
Prices for starter homes are crowding out millennials - huherto
http://www.bloomberg.com/news/articles/2015-10-20/prices-for-starter-homes-are-crowding-out-millennials
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arielweisberg
I wish we were back in the days of 20% down. Seems like that would ground the
market properly and make people more price sensitive, but I am not an
economist. Turning the spigot off is harder than turning it on.

My beef is that easy credit isn't just driving up the price of housing it's
driving up the size of housing which is connected to the price.

~~~
VT_Drew
20% down would mean even fewer millennials would be able to buy a house. I
don't know anyone that has 40k sitting around in their bank accounts for a 20%
down payment on 200k starter home.

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zardo
I can save 40k, finding a home for only 200k is a laugh though.

~~~
Phlarp
Minneapolis reporting in, 200k houses abound.

But hey fuck us flyover states-- what with our high paying jobs and affordable
housing

~~~
eric_the_read
Flyover states? Like... Virginia? [http://www.businessinsider.com/which-
states-are-flown-over-t...](http://www.businessinsider.com/which-states-are-
flown-over-the-most-2014-10)

Just kidding, I'm in flyover country as well (Colorado), though our real
estate is much less affordable than yours, it sounds like.

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Retric
Where I live the choice is renting for 1600/month or 'buying' a similar play
for 300k + Appliances with a 800$/mo amenity fee AND property taxes AND
Maintenance.

The only way buying works out is if there is some greater fool out there
willing to play the sucker in a few years.

PS: Looks like 150$ of that amenity fee is a special assessment for the next 8
years. But, new condo's are notorious for artificially lowering condo fees for
a few years and then bumping things when they need to fix something major.

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mikeryan
800 bucks a month or a year?

300k place with 20% down should be about $1500 a month ($1600 a month at 10%)
for mortgage + property taxes.

Am I missing something?

~~~
nkrisc
$800/mo for an HOA fee is crazy. I recently purchased a condo for $330k at 20%
down and I'm saving $200/mo over renting a smaller place.

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charlesdm
I can easily make 10-15% a year on my money investing, so that $66k
downpayment actually means I would lose $6.6k-9.9k in annual income.

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eclipxe
"Easily make 10-15% a year" .... until the market corrects and you lose 50%.

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charlesdm
I said easily, I didn't say risk free. I also didn't say put everything in
stocks. Stocks are extremely overpriced at the moment, and only a small of my
portfolio are in them. Investing is a hobby I spend some time on each week.

I'm just pointing out that you should calculate the gain you could personally
make from your capital and account for that in your decision.

~~~
nkrisc
Part of that equation is the time and knowledge required to invest that
successfully, which not everyone has whether the time, the knowledge, or the
time to acquire the knowledge.

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snowwrestler
This is a temporary consequence of the 2008-2009 housing crash.

Housing construction is a lagging indicator because of the regulatory and
capital requirements to build a whole bunch of homes. So what we see right now
is that demand is growing because the economy is growing again, but supply has
not yet caught up. Result: fewer affordable houses.

In my neighborhood a new row house development was just breaking ground when
the shit hit the fan in 2008, and of course they stopped. Well, they're
building fast today, and selling every unit, but they're still not done. It
just takes a while to build houses.

The only connection is Millenials is that they are the youngest generation
currently looking to buy a home, so they are more price-sensitive than Gen
Xers or Boomers.

~~~
toomuchtodo
I'm curious if we're going to see a glut in housing with so many Boomers
entering retirement, wanting to downsize or needing to extract their equity to
live on.

Also, economics for Millennials have been terrible. They're of course going to
have a terrible time trying to get a down payment together as well as afford a
reasonable mortgage payment. Even assuming they use a 3% down mortgage
program, they then have no equity, and are locked to the property if they need
to move/relocate unless they're willing to default on the property (which then
keeps them out of buying again for 3 years).

EDIT: As someone who has seen deep into the real estate market, the game is
rigged.

~~~
XorNot
Hasn't happened in Sydney yet. I think we're still beating out SF in real
estate prices.

~~~
toomuchtodo
It'll happen first in the US. We're not known for a big influx of foreign
money except in SF, NY, and parts of Texas. I could see Chinese money picking
Australian cities over second-tier US cities.

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Mikeb85
It's even more depressing in the larger Canadian cities. In Greater Vancouver
the average price is 1.47M, in Calgary (which is in the midst of a recession)
the average price is still 457000 (and good luck finding a decent job), in the
GTA it's 602000 and over a million in Toronto proper. The only affordable
'big' city is Montreal, and even smaller markets with few jobs are far more
expensive than an equivalent sized market in the US.

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cpursley
I can't stand this term - "Starter Home". Not everyone, even those who can
afford it, wants a McMansion.

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allencoin
I would like a small, maybe 2-bedroom house, in a cool neighborhood in a cool
medium-sized city. That's my dream.

~~~
irishcoffee
You basically described Baltimore. Just be careful, 2 blocks outside of that
'cool neighborhood' is a very 'un-cool' area.

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VLM
Real estate ownership for the young is obsolete.

Total deja vous its just like people lecturing my parents generation about why
they don't get a job for life which would be easy if they really wanted one,
ditto pension and gold watch.

Its not coming back any more likely than I'm buying a horse or a record
player.

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ChuckMcM
Really? Since millenials are going to be buying most of the houses over the
next 15 years this suggests that housing starts will go up dramatically. Look
at previous housing shortages, people returning from WWII, baby boomers
entering the market, and now millenials. So demand goes up, clearly a lot of
them are unserved by current prices, so developers figure out how to make
houses they can afford to capture that demand.

A more interesting question is whether or not they _want_ houses. It seems
that with work mobility its simpler to just rent for a lot of folks. That
drives interesting price inversions where it becomes cheaper to buy than to
rent because people don't want to be "tied down" to a particular place.

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api
I don't understand how present housing prices are possible. Don't markets
require buyers? Look at prices in most cities vs. the average family income
and it's beyond insane. Who is actually able to buy at these prices and where
are they coming from?

IMHO it's much crazier than the "unicorn" phenomenon, since that can be
explained by crazy term sheets and a lot of private investor cash sloshing
around. I can't understand how present housing prices are even possible.

~~~
hdctambien
In my neighborhood all the houses going up for sale are being bought sight
unseen, over asking price, by investors who replace the carpet, paint the
walls, then rent them out.

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api
Yes, I've seen this too, and in Orange County (SoCal) there are houses being
bought like this and then nothing is done with them at all. They just sit
there. I guess you can get away with it in a climate that never freezes so no
issues with the pipes bursting, etc. The owners are foreign corporations, off-
shore funds, etc., and a lot of Chinese.

I think the only solution is some kind of state or national tariff on foreign
purchases of property or a tax on property owners that do not reside in the
state. Of course then they'd incorporate shell corps but it would at least
reduce the phenomenon a bit.

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peapicker
Pretty sure this is because many people, with the economic instability of the
last five years, are deciding not to by the big McMansions anymore and don't
want to take care of them... unfortunately, this means that those with more
money that millennials also want the same "starter" houses. The real problem:
too many builders built big-ass houses no one wants to pay for and take care
of anymore.

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strathmeyer
I'm thirty four and nobody has ever suggested to me that I am supposed to buy
a home. How on earth are we supposed to figure out what is going on in the
world when everyone lies to us about society?

~~~
arenaninja
I'm very confused by your comment. Is there some context that I'm missing?

What does

> How on earth are we supposed to figure out what is going on in the world
> when everyone lies to us about society?

have to do with

> I'm thirty four and nobody has ever suggested to me that I am supposed to
> buy a home

???

~~~
lfowles
I think they are snarkily trying to suggest that home ownership isn't
something everyone must aspire to.

