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because 30% is an impossible amount to spend on housing anyway. If rent costs 50% of your income, then "only" spending 40% of your income on a mortgage payment is a massive step up. You're also quite a bit less likely to have your mortgage payment suddenly increase year after year in the way that rent hikes, so getting into a slightly expensive mortgage early can pay dividends later if your wages increase annually.
Yes, because if they don't then somebody else will and they won't have anywhere to live.
That's how shortages of essential commodities work. Build more homes where people want to live and ensure businesses don't buy them for renting.
We don't have an issue that there aren't enough houses. We have more than enough houses. The issue is that they're not being utilized primarily because they're just being bought up for value by corporations.
I keep seeing that but I don't buy it. There are corporation owned homes and there are empty homes, but I don't think they're the same homes.
I'm struggling to think of any logical way that you could make more money buying a property and leaving it empty on purpose while watching the value go up, than you would by doing the exact same thing while collecting a colossal monthly rent.
Most "empty" homes that don't have the roof caved in or boarded up windows in suburban slums are holiday homes and air BnB type things.
I mean, if an entrepeneur owns a significant portion of the available houses in a region then they can chose to only keep the as few on the market at a time as possible to force the prices to stay high, they might even work with their other housing entrepreneur buddies to have them do the same thing so that all the housing entrepreneurs in the region can win big.
So a re-run of 2006-2007, but this time around there wasn't even an actual boom preceeding this.
I’m in the US. House values in my neighborhood have doubled since 2017 (7 years). Things are the same where the rest of my family lives, 11 states away. Are we not in a boom?
No this is another housing bubble, similar to what happened back in 2010. My house is now worth more than double what I paid for it, which is more than it was at the peak of the housing bubble right before it crashed back in 2010.
But biggest difference this time around is the bubble has been intentionally accelerated by a handful of investment firms that have been buying up all the houses across the US for the past decade.
The Economy is not booming, it's only the prices of Assets such as houses that are in a bubble.
Last time around the "wealth" (even if illusory) was spreading a lot more and causing all sorts of things to grow by feeding consumption, as well as a general feeling of prosperity (until it turned out it was illusory and the whole castle of cards fell) whilst this time around it's pretty much only large asset owners who are actually gaining from this whilst the rest just increasingly feel poorer and more treading water ever harder merelly not to drown.
It's a different Economic climate and even a different feeling for most people, even if both periods share the house price bubble.
PS: And, by the way, this is not just in the US.
People have been buying beyond their means since the '70s
Because renting a home that's barely enough to get by is even more expensive and will go up faster than inflation, so if you're lucky you buy a house that's barely enough to get by and wait for the day when it's finally affordable since the payments don't increase as much as inflation.
Yeah but repairs don’t get taken care of by a landlord. When you buy a home, you have even less monthly funds available for mortgage because you also need to be saving a little for the big repair things that come up.
Renting allows those repair expenses to be handled by the landlord rather than the tenant. Renting is not inherently a worse decision than buying, there are pros and cons to both.
I own a small house that is 118 years old with plenty of issues, and the amount I put into repairs and maintenance is nowhere near the difference in what it would cost to rent a similar sized home in my neighborhood compared to my mortgage, taxes, and insurance. That includes a major sewage issue that required digging up and replacing the old clay pipes, something I couldn't do myself.
And I've only owned it for 3 years, so I haven't even gotten to a point where inflation has increased rent over the mortgage payments yet, mosly because the rental market is insane in most cities due to short-term rentals and offshore investors leaving lots of properties off the market, so landlords can charge way higher rents with so little competition. In 10 years, assuming there's not a market crash, I'll be way better off.
Renting only saves repair cost in the short term, spreading out those costs across time, because otherwise there wouldn't be profit in renting. As a renter, you're never in a position to do that saving because rent is always so much higher than mortgage cost. Even if you have to pay more for the home than the asking price like I did. I just happened to get in before the interest rate hikes is all that I benefited from.
It all sounds good until your mortgage increases by 25% in one year due to increasing property taxes and insurance.
But the same happens to the rental owner, and trust me, they pass that increase on to the renters. So it's still better than that.
When buying our first house in 2008 the mortgage company was pushing us to buy more by saying, “why are you purchasing this house at $197,000 when you can afford twice that?” My response was, “we’ve done the math, we can’t afford twice as much.” Never listen to a mortgage broker. They all want you to spend more so they make more.
I bought in 2022 and can't imagine having that much interaction with a mortgage broker. My interaction consisted of giving them my information. Getting pre approved for a stupidly large mortgage (about twice what I could afford). Then, when I found a place to buy, they punched in the address for the "virtual appraisal" and approved the loan.
The amount I "qualified for" when applying for a mortgage was fucking insane. I would be completely under water if I had taken the bank up on that full amount. I assume plenty of people jump at the chance to spend huge piles of money they don't have and will likely never have.
I had the exact same experience a few years ago. A lender did some quick math within like 20 minutes of talking and was like "I think we could go ahead and lock you in at loan in the mid 600's"
Lmao we could never in a million years dream of affording that. Idk wtf that dude was thinking but I can't even begin to try and figure out how I'd be able to afford that mortgage unless it was like a 3,000 year 1.08% loan or something.
Alternative headline: "Homes buyers can comfortably afford increasingly rare."
Seriously, what a fucking disgusting headline... It reads as if the people are being irresponsible and buying things larger than they should...
Way to blame the people for an issue that isn't their fault...
Well, the thing is, this is exactly what led to the housing crash of '08. Back then it was because the banks were pushing people into it (and then selling the bundled loans as better rated than they were, where inside investors bet on the loans failing). If this is what's happening now, it's certainly because the banks are enabling it again. That would be insanely stupid of the banks after what happened in '08, but somehow we've gotten stuck in the stupidest timeline, so...
That would be insanely stupid of the banks after what happened in '08,
Would it be though? Leeman fell, but then we started with the "too big to fail" bullshit and gave a nice lesson to the bankers that we'll be here to bail them out should their greed take them too far. Only Joe schmoe should suffer the consequences of their actions, not the ownership class naturally. :/
Washington Mutual didn't get bailed out. The feds forced Chase to buy their accounts, making it less dramatic than Leeman.
Where I am, one would need to be making $29.70/hr (working 40 hours a week) to afford to only be paying 30% of their income on housing, and there aren't many actual slums left. State minimum wage is $14/hr. Federal is $7.25/hr. The cheapest bottle of alcohol and a thin rag costs $12.95, though you can save a quarter if you rip your shirt into strips instead of using rags.
At least you roughly lock in a monthly rate. I was happy to not have 15% rent increases each year.
This is the real explanation. There is no more choice to rent a cheap apartment or buy an expensive house. You can live in a van maybe but that's being outlawed in many states. My brother in law and his family are paying almost $2000/month for a shitty apartment built in the 1970s. I bet the same place will be $4000 in 10 years, and even shittier.
Well, yeah. We can't afford rent either.
Should we suffer from rent we can't afford or a house that might one day have some value?
That's because to get the actual value of a home in 2024 you have to cut its price in half.
Every home I can afford is a home I can barely afford, for both rent and mortgage.
I have been house hunting for over a year. I don't have crazy requirements....I want a 3 bedroom house with a sub basement (tornadoes) and a fenceable yard within an hour of work.
The average price for that around here is 425k. A house that needs major work might only go down to 300k.
Down payment on a 300k house is 60k. A 240k mortgage plus taxes and insurance is $2100/month. $2100 is 30% of $7000. That's a $140k salary. The median income in my county is 78k.
I make above that, have 200k for a down payment, and am still struggling to find a place.
[Edit] fixed math
Might want to double check your math there. $2,100 is 30% of a gross $72,000 salary. That’s under your median income target.
Are we talking gross or net income as the baseline? Before taxes, $7k a month is still under $100k annually.
Down payment is not $60k. That's only if you want to avoid PMI. That said, putting down less means several hundred more a month in payment.
Also, not sure how you are doing the math to get to a required $200k income. $7k/month is $84k/year. Even with taxes, that is a little over $100k.
7k a month is 84k a year, not 200k. I bought my house with similar numbers (house price, down, and monthly mortgage) and while I earn higher than average, I’m nowhere close to 200k.
And most of those willing to take on the additional risk will look back at their decision positively. Shit’s not getting any cheaper.
When the options are rent you can barely afford or a mortgage you can barely afford ,the choice is obvious .
More importantly, can you lock in a mortgage payment that won't change much, vs. a rent that may skyrocket in the next 6 months? And sometimes a mortgage can be less than rent (although there are other costs to be considered). In our situation we were very lucky to be able to leverage money and jump on a house before things got stupid, and if we hadn't taken that jump I'm not sure where we'd be right now since rent prices got crazy while we're now still paying a decent monthly price.
Then there's the unlucky few like myself who are perpetually single and stuck in a state where I spend half my income on renting someone's garage, but a house would be almost 80% of it...
I literally just hit an income level where I could start looking for a house and then fucking COVID ruined everything...
I get it. My wife and I just bought a home in Canada this summer and the pressure is very real. The prices just keep climbing and there is so much competition for everything that comes up on the market. Throw in periodic drops in interest rates and you feel like you have to pounce now or you'll never get one.
We were very fortunate that the sellers chose us specifically because of our family dynamic and the vacancy their own family was leaving in our little neighborhood of playing/communal children. We got the house at asking price and are well within our budget, but things were looking a bit grim there until fate worked itself out. People put shit-holes up for 400k and half the time people buy it anyway. If they don't, the price drops by 15k and it's sold the next day.
Buckle up, here we go again!