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I don't have all of the math for all the scenarios you describe, but still, overall you're completely correct. If you account for inflation and interest rates, and look at median home price, a home earlier this year was CHEAPER than home in 2005. Roughly the same monthly payments before accounting for inflation, because of the interest rates (6.X% vs 2.5-2.8%ish). That alone makes a huge difference. People are also becoming more financially literate. Once folks are able to crunch all of the numbers on their own, start calculating how much rent costs, how much money they will make from asset valuation, how much they can save from using HELOCs instead of credit or other types of loans, they're willing to spend more, too. There's the tax deductions, but that got gutted, so it's not that big anymore. one can say the down payment increases, but it increased slower than the market did, so if you just sat on investments since 2005, you can make a BIGGER down payment now than then, proportionally. At current interest rates, even with PMI, you're potentially better off doing a 3% + PMI than putting a large down payment (unless you're expecting a market apocalypse the likes of which the US has never seen). We could crank up the interest rates to 10% and home values would tank. It wouldn't reduce monthly home costs any though. |