www.cnn.com/2024/05/09/business/housing-market-good-time-to-buy
Americans say it’s the worst time ever to buy a home | CNN Business
NewsI was looking the other day, if I were to buy a 200k house, my payment would be the same as it is currently for my 350k house. And prices have only gone up here.
Current house is ~200k at 3%, my wife is looking at 7-800k houses rn because “we need more space and to be closer to her parents”.
I would rather literally eat a dirt bike than even look at the paperwork for that right now.
Brother!
Got a $125k house at 5%, fiancee is looking at 450k houses at like 9% right now and I'm like...sweetheart...
We can't go from $1k a month mortgage to $4500 a month!
9% seems absurdly high. I just went under contract literally today in one of the toughest housing markets and my rate was 6.625. the house was priced right around 450k and our mortgage will be 2900. 3400 including insurance and PMI and tax. That's with only a 5% downpayment
I didn't run hard numbers, just assumed what it'd be lol.
I do not have any plans to change homes for a very long time. I was extremely lucky to have the opportunity to get the place I did lol.
Yeah the couple that's selling the house I bought got it in December 2008 (hmm) for 110k... The earlier you get in the better
Yerp. I've already put a bunch into it, new appliances and paint and living room floor. The lot is gorgeous but needs so much landscaping it makes my head spin.
Hoping to be able to pay it off in 15ish years and either rent or sell for profit.
$3500/month could be spent going to a Mexican all inclusive for 10 days every month.
Being her into the fold financially. For me it’s been a bit of a process but now we’re both making decisions with a cost/benefit approach
Whats crazy is those prices are starting to look normal to me too.
I'm in the same boat...$200K 8 years ago at 3% and if we want something bigger we're all of the sudden looking at million dollar homes.
Tell her to cover the difference and sure. What I always tell my wife when she wants a new car or some shit.
“Are you going to work to cover the difference” “No” “Then no”
I have always been curious, when you discuss mortgage interest rates do you refer to the EAR? 3% EAR sounds like fantasy where I live (not the States)
Do you mean AER rather than EAR? Not sure what EAR might be, AER is Annual Equivalent Rate used to calculate interest on savings including compounding. Which is only applicable when you’re being paid interest, not when you’re paying interest on borrowed money. When people talk about mortgage rates in the US they’re referring to APR, annual percentage rate.
I managed to time my last refinance near the bottom of interest rates before they started going back up and have a 2.something% rate locked in for 30 years.
😂
I would love to move but we have those same "golden handcuffs" with a fixed 30-year @ 2.6%
Those "golden handcuffs" really feel like a noose when struggling to pay for basic utilities and necessities
Never really thought about it, but could you not "sublet" your handcuffs? I mean, you may not be protected, but it seems like it would be easy enough to find some sucker to pay you 4.5% while you're paying 3.5%? Which I guess you could basically do as someone renting your property, but I guess that demands that you have somewhere else to live.... Sorry for thinking this out in real time lol carry on 🫡
Maybe it's because I've sublet a few times that I'm like... No. Hell no. The thing is, it's never just one room. I can attest to this as a subletter; some of my stuff just doesn't belong where I sleep: it's either toxic and belongs in a garage, or too big. And the amount of space taken up around the house can become a point of contention.
And then there's how bitter I was when I found out I was paying someone's whole house note while they bought ounces of weed every month and went and partied with the homies every weekend. This was around the time I ate nothing but rice with a little bit of ground beef and carrot mixed in for a week because it's all I had. I lived with the guy that owned the house so I got to see all of the food on his side of the fridge, hear all the friends come through for parties and all that. And it's not like I was mad I wasn't living for free to have the same lifestyle: I actually like to keep pretty quiet and to myself. It's just hard feeling like I'm floating someone else's luxuries while struggling so much for my own necessity.
It be like that... You're both making each other's life easier (compared to not having a roommate) but his life is already easier, so it seems that disproportionately you're helping him more than he is helping you... It's wack, but that's how it be... A real friend may acknowledge this and level the field, but otherwise, you'll be bitter about just another facet of the accumulation of wealth inherent in the system... Though I suppose you should look at it from the other perspective, you're barely benefitting, while the other person is vastly improved (they couldn't afford to live alone while you could) this could lead to some resentment that even in a close relationship would be hard to absolve without some airing of the grievance at least
And the 200k house is probably shitty as fuck compared to your house.
Nervous laughing from Canada in my shitty 1.2 million dollar house.
For real. Sitting pretty in Montreal for now, but my friends in Toronto are getting bled dry. I'm on here, surprised 200g houses still exist somewhere.
Victoria bc here. The boat is long gone - if you aren’t on it, you missed it.
350k for a house? I will take 3!
Medium cost of living area, bought in 2021 at 2.5%, now valued at 460k from recent comps.
460k for a house? I will take 2!
Seriously tho... housing prices suck everywhere, but be thankful you live where you do. I'm in Vancouver, and its slim pickings under 1.5 million. That's in Canadian currency to be fair. Its depressing even for me, and I was lucky enough to get one before the craziness peaked.
If I were to sell my house
And Use all my equity towards a down payment to buy my house back
My payment would still be 3x higher
Try buying a house in NZ. This shitehole is in one of the worst areas of the main city, Auckland, and sold in Dec 2023 for the equivalent of US$512,000.
A decent house, buy still nothing too flash, in a middle-class neighbourhood? Try US$1,026,000
https://homes.co.nz/address/auckland/hillcrest/21-holland-road/wqnNq
I’d have to crack open my retirement accounts to make a decent down payment, drown in high interest rate + PMI, and/or live in a shitty house in a shitty neighborhood.
No thanks.
Don't forget the home owners insurance issues that are only starting to spiral.
Just starting? More like it’s been here and getting worse! One in thirteen homeowners across the United States are uninsured
This is terrifying.
Those are people that actually own their home, if the bank owns your home you don't really have the option of forgoing insurance.
If they are willing to assume the risk I don't really see how its terrifying. Not my monkey, not my circus.
If they are willing to assume the risk I don't really see how its terrifying. Not my monkey, not my circus.
When the federal government bails out large groups of people with taxpayer money, its everyone's circus.
Idk man, these are people with names like "Smith, Williams and Brown" not "Wells Fargo, Chase and Goldman Sachs".
As a dude that worked all their life in healthcare, I'd advise not holding your breath waiting for a government bail out unless you are a multibillion dollar corporation.
I must have missed when the Federal government bailed out homeowners lol
Be real, they’re only going bail out “homeowners” with double digits in houses and millions of dollars and up.
What’re the side effects of not being insured? Say living in a stable environment and not in a flooding area? How often does insurance come into play versus the money you save not having it?
Homeowners insurance doesn't typically cover flooding anyway. You need a separate flood policy for that which most people don't have. It also doesn't cover termite damage for some reason.
Speaking for myself, living in Kansas, in 20 years of owning my house I've had one claim for water in the basement due to a broken sump pump.
The major thing Homeowner's insurance covers is probably fire.
I had a 44K claim last winter when a tree fell on my house. Something like that could happen.
Yup, sump pump failure caused me 75,000 in damage, two years prior at our old house a dishwasher valve failed giving us a 50,000 claim.
Insurance company paid out, no issues, we paid less then 2500 deductible for both without an increase in premiums. My understanding is that they sued in both the valve and sump pump manufacturers.
New houses as well.
You can do everything in the world right, and still need insurance.
There’s a pretty good chance you will have absolutely no bad outcome. However, there a… 1%? chance that you lose everything. This is literally textbook what insurance is for. You pay a premium to transfer risk. Theoretically the premium should be fair representation of the risk transfer. By pooling losses, the aggregate risk actually reduces and everyone pays a lower cost to protect themselves.
Here’s some more detailed info of the probability mechanisms behind risk pooling and insurance:
We’ve only owned a home for 3 years before we found out how important it is to not only have insurance, but also with a company that provides good service. Last year, we had a toilet (dirty water 🤢) overflow upstairs while we were out of the house. In less than an hour, it had spread across the floor of the upstairs, soaked through the floors, and was coming through the downstairs ceilings and also down through the walls. Anything dirty water touched had to be ripped out, so basically the entire inside of the house was gutted. Our insurance company was extremely helpful. Told us immediate steps to take, sent in disaster remediation and got us in a hotel. We stayed there for about five weeks until insurance found an apartment for us to stay in while construction was going on. Insurance covered everything: home repairs, hotel/rent, food while we were in the hotel (no kitchen), and reimbursement for anything else that was damaged (clothes, furniture, etc). We were out of the house for 8 months - just moved back in to our (basically new) house beginning of this year. The insurance company never argued price. Any quote/receipt that I gave them was reimbursed (as long as it wasn’t for upgrades, they are only required to put you back in same quality you’d had prior). I have heard a LOT of horror stories, so I know this isn’t the norm (shout out to State Farm and my rep for being awesome in a horrible situation). In total, they paid out over $100k to get us back in our home. Because of one clogged toilet. Unless a person has enough money to rebuild the house on their own, insurance is necessary. We would have lost basically everything if we didn’t have a safety net.
Depends, but people have house fires, car crashing through the living room, tree falling on the roof etc. A stable area reduces risk, does not eliminate it. Those areas tend to have cheaper insurance over say, Florida though due to lower risk (less fraud as well).
You can't get a loan if you're not insured. If you can afford to pay cash for a house, you can probably afford to self insure as well.
New roof after a hail storm is like $20K+
Depends on your luck. Fire, thefts, random cars crashing into the house, kids walking on your grass trips and breaks something. You tripping and hurting yourself
Gotta watch out for acts of god and floods however
Yes. Its just starting. Without homeowner's insurance, there is no home financing or refinancing. Without home financing, the real estate market is dependant on cash buyers, (which the overwhelming majority of Americans are not,) and corporations to prop up values. However, why would corporations and high net worth individuals buy RE if the risks outweigh the returns? A lack of demand or ability to purchase will cause devaluation.
It is also not possible to refinance a loan without homeowners insurance. Anyone stuck with an ARM loan and no insurance is fuuuuuuu_ked. It's also impossible for the majority of Americans to rebuild without insurance after a natural disaster. Storms, tornados, hurricanes, and flooding. Droughts, water shortages, wild fires, crop failures, and famines. Y'all think the cost of living is high now? Wait 3 to 5yrs. The world is changing at an increasingly rapid rate. People should account for the variable changes that are happening and adjust their life strategies accordingly.
In my opinion that's realizing that RE is no longer the safe, long term investment it once was, and maybe don't bring kids into a world with an uncertain future. Not having kids will also lower the cost of living, which is a good thing considering AI and automation are concurrently devaluing human labor, while climate change is doing its best to make the world uninhabitable.
Nice to see someone else out there on the same page about kids and the shit they’ll inherit.
The home insurance is what scares me. I need to buy a plot of farm land and live in a home depot shed
Same. I managed to buy a $59k place that's maybe 1 level above "shack" in a low COL, no flood area, no claims, great credit and the HO insurance has more than tripled in the 9 years I've owned the home.
The social contract is broken and the economic one is almost there too
I’ve had so many issues securing insurance with my home. Any literature on this you recommend about the crisis?
It’s likely to only get worse from here unfortunately. If the interest rates get lowered it will reinvigorate the FOMO once more.
Don't touch your retirement accounts.
That tax-advantaged compound growth will eventually exceed the value of that house (stocks generally grow faster than real estate).
If you want to save for a down-payment, invest in a separate taxable account on the side. Maybe 60/40 stocks and bonds if you think you need the money in the next 5 years.
“Generally” grow faster, yes. I am laughing because I was just looking at a house assessment in my home town yesterday that increased 120-percent over the assessment three years ago
Yes.
Things vary between locations and different points in time.
But, on a long time horizon, stocks generally outperform real estate when you do not take mortgage leverage into account.
This makes sense when you think about it because most corporations own or rent real estate themselves and need to outperform those expenses to stay in business.
I agree with you, I am just astounded with housing recently, not happily. I think it is horrible for first time home buyers
As with all things Real Estate, it depends on the location.
As a whole across the country Real Estate is still growing slower than the economy on average.
But there is a trend, especially among younger generations, of people moving to HCOL cities which drastically increases demand faster than supply in those key areas.
The market will eventually work itself out by some combination of building more housing and/or people reversing the trend and moving to LCOL areas.
But, those changes take a long time and things will continue to suck in the short-term.
There also plenty of countries that had this issue with housing costs and have never recovered. I’m looking at you japan! This is seen in cities across the world.
There will be places your priced out of forever because someone was born before you. It is what it is.
I think someone at Harvard looked at this a while back. I think real estate and stocks have about the same historical return, but housing is more volatile in the long run.
Edit: I found the paper. PDF warning.
Nothing beats stocks in the long run, as long as you are sufficiently diversified to not overexpose yourself to a specific geography, sector, size or country risk:
https://finalytiq.co.uk/lessons-118-years-capital-market-return-data/
The issue with even the best performing real estate is that almost anyone buying them cannot geographically diversify enough to reduce the tail risks. It was not clear in advance that Australia or Canada would do so well from real estate perspective over the past few decades, and most people can't buy property in multiple countries to improve the chances of picking the right places.
This is the problem with casualty insurance and the reason for reinsurance. If I’m “Fate Sarm” insurance company, I need to limit my exposure to total losses, so in a place that has fires, earthquakes or hurricanes, I can’t stay solvent if I have more than 10% or so of the policies in a particular locality that could get totally wiped out in a natural disaster. This is why the insane incompetence of the Florida Republican Party is going to cause the entire state to be uninsurable. When private insurance starts to pack up and leave, it’s a death spiral of increasingly higher risk insurance policies that overly expose the underwriters to insolvency.
I thought, on average, real estate grows around 4% while stocks grow around 8-10% depending on the index you track.
The advantage of real estate is access to government subsidized leverage in the form of a mortgage. But, with rates above 6%, that advantage does not really work anymore.
You also obviously have the ability to live in your "investment" when you buy real estate. But, if that is your intention, it tends to be better to treat it as an expense rather than an asset unless you plan to rent it out or until you decide to sell.
Don’t take life advice from the internet.
Isn't it still better to own something rather than continue throwing money into the rent hole? You say the retirement accounts will out pace the value of the home but isn't that always true unless you own a home in the first place?
It is better to own than rent if you plan to stay in an area long-term.
But stocks, historically, outperform real estate, especially in tax-advantaged accounts.
My recommendation would be to focus on saving for a down-payment only after at least getting your full employer 401k match.
You also shouldn't tap into any tax-advantaged savings you already have. Pulling money from a taxable account for a down-payment would work though.
Thanks for the response!
I have a downpayment the monthly payment would just be about 60 percent of my take home pay for a 900 sq foot home 🙃
Don't worry I have a huge down payment saved and the mortgage would still be 3.5k+ for anything remotely decent
$140k down payment saved here and the mortgage on a crappy outdated sub 1k square foot home in my area would still be over $4.5k a month.
This has been the case in a lot of places for 20 years.
The American south, and Midwest are just catching up to the northeast, West Coast, and Denver.
We have the highest interest rate in 20 years, the highest median house prices in 20 years, and the lowest # of homes sold in 20 years.
Can't blame interest rates. They are the ones holding home prices somewhat steady.
The core issue is that US failed to build homes to keep up with population growth. We are 4 million homes short.
So demand far outstrips supply. Anyone who bought before pandemic is laughing their way to retirement.
I mean don’t we also have the largest generation in history staring to die off? Ie boomers? Surely over the next 10-15 years there will be a glut of housing. Or at least much less of a shortage.
The question of whether it all gets bought up by huge investment firms who can outbid regular people is a different issue though. My hope is there’s just so much stock at some point that even regular home buyers get a bit of a break.
There’s got to be some sort of analytics of expected effects of the boomer die off. Somewhere.
My parents are just gifting their homes to us (children) when they die. I don’t know what % of homes go on the open market following home owner death, etc. that would be an interesting metric
That's the goal for a lot of elder families. But a lot of those haven't had to finance years of nursing home care at the end of their lives yet.
Elder care does a remarkable job siphoning wealth or of a lot of families.
I live in the Northeast, and a nursing home here costs about $10k a month. My dad passed away unexpectedly before he went to a home, but we had to hire a lawyer to structure things so those costs didn’t force my mom to eventually sell their house. Since people are regularly living into their nineties now, I think a lot of the baby boomers’ wealth is going to be vacuumed up by the healthcare system
My parents are already executing their will because of this potential. My dad is gifting us his properties, and getting them out of his estate, so his estate and whatever assets in it aren't eaten up my the retirement home pitfall. Essentially, I'll have my inheritance (in terms of real estate) in my name before my dad even retires (~next couple of years). You avoid probate and all the death/inheritance stuff at time of death and just work out the inheritance while both parties are alive and get it transitioned to the younger generation before any outside parties (like banks or retirement housing credit unions) steal every cent under their collateral clauses that allow them direct access to the estate and they end up taking everything.
If it's out of my dad's estate and now formally in mine, no outside parties can access it and it's protected from the vultures.
Protecting generational wealth is just as important as making it.
This is smart. I have seen family members squabble over dead relatives' property far more than I would like.
I assume your dad will have enough to self fund for the duration of any Medicaid lookback period? Medicaid is the program that pays for long term nursing home care.
A good elder care attorney will help you plan around the Medicare/Medicaid rules. I highly recommend getting one if you’re ever dealing with a nursing home
That's what we had to do. But it wasn't planned years in advance to handle the look back periods.
Yeah that is the calculus right now. That he and my mom (through SS, their state pensions, and their passive income from their investments) will be enough passive income to survive into their 90s quite comfortably. And that we all (I have siblings) will support both him and my mom in their later years (if they use all their income/savings up), we will house them and/or figure out hospice or end of life care based on our own finances and what's available (instead of a some collection agency dicking around in my parents' estate).
So, yeah this plan only works if everyone is in agreement, and the inheritance is already determined and it's mutual. We get their houses when they retire. They'll downsize and enjoy their retirement savings. And if any medical catastrophe happens, the banks dont have access to any of our family's real estate (which is where our generational wealth mostly resides). We are more of a real estate rich and cash poor family. This is because my grandparents passed down their houses to my parents too. So we are protecting our most valuable assets that we've grown across 3 generations (3 houses) and it also ensures everyone in the family has that foundational need (a roof over their heads).
And with that, it ensures a basic need is met, while also allowing myself and my siblings to invest in other ways and start building larger investment accounts, so by the time I die I can not only pass off the generational real estate (and gains from it), but also have more cash than my parents did at retirement age and pass on a bag of cash to my own kids in addition to the real estate they'll get.
As long as a parent doesn't need to go on Medicaid during the look back period (whatever it is in your state now), it's a solid plan. That's where people get screwed with losing their net worth because the state wants you to spend your assets to pay for your own care. They can't pay the 10K per month and require the state to intervene and the state doesn't want to pay it all and wants them to liquidate their remaining assets and any recent gifts. Generational wealth transfers aren't something the states struggle to protect.
Homes are assets. Boomers will sell them to pay for elder care, and the homes will be resold. It ends up being roughly the same.
Millennials were also a huge baby boom. They are a larger population than Baby Boomers, and are currently the largest buyer of property. Gen Z is just as large, and will soon be buyers.
Don't expect a glut, it isn't coming, short of something catastrophic happening
What’s interesting is last year boomers actually overtook millennials as the largest share of homebuyers although I believe that reversed recently
How Money Works did a video on it. The TL:DW is don’t expect much if any intergenerational wealth transfer
Two issues:
- Boomers have the highest wealth in generations
- Boomers are also spending the most due to retirement, COL, and supporting/maintaining their children and their family due to higher COL.
How much of that will go to their children and so on is to be determined, but not looking good. Physical assets may be passed down mainly, but may be used to supplement LTC facilities as they are getting expensive. I'm seeing this already in my nursing practice. I'm sure there is data to back it up, but from the healthcare perspective, it's obvious what's happening.
they are laughing? Why do people have to be assholes lol maybe they are just relieved they bought at the right time...
I'd say it is the worst time to finance a home...not necessarily to buy a home. And, it is the worst time to finance a home, until the next worst time to finance a home.
Well if homes are overvalued then yes it’s a bad time to buy as well.
Home prices have only dropped more than 5-6% like 6 times since the early 1900s and almost every drop was associated with a major economic decline. Home prices are pretty bonkers right now but it’s not likely the market is just gonna correct and home prices are going to drop 15% in a year. If youre buying a home to live in for at least 10 years even overpaying a fair amount is probably not a huge deal as the home will likely be worth more than your mortgage by the end of that decade. Unfortunately no one can predict the future and you can’t say definitively the booming prices now won’t be even worse is 3 years.
Obviously all home buying decisions are location based though. Rent in my area for a nice town home we could start a family in was almost 3k. I’d rather pay an extra 50-75k on a 600,000 dollar home than spend 72,000 dollars in rent for 2 years. Other areas may favor the rent or right now but overall rents only going to go up and a mortgage stays the same.
People who have "cash" to buy a home (not finance) are a bit less concerned as they have time to spare waiting for any recovery (if the market drops). Homes being overvalued is much further down the "concern list" for them because the don't have a payment. If these people aren't buying from an investment perspective then no, it isn't the "worst time" to by a home for them.
When is the worst time to buy for cash buyers?
When there is cheap credit. Buying with cash is a bad idea if you can buy with a low interest loan and put the rest of your cash somewhere else where it can earn more then the interest you're paying on the mortgage
Not very many cash buyers who aren't buying as an investment at this point.
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I work with buyers in the real estate industry and this is not what I am seeing.
Lots of them. Sell a house you lived in for 30 years and paid off the mortgage, buy with cash. Sell a higher priced house and use the equity to buy in a lower priced area. And so on.
Also if you upgrading then it’s never a worst time. The cost gap is covered by the value your current place has gone up. I’m looking in the 400-500k range right now for a possible upgrade and financially it’s gonna be more like buying a 200k home when I sell my current and make a move.
1980 would like to have a word with you.
Houses were much closer to incomes then so despite the high interest rates it was still easier to buy back then than today.
I remember it well. I would say that it is worse now to finance a home because of the larger disparity between incomes and home prices you see now. Interest rates were much higher...that is for sure, but the price of the home wasn't so extreme from wages that a mortgage payment back then didn't take up as a large percentage of your take home pay that it does now.
There was an insane interest rate spike from ~1980-1983, but rates plummeted in following years. I think it's safe to say this is the second worst time, in that interest rates have spiked AND prices are massively inflated AND wages have fallen relative to housing prices.
Yep, historically it's the 2nd worst time to buy
There’s going to be a point where most people are calling for increased supply. That takes years to play out but has to start now. Local and state governments doing their urban planning jobs. Expanding infrastructure into surrounding rural areas. Builders not just doing high end homes.
It's really a decade out at best case. Where I am there isn't even anywhere to build
It's not the worst time to buy a home. The worst time will be when rates come down into the 5s and everyone who's been sitting out for the last year and half waiting for rate drops jumps back in and prices somehow rise even further because demand goes through the roof.
Savvy buyers can at least sniff out deals right now and refi out when rates come down.
The early 2000’s called and they would like a word with you regarding the “refi when the rates come down” plan.
It works OK if you can afford the payment. The problem with the 2000s were liar loans to people who could barely afford the introductory rate and quickly failed when the balloon payment kicked in.
Good ole ninja loans. No income, no job, accepted. What a time to be alive.
During that time my dad tried to talk me into buying a townhome. I didn't make much money then I knew that I would barely be able to afford mortgage so I declined. I'm thankful that I did because I would have been one of those people who were either foreclosed upon or forced to walk away.
I bought a little townhouse in 2006 for about 70k. I was only making 35k at the time. I did have perfect credit, but the bank approved me for a 400k loan! I was 22.
A few years later when the market crashed it occurred to me that people were taking those loans.
I wasn't even making that much back then. Close, but under that amount. I also had near to perfect credit. I'm still thankful that I didn't buy because soon after I met my future wife and we bought a house together.
While true, we just met with a mortgage broker who was ready to gladly give us a $3500 mortgage on a $100k income he said we even qualified for slightly more than that. We would be living on beans and rice. Thats about 42% of our gross and about 65% of my take home. We also have another $700 a month in car and student loan payments pushing our gross DTI up to almost 50%. Maybe that's normal for some I have no idea but we couldn't make that work. We would be under foreclosure in a year. And we have a toddler.
Early 2000s was a VERY different market. The existing mortgages and occupancies out in the wild at that time were very different from the fixed rate primaries today. If rates don't come down, the existing homeowners just wait until they do.
I've been saying this for months. Everyone wants lower rates. I think it'll be better for the market long term if rates stay higher so home prices actually drop and get back in line with reality. If the fed cuts rates even 50 basis points this year the endless climb of housing costs will continue.
Prices ain't gonna drop unless we will a deep recession into play.
And at that point the stock market may also drop. Good luck with a down payment when your investments are down over 50% a la 2008/2009.
Yup I bought about 2 years ago. I absolutely would not sell this house at a loss, I don't think the general public will either so I don't forsee prices coming down all that much
You wouldn’t sell at a loss on purpose.
Many people won’t have a choice if they get wiped out by a recession. Short sales were sooooo common after the 2008 bs.
Understood, but unless something catastrophic like that happens, I really do not think house prices will go down. And if an event like that does happen, I doubt it will be a good time for everyone else to swoop in and buy either
Too much of discussion is focused on interest rates, when it should be focused on a building boom. Hold interest high for home buyers, but lower interest rates for home builders and construction loans.
That is something congress can do. Remove permit shenanigans by NIMBYs, convert X% of single family zone neighborhoods to high density.
People complain about traffic and schools and hospitals. Make construction loans for building cheap, and make the process of building faster.
America forgot how to build.
So create a perverse incentive structure for building like China?
If you offer cheaper than market debt for a certain project, you are virtually guaranteed to get a massive amount of fraud.
Rates will stay here until the Fed's dogshit shelter measures come into line with the higher frequency measures of housing inflation (which have largely been flat to down). There is a reasonable probability that renters will be paying less than owners on a monthly basis here in the very near future.
China had the right idea it's just they kept at it for way too long to the point where they built more housing than there are people. They also made investments into anything else nearly impossible.
get back in line with reality
Looking at other OECD countries, and in particular Canada, it's clear that housing prices can get much, much higher relative to income. The US still remains one of the more affordable places to buy a house. Likewise, look at the cost of new construction, it's astronomical. So even if there was a building boom, I wouldn't expect the new houses to be sold cheaper than the current inventory.
Would it be good if housing prices went down? Yeah probably. But it's a much safer bet that US housing prices soar to Canadian levels than assume the government, made up almost universally of rich land owning millionaires, will pass laws that would cause houses to get cheaper. At best we can hope for a stagnant market.
The prices right now are reality. The people begging for a crash since 2013 can’t accept it.
Just like the people that think interest rates will go down anytime soon. I bite my tongue (since I work in the field) but I just want to tell them: "they will when you struggle to find a job".
I left the field and don’t bite my tongue about it. People should have seen the writing on the wall in Q2 2022
I think it depends on the area. I'm in the DC suburbs in VA. There are still bidding wars and prices have continued to climb along with the interest rates. I keep thinking people will run out of money at some point but they are bringing even more to the table.
This is literally why I bought a house in December.
Don't let any of these BS clickbait articles change your thoughts on it. It was the right move. It's going to be a shitshow, even when rates drop into the mid to high 6s.
We actually got a really good rate at 6.75% for todays market. Paying the same for more house then I was renting.
It’s so crazy how market dependent that is because if I were to buy an equivalent house to the one I’m renting it would add $3,000/month to my bills.
LOL, the highest rates in 20 years combined with the highest prices ever? By definition, that is absolutely the worst time to buy a home.
Your fundamental assumption is that housing will continue appreciating at a particular rate, which is going to be challenged by the fact that leases are cheaper than buying in a huge number of metro areas. "Just refi later" is cold comfort if you are stretched to your leverage limit (which, most people are as every part of the real estate transaction process is incentivized to generated the biggest sale price possible).
It's the worst day of your life... So far
This is literally gambling lol
The worst time to ever buy home is today. The second worst time was any other day millennials have had the resources to buy a home. The next worst day will be every other day in the future
“On average we live pretty well: worse than last year, but definitely better than next year.”
I would say buying from 2010 - 2015 and refinancing to 2.5% during Covid worked out well for many Millennials. For the ones who were the right age and in the right careers at the time to make it work.
For those just trying to buy now it is much harder. Personally, if I was a FTHB I would not be in a big hurry to buy now.
Yall fools be acting like millenials bought there forever homes when they were 21 years old or something. So many good ideas talking about the past.
Some Millenials were 21 two decades ago. Buying a house 10 years ago was still a good deal, hell 5 years ago it was great!
Can confirm. Bought my house 5 years ago. Insanely low interest rate.
underrated comment here. As a millennial why does everything have to suck so bad.
Because most of us were raised to think that life would just sort of work out no matter what we did so we did what we wanted with minimal guidance and the guidance we got was from people telling us college solves all. That plan sucked and now most of us can't even change a tire without anxiety.
We were born in the “end of history”. The Cold War was over, America won, business was booming everywhere, new futuristic technology was emerging that would surely bring everyone together.
Wii sports brought everyone together and then they never released a better game for the wii.
It was all downhill from there.
I had the best parents someone could ask for but the “just go to college and get a degree, it’ll work out” probably wasn’t the soundest advice. My only saving grace is that I worked a warehouse job that offered tuition reimbursement so at least my worthless degree was free.
You created an interesting question. How do you as a child evaluate your parents? I personally think I had okay parents but based on how I turned out in life we could argue I had amazing parents and based on how I feel towards my parents we could argue that one of them just sucked and one of them was great.
Dude get out of here with that crap. Material conditions in the West have gone to shit because of FINANCIALIZATION. It's not cultural. Stop it. It's economics.
https://en.wikipedia.org/wiki/Financialization
We were screwed no matter what. The only people who have a chance are those with well off parents/grandparents.
The Northeast:
“The median existing-home sales price increased 5% year-over-year in March to $393,500 — the highest price ever for the month of March, according to NAR. Home prices increased across the country, led by a 10% jump in the Northeast to $434,600.”
It is in full swing here and nowhere near done. Traditionally the northeast lags in lots of indicators, recessions, unemployment. It catches the wave last and comes out of things last
Housing prices started increasing in popular areas as the pandemic started, like everywhere, but the true acceleration hit later
Worst time to buy a home if you don't already have one to sell. People that own a house, sell it for a higher price to offset higher purchase price so it doesn't matter.
Aka worse time to buy for FTHB. I’m one of those people. The idea that buying a house is a vehicle to growing wealth does not add up in this current climate. I am saving more and building wealth renting better than I would through buying a house. I really want a house though bc my wife and I both work remote and we have a toddler and part time nanny. We make good money and have a huge down payment saved yet we still feel like houses are absurdly overpriced for what you get. Hence we are renting another year.
It’s insane, house prices are just as high as they were during 2% interest rate environment. But now you have 7% interest rate, so it’s quite possibly the worst time ever to buy a house in terms of median income to housing and interest rate.
They say that meanwhile houses are still flying off the market in less than a week - and still at premiums. It's wild. 7% mortgages haven't slowed anything down.
That’s because supply is so low. Mortgage applications are actually down to a multidecade low so the rates have had some impact to demand, but you don’t see it because supply is down so much.
2 out of 5 aren't even people buying, its corporate funds that ruined the stock market so they've cornered/monopolized the housing market. They've monopolized food. They're working on water right now.
https://www.theguardian.com/environment/2024/apr/18/water-scarcity-private-speculation
Housing is still a necessity, and inventory is still low.
It's natural that sales would still be quick, but it does not follow that it is a good market. Housing has been an issue for over a decade since the market finished rebounding from the great recession. Don't conflate how fast a house can sell with actual economic conditions.
Basically, I can sell fire extinguishers really fast during a wildfire, but that doesn't mean wildfires are good for business.
In my city, lots of buyers (corporate and private) pay cash, no mortgages
That's just not true. Existing home sales are down 40% and are close to the housing crash lows.
The market may "feel" normal and competitive only because supply is low. That's because people can't afford to move and lose their 3-4% loans and pay into the higher cost market. Excluding equity they have built, it is likely around 60-70% of Americans could not afford the home they live in right now if they had to buy it at current prices and rates.
Low supply or high demand, same effect in the end. Demand is only high relative to supply.
The effect isn't the same. The prices might be the same but there is a huge difference in flexibility due to how many homes are sold. Now, people won't move because the interest rates mean buying something new with the same monthly payment will be a big downgrade. If the rates were low, people could move without having to worry about giving up their low interest rates. The market is grid locked by this.
I absolutely agree with all of your comments above; however, in my area, nothing is staying on Zillow for more than a week, sometimes days. I realize my county is not indicative of the nation.
That is because if it doesn't sell it gets removed. I have had multiple houses in my town repeatedly going up again and again.
That's fair. But in talking to realtors, many aren't Even bothering to put signs in yards because once they hit the MLS there are dozens of offers. And this is on anything between $200k to $2 million.
People forget that real estate markets are hyperlocal. Sure they follow national trends but each market is different
It varies by region. Some urban markets are still hot (California, Northeast) but a lot of the local markets are pretty much frozen.
Many markets are seeing price drops now. I know that in Denver, one of the strongest markets for a long time, prices are falling. Other cities like Austin and Las Vegas are seeing declines.
Fact remains people want houses and simultaneously there’s a shortage so they’ll buy it anyway. Furthermore, 7% isn’t that high considering historical norms.
7% is average in a historical context, but highly abnormal in the context of a 5:1 median income to median sales price context. When interest rates in the early 80s were 12-15%, the ratio was closer to 2:1.
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23d
I am not saying interest rates need to go down.
The underlying issue is that homes are viewed as speculation vehicles and not a service. Policies need to change to address that. Get rid of subsidies for home ownership and redirect them to home construction/development.
There are already a significant amount of subsidies/tax credits for construction/building firms.
Problem is the construction/builders got burned so bad in 08 that they are now focused on more profitable projects. This out of fear because many of them didn’t survive 08.
Subsidies for builders pale in comparison to the mortgage interest tax deduction, property tax deduction (especially in states with no income tax), first time home buyer assistance programs, property tax locks (e.g. prop 13), and capital gains exemption from residences. By at least an order of magnitude.
7% is high when you combine it with the actual prices of the homes. The amount of money it costs to actually own a home is higher right now than it was in the 80s when rates were higher.
You also have to consider the Slowdown in inventory of people selling because they can't move because they can't afford payments at a new place of equal value
Then you have to take an account it's almost been 2 years of this interest rate and people's wages have grown around 10% in that time so that means houses have become 10% more affordable for the median person than it was 2 years ago in the summer
The only way not to lose is not to play. I'm out, I'm not buying, I'm not shopping, I don't care - I'm resigned to rent for at least the next 5-10 years.
The appreciation of homes will be yet another way this country has optimized the financial outcome to benefit Baby Boomers. I don't feel like a Millennial, I feel like a credit card and my parents are using. Every single fiscal policy this country has created for the past 50 years has been to benefit them and win their vote.
Uh yeah, first things first.
I’m pretty sure I’ve seen a recent 7% interest rate for purchasing a home, and homes in my state that are under $300,000 are dogshit foreclosures or condos with, I shit you not, $500 or more monthly HOA fees.
Yes, I live in a high cost of living state, but home prices have skyrocketed since before, and during COVID with no affordable homes being built.
I couldnt afford my own house if we were to buy it now. I bought right before COVID for $225k. My house is now worth $400k and new versions of my same model in my neighborhood are going for $450-$475k. It's fucking insane and unsustainable.
I mean yay equity but holy shit.
Hmm, it makes me wonder by looking at Zillow pricing graph, the house price have gone up, say since pandemic, Im not thinking the price should have deflated or gone up since the interest are way higher now.
How can home price go up while interest rate too?
IF people have a home and low interest rates and the neighborhood is decent, then I don't see much need to sell, just to move to a new house that may not even have the quality stability as some older homes, but they look nice. But they come with Big Price, Big Insurance, Higher Taxes, so I don't see the benefit of the trade up to new home as being an advantage. Even in people want to downsize, it comes at a steep price to do so at the price and rate of today.
Some people move a lot, what are their reasons, I don't know.
I think it's a good thing if people have a nice older home, with low payment, low interest rate and low taxes, it is a good thing to have a pro-active neighborhood association, to help enforce people keeping their house up, the lawns maintained, their shrubbery trimmed and no junk and clutter around the homes, and then the neighborhood value can remain stable.
Some of the newer cookie cutter homes with the very high roof, with small back yard, and small front yard in communities that look like something out of the Stepford Wives. They are costly and don't compare to some of the communities that was built in the the late 1950's and 1960's; which had nice homes with 3 or 4 bdrms, 1 and 1/2 or 2 baths, 2 car enclosed garage, nice size front and back yards, and likely on a 50x150 Lot.
It's going to be a bad time as a buyer when the new rules for buyer commissions come into play. I think it's going to be a confusing mess for a while.
I just got screwed on this. Sold my house in AZ and paid the commission for both Agents
Bought a house in CA and paid the commission for my Agent
I bought somewhat recently and during the closing process rates went up .5% but I was locked in at a lower rate.
I’m sure in 6 months if this continues, right now would seem much better.
We also got the house 100k cheaper than listing. Due in part to some repairs but also because not many people are buying.
Our first lowball offer the seller balked at and wouldn’t even start negotiating so we withdrew. Two weeks later with no additional showings or offers they came down 50k on the listing and we put in an even lower offer and this time they negotiated.
That same week the house appraised for 59k more than we paid.
Things are only worth what someone is willing to pay. Your place isn't worth +$59k.
The house was definitely appraised for +59k for increased property tax revenue from their city. Suckers gonna get hosed for more property tax burden despite what a person will actually pay when the home is listed.
yea that literally makes no sense lol. He spent the whole post saying how nobody wanted the house at that price and still thinks he made 59k in a week.
If I didn’t have wealthy in-laws and extremely handy parents, it just wouldn’t be possible to ever own. My wife and I make $120K combined in a LCOL, but houses that were $149K in 2018 are $319K today, plus interest is out of control. It’s absolutely bananas.
Given social security might be on the chopping block for a variety of reasons in the near future, I’d be reluctant to cash out any retirement savings and leave yourself short at retirement.
If you look at houses as a place to live with a payment you can afford, then go for it. But please, please folks be patient and put aside the money to put 20-30% down. Yes that will take time, maybe years, but as you are patient we may see another cyclical bubble pop and people who bought high are under water, ie, some values to be had.
It’s hard to take the emotional component out of housing, but if you can and are discipline, a bargain cycle will come around again… always does..
Gen Z here. I’ve come to terms with the fact that I will never live comfortably, never own a home, never be able to go on vacations. Life is depressing. How is it that my little family has a great income and yet we are still scraping by. What the hell has this world come to
For people wondering I just bought a house in Jersey, roughly 7-10k worth of repairs needed at move in. Got a credit from seller for 7.5k. House was appraised for 375, we bought it at 375. In a relatively good/great area. Buying two points closing costs are roughly 28k total. With a 6.65 rate and 3123 per month on mortgage. If you’re not running duel income, all I gotta say is goodluck in more crowded areas!
I don’t know what’s happening in my state homes are not lasting over one week on the market. Five new homes being built on my street currently
I am a single guy looking at small homes in my area. The 675sq ft fixer upper I looked at last week is 275k. It's in decent shape but will need at least 10k of work in the first year.
The only reason a home this size exists in my area is because it was built in 1930 before all the B.S. regulations the government has put in place to restrict supply.
The cookie cutter condos In my area (which is all they build other than mcmansions) are 1150 Sq ft and start at 400k
Unless I marry a Kardashian I guess I'll just rent for life.
You can only know that for sure with hindsight. I'm older than most of you, and I can remember many times when it looked that way. But trust me... it can get worse.
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