The whole mentality around “a home is your piggy bank and retirement plan” has screwed future generations out of a chance for an affordable domicile. I’m a millennial that “missed the boat” on a property prior to the pandemic.
I want to believe this will eventually self correct, but should I be waiting till my twilight years to have a piece of the American Dream?
This is why I do cringe about folks that bought before and got in with super cheap interest rates, and then brag about it like they are geniuses. They simply got ridiculously lucky.
What are we supposed to do about it? Building more homes isn’t terribly economical due to the obsession with large McMansions, and the rise in interest rates caused a chilling effect, where few want to sell, so we are in a deadlock.
Observationally it's less " a home is your piggy bank and retirement plan "
more
" at least seven homes should get you by " with many opting for more.
A great many people I've known from school days in the late 70s | early 80s just kept buying more houses after a long haul getting the first one (interest in Australia early on was tough, then easier).
Enough people got carried away with property accumulation that they're now competing with each other and both snapping up new properties fast and pushing prices for first buyers out of reach.
> I want to believe this will eventually self correct, but should I be waiting till my twilight years to have a piece of the American Dream?
Right. I expected this to self-correct about two decades ago. The ratio to watch is median home price / median income.[1] Note what happened in 2006-2010.
This situation is a smaller economic stage upon which the same script is playing itself out on the larger economic stage. The FIRE economy [1] and its accompanying regulatory capture apparatus that enabled the pricing out of your and younger generations relies upon capturing the value derived from the network effects of aggregating people into the same volume of space over time. There are ways for non-accredited investor actors in this dynamic to get out from under the feedback loop, but they all take more time than most are willing to put in and in some scenarios, more trust within larger groups than is usually culturally feasible.
Some of the backlash is already inexorably unwinding in the baked-in demographic collapse in many areas of the world, but that will take at least a couple more decades to impact housing prices in a material manner (to within 2-3X median annual income). Mass population-scaled solution implementations are still currently quite out of reach, but you can see lots of people reacting with solutions that fit their individual profiles at the margins: intentional communities, co-operatives, vanlife, tiny home, etc.
Anyone who is not directly, daily working in the real estate industry should be commoditizing that complement of their lives, but the real estate industry has successfully convinced most to work for that industry with the "your home is an investment" canard...periodically (on average once every 7 years in the US)...with a ~10% round trip transaction fee after all is said and done (better than 2 and 20 in many scenarios per unit effort, however you want to measure it). Most people cannot stand against the allure of "your home went up in value!!!", but it's a clever trap.
Both times I've bought property it's been expensive for me at the time and worked out to be a great decision. I bought about 80% of one peak and still managed to save a ton on rent even though I'm break even on the property. One I bought at a trough in 2013 but it was still a stretch for me. I've got about 8 times I felt I missed the boat and 2 so far have turned out to be a bad idea. Basically you have as many fomo opportunities for property as you have times you found a house that became more expensive later.
I've been hearing that I'll never be able to buy a house since I've been an adult.
It’s interesting that you read an article that basically outlined all the structural supply and demand issues around why house prices are the way they are.
And then you turn around and blame the “home is your piggy bank” mentality.
Any many of the structural problems are made worse by the “home is your piggy bank” mentality.
If homes are an viewed as an investment, people are incentivized to push for policy that drives prices up faster than inflation. It leads to NIMBY laws, shortsighted assistance to the demand side of the equation (lower rates, special grants/loans), and a reluctance to sell when the market is down.
Home instead should be treated like cars. Big purchases but always a cost. Profit is to be made from production, maintenance, and management. Not from ownership alone.
The "home is your piggy bank" mentality is the cause and motivating force behind NIMBYism. It's not only in the article, it's prominently in the article.
I think NIMBYism is a result of a home purchase being more permanent than a rental, and comes with a certain expectation of some peace and quiet for many.
It makes sense people would want to protect against the things they moved to the house to get away from.
I just bought a house a few years ago. There is 1 annoying house in ear shot of me and it’s a rental house that seems to get a new family each year, and no matter the family, it’s the house having parties, and slamming car doors at all hours of the night. It’s not every night, but it’s enough that I noticed. All the houses that are owner occupied aren’t like that.
Inviting more of that around me would make me want to move, and I’d rather not move. If you take away the reason a group of people moved to an area, they are going to find a new area. The previous area will slowly erode, and the new area will grow and thrive.. and then YIMBY people will want to come in and change the new area, and the cycle will start again.
I don’t see my house as a piggy bank. I see it as a means to stop rising rent costs, to stabilize my budget over time, and lower my fixed expenses in retirement. I’m not borrowing against it (the piggy bank), as I don’t want to risk the stable housing.
People don't say no to increased density because they are worried about increased overall housing supply affecting their house value.
They say no mostly because they like the place they are how it is, and they don't see any reason for it to change because the upside doesn't affect them.
And the rest of the time they are saying no due to a direct downside like having a new large building near them that wasn't there before.
I'm not saying that this attitude should be allowed, but let's be honest about the cause of it.
No, let's be honest about the cause of it: it's because they want their housing value to keep going up. The parade of excuses is much less convincing than the plain, obvious, dramatic financial incentive.
Increased density would make their property even more valuable because it would be in a more desirable place in general: more walkable (more people = more businesses in a smaller area), fewer single family homes (the ones that were removed to build higher density housing, so that = more demand for the ones that are left), better public transit, etc.
No one is saying this doesnt contribute, but my experience with NIMBYs is that its much more about keeping things the same because they like the way they are now than it is about pumping their homes value.
Mainly this, agreed. A place is a place because of how it is. Changing how it is makes it not that place anymore. Drastically opening access to the place will drastically change it and the people that live in the place often don’t want to change the place. They like the place how it is. That’s why they bought property in the place.
And then there’s construction. It takes a long time to build a thing in the place and not only will it change the place it will make the place much worse while long term construction happens. Nobody wants that.
A lot of people bought into places that weren’t very desirable and helped make the place desirable. There’s a lot of old towns that were down market from where they are today because the housing stock aged and owners couldn’t afford the renovate. But eventually some people took a risk and did because they saw the potential. Then more did and so on and the town is much more attractive than it was.
The idea that an interloper should just be able to walk in and exploit that is ridiculous. Talk about getting in while the getting is good!
There’s plenty of shabby places with potential. Go there and unlock it. It’s futile to try and jump on the back of people that did that elsewhere by demanding they build affordable housing after they turned a place around.
You make a decent point... but this recent run up in property values truly feels different than the norm. I'm from the Phoenix area, and prior to the Pandemic, I could have afforded a three-bedroom, two bathroom house with a pool, and with a sub six-figure income to boot. That same property has doubled or tripled in price within the past few years (which is an abnormal level of growth in real estate) plus the interest rates have also gone up. I'm getting fscked on both ends, with a monthly mortgage payment that would make me absolutely house poor.
I just hate the feeling of needing to put more of my life on hold because a world changing event disrupted my buying power and messed up the available housing stock. Truly the perfect storm of disappointment.
The thing is..a home and 3y mortgage is worth it even if it doesn't appreciate wildly in value!
Locking in living expenses for years to guard against inflation is great. I pay the same as my Seattle apartment for a 3k sq ft Tacoma home. And having my monthly payment build equity instead of go to a landlord is even better.
I agree buying a house in 2024 is tougher. But man was it easy for all of the 2010s. 2020 pre-craziness was a good time to buy. Sub 3% interest was the norm.
At the end of the day, finances have luck involved but also the saying about preparation meets opportunity is true. It might feel like there's no opportunity now, but that just means you should prepare because it's all cyclical. Don't miss the next wealth-boosting event.
But yeah it's not a piggyback or retirement plan. I would happily just live here forever and use my the rest of my money for that.
It is not entirely dependent on macroeconomic cycle either.
This place is called Hacker News. The application for YC asks about a notable hack of a system. Residential real estate is a very large system.
It is unlikely someone would hand you a free house in a desirable location, but it doesn’t mean everyone must join the ranks of homeowners via a property that anyone can find and “like” on a real estate app.
I’m not saying don’t save, do.
But if you are not looking for special circumstances to get in, you are indeed stuck competing on the basis of capital accumulation and credit ranking.
I appreciate your sense of optimism. To be clear, through the 2010s, I was still finding myself and didn’t feel ready to settle down. Additionally, I prioritized paying off debt and being as fiscally responsible with my spending habits, since in my youth, I was terrible with money.
I’m just bummed that by the time I finally had my chance to get a property for myself to live in and… whoops. I got rug pulled.
Why do you want to own a home? I'm guessing it's something like you want to save/invest money every month rather than tossing it down the drain on rent. In other words, it's the “a home is your piggy bank and retirement plan” mentality. If it's something else, I'm happy to listen.
Wanting to own a home so you don't have to pay a monthly fee to have a roof over your head so you can save is pretty different from wanting to own a home so it can appreciate in value, thus essentially paying you something monthly, so you can not just save what you don't pay in rent, but also have that passive increase too, aren't the same thing, economically speaking.
If money is saved or not depends on a lot of factors. When I was working around Chicago, a co-worker of mine paid more in property taxes than I paid in rent. I also rented a condo once, and when I inquired about buying a unit, the monthly association fee was only $200 less than my rent. The owner was basically renting the place at cost, assuming it was paid off. It made me feel not so bad about renting.
There are also a lot of extra costs to owning a home, beyond the property taxes, there is the maintenance. When renting, 0 time and energy needs to be spent on maintenance. If something breaks, there is 1 number to call, and other than that, it’s easy living. With a house the owner has to either spend time/money doing it themselves, or spend money to hire out for it, and manage all the various contractors doing the work.
The first time I bought a house it was a disaster. Every month I was having to spend at least $800 fixing something. My savings were going fast. I ended up bailing on it in less than a year for a few reasons, but one was that it was significantly more expensive than rent when it was all said and done. My current house is better for than perspective, and I was much more prepared going into it. I still like the carefree nature of renting, but after almost 20 years of renting, I was worried about how much it would cost me if I was renting into retirement, or if I still had mortgage, so I hit a now-or-never moment.
This is a sentiment I share, but with the caveat that a mortgage is the least amount you spend, since you also account for taxes, insurance, repairs, etc. Rent, by comparison, is the most you’ll spend.
But yes, generally, I’d like to have control over my place and not deal with a landlord dictating what I can and can’t do.
As a virtuous person who just wants a roof over your head, which of these are you going to differently so you don't wreck things for future generations?
I want to believe this will eventually self correct, but should I be waiting till my twilight years to have a piece of the American Dream?
This is why I do cringe about folks that bought before and got in with super cheap interest rates, and then brag about it like they are geniuses. They simply got ridiculously lucky.
What are we supposed to do about it? Building more homes isn’t terribly economical due to the obsession with large McMansions, and the rise in interest rates caused a chilling effect, where few want to sell, so we are in a deadlock.