The economy and housing markets aren't 2 things I know tons about so might be a dumb question but if there is tons of boomers filling up houses now then doesn't that mean there will be a lot of houses for sale in the near-ish future? And wouldn't that make them less valuable?
joedirt wrote:
deradoodledoo wrote:
Math here. You are simply wrong.
Median House price in Boston:
1983: 82,000 .
2018: 580,000
1983 median house price adjusted for inflation: $207,000
You were only off by about 200%
Dumbarse millennials. You adjusted for wage inflation, but what you didn't adjust for was the cost of borrowing. In 1983, the average mortgage rate was 12.83%, The average mortgage rate today is 4.47%. So, a mortgage on $207k at 12.83% would be about $2300 a month (assuming 20% down). $580k at 4.47% comes to about $2900, so really he is only off by about 25-30%, which can be explained by the fact that housing prices are inflated.
One other aspect you forgot to account for as well is the size of the average house. In 1983, the average house was 1,725 sq. ft. The average size of a home today is about 2,600 sq. ft. So once you have adjusted for income, inflation, interest rates and home size, real estate is pretty close to what it was back in 1983 (with a little speculation thrown in to provide some inflationary pressure). Buying a home isn't an easy thing, and if you really love the idea of living in a big city (which is highly overrated in my estimation), then that is what you have to deal with. There are innumerable places to live in this country that are affordable that don't lie on the coasts.
generation fail wrote:
In california, NY, DC, Seattle, Boston, etc - there's no way a millenaial could afford the 250k down payment on a starter home in these markets. Homes in these areas are owned increasingly by two groups - asians (Chinese) and people who bought them in the 70s when they were cheap (boomers)
so lol, they have to move to Utah/Kansas/Tennessee. Sad!
Several problems with your "pay attention to me" post.
For starters --
Millennial are defined as being born between 1982 and 2004, so this cohort is 14-36 years old. Most of that cohort (those who are 14-24 years old) cannot afford ANYTHING in terms of a down payment, even in a low-priced market. Even if you are working you have not worked long enough to save the 10-20% required even on a $100,000-150,000 house.
Next, if a 250k DP is required, the home would be $1,250,000-$2.5M (reflecting a 10-20% down payment). Nobody, whether they are 14-36 or something else has $250K for a down payment and the $15,000 a month payment that a $2M mortgage would require. When I say "nobody", I mean statistically "nobody". Whether you are 40 or 50 or 60, you likely don't make enough to plunk $250K down and then make payments of $10-15K a month for 30 yrs. This would require a consistent $500K annual income at a minimum. Yes, doctors make this much, some other professionals make this much, but 99% of America does not make this whether they are 14-36 or not.
So, my point is that most 37-100 year olds cannot afford a $1.25M-2.5M house either and those are the houses that would require a $250K down payment.
What is wrong with Utah, Tennessee or Kansas?
Absolutely correct, but boomers are living longer and staying in their homes longer than any generation before. Its already at a breaking point.
combine that with the lack of development from 2008-2014 and you see why there is such a housing crunch.
Yes boomers also struggled to buy homes (despite the advantages they had), but there is a difference between struggling to buy homes and struggling to rent.
Boomers holding on to homes, lack of development, horrendous wage growth last 10 years, its incredible what these millennials are doing. Surviving against these odds that haven't been seen in America in nearly a century
MessageToMillenials wrote:
https://youtu.be/rX7wtNOkuHo
Agree
live in a 400 sq foot apartment for 5 years and downsize, it's liberating. then, take a slight risk. 10% down, HELOC. property value increase.
my house value has gone up almost $200k in less than 2 years since I bought. I refinanced and HELOC went away and payments went down. this thing is also part of my retirement plan since it will keep climbing in value and demand because of inventory. not gonna happen anywhere but the coasts where living is good and beautiful
Lets be fair here wrote:
deradoodledoo wrote:
Math here. You are simply wrong.
Median House price in Boston:
1983: 82,000 .
2018: 580,000
1983 median house price adjusted for inflation: $207,000
You were only off by about 200%
Lets be fair. Per capita income in Boston:
1983: 15k
2018: 70k
1983: 5.4 times median salary
2018: 8.2 times median salary.
Its not really that close. And these things compound on each other. higher home prices mean higher rents means less saving means more years of saving its all a cycle that favors the rich.
...and today you can leverage the $hit out of that salary. In 1983 you were limited to a 30 year fixed going at about 12%.
Today you can get a fixed at less than 5%.
Don't have amortization charts but that's difference is huge in monthly payments.
..... Most "qualified" buyers today would never qualify then so housing was even more exclusive. Today there are way more home owners to renters compared to then.
jamin wrote:
Wonderin' wrote:
(1) One of the most beneficial aspects of home ownership is -- wait for it -- security. If you own a property, debt free, then maintaining it indefinitely is relatively easy. By comparison, if you rent, you are forever at the mercy of the market and your income sources. Rents can go up, variable interest payments can go up, jobs can be lost, etc.
Not sure I agree with this. If you rent and your income decreases, you can downsize to a less expensive rental, or, worst-case scenario, live in your car. If you buy and your income decreases, your mortgage that you agreed to when your household income was high is still there.
He said owing the property debt free. 15 year mortgages are awesome and 15 years is not that long. 15 years will come and go. At the end, you'll have a house free and clear. For me, that's a ton of security right there. Real estate is unlike any other investment.
Look, if you buy significantly more house than you can afford it's typically not a solid financial decision. One does not need to be financial wizard to know this. Personally, I would never buy a house unless I felt fairly certain that I would not be moving in less than 5+ years. That's the minimum. If one is open to bouncing around the nation chasing promotions in their career I would not advise home ownership....at all. On the other hand, if you commit to a city and lock down your housing for 15 to 20+ years the benefits of real estate ownership are massive. And in ways you may not even consider.
John Utah wrote:
He said owing the property debt free. 15 year mortgages are awesome and 15 years is not that long. 15 years will come and go. At the end, you'll have a house free and clear. For me, that's a ton of security right there. Real estate is unlike any other investment.
Why do people lock themselves into 15-year mortgages? Why not take the 30-year and pay it off in 15? Then if your income decreases you aren't locked into a high payment. That's what I'm doing anyway. I'll pay a little more interest, but it's worth the added flexibility and security.
moist wrote:
Why do people lock themselves into 15-year mortgages? Why not take the 30-year and pay it off in 15?
Haha - if you think you're going to "pay it like a 15," you're not fooling anybody but yourself!
moist wrote:
John Utah wrote:
He said owing the property debt free. 15 year mortgages are awesome and 15 years is not that long. 15 years will come and go. At the end, you'll have a house free and clear. For me, that's a ton of security right there. Real estate is unlike any other investment.
Why do people lock themselves into 15-year mortgages? Why not take the 30-year and pay it off in 15? Then if your income decreases you aren't locked into a high payment. That's what I'm doing anyway. I'll pay a little more interest, but it's worth the added flexibility and security.
Typically you pay a higher rate for a 30 vs. a 15, but I get your point.
Dave Ramsey wrote:
moist wrote:
Why do people lock themselves into 15-year mortgages? Why not take the 30-year and pay it off in 15?
Haha - if you think you're going to "pay it like a 15," you're not fooling anybody but yourself!
Why is this so hard to believe? You just set up direct deposit for the 15 year amortization schedule payment amount. Takes 15 minutes at most. I know very few people who haven't done this or employed some variation of the "pay additional principal each month on a 30yr fixed mortgage" strategy. The optionality of the lower required payment is certainly worth the additional interest.
Getting Old wrote:
Dave Ramsey wrote:
Haha - if you think you're going to "pay it like a 15," you're not fooling anybody but yourself!
Why is this so hard to believe? You just set up direct deposit for the 15 year amortization schedule payment amount. Takes 15 minutes at most. I know very few people who haven't done this or employed some variation of the "pay additional principal each month on a 30yr fixed mortgage" strategy. The optionality of the lower required payment is certainly worth the additional interest.
All of that depends on individual situations and preferences. I refinanced to a 15 and kept payment exactly the same and cut many years off my term. Payment is not a problem for me as I have plenty of financial cushion and not a ridiculously expensive house.
Interested? wrote:
...and today you can leverage the $hit out of that salary. In 1983 you were limited to a 30 year fixed going at about 12%.
Today you can get a fixed at less than 5%.
Don't have amortization charts but that's difference is huge in monthly payments.
..... Most "qualified" buyers today would never qualify then so housing was even more exclusive. Today there are way more home owners to renters compared to then.
First off, no a $70k salary is not going to get you a $700k house. (also that's average salary of everyone not millennials just entering the workforce)
Secondly, there is the down payment. don't put up the requisite amount and you are going to be paying a hefty PMI. Plus you can't count on the wage growth they took for granted that easily kept pace and surpassed that 12% interest.
And that's not true about qualified buyers today not qualifying back then. Why? they would have been making higher salaries vs the rent they paid, they would have gotten ridiculous increases every year, they wouldn't be saddled with student debt despite attending the same exact colleges we go to today, and they could save enough money in 3-4 years after college to join that "exclusive" club of home buyers. Isn't that but R1200 did?
" Buying a home isn't an easy thing, and if you really love the idea of living in a big city (which is highly overrated in my estimation), then that is what you have to deal with. There are innumerable places to live in this country that are affordable that don't lie on the coasts."
Like has been mentioned before, millennials graduate college carrying a much higher debt load requiring them to seek higher paying jobs in the city. Plus a lot of those jobs ONLY exist in the cities, and not the cheap one either.
My job for example is pretty much only done in the most expensive cities in the world. (LA, New york, SF, Vancouver, London, Sydney, Singapore)
It's not really a realistic option to live in Podunkska, Ohio if there are zero jobs in my trade. If i wanted to move to Podunkska, Ohio I would have to take an entry level job in a different field with a 500-800% pay cut or else go back to college or trade school, which is really difficult for people who ALREADY have huge loans that are due.
It seems like the middle class jobs with low education requirements are few and far between these days. Jobs seem to be either no skill/no pay, or high skill/high pay. So once you've put 10 years in an industry gaining the skills required for high pay, it's hard to successfully change careers as would be required to live in Podunkska, Ohio.
Totally agree with the home size issue. Part of the problem is what the market is offering. there seems to be so few smaller houses on the market that they aren't usually a great deal either. When's the last time you saw an 800-1200 sf home being built?
And in the cities where the tech jobs are, the 650 sf apartments are $300-400k, so not exactly an issue of people buying more home than they need.
Lets be fair here wrote:
First off, no a $70k salary is not going to get you a $700k house. (also that's average salary of everyone not millennials just entering the workforce)
Secondly, there is the down payment. don't put up the requisite amount and you are going to be paying a hefty PMI. Plus you can't count on the wage growth they took for granted that easily kept pace and surpassed that 12% interest.
And that's not true about qualified buyers today not qualifying back then. Why? they would have been making higher salaries vs the rent they paid, they would have gotten ridiculous increases every year, they wouldn't be saddled with student debt despite attending the same exact colleges we go to today, and they could save enough money in 3-4 years after college to join that "exclusive" club of home buyers. Isn't that but R1200 did?
Yeah, lets be fair here. You can start by not making things up and no, thats not what I did.
-Despite your statment to the contrary it is true about having to be qualified buyers (and may be true again now - not sure. There was a formula based on your financial history, salary etc. Down payment was a percentage - I think 25%. Banks were very strict.
-What makes you think we had no student debt? My dad died when I was 11 & there was no bucket of money for me. I concede that going to a private school now is much worse debtwise.
-I love your idea about wage growth but alas, simply not true at least in my case. Tech companies werent just handing out money. Like today they had controllers. Again, I made the biggest salary increases when I changed jpbs.
-On my situation. To recap. I went to school in Boston but could not afford to live there when I got out so I moved to an apartment in NH with roomates, then an apartment with my wife. At 26 we bought our first house further away still in NH. Very blue collar town and about 80 miles from Boston. Lived there 12 years then moved to a nice town that is closer.
kkkppp wrote:
The economy and housing markets aren't 2 things I know tons about so might be a dumb question but if there is tons of boomers filling up houses now then doesn't that mean there will be a lot of houses for sale in the near-ish future? And wouldn't that make them less valuable?
I live in a city with areas of dense apartments rented by millennials and large, single family estates owned by wealthy boomers. Most of those large homes are getting divided into rental units when the old folks leave. The scant few millennials who might be able to buy one of these homes have no desire to deal with the maintenance issues.
Millenials should go to schools they could afford. My kids will go to state schools so we won't be saddled with debt. Live where you could afford. If you can't afford to live in the middle of Manhattan, live in a nice area in another boro, the commute might not be much longer anyway. Many young people foolishly want a Manhattan address and live like rats in an area not that accessible to their work.
R1200 wrote:
Lets be fair here wrote:
First off, no a $70k salary is not going to get you a $700k house. (also that's average salary of everyone not millennials just entering the workforce)
Secondly, there is the down payment. don't put up the requisite amount and you are going to be paying a hefty PMI. Plus you can't count on the wage growth they took for granted that easily kept pace and surpassed that 12% interest.
And that's not true about qualified buyers today not qualifying back then. Why? they would have been making higher salaries vs the rent they paid, they would have gotten ridiculous increases every year, they wouldn't be saddled with student debt despite attending the same exact colleges we go to today, and they could save enough money in 3-4 years after college to join that "exclusive" club of home buyers. Isn't that but R1200 did?
Yeah, lets be fair here. You can start by not making things up and no, thats not what I did.
-Despite your statment to the contrary it is true about having to be qualified buyers (and may be true again now - not sure. There was a formula based on your financial history, salary etc. Down payment was a percentage - I think 25%. Banks were very strict.
-What makes you think we had no student debt? My dad died when I was 11 & there was no bucket of money for me. I concede that going to a private school now is much worse debtwise.
-I love your idea about wage growth but alas, simply not true at least in my case. Tech companies werent just handing out money. Like today they had controllers. Again, I made the biggest salary increases when I changed jpbs.
-On my situation. To recap. I went to school in Boston but could not afford to live there when I got out so I moved to an apartment in NH with roomates, then an apartment with my wife. At 26 we bought our first house further away still in NH. Very blue collar town and about 80 miles from Boston. Lived there 12 years then moved to a nice town that is closer.
oops, premature post
cost of attending PUBLIC universities is much higher now , not just private
Also more jobs require, (or at least that's the perception) a college degree now, so the percentage of students with student debt is higher. Maybe less of them should have gone to college, but it's hard to place blame on millenials for listening to advise that education "always pays."