Maybe Treating Housing as an Investment Was a Colossal Mistake

Re:Maybe Treating Housing as an Investment Was a Colossal Mi... by kitsunesoba on Monday March 06, 2023 @12:38PM (#35044297)

I too went for a down payment below 20% (somewhere closer to 5%) because saving up a full 20% would've been daunting to say the least, and as such pay PMI. Still a better deal than renting by a large margin, and the feeling that the cash being put into payments is going towards owning something rather than being set aflame is nice.

That said I agree with the sibling comments that 20% down payments shouldn't be as out of reach to as many people as they are.

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Re:Maybe Treating Housing as an Investment Was a Colossal Mi... by findthewords on Monday March 06, 2023 @04:38PM (#35048025)

We can take a look at the St. Louis Fed "Fred" database take a look at historical affordability of 20 % down payment. Let's divide two numbers, a and b to get a ratio of yearly median wage divided by median house price, from 1980 to 2023. [1]

a) Employed full time: Median usual weekly real earnings: Wage and salary workers: 16 years and over

b) Median Sales Price of Houses Sold for the United States

We see that the a/b ratio was 0.25 in 1980, and has declined to 0.05 today.

Therefore, a 20 % down payment in 1980 would equal to a 4 % down payment today. Conversely, a 20 % down payment on a house in 2023 (median wage, median house) is equal to a (25/5)*20 % = 100 % down payment in 1980!

[1] https://fred.stlouisfed.org/series/LES1252881600Q#0

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Re:Maybe Treating Housing as an Investment Was a Colossal Mi... by kitsunesoba on Monday March 06, 2023 @05:29PM (#35048672)

Wow, that's brutal. Not much more can be said.

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Re:Maybe Treating Housing as an Investment Was a Colossal Mi... by brewdad on Monday March 06, 2023 @09:01PM (#35050572)

Ok, but in 1980, you needed that 20% down payment because mortgage rates were approaching 20%.

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