Will mortgage rates drop below 5%?

[ua_guy]

30 year fixed rates are still north of 6%.

The land pricing around here is still about $350k per buildable/developed acre with utilities nearby.

The median home price still hovers around $950k.

Those of us who have lived this reality for the last 25 years know for sure it's simply a different world now to own a home where there is high economic opportunity.

Then again, single-family homebuilders used to be carpenters, not RE tycoons running multi-billion dollar construction conglomerates.

[Fishindude77]

Then again, single-family homebuilders used to be carpenters, not RE tycoons running multi-billion dollar construction conglomerates.

If most housing was being built one or two at a time by small carpenter / builders things would be more costly yet.
There are tremendous cost efficiencies in doing large scale developments (a bunch of homes at the same time). It takes a big outfit to put these deals together and pull it off.

[ua_guy]

If most housing was being built one or two at a time by small carpenter / builders things would be more costly yet.
There are tremendous cost efficiencies in doing large scale developments (a bunch of homes at the same time). It takes a big outfit to put these deals together and pull it off.

But that's also the reason why so many people are encouraged to be over-housed for their needs and budgets, and our idea of a true starter home really only exists in very old homes. Big builders need profit margins so they force buying more home, with very limited customization when it comes to new home inventory. That's why affordable housing has to be forced and incentivized, so it even exists.

[disneysteve]

Even if you could get buyers to accept and buy similar homes today (doubtful), you would probably have at least $250k in it due to current labor and material prices. Can lower and middle income folks come up with a down payment and afford a $250k home?

Absolutely. 250K homes is exactly what we need to ease the housing shortage. The problem is nobody is building them.

We bought our house in 1994 for $142,000. Plug that into an inflation calculator and today it would be $308,000. Great, except today these homes are selling for over $500,000. A house down the street just hit the market for $599,000. The house next door sold a few months ago for $551,000.

Home prices have grown much faster than inflation in part due to the tremendous shortage of affordable homes. We need tens of thousands of those $250-300,000 homes to meet demand.

[LivingAlmostLarge]

My grandad was a home builder in the 50's & 60's when home buyers didn't have such big desires. Most of what he built were in the 1,000 SF range; (3) little bedrooms, one bathroom or maybe a half bath too, a small kitchen, a living room and a full unfinished basement if you were fortunate. Very few had an attached garage, if so it was one car. The homes weren't air conditioned. Just about as simple and basic as it gets. Families raised a bunch of kids in those homes and seemed to get by fine.

Even if you could get buyers to accept and buy similar homes today (doubtful), you would probably have at least $250k in it due to current labor and material prices. Can lower and middle income folks come up with a down payment and afford a $250k home?

It's a different world now to own a home. I think the starter home answer for lower and middle income folks is probably a beat up fixer upper that they will have to rebuild, repair and fix up over time, pay as you go.

People aren't accepting starter homes. Everyone is "Saving" for more and not expecting to move up. NO one seems to consider a condo. Even in HCOLA people turn their noses up. 24 years ago DH and I bought a 1 bd condo because that was what we could afford and what was acceptable. Now no way would anyone be saying "sure" we can live in 1 bedroom condo as a couple. we need at least "2 bd" for resale and to be happy. Truth be told that 2 bedrooms would have been lovely had we been able to come up with $180k instead of $150k. Just wasn't happening.

But I don't know anyone who buys condos really and certainly not 1 bd condos with the intention of living there. They would rather rent for a long time and then jump into their 3 bd home. So at least in coastal areas the starter home is the cond but people aren't doing it.