
Young Homebuyers Are Vanishing from the U.S. - pseudolus
https://www.bloomberg.com/news/articles/2019-11-08/young-homebuyers-vanish-from-u-s-as-median-purchasing-age-jumps
======
harshalizee
I'm a single male, 30, who can currently afford to buy a house but isn't sure
if I want to.

I understand it's an asset investment, but i fear that it might largely be
detrimental to my lifestyle. I live in a high CoL area (Seattle), when I can
only think about buying a house in the suburban area. This will increase my 10
min walk commute to at least 45 min bus/car ride. My social life may suffer
due to the distances, but at the same time I want a place to call it my own.

Anyone else going through the motions or have a different perspective on how
to figure out my dilemma?!

~~~
murph-almighty
Vaguely similar boat! Northern NJ though.

I'm 24 and became single about 6 months ago. After this happened, I moved out
of my family home to rent closer to work, which cut an hour off my commute.
It's been a mixed bag financially and I've been borderline paycheck-to-
paycheck (I do max my 401k, so it's more of a self-wrought liquidity issue).

My thoughts:

\- I'm really getting punched down by the 20% down payment standard. I know
PMI is a thing, but it's a fee that I'd like to avoid paying in addition to
interest. Assuming 20% is enough to avoid PMI, even if I snag a 600k condo I
need 120k down to not have a PMI.

\- I don't entirely know that I'd like to commit to this area, but I know I
want to buy at some point, and I'd like to believe that snagging a property
sooner than later will at least give me some leverage for a future purchase
via the equity in the property. One of my friends bought a studio in FiDi for
similar reasons- he'll probably break even in the `rent v buy` scenario but
will at least have some sort of fund to fuel his next purchase via the equity
in the apartment.

\- This is also a game of forecasting your income for some period of time. I'm
in software development, which seems stable for now (I hope), so I'm pretty
confident in my ability to eventually pay off a high mortgage.

In the end, I have no hope of buying a place right now, all I can really do is
shove money into a MM savings/mutual fund and wait around until its worth
enough to convince a bank I'm worth their time.

~~~
jackcosgrove
> I'm really getting punched down by the 20% down payment standard. I know PMI
> is a thing, but it's a fee that I'd like to avoid paying in addition to
> interest. Assuming 20% is enough to avoid PMI, even if I snag a 600k condo I
> need 120k down to not have a PMI.

Ask lenders about what's informally known as a "piggy-back loan". You can put
10% down, then get a second lien withdrawing that 10% and putting it towards
the 20% number. That can avoid PMI, but be aware that the second lien will
have worse terms, often with a floating rate, than the first so it's
definitely in your interest to pay that off really fast. These were abused
during the housing boom but they're not intrinsically bad. It may be
preferable to paying PMI depending on how quickly you can pay off the second
lien and how disciplined you are with money.

~~~
kmano8
I put down 5% a few years and was able to avoid PMI by taking a higher rate
(about 5%) -- forget what doing this actually called. You can take the
increased interest as a deduction, but not PMI.

~~~
awinder
It's called lender-paid mortgage insurance, which comes in 2 varieties, the
one you did where you take a higher interest rate or as a single one-time
charge

------
rpmisms
As a young person who could afford to buy a home, I'm not, simply because I
expect the housing market to crash, and I absolutely don't want to be upside-
down on a house right now.

~~~
YourMatt
Personally, I suspect that when a crash happens, it will come with higher
interest rates. A 2% increase will result in an 18% higher mortgage payment,
which could actually be higher than the dip in home values.

That's why I'm buying right now. I too expect a dip in values within the next
couple years, but we've got cheap money right now, and I don't plan on moving
again for long while, if ever.

~~~
pjbk
Depends on the location, but a crashing house market halving the price (or
even more) of properties is not uncommon. It happened in the last one.

~~~
lotsofpulp
Treating all of the US (or any country) as one housing market is also a
mistake. As wealth and economic opportunity concentrate in certain areas, I
would expect some places to crash, some to stagnate, and a few to keep rising.
Right now, there’s quite a few states and vast swaths of regions with lower
housing prices than ever before, or housing prices that don’t move up (upper
midwest and northeast come to mind). And then there are places that not only
held their own in the last recession, but have doubled and more.

------
mackey
My wife and I both graduated from college in 2008, with a lot of student loan
debt. That was a bad time time to graduate. We both took relatively low
salaries and wages increases were nonexistent for a few years. Combine this
will living in an already expensive market, and it was definitely difficult to
save up enough to buy a house. We bought two years ago, in a city with a
median home value of 580K and high property tax. My wife still pays ~1000 a
month in student loans. We are trying to start a family, so we need to think
about day care at some point. Student loans + daycare + mortgage is a lot. I
feel incredibly blessed and lucky that we both have good salaries and very
healthy savings.

~~~
quaquaqua1
Simple solution here is to not have kids and not have a house until you pay
off the student loans.

It's like saying "Ahhh you see I want a Ferrari, a mansion, and a honeymoon
but I can't find a way to finance all three"

~~~
LarryDarrell
I feel like a system that discourages young, healthy and educated citizens to
not have children until they are much older... is screwed up. Especially since
many of those with student loans are not finding jobs that would pay them off
before the end of their child bearing years.

~~~
quaquaqua1
Sure, I agree the system is broken, but I am not sure if that will ever
change, even if you attempt to organize some type of violent revolution.

As a result, you can only make the rational choices offered to you by the
system, despite the system being deeply irrational.

That's why my gf and I rent a small place with the best roommates we can find,
we don't have plans for kids, and we paid off student loans as quickly as
possible and continue trying to increase our earning potential in tech

------
esotericn
In the UK the idea of buying a home to me seems like basically anchoring ones'
self to a lifetime of having to maintain a highly paid career (assuming it's
even possible in the first place).

I look at a 300K+ apartment and think - buying that for the average person
would mean they could pretty much never take a break from the 40-hour a week
grind for the next 15 years or more.

In a world in which we've pretty much bent nature to our will, buying a home
should not be this colossal struggle in developed countries.

It seems like such an enormous drag on all activity - not just economic -
"everyone" is running around pretending that they're in poverty and we can't
solve any of the problems because the landlord sucked all of the money away.

~~~
CalRobert
You're right, it shouldn't.

But if you take that 1) housing is a necessity, 2) housing supply is
restricted by law to a value below demand, and 3) we make it possible to get
mortgages that DEPEND on "anchoring ones' self to a lifetime of having to
maintain a highly paid career", this means that housing will eventually be
priced at the amount of debt available.

If 20 people want 10 houses, all you need is for 10 of them to say "well I
don't want a mortgage for 10x my income, but I guess it's what I need to do"
in order to drive houses to be that price. If the bank made it 15x, then you'd
see that as the price. Hell, there are places (Sweden iirc) with 100+ year
mortgages and lo and behold, people take out these "mortgages" (basically
renting from the bank at that point).

We could allow building more homes, but that would be unpopular with people
who own houses, who are often old voters, so it's a nonstarter politically.

The goal is to keep housing _just barely_ affordable to people who work their
asses off their entire productive life. It's an outcome of enforced artificial
scarcity.

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helpPeople
Maybe I need to double check the math on this, but due to amortized interest,
I'll be paying 2 million dollars for my half million dollar home.

I don't understand why we are pushed to go into debt on housing. I don't plan
to sell, and my apartment was 1/6 the price.

Looking back, I would have saved up money for 6 years and buy the same house
with Cash.

The only way I see this as a good investment, is if we experience near hyper
inflation in the next 15 years.

~~~
Cerium
That does not sound right to me. Your interest rate would have to be pretty
high. I currently have a loan with a 4% rate I got last year, and my friends
are reporting getting around 3% currently. With a 4% rate, you should end up
paying a total of about $860,000 - $500,000 in principal payments and $360,000
in interest.

~~~
lotsofpulp
It is shocking how many people come out of a high school education in the US
without understanding amortizations. I cringe every time I hear “front loaded”
interest. As if the borrower didn’t “front load” the debt?

[https://www.bretwhissel.net/amortization/amortize2col.pdf](https://www.bretwhissel.net/amortization/amortize2col.pdf)

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zip1234
Single family zoning in particular skews the market and prevents more
affordable options. Also, the tendency to for new construction to be bigger
houses than people used to build with the same price/sq foot means a more
expensive house to start with.

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jdlyga
My wife and I make combined 250k per year, and even we are unsure about
whether it makes financial sense to buy. I'm in a high cost of living area
(NYC), and a 1 bedroom apartment is 600k or higher vs renting at 2.5k per
month.

~~~
murph-almighty
2 things:

1) The fees surrounding condos/co-ops are _real_. Like I've heard upwards of
1k a month.

2) Have you considered North NJ?

------
georgeburdell
>Builders have cited a shortage of affordable lots and labor as reasons to
build fewer or bigger single-family homes

I can't speak to the former, but the latter is definitely true in the Bay
Area. I recently doubled the size of my once-modest house and it cost over
$400/sqft. I speculate a few reasons:

1\. There is a poor pipeline of Americans going into construction and the
skilled trades

2\. Because of (1), immigrants (illegal and legal) need to fill the gap, but
immigration is being tightened at the national level

3\. Competition with bigger projects (not really true this year, but was last
year)

4\. If we are to believe Nobel-winning economist Baumol, since house
construction is a low productivity endeavor, it is subject to "cost disease"
[1].

I don't think regulation played a big part in my addition's cost because
building costs have been going up by 1% per month, roughly, and many of the
most onerous regulations are decades old.

[1]
[https://en.wikipedia.org/wiki/Baumol%27s_cost_disease](https://en.wikipedia.org/wiki/Baumol%27s_cost_disease)

~~~
quaquaqua1
Your addition would have been very cheap if the process wasn't tightly
regulated by local, state, and federal government. The materials themselves
are probably 20% of the cost for the whole project, the rest of the overhead
goes (rightly or wrongly) to fees and inflated wages.

------
mancerayder
Late 30s, single, owner of multi family in New York City of all places. Bought
it a few years ago in an up and coming area that's now exploding.

Original idea: fix it up and either live in part and rent part, or rent it
all. Rents are high here and mortgage is fixed at a low rate.

Reality: living in an up and coming area when you're a professional and
gentrifier, and surrounded by 25 year old barristas, artists and rock stars is
difficult. Rats are annoying and always find a way in. Construction costs are
not 10 or 50 pct more than what was estimated to me by several people when I
bought, they are 300 pct what the estimate is. I can't afford it. What else is
hard, an insulated brick house from the late 1800s, illegal work done before
me, and dealing with contractors and handymen.

It's going for sale next week, unrenovated.

Would I do it again? Probably not.

What I gained: equity (1/4 of the mortgage) plus rental income minus mortgage
and taxes means I paid 1K a month for a brownstone while a 1 bedroom apartment
costs 3200 here. Thus I saved money.

What I lost: several years of my single life being stressed in a commute and
in a lawless/hostile neighborhood.

It's a real toss up. I'll be a renter again soon.

------
logfromblammo
Businesses have burnt job security to the waterline and demanded more mobility
of workers. Meanwhile, they have concentrated jobs in high-cost-of-living
cities while completely ignoring Rust Belt bargain prices. Incumbent NIMBYs
have quashed higher-density housing construction. Nobody can confidently
expect to stay in one place for the minimum 5 years it generally takes to
break even on selling one's primary residence with a 30-year mortgage.

It's a perfect storm for living in a van down by the river--or at least
renting for a long, long time.

------
magashna
At one point I considered buying a home, but the flexibility of renting
outweighed the benefits in the current economic climate, where I'm uncertain
how things will go in the next few years.

~~~
lotsofpulp
Uncertainty for the bottom 4 quintiles of the populace is the real drag on the
economy. Whether it be unexpected healthcare costs, or instability in income
due to automation and consolidation, the lack of stability affects not only
home buying, but also building relationships and creating networks of
family/friends.

------
eli_gottlieb
My wife and I bought a condo this past year. It's working for us at the
moment, but getting an offer accepted without breaking the bank was the hard
bit. We got our offer rejected, then someone else reneged on an offer, and
then we were asked to fucking _match their offer_. We had to go up from our
original, which was already quite sufficient, just to get it accepted, and
even that was by luck! It was something like the third place we'd offered on.

------
gumby
This is median age. I have just listed my house and the two most serious
parties are empty nesters looking to downsize. Either couple would bring up
the median in the "all buyers" category.

Also home ownership makes it harder for people to move, which was a core
element of mid-century economic growth in the US. So this isn't an inherently
bad thing.

------
Shivetya
well just an observation, yes median home prices are high in some areas but
too many potential buyers aim too high.

throw in all the monthly bills people accrue it is easy to nickle and dime
yourself out of home ownership. so many services wanting their ten to thirty
dollars a month

however one consideration not mentioned in the article is high property taxes
that can raise the per month cost of owning a home beyond what many can afford
or safely afford in one half of the income stream is lost. I am in a lower tax
area but even that adds over two hundred a month just to own the house not
counting all the other assorted costs. Go closer in town and I can see that
number double if not more.

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crb002
In the DSM market NIMBY regulation and HOAs have driven out bungalows, ADUs,
and efficiency condos. Almost all new construction is $300k and up. There just
isn’t affordable supply for 20 somethings.

