https://fred.stlouisfed.org/series/CSUSHPINSA

https://finance.yahoo.com/news/home-prices-set-record-in-july-140213592.html




Enjoy your high priced home at 8% interest. We've obviously got inflation well under control.

It's really terrible. I know a number of young couples just a few years removed from college that have been very successful and are still absolutely crushed at their prospects of getting a home due to the overwhelming double-whammy that is prices and interest rates.

I had an assignment for new construction of a townhome in Denver not long ago. Closed around $1.7MM for 1 unit... don't remember where I came in but it was over.

Housing market has gone full stupid.

not really an "inflation" problem, it's a supply and demand problem. Unfortunately with no obvious solution.

If the fed wasn't focused on a soft landing there might be hope, but I don't see this dropping outside of a recession

What did we ever do back when the interest rates were near 18%?

Oh yeah, I remember. We saved up for 20% down, didn't buy more than we could afford, and refinanced when rates went down.

JobSecurity said:

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not really an "inflation" problem, it's a supply and demand problem. Unfortunately with no obvious solution.

If the fed wasn't focused on a soft landing there might be hope, but I don't see this dropping outside of a recession

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Huh? It has alot to do with inflation…. prices of goods and labor to build homes significantly increased the past few years which in turn raised the prices of new and used homes. Add in the fed raising interests rates significantly to try and slow inflation and you have high prices and high cost of borrowing.

Except home prices were much closer to wages back then. Big difference.

techno-ag said:

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What did we ever do back when the interest rates were near 18%?

Oh yeah, I remember. We saved up for 20% down, didn't buy more than we could afford, and refinanced when rates went down.

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We'd love to do that. You had an attractive job market and your grocery bills didn't double every few years from inflation.

There's no saving up for a down payment right now. Prices are increasing faster than wages

techno-ag said:

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What did we ever do back when the interest rates were near 18%?

Oh yeah, I remember. We saved up for 20% down (about 12k for the average house costing app. $61k), didn't buy more than we could afford, and refinanced when rates went down.

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Edited for historical context.

HDeathstar said:

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I will listen to complaints when it hits 10%.
These high rates will also help to bring down prices when demand decreases. Just wait a few years and collect 5% on your down payment savings for now. There will be a switch. High inflation will cause people to sell

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How is high inflation going to cause people to sell? They're locked in to a 3% mortgage based on a home value that was 30%+ less than it's worth today. So inflation is going to cause them to sell and move where.. an apartment that is equally as expensive as their home? Or downsize to a smaller home for an even higher mortgage?? Many people couldn't even afford to buy their current home at market prices and rates

There are two ways supply will increase
1) rates fall. This will not lower prices as demand will increase proportionately if not more so than supply. Ie values rise further in desirable areas
2) mass unemployment causing an inability to pay existing mortgages with low rates. No evidence this is coming whatsoever

Try building a home in Central Texas right now

techno-ag said:

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What did we ever do back when the interest rates were near 18%?

Oh yeah, I remember. We saved up for 20% down, didn't buy more than we could afford, and refinanced when rates went down.

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I remember, a lot of people walked out of their homes in the early 80's due to our economy that depended on a strong oil economy. The home I bought in 82 for 62k dropped to around 33k in 2 years, it was terrible. There were some very lean years going forwards. Not a lot of jobs, much doom and gloom. Our economy is diversified now but this administration is screwing with everything and I don't know if we will ever have it as good as in the last 40 years. For my families sake I hope and pray! I truelly feel bad for not just young Ag families but all families trying to teach and do the right things for their own.

Sims said:

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techno-ag said:

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What did we ever do back when the interest rates were near 18%?

Oh yeah, I remember. We saved up for 20% down (about 12k for the average house costing app. $61k), didn't buy more than we could afford, and refinanced when rates went down.

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Edited for historical context.

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My A&M degree got me a $950/month job at a bank during that time so saving $12K was not an easy thing to do.

techno-ag said:

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What did we ever do back when the interest rates were near 18%?

Oh yeah, I remember. We saved up for 20% down, didn't buy more than we could afford, and refinanced when rates went down.

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You have to save 2.5x as long to purchase a home that costs 3x as much monthly. Interest rates are a portion of the equation, but they matter WAY less than price relative to income. Even at 0% interest rates it's more expensive/difficult to buy a home than it was in the early 80's.

1980
Median House Price: 47,200
Median Household Income: 21,000
20% Down: 9,440
Interest Rate: 17%
Tax: 864/yr (72.00/mo)
HOI: 250/yr (20.80/mo)
P&I: 539.00
Total Payment: 631.80
Down payment percent gross income: 45%
Total payment percent of gross income: 16%

2023
Median House Price: 416,000
Median Household Income: 81,500
20% Down: 83,200
Interest Rate: 7.5%
Tax: 7615 (634.59/mo)
Insurance: 2204 (183.67/mo)
P&I: 2327.00
Total Payment: 3145.26
Down payment percent gross income: 102%
Total payment percent of gross income: 46.3%

xiden economy

hph6203 said:

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techno-ag said:

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What did we ever do back when the interest rates were near 18%?

Oh yeah, I remember. We saved up for 20% down, didn't buy more than we could afford, and refinanced when rates went down.

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You have to save 2.5x as long to purchase a home that costs 3x as much monthly. Interest rates are a portion of the equation, but they matter WAY less than price relative to income. Even at 0% interest rates it's more expensive/difficult to buy a home than it was in the early 80's.

1980
Median House Price: 47,200
Median Household Income: 21,000
20% Down: 9,440
Interest Rate: 17%
Tax: 864/yr (72.00/mo)
HOI: 250/yr (20.80/mo)
P&I: 539.00
Total Payment: 631.80
Down payment percent gross income: 45%
Total payment percent of gross income: 16%

2023
Median House Price: 416,000
Median Household Income: 81,500
20% Down: 83,200
Interest Rate: 7.5%
Tax: 7615 (634.59/mo)
Insurance: 2204 (183.67/mo)
P&I: 2327.00
Total Payment: 3145.26
Down payment percent gross income: 102%
Total payment percent of gross income: 46.3%

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Thanks. Some people's inability to admit that economics were more favorable to them in the past is strange. And that's not to absolve the idiocy towards our current economic policies that this generation is perpetuating. I'm sure the millenials will be gaslighting the 30 year olds the same way in 30 years.

We tried this same strategy in the late 70's, didn't work. Has to be a full attempt to stop inflation, and it's going to be very painful. Bank failures, home industry bankruptcies, huge unemployment. 18% interest will crush the growth. Probably be a depression.

Definitely Not A Cop said:

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Thanks. Some people's inability to admit that economics were more favorable to them in the past is strange. And that's not to absolve the idiocy towards our current economic policies that this generation is perpetuating. I'm sure the millenials will be gaslighting the 30 year olds the same way in 30 years.

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How about there be some honesty in what that average home bought you in 1980 vs 2023 and then there can be a discussion. Until then, its a bunch of hooey as most millenials wouldn't let their cats live in what the average home was in 1980.

If you add a 0 to both of those numbers, it's a bit closer to what graduates face today. Except most students coming out of college nowadays may take home about $4000 a month rather than $9500.

It is significantly harder for recent college grads to save nowadays than it has been before. Also, there are very, very few starter homes available to buy with reasonable commutes.

Definitely Not A Cop said:

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hph6203 said:

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techno-ag said:

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What did we ever do back when the interest rates were near 18%?

Oh yeah, I remember. We saved up for 20% down, didn't buy more than we could afford, and refinanced when rates went down.

---

You have to save 2.5x as long to purchase a home that costs 3x as much monthly. Interest rates are a portion of the equation, but they matter WAY less than price relative to income. Even at 0% interest rates it's more expensive/difficult to buy a home than it was in the early 80's.

1980
Median House Price: 47,200
Median Household Income: 21,000
20% Down: 9,440
Interest Rate: 17%
Tax: 864/yr (72.00/mo)
HOI: 250/yr (20.80/mo)
P&I: 539.00
Total Payment: 631.80
Down payment percent gross income: 45%
Total payment percent of gross income: 16%

2023
Median House Price: 416,000
Median Household Income: 81,500
20% Down: 83,200
Interest Rate: 7.5%
Tax: 7615 (634.59/mo)
Insurance: 2204 (183.67/mo)
P&I: 2327.00
Total Payment: 3145.26
Down payment percent gross income: 102%
Total payment percent of gross income: 46.3%

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Thanks. Some people's inability to admit that economics were more favorable to them in the past is strange. And that's not to absolve the idiocy towards our current economic policies that this generation is perpetuating. I'm sure the millenials will be gaslighting the 30 year olds the same way in 30 years.

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I think it's more modern expectations that are out of whack. A young grad expects $100,000 job on day one. Wants a 5 bedroom $750,000 house with 0 down at 3%.

Examples only of course, but you get the point.

ABatt18 said:

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If you add a 0 to both of those numbers, it's a bit closer to what graduates face today. Except most students coming out of college nowadays may take home about $4000 a month rather than $9500.

It is significantly harder for recent college grads to save nowadays than it has been before. Also, there are very, very few starter homes available to buy with reasonable commutes.

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Drive a used car. Live in a dump apartment. Have a used iPhone X not iPhone 15 Pro Max with matching Ultra 2 watch. Brew your coffee at home. Eat ramen. Vacation on surfside beach sleeping in a tent.

I graduated A&M in 2000 and went to work in Big 4/5 accounting. And lived frugally in order to save. And spent an hour each way commuting to that dump apartment.

Next.

hph6203 said:

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techno-ag said:

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What did we ever do back when the interest rates were near 18%?

Oh yeah, I remember. We saved up for 20% down, didn't buy more than we could afford, and refinanced when rates went down.

---

You have to save 2.5x as long to purchase a home that costs 3x as much monthly. Interest rates are a portion of the equation, but they matter WAY less than price relative to income. Even at 0% interest rates it's more expensive/difficult to buy a home than it was in the early 80's.

1980
Median House Price: 47,200
Median Household Income: 21,000
20% Down: 9,440
Interest Rate: 17%
Tax: 864/yr (72.00/mo)
HOI: 250/yr (20.80/mo)
P&I: 539.00
Total Payment: 631.80
Down payment percent gross income: 45%
Total payment percent of gross income: 16%

2023
Median House Price: 416,000
Median Household Income: 81,500
20% Down: 83,200
Interest Rate: 7.5%
Tax: 7615 (634.59/mo)
Insurance: 2204 (183.67/mo)
P&I: 2327.00
Total Payment: 3145.26
Down payment percent gross income: 102%
Total payment percent of gross income: 46.3%

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To make sure that apples are being compared to apples, what are the square footages of the average houses in 1980 & 2023? My guess is that 2023 is substantially larger. Also, what amenities are in each house? Does the 2023 house include granite countertops, 10' ceilings, luxury master baths, etc.?

The reason I ask is that I bought my first house back in 1982 and it was right at that medium price. However, it had been built in 1920, did not have central air, the heat was 2 gas furnaces in the floor with no ductwork, shag carpet that was already out of date and tacky, one bath, a tiny kitchen, and so forth.

UTExan said:

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One way to drive down home prices is by zoning for smaller homes (800-1000 sq ft) in areas that have space to build them. It would allow singles and young couples to purchase at 80-150k, get the tax advantages and start building a wealth base. Putting people in small crappy apartments with no ability to generate equity is stupid and hopefully, some smart town or city on the outskirts of a major metro area will figure this out.

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Even if you got the lot for free your numbers are not workable. Well, maybe in Colony Ridge.

Fun fact, VDLs exist in many older communities located within commuting distance, particularly in places like Houston.

I have spent copious amounts of times looking at the situation you describe. Even when the numbers work from an affordability, the market is simply not there (even entry level home buyers demand the best schools, newest features, short commute).

Resetting expectations is the biggest challenge.

Down payment percent gross income: 45%
Total payment percent of gross income: 16%
Average house size: 1800 sqft
2023
Down payment percent gross income: 102%
Total payment percent of gross income: 46.3%
Average house size: 2500 sqft

So the house size has increased 40%, while the down payment compared to income is more than twice the amount. Economics were favorable in the 80's.

We're locked in at 3% with our starter home.

Would love to get something larger - but can't do that with the current interest rates and inflated prices. If we sold, we wouldn't be ably to get something as nice.

Thanks, Democrats.