the insane mortgage rates we saw in the last few years really are going to be a generational redistribution of wealth that we'll talk about for the next century, I think. That might have been the last train out of town for the middle class to widely own housing in a lot of cases.

No idea about if it’s the last train out of town but home ownership in the US is extremely high[0] (it ought to be we subsidize it like crazy).

If you go back to 1900 you see home ownership rates in the US at less than half of households[1]

The interesting thing to me is how conflated home ownership has become with housing affordability. As we’ve doubled the numbers of home owners we’ve dramatically removed the options for housing.

[0] https://fred.stlouisfed.org/series/RHORUSQ156N

[1] https://www.census.gov/data/tables/time-series/dec/coh-owner...

People have been making this argument since 1990.

The Federal Reserve MANDATES that consumer prices go up 2% per year. If house prices ever go down, they'll be there - waiting - to pump them up.

Prices will rarely ever go down substantially for a long period of time unless the Fed completely changes (I doubt it).

You can either:

1) try to time the market (difficult in housing, I'd argue not as impossible as equitities)

2) buy into the bubble

3) hope that the US basically turns into a different country

4) be ruined financially by missing out on the biggest handout in the history of the world (the 30-year fixed negative real interest rate mortgage)

Pick your poison.

Housing prices exploded to compensate for the negative real interest rates. The people who got the handouts were rich people who owned multiple houses and sold them off. For the most part others didn't get that hot of a deal. In effect it was a regressive tax that the poor paid for the rich by paying in inflation the cost to make multi-home owners rich.

> For the most part others didn't get that hot of a deal.

How? Dollars are worth $0.5 in 1990. Yet your mortgage payment is unchanged. Your house payment is much less.

Rents are much higher.

You won.

>Housing prices exploded to compensate for the negative real interest rates.

They didn't "win." They broke even. The people that sold them won. The people with no house but inflated away cash/salary lost.

If your payment is massively lower than your rent would be - you won.

Someone else is allowed to win, too.

It's a zero sum game, and the only losers have been renters.

That can change if there's a massive, sustained housing crash. But I won't hold my breath for that.

I'm willing to bet, like always, house prices won't decline. The value of the dollar will decline instead (because the Fed can just easily QE until the only people that lose are renters).

> The 30-year fixed rate mortgage at negative real rates is the biggest handout the world has ever seen.

Agree. I bought a house around a decade ago. Refied into a sub 3% rate. The house next door now rents for 2.5x my mortgage. That's 10s of thousands of dollars/year extra I have in my pocket.

Being able to afford 20% down on a mortgage is something affordable to less people every year. With rates increasingly quickly, it's not going to be much cheaper if prices fall too.

So buy at 3.5% down.

The more leverage you have - the more you're taking advantage of The Federal Reserve mandate that prices go up at least 2% per year.

2%x33 = 66% return GUARANTEED by yours truly, the Federal Reserve.

Maybe, in the back of peoples minds, we all know "The Fed" isn't magic and crisis do happen. So if this "guaranteed 2%" falls apart, it's going to freaking suck for a lot of people.

Isn't it an exponential formula instead of a mere multiplication? 1.02^33 ?

If you put 3% down on 100k = $3000.

If prices appreciate 2% = $2000.

$2000 / $3000 = 66%

Can you elaborate on your last sentence a bit more? Just trying to get a more thorough explanation. I just got my first 30 year mortgage so, trying to make myself feel better I guess.

If you just bought, you don't have a negative real interest rate.

Your interest rate is probably 5% or so?

The real interest rate is probably 3% or so. That means your REAL interest rate is 2%.

When you inevitably get the chance to refinance at below 3% - your REAL interest rate will be negative.

The 30-year fixed mortgage is a product that would not exist without a government guarantee on Fannie & Freddie's debt. Even if you have a jumbo loan - it's only because of the MBS market created by Fannie & Freddie.

In essence, the tax payer is paying you for you to have a mortgage on your house - regardless of whether Fannie securitized your mortgage.

My interest rate is 2.7% - We've been in the house for close to a year now. Renting was going to be 700 more MINUMUM. I couldn't justify not buying but also feel..unsure about everything for obvious reasons.

I'll take a whack at it. You have your mortgage, and let's say the hypothetical payment is $1000/month. That is all you'll ever be obligated to pay each month in order to live in your house (we'll ignore property taxes for the moment). Whereas your neighbor rents her house for $1000/month. But next year her rent is $1050/month, and so on. In ten years, she'll pay on the order of 50% more to stay in that house. But you'll still be paying $1000/month, and will continue to do so for 30 more years.

But that's just how mortgages work, right? Lock into a rate, and have that for 30 years? Only in the U. S., AFAICT. Canadians will correct my details, but as one example in Canada one gets a mortgage for, say, five years at x%. After five years, go renegotiate? (Help me out here, Canucks; as soon as I went to write it out, I knew I had it wrong.) Anyway, point is, the "lock it in at 2.5% for 30 years" seems to be unique to the U. S., and assuming that your wages increase, after a period of years you will keep more money in your pocket than the neighbor that rents.

Paying a mortgage is in essence paying yourself.

Yeah this probably is the best bet. Will be keeping in mind as I save up money and figure out where I want to settle down.

Yep Millennials, Gen X and Boomers have all been handed a once in a lifetime gift here. Each of those generations made out like bandits with low housing prices until the last few years and low interest rates.

Gen Z and the generations to come have a real reason to be pissed at the rest of us.

What gift would that be? Genuine question - I don't see what gift I received that is comparible to my in-laws purchasing their first home for 30k and flipping it for 100k not long after. I haven't had a gift close to that.

> purchasing their first home for 30k and flipping it for 100k not long after

In a lot of markets here (I’m Canadian) average people who bought average homes in the mid 2010’s (millennials) have already made over a million dollars. Most home owners make way more money from their home than their job. This will never happen to my generation.

In Australia at least there's a substantial gap between affordability for millennials and us Gen X'ers, reflected in homeownership rates. The trend only seemed to have been getting worse throughout covid (governments threw a lot of money into economic recovery, combined with super low interest rates, driving up house prices despite near zero immigration and absence of foreign students etc., though they're coming down now). Was that not true in the US? Gen Z are just coming into house- buying age now, though my own son is likely 8-10 years off from being a good position to afford anything at all, and without my help (or a lottery win), it's not going to be a house or even apartment anywhere close to where I live. But a lot could change in that time.

No idea about the US, I'm in Canada and housing has only gone off the rails in the past 4-5 years. So those 3 generations all had legit chances to buy a home at a reasonable price.

I'd assume every country is its own special mess:)

In Canada last year we had a stat released that said 1 in 5 Millennials that own property own more than one. This was inline with both GenX and Boomer stats.

Millennials are just as much a part of the problem as any other generation, assuming you think speculators are part of the problem.

"Speculators" sure, but most people who own multiple properties I wouldn't think fall into that category. We own a rental property - it's very much a long term investment, and we charge rent below market rate (it's still positively geared!). I don't believe our purchase locked out any first home buyers, it's a tiny 1BR flat, and priced at a point those just getting onto the property ladder could've afforded it (and outbid us). If we do sell the property it'll be to help my Gen-Z son buy a house. Having had assistance from my own parents (a smallish interest free loan that I paid back within 5 years) that seems fair enough.

> I don't believe our purchase locked out any first home buyers, it's a tiny 1BR flat

I mean, by definition that property would have sold to either a new home buyer or another speculator like yourself.

And by definition, if you own a property you rent out, you are a speculator:)

i have no problem with you being a speculator:)

I would if I thought I was one! A speculator I'd see as the sort of person who regularly buys and sells property hoping to make quick cash. While there is some tax regulation to discourage that here (you pay a lot more in CGT if you sell quickly etc.), I still don't think we have the settings right, it's too easy to make money if you already have it, at the expense of houses not being available to people who actually want to buy a house they can live in (who are stereotypically couples thinking of starting families etc.)

Where did you invest in CA that the Price-to-Rent ratio isn't abysmal? Or did you buy 20+ years ago?

Not in CA! And no, about a year ago now.

...and you are absolutely right that we're pissed. Hopefully y'all will be willing to help out with reasonable public policy at least.