The question is what the Fed should do about. Part of the problem is that Congress has been so intransigent on doing anything like fixing the unemployment rate, that the Fed has been the only player in trying to right the economy over the last 8 years. And what can they do? Manipulate interest rates and print money. Not much else, and unfortunately, we're finding out what the negatives of long term 0% rates produce. I wonder what the long term consequences of this trend are going to be. Even though housing isn't a very good way to make money, it is a very good way to store money (as prices more or less track inflation over a decades timescale). $1000 toward rent is 100% expenditure, but $1000 toward a mortgage is at least a little money still in your possession (provided you don't refi all your equity away). And of course the interest to principle ratio drops as the mortgage matures. I fear that a whole generation of lifetime renters are going to be particularly fucked when they reach retirement age, and they have nothing of value to sell. Hopefully interest rates will begin to rise significantly in the near future, and prices can adjust downward in a moderate way. The underlying causes of bubble 1 and 2 are very different, so hopefully they same catastrophe won't ensue when prices eventually decline.
Hopefully not, if they've been putting their mortgage - rent = savings into a retirement account every month. I fear that a whole generation of lifetime renters are going to be particularly fucked when they reach retirement age, and they have nothing of value to sell.
While I technically could have afforded to buy a house, month-to-month living would've required a pretty strict budget and also for me to stop aggressively paying off my other debts - car loan, student loans, a medical bill, etc. Generic, general financial advise for money management is that debt should be paid down first, and then savings should be built. Now, I admit I don't follow this 100% as I'm not comfortable without some kind of "emergency fund" in cash, but as a whole I subscribe to that idea and it's sound. The longer you have debts the more interest you pay and the more it costs you, and there's no way typical savings can accrue enough interest to offset that. So, debts first, saves more money in the long run. What I'm trying to say here is that the $600/month that is not going towards the mortgage I didn't get, would not and could not intelligently have been turned into $600 worth of savings each month. I doubt that most Americans, especially the under-35 age group who have dealt with the increase in student loans and indebtedness, have situations that are much different from mine. Even paying off my debts as aggressively as I do it'll be 5 years before I project to end my student loans, and that is only about $15k of debt. American consumerism encourages a lifestyle of debt. Choosing not to take on even more debt via a mortgage doesn't mean that you suddenly have free money, it just means that your money can go to those other places you owe it. Debt is one very accepted lifestyle here nowadays.
Buying a house is actually cheaper in many areas right now on a per month basis, if you have a down payment. That's the way retail investors have been able to become landlords in the first place. But even if that weren't the case, nobody makes that calculus.
From a 2014 Forbes article: Of course, this probably doesn't include maintenance costs, which can be steep.Homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas. In fact, buying is 38% cheaper than renting now, compared with 35% cheaper than renting one year ago.
Yeah, but Forbes is full of shit and you know it. Let's take my neighbors downstairs. They're teachers. They've got student loans. They live in a 2 bedroom condo with their 3-year-old son and their nine month old twin daughters. This is obviously an untenable situation so it's a good thing they were able to get their inlaws to loan them a 20% downpayment on their $350k condo in 2008. But now it's 2015 and they need another bedroom. And while their condo will likely sell for $500k (they actually got an offer of $75k over ask - but they had to do some chicanery with cash payments and the like because the bank won't actually loan that much over appraisal), the 3-br replacement for their condo is $650-700k. Take out some closing costs and the like and even though they've got a foot on the property ladder, they have to ask their parents for more money for another down payment. Forbes is basically saying "If you have six figures of liquidity, mortgages are easy to get" which is about the greatest "no shit sherlock" of a statement any financial journal has ever made. I'm looking in my building. Same exact floorplan, except they have the shitty deck while I have the dope one. There's a 3BR down the hall going for the bargain price of $550k ('cuz it's rough - and it'll still go for wildly over ask). And if I can put $110k down, I'll only pay $300/mo more to live there than I do here!Nationally, buying is 38% cheaper than renting with a traditional 20% down, 30-year mortgage. Buying is an even better deal with a 15-year mortgage, but not as favorable with less money down.
Sure, and that's a big part of the problem--that with the advent of large student debt and stagnant wages (plus untenable inflation in the rental market), no one can afford to save up for a down payment anymore. I'm not arguing that buying is easy; I was just responding to the previous poster's claim that people should be putting the difference between rental and mortgage payments into savings. I'm trying to make the assertion that the difference isn't there, and that this is just one more reason people with less money are buttfucked right now. I think we're on the same side here.
'k. I stand by my statement: even with a down payment, prices are so exuberant right now that it's cheaper to rent even without the externalities. That may not have been true in 2014 but it's been a damn ski jump around here and every market I monitor is chockablock with renters bitching about house prices.
I dunno, man. The street is absolutely batshit beside itself over the notion that Yellen might throw 25 basis points in September. A quarter point. I think what's going to happen is radically increasing income inequality. You're right - everyone under 35 is gonna be mondo fucked when they're "everybody under 65." I'll bet by the time the Millennials hit their 40s we'll see inheritance taxes and steep marginal tax rate increases on the $200k set. But I'll bet it's ten or more years out.
Yeah, because it means the eventual unwinding of the gravy train that they've had for the better part of a decade. Youngsters these days don't even know what a savings account with a return looks like. It's ancient history. It shouldn't be. Who the hell would even buy a 5 year CD at 2% (which as of writing this is what Ally is offering, and I'm told they're the good one) when you can make 10, 20, 30% in the market if you have a little luck? I would be scared too if my business were dependent on people throwing money at me because they don't have anything else to do with it.The street is absolutely batshit beside itself over the notion that Yellen might throw 25 basis points in September.