Home purchase is so much harder for young people than it was 20 years ago

I bought my first house in 1996. I was earning £16,000 per year at the time and was able to borrow up to 3 times my salary with a 5% deposit to lay down. Being sensible, I quickly saved up £1,800 for a deposit and borrowed £34,200 to secure a 3 story 3 bedroomed house with front and back gardens. Mortgage payments were easily payable on my own salary, so with my wife working full time we lived like a king and queen.

Now fast forward to this year, that same house is on the market again at an asking price of £230,000. Curious, I checked the current pay grade of the job I was working back in 1996, and it is a measly £23,000 per year.
Using the same 3 times salary mortgage calculation it means a loan of £69,000 is the most someone at that pay grade could possibly obtain.
I checked estate agents in my area and the only properties available at that price are bedsit/studio flats/apartments (shower room/toilet, open plan kitchen/bedroom/living room) with no patio/yard/garden.

What a change 20 years can make. My own 20 year old 'child' is earning £22,500 per year at the moment and can only dream of buying property. It'll probably only happen whenever I or my Mother dies and he'll get his inheritance as a jump start.

So that's my story from here in England, I'm wondering is it similar in the US, and/or are there massive regional/state differences?
What's the price of property where you are compared to wages, and has it got worse in the last couple of decades?

I can only see it getting worse as more wealthy people buy properties solely to rent out. Millions of young people unable to buy so renting and paying the landlords mortgage instead. How did we let this happen to ourselves...

a reply to: CornishCeltGuy

Blame the 120% mortgages that were doing the rounds back when the arse fell out of the property market.

Even trying to rent private accommodation these days is a nightmare never mind buying a home. Some agents/renters want deposits that are twice the first month's rent and even require guarantors in some instances.

Values are still dropping here in the US in most places. They'll tell you the real estate market is great, but that's very misleading. It's true there is a higher volume of sales than there has been for a while, but HOME VALUES ARE LOWER than they've been in a long time. So if you buy a home, even if you put thousands of dollars of improvement into it, you will still lose money in most cases when you try to move and sell your home. This is even more apparent for people who refinance their mortgages. They'll find they are stuck in their current home, or else they'll take a massive hit.

meanwhile in the us, 8 years back I was making 32k (before tax) and borrowed 180k to buy a two bedroom house with nothing down- about 8k in up front costs.

my mortgage was about 1100 a month.

rent in that same area for a small apt with no basement, attic, or garage would have cost me 1200.

I sold that house last summer for 250k, but easily put 100k in improvements into the place in that time frame.

housing costs are out of control. now I'm am hour outside the city renting... for 1100 a month. living in a dump.

originally posted by: andy06shake
a reply to: CornishCeltGuy

Blame the 120% mortgages that were doing the rounds back when the arse fell out of the property market.

Agreed, those loans were nuts, and many were not even at fixed rates so when they went up people lost their homes.

Even trying to rent private accommodation these days is a nightmare never mind buying a home. Some agents/renters want deposits that are twice the first month's rent and even require guarantors in some instances.

Again total agreement, I've known friends who have had to pay over 2 grand just to secure a rented flat!
My lad was lucky, the house next door to me came available and I'm mates with the landlord so he let him move in with no money up front just pay his rent monthly in advance. His girlfriend has moved in with him as well now so he's living more than comfortably, just a pity it's dead money not paying for his own property.

a reply to: Farlander

I've never known house prices to drop much for long in overcrowded UK, sounds a nightmare for different reasons where you are.

a reply to: lordcomac

It's crazy that people who can prove they've paid more in rent than a mortgage for a year or so are unable to get finance for a home purchase. I know a few people in that trap because while paying such high rents they are barely able to save.

a reply to: Farlander

here in Vermont the home prices have virtually doubled in the past several years, and there are a number of areas where real estate is in a bubble, but I'm not sure where you are at. I'm sure it can vary due to the size of the US and the diverse landscape

To be honest, even in my day a twenty year old could not afford a house. Your 20 year old "child" has unrealistic expectations.

House prices in the UK vary quite a bit, from the extortionate in some parts of London and other places, to the cheap as chips elsewhere. Houses, flats and apartments are still affordable for first time buyers if you are not too picky about location, because they all want to live in central London, or have a garden and a spare room etc...

I am not arguing against you as I agree with the gist of what you are saying, but some people expect things that just won't happen, and never really happened anyway.

It was hard in my time, too.

Consider, as an anganeer at a major defense plant with a college degree in the 60s, my dad was able to afford a down payment and monthly payments on a house, a wife and kids, two cars and trips to Disneyland.

Making the same salary in the 80's, my monthly pay couldn't afford the monthly payments on a house.

I was forced to pay rent, wound up paying off someone else's mortgage for them. Thats the real desired result nowadays. Rent or lease everything, from home to cars to utilities.

Working for mega corporations to earn the money to buy the products you produce in the factory.

Welcome to the grand socialization of your destiny.

Yu were a commie and didn't know it, lol.

a reply to: FamCore

It varies wildly in Britain as well, my mothers house is worth around £120,000 where she is up north, but if you moved her property to my street down south it would command an asking price of £350,000+
It's strange when people say it's worse up north because, outside of London, wages are pretty similar across the UK, so it's actually easier for our northern cousins to get a property than us poor southerners.
I prefer to live down south though so I'm not complaining.

I bought a house in the UK for 85,000 pounds and sold it 4 years later for 245,000 pounds. We then moved to florida and bought a nice place for $290,000, only to sell it 10 years later for $218,000. I made up for some of the loss with rent, but I do wish I would have kept my UK house. But who knew?

The UK is all supply and demand, the government purposely keeps new builds low because the general populace would spaz out if the housing market crashed. A lot of people have invested in property as an investment for retirement. Then there are the Homes under the Hammer programs that encourage all sorts to buy low and sell high. I can't believe it all hasnt crashed yet.

originally posted by: paraphi
To be honest, even in my day a twenty year old could not afford a house. Your 20 year old "child" has unrealistic expectations.

???
I was just early 20's when I bought that house in 1996. If you live in London/home counties I can understand what you are saying though. All my friends from back in those days are homeowners, and all of us are saddenned for our 20 something kids who haven't got the same opportunities we had.

originally posted by: CornishCeltGuy
I bought my first house in 1996. I was earning £16,000 per year at the time and was able to borrow up to 3 times my salary with a 5% deposit to lay down. Being sensible, I quickly saved up £1,800 for a deposit and borrowed £34,200 to secure a 3 story 3 bedroomed house with front and back gardens. Mortgage payments were easily payable on my own salary, so with my wife working full time we lived like a king and queen.

Now fast forward to this year, that same house is on the market again at an asking price of £230,000. Curious, I checked the current pay grade of the job I was working back in 1996, and it is a measly £23,000 per year.
Using the same 3 times salary mortgage calculation it means a loan of £69,000 is the most someone at that pay grade could possibly obtain.
I checked estate agents in my area and the only properties available at that price are bedsit/studio flats/apartments (shower room/toilet, open plan kitchen/bedroom/living room) with no patio/yard/garden.

What a change 20 years can make. My own 20 year old 'child' is earning £22,500 per year at the moment and can only dream of buying property. It'll probably only happen whenever I or my Mother dies and he'll get his inheritance as a jump start.

So that's my story from here in England, I'm wondering is it similar in the US, and/or are there massive regional/state differences?
What's the price of property where you are compared to wages, and has it got worse in the last couple of decades?

I can only see it getting worse as more wealthy people buy properties solely to rent out. Millions of young people unable to buy so renting and paying the landlords mortgage instead. How did we let this happen to ourselves...

I'm in Atlanta and have never had any issue flipping houses after renovations for a large profit. I am sure there are plenty that sit on the market but most are cookie cutter homes with no staging...can't expect those to sell quickly or for much of a profit.

a reply to: intrptr

So it's a similar inflation hardship experience where you are as well then. I feel so sorry for the next generation.

a reply to: lakenheath24

Gutted for you, that UK house would have just kept rising in value and at a speed much faster than wages.

a reply to: andy06shake

It’s because anybody with any savings whatsoever has been investing it in property.
Prices keep rising disproportionately to inflation and its considered the easiest and quickest legal way of making money. Government policy hasn’t helped neither has the greed of the banks.

It all comes down to greed at the end of the day.

a reply to: Vasa Croe

Same here regarding easy profit from renovations, a few mates do that as their business.
I'm wondering more about the wages/house price inflation comparison though, have house prices in Atlanta increased faster than wages as has happened in the UK?

originally posted by: surfer_soul
a reply to: andy06shake

It’s because anybody with any savings whatsoever has been investing it in property.
Prices keep rising disproportionately to inflation and its considered the easiest and quickest legal way of making money. Government policy hasn’t helped neither has the greed of the banks.

It all comes down to greed at the end of the day.

Excellent points.
Savings, even in an ISA, are making such a poor return that property is the biggest lure. A friend of mine bought a house cash recently and the rental income is making him about 7% per year. You could only dream of that from a bank or other investments.

a reply to: CornishCeltGuy

I bought a big house on a golf course in 2003 for $160 and just sold it this year for $185.
We bought a small 2 bedroom house on some land and did a total refurb on it. Only paid 55 for it. So the market here is low. I think it all depends on the area.