Interests rates are not historically insane though. My parents bought a home when mortgage interest rates were in the mid 10s. The interest rates aren’t the problem. It’s the ratio of the cost of living to wages that’s gotten to insane levels.
the problem with interest rates was abruptly jacking them from 2% to 7% when there’s barely any houses for sale, and every “starter” house that comes on the market in my area lists at nearly triple what it sold for a few years ago. it means that anyone that bought or refinanced property during the worst of the COVID pandemic will get a life changing wealth transfer paid for by everyone that doesn’t own property.
someone who bought a $100k house with 20% down and a 2% interest rate in 2021 would pay $20k cash and around $126k total over 30 years. someone trying to buy the same property today at $300k with 20% down and a 7% interest rate would be paying $60k cash and around $635k over 30 years.
every realtor I talk to says the same thing: “this is just the way things are now. it’s not going to get better. you can either buy now and struggle for the rest of your life, or wait and be priced out of the market forever.”
yeah, wages, housing inventory, housing prices compared to wages, public sector spending on social programs, stable employment, and consumer good inflation were all different back then too. one might say the fundamental material conditions of those earlier times were less bleak for workers.
which is why boomers all bought houses even at 7%.
borrowing 2-3x your salary at 7% is way different than borrowing 8-10x at 7%.
the rapid spike in interest rates is completely kneecapping already struggling people, because taking on debt hurts much worse in a credit crunch.
Interests rates are not historically insane though. My parents bought a home when mortgage interest rates were in the mid 10s. The interest rates aren’t the problem. It’s the ratio of the cost of living to wages that’s gotten to insane levels.
the problem with interest rates was abruptly jacking them from 2% to 7% when there’s barely any houses for sale, and every “starter” house that comes on the market in my area lists at nearly triple what it sold for a few years ago. it means that anyone that bought or refinanced property during the worst of the COVID pandemic will get a life changing wealth transfer paid for by everyone that doesn’t own property.
someone who bought a $100k house with 20% down and a 2% interest rate in 2021 would pay $20k cash and around $126k total over 30 years. someone trying to buy the same property today at $300k with 20% down and a 7% interest rate would be paying $60k cash and around $635k over 30 years.
every realtor I talk to says the same thing: “this is just the way things are now. it’s not going to get better. you can either buy now and struggle for the rest of your life, or wait and be priced out of the market forever.”
yeah, wages, housing inventory, housing prices compared to wages, public sector spending on social programs, stable employment, and consumer good inflation were all different back then too. one might say the fundamental material conditions of those earlier times were less bleak for workers.
which is why boomers all bought houses even at 7%.
borrowing 2-3x your salary at 7% is way different than borrowing 8-10x at 7%.
the rapid spike in interest rates is completely kneecapping already struggling people, because taking on debt hurts much worse in a credit crunch.
Yeah that home also only cost like $20,000 which is basically nothing.