This is a very silly comment when you look at actual prices. Even adjusting for inflation house prices have doubled or tripled in a lot of places while wages have remained stagnant.
No amount of scrimping and saving will overcome the fact that the house I grew up in is now $600,000 more than they bought it for when the average wage is like $55,000.
I’m not even a generational doomer type. Millennials and Gen Z will probably broadly be ok in the long run. But pretending that not owning a house is a problem of excess is just stupid when looking at the math.
As a single with no dependants I've purchased a home at $360k and with a student loan.
It's only possible having boarders that pay rent and help with the bills.
The value has increased so much that I don't think it would be possible to own a home in my area on my salary any more.
Now I'm looking at getting married and the cost of living is going to be okay as long as we don't have kids soon. But I'm getting older and can't put that off too long.
I don't understand the housing market to know why it's like this but I'm not sure it's sustainable. People aren't going to be able to afford to have families at this rate. Also, If interest rates ever go back up I'm done.
10 years ago one person buys a house for £100K
10 years ago one person buys a house for £250K
They both buy their houses in accordance with the level of income they earn.
The person who bought the £100K home could not afford the £250K home.
10 years later house prices have increased by 100%.
The person who's home is now worth £200K still cannot afford the house which is now worth £500K even though, on paper he is £100k richer.
The person who owns the £200K home can only buy the expensive £500K house if he increases his mortgage which involves increasing their earning capacity.
Back in 1982 I bought my first home for £29,500 (cheap as chips) with a 25 year mortgage. The mortgage adviser said that over the 25 year period I would pay back £160,000 in interest. 42 years later that same house is on the market for £360,000.
On paper I am considerably richer today than I was 42 years ago. This is meaningless. I have no access to that money. I cannot just sell my home and have loads of cash in my bank account. I would be homeless. I cannot buy a cheaper home because my home was cheap when I bought it and is still cheap.
As a 25 year old I loved my new home. I looked around at all the more expensive homes and thought that one day I would buy one of them. Naively misunderstanding that as my home went up in value so would all the other homes around me even the more expensive ones.
After working all my life I finally retire. My dream is to sell my home and move to the seaside and enjoy my final years and die in peaceful surroundings. Alas, my home will not sell for enough money to buy a home near the seaside. I remain forever stuck in the home I bought 42 year ago.
It is increasingly more difficult for young poeple to buy their own homes. Unless you are earning £120,000 per annum you cannot afford the house that I bought for £29,000 when I was 25 years old.
Who really benfits from home ownership?
Who really benfits from ever increasing house prices?
Who really controls house pricing?
The problem is that people need houses to live in now. I can’t suddenly not need a house to live in simply because I feel very strongly that the trend of real estate appreciation won’t continue forever.
Not to mention, apparently a lot of them base the cost-of-living on the cost of buying property, vs. renting. I have no interest in owning a house in the next five years, and wish I could exclude that stuff from comparisons.
Yeah, the rising rent is totally unacceptable. There need to be more homes built YESTERDAY to keep up with demand, but that is it's OWN can of worms.
I feel that ALL U.S. cities have been blind-sided by the population boom, and all of us millennials flocking to cities to find high paying jobs.
I'm NOT hoping to be a homebuyer. I'd love to, but it's just not financially realistic even as a well-paid developer who recently paid off their student debt... maybe in 5 or 6 years.
As an aside: I've heard the sentiment that I should lower my expectations on where I can live and buy a home, but: The most expensive home is the one you can't sell!
I never understood buying things that I can't afford. I always thought you earn money and when you earn enough money to buy something you can buy that something. That is always how I have lived life.
For that reason I also find it ridiculous that it's the social norm to take debt to buy a roof to put over your head. A (simple, clean, functional) house is a basic need, not a luxury item. I always assumed that if I don't have the cash for a house, I can't afford a house. In those terms, I can't afford a house right now, so I've been renting the whole time.
I think it should be the social norm for the median income to be able to buy a house with cash. For that to happen either people need to be making $1M/year median, or house prices need to come down to 1/5 of what they are.
"You are most certainly correct that buying a house for cash would make sense, but if that seems like a truly viable option for a younger family then you have lost touch with reality in a big way."
Well, yes, my point is not that you would do it, but someone "must" see it an do it. Its like the old joke about getting an economists attention and pointing to a $20 bill laying on the floor, and the economist refusing to pick up the $20, saying, "thats impossible, by the efficient market hypothesis $20 bills can't be laying on the floor ready to be picked up by anyone."
If my house maint only cost $200/month long term I'd be pretty happy. Or it would have collapsed around me as I live here. The killer isn't so much the multi $1K class expenses like roofs and HVAC, but the $750 appliances, theres so darn many, all value engineered to fail in five years, and the uncountable $100 trips to home depot.
I think people are overthinking the problem when it is quite simple: Housing prices have put owning your own home out of reach for the vast majority of young people.
I worked hard to pay my mortgage, feeling happy that I was on my way to owning a house. With a house, I started a family and life was good. I didn't mind putting up with corporate nonsense.
Without a house, I most certainly would not done this. I probably would have kicked around doing odd jobs to save for going backpacking in Thailand. Why the hell would I want to be part of a system that doesn't reward me? There's no reason to buy in (or sell out)
It’s not a lifestyle thing. We need to separate our house from our net worth.
As long as house prices rise faster than inflation, then that’s nice for the people who manage to buy a house, but it’s common-sense unsustainable.
A soldier returning home from WW2 could buy his first house with a few years of savings. No mortgage necessary.
A few decades later, housing prices rising faster than inflation, and a Gen X yuppie needs a 30-year mortgage to afford a house. Not ideal, but still affordable.
A few more decades, and Millenials face a world where you need to be making bank to even think about paying for the mortgage. No wonder we are having kids later, etc., etc., etc.
I don’t know how net worth and housing will be decoupled, but it has to happen. When only the bank can afford your home, that’s an ingredient for social unrest. All I know is that it’s really going to suck for the people who’ve pumped so much money into their house, when it all comes down.
I'd gladly pay more if it meant everybody in America could be homeowners (if they actually wanted to, and put in effort i.e. 9-5 at a FACTORY job for 40 years, to retire w/ a decent pension, and the works), you know like 90% of baby boomers had, but current generations do not have. We're already at a point where nobody will own anything anymore, everything is rented. Owning a home is out of reach unless you make over 200k.
For most of my adult life (now I'm 34) I have spent 30-50% of any paycheck I've received on rent.
In my country (Ireland) over the previous two generations, houses went from dirt cheap to extremely expensive. In the generation that came of age in the late 80s and early 90s, you could work a normal job and buy a house, easily. If you had a good job, you could buy several houses.
Now, my generation. We came too late. Houses now cost so much that you will be en-debted to a bank for life if you buy one. Now we have a rent crisis. For many people, they can barely even afford to rent a house and buy basics like food. Meanwhile, anyone who was lucky enough to be a bit older and smart enough to jump on the property wagon when it was cheap, they are rolling in money. They earn thousands of euros from doing essentially nothing except be born in the right generation.
It's very hard not to look at them, look at the hardships of the people my age who struggle to pay rent, and not think of landlords as social parasites.
My mom used to push my dad to buy a 2nd house in Florida. They wanted to retire there and the prices were rising so fast she believed they never would be able to afford it if they didn't get one in 2005 or 2006. (They are retiring in the next 2013-2014 range).
My dad always refused. He ran a medium sized manufacturing business (about 100 employees) and is certainly in the top 5%, but not the 1% of people in the country in terms of income.
His rational at the time for not buying the house was very simple: "There aren't that many people in this country that can afford a house this expensive. It just doesn't add up to me. I know that most people don't make what I make, and if it's a struggle for me to do it rationally, something is wrong here".
They didn't buy the house, but we all thought he was being too pride bound at the time.
Now they're looking at what used to be 1.5 million dollar places that are going for $550-$600k. Meanwhile our house in New Jersey dropped in price roughly $100k because the bubble economics didn't take hold here as much.
The bubble was absolutely crazy. At the end of the day there were a lot of people buying houses that they could only afford assuming the value of the house increased signifcantly before they sold them. Essentially they could only pay the carrying costs - and that was before the jobs market tanked.
The debate annoys me. Housing has become more expensive and food, including eating out, has become cheaper. Yes, a totally financially responsible person should be minimising eating out in order to save. I do this. I'm on close to average full time wage. Even though I'm saving very carefully, it's still going to take me a lot longer before I own my own home than an average wage earner from the previous generation.
Yes, stop buying avocado every day, if you do. But also, Australian housing needs to come down in cost if you don't want people like me to be renting forever.
It's not the end of the world if I rent forever, but it is a bit sad. Everyone else got to own a home, why should that be so much harder for me?
Not to mention that it takes considerably greater qualifications now to earn an average wage compared to the past. So I'm starting later and with student debt.
I don't want to completely absolve myself of agency. I plan on doing the best I can with my situation and I will probably own a home one day. But is it unfair? Yes. There really is no argument.
Us modern folk have it easier in many ways, but in terms of home ownership we're not hallucinating that it's harder. Wages aren't going up as fast as house prices, and that's really what it comes down to.
I make considerably more than my parents combined when they bought our last family house in 1989. That house is now about twice what I can afford and about 600% what they paid for it. Having doubled in just the past few years.
It’s ridiculous.
My wife and I bought a house in rural Ontario. It appreciated by 25% in two years.
It’s ridiculous.
I don’t want property to be an investment asset. I want it to be a tool, as close to at-cost as reasonably possible. I want everyone to have secure homes. And not just by eternally paying rent.
>>There is another side of this that the article doesn't touch on: home ownership.
Oh boy. There's so much I can say about this topic, and none of it is positive.
Basically, the way our culture mindlessly promotes home ownership is insane. Absolutely insane!
Every time I hear people complaining about "throwing away money" by renting, and how they would rather put that money into a house, I want to hold them by the shoulders and shake them violently. It's like the housing market crash did not teach anyone anything!
It comes down to this: a house is a terrible, terrible means of investment. It's a fixed asset that, contrary to popular belief, is not guaranteed to always go up in value. In addition, people don't really take into account the negatives. Primarily, a house ties you down. You have zero mobility as a labor market participant if you own a house, and this significantly reduces your leveraging power when it comes to negotiating salary. Besides that though, houses have a ton of expenses, and as fixed assets they are subject to a lot of uncontrollable risk (fire, floods, earthquakes, the neighborhood depreciating, etc.).
Instead of having that money tied down on a house, people are much better investing in the stock market, which has, over the past 100 years, gone up by 7% annually.
The only time a house makes sense is when raising kids. The stability of the environment has a lot of positive benefits for their growth. It also makes social integration easier.
Given your last point re: kids, how is it "insane" that people want to buy houses? Most people have/want to have kids.
Btw, I don't agree with your last point. It's pretty much possible to stay in a rented apartment for 5 years at a time quite easily. And kids go through wrenching changes every five years on average (home->kindergarten->middle->high school).
You make good points about the drawbacks of buying a house. However, the ability to lock in your housing expenses for the next 30 years (i.e., no impact of inflation) shouldn't be underestimated. IMHO.
Even with rent increases, I can live in 500 sqft apartments and basically retire in my 30s/40s.
If I buy a house I’ll work until I’m 70. And I’ll be house poor that whole time.
The price of single-family detached homes is so out of line that it is absurd.
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