What can be done about the cost of living?

[phattonez]

It isn't as bad nationwide, it is mainly metro areas and outside of larger cities. Rural areas aren't near as bad because there is generally more supply than demand (less regulation and fewer people).

But rural areas have always been cheaper, so something has changed and should be fixed.

Sent from my HTC phone. Instaurare omnia in Christo.

 

[Nap]

But taking out an FHA loan means you're paying PMI and thus you get higher payments that maybe you can't afford.

Sent from my HTC phone. Instaurare omnia in Christo.

Buy a cheaper home. It sucks but it is better to take the hit paying the PMI early and build equity in a home rather than rent because the equity you build simply by paying your mortgage will eventually turn into the down payment for the next house where as renting does nothing for you. There is literally no reason to rent other than the freedom of not being responsible for maintaining it.

 

[MrWonka]

How do you think that they're able to do that? Through debt!

No, through technological advancement. 100 years ago if you wanted to buy a pair of shoes you have had to go to one of the shoe stores in town, usually within a few miles at most to buy them, or you had to learn how to make your own. Each shot was independently owned by one guy. Today if you buy shoes you're almost certainly buying shoes from some type of massive chain store that has those shoes made overseas. The profits from each of the stores go all the way to the top. Instead of ten stores owned by ten people you have ten stores owned by one.

 

[phattonez]

Buy a cheaper home. It sucks but it is better to take the hit paying the PMI early and build equity in a home rather than rent because the equity you build simply by paying your mortgage will eventually turn into the down payment for the next house where as renting does nothing for you. There is literally no reason to rent other than the freedom of not being responsible for maintaining it.

I agree that paying a mortgage is preferable to renting, but I don't think a zero down payment mortgage is financially prudent, nor would I call it a solution to high home prices.

Sent from my HTC phone. Instaurare omnia in Christo.

 

[phattonez]

No, through technological advancement. 100 years ago if you wanted to buy a pair of shoes you have had to go to one of the shoe stores in town, usually within a few miles at most to buy them, or you had to learn how to make your own. Each shot was independently owned by one guy. Today if you buy shoes you're almost certainly buying shoes from some type of massive chain store that has those shoes made overseas. The profits from each of the stores go all the way to the top. Instead of ten stores owned by ten people you have ten stores owned by one.

We've had large chains for a long time. Sears was founded in 1892. This doesn't explain centralization of wealth. The accumulation of debt, however, does correlate and offers an explanation as to why there's more inequality.

Why do you think it isn't debt?

Sent from my HTC phone. Instaurare omnia in Christo.

 

[Nap]

I agree that paying a mortgage is preferable to renting, but I don't think a zero down payment mortgage is financially prudent, nor would I call it a solution to high home prices.

Sent from my HTC phone. Instaurare omnia in Christo.

It isn't a solution to high home prices, if anything it contributes to it as more people are able to buy a home who otherwise wouldn't be in a position to buy one.

Zero down payment mortgage is not financially prudent, you are correct in that as having a down payment or even better enough cash to pay outright is always better, however it is far better than renting as you are building equity for yourself rather than someone else.

 

[Nap]

We've had large chains for a long time. Sears was founded in 1892. This doesn't explain centralization of wealth. The accumulation of debt, however, does correlate and offers an explanation as to why there's more inequality.

Why do you think it isn't debt?

Sent from my HTC phone. Instaurare omnia in Christo.

There is truth in both your position and MrWonka's. It is a multivariate problem with no single solution. When you intervene in the market there is going to be a butterfly effect causing unintended consequences, it is important to find a balance where changes made have a more positive impact than negative.

 

[phattonez]

It isn't a solution to high home prices, if anything it contributes to it as more people are able to buy a home who otherwise wouldn't be in a position to buy one.

Zero down payment mortgage is not financially prudent, you are correct in that as having a down payment or even better enough cash to pay outright is always better, however it is far better than renting as you are building equity for yourself rather than someone else.

Of course and I agree fully.

By the way have you heard about the new HomeOne mortgage? That sounds like 2006 all over again.

Sent from my HTC phone. Instaurare omnia in Christo.

 

[Nap]

Of course and I agree fully.

By the way have you heard about the new HomeOne mortgage? That sounds like 2006 all over again.

Sent from my HTC phone. Instaurare omnia in Christo.

Nope, I bought my house when the interest rates first bottomed out (would have done slightly better had I waited another month but cant complain). Once I am completely out of debt (minus mortgage, about 3 years out) I will start looking around again to build/buy the home I plan to stay permanently.

Edit: Just saw the Homeone, seems like a reinvention of the FHA loan.

 

[Winchester]

Did they buy them right after the collapse? Because if so, they had great timing.

Sent from my HTC phone. Instaurare omnia in Christo.

No, younger son bought his last December, older boy bought his 2.5 years ago, but they live in pretty modest housing cost areas.

 

[Winchester]

Ya but their peers rather suck, people of that age who were well forged by their parents and their communities are really cleaning up....one of my daughters is already at 27 making over $140K a year, my son who just in the last year became an officer at the 101st Airborne jumped over 6 people to get a leadership spot on his current deployment to Afghanistan...they lack much competition.

Their peers don't suck any more than our peers did.

 

[Hawkeye10]

Their peers don't suck any more than our peers did.

They have science on this, this new crop are the most delayed in development since science has been looking....they are unformed....they are not ready....which is why it is said that 27 is the new 19.

https://www.usatoday.com/story/news/2017/09/19/teens-grow-up-slower-study/105758486/

https://www.theatlantic.com/busines...has-the-recession-done-to-millennials/252913/

 

[phattonez]

Edit: Just saw the Homeone, seems like a reinvention of the FHA loan.

With no income requirements.

Sent from my HTC phone. Instaurare omnia in Christo.

 

[Nap]

With no income requirements.

Sent from my HTC phone. Instaurare omnia in Christo.

I didn't notice that part, hopefully the government doesn't bail them out should it fail.

 

[phattonez]

I didn't notice that part, hopefully the government doesn't bail them out should it fail.

Freddie Mac is the government.

Sent from my HTC phone. Instaurare omnia in Christo.

 

[Nap]

Freddie Mac is the government.

Sent from my HTC phone. Instaurare omnia in Christo.

I feel like such an idiot, I always heard about Freddie Mac but thought it was just a large mortgage/finance company. How is this constitutional?

 

[HowardBThiname]

I'm not so sure, since they'll feel pain from lowered amounts of debt.

You'd think but it doesn't always happen that way. Back when Clinton was President, the rates were pretty high but people just kept buying homes. They just looked at a slightly cheaper range of homes than they would have had the rates been lower.

But higher rates that lead to decreased home prices would also cut into your profits, no?

Not so much. The market just shifts a little. First-time buyers start looking at smaller, older houses, but there's still a market for custom high-end homes because people with money rarely take mortgages. They have the cash to buy so the rates don't affect them much. If we were limited to building mid-range tract homes, I could see where the market would slow down. But builders slow down then as well. That's currently part of the problem -- they never returned to pre-recession building levels.

I can't see higher rates helping the young potential home-buyer -- it just means that the house they could buy last year will cost 15% more this year (when paid out over the life of the loan).

Interesting, that's what I thought. So if land becomes cheaper, homes become cheaper.

Yes, anything that reduces the cost of building will reduce the ultimate cost of the home.

I don't think that specifically building affordable housing fixes anything. I'd rather see home prices in general come down.

Barring a recession, I don't think that's going to happen -- at least not nationwide -- but it can happen in different communities for sure. If industry leaves a community, the housing prices will drop. The reverse will happen too if a place suddenly becomes a boom town.

The problem most have is saving up enough for a down payment. The payments aren't bad, but that down payment is too high.

I get that -- but that's not an obstacle you can't overcome. Despite what your banker may be telling you -- not all lenders have the same rules. When you don't have a big down payment - shop the loan. Contact another lender -- one like Quicken Loans where they don't require as much of a down payment. We've had buyers who were financed through Quicken that no local bank would touch. Sometimes their rates are just slightly higher - not much - but after you've been in the home 5 years, you can always refinance. You might also qualify for a FSA or Rural Development loan, both of which have lower down payment rates.

 

[HowardBThiname]

That is most definitely part of it, but you also have various regulations (for instance the recent solar panel requirement in California), tons of red tape to go through, rent control, councils blocking construction for various reasons, environmental protests blocking or prolonging construction, zoning requirements. There are so many taxes and fees some states require before even lifting the first 2x4 that it is ridiculous.

Absolutely. The new restrictions are stifling and greatly add to the total price of the home. Some of the stuff is so ridiculous. Especially in California.

 

[phattonez]

You'd think but it doesn't always happen that way. Back when Clinton was President, the rates were pretty high but people just kept buying homes. They just looked at a slightly cheaper range of homes than they would have had the rates been lower.

Nah, mortgage demand was nothing like it was post 2000.

Not so much. The market just shifts a little. First-time buyers start looking at smaller, older houses, but there's still a market for custom high-end homes because people with money rarely take mortgages. They have the cash to buy so the rates don't affect them much. If we were limited to building mid-range tract homes, I could see where the market would slow down. But builders slow down then as well. That's currently part of the problem -- they never returned to pre-recession building levels.

I can't see higher rates helping the young potential home-buyer -- it just means that the house they could buy last year will cost 15% more this year (when paid out over the life of the loan).

You yourself say that the rich aren't buying these more moderately priced homes. So if there's less debt chasing these homes, there's less demand, thus prices would have to come down, no?

I get that -- but that's not an obstacle you can't overcome. Despite what your banker may be telling you -- not all lenders have the same rules. When you don't have a big down payment - shop the loan. Contact another lender -- one like Quicken Loans where they don't require as much of a down payment. We've had buyers who were financed through Quicken that no local bank would touch. Sometimes their rates are just slightly higher - not much - but after you've been in the home 5 years, you can always refinance. You might also qualify for a FSA or Rural Development loan, both of which have lower down payment rates.

Which great, that helps with the down payment, but you're not going to get a loan if your LTV exceeds 97% generally. We have situations where people can get 3% down and can afford the payment (since it's generally much lower than their rent), but they won't qualify for the mortgage. So you're right, it isn't just the down payment, but there are other restrictions which are quite burdensome given current prices.

 

[HowardBThiname]

Nah, mortgage demand was nothing like it was post 2000.


You yourself say that the rich aren't buying these more moderately priced homes. So if there's less debt chasing these homes, there's less demand, thus prices would have to come down, no?


Which great, that helps with the down payment, but you're not going to get a loan if your LTV exceeds 97% generally. We have situations where people can get 3% down and can afford the payment (since it's generally much lower than their rent), but they won't qualify for the mortgage. So you're right, it isn't just the down payment, but there are other restrictions which are quite burdensome given current prices.

Okay, I know you've gotten some ideas in your head -- and that's fine, but your "debt chasing" scenario is off-kilter.

I agree that it's tough to be able to afford a house for some people, but for most, it's still doable, and that's what matters. They scrimp, they save, and they do what they have to do to afford the house.

Home-ownership is on the rise -- it's been rising since 2015 -- and it shows no signs of abating. Your 'inflation' scenario could slow it down, however.

As for us -- unless a recession hits -- we won't take a hit building. It just doesn't work that way. Inflation (moderate) won't affect us. It will, however, make it harder for you to buy a house.

 

[phattonez]

Okay, I know you've gotten some ideas in your head -- and that's fine, but your "debt chasing" scenario is off-kilter.

I agree that it's tough to be able to afford a house for some people, but for most, it's still doable, and that's what matters. They scrimp, they save, and they do what they have to do to afford the house.

How do you consider it doable when still fewer than 60% of 35-44 year olds are homeowners (this rate never fell below 65 prior to the housing market crash)? It seems like people are just getting more leveraged, when that's not financially prudent.

Home-ownership is on the rise -- it's been rising since 2015 -- and it shows no signs of abating. Your 'inflation' scenario could slow it down, however.

Home ownership is on the rise because the population is aging, not because there is a real recovery. Look at the age distribution and you'll see no significant recovery.

https://www.census.gov/housing/hvs/data/charts/fig07.pdf

 

[late]

To answer the OP, Progressive policies.

https://www.amazon.com/Price-Inequa...words=the+price+of+inequality+joseph+stiglitz

 

[HowardBThiname]

How do you consider it doable when still fewer than 60% of 35-44 year olds are homeowners (this rate never fell below 65 prior to the housing market crash)? It seems like people are just getting more leveraged, when that's not financially prudent.

It hasn't yet recovered completely, and it's really an individual decision whether or not to take on that kind of debt. Most financial planners will still advise young clients to purchase a home as an investment.

Home ownership is on the rise because the population is aging, not because there is a real recovery. Look at the age distribution and you'll see no significant recovery.

https://www.census.gov/housing/hvs/data/charts/fig07.pdf

Actually, since 2015 (the date I cited earlier) your chart shows that older Americans are the group that is dropping while the Under-35 and 35-44 group have trended upward in that same time.

 

[phattonez]

It hasn't yet recovered completely, and it's really an individual decision whether or not to take on that kind of debt. Most financial planners will still advise young clients to purchase a home as an investment.

No it has not, not even close. I think that ownership rates have remained low because prices are still far too high. Have you ever seen this graph?

https://4.bp.blogspot.com/-GEmhDDB-pGI/WYdX4las55I/AAAAAAAAPWs/3C1_DCT4Z-QBLWckAs0pY8ZL-tZlsoEbACLcBGAs/s1600/ratio-ttma-US-median-new-home-sale-prices-and-ttma-median-household-income-annual-1999-2015-monthly-200012-201706.png[/img[

[quote]Actually, since 2015 (the date I cited earlier) your chart shows that older Americans are the group that is dropping while the Under-35 and 35-44 group have trended upward in that same time.[/QUOTE]

Under 35 has gone from maybe 34% to 35%. 35-44 has gone from maybe 58 to 59%. These aren't big recoveries, more like blips at this point. Even the overall rate has just slightly gone up. If this is the best kind of recovery we could get while rates were low, what is going to happen as rates continue to rise?

 

[late]

You can expect a decline in home ownership thanks, in part, to income inequality.

From the 60s, to just before the big economic crash a decade ago, the number of hours worked, by family households, increased almost 300%. Everything has a limit.

Even if we get a Progressive era, there will be choices to make. The inefficiencies inherent to suburbia will make the previous levels of government support for single family housing dubious.