If Nobody Can Afford A Home... Who's Going To Buy Them?
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Published 2023-09-11
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#realestate #finance #investing
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Fewer young people than ever before are going to be able to buy a house in their lifetime, and at the same time homes are getting more expensive every year… But if nobody can afford to buy a house then how do they keep getting more expensive?
A family home should be the bedrock of your financial life, it gives you somewhere to live while building up equity in a place that you can one day call your own. Owning a home with a thirty-year mortgage is cheaper out of pocket every month in most cities than renting, so if you can buy your own home, you will be richer now and richer in the future.
You already know this, but if you are in the seventy-five [75%] of my audience that doesn’t own a home it’s probably because you can’t afford one. According to a report by Redfin only twenty one percent [21%] of homes that went on sale in 2022 were considered affordable, that’s down for SIXTY percent [60%] of homes on sale in 2021. That means in just one year two thirds of ALL affordable housing became too expensive for the average American.
The team conducting this survey concluded that housing affordability is at its lowest point in history. But what’s the end game here? If people can’t afford a home, then house prices can’t go up anymore… Right? Wrong… I don’t want to make another one of those stupid finfluencer videos about how the housing market is going to crash in three point five days but there are three reasons why it could get a lot worse before it gets better. The first reason is that houses do not need to be affordable for you to buy one. If you think that can’t make sense, there is an entire industry working to make it true. You don’t save money to buy a house, you save money for a down payment. Wages have not kept up with house prices but a twenty percent [20%] down payment only grows at one fifth [1/5th] the rate in absolute terms so people are still able to get into the market. According the Zillow the average home sold in America in 2020 traded for two hundred and thirty thousand dollars [$230,000]. At the start of 2023 the average home price was THREE hundred and thirty thousand dollars [$330,000] a jump of one hundred thousand dollars [$100,000] in less than three years.
According to Forbes the average American makes a salary of fifty-nine thousand dollars BEFORE tax [$59,428] after federal tax and FICA that leaves them with a take home of forty-nine thousand dollars [$49,000]. If this average person saved a ridiculous SEVENTY percent [70%] of their take home pay, to buy a house they would be just as far away from their goal after three years because the price of the average house grew just as fast as their savings. The average home earns as much as the average person. But most people only save for a down payment so seventy percent [70%] becomes fourteen percent [14%] or seven percent [7%] if it’s a dual income household where the other partner also earns the average salary.
That still a major savings commitment when fifty seven percent [57%] of American can’t afford a one thousand dollar [$1,000] without taking on debt. Fourteen percent [14%] of your take home pay should be more manageable than seventy percent [70%] but remember this is ONLY how much you would need to save JUST to keep up with price increases, this doesn’t actually get you any closer to your goal of buying a home. Lenders and banks with a vested interest in real estate assets across the country know this is still too hard for most families who also need to pay for food, rent and other essentials that are also outpacing wages. So they have moved the goal post.
A report by the national Association of Realtors found that the average down payment for a first home buyer was just SEVEN percent [7%] and the average down payment for a REPEAT purchaser that has had time to build equity in their previous home was only seventeen percent [17%].
Well, it’s time to learn How Money Works to find out if this circus really can go on forever
All Comments (21)
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My biggest financial mistake was not investing in a house in 2008 and instead learning multiplication in elementary school
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The endgame is to make home ownership so unaffordable that we are all forced to rent from the nobility class like a bunch of feudal serfs!
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Purchasing a home is already a very difficult thing to do, unless you pay cash or don’t get a loan from the government. If only my minimum monthly house payment, over the course of 30 years I’ll pay more than double what my home is worth. I purchased before things got crazy so I got a good interest rate. I couldn’t imagine trying to rent or buy right now.
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I believe the retirement crisis will get even worse. Many struggle to save due to low wages, rising prices, and exorbitant rents. With homeownership becoming unattainable for middle-class Americans, they may not have a home to rely on for retirement either.
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Everything is moving toward “subscription” model —- you rent everything in your life so others may profit more and more. It’s a sickness.
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We need to ban corporate ownership of single family homes...
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I tried to escape this madness with my partner last year. We live in Italy, we both love nature and hate the city, we bought a cheap house in a small town in the forest, no mortage and I work remote, super happy of my decision so far
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My parents bought a house in 2010 for $250,000. They listed it last year for $900,000. Even with the renovations they put into the house that's still an absurd increase
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It's pretty crazy how it's gotten to this point so quickly. My grandparents came here from Italy. Didn't speak English, no money, no education. They were able to buy a small home that they raised 4 kids in on just my grandfather's income. Sure, they weren't rich and struggled to get by but they made it work and it beat living under Mussolini's rule. My grandparents lived in that house for the rest of their lives. Now, 2 generations later we are talking about dual income, educated, natural born citizens who can't even afford to buy a home. Pretty sure my grandparents wouldn't have come to this country if they knew this would be the future for their grandchildren.
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The phrase "You will own nothing, and your will like it" is too accurate for the housing sector.
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I've been watching the housing market closely, Prices have been skyrocketing for years. It's going to be tough for first-time buyers to enter the market." how can one diversify $280k reserve .
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It is difficult to make exact projections for the housing market as it is still unclear how quickly or to what degree the Federal Reserve will reduce inflation and borrowing costs without having a substantial negative impact on demand from consumers for anything from houses to cars.
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My mom loves telling me how easy it'll be to buy a house if I'm just frugal with how I live. I swear to god I am going insane This is an editted section, what's above is original. My mother did, at some point, realize that I could not reasonably buy or rent any homes or appartments within our area at a reasonable price, and is looking to rent out a home she was already planning to buy to my friend and I. I've been making strides in improving myself and learning terminology and information school never taugh me. Keep in mind, I am only 19 (still). I have much to learn of this world, and this world could use more kindness and helping. So please, to anyone in the comments or anything, be kind, supportive, and explanatory. There is no such thing as a dumb question, or a dumb concern. Sometimes, you just need it explained differently, or framed differently.
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Crazy to think 160 years ago they were better at housing people than we are now. Housing should be for housing, not an investment!
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In order to buy cheaply, I'm waiting for a housing crisis after selling a few houses in 2020. I've been considering buying stocks as a fallback. Do you have any advice on when is the greatest time to make a purchase? On one hand, I continue to see and read about traders making more than $$$k per week. On the other hand, I constantly hear that the market is crazy and in the midst of a dead cat bounce. What causes this?
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The amount of new home construction in my southeast city is unbelievable. It seems like every inch of available land is being built on, but most of it is rentals, apartments and tall/skinny homes.
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I think what's also pretty insidious is the comodification of property. I watched another video where the creator made a good point: the shift came when houses started to be seen as an investment vehicle as opposed to a place where people and families live. This led to massive growth in rental real estate and less focus on people being able to own property.
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15 years ago I built a sub-1000 sq.ft house myself. Nowadays what I did isn't even allowed here anymore due to red tape and changing zoning laws and building codes. That is another huge root of this problem, smaller affordable 'starter' homes are getting phased out by bureaucracy.
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When we bought our home, just a couple years ago, we made an offer that was $80,000 below the asking price. The realtor said there were others who are also interested in the property. We said, we don't care, submit the offer. 2 hours later, he called. The seller accepted our offer. The next 4 homes in this neighborhood sold for up to $60,000 ABOVE asking price. With the younger people buying homes without knowing how to negotiate a deal, it's no wonder prices are out of control. Most only want to stay 3 - 4 years and then sell for a nice profit, only to find they have to stay longer or sell for less than they hoped for.
