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.
The problem here is that, in general, you don’t get to own multiple houses by being a hard worker. You could be an extremely hard worker, but not make very much money. You could be very lazy and make loads of money. The reality is that the housing market is on a trajectory where most people cannot and will not be able to afford ownership, even for white collar jobs. Wages do not go up quickly for most folks either, so the cost of acquiring a house relative to your income continues to rise.
More specifically, say you enter society making $80k in a major city. You’re young, so this is normal. At this point in time, a house is not an option, because a mortgage would require $100k in savings. And if the housing market continues increasing like it has the past few years, that amount keeps going up. For most people, the rate that house prices go up is quicker than the rate they can save towards a down payment.
It’s important to note that a quickly accelerating housing market is EXTREMELY beneficial for investors. It creates a feedback loop which makes investments more common, which makes the prices go up further. Spending $400k this year and selling for $500k next year is an excellent investment opportunity.
Is it greedy to think that one deserves a home? Likely not. Is it greedy to make some extra money via property investment? Maybe sometimes, maybe not. The point isn’t that property investment is inherently bad, but that property investment is pricing most people out of the housing market.
As a hypothetical, would you like to live in a society where homes are not accessible for 90% of people? I personally do not want to live in a society where housing is extremely scarce. That’s a recipe for societal upheaval. If property investment is making the market spiral out of control, which it likely is, it benefits most people to curtail that problem.
Good. America needs to stop trying to make the existing rich richer by artificially propping up house prices, and therefore preventing those who want to build wealth from being able to buy a house and start doing so.
This would not be a problem if the entire US economy, right from nearly every tax incentive, to the schools you send your kids to, to the opportunities that are available to you and your kids, etc. wasn't based on home ownership and making home ownership the primary source of building starting wealth.
The other alternative is to find a high paying FAANG or finance job and/or starting a company. The former is available to a select few, and the latter also is built on owning a home, because many people who start companies will often find funding to start, maintain, and/or grow their company by taking loans against their homes.
Because, once again, the entire US system is built around rewarding home ownership, and so it's the only source of wealth building available to the vast majority of Americans.
The reason people aren't buying a home in cash, which is not necessarily common but completely doable and not illegal or anything, is because almost no one can afford to do so. Saving for 30 years and then buying a house in cash all while paying rent somewhere in the meantime I think is pretty undesirable.
I feel the biggest issue with owning a house is the amount of debt recent college graduates are already in. If I didn't have my student loans hanging over me, I would've totally gone and bought a house, or built my own (everyone in my family has built their own, pretty much, so I have a wealth of knowledge to draw on thankfully). But, I can't afford it. I feel that's part of the issue with many people choosing to pay rent over building. Not to mention trying to save so you have a decent down payment size.
Just to note - that last class of buyer has no financial motivation to remain a renter. They are stuck in a situation they can't get out of easily where a larger portion of their paycheck goes to housing and decreases the rate at which they accrue value.
This is why home buying assistance exists and is a very very good program for the government to subsidize, renting should, ideally, be a tool for those just starting life and those with the means to indulge in luxury - most people should own their homes since most people are living in the same place for extended periods of time. The exceptions to that are rare and need consideration, but the majority of renters today are people who are stuck in the rent cycle or don't know any better.
I make a decent living, way above median household income, but my wife and I rent in a dense urban center for the simple reason that even with our income we couldn't afford to own in this area. Even if we weren't paying student loans it would take several years to build up a down payment that would result in cheaper mortgage payments than our rent burden, which would be crucial since homeownership adds property taxes and significant upkeep costs above the mortgage payment. Sure, we could afford a house in the 'burbs, but we don't want to live in the 'burbs. The rent is too damn high, but so are the housing prices.
Housing is one of the _very_ few ways a peasant can leverage debt beyond his means to hedge against inflation.
There's no other way I could take out a loan for > $100k to buy an asset. Since leveraging dollar debts to assets is the only sane thing to do in an inflationary regime, it's no surprise that housing has become ridiculously overpriced.
Buying a house is the only way an average person can utilize financial techniques of the wealthy. Namely leveraging dollar debts against an inflationary hedge.
The problem is single-family homes being bought by investors to rent in the first place. People want to buy, but even low interest rates allowing my bank to offer me cheap money can't out-compete a large investor that has more more assets that allow them access to even more cheap money.
I get that no one has a God given right to home ownership, but we've made a deal with the devil where home equity and housing appreciation are major stores of wealth for the middle class. Letting the investor class corner this market feels like kicking out the ladder for anyone not already on it.
That's a weird comparison. Not every household makes enough money to afford a home. I don't think home ownership is a universal human right so I don't really see the problem with this. The median household shouldn't be buying a median priced new car either
Affordable housing/having roof over your head is a massive problem for everyone but the super wealthy. House costs in the western world are wildly out of whack with median incomes and whether you rent or own a disproportionate amount of your income is gone on this. The 'Rich Dad, Poor Dad' house flipping and rental era did enormous damage to society, giving the illusion property owners are primarily rent seekers. (Slightly ironic on HackerNews since so many are now paid for working on software for rent rather than being purchased outright).
The reality of owning rental property is often one of breaking even and spending money for repairs and new appliances that must be done now, as opposed to when you have the money in the bank for your own place. Finding good tenants is like Russian Roulette. A friend's mother died and she rented the house to a man without doing proper background checks. He showed up once and was never seen again after saying a 'friend' would move in some furniture. That 'friend' was a woman who changed the locks, never paid any rent and was seen bringing large packs of dogs in by neighbors. After months of expensive litigation the woman suddenly left on the eve of final eviction. The house had been trashed with every room used to keep dogs in for her 'dog walking' business. The place stunk and there was drug paraphernalia and needles everywhere. It cost thousands more to restore the house to livable condition. Horror stories like this are not uncommon, These are not 'rent seekers', just ordinary people renting out houses and flats, often under considerable financial stress themselves. Another (also female) friend answered a home wanted ad on a lamp post for a section 8 person and rented a small unit in her garden to her out of the kindness of her heart. That person then called social services after harassing her 'landlord' and told them the person she was renting from was insane. She made her 'landlord's' life hell for months until she was finally dealt with.
The solution is far more affordable housing but how we get back to that 1960's era English and Irish council housing model I have no idea in the current political and financial climate...
In the USA you can't out save the housing market unless your making 10x+ the median salary. A lesson I've repeatedly learned. I worked for a number of bootstrapped startups, and purchased houses far under what I could have borrowed based on my salary because I always wanted to have a good solid year+ of runway should I face an unexpected layoff during a downturn.
That has turned out to be some of the worst financial decisions I ever made. While my contemporaries were buying house for 4-5x+ their salary and over time those houses doubled, tripped in value, my house also doubled and tripped in value, but now the difference between the houses I could have purchased and the ones I did, are now in the millions of dollars (aka I have to find 2+ million to upgrade to a house only slightly better than the one I own). Meaning if I want to move up in the housing market to a house I could have purchased a couple years back for just a slightly higher percentage of my income is basically out of reach.
So a lot of people complain about what it takes to get their foot in the door, but the spread between houses has massively widened as well. Just 10 years ago 1.5 million would have gotten a house in the top couple percent, now that number is probably closer to 7-9 million. So even if your salary doubled or tripped, unless you purchased at the max of your previous salary its like starting all over in the housing market.
(and just to make this post longer, this is largely the result of interest free money, a few years back I realized that steady state interest one pays should always be just slightly higher than inflation. Anytime the inflation != interest rates happens it throws things out of wack. AKA while people are complaining about the current rates, if inflation is 8-9% the fed should have immediately reacted with 7-8% rates, which would have massively hammered the system, but apparently no one at us fed/etc has really studied control systems enough to understand that adjusting rates every couple months will never result in a stable system, especially if they fail to react to changes strongly. Their current strategy entirely assumes that inflation/etc slowly rises or falls.).
A family member of mine is in the same position: they bought a house, and now they can't afford it. I'd love to feel as if the bank should be held accountable, but at the same time, I look at my family members, what he does, how they spend their money, and I can't feel sympathy. They dug their own hole.
And yet, the amount of entitlement coming from them is just insane. They feel as if it's not their fault; they point at everyone except for them. It's the governments fault they aren't getting money. Ignore the fact that they both dropped out of college, bought a house together before marriage, had a child before marriage, and are now on their way toward a second child, while basically unemployed.
I've tried to help. Bought them a computer for school, send them gift certificates so I know the money goes toward the kids. Bought them a washer for their clothes. But when they go out and spend $200 on a tattoo for a birthday gift (not to mention an iPod touch!), I can't help but wonder what they are thinking.
And still, the self-entitlement they reek of is horrible. My wife and I work hard, pay our bills, and still rent. We make more than enough to get a house, but we want to pay off the few outstanding debts we have, and save up money for a nice big down payment before we settle on a house. We look at them, and wonder how they were given a loan, how they could feel like they should get one, when we can't imagine getting one right now.
Maybe the lenders should be held accountable in some regards, but this doesn't excuse the borrowers. The worst part is the kids. With a second a month away, I just can't see how they'll be able to afford everything. I know they are using their credit cards right now, but spending it on stupid crap ($200 for carpeting for the new babies room.. seriously?)
Sorry. Long useless rant. Just had to get it out somewhere.
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.
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