I don't know where you live but I almost find this insulting.

I'm from Amsterdam my self and friends of my are being forced out the city because of the high rent prices. I'm 32 year now and because of some shitty new rent laws that says every tenant needs to have an individual rent contract which our landlord refuses to give I'm also being pushed out of my home. I tried to find something for my self just anything would do, but I'm kinda skewed because I just earn above social housing and here in Amsterdam there is not really a market anymore for middle incomes. So yeah I'm being pushed to either live in a room or move out of the city. But I also couldn't find a room in time so now I'm going back to my parent. So yeah your comment kinda hits a nerve for me.

I live in DFW, and there is an abundance of middle income places to rent and even buy. The problem, as described in my previous comment, is that those middle income places are in older buildings, or have older appliances, or aren't within walking distance to the hip nightclub area, or have a 10 minute longer commute, and thus my fellow millennials seem to deem them unacceptable places to live. These are the same people who have complained to me that their high-rise condo downtown across the street from the nicest steakhouse in the city is driving them into debt, or have complained that they're depressed that they will never be able to afford a home while linking me a Zillow page of a $1.5m newly renovated house in the premiere neighborhood in Dallas.

No country for old men indeed.

BTW, I'm mentioning social services because here we do have some complain how hard life is with their meagre pension... all the while living in a 3 room flat in the middle of the city. I find those people unreasonable and I believe if they would sell / rent that property and downsize they would have a much better quality of living.

I think it is reasonable to ask if you set up a whole generation for failure yourself. Millennial choices are severely handicapt considering how we inherit the world versus how the boomer in the 90ties got it.

"Starter homes" for young people is the stuff that was built 30-40 years ago that hasn't been updated. So they are buying those mcmansions because that's what was built in the 80s-90s-00s. The really nice, older urban areas with housing built before that is way more expensive in absolute dollars.

Smaller is not cheaper in most cases. Smaller is "established" and everyone with money wants to live in those established neighborhoods, not the suburban sprawl 50m from the city center.

Price correlates more with location than size, at least around here. "Starter home" prices don't start to show up until you get to the wrong end of a 1-hour commute. And most of those less-expensive houses are physically larger than mine, because no one has built houses under 1,000 square feet for decades.

In my metro (DFW), the neighborhoods of houses built in the 60s/70s/80s are dwindling because nobody will buy them. There are neighborhoods of perfectly fine ~200k houses just sitting on the market for months because "ewww, I don't want to live in Grand Prairie/Garland/Irving". Then those same people pine over the newly built $500k mcmansions in Frisco or the $2m mansions in Highland Park and lament about how they'll never be able to afford being a homeowner. Do you see the disconnect?

>Smaller is "established" and everyone with money wants to live in those established neighborhoods, not the suburban sprawl 50m from the city center.

It's not some secret that desirable location is a huge driver of property prices, and being closer to a city center is more desirable. My parents knew this 50 years ago, which is why even though they loved living downtown in an apartment, when it came time to buy a house they moved out to the suburbs because that's where the affordable starter homes are. Then, when they became more established in their career and built up some wealth, we moved a little bit closer to the urban center. That's just how it works. But these days, millennials seem to think that they are automatically entitled to live downtown in a 4 bedroom, newly renovated/constructed house with full amenities next to the main park and hip shopping center and zero crime while on an entry level salary. I understand that, and I wish I could have that too, but that's just not how the world works (nor how it has ever worked).

This is another reason people are burned on "starter homes". You can't get your money out if you need to move. Cheap houses are in undesirable areas and you can't sell them, better to rent.

An alternative hypothesis would be that suburban development patterns don't work generally. I don't know anything about the DFW area specifically, but it's possible people don't want to live in those cheaper areas because they are poorly laid out and the infrastructure maintenance is higher than the revenue the area can generate. This may manifest itself in different ways (poorer schools, sidewalks, amenities), but one way or another, these neighborhoods are signaling decline.

Many first and second generation suburbs are in death spirals because of this problem. Buyers who can afford it chase newer development because the areas have an optimistic future and no obvious maintenance problem. Unfortunately, many of those areas will be in the same spot 30 years down the line.

> But these days, millennials seem to think that they are automatically entitled to live downtown in a 4 bedroom, newly renovated/constructed house with full amenities next to the main park and hip shopping center and zero crime while on an entry level salary.

I'm not saying there aren't some entitled people, but I haven't encountered this attitude very often - it seems like there are plenty of other reasonable explanations for what is driving consumer choices without stereotyping.

I think the quality of the local school drive home prices considerably.

Why not move into a cheaper starter home now, and then once your child is about to start school (and you presumably have gotten some raises and built up some wealth), move into a more expensive house in the better school district? That's what the entire concept of "starter home" is about.

So now the conversation becomes: it's not that this person can't afford housing, it's that they can't afford housing that has an amenity they won't even use... which makes the entire situation seem even more silly.

The properties of wood and physics have remained surprisingly constant over the decades.

I would have not much of a problem living in an old place. I'd have a lot of skepticism to conquer about purchasing one.

This ends up being reflected in renal prices. My building has a 578 sf studio @ 1515$/month where a 751 sf 1br is running $1,625/month. Add in parking and your talking 30% more space for 7% more rent.

It’s not that the actual cost per SF is equivalent, it’s that housing got upsized without much input from consumers.

457 sf @ $2,245, vs 636 Sq Ft @ $2,405. That’s 40% more space for 7% more per month.

Are you sure your friends aren't just being rational? I thought about the rent vs buy thing pretty constantly in my 20s and always came down on the rent side. Not because renting Dwelling A would be cheaper than buying Dwelling A, but because I was happy living in Dwelling A (a nice-ish 1-bedroom apartment) but if I were to commit to ownership I'd want Dwelling B (at least 3 bedrooms). Life can change fast - you're not sure which fling will turn into a spouse or when a little one will come along or when you'll really need a home office. Selling a one-bedroom condo is obviously doable, but transaction costs are fairly insane on real estate, and it seems like low-end places (like 1-bed condos) haven't historically experienced the same appreciation as standard houses.

It sounds like your friends could get by with a Smart car but bought a Toyota RAV4 instead. And when they decide to trade up to a Tesla in a few years, they might find that the RAV4 retained value better than the Smart car, because that's what "everyone" wants!

But it's not as rational to insist that you need 4 bedroom house with a three car garage inside a top school district when you aren't even married/pregnant yet. Yes, life can change fast, but paying a premium mortgage for a top school district that you won't even use for 6 years minimum (if you suddenly got pregnant today) and an extra bedroom that is going to go unused for at least several years (second pregnancy, perhaps)? I can't see how that's rational.

It's a risk, because things change, but if you know you're going to be somewhere long-term, it's a rational decision in a irrational game.

I was one of these people who was conservative and bought a small cheap apt starter home instead of a 3-4 bedroom house. 10 years later I can't afford a 3-4 bedroom house because they've gone up in value so much so I'm still in my apt and its crowded.

Looking back and what would have been optimal I should have bought a huge house as soon as possible, probably a couple of them. That way I could retire by now.

I would never recommend the idea of a "starter home" to anyone, ever. It only works when housing prices are on the rise and continue that way the entire time you live there.

It should be noted, they don't build 2 bedroom homes anymore. I was talking to a real estate developer in Sacramento about this. New 3 bedrooms do exist, however, they would rather cram out the lot with a 5 bedroom since the cost to add on another few hundred square feet is nothing if you have the equipment and material right there. PLUS! People will go ahead and take on huge loans with that low interest rate. It is win win (unless you don't want huge crushing loans).

I don't know if this is what you meant by this, but I do see this same argument come up a lot, and it's a great example of the "entitlement" I'm referring to.

The only reason it would be relevant that they don't build 2 bedroom houses anymore is if you for some reason think you must have a newly built houses. The old 2 bedroom houses didn't suddenly disappear. They are there in abundance for great prices (at least in my metro), but my extended circle (close friends plus people I know from childhood/high school/etc) won't buy them because they insist on new builds or new renovations.

Yep. Hence "they don't build 2 bedroom homes anymore"

"The old 2 bedroom houses didn't suddenly disappear."

They didn't. But the population is growing.

The population of Americans in their 20s/30s (typically the age of first time home buyers) has remained mostly static since 2000.

But hell, let's go ahead and assume that the population has grown in some unknown way. Why is my metro awash with perfectly fine $200k 2bedroom homes? The supply is there. It's the demand that has dwindled.

The main reason behind it all is the low costs of taking on debt, which in some scenarios is totally insane. Italy for example that has been bailed out several times can get rates around 1%. What kind of entity would accept the risk of default when the profit is close to none after inflation?

The world is obviously in a debt bubble - the question is only when it will pop & how dramatically it will happen.

Who's willing to promise more of their future to buy an asset?

So the whole thing comes down when you run out of other chickens.

Underwriting standards for mortgages are typically based on loan to value (LTV) and debt to income. In that calculating, value is traditionally defined as "what the market currently values comparable assets at" (aka comps). For debt, providers of credit (banks and the central mortgage agencies) are more concerned with ability to repay, rather than absolute debt. Consequently, monthly payment >> total price.

Therefore, in business as usual (moderate to high interest rates), there are caps on how much individuals can leverage with mortgages (i.e. eventually their LTV or debt to income will exceed standard limits and they'll be denied a mortgage).

Unfortunately, both of those key components are heavily influenced by central bank interest rates. If the Fed decides to plunk the rate at 0%, mortgage rates decrease as well.

Because mortgage rates have decreased, my resulting monthly payment for the same total loan value decreases. Or, conversely, the total loan value I can assume for a given monthly payment increases.

Because it increases, I can pay more for a house. And either I, or someone else does!

Now, a few months later, someone else wants to buy the 2nd house on the block. They call out an appraiser, who turns the crank on their standard process, looks at comps in the neighborhood, and values the 2nd house in light of the 1st home sale. Because that 1st sale was inflated (inasmuch as we can judge), the valuation on the 2nd house is likewise inflated.

Ultimately, both of these have the end result of raising the cap on how much borrowers can "afford" to pay (assuming static income) for the same asset. Whereby the financial system previously capped their effective leverage at one level, now it's allowing greater leverage (albeit greater leverage that "looks" like the same value, because the underlying inputs have changed).

Tl;dr - The financial system used to impose a cap on how much I could pay and qualify for a standard mortgage. Because of actions taken by central banks and consumer behavior, that financial system-imposed cap has effectively been lifted. Now, the consumer themselves is the primary brake on overpaying. And average consumers? They don't math too good.

In St. Louis there's a small but frothy back-to-the-city movement that's driving prices up to new highs in a handful of trendy neighborhoods. And it's all anybody can talk about. It's a kind of synecdoche for "the housing market" to reference these tiny neighborhoods while using cargo-cult language about "gentrification" that people learned on twitter.

Make no mistake: prices are way up in those neighborhoods. But they're walking distance to far more affordable housing. It's really bizarre.

There was gorgeous old architecture to be had on the cheap, if you were okay with a couple crumbling vacants on the block, trash everywhere, poorly rated public schools, overflowing weeds, and frustratingly difficult access to the ostensibly adjoining trendy neighborhood (the ones I was looking at were separated by a half mile with a single cross street, where blocks in each of the neighborhoods are probably 4-500 feet long).

When you're shopping for ten years (and not just yourself) you get gun shy about stuff like that

St. Louis really punches above its weight in gorgeous old architecture, so there are well-maintained, affordable neighborhoods with pretty old red-brick houses, too, but the real value is to be found in plain working-class neighborhoods where the houses never show up on Instagram. That housing for actual working-class people is unsurprisingly where most working-class St. Louisans live.

Of course, nobody who has ever used the word "gentrification" on twitter has any interest in living in any of those neighborhoods, so their existence is rounded down to zero in the discourse.

It wasn't that long ago that even the coolest neighborhoods with the best housing stock were wildly undervalued against their fundamentals. And hipster St. Louis isn't thrilled that the secret is out.

I've noticed this too, but obviously it's not universal (lest someone accuse me of bashing millennials).

And with regards to houses getting bigger, I keep hearing about the "golden years" when you could buy a home on a single income. Sure, but those homes were similar to what my parents starter home was - 1000 sq ft, 2 bed, 1 bath with a family of 5 living in them (siblings sharing rooms).

"Starter homes" tend to be fewer these days, especially in desirable areas. Much of the old "starter home" inventory has been upgraded and made much larger over the years, making them not really starter homes anymore, and very few builders build small houses these days, since profits for building larger homes are higher. The closest thing to starter homes being built today are condos, but those are usually in high cost areas, so again not terribly accessible.

This is why it would be good to change zoning to allow existing single family zoned lots to be subdivided or turned into multi-dwelling lots, which can accommodate a main home and a separate "starter home". This is starting to be done in places like Toronto with "Laneway houses"

> McMansions with huge yards, white picket fences, hip restaurants within walking distance, etc.

Huge yards, white picket fences, absolutely, but where are you finding "McMansions" with hip restaurants within walking distance? Usually "McMansions" are synonymous with totally un-walkable and car-bound developments.

And cant afford large houses, not even with debt. Cause no bank will borrow them. If your friends could get that much money, they are likely well off and see the house as investnent.

Which is how we bought put flat - rent was only slightly cheaper then mortgage.

The problem is they think they might not be able to afford it once they have enough kids to need it. Ironically lots of people thinking that way reinforces the problem.

Then you've got a non representative sample. This claim is outrageous, and it's not true. Honestly it pisses me off how casually you just assert that most millenials think this way. A very simple search for millenial home buyers surveys will show this is not the case.

https://listwithclever.com/research/millennial-home-buyer-re...

Median price range is below 300k.

Biggest desires are safety and good schools, likely driven by the fact that the ones buying properties are couples looking to start a family.

He never asserted anything about "most millenials" and specifically talked about his friends. If someone talking about their personal experience with their owns friends pisses you off, then you're reacting to something else.

I've got 500k in liquid assets, a respectable salary and no debts. I'm looking at the housing market and see two options: a junk house in a sketchy area for 600k or a decent house for 1.2M, but I'd have to give up financial security and live pay check to pay check.

If there was a smallish decent condo for 200k, I'd write a check today.

Yes some have trade offs but that seems to be either they are house poor or car poor but mostly the latter. What catches them as with those who do have the money is all those monthly bills can add up really quickly. Adding twenty to thirty to your monthly phone bill for a new phone doesn't sound bad until they add in other similar arrangements.

Sadly far too many seem to think they are just free this or free that away from having it all. (as in if healthcare were only free or college was only free they would not have such problems - welcome to the poison of politicians and mass merchandise marketing combined)

Not 'forced into renting instead of buying property' but 'subscription over ownership for everything'. No money left, lots of stuff, as little of it as possible actually bought and owned. Lease car, rented flat, rented furniture, takeaways and meal box kits, craft beer / organic veg boxes, etc.

In many cases it's a reversion rather than a new idea, and fine, it's not wrong, just different. Very different though, and largely not for me (though I fall in the generation described).

Incur cost being an outlier and then hope it all comes crashing down and you're left standing. I.e. do everything right and be financially prudent.

Or:

Just do what everybody else is doing and hope that you'll get bailed out eventually at the expense of the group that chose the other option.