First-Time Buyer Lorenz Curves (2020)

https://doodles.mountainmath.ca/blog/2020/09/28/first-time-buyer-lorenz-curves/

by luu • 5 years ago

138 37 5 years ago

doodles.mountainmath.ca

This is a great article. It's odd we all call it a "housing crisis". It's a "housing dream" for 50%+ plus of the population. And a "crisis" for only like 10-20%. This is not an issue that gets fixed. This is an issue that only gets better if you're on the winning side and worse if you're on the losing side.

tgv• 5 years ago

According to the dictionary: a time of intense difficulty or danger, a time when a difficult or important decision must be made. If 10%-20% of the population has serious housing problems, that's a crisis in my book.

dcolkitt• 5 years ago

It’s a crisis for all of us, even homeowners, because it imposes massive drag on the economy. Much of economic growth is driven by people relocating from low productivity regions and firms to high productivity regions and firms.

When housing costs explode, there’s no way for that to happen. New entrants have no way of getting on the property ladder in HCoL areas with high paying jobs. We all lose out from the stuff that doesn’t get made and the innovation that doesn’t happen because IT help desk specialists at regional banks can’t become data scientists at tech startups because they can’t afford to move from West Virginia to Seattle

dzhiurgis• 5 years ago

Almost all of NZ's parliament owns multiple homes. It's a bit of a joke.

turbinerneiter• 5 years ago

I'm in the top 30% income bracket in the country I live in. I would need to spend 2/3 of my monthly income for 30 years on a mortgage to buy a 3-room flat (for a small family) in the city I live in. But first I need another ~3 years to save enough for the down payment.

It feels monumental and I think I will rather move to the countryside (grew up there anyway) and try to find another job there. I can build a big house there for half the price of a 3 room flat here.

I honestly don't know that to tell the lower 50% of the income bracket. They have no chance in this game. They will perpetually have to pay rent, distributing 1/3 of their income to someone richer than themselves.

hourislate• 5 years ago

Housing in Toronto goes up 2k a week. The average price is over 1 million. Unless you inherit Grandmas house, you aren't buying shit on your salary in Toronto. The crisis is now spilling over to all of Ontario. I don't even know what you have to bring home after taxes to save up for a down payment. Most houses are well over 1 million. The house I bought in 2005 for $440k could fetch around 1.2 million today with multiple bids and I guarantee that it will be torn down so a new home can be built on the lot. A new home in my area goes for 2.5 plus million and they can't build them fast enough.

https://www.blogto.com/real-estate-toronto/2021/05/toronto-l...

throw0101a3• 5 years ago

and they can't build them fast enough.

Which has generally been the problem: lack of supply given current population growth.

hellbannedguy• 5 years ago

You need to stop that Chinese funny money. Along with the USA.

(In the USA any foreigner can pick up a phone, or send an email, and buy our real estate. I can't think of any other country that all allows such easy buys. Now---they arn't suspose to live in them, but it always seem like they do.)

jjav2• 5 years ago

I would need to spend 2/3 of my monthly income for 30 years

But it is not 2/3 of your income for the entire 30 years.

Even if it is 2/3rds of your income right now, the mortgage payment only ever goes down due to the three factors of inflation, refinances and (hopefully) raises you get over the decades. Compare to rent which only ever goes up.

HPsquared2• 5 years ago

Interest rates can rise, which would increase the mortgage. Also, buyer's income could fall at some point in the next 30 years.

onion2k• 5 years ago

A good rule of thumb for mortgages right now is "Can I still afford this if interest rates go up by 5%?" That would (approximately) double the monthly cost for me...

isolli• 5 years ago

Small nitpick: with a mortgage, you pay rent (interest) to the bank for the money you borrowed. However, the interest you pay to the bank is usually less than the equivalent rent (the principal you pay back goes into your pocket by decreasing your debt).

More importantly, the interest you pay goes down over time (unless you took the risk of a variable-rate mortgage). It goes down because you pay down the principal, it goes down in real terms because of inflation, it hopefully goes down relative to your salary, and (at least historically) it goes down relative to market rents.

reedf1• 5 years ago

As a young person on the horizon of starting a family the only reason I want to buy in my country (UK) is due to how renters are treated. I've had a total of five landlords in my young life - and they have all (and I understand this is anecdotal and not everybody's experience) been different shades of exploitative/incompetent. I don't want to have to live with the boot heel of some lucky idiot on my neck. I don't want to have to have my day-to-day life beholden to the bizarre whims of a random who doesn't need to prove that they are sane, competent, or empathic enough to be a landlord.

Renting is not a functioning market in the UK, the quality of the landlord is now my biggest concern and this information is kept completely hidden. If I was a policy maker I would implement a landlord license and setup an independent review site for those landlords so that tenants can leave reviews of their tenancy.

vishnugupta2• 5 years ago

This is precisely what forced me to buy a house in India. The 2nd landlord decided to sell the house within a month of moving and said I’ll be at the mercy of the new landlord. I had it enough and bought a house even though I had to stretch in terms of monthly mortgage payment.

iso16313• 5 years ago

I rented 3 different flats from 2006-2008, and 3 different houses from 2011-2016, ranging from a brand new flat to a conversion in a 1850s house to grade 2 cottage from the 1700s.

Can't think of any issues with landlords, but then most of them were dealt with by a management company (estate agent or whatever).

I rented out my own flat (which I'd bought in 2008) from 2011-2016 and let the letting agency sort the management. I certainly didn't hear of any issues, occasional bills for plumbers, gas checks, replacement appliance, were taken from the rent, but otherwise it just worked.

The primary reason to buy for us though, as well as being far cheaper (£350pcm mortgage interest vs £800pcm rent), is the security of tenure. If your landlord wants to sell up, or dies, then you might find yourself needed to rent a house with a couple of months notice, which means you might not be able to find anywhere near to your kids schools, or afford it if you can.

renting "somewhere in zone 2" is very different to "renting in the small village you live in". Currently there is just 1 house within 5 miles of mine, but it's in a different council area (so different schools etc). It's also more than the total price of a 90% mortgage on the house value (not just the interest part, the repayment part too)

catchmilk• 5 years ago

The worst part about the UK (specifically London, not 100% sure about the rest), is that even when you buy a property (assuming it's a leasehold), then you're again at the mercy of the freeholder. Depending on your lease - you'll still be paying rent (ground rent) in addition to service charge and building insurance. Technically, you're only 'renting' the property for the lifetime of the lease. All from probably someone who was merely lucky enough to have been born into an aristocratic family, or a money-hungry company.

It's an embarrassingly archaic and unfair system. God forbid working families want to own their own home/land in this country (city).

alexgmcm• 5 years ago

Is leasehold that common outside of London?

My parents own their property as freehold, and it's only an hour from London by train.

Tbh, I just ended up emigrating as the property market was so bad it felt hopeless.

philjohn• 5 years ago

And there are fun leasehold arrangements like "The ground rent doubles every 5 years"

Starting from a peppercorn value, this quickly amps up to hundreds of thousands, or even millions, of £ a year.

It's the wheat and chessboard problem[1] made concrete

[1] https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem

refurb2• 5 years ago

It should be noted that Canada has some of the highest home ownership rates in the world, almost 70% (in 2020 and highest in last 30 years).

https://www.canadianmortgagetrends.com/2019/03/homeownership...

First-Time Buyer Lorenz Curves (2020)

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