They still hold a decent amount of cash as a percentage of their portfolio. 10% of a million dollar portfolio is still $100k which is more than the average joe has. He would use that money to buy a house instead of letting it sit around.
Yes, bigger down payments suck but that is mostly a zoning/housing supply issue.
Because even if it's their parents that pay for the mortgage, they are still affected by the consequences of high housing prices (longer travel times, less disposable income, lack of space, bad neighborhood, lack of social mobility, etc...)
Tight supply and government backed mortgages can both be contributors.
I can't imagine taking out the loan I supposedly qualify for. Meanwhile, people calculate affordability based on a percentage of their income rather than sweating the overall longterm value of a particular property.
Not if in lieu of homes they invest in nothing at all. If you don't own a home you're paying rent. Rent prices have also increased dramatically so it's not like there's money going into savings.
Personally, I pay more in student loans than every one of my parents, aunts, and uncles pay on ybeir mortgage. I pay 2-3 times more in rent than their mortgage. I might be ok but only because of a high paying tech job. Those at the lower end the scale are absolutely fucked.
They also have a very large part of their debt in real estate. It's part of the problem.
Median net worth in the US is $121K. Median home price is $301K. The middle class doesn't own most of the real estate in the US. Lenders do, which was kind of my point.
Indeed. Why would they get paid more if the house happens to be more expensive?! That's like a doctor charging 1% of the patients income... "rich people should pay more".
The idea that every area is HCOL is just wrong. You can get property for as little as 3% down. You can rent out extra rooms.
It’s remarkable that our generation willingly takes out 6 figure loans for worthless college degrees but can’t save 10k for a down payment on a condo in Atlanta.
People spend more money on their homes nowadays. Especially now that remote work is widely accepted.
I was just clarifying that while the buyer in theory has more total buying power (so yes, I agree there), it is all on the debt side. Their buying power from a cash standpoint has, if anything, worsened, because of housing cost inflation and the extra downpayment they need to have saved up.
In this market with cheap debt, there's a large number of HENRY's (High Earner, Not Rich Yet) who can afford the mortgage payments, but are perhaps too young to have had a chance to have saved up the necessary downpayment without help from families and such.
This doesn't seem to fit the facts. Entire occupational classes today can't buy homes that a single income household could buy in the past. The quality of housing is better in some ways (much bigger, heating, AC in most areas, etc.) but that's not much consolation if you're priced out.
Or maybe they're just not rich. Because you have to be rich to live--and especially to buy--in most cities' walkable parts in the US. Not even just middle class but upper class. And even if you can afford it, it often doesn't make financial sense. For less than a studio or one bedroom, I can get a 5 bedroom house 20 minutes away by car. And I don't have to pay extreme HOA fees, essentially private taxes. I hate driving / would love to walk places too. I just can't afford it.
Yeah, this is kind of aggravating. I'm not an engineer, but I know many, and anyone who thinks they are all just living the high life is crazy. With the cost of living they are no doubt faring better than many traditional working class folks, or service industry folks, but let's be real--they aren't just idle rich bathing in tubs of caviar.
In fact, while they might be able to purchase a home still, it often times will be quite a bit smaller, more run down, and in a worse neighborhood due to the sheer cost of buying one. And often times they are only buying out of desperation because they don't want to be forced out of the area entirely due to rents beyond their control.
The point is if nobody builds the nicer dwelling, the person with the money that could have afforded the higher price will just turf out a lower-earning person living in a worse house, because the main feature of the house is that it provides access to the occupant's job.
Yes, they would have been better off with cheaper housing costs all their lives, but we are talking about people who have already purchased. If housing prices dropped to one half their current value, a large fraction of the owner-occupiers in this country would be bankrupt.
Saddens me that the top earners in our world have to dream of affordable housing so they can save a bit of money. Probably not enough to buy a house in that same area. Sigh.
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