Those numbers are so not reality. $2K/month is nowhere near the payment for the first one.
It could be. The very key thing that is left out of both is the down payment amount
600k at 3%, you need 229k down (38%) to pay $2,025/mo (assuming extremely low property tax and insurance).
850k at 8.5%, you need 40k down (4.71%) to pay $6,850/mo (assuming extremely low property tax and insurance).
40k seems like a much more reasonable down payment…
The 600k house at 3% with 40k down would be $2,821/mo. Almost $4k/mo difference from the 850k example.
Isn’t 20% standard? Where can you get a house for 3% down in today’s market?
Almost $4k/mo difference from the 850k example.
So their point still stands
It’s $2028/mo. Think before you say these things, Mitch.
Yeah I had a 300k house at 3% was around 2k
You seem like someone who would be prepared if gravity reversed itself.
Not quite, I’m still working out where to keep my phone. Velcro chafes.
Both are heavily overpriced.
I still wonder why US houses are so expensive? I mean they are basically just a couple plywood planks slapped together, what can be so expensive about that?
Well, when 5 people own all the houses and all the land they can jack up the price and leave the houses empty.
Supply and demand. The 2008 financial crises crushed perspective home home owners and rightfully made it harder to purchase homes for people with low credit. The demand for construction slowed/stopped driving many construction businesses out of business. Now we don’t have enough supply or enough construction to meet the supply. Somewhat ironically rents and prices are so high that it is economically viable to start building again. Many new apartments are being built now and for the first time in a very long time rents actually flatlined.
Beyond this there were also issues that made the problem even worse. Land lords started using the same tools to determine rent and even though they weren’t directly colluding, in effect they were through the tools. Also Blackstone started buying up as much property as it could during the low interest rates during covid.
Also nimbyism blocks a shit ton of new development.
Yes, that’s not a new problem though. The biggest issue there is it tends to block medium density stuff like apartments. It’s one reason the US has the “missing middle” problem.
Here in Australia, they just changed a lot of the tax laws. Every shonky house investor out there is freaking out telling everyone how important they are and we’ll fail without them lol
Made from the finest in cardboard material that every builder has assured me has the same structural quality as brick.
any cardboard derivatives?
Hey, they touched up the images for the second posting with AI. So, that’s an improvement. /s
My home was sold for $115 in 2011 and now the “zestimate” is more than double this. If I’d be happy living in a cardboard box, man I’d be doing pretty good
For perspective the record high for mortgage interest rates in the US was 18.6% in October 1981. Wait… isn’t that when Boomers were buying houses and everything about life was easy and perfect? Yes.
Except the more important metric is number of years salary it takes to buy a home. Interest rate is mitigated by so many other factors.
I agree - if only the meme creator had used this instead of the more important point.
Is this Canadian or something? Average house prices peaked in the United States in Q4 2022. House prices are only marginally higher than they were in Q1 2021 rn and are lower than Q4 2021.
source?
The Case-Shiller index disagrees. https://fred.stlouisfed.org/series/csushpinsa
Let’s break this down. Plugging these numbers into a mortgage calculator, yes a $600,000 home with a 3% interest rate would be a payment of ~$2024/month. However, this assumes a 20% down payment, $0 property taxes, $0 insurance, $0 HOA etc.
However, an 850k house at an 8.5% interest rate with those same numbers would “only” be $5228/month. Additionally, as other commenters have pointed out, interest rates are not that high.
OP is straight up lying to you at worst, or just cherry picking numbers in a very deceiving way at best.
Not that I’m trying to argue housing is affordable. Just that people will go on the Internet and tell lies to spin a narrative and drive engagement.
I agree. But I do wish more people knew about USDA loans in the US, it was the only way I could initially buy my home because it means you can put any amount down, even 0% if you so desire. It allowed me to lock in a low rate (3.2%) in 2021.
The catch is that you must not be in an incorporated city or town, and income limits apply (based on your area’s COL).
There’s also FHA loans for those with not great credit, and VA loans for veterans. VA loans also allow 0% down
In addition to the crackpipe interest rates OP is proporting, house prices peaked in the US in Q4 2022. House prices are actually currently lower on average than they were in '21.
Donald Trump wants the interest rates to go down, so wealthy people can have more free money.
Point taken, but where are you in the world with an 8.5% mortgage? Rates in the US for 30 year mortgages are around 6.5% right now (source: https://fred.stlouisfed.org/series/MORTGAGE30US)
the baseline is around 6.5% but I don’t think most people get that, plus it was up around 7.5% six months ago
the numbers in the meme are definitely closer to what we’ve seen recently
When I bought my first house - doing so with decent income but pretty bad credit - I did so at 6.25%.
Everyone in the room recoiled at such an apparently high number.
Nowhere but then the infographic would have been less shocking.
My math says that the monthly principal+interest on that house is more like $4,300 a month, assuming:
- Purchase price: $850,000
- Down payment (20%): $170,000
- Loan amount: $680,000
- Interest rate: 6.5% fixed
- Term: 30 years (360 months)
Not insignificant, but not wildly off like the infographic.
You gotta roll home owners insurance in there, and taxes.
That’s realistic, but the infographic doesn’t include tax and insurance. Working backwards, it has:
- Home price: $600,000
- Down payment (20%): $120,000
- Loan amount: $480,000
- Interest rate: 3.0% fixed
- Term: 30 years (360 months)
The monthly principal-and-interest payment is exactly as the post said, $2024 / month.
Has insurance gone up? Absolutely? Have property taxes generally rise? They have. But this is an honest like-for-like comparison.
Who has 120k lying around for a down payment?
Someone selling a home they already own. I know thats not helpful to most, but thats the only realistic way to have 120k sitting around
$2024 > $4300 is more than double, while also assuming saving an extra $50,000 in downpayment while that cost increased.
Although the down payment has less impact. But nonetheless, that lower payment boosts the loan to about $4600.
Wages aren’t doubling.
Oh, I agree with you, and concur with the spirit of the infographic. I just like accurate calculations!
We don’t do 30 years here anymore. Its 25, and most people can’t do the 20% down, its 5% for first time homebuyer
Gary’s Economics has as usual many great videos about this
It sucks because this ridiculous setup distorts everything about the economy and benefits no one except banks and the rich
and benefits no one except banks and the rich
Ah, so you mean a typical Tuesday on earth. :/
Gee, I wonder how that came about.
On the bright side, banks and the rich finally having their day in the sun!
Now do 2016
It would take about 45 years to pay off the house with the monthly payment on the left. The one on the right for some reason randomly increases the monthly payment so that you’d pay off the house in around 24 years.
Well, the banks can’t be loaning just anyone money for a home. They need that capital to be able to give loans to billionares, so they can fund their lifestyle and allow them to avoid paying any taxes.
