How are people affording these crazy home prices?

[Customweld]

Which is really a shame. We seem to have been programmed that if we don’t buy big houses and fancy cars we aren’t a success.

What has replaced the 1955 dream?

in my mind it’s pure envy and materialism.

Boy, marketing sure has made fools of us! Have you seen Polaris’s newest utv?
They keep us mired down in monthly installments, to never realize the true price we pay for everything.

 

[sasquatch]

Boy, marketing sure has made fools of us! Have you seen Polaris’s newest utv?
They keep us mired down in monthly installments, to never realize the true price we pay for everything.

Stand by for the 40 and 50 year mortgages!!! It’s all about the monthly note for the easily fooled. Aka average American


Sent from my iPhone using Tapatalk Pro

 

[Yellowknife]

I think that's what some of the disconnect in this thread has been in the rent vs buy. Builders don't build reasonable sized homes anymore. If you call a local builder and want a 1500sqft house, they'll just hang up on you. So no new stock of houses for the middle class exists. You are limited to whatever exists older than about 1980.

For what it's worth, this if from the LGI Homes earnings call two days ago:



So at least some developers are reverting back to smaller houses to cope.

And this from the National Association of Homebuilders about decreasing sq footage. With current rates, I suspect that thrend will continue.



Lots of data out there about builders switching to smaller and more affordable house plans over the last year. It will take a while to really impact the market though and still a long ways to go to get down to even the '90's house size. And they aren't making new land... so that is always a problem.

 

[Kurts86]

I don’t think owning a house is particularly special or is necessarily a sign of success or good decisions. I own a house and have picked up a small fortune in equity in the last 5 years but it was just dumb luck and not something I worked hard to create. It just means you saved enough money and filled out all the forms right to get the mortgage.

Owning a house is a lot of work and it’s time consuming. I had a lot more time for personal activities when I rented. If consider your time to be valuable like money the math evens up pretty quickly. Owning real estate as an investment is work unlike buying index funds. People with money buy real estate to diversify their portfolio in addition to stocks/private equity not because it’s always a better investment.

People have been talking about how expensive larger houses are to build but where I live and really anywhere desirable the land is worth a lot more than the standard 20% of your home’s value. They playbook in my neighborhood is to knock down 1 house, split the lot and build 2 houses in its place because the land is so valuable.

 

[Dos Perros]

I live in a 1,200 sf house. Folks can be totally happy in any situation they allow themselves to be happy in. Maybe you aren't as in touch with middle class America as you are the wanna look like upper class America. I'm likewise amazed at the size of current houses.

Johnny wants to compete with the neighbors and his online social network, Jimmy doesn't care what anyone thinks, makes the same as Johnny and saves $50K a year instead of continually updating the house. Two diff mindsets, neither is wrong or right. All depends on what is important to you.

I don't know, maybe it's always tough to avoid myopia. I think we live modestly compared to others around us. We have 3 vehicles, the newest a 2008 with 180k on it, and we save $70k a year into various retirement accounts. We live where we live for the kids and the social opportunities it provides. If it were just me and my wife we could get rid of most of this stuff. I envision our retirement to be in a small place on a small piece of land, and we are working hard to get there by age 55 (and I think we will).

I'll say again, I don't think middle class America wants 1200, 1400, or even 1800 sf. Middle class America would rather mortgage up to their eyeballs on 3000+ sf and work till they die, and there is plenty of evidence to prove that.

 

[Dos Perros]

Ok, how about the American dream in 1990 then. When maybe both adults had to work, but not if one had a good job, and the average home size was only 2000sqft and that was easily affordable on a single middle class salary.

Do you have a link to support the average house size built in 1990? Even better if it's over time. I'll admit my bias here, homes tend to be larger because of the lower cost of living.

 

[z987k]

Boy, marketing sure has made fools of us! Have you seen Polaris’s newest utv?
They keep us mired down in monthly installments, to never realize the true price we pay for everything.

I had a 80s S10 that was smaller than that thing.

Stand by for the 40 and 50 year mortgages!!! It’s all about the monthly note for the easily fooled. Aka average American


Sent from my iPhone using Tapatalk Pro

Those are already here. Even the 30 year mortgage is in the you will never own anything range. A lot of people who take out new 30 year loans won't be alive in 30 years.

 

[fmyth]

Stand by for the 40 and 50 year mortgages!!! It’s all about the monthly note for the easily fooled. Aka average American


Sent from my iPhone using Tapatalk Pro

Fannie Mae is currently offering loan modifications with a 40 year amortization:

Fannie Mae Flex Modification | Fannie Mae

www.fanniemae.com

"The Fannie Mae Flex Modification offers eligible homeowners mortgage payment relief by extending the term to 480 months and targeting a 20% principal and interest reduction. The modification may also result in a lower interest rate."

 

[z987k]

I'll say again, I don't think middle class America wants 1200, 1400, or even 1800 sf. Middle class America would rather mortgage up to their eyeballs on 3000+ sf and work till they die, and there is plenty of evidence to prove that.

I'm 36 and I don't see that in my immediate peers. Very much not so in people younger than me.

Do you have a link to support the average house size built in 1990? Even better if it's over time. I'll admit my bias here, homes tend to be larger because of the lower cost of living.

Average Size of US Homes, Decade by Decade

How much is enough?

www.newser.com

When you consider that Americans make only slightly money today adjusted for inflation than they did in the mid 70s, people's expectation are completely out to lunch. The only way to sustain it is just massive crushing debt.
From 1973 to 2014, wage growth adjusted for inflation was 9.2% while the home size grew 48%. Unless building materials got a LOT cheaper, then the average middle class family should be living in something about 1650sq ft if we're talking new construction.

 

[ODB]

I don’t think owning a house is particularly special or is necessarily a sign of success or good decisions. I own a house and have picked up a small fortune in equity in the last 5 years but it was just dumb luck and not something I worked hard to create. It just means you saved enough money and filled out all the forms right to get the mortgage.

Owning a house is a lot of work and it’s time consuming. I had a lot more time for personal activities when I rented. If consider your time to be valuable like money the math evens up pretty quickly. Owning real estate as an investment is work unlike buying index funds. People with money buy real estate to diversify their portfolio in addition to stocks/private equity not because it’s always a better investment.

People have been talking about how expensive larger houses are to build but where I live and really anywhere desirable the land is worth a lot more than the standard 20% of your home’s value. They playbook in my neighborhood is to knock down 1 house, split the lot and build 2 houses in its place because the land is so valuable.

The two-on-one lot is (or at least was) pretty common around Seattle. As a matter of fact Steve rinellas house there was one. I knew the lot before they demolished the house, then watched them build two in the same space. He bought the right side of the pair.

 

[Dos Perros]

I'm 36 and I don't see that in my immediate peers. Very much not so in people younger than me.

Average Size of US Homes, Decade by Decade

How much is enough?

www.newser.com

When you consider that Americans make only slightly money today adjusted for inflation than they did in the mid 70s, people's expectation are completely out to lunch. The only way to sustain it is just massive crushing debt.
From 1973 to 2014, wage growth adjusted for inflation was 9.2% while the home size grew 48%. Unless building materials got a LOT cheaper, then the average middle class family should be living in something about 1650sq ft if we're talking new construction.

I think your link substantiates my point that people want bigger.

My parents were paying something like 13% interest in 1984...more expensive homes at lower rates are more comparable (else, how could we be building them acknowledging the stagnant wages as you have mentioned).

 

[z987k]

I think your link substantiates my point that people want bigger.

My parents were paying something like 13% interest in 1984...more expensive homes at lower rates are more comparable (else, how could we be building them acknowledging the stagnant wages as you have mentioned).

A combination of decades of low interest rates following the 80s and getting into debt you'll never actually pay off.
These 7% interest rates, IMO, are a very good thing. They probably should be higher, for a long period of time.

 

[Dos Perros]

A combination of years of low interest rates following the 80s and getting into debt you'll never actually pay off.

Who would ever want to pay off debt at 3%?

 

[z987k]

Who would ever want to pay off debt at 3%?

Depends on the inflation rate. If we got into a deflationary situation, you would want to, otherwise agreed. I will never pay an extra dime on my 2.5% place. The same bank literally pays me more than that on the money I then pay them at the end of the month.

However, if the monthly payment is 40+% of your income, you're going to be living a really crappy life until you do pay it off or increase your income.

 

[browning2480]

Who would ever want to pay off debt at 3%?

Me. Borrower is slave to the lender. I am almost to the point that I owe no one anything and will sleep peacefully at night knowing whatever happens, I control my destiny, not a bank or anyone else

 

[Customweld]

Its been a while since I have been in the subdivision game. In the upper Treasure Valley, it would cost 25-30k per lot (from bare ground) to make it buildable. This includes roads, sidewalks and wet utilities. This didn’t include the cost of the ground itself. As the cost goes up to develop bare ground, the pressure goes up to reduce lot size and increase lots per acre. This is eventually going to swing back into smaller houses to fit on that 8k sq ft lot. Unless cities rezone their height restrictions.

 

[CJohnson]

I’m genuinely curious what everyone’s property taxes look like. I chose where I live currently based in part on the property taxes. 1 mile down the road (next county over they are almost quadruple). I have a 3800sf house on 7-ish acres and pay somewhere in the neighborhood of $2000. Although that will go up next year to pay for bigger schools and road improvements- etc.

 

[z987k]

Me. Borrower is slave to the lender. I am almost to the point that I owe no one anything and will sleep peacefully at night knowing whatever happens, I control my destiny, not a bank or anyone else

That's way too simplistic way to look at it.

Are you really a slave to the lender if the lender gives you $1k a month in interest on the money you have, but only charges you $500 a month in interest on what you owe him? Seems like he's a slave to me.

I could pay off my house right now, but my lender is paying me not to. If everything remained constant(My MM interest rate didn't change for the next 20 years), I will be 120k ahead by NOT paying off the loan early.
If that swaps, and the interest paid to me becomes less than the interest I owe, I can take not only the money I have but all the extra money they've given me up to that point and pay off whatever amount I want.

 

[browning2480]

That's way too simplistic way to look at it.

Are you really a slave to the lender if the lender gives you $1k a month in interest on the money you have, but only charges you $500 a month in interest on what you owe him? Seems like he's a slave to me.

I could pay off my house right now, but my lender is paying me not to. If everything remained constant(My MM interest rate didn't change for the next 20 years), I will be 120k ahead by NOT paying off the loan early.
If that swaps, and the interest paid to me becomes less than the interest I owe, I can take not only the money I have but all the extra money they've given me up to that point and pay off whatever amount I want.

Gotta factor in risk. You lose your job what happens? You work for Yellow Freight and wake up tomorrow without a job, how does that math work out for you? I will take my way every day you can do yours. Great thing about America

 

[Rich M]

I don't know, maybe it's always tough to avoid myopia. I think we live modestly compared to others around us. We have 3 vehicles, the newest a 2008 with 180k on it, and we save $70k a year into various retirement accounts. We live where we live for the kids and the social opportunities it provides. If it were just me and my wife we could get rid of most of this stuff. I envision our retirement to be in a small place on a small piece of land, and we are working hard to get there by age 55 (and I think we will).

I'll say again, I don't think middle class America wants 1200, 1400, or even 1800 sf. Middle class America would rather mortgage up to their eyeballs on 3000+ sf and work till they die, and there is plenty of evidence to prove that.

We’re on similar paths. we lost a business in 2009 and abruptly hit negative. Took til 2014/2015 to get feet back under us. Leased house so we didnt lose it. Investing about the same in 401k and stock options. Wife drives a 2013 and i drive a company vehicle. We live here for work. Our kids are long out and have grandkids.

Not gonna make it in time for 55, hoping for less than 10 yrs tho. Hope you get it all down tight and make it work. 55 is a great time to retire.

Yes, many folks desire big. Some can afford it.

I’m genuinely curious what everyone’s property taxes look like. I chose where I live currently based in part on the property taxes. 1 mile down the road (next county over they are almost quadruple). I have a 3800sf house on 7-ish acres and pay somewhere in the neighborhood of $2000. Although that will go up next year to pay for bigger schools and road improvements- etc.

You can go online to many tax assessor websites and pull the data for houses, taxes, what they paid, etc.

My dad always talked about turning down this certain lot on a river. It was maybe $60k when they were looking. It now has a $2.3 mil house on it and pays $38k/yr in taxes. I looked it up kadt time hecwas telling the story.

Gotta factor in risk. You lose your job what happens? You work for Yellow Freight and wake up tomorrow without a job, how does that math work out for you? I will take my way every day you can do yours. Great thing about America

Wife and i bought our house with this mindset. I had already been laid off a few times and wanted to be sure we could afford it one 1 salary. Could have gotten more but went with affordable.

Right now we have 3.75% mortgage. They are basically paying us to have it. Some Banks are paying close to 5%. I think that’s what he meant. No need to pay it off early, put that money into interest earning account…