Quote:
Originally Posted by opendoor
You tell me which situation would be easiest for a young person entering the market. Here are the three examples with a 20% down payment and a 25 year mortgage at those rates with all the dollars inflation adjusted:
1969: $53K down and $1749 a month
1998: $53K down and $1479 a month
2017: $150K down and $2688 a month
So a person now has to save up 3 times as much of a down payment and their mortgage payments are 50-80% higher than in the previous examples. You could get a 10 year mortgage on that 1998 house and still be paying more than $200 less per month than the 2017 one. Hell, you could literally have a 0% interest rate on the $750K house and the payments would still be 35% higher than the 1998 one.
And of course the older examples are vastly easier to pay off early. If you can manage $200 a month extra towards your principal you'd pay off your mortgage 6.8 and 6.3 years early in the first 2 examples respectively. In the 3rd example you'd need to throw nearly 4 times that much money every month just to knock that amount of time off of it.
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One final problem to address: where, other than in Vancouver or Toronto, is $750,000 representative of a starter home?
Comparable homes, in normal areas, when factored for interest rates, are not 3 to 4 times more expensive, as you were originally presenting them to be.
At least not when compared to the late 70s or early 80s. The 90s? Sure. Because housing prices had been flat for a while and weren't all that expensive compared to other periods.
Again, I am not saying things aren't tough right now. But the dates used in the original post to this chain were random and didn't represent anything close to the worst times to buy.
As your numbers show, once mtge rates are factored in, the differences are quite a bit less than the headline price implies. Looking at the early 80s, and comparing starter home to starter home, it isn't as crazy as some people want to believe.