the 70s when Prop 13 passed in California. The primary responses have been to vilify the homeless for their own plight and funnel billions into “affordable housing schemes” that are little more than graft engines for local politicians.

Re: Americans don't believe middle class can afford homes

#38

Post by skywhopper »

soco wrote: post #29
lucidguppy wrote: post #12

Feedback systems with long delays are going to be easier to destabilize than systems with short feedback cycles. There's a lot of "memory" in housing prices. Houses are just about the hardest item to build in America today. You need land, and you cannot make them in a factory. All cost cutting measures have been in materials (to the point where quality is degrading). Regulations push new players out of the market - i…

Healthcare and education are prestige items around there? Did I get this correctly?

Education is for sure. Where do you live that it isn’t?

Re: Americans don't believe middle class can afford homes

#39

Post by gadders »

burlesona wrote: post #6

We spent 40 years believing that house prices were fine because the debt load didn't matter because interest rates would go down forever. Prices are based on the seller extracting the maximum ability to pay from the buyer, so payments were effectively fixed, and every drop in interest rates was perfectly offset by an increase in the purchase price. Then we hit interest zero, there was nowhere left to go. Now we're fi…

>>We have to increase supply to meet demand.

You can also reduce demand by reducing immigration (legal and illegal).

Re: Americans don't believe middle class can afford homes

#40

Post by WarOnPrivacy »

burlesona wrote: post #6

We spent 40 years believing that house prices were fine because the debt load didn't matter because interest rates would go down forever. Prices are based on the seller extracting the maximum ability to pay from the buyer, so payments were effectively fixed, and every drop in interest rates was perfectly offset by an increase in the purchase price. Then we hit interest zero, there was nowhere left to go. Now we're fi…

> Now we're finally back to more historically normal and healthy interest rates, and it has broken the housing market.

1980s interest rates were higher than now. The 1980s middle class could afford homes.

A new 1987 townhome that cost $212k (in inf adj 2023 dollars) costs about $500k today - allowing for similar quality, features, market.

I think houses are unaffordable because they cost more than double what they did.

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