Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Americans don't believe middle class can afford homes

newsweek.com

Post reply on HN
Print view View original

51–60 of 183 posts

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

#51

Post by spamizbad »

Analemma_ wrote: post #23
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. We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people. To be clear, I completely agree with you that this system has to be dismantled before it gets worse, and a lot of this suppose…

> you nuke the retirement accounts of 100 million people.

I don't understand how this works - if the assumption is you're going to sell your house for a profit, isn't a significant chunk of your upside just going to be rolled into your new housing?

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

#52

Post by firefoxd »

I can't afford a home, even though I'm considered a high earner. But always ask, how much is an affordable house? In California the answer can vary between 200k to a million dollars. Travel across the states and the range continues to stretch.

I can't afford a decent house in California without disrupting my children schooling and schedule. But then you may ask, what is a decent house?

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

#53

Post by willis936 »

spamizbad wrote: post #51
Analemma_ wrote: post #23

Earlier quoted context omitted.

> We're going to have to have a cultural shift towards housing as shelter, not investment. We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people. To be clear, I completely agree with you that this system has to be dismantled before it gets worse, and a lot of this suppose…

> you nuke the retirement accounts of 100 million people. I don't understand how this works - if the assumption is you're going to sell your house for a profit, isn't a significant chunk of your upside just going to be rolled into your new housing?

It's reverse mortgage. Balance the checkbook on the way out.

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

#54

Post by spywaregorilla »

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.

income cannot define social class by definition.

I would say its rather backwards. Thinking of things as lower class seeks to afford rent, middle class seeks to afford housing, and upper class is beyond it. House ownership is basically the cornerstone of class wealth in the US. Prehaps with secondary lower/middle/upper modifiers your degree of success there (e.g. upper middle class comfortably affords their house, but it's still the bulk of their wealth; lower lower cannot reliably afford rent)

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

#55

Post by bugglebeetle »

Analemma_ wrote: post #23
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. We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people. To be clear, I completely agree with you that this system has to be dismantled before it gets worse, and a lot of this suppose…

> if your house has a "market value" of $750K but no millennial or zoomer can ever possibly pay that, it's not actually worth $750K.

The valuation isn’t illusory if you can constrain supply and monopolize ownership. The plan for the next generations is for them to never own housing and instead be parasitized by huge investment firms who buy up all the existing stock.

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

#56

Post by financypants »

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…

I am personally very curious to know when interest rates are not perfectly offset by increased purchase price. I believe this is a popular belief that is wrong. That can’t possibly be the case, not even in the majority of mkts.

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

#57

Post by jfim »

Analemma_ wrote: post #23
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. We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people. To be clear, I completely agree with you that this system has to be dismantled before it gets worse, and a lot of this suppose…

> If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people.

The alternative is that the younger generations defer or forego having children due to housing insecurity.

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

#58

Post by karaterobot »

Well, yeah. I live in Seattle, where the median household income is $115k, which would mean a home would have to cost around $350k to be affordable, given the 30% of income rule of thumb. The median home price in Seattle is $816k.

Hmm, now that I think about it, that's still affordable if you can afford a modest $500k down payment. Most couples I know who both make around $60k a year have at least that much in the bank. Never mind please disregard, everything is actually fine.

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

#59

Post by beisner »

brianwawok wrote: post #34
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.

This doesn’t necessarily follow - it may be that the average potential buyer wants the same amount of house as before, but due to supply issues the lower end of potential buyers can’t afford to buy anything at all. And size doesn’t scale linearly with price - it’s usually sublinear. So it could be that the only homes that get built/sold are larger because nobody is building homes for middle-lower income price ranges.

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

#60

Post by Analemma_ »

dragontamer wrote: post #30
Analemma_ wrote: post #23

Earlier quoted context omitted.

> We're going to have to have a cultural shift towards housing as shelter, not investment. We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people. To be clear, I completely agree with you that this system has to be dismantled before it gets worse, and a lot of this suppose…

> We can't have this, because a huge fraction of household wealth is tied up in people's houses. If you stop protecting them as investment accounts, you nuke the retirement accounts of 100 million people. So the question is if the wealthy can remain wealthy, or if the poor can get houses? I'm sorry, but... as a Catholic the choice is obvious to me. Blessed are the poor, etc. etc. We should favor those who don't have…

I mean I agree with you. But what I'm trying to convey is, if you go to voters and say, "here's a policy update that will fix the housing crisis and secure a future for the next generation, but it will also subtract $400K from your total wealth", they're going to not just say no, but fight you to their last breath. Proposed policies need to account for this if they're going to have a realistic hope of success.

And no, "move it to the stock market" will not fix this problem. Again, imagine putting this question to someone in their 50s with a house they have nearly paid off: "I could take this wealth and move it to the volatile stock market, or I could continue the policy of protectionist zoning restrictions so my always-appreciating asset can keep on appreciating as it has done for decades. Gonna go with door #2, Bob."

Post reply on HN