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Germany is a terrible comparison here. Home ownership in Germany is about 50%, true, much lower than the US' 65%. However, the majority of those rentals are apartments rather than houses, since even small towns are highly densified, very unlike the USA. There are many state landlords which provide rentals at a very attractive price; it's rare for people to spend more than 30% of their post-tax income on rent. Furthermore, there are extremely strong protections for renters, restrictions on rent increases, and they can renovate their apartments as they please. That's very different from what American real estate corporations want.

Really is that how Germany is? And all this bullshit about inflation it is called Corporate Greed and we need to be singing it to rafters. Fucking greedy corporations making record profits while wages stagnate.

All raising rates do is continue to make it impossible for average American to own a home.

Yeah, this was the outcome that was predicted when they allowed real estate brokers to also be property managers.

People wonder why starter homes havent existed on the market for 25 years and the answer is because nobody builds them, and when they do go up for sale, real estate agents are sending them the way of clients they already represent as property managers.

Why sell a house for 3% commission just once when you can sell it to somebody you are already partnered with and then make a 5% comission every month for the rest of your professional career while maybe only putting 15 hours per year worth of work into the unit?

Pretty much every issue in America comes down to the partnership of banks, real estate agents and landlords.

Interesting, I didn't know that about Germany. I'll have to look into how that is working out for them, seeing as probably quite a lot of people my age and younger won't be able to afford to buy.

Worse. The US is building suburbs.

All right let’s talk through this a bit. Let’s say you earn like 90K a year.

Uncle Sam takes about ~25%ish to make things simple, so we’re looking at 67,5K take home, so $5625 monthly. But you’re doing as the logical advice says and you’re paying 5% into your 401K since your job matches it, and it comes out pre-tax, so recalculating, you’re at $5250 a month take home. But wait! There’s also healthcare to pay, which has medical, dental, and vision paid separately, post-tax, which we’ll say is around $250 a month, so now we’re actually down to $5K take home.

A mortgage that comes to $28K yearly would be something like $2300/month, so we’re down to $2750 for everything else.

Now, assuming you’re between 25-45, you’re a millennial who likely hasn’t been able to save up 80K for a 20% down payment, so you’ll be paying mortgage insurance, but you’ve got a great credit score, so you’ll be adding about $400 a month for the PMI. Then there’s property taxes going straight into your escrow account, which we’ll say is around $400 to make things simple.

Then, you’re going to have your homeowner’s insurance, which might be around $150 a month, plus you’ve bought in an actual neighborhood, so you’ve got a little HOA fee of $30 a month.

Now, we’re down to $1720 a month after we’ve covered taxes and just having a place to live. This is where we get into the fun budgeting items.

Basic utilities (electric $80, gas $50, internet $90, water $30, trash $20, car fuel $40) come to around $310/month. You’ve then got your mobile devices ($100), maybe two streaming accounts ($25), and then accounting for things you pay yearly (Xbox $5, Office $8). You likely had to pay for the move into your new home as well as a couple of newer furnishings on a credit card, so we’ll assume just some base card debt of $300/month. Plus since you’re a millennial, you’ve likely got a student loan you’re still paying ($200/month). Overall, we’re around $950 just living in this house, which brings us down to about $770/month at this point.

We haven’t yet accounted for food and amenities which can vary widely. A nice food budget that allows for a couple meals that can be made at home these days will run a single person about $100 a week. Amenities can range anywhere from haircuts to tampons to sandwich baggies so you can bring your lunch and snacks to work, and then if you’ve got one small cat, you’re adding in litter, food, and pet insurance. If you’re allergic to grass, like I am, you’ll need to pay for lawn care, too which can add an additional $100-200. If you’ve got a car payment, you’re adding an additional ~$400.

Let’s assume that your meals, amenities, and car payments eat up that remaining $770 a month. If you are ever too tired to make dinner one a week, you’re already going over budget. If the 15-year-old water heater goes, you’re looking to go into debt to cover that, and if you do something like get married and have a kid, the hope is that the spouse is bringing in another $90K because childcare is so outrageous, one of you would just be better off staying at home with the kid. If property taxes go up, the funds going into your home escrow are going to make things even tighter.

Could you make your $2300/month base mortgage work if you’re making 90K/annually? Yeah, with a very tight budget and having none of the more asinine homeownership issues, it’s more or less doable. That said, there’s just not a lot of people in the 25-45 age bracket that are earning that 90K and the average is coming around to $2300/month, and this is all assuming you can get a bid accepted when there’s some corporation planning to rent the property who’ll offer 20% over the asking price.

TL;DR: $28,000/year is ridiculous.

150k at 12% is $1543/mo; in 2023 dollars, that’s $3609/mo. 1.2M at 7% is $7984/mo.

Over the same time period, the S&P500 has gone up by a factor of 13.6x - if you invested $150k in 1990 you’d have $2.04M today.

I’m not trying to make a point - I just thought this was interesting.

Right, these people are so quick to "well akshually" they completely ignore the inflated house costs since which layers more unaffordability on top of already unaffordability.

That's also true. Housing prices got really stupid during the run up to 2008 and they've never fallen back to Earth. And, after a short dip, they went ludicrous. But, that isn't a reason to try and keep interest rates down. If anything, low interest rates have been part of the reason for the run up in home prices. Money has been cheap; so, investors have been able to borrow cheaply and use the rising home prices as a short to mid term investment. For example, if I can borrow $350k at 3% APR, buy a a house and sell it again in six months with the price having gone up 5-10%, that's basically a license to print money.

Even better, let's say I borrow $500k at 5% and assuming the bank lets me do that with no down payment (crazy these days, but let's pretend Countrywide is still in business). I'm now paying $2,684 in Principal and Interest (calculated here: https://www.bankrate.com/mortgages/mortgage-calculator/). I then turn around and rent out that same house for $4,000/month. Assuming some costs for maintenance and management, I'm likely still ahead a $1,000/month or so. And that's basically free money for me. Done on an institutional scale, it's easy money and easier the lower interest rates are.

Any fix to home prices isn't going to come from interest rates. We're going to need changes to the legal framework around home ownership and property investment. And that is going to be a rough road.

There's only a handful of areas where that level of appreciation happened. There's about as many places that 150k house is the same or less because it's a crime ridden neighborhood now, or there's no economic activity in the area anymore. The average is more like 2-3x increase in the last 30 years.

The opposite is happening. Everyone with a 2-4ish% mortgage is holding onto it for dear life so supply is super low which is causing housing prices to continue to climb. Can't blame those homeowners. Even if you sell your house for some inflated amount, you need to buy too and then you're stuck with a shifty mortgage rate.