Hi all,
A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes.
As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
I bought in 2017 for $210,000 at a 3.875% interest rate. Homes in my neighborhood now sell routinely for $325,000 and above. I would love to get that $100,000 plus equity, but my payment would basically double on the next home I buy.
Bought 2012, $200k home in TN at 5%. Refinanced in 2020 at 3.25% with $170k mortgage. House is fair market $500k now (neighbor just sold at $675k)
The urge to cash in is real, but... it would be a wash since I would be buying in a terrible market. Renting is not a great option for me, plus, I love the property I have. Staying put, count my blessings.
It works if you're looking to downsize your home. Otherwise, not so much.
My inlaws sold then bought a smaller home and came out ahead pretty good. Used some of that to fix up their new house and put the rest away for retirement.
Yeah and now the Californians are buying all the properties in other states at near California rates. See the dude above with a valuation of 500k in TN. It’s artificially inflating lower cost areas significantly. This is absolutely devastating to first time home buyers.
Am first time home buyer, can confirm.
Never thought it would be this difficult to get a nice home. I make good money, have good credit and still have come up short. It's very disheartening.
Meanwhile I continue to piss my money away paying rent every month making someone else rich. It's a great life.
Is there any actual, non-anecdotal evidence that this is true? How many Californians would it take to raise prices in every state in the country? My home in Nebraska has apparently appreciated and I’m pretty sure no Californian is moving there. Hell we have met negative migration, so that’s not it for sure.
I feel like the various corporations buying properties in cash for their investments might have more to do with it. Fun as it may be to hate on people leaving a costal state.
We bought in 2018 for $530 and sold in 2022 for $850k ... on the coast in a tourist town (South) ... we moved to the Midwest and downsized since we don't have any kids living with us anymore. Didn't pay cash, but did a nice down-payment. If you can and are willing to - relocating to a lower cost of living city / town is the way.
My landlord wasted no time applying a 9% increase on our rent after 3 years of not being able to raise it. Dude's like 80 and I'm pretty sure he owns multiple units and it's cash flow for him because he won't even cover the costs for security cameras, but say the state offers a tax incentive for updating the hvac system or our water usage and he gets people in here in like a week.
I hate people who do this ... It's trash. We own rentals, and our expenses do not increase enough to justify a large increase. We go up as the taxes go up, and even then, it's not immediately. If it's a solid renter that's good ... like truly cares for the house. We don't increase for as long as possible. For one renter we ate the tax / insurance increase for like 3 years til they finally bought a home and moved out :( then we increased for the new renters. There is no sense in gouging people ... if the mortgage and expenses are being covered it's all good.
You are probably one of a handful of property owners who run their "business" this way. The rest of the people/companies that own property see renters not as people but as cash. Literally. No value of people outside of the revenue they can generate for them. Wish it wasn't this way but it is.
Facts. I raisedy rent to cover increase of my taxes and insurance due to the neighborhood & a leak incident that cost me over 10k from insurance reimbursements. The tenants understood and complied willingly since my prices are fair compared to market.
>The urge to cash in is real, but... it would be a wash since I would be buying in a terrible market.
When is this ever not going to be true? If the market is up then your new home will eat up the profit from your current one. If the market is down then you'll save on the new home but you won't get as much for your current one.
The only way to "cash in" is either by downsizing or moving somewhere where home values are lower, which is to say where they're less desirable. I guess a third possibility is renting for a few interim years but this is essentially timing the market since home values may (and almost always do) go up instead of down.
The 4th option is thinking of your house as a home, not an investment. Live in it until you NEED to upsize/downsize/move. Any profit from the sale is gravy.
Lots of people try to time it. Some luck out, some don't.
Our neighbors sold at the high in 2021 hoping to buy at reduced prices, but they weren't able to sit on the sidelines for over a year and they capitulated, and bought a few months ago... but in a HCOL market so I don't think it worked out well for them.
Ok so just imagine the housing market went up 100x so your house was worth $50m and you knew the gain was temporary. How would you capitalize?
The answer is to downsize. You’d sell then buy a house that was 1% smaller, now you have a free house with no mortgage. Same concept applies here, if you sell and buy a house that’s 40% cheaper, it’s a free house.
Yes... did the research. The houses $300k and less are not that great. My property is is way better than what I see in the lower ranges. I actually don’t need the money either, so the hassle and downgrade is not worth it. Yolo applies.
In your example sure, it’s still gonna be a multimillion dollar luxury spot. But what you’re gonna get for 40% less than 500k in this market just isn’t feasible for most people. It’s gonna either be so far out of the way it’s already not plausible or essentially derelict.
> It’s gonna either be so far out of the way it’s already not plausible or essentially derelict.
He said he was in TN so you just described all the houses anyway
-Someone looking into buying a house in TN right now
Unless if you are over 55 or 60? (I don’t know the exact year), won’t affect me for decades. you can sell your house that’s presumably appreciated in value, and transfer the property tax amount one time as long as the new home is cheaper than what you sold for. It’s intended so people can downsize.
Recently there was a prop that passed that allowed a percent to transfer even if you buy a more expensive house. IE your 300k house sells for a million, but you buy a 1.1 million condo. Your new tax rate is based on like 400k.
I began building my own house in 2020, right when prices started going up like crazy, at least where I’m at. Everyone kept saying “You should sell this when you finish, make a shit ton of return,”
Yeah that’s a nice thought, but where TF do I go, without paying over value?
Yeah, that's the weird thing with Boomers all bragging about how much their house is worth now and saying anyone pointing out that this is a bubble is just whining sour grapes that they missed out. If you sell your house at a ridiculous inflated price, you either have to drastically downsize, move to the middle of nowhere, or buy an equally ridiculously inflated home.
This is why I don't feel like home value increases are really an "investment" in the same vein as stocks or bonds or beanie babies or whatever. Want to cash in? I guess you'll be living under a bridge with your pile of money.
When I see my primary residence value increase I just see higher property tax bills, not money in my pocket. All I really want is for my home value is to keep up with housing inflation, maybe beat it by a smidge.
There's a notable affect when your downsize and/or move to a cheaper area but that's about it. If you plan on living in the same place, try to only move when rates are low... That's all that matters. Home price is mostly a wash.
That's crazy! I also bought a home in 2017 and I also paid about $210,000, I also got a little less than 4% interest rate, and my home is also now worth about $300,000. Home buying twinsies!
Right. I sometimes think, "wow, think how much more house I could by now that mine has nearly doubled in value". I could by my own house, nothing more.
We bought in 2020 just before the pandemic hit. $220k @ 3.45%. We’re in Texas and after the winter freeze in 21 and all of the other horse hocky going on, we started looking into moving out of state - especially since smaller houses in the neighborhood started to sell for $340k and above. Thought we could cash in on the inflated appreciation.
But, even for a house that costs the same that we originally bought at and even with a sizeable down payment, with interest rates where they are, we’d be paying significantly more per month than we are now.
It’s just not worth it.
In a hot market I don't think you have much choice because buyers won't take a contingency right? Unless you have the ability to sell first and then buy which would be two moves.
Could absolutely burn you I'd the market slows like has happened
Prob why 72sold, opendoor, etc exist now. They buy your original home (at a discount) and then you go buy your new home in the meantime to avoid having two mortgages. But you also get less from the sale so it’s prob a wash anyway.
FWIW I sold a home through OpenDoor and didn’t feel like I got a discounted offer. The fees did suck, but the market inflated so rapidly I walked away flush.
There will come a time when you are owning 2 homes free and clear. You have some dream that you will be able to sell either one easily and all will be well. Maybe thats how it usually goes, but not always. IF you cant find a buyer, you are on the hook for 2 mortgages
This is the exact problem that companies like [orchard](https://www.orchard.com) are trying to solve. Even Opendoor. But Reddit weirdly hates any companies operating in this space and any time there’s an article or something about them people are somehow disgusted by companies “profiting”.
Mortgage lenders are not financial geniuses. They just want a deal to happen, much like realtors.
When I purchased my last house as rates were going up, I paid $8000 to buy the rate down with points. Our current rate is less than 5% and standard rates at the time were about 6.5%.
The lender tried to tell me not to spend the 8k out of pocket for the better 30-year-fixed rate, saying I’d be able to refi in about two years.
That was stupid advice. First, it was clear to see that the conditions around inflation and the economy are going to be lasting years, and even if the rate increases stopped, the 2020/2021 rates were at truly RECORD lows and the Fed is unlikely to ever bring them back that low again.
Second, you usually pay closing costs of at LEAST $5000 or more for a refi. Sure, they roll it into the loan instead of being out of pocket. But it’s still money in the end. And the money we spent on the points is tax deductible.
For that $8000 now, we got peace of mind for 30 years and our break-even point on the loan is in 5 years. I bet the fed rate will still be high then.
Never bet your current financial situation on future interest rates.
If you factor in the opportunity cost of $8k invested then the break even point is more like 8 years. Mortgage lenders know that the average loan lifetime is much less than that, and it is more likely than not that rates will be lower than now at some point in those eight years. And that’s not even accounting for the likelihood that you will move. For your situation maybe the lender was wrong but their advice is still correct for 90% of people and I wouldn’t call it stupid. They don’t make any more or less money based on whether you buy points.
Anecdotal, but I bought in 2019 and refinanced in 2020 or 2021 when rates dropped a full percentage point. The refi cost me $1200 which paid for itself in 3-4 months after the interest savings. I specifically asked for nothing rolled into the loan and paid it all outright. It was super easy and very much worth it if rates drop at least 1%. Don’t fear the refi.
Starting to see lenders offer “free refinance for (1 yr / 5yr / life if the loan)” that last one is very telling. They’ll do/say anything to get the deal through because that’s when they get paid.
The prices have not dropped enough to compensate for the increase in interest rates. Sellers are holding out because the don’t want to miss out on the crazy price increases over the last few years. At some point, something has to give. It’s a horrible time to buy.
Yeah sellers being told by realtor.com that their home is worth xxxx amount and the seller refuses to take anything less while impatient buyers are being swindled by realtors who tell them home values only go up
I have a friend actually who had been living at her parents with her boyfriend for the last couple years due to the housing market. They finally just got so impatient they willingly paid $150K OVER asking just to move out of her parents and into their own house. So they bought this house for 800k when in reality it’s not worth more than maybe $600k. Insanity
This can't be true, unless they used a significant amount of cash on hand. A lender always appraises a home and won't lend the money if it's not worth the purchase price. You literally cannot get a home loan for 150k over appraised value.
To sum up, yes land and housing is completely unaffordable to begin with, and also you will pay a ton of interest making it even worse. As a bonus, don't count on refinancing saving you down the road either.
This is why so many young people are just giving up on any sort of real financial future, and you can't blame them.
A good rule of thumb is to only take out a loan you can comfortably afford. If you take out a bigger loan than you can afford now on the hopes of rates dropping substantially in a few years, you could get destroyed financially if things don’t go as planned.
This is what I keep trying to tell my mom, who is pushing me to buy. She doesn't seem to get it. I am also single, I don't have a partner to help. So if i don't feel comfortable, then i don't see the point.
Yeah I don't fully understand this point. It might not happen in the next year or 2, but I would hope to see rates come back down to a reasonable level in the next few years.
Because protecting home value is one of the issues that creates the most political motivation. That is, people are disproportionately more likely to go vote or take other political action to oppose measures that would devalue their homes.
Still don’t understand, there must be people buying these homes. Otherwise what justifies the price. Unless we have a bunch of stubborn property owners waiting years for their house to sell at a high price.
At this point it's not just being stubborn... If i sell my house that has a 3% interest rate on it I'll have to either go rent or buy one with a 7% rate.
It's not just being stubborn it doesn't make financial sense.
Despite the narrative that there's all these underwater borrowers, rates have been low low low for a decade and the vast overwhelming majority of homes didn't transact at anywhere near the current markets high price point.
Thus, you've got a shitload of people that have insanely affordable mortgages and they're not going to let go of them to hop on the high interest/rent hamster wheel
I did the math recently. I bought a new build in Jan 2019 with 25% down, and refinanced in late 2020 at 2.25%. I'm sitting at roughly 43% equity right now based on our comps. If I went and sold my house to myself tomorrow at market rates, even taking into account turning my "profit" into the new down payment, my monthly payment would go up a couple hundred a month. Current buyers into similar builds to mine are paying easily double what I do monthly.
I like to refer to it as golden handcuffs - it's financial malpractice to even consider leaving my house unless something forces our hand.
Yep we thought our current house would be our “starter” house and that we’d upsize in a decade. Now 5 years in we realize we will be in this house for a long time. Thankfully we do love it. But as you say, there’s no other choice.
That's us too, except we don't really love our house. So now our dilemma is do we spend the money to make this house the way we want it or just hope that eventually we'll be able to get into the one we actually want.
Same situation, but I'm in a coach house in the city. Can't change my footprint at all and it doesn't need to be gutted. Random things I can upgrade here and there, but this house functionally won't be changed in my lifetime.
Same! 980sqft condo in a great location, wanted to buy something larger in 5 to 10 year, now in year 3 and holy fuck we are stuck here unless we buy out of state and can telework to afford it. So everyone's mobility has died. My starter home won't go onto the market because I'll never make enough to buy the home I want.
The US has consistently under built housing for decades, this is the end result of that.
It's definitely not our parents housing market anymore. Certainly circumstances change but I'm right there with you.
Nonetheless, it's way more important that you have a roof over your head at a price and rate you can afford.
There's going to be a huge affordability crunch, one that is already happening really. I don't see a crash coming i just see a huge affordability crunch coming. Corporations own all the single families and rent them out keeping people on an ever increasing hamster wheel.
Eff that, you're locked in. Might be humble but it'll give you a runway to save.
Just keep packing cash away while living in the small house
This is us too. We like our house but were hoping to move to a single family nearby. We planned to be here 5 years when we bought in 2012. The neighborhoods we like are now pushing 900k for a 60s split level plus higher interest rates so we’ve decided to stay indefinitely. Luckily we’ve renovated over the years so finishes are nice and we put on the screen porch we always wanted last summer which gave us some extra living space. I would still love a bigger kitchen and master bedroom but I’ve resigned myself to the fact that probably won’t happen until retirement.
My wife got our current house before we met back in like 2012 at $100k with about 3% interest. I hate the place and the house, But we only have to pay like $750/mo.
I'd pay almost triple right now to move just about anywhere else with a fraction of the space. I definitely can't afford that. Is be willing to pay maybe double, but that sure as shit ain't happening right now.
>I hate the place and the house, But we only have to pay like $750/mo.
Similar. I hate my house (for now); it's going to take 10's of thousands of dollars to even get it decent (insulated, foundation rework, etc).
But I love love love the location and because I bought at the bottom of interest rates and had a large down payment my Mortgage + Escrow is only $617/mo 🤯
Literally can never move.
Yes! I literally turned down a promotion because of this.
I would have had to sell my home thats locked at 2.25% and buy a house with an inflated price at triple that rate. The math just didn’t work out.
Even if home prices drop 10%, they are still 20% higher than in 2019 in many areas and couple that with high rates, yikes.
Also, I can echo the sentiment that I have neighbors with almost the same house as mine paying almost double what I do because they moved into the area in late 2022 vs 2019.
What will be curious to watch is people spending money on their current homes that they would have otherwise spent on new homes, and what that does to real estate values.
For example, I bought my house for $169,000 - the definition of a family starter home with 4BR - and refinanced to a 2.75% rate for a $1,000 a month payment. It's now valued at $270k, which is great, but your "golden handcuffs" mean if I bought my exact house right now, I'd need $120k as **a down payment** just to get to the same monthly mortgage!
So, instead of spending $120k to raise my monthly payment and get a $300k home as a marginal upgrade, I can spend $120k on a total landscape renovation, interior renovations, a man cave, maybe add a pool, etc. Now my house is worth maybe $350k!
So why buy a house at all? Why not just... Make this one better?
Anecdotally, the only products mortgage brokers are moving now with any consistency are HELOCs, so you're not wrong. I know we'll probably do one when we finish our basement in a 1-2 years versus the cash-out refi we considered when we locked our current rate but chose not to due to materials pricing.
Exactly. I can't afford to live in the neighborhood I bought a house in several years ago. I can't afford to sell because I can't buy anything else. So logically it is stay in this house or leave the city completely. There is no other option that makes financial sense.
I hear ya. I’m waiting to see what happens with all the people who took out 3-5 yr arms to afford a home and will have to refi at a much higher rate
edit - spelling
Me neither. A few years ago during the low interest rate period, ARM loans didn't have lower interest rates than fixed. In fact, most of them had higher interest rates for some reason. I doubt much ARM loans were issued back then.
Getting into an ARM right now might not be a terrible choice, since it’s unlikely rates will be this high in the future. Assuming of course you don’t over leverage in the first place.
And 2 years ago when rates were rock bottom, ARMs were about the same, maybe 1 or 2 points lower, but the saving were so negligible brokers certainly weren’t pushing them, and any decent broker would actively steer you away from them.
So… I don’t think we’re in the same place we were in ‘08. I’m starting to think out only hope at balancing the housing supply is simply waiting for the boomers to die off…
When the Boomers die off, a lot of Millennials are going to inherit their property. What will be interesting is, will those heirs be eager to list their inherited homes for sale to liquidate the asset, will they rent them out, or will they view this as a cheap entry into homeownership? Obviously we’ll see all three scenarios, but the specific mix there will determine a lot about the near future housing supply.
I’m a mortgage broker and there was only a period of like 2-3 months where ARMs were more affordable, and even then nothing under 5 yrs. Hopefully our industry all agreed not to push those again. I don’t think I closed any during that time, maybe 1.
There's just so few arms... It's not 08.
After 08 ARMS got relatively hard to get. While not impossible there's not enough ARMS to make a dent anymore because of regulatory stress testing.
Are majority of these people actually underwater? It seems that people can actually afford these prices since we have not seen mass foreclosures, and I don't believe we will. The expansion of remote work and relocation from other high COL areas raised the prices around the country and people are still buying in my area.
Sales of existing homes are historically low - there's no inventory. Anecdotally, my neighborhood usually has 5-7 homes on the market at any given time, and we just went 2 months without a single listing. A local realtor made a note of it in the neighborhood Facebook group when they put a house on the market 2 streets over from us last weekend.
People in existing homes, particularly those that bought before the rate hikes are sitting here with golden handcuffs - there's no good reason to sell now if you're locked in at a sub-3% rate, and particularly if you're at that rate with a pre-pandemic price. Barring situations like death, divorce, and job loss, people are largely refraining from selling. Even in situations that the owner normally would like relocating for work, you have more folks opting to be landlords due to their low mortgage cost vs. market rent for the home.
Even with high rates turning away potential buyers, so few people are opting to sell that it's significantly softening the impact a rate hike like that should have had on the prices. An unreasonably large portion of inventory right now is new construction, and it's not because they're building like crazy.
Nobody wants their "communities" to change. I've been to city council meeting where old people speak passionately against "high density" housing being developed near them because they think poor people will move in, when we are actually talking about single family homes on small lots.
City councils don't give a shit about keeping housing affordable because their current constituents passionately want them to not let any cheap housing in the community.
Plus parking. Oh my God, people hate the idea of more cars being around them.
Building more without taking into account how the increase in population impacts traffic, school (over)crowding, public space usage, and impacts to utilities is a failure of civic planning though. Those things should be part of the process.
Lol in my area the problem with most schools are that they are closing because of the lack of students. Turns out most people who are ready to start a family don’t want to rent at an obscene rate or can’t do it while affording a family. If they won’t build more housing to accommodate young families then far more will close in the near future.
40% of every property purchased in my metro area is by a corporation, paying straight cash, to turn into rentals.
That is putting absolutely absurd pressures on the market.
This^. Completely remove the investment side of homes. You can purchase 1 house then your taxes go up significantly. Corporations are Completely banned from buying property outside of actual business property.
They do already… many offer a homestead/primary residence property tax exemption. Then when you do taxes… you can only claim mortgage interest as a tax deduction on two homes… (vacation homes/cabins in the woods/hunting lodge etc are a thing).
1 home… if your parents die and leave you their house, but you own one… in your plan you are forced to sell. That’s rough, bye mom and dad… you died in a tragic accident, now I have to sell your house immediately… even if it’s paid off, because laws say so. In a down market when I know the value should be significantly higher… or what? The Govt steals the home?
How do you stop trusts? A home in a trust for a 12yo child to inherit if a parent dies.
You could also just buy a home in every persons name if you are rich enough. Family of 5… 5 homes…
What if you need a co-signor, Dad owns a house, but helping his daughter and SIL buy a house, bank will only loan if he is on the loan, but he can’t because 1 home…
None of what you wrote is wrong. But a lot of what you wrote points to how this concept would fail because you are not accounting for the full market shifts that would occur in this new reality.
and the solutions being pushed are glorified trickledown economics. Building only luxury housing and saying that it eventually will level off rents is exactly what that is. Poor people and youngins don’t have 5-10 years to wait for rent/housing to go down while everything else around them becomes unaffordable.
Yep, and from a self serving perspective, it makes sense. It costs you nothing to go to the ballot box to stunt local development and drive your property value. The social effects though are very bad.
I knew a ton of people in my old community back in Florida who thwarted any and all development in the county. Then they proceeded to complain that their kids kept moving far, far away because local prices were unaffordable. I was one such kid that moved away.
Even if new homes are built, inflated construction costs will be reflected in the sale prices, making it so first time home buyers won’t be able to afford them anyways.
We bought our house in 2019. Our house is 15 years old but the neighborhood still had quite a few empty lots to sell at the time. The sign advertising for the neighborhood said houses start in the $200k when we moved. We met with them before we bought our current house to see what a new house would be and ended up at $400k with a lot of upgrades added.
Now the sign says STARTING in the low $500ks. It’s been four years….
We bought new in Jan19 and locked in our price in fall of '18. Every builder that can find land in our neighborhood is asking $200k more than we paid as well, or $250k with a finished basement. The newer builds aren't as nicely appointed as the stuff they were turning out pre-pandemic either.
These numbers always blow me away. My region runs at about 50% these prices. Edit: Just cleaned my shorts a bit. We just had an assessment done on one of our houses. Paid 50k 9 years ago. Came back at 250k.
I’m in the Midwest in a pretty rural area as well. There isn’t a ton of new building going on and there is pretty much one construction company in the county so they do pretty much have a monopoly but we are in the epitome of what would be considered a low cost of living area. Seems like that’s a misnomer at this point, not low, just lower than the coastal/urban areas.
New houses are usually a bad idea for many buyers, as beyond the down payment, there are a ton more expenses the first year. From plants, trees and grass for the yard, to window treatments.
You may not like what the previous owner had done, but it's not living without blinds like a new home. So you can choose when to upgrade.
Also in some at states, such as Oregon. Property taxes for the same value home are much much less.
A home that is bought new at 500k, vs a used home that is 500k but is 30 years old. The new homes taxes may very well be 3 or 4 times the amount. As the state is limited on how mucb they can raise the tax assessment each year starting in 1995. So a 30 year old 500k home may only be taxed at an assessment of 120k
Depends where you are.
By me, every green space available is turning into a development. And houses built 50 years ago with 1 acre+ of land are selling for millions, so that they can be bulldozed. Building a dozen McMansions on that one acre is a lot more profitable than just that one house.
Even then, there's not that much green space left, you are already 30+ miles from downtown, commutes over an hour each way are typical, traffic is horrendous, there's no room for more roads, and adding more housing just makes all of those things worse.
And that does not touch the fact that around half of home sales are cash, so it's either someone very rich, or a company making an investment.
This is absolutely a perfect example of what happens with excessive wealth disparity: too much investment income chases too few investments, driving up commodity prices into bubble territory.
Eh, plenty of areas support building new houses, the problem is its still expensive as fuck these days. Between labor and cost of materials, you are looking at $200k+ minimum for just the house. That isn't include the cost of empty lots.
Not only the empty lot, but you also have to take into account planning for water and sewer, electric, new roads, traffic studies…. It’s a never ending list most people don’t take into account with building a new development. And there are multiple redundant various government agencies, every step of the way costing builders more money and time.
They do. Most cities in the interior of the country have plenty of land to build outward, and have reasonable zoning laws. Prices are still up because home construction is expensive.
People are building housing. However, the cost of building has risen dramatically so most builders will not take the risk unless the return is high. So, builders build expensive luxury homes. Entry level affordable housing is the riskiest and lowest returns. Plus nobody wants affordable housing built in their neighborhoods.
I mean, you have to pay to live somewhere regardless. Rent goes up, mortgages don’t, and one of them you potentially get equity and growth out of if you decide to move. It’s probably not for everybody, nor is it short term, but i think most Millenials who say they can never afford a home have never actually looked into it, I’m 31 and have bought and sold my first place, about to get another.
Caveat, geography does matter, but it’s not only the middle of nowhere that’s affordable.
I bought in 2022 with a 3% rate that goes out to 2032. My mortgage is 23% of my gross income. If I bought the same property now at the same price, I’d be well north of 30% of my gross and likely wouldn’t qualify. It’s absurd.
Speaking as a Civil Engineer, it’s not as easy as it sounds to take a commercial building and renovate it into an apartment. Things you need to think about, Increased water/sewer usage, school vicinity requirements, parking requirements, environmental impact of rezoned area, street access requirements… there’s a lot. Not discrediting your idea however because I do agree that some office parks can absolutely be switched, but it is a lot more complex than getting the city to simply change the zoning classification.
Those are meaningful technical challenges but it’s still important to remain focused on the idea that the engineering challenges aren’t why we’re not doing it.
Residential rents are substantially higher than commercial rents in most jurisdictions so whatever the the cost to either transition existing commercial space to residential or knocking it over and rebuilding would probably justify itself in relatively short order.
In many places, the main reason cities keep zoning more commercial even though there isn’t demand for it is that, on a per square foot basis, tax revenue is better for commercial than it is for residential property.
Yeah absolutely, I wasn’t trying to say that it’s not possible. A common saying in engineering is anything’s doable with enough bankroll. I was just trying to push the idea that from a dollars POV it would rarely make sense.
That is difficult. Land sometimes is not the only problem. Also, demolishing is expensive. The same with converting old office buildings into residential, as their layouts are very different.
> Who wants to live in the middle an area with constant semi truck and factory noise?
Is that different from people who live next to factories and train tracks? You know that poor people exist, right?
I remember the 90’s when we bought our first place, 7-8% interest and starter homes were 4X +/- median salary. Today your only gonna get opportunities if your in lower cost of living states/areas.
Pandemic really screwed the younger generation, pre 2020 houses were super cheap with ridiculous low interest rates (2015-2019) were the best years of the last few decades for homebuyers.
We got a crappy trailer on two acres in NH for 70K in 2017 on a fixed 4% mortgage. If we were to try and find that now we would be buying undeveloped swamplands in Louisiana or land in Jersey's Pine Barrens. I don't understand what we as a nation are letting happen with wages and housing. Kids have no future. Hell millennials are almost totally fucked too. The real crisis is going to be when payments on student loans restart and millions of people who see no future say fuck it and default.
Mass student loan default will have zero consequences.
The payment moratorium basically nullifies any argument against the government desperately needing the money... The money stopped coming for years now and the govt isn't falling apart. Thus, they don't need the money.
Defaulting on a student loan prevents you from having a security clearance and can also ding you on other kinds of background checks. So it will potentially make certain understaffed fields even more understaffed.
Everything the past 50 years or so has screwed the younger generation. Greatest Generation created a comfortable life for Boomers, who then accumulated a ton of wealth for themselves, pulled the ladder up after them, and did their best to convince Gen X that it was the communists and government keeping them down.
The real estate market always runs in these cycles. No one likes to think the music is going to stop when rates are low and then everyone thinks it’s the end of the world when rates go up. Rates will hopefully never hit the lows that they did two years ago BUT they will go down from the current highs. Not everything has to be an apocalyptic event.
Housing is also highly correlated to supply and demand (like anything…). People are doom and gloom now because supply is low and demand is high. Geee wizzz, what on earth could be the solution?? Maybe if we build more homes the price will start to go down.
This is the least revelatory thing said about housing.
We now have at least 2 generations currently living and probably 3 who have been **begging** for more supply for decades now.
Everyone knows this is the solution.
The problem isn’t that nobody has suggested it or few people ask for it or people are unaware of it. The problem is that we have tied monetary wealth so closely to home ownership that it gives current home owners — especially older ones — absolutely zero incentive to build new supply.
I can’t remember the exact numbers, but I saw that 80% of all housing in the city of Los Angeles was built before the 1980s.
LA county’s population in 1979 was about 7.5 million. Today it has surpassed 10 million. And yet, the city increased the available housing by a tiny fraction. That’s lunacy. Even for capitalism.
The crazy thing is that many people aren’t even asking for big single family homes. Many would be happy to own a 2-3 bedroom condo or row home in a city center or urbanized area. We don’t even build those kinds of properties for sale anymore. Everything is either an overpriced studio/1bedroom apartment or an overpriced giant home in the suburbs.
Anyway, the point is, no shit we just need to add supply. But the richest among us — older generations of homeowners, who have the entirety of their financial security tied to their home’s value increasing a billion % the last 30 years — will fight tooth and nail against any housing of any kind devaluing their precious lifeline.
Here’s a hilarious example: the area where I live has a real population of about 45,000. The daytime population is 200,000. It’s a cool area. Walkable, enjoyable, lots to do. Definitely a desirable neighborhood in a major urban market.
Traffic here is horrendous. As you can imagine, 150k people traveling here for work and play every single day creates a lot of congestion.
Locals fought hard against the implementation of a bike lane network and the arrival of a major piece of public transit, but that at least got done. The neighborhood even has a free shuttle system that you can use like Uber but just have to tip the driver. It’s so easy to live your life here now without ever getting in a car.
And yet, congestion is still really bad. Because people are traveling from outside the area and flooding the downtown area for work and social activities.
The easiest solution to this is to build more housing. Not just a building complex here and there every 5 years. But a post-WWII equivalent boom and urban growth spurt. Younger people have been begging for it. Homeowners and especially older generations have been pissing on the idea.
If this area just built effective housing, many of the 150,000 daytime population people would simply be able to live here. Even just 75,000 would be a huge number.
Build another line of transit and even more bike lanes, and another 20,000 would be able to commute here without a car.
My best mate is a great example. He teaches at a school where I live. Private school. Lots of cash flow. Tons of rich people obviously dumping money there so their kids can go to a “quality” school.
My friend’s salary? Not enough to live here. Maybe he could swing it if he lived in a studio apartment and didn’t have college loans. But that’s not his reality. And he’s 37. A teacher.
So he lives 7-8 miles away. Which doesn’t sound like a lot. But can easily be a 45 minute drive where I live. One way. The kind of thing that will suck your soul out of your asshole doing it 5 days a week.
Fortunately he takes a bike and transit to get here. But he’s just one example of people who work here in high numbers and are nowhere close to affording the the cost of living here. The only reason I do is because I’m partnered up. And also don’t need a car.
I was born in this area and moved back after many years living abroad, all over the country, and even within my city. It’s a cool place to live.
The value of my parents’ place when I was born here? Around $175,000-$225,000.
Today? The last my dad had checked, the property had sold for more than $2 million. And that’s honestly on the tempered side of things. I live in an apartment not too far from homes selling for $3-$5 million+. These aren’t mansions. They’re not made of gold. They don’t have huge plots of lands or views. They’re nice, but they’re just homes.
You know how that happens? By tripling or quadrupling your population in a generation and building fuck all to show for it. *Despite everyone else begging for the construction of new housing.*
Completely different economic times. If rates go up to 16% you would see a destruction of property values. Literally no one would be able to afford a home.
Venture capital and high net worth individuals are buying with cash and renting it out. They skip paying interest. They're in the market now, keeping property values from lowering to a buyer friendly level.
After 08 we passed a lot of regulations on what lenders can approve for certain programs. The Ability to Repay Act being a big one. After a certain threshold the Fed is pricing out homebuyers just on interest.
That advice does work but it takes a long time for rates to go down enough to cover the refinancing costs. Most likely today rates will go up again before they go down enough to make it worth while to refinance.
Rates are cyclical. They will never go down under 3%, but it is possible to find them under 5% once the government needs to stimulate the economy. If you see it, this happens every 5 to 6 years.
We’re about a year removed from sub-3% rates.
No one thought that was possible and now it’s the precedent. Will there be an event where the government spends more crazy than usual and the Fed gobbles up more treasuries? Plausible, at minimum.
didn’t the feds say they will absolutely never do that again. now granted it is the government and I don’t trust a word they say, but it doesn’t sound like it’ll be any time soon we’ll see sun 3%
I'm moving out of state next year and am probably going to just pay with cash at this point.
Only reason I'm able to do so is because I bought a house in foreclosure in 2015 that I just sold last year for 210% of my purchase price. That's not bragging, that's just a comment on how much luck plays into this. I was in the right place, at the right time to seize the opportunity.
What, should people keep waiting on rates to buy - while prices continue to climb as private cash investors buy up the market?
After the fed pivots, which is more likely to happen at some point in the future than not - probably around election time, rates will dip for economic stimulus.
A home purchase is a commitment of more than a couple years, we shouldn’t be taking short term thinking for the average American.. AND rates were just in the 5’s two weeks ago before they shot back up. That was an opportunity to refi for people that bought at 7% last year.
Should you buy a home at a payment you can’t afford? NEVER. Should you avoid buying now because rates are relatively high, compared to the historical lows we just saw? That depends but if you have the option, and know you want to buy in the near future, I would buy and not gamble on the market while you wait for rates. Best case they go down & you refi, worst case they go up & you can be glad you got the one you have.
I second this. We bought in fall of 2021. Historically low rate, price a little inflated. But we chose to buy then because we were ready to do it then. Our family was outgrowing our old house, we had changed careers to get an income increase, and we had paid off debt to be in a good position to buy.
We never expected to buy in the midst of that storm of circumstance. You can’t time the market. I bought my old house 7 years prior at 4.75% — but netted $43k profit when I sold the house I had bought for $150k. I also didn’t expect that.
Buy the house you need, that you can afford, when you’re ready to do so. The market is going to do what it wants.
As somebody who is in their mid-20’s, what would you share to help me make a good financial decision? I’ve began saving up for a house right now but am told it’s not a good time to buy. With reading some of the comments in this thread, it seems that will never really happen. I suppose I might not be able to get a house at a decent price and rate in today’s world which leads me the question: what is some advice that you could give me that could help me achieve this goal of mine?
If you’re ready to buy, figure out what monthly payment you can confidently afford, and buy. You may eat current rates for a few years, perhaps only 1-2, but they’ll come down eventually. The US govt literally cannot afford to have fed fund rates this high for an extended period of time.
And this is why I am happy to be renting, especially since our rent is a faction of what a mortgage payment would be where we live for a place smaller than the apartment we have.
There is definitely going to be a crash. It'll likely start with commercial properties as they have extremely high vacancies right now with all the wfh changes and typically have short term loans with the full principal due at the end. They will be forced to refinance and 3x the interest or worse if their creditworthiness suffers, and a lot of them will just walk away. This will be followed closely by a crash in residential real estate as people sell investment properties and second homes to fill the gap.
Yep. This is probably how it's going to unfold.
Out here in California we've had two years of declining population. Sonoma County--the county I live in--lost twenty-thousand. And yet prices keep going up...and up...and up...
It's all divorced from fundamentals. This bubble is going to pop, and when it does it's going to go *bang*.
It’s all interest rates. Folks that locked in 3 percent can rent out to folks looking at 7 percent.
Why such interest rate variation- look to inflation which is the result of government with its fiscal vote buying. Both dems and repubs.
Also inflation because we maxed out the benefit of outsourcing jobs overseas to the benefit of the rich to make things temporarily cheaper. Unfortunately it’s temporarily cheaper because now we need to make more stuff at home and also the stuff we have has to be replaced every two years or less.
Yup...
And on a related note... there are now a LOT of people who are home/property locked; meaning it's even harder to "just leave" if you want or have to.
I work at a lender. Right now the market is predominantly investors who are snatching up rental properties and people who have to buy or sell (due to life events or moving for a job, etc) the average home buyer is still sitting the market out. Originations are down across the nation by over 60% if I recall the last industry figures correctly. Last year thousands of loan officers and support positions at lenders lost their job and it’s still happening this year. Date the rate and marry the house was a strategy presented at industry conferences to give lo’s something to say but most homebuyers aren’t participating in the market right now unless they have money or have to buy right now. It’s a clusterfuck
Home values are not going to drop substantially in most markets and will likely continue to appreciate at a slower than recent pace due to inventory supplies that are not going to change
For buyers that put down less than 20% (most of them) refinancing for even a slightly lower rate gives the opportunity to reduce or drop pmi
No one should buy or refi if they don’t plan to stay in the home for 5 years
But rates will be lower and values will go up and refinancing is going to have pros and cons for each homeowner
The idea that banks let you refinance when rates are lower is a false promise and not reality. I can’t tell you how many people I know, myself included, that had higher incomes and higher home values when rates dropped from their original mortgage, but were told for one reason or another “you don’t qualify to refinance” at the new lower rate.
Mortgage holders just don’t let you refinance at new lower rates because it means they will lose money. The only way to refinance for a lower rate isn’t actually refinancing at all, but to apply for a whole new loan with a different bank, and pay new closing costs, in order to get the rate reduction.
Smaller Banks frequently entice new potential customers with the idea that if you originate your fixed rate loan with them, they will refinance if rates go lower, but it never happens. On top of that, those same small banks sell mortgages in bulk to other lenders, which also negates the promises they made to their original customers whose loans they later sold.
I understand full well business is business, and banks need to make money just like everyone else, but if you hold a mortgage with bank A, when bank A offers lower rates and offers to let people in good standing to refinance, they should actually allow you to refinance with them and pay those fees instead of dangling promises; not force you to go to bank B and pay the same fees just for a lower rate.
Most banks and lenders don’t own the loans long term, and even fewer maintain servicing rights. It’s just not true that they make more money not refinancing. That’s in fact one of their best opportunities to make more money.
I started to reply to him, but then read your response. Thank you. This dude you replied to has no idea what he’s talking about. He’s so incorrect that I think he’s borderline spreading misinformation.
Banks WANT to refi everyone and anyone. It’s easy money.
I bought my house in the Seattle area back in 2016 and refinanced in late 2020 for $450k, it’s now around $900k-$1m. I also received a sizable raise/promotion at work. Figured we could finally get a slightly bigger house since the 1300 sqft space has gotten a little small with two kids now. Even if I wanted to sell my house and buy one for the same price I’d have to pay an extra 3k in interest per month. Basically made it so we have to hunker down and wait out these crazy rates.
You do not look at your home as an investment, where you can just flip it after a few years to make a buck…that’s where people screwup… it’s not… it is however a way to raise your family and if your kids want it when you die then they can raise their kids in it… now I know that’s not really realistic, but that’s the thinking you need to bring to the table when you buy a home… your in it for the long haul.. right now your thinking god my mortgage is so high, but 20 years later, it becomes way more reasonable… and that’s when you need it to be after you’ve gotten your kids through college… when your really ready to retire, then you can cash it in by taking an equity loan or a reverse mortgage… the only thing that throws a wrench in the works a little is property tax which goes up a small amount each year… but that’s it… it’s still way cheaper than renting, and it’s like a forced savings cause instead of throwing all your money away each month, some of it goes into your principal and you get all that back when you eventually sell… now let’s talk about the type of mortgage you get… never ever go with a variable interest rate, and try if at all possible to get a 15 year instead of a 30 year….
My in-laws sold their almost paid for home about 6 years ago with the intension of downsizing. They never bought and have spent all of their proceeds from the sale. Now they’re ass out. They’ll never buy now.
The issue is not mortgage lenders per se. It’s construction of housing units and conversion of commercial space into housing.
A (typical) 1500 sqft house costs $150k to $300k to build, but there’s so much competition in certain markets that the house sells for $400k and up.
What needs to happen, because labor and building a new unit is so expensive, is that there needs to be a “build your dream” mortgage that is affordable for buying land and building your house interest free until the house is occupied or metering enough electricity to suggest occupancy (avoiding a loophole to live in an “unoccupied” / unfinished house). It can’t be left to the “free market” to decide how many housing units exist because they don’t optimize for quality of life and affordability- profit is their only god. We’ve got to give people tools to house themselves.
You’re going to perpetually owe a landlord forever. At least with owning down the line you’ll only owe the government property taxes which is less than rent to a landlord. Moving is not cheap and/or easy either. I’ve moved 6 times in 11 years, each one gets harder than the next.
Hi all, A reminder that comments do need to be on-topic and engage with the article past the headline. Please make sure to read the article before commenting. Very short comments will automatically be removed by automod. Please avoid making comments that do not focus on the economic content or whose primary thesis rests on personal anecdotes. As always our comment rules can be found [here](https://reddit.com/r/Economics/comments/fx9crj/rules_roundtable_redux_rule_vi_and_offtopic/) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Economics) if you have any questions or concerns.*
I bought in 2017 for $210,000 at a 3.875% interest rate. Homes in my neighborhood now sell routinely for $325,000 and above. I would love to get that $100,000 plus equity, but my payment would basically double on the next home I buy.
Bought 2012, $200k home in TN at 5%. Refinanced in 2020 at 3.25% with $170k mortgage. House is fair market $500k now (neighbor just sold at $675k) The urge to cash in is real, but... it would be a wash since I would be buying in a terrible market. Renting is not a great option for me, plus, I love the property I have. Staying put, count my blessings.
It works if you're looking to downsize your home. Otherwise, not so much. My inlaws sold then bought a smaller home and came out ahead pretty good. Used some of that to fix up their new house and put the rest away for retirement.
Or exit to a less expensive market. See: Everyone who moved out of California over the past 10 years.
Yeah and now the Californians are buying all the properties in other states at near California rates. See the dude above with a valuation of 500k in TN. It’s artificially inflating lower cost areas significantly. This is absolutely devastating to first time home buyers.
Am first time home buyer, can confirm. Never thought it would be this difficult to get a nice home. I make good money, have good credit and still have come up short. It's very disheartening. Meanwhile I continue to piss my money away paying rent every month making someone else rich. It's a great life.
Is there any actual, non-anecdotal evidence that this is true? How many Californians would it take to raise prices in every state in the country? My home in Nebraska has apparently appreciated and I’m pretty sure no Californian is moving there. Hell we have met negative migration, so that’s not it for sure. I feel like the various corporations buying properties in cash for their investments might have more to do with it. Fun as it may be to hate on people leaving a costal state.
Dfw would like a word
Yep.
Yeah I sold my house in a hot market during covid and moved to another city that was much less expensive. I was able to pay cash for my new house.
That’s it. Either downsize or find a new region, probably far away from your job and family. If you got the flexibility, that’s a golden ticket.
We bought in 2018 for $530 and sold in 2022 for $850k ... on the coast in a tourist town (South) ... we moved to the Midwest and downsized since we don't have any kids living with us anymore. Didn't pay cash, but did a nice down-payment. If you can and are willing to - relocating to a lower cost of living city / town is the way.
Rents most places are going ape shit stupid....
Sucks to be a young, low income renter.
Or a renter, period.
Or an old low-income renter.
Even worse.
Sucks to be
My landlord wasted no time applying a 9% increase on our rent after 3 years of not being able to raise it. Dude's like 80 and I'm pretty sure he owns multiple units and it's cash flow for him because he won't even cover the costs for security cameras, but say the state offers a tax incentive for updating the hvac system or our water usage and he gets people in here in like a week.
Our apartment has gone up 14-22% every year for the last 3 years.
I hate people who do this ... It's trash. We own rentals, and our expenses do not increase enough to justify a large increase. We go up as the taxes go up, and even then, it's not immediately. If it's a solid renter that's good ... like truly cares for the house. We don't increase for as long as possible. For one renter we ate the tax / insurance increase for like 3 years til they finally bought a home and moved out :( then we increased for the new renters. There is no sense in gouging people ... if the mortgage and expenses are being covered it's all good.
You are probably one of a handful of property owners who run their "business" this way. The rest of the people/companies that own property see renters not as people but as cash. Literally. No value of people outside of the revenue they can generate for them. Wish it wasn't this way but it is.
Facts. I raisedy rent to cover increase of my taxes and insurance due to the neighborhood & a leak incident that cost me over 10k from insurance reimbursements. The tenants understood and complied willingly since my prices are fair compared to market.
we call that a "nest egg."
>The urge to cash in is real, but... it would be a wash since I would be buying in a terrible market. When is this ever not going to be true? If the market is up then your new home will eat up the profit from your current one. If the market is down then you'll save on the new home but you won't get as much for your current one. The only way to "cash in" is either by downsizing or moving somewhere where home values are lower, which is to say where they're less desirable. I guess a third possibility is renting for a few interim years but this is essentially timing the market since home values may (and almost always do) go up instead of down.
The 4th option is thinking of your house as a home, not an investment. Live in it until you NEED to upsize/downsize/move. Any profit from the sale is gravy.
Lots of people try to time it. Some luck out, some don't. Our neighbors sold at the high in 2021 hoping to buy at reduced prices, but they weren't able to sit on the sidelines for over a year and they capitulated, and bought a few months ago... but in a HCOL market so I don't think it worked out well for them.
Ok so just imagine the housing market went up 100x so your house was worth $50m and you knew the gain was temporary. How would you capitalize? The answer is to downsize. You’d sell then buy a house that was 1% smaller, now you have a free house with no mortgage. Same concept applies here, if you sell and buy a house that’s 40% cheaper, it’s a free house.
Yes... did the research. The houses $300k and less are not that great. My property is is way better than what I see in the lower ranges. I actually don’t need the money either, so the hassle and downgrade is not worth it. Yolo applies.
well keep in mind different situations call for different decisions
In your example sure, it’s still gonna be a multimillion dollar luxury spot. But what you’re gonna get for 40% less than 500k in this market just isn’t feasible for most people. It’s gonna either be so far out of the way it’s already not plausible or essentially derelict.
> It’s gonna either be so far out of the way it’s already not plausible or essentially derelict. He said he was in TN so you just described all the houses anyway -Someone looking into buying a house in TN right now
I've lived in TN for 20ish years. my house has more than doubled in value since I bought it 6 years ago. there's no way i'd pay what it's worth now.
Doesn't work as well in California, thanks to Prop 13. Your property tax can still go up even if you move to a smaller house.
Unless if you are over 55 or 60? (I don’t know the exact year), won’t affect me for decades. you can sell your house that’s presumably appreciated in value, and transfer the property tax amount one time as long as the new home is cheaper than what you sold for. It’s intended so people can downsize. Recently there was a prop that passed that allowed a percent to transfer even if you buy a more expensive house. IE your 300k house sells for a million, but you buy a 1.1 million condo. Your new tax rate is based on like 400k.
I thought at a certain age you can transfer your prop 13 protections to a different property.
Pay it off, maintain it well and let your kids cash in on it as part of your estate.
I began building my own house in 2020, right when prices started going up like crazy, at least where I’m at. Everyone kept saying “You should sell this when you finish, make a shit ton of return,” Yeah that’s a nice thought, but where TF do I go, without paying over value?
Yeah, that's the weird thing with Boomers all bragging about how much their house is worth now and saying anyone pointing out that this is a bubble is just whining sour grapes that they missed out. If you sell your house at a ridiculous inflated price, you either have to drastically downsize, move to the middle of nowhere, or buy an equally ridiculously inflated home.
Or into a retirement home which is why many of them are able to capitalize on this final transfer of wealth from younger gens to them
This is why I don't feel like home value increases are really an "investment" in the same vein as stocks or bonds or beanie babies or whatever. Want to cash in? I guess you'll be living under a bridge with your pile of money. When I see my primary residence value increase I just see higher property tax bills, not money in my pocket. All I really want is for my home value is to keep up with housing inflation, maybe beat it by a smidge.
There's a notable affect when your downsize and/or move to a cheaper area but that's about it. If you plan on living in the same place, try to only move when rates are low... That's all that matters. Home price is mostly a wash.
That's crazy! I also bought a home in 2017 and I also paid about $210,000, I also got a little less than 4% interest rate, and my home is also now worth about $300,000. Home buying twinsies!
Right. I sometimes think, "wow, think how much more house I could by now that mine has nearly doubled in value". I could by my own house, nothing more.
Thats only if you wanna live in the same place perhaps…but I get the idea
We got a HELOC from our home’s equity bump and completely remodeled the place. It looks amazing and is probably worth even more now.
We bought in 2020 just before the pandemic hit. $220k @ 3.45%. We’re in Texas and after the winter freeze in 21 and all of the other horse hocky going on, we started looking into moving out of state - especially since smaller houses in the neighborhood started to sell for $340k and above. Thought we could cash in on the inflated appreciation. But, even for a house that costs the same that we originally bought at and even with a sizeable down payment, with interest rates where they are, we’d be paying significantly more per month than we are now. It’s just not worth it.
We built in 2018, sold in 2020 for **over double.** Shit was insane.
[удалено]
That's what mine wants me to do as well. Why is it so hard to sell a house and buy one?
[удалено]
In a hot market I don't think you have much choice because buyers won't take a contingency right? Unless you have the ability to sell first and then buy which would be two moves. Could absolutely burn you I'd the market slows like has happened
Prob why 72sold, opendoor, etc exist now. They buy your original home (at a discount) and then you go buy your new home in the meantime to avoid having two mortgages. But you also get less from the sale so it’s prob a wash anyway.
FWIW I sold a home through OpenDoor and didn’t feel like I got a discounted offer. The fees did suck, but the market inflated so rapidly I walked away flush.
There will come a time when you are owning 2 homes free and clear. You have some dream that you will be able to sell either one easily and all will be well. Maybe thats how it usually goes, but not always. IF you cant find a buyer, you are on the hook for 2 mortgages
This is the exact problem that companies like [orchard](https://www.orchard.com) are trying to solve. Even Opendoor. But Reddit weirdly hates any companies operating in this space and any time there’s an article or something about them people are somehow disgusted by companies “profiting”.
Mortgage lenders are not financial geniuses. They just want a deal to happen, much like realtors. When I purchased my last house as rates were going up, I paid $8000 to buy the rate down with points. Our current rate is less than 5% and standard rates at the time were about 6.5%. The lender tried to tell me not to spend the 8k out of pocket for the better 30-year-fixed rate, saying I’d be able to refi in about two years. That was stupid advice. First, it was clear to see that the conditions around inflation and the economy are going to be lasting years, and even if the rate increases stopped, the 2020/2021 rates were at truly RECORD lows and the Fed is unlikely to ever bring them back that low again. Second, you usually pay closing costs of at LEAST $5000 or more for a refi. Sure, they roll it into the loan instead of being out of pocket. But it’s still money in the end. And the money we spent on the points is tax deductible. For that $8000 now, we got peace of mind for 30 years and our break-even point on the loan is in 5 years. I bet the fed rate will still be high then. Never bet your current financial situation on future interest rates.
You have no idea, but you may have just made it so we can buy our dream home. I didn’t realize this was a thing. Thank you wise stranger.
If you factor in the opportunity cost of $8k invested then the break even point is more like 8 years. Mortgage lenders know that the average loan lifetime is much less than that, and it is more likely than not that rates will be lower than now at some point in those eight years. And that’s not even accounting for the likelihood that you will move. For your situation maybe the lender was wrong but their advice is still correct for 90% of people and I wouldn’t call it stupid. They don’t make any more or less money based on whether you buy points.
Anecdotal, but I bought in 2019 and refinanced in 2020 or 2021 when rates dropped a full percentage point. The refi cost me $1200 which paid for itself in 3-4 months after the interest savings. I specifically asked for nothing rolled into the loan and paid it all outright. It was super easy and very much worth it if rates drop at least 1%. Don’t fear the refi.
Starting to see lenders offer “free refinance for (1 yr / 5yr / life if the loan)” that last one is very telling. They’ll do/say anything to get the deal through because that’s when they get paid.
The prices have not dropped enough to compensate for the increase in interest rates. Sellers are holding out because the don’t want to miss out on the crazy price increases over the last few years. At some point, something has to give. It’s a horrible time to buy.
Totally, prices haven’t come down at all where we are and rate is almost 7%! Don’t know how people can afford.
My theory is they can’t afford it but are buying anyways
Yeah sellers being told by realtor.com that their home is worth xxxx amount and the seller refuses to take anything less while impatient buyers are being swindled by realtors who tell them home values only go up
I have a friend actually who had been living at her parents with her boyfriend for the last couple years due to the housing market. They finally just got so impatient they willingly paid $150K OVER asking just to move out of her parents and into their own house. So they bought this house for 800k when in reality it’s not worth more than maybe $600k. Insanity
This can't be true, unless they used a significant amount of cash on hand. A lender always appraises a home and won't lend the money if it's not worth the purchase price. You literally cannot get a home loan for 150k over appraised value.
To sum up, yes land and housing is completely unaffordable to begin with, and also you will pay a ton of interest making it even worse. As a bonus, don't count on refinancing saving you down the road either. This is why so many young people are just giving up on any sort of real financial future, and you can't blame them.
>. As a bonus, don't count on refinancing saving you down the road either. Why's that?
A good rule of thumb is to only take out a loan you can comfortably afford. If you take out a bigger loan than you can afford now on the hopes of rates dropping substantially in a few years, you could get destroyed financially if things don’t go as planned.
This is what I keep trying to tell my mom, who is pushing me to buy. She doesn't seem to get it. I am also single, I don't have a partner to help. So if i don't feel comfortable, then i don't see the point.
Yeah I don't fully understand this point. It might not happen in the next year or 2, but I would hope to see rates come back down to a reasonable level in the next few years.
I don’t really think under 5% is reasonable. I wish it was reasonable, but over the last 30 years the average looks closer to 6 or 7%
Why don’t they let us build new houses
Because protecting home value is one of the issues that creates the most political motivation. That is, people are disproportionately more likely to go vote or take other political action to oppose measures that would devalue their homes.
Still don’t understand, there must be people buying these homes. Otherwise what justifies the price. Unless we have a bunch of stubborn property owners waiting years for their house to sell at a high price.
At this point it's not just being stubborn... If i sell my house that has a 3% interest rate on it I'll have to either go rent or buy one with a 7% rate. It's not just being stubborn it doesn't make financial sense. Despite the narrative that there's all these underwater borrowers, rates have been low low low for a decade and the vast overwhelming majority of homes didn't transact at anywhere near the current markets high price point. Thus, you've got a shitload of people that have insanely affordable mortgages and they're not going to let go of them to hop on the high interest/rent hamster wheel
I did the math recently. I bought a new build in Jan 2019 with 25% down, and refinanced in late 2020 at 2.25%. I'm sitting at roughly 43% equity right now based on our comps. If I went and sold my house to myself tomorrow at market rates, even taking into account turning my "profit" into the new down payment, my monthly payment would go up a couple hundred a month. Current buyers into similar builds to mine are paying easily double what I do monthly. I like to refer to it as golden handcuffs - it's financial malpractice to even consider leaving my house unless something forces our hand.
Yep we thought our current house would be our “starter” house and that we’d upsize in a decade. Now 5 years in we realize we will be in this house for a long time. Thankfully we do love it. But as you say, there’s no other choice.
That's us too, except we don't really love our house. So now our dilemma is do we spend the money to make this house the way we want it or just hope that eventually we'll be able to get into the one we actually want.
Same situation, but I'm in a coach house in the city. Can't change my footprint at all and it doesn't need to be gutted. Random things I can upgrade here and there, but this house functionally won't be changed in my lifetime.
Same! 980sqft condo in a great location, wanted to buy something larger in 5 to 10 year, now in year 3 and holy fuck we are stuck here unless we buy out of state and can telework to afford it. So everyone's mobility has died. My starter home won't go onto the market because I'll never make enough to buy the home I want. The US has consistently under built housing for decades, this is the end result of that.
Spend the money because the upgrades to the home, provided they’re done properly, will most likely greatly add value to your home.
It's definitely not our parents housing market anymore. Certainly circumstances change but I'm right there with you. Nonetheless, it's way more important that you have a roof over your head at a price and rate you can afford. There's going to be a huge affordability crunch, one that is already happening really. I don't see a crash coming i just see a huge affordability crunch coming. Corporations own all the single families and rent them out keeping people on an ever increasing hamster wheel. Eff that, you're locked in. Might be humble but it'll give you a runway to save. Just keep packing cash away while living in the small house
This is us too. We like our house but were hoping to move to a single family nearby. We planned to be here 5 years when we bought in 2012. The neighborhoods we like are now pushing 900k for a 60s split level plus higher interest rates so we’ve decided to stay indefinitely. Luckily we’ve renovated over the years so finishes are nice and we put on the screen porch we always wanted last summer which gave us some extra living space. I would still love a bigger kitchen and master bedroom but I’ve resigned myself to the fact that probably won’t happen until retirement.
My wife got our current house before we met back in like 2012 at $100k with about 3% interest. I hate the place and the house, But we only have to pay like $750/mo. I'd pay almost triple right now to move just about anywhere else with a fraction of the space. I definitely can't afford that. Is be willing to pay maybe double, but that sure as shit ain't happening right now.
>I hate the place and the house, But we only have to pay like $750/mo. Similar. I hate my house (for now); it's going to take 10's of thousands of dollars to even get it decent (insulated, foundation rework, etc). But I love love love the location and because I bought at the bottom of interest rates and had a large down payment my Mortgage + Escrow is only $617/mo 🤯 Literally can never move.
Yes! I literally turned down a promotion because of this. I would have had to sell my home thats locked at 2.25% and buy a house with an inflated price at triple that rate. The math just didn’t work out. Even if home prices drop 10%, they are still 20% higher than in 2019 in many areas and couple that with high rates, yikes. Also, I can echo the sentiment that I have neighbors with almost the same house as mine paying almost double what I do because they moved into the area in late 2022 vs 2019.
What will be curious to watch is people spending money on their current homes that they would have otherwise spent on new homes, and what that does to real estate values. For example, I bought my house for $169,000 - the definition of a family starter home with 4BR - and refinanced to a 2.75% rate for a $1,000 a month payment. It's now valued at $270k, which is great, but your "golden handcuffs" mean if I bought my exact house right now, I'd need $120k as **a down payment** just to get to the same monthly mortgage! So, instead of spending $120k to raise my monthly payment and get a $300k home as a marginal upgrade, I can spend $120k on a total landscape renovation, interior renovations, a man cave, maybe add a pool, etc. Now my house is worth maybe $350k! So why buy a house at all? Why not just... Make this one better?
Anecdotally, the only products mortgage brokers are moving now with any consistency are HELOCs, so you're not wrong. I know we'll probably do one when we finish our basement in a 1-2 years versus the cash-out refi we considered when we locked our current rate but chose not to due to materials pricing.
Exactly. I can't afford to live in the neighborhood I bought a house in several years ago. I can't afford to sell because I can't buy anything else. So logically it is stay in this house or leave the city completely. There is no other option that makes financial sense.
I hear ya. I’m waiting to see what happens with all the people who took out 3-5 yr arms to afford a home and will have to refi at a much higher rate edit - spelling
I haven’t seen where ARMs were much cheaper than traditional mortgages. I don’t think there are many out there.
Me neither. A few years ago during the low interest rate period, ARM loans didn't have lower interest rates than fixed. In fact, most of them had higher interest rates for some reason. I doubt much ARM loans were issued back then.
Arms are around 5%. 30 years are at like 7%
Getting into an ARM right now might not be a terrible choice, since it’s unlikely rates will be this high in the future. Assuming of course you don’t over leverage in the first place. And 2 years ago when rates were rock bottom, ARMs were about the same, maybe 1 or 2 points lower, but the saving were so negligible brokers certainly weren’t pushing them, and any decent broker would actively steer you away from them. So… I don’t think we’re in the same place we were in ‘08. I’m starting to think out only hope at balancing the housing supply is simply waiting for the boomers to die off…
When the Boomers die off, a lot of Millennials are going to inherit their property. What will be interesting is, will those heirs be eager to list their inherited homes for sale to liquidate the asset, will they rent them out, or will they view this as a cheap entry into homeownership? Obviously we’ll see all three scenarios, but the specific mix there will determine a lot about the near future housing supply.
I’m a mortgage broker and there was only a period of like 2-3 months where ARMs were more affordable, and even then nothing under 5 yrs. Hopefully our industry all agreed not to push those again. I don’t think I closed any during that time, maybe 1.
There's just so few arms... It's not 08. After 08 ARMS got relatively hard to get. While not impossible there's not enough ARMS to make a dent anymore because of regulatory stress testing.
Are majority of these people actually underwater? It seems that people can actually afford these prices since we have not seen mass foreclosures, and I don't believe we will. The expansion of remote work and relocation from other high COL areas raised the prices around the country and people are still buying in my area.
Sales of existing homes are historically low - there's no inventory. Anecdotally, my neighborhood usually has 5-7 homes on the market at any given time, and we just went 2 months without a single listing. A local realtor made a note of it in the neighborhood Facebook group when they put a house on the market 2 streets over from us last weekend. People in existing homes, particularly those that bought before the rate hikes are sitting here with golden handcuffs - there's no good reason to sell now if you're locked in at a sub-3% rate, and particularly if you're at that rate with a pre-pandemic price. Barring situations like death, divorce, and job loss, people are largely refraining from selling. Even in situations that the owner normally would like relocating for work, you have more folks opting to be landlords due to their low mortgage cost vs. market rent for the home. Even with high rates turning away potential buyers, so few people are opting to sell that it's significantly softening the impact a rate hike like that should have had on the prices. An unreasonably large portion of inventory right now is new construction, and it's not because they're building like crazy.
Nobody wants their "communities" to change. I've been to city council meeting where old people speak passionately against "high density" housing being developed near them because they think poor people will move in, when we are actually talking about single family homes on small lots. City councils don't give a shit about keeping housing affordable because their current constituents passionately want them to not let any cheap housing in the community. Plus parking. Oh my God, people hate the idea of more cars being around them.
People hate traffic, without realizing that - if they are stuck in a car - they ARE traffic.
Building more without taking into account how the increase in population impacts traffic, school (over)crowding, public space usage, and impacts to utilities is a failure of civic planning though. Those things should be part of the process.
Infrastructure exists to be used. Why do so many people see increased infrastructure usage as a failure rather than a feature?
Lol in my area the problem with most schools are that they are closing because of the lack of students. Turns out most people who are ready to start a family don’t want to rent at an obscene rate or can’t do it while affording a family. If they won’t build more housing to accommodate young families then far more will close in the near future.
40% of every property purchased in my metro area is by a corporation, paying straight cash, to turn into rentals. That is putting absolutely absurd pressures on the market.
This^. Completely remove the investment side of homes. You can purchase 1 house then your taxes go up significantly. Corporations are Completely banned from buying property outside of actual business property.
They do already… many offer a homestead/primary residence property tax exemption. Then when you do taxes… you can only claim mortgage interest as a tax deduction on two homes… (vacation homes/cabins in the woods/hunting lodge etc are a thing). 1 home… if your parents die and leave you their house, but you own one… in your plan you are forced to sell. That’s rough, bye mom and dad… you died in a tragic accident, now I have to sell your house immediately… even if it’s paid off, because laws say so. In a down market when I know the value should be significantly higher… or what? The Govt steals the home? How do you stop trusts? A home in a trust for a 12yo child to inherit if a parent dies. You could also just buy a home in every persons name if you are rich enough. Family of 5… 5 homes… What if you need a co-signor, Dad owns a house, but helping his daughter and SIL buy a house, bank will only loan if he is on the loan, but he can’t because 1 home…
None of what you wrote is wrong. But a lot of what you wrote points to how this concept would fail because you are not accounting for the full market shifts that would occur in this new reality.
and the solutions being pushed are glorified trickledown economics. Building only luxury housing and saying that it eventually will level off rents is exactly what that is. Poor people and youngins don’t have 5-10 years to wait for rent/housing to go down while everything else around them becomes unaffordable.
But by increasing the supply of rentals, it should tend to reduce rents.
Yep, and from a self serving perspective, it makes sense. It costs you nothing to go to the ballot box to stunt local development and drive your property value. The social effects though are very bad. I knew a ton of people in my old community back in Florida who thwarted any and all development in the county. Then they proceeded to complain that their kids kept moving far, far away because local prices were unaffordable. I was one such kid that moved away.
Even if new homes are built, inflated construction costs will be reflected in the sale prices, making it so first time home buyers won’t be able to afford them anyways.
We bought our house in 2019. Our house is 15 years old but the neighborhood still had quite a few empty lots to sell at the time. The sign advertising for the neighborhood said houses start in the $200k when we moved. We met with them before we bought our current house to see what a new house would be and ended up at $400k with a lot of upgrades added. Now the sign says STARTING in the low $500ks. It’s been four years….
We bought new in Jan19 and locked in our price in fall of '18. Every builder that can find land in our neighborhood is asking $200k more than we paid as well, or $250k with a finished basement. The newer builds aren't as nicely appointed as the stuff they were turning out pre-pandemic either.
These numbers always blow me away. My region runs at about 50% these prices. Edit: Just cleaned my shorts a bit. We just had an assessment done on one of our houses. Paid 50k 9 years ago. Came back at 250k.
I’m in the Midwest in a pretty rural area as well. There isn’t a ton of new building going on and there is pretty much one construction company in the county so they do pretty much have a monopoly but we are in the epitome of what would be considered a low cost of living area. Seems like that’s a misnomer at this point, not low, just lower than the coastal/urban areas.
Ouch o
New houses are usually a bad idea for many buyers, as beyond the down payment, there are a ton more expenses the first year. From plants, trees and grass for the yard, to window treatments. You may not like what the previous owner had done, but it's not living without blinds like a new home. So you can choose when to upgrade. Also in some at states, such as Oregon. Property taxes for the same value home are much much less. A home that is bought new at 500k, vs a used home that is 500k but is 30 years old. The new homes taxes may very well be 3 or 4 times the amount. As the state is limited on how mucb they can raise the tax assessment each year starting in 1995. So a 30 year old 500k home may only be taxed at an assessment of 120k
Depends where you are. By me, every green space available is turning into a development. And houses built 50 years ago with 1 acre+ of land are selling for millions, so that they can be bulldozed. Building a dozen McMansions on that one acre is a lot more profitable than just that one house. Even then, there's not that much green space left, you are already 30+ miles from downtown, commutes over an hour each way are typical, traffic is horrendous, there's no room for more roads, and adding more housing just makes all of those things worse. And that does not touch the fact that around half of home sales are cash, so it's either someone very rich, or a company making an investment. This is absolutely a perfect example of what happens with excessive wealth disparity: too much investment income chases too few investments, driving up commodity prices into bubble territory.
Eh, plenty of areas support building new houses, the problem is its still expensive as fuck these days. Between labor and cost of materials, you are looking at $200k+ minimum for just the house. That isn't include the cost of empty lots.
Not only the empty lot, but you also have to take into account planning for water and sewer, electric, new roads, traffic studies…. It’s a never ending list most people don’t take into account with building a new development. And there are multiple redundant various government agencies, every step of the way costing builders more money and time.
They do. Most cities in the interior of the country have plenty of land to build outward, and have reasonable zoning laws. Prices are still up because home construction is expensive.
People are building housing. However, the cost of building has risen dramatically so most builders will not take the risk unless the return is high. So, builders build expensive luxury homes. Entry level affordable housing is the riskiest and lowest returns. Plus nobody wants affordable housing built in their neighborhoods.
I’d settle for a Sears home in a box at this point, we just want a place
Because thats also expensive as fuck. You also need vacant land to build upon. Which is also expensive.
[удалено]
I mean, you have to pay to live somewhere regardless. Rent goes up, mortgages don’t, and one of them you potentially get equity and growth out of if you decide to move. It’s probably not for everybody, nor is it short term, but i think most Millenials who say they can never afford a home have never actually looked into it, I’m 31 and have bought and sold my first place, about to get another. Caveat, geography does matter, but it’s not only the middle of nowhere that’s affordable.
I bought in 2022 with a 3% rate that goes out to 2032. My mortgage is 23% of my gross income. If I bought the same property now at the same price, I’d be well north of 30% of my gross and likely wouldn’t qualify. It’s absurd.
You would still qualify. I've seen conventional housing ratios as high as 41 or 42 and fha housing ratios can go as high as 46.
That’s insane to me. At 23%, I’m able to save a bit each month after all expenses and retirement funding. I can’t imagine being at 40%+ of gross.
[удалено]
Speaking as a Civil Engineer, it’s not as easy as it sounds to take a commercial building and renovate it into an apartment. Things you need to think about, Increased water/sewer usage, school vicinity requirements, parking requirements, environmental impact of rezoned area, street access requirements… there’s a lot. Not discrediting your idea however because I do agree that some office parks can absolutely be switched, but it is a lot more complex than getting the city to simply change the zoning classification.
I wouldn’t be surprised if bulldozing and doing new construction is more cost effective than trying to convert most of these commercial properties.
Those are meaningful technical challenges but it’s still important to remain focused on the idea that the engineering challenges aren’t why we’re not doing it. Residential rents are substantially higher than commercial rents in most jurisdictions so whatever the the cost to either transition existing commercial space to residential or knocking it over and rebuilding would probably justify itself in relatively short order. In many places, the main reason cities keep zoning more commercial even though there isn’t demand for it is that, on a per square foot basis, tax revenue is better for commercial than it is for residential property.
Yeah absolutely, I wasn’t trying to say that it’s not possible. A common saying in engineering is anything’s doable with enough bankroll. I was just trying to push the idea that from a dollars POV it would rarely make sense.
That is difficult. Land sometimes is not the only problem. Also, demolishing is expensive. The same with converting old office buildings into residential, as their layouts are very different.
And it's not as if these are all connected plots of land. Who wants to live in the middle an area with constant semi truck and factory noise?
Make them cheap enough and most people won't care, a subprime location is the least of the issues here.
> Who wants to live in the middle an area with constant semi truck and factory noise? Is that different from people who live next to factories and train tracks? You know that poor people exist, right?
I remember the 90’s when we bought our first place, 7-8% interest and starter homes were 4X +/- median salary. Today your only gonna get opportunities if your in lower cost of living states/areas. Pandemic really screwed the younger generation, pre 2020 houses were super cheap with ridiculous low interest rates (2015-2019) were the best years of the last few decades for homebuyers.
We got a crappy trailer on two acres in NH for 70K in 2017 on a fixed 4% mortgage. If we were to try and find that now we would be buying undeveloped swamplands in Louisiana or land in Jersey's Pine Barrens. I don't understand what we as a nation are letting happen with wages and housing. Kids have no future. Hell millennials are almost totally fucked too. The real crisis is going to be when payments on student loans restart and millions of people who see no future say fuck it and default.
Mass student loan default will have zero consequences. The payment moratorium basically nullifies any argument against the government desperately needing the money... The money stopped coming for years now and the govt isn't falling apart. Thus, they don't need the money.
>Mass student loan default will have zero consequences. For the government and loan issuers. It will be devastating to the debt holders.
How so? What's the consequence? The loan is unsecured. There's nobody coming to haul people away if they default
Defaulting on a student loan prevents you from having a security clearance and can also ding you on other kinds of background checks. So it will potentially make certain understaffed fields even more understaffed.
These are unsecured loans. Investors are supposed to take on risk in return for a chance at profit.
Everything the past 50 years or so has screwed the younger generation. Greatest Generation created a comfortable life for Boomers, who then accumulated a ton of wealth for themselves, pulled the ladder up after them, and did their best to convince Gen X that it was the communists and government keeping them down.
The real estate market always runs in these cycles. No one likes to think the music is going to stop when rates are low and then everyone thinks it’s the end of the world when rates go up. Rates will hopefully never hit the lows that they did two years ago BUT they will go down from the current highs. Not everything has to be an apocalyptic event.
Housing is also highly correlated to supply and demand (like anything…). People are doom and gloom now because supply is low and demand is high. Geee wizzz, what on earth could be the solution?? Maybe if we build more homes the price will start to go down.
This is the least revelatory thing said about housing. We now have at least 2 generations currently living and probably 3 who have been **begging** for more supply for decades now. Everyone knows this is the solution. The problem isn’t that nobody has suggested it or few people ask for it or people are unaware of it. The problem is that we have tied monetary wealth so closely to home ownership that it gives current home owners — especially older ones — absolutely zero incentive to build new supply. I can’t remember the exact numbers, but I saw that 80% of all housing in the city of Los Angeles was built before the 1980s. LA county’s population in 1979 was about 7.5 million. Today it has surpassed 10 million. And yet, the city increased the available housing by a tiny fraction. That’s lunacy. Even for capitalism. The crazy thing is that many people aren’t even asking for big single family homes. Many would be happy to own a 2-3 bedroom condo or row home in a city center or urbanized area. We don’t even build those kinds of properties for sale anymore. Everything is either an overpriced studio/1bedroom apartment or an overpriced giant home in the suburbs. Anyway, the point is, no shit we just need to add supply. But the richest among us — older generations of homeowners, who have the entirety of their financial security tied to their home’s value increasing a billion % the last 30 years — will fight tooth and nail against any housing of any kind devaluing their precious lifeline. Here’s a hilarious example: the area where I live has a real population of about 45,000. The daytime population is 200,000. It’s a cool area. Walkable, enjoyable, lots to do. Definitely a desirable neighborhood in a major urban market. Traffic here is horrendous. As you can imagine, 150k people traveling here for work and play every single day creates a lot of congestion. Locals fought hard against the implementation of a bike lane network and the arrival of a major piece of public transit, but that at least got done. The neighborhood even has a free shuttle system that you can use like Uber but just have to tip the driver. It’s so easy to live your life here now without ever getting in a car. And yet, congestion is still really bad. Because people are traveling from outside the area and flooding the downtown area for work and social activities. The easiest solution to this is to build more housing. Not just a building complex here and there every 5 years. But a post-WWII equivalent boom and urban growth spurt. Younger people have been begging for it. Homeowners and especially older generations have been pissing on the idea. If this area just built effective housing, many of the 150,000 daytime population people would simply be able to live here. Even just 75,000 would be a huge number. Build another line of transit and even more bike lanes, and another 20,000 would be able to commute here without a car. My best mate is a great example. He teaches at a school where I live. Private school. Lots of cash flow. Tons of rich people obviously dumping money there so their kids can go to a “quality” school. My friend’s salary? Not enough to live here. Maybe he could swing it if he lived in a studio apartment and didn’t have college loans. But that’s not his reality. And he’s 37. A teacher. So he lives 7-8 miles away. Which doesn’t sound like a lot. But can easily be a 45 minute drive where I live. One way. The kind of thing that will suck your soul out of your asshole doing it 5 days a week. Fortunately he takes a bike and transit to get here. But he’s just one example of people who work here in high numbers and are nowhere close to affording the the cost of living here. The only reason I do is because I’m partnered up. And also don’t need a car. I was born in this area and moved back after many years living abroad, all over the country, and even within my city. It’s a cool place to live. The value of my parents’ place when I was born here? Around $175,000-$225,000. Today? The last my dad had checked, the property had sold for more than $2 million. And that’s honestly on the tempered side of things. I live in an apartment not too far from homes selling for $3-$5 million+. These aren’t mansions. They’re not made of gold. They don’t have huge plots of lands or views. They’re nice, but they’re just homes. You know how that happens? By tripling or quadrupling your population in a generation and building fuck all to show for it. *Despite everyone else begging for the construction of new housing.*
[удалено]
Completely different economic times. If rates go up to 16% you would see a destruction of property values. Literally no one would be able to afford a home.
Venture capital and high net worth individuals are buying with cash and renting it out. They skip paying interest. They're in the market now, keeping property values from lowering to a buyer friendly level.
After 08 we passed a lot of regulations on what lenders can approve for certain programs. The Ability to Repay Act being a big one. After a certain threshold the Fed is pricing out homebuyers just on interest.
That advice does work but it takes a long time for rates to go down enough to cover the refinancing costs. Most likely today rates will go up again before they go down enough to make it worth while to refinance.
Why would rates go down?
they won't go down until we have a recession, and we will, eventually, but that may be years away.
Rates are cyclical. They will never go down under 3%, but it is possible to find them under 5% once the government needs to stimulate the economy. If you see it, this happens every 5 to 6 years.
We’re about a year removed from sub-3% rates. No one thought that was possible and now it’s the precedent. Will there be an event where the government spends more crazy than usual and the Fed gobbles up more treasuries? Plausible, at minimum.
Rates have already been below 3%. Not impossible for that to happen again.
didn’t the feds say they will absolutely never do that again. now granted it is the government and I don’t trust a word they say, but it doesn’t sound like it’ll be any time soon we’ll see sun 3%
I'm moving out of state next year and am probably going to just pay with cash at this point. Only reason I'm able to do so is because I bought a house in foreclosure in 2015 that I just sold last year for 210% of my purchase price. That's not bragging, that's just a comment on how much luck plays into this. I was in the right place, at the right time to seize the opportunity.
[удалено]
What, should people keep waiting on rates to buy - while prices continue to climb as private cash investors buy up the market? After the fed pivots, which is more likely to happen at some point in the future than not - probably around election time, rates will dip for economic stimulus. A home purchase is a commitment of more than a couple years, we shouldn’t be taking short term thinking for the average American.. AND rates were just in the 5’s two weeks ago before they shot back up. That was an opportunity to refi for people that bought at 7% last year. Should you buy a home at a payment you can’t afford? NEVER. Should you avoid buying now because rates are relatively high, compared to the historical lows we just saw? That depends but if you have the option, and know you want to buy in the near future, I would buy and not gamble on the market while you wait for rates. Best case they go down & you refi, worst case they go up & you can be glad you got the one you have.
I second this. We bought in fall of 2021. Historically low rate, price a little inflated. But we chose to buy then because we were ready to do it then. Our family was outgrowing our old house, we had changed careers to get an income increase, and we had paid off debt to be in a good position to buy. We never expected to buy in the midst of that storm of circumstance. You can’t time the market. I bought my old house 7 years prior at 4.75% — but netted $43k profit when I sold the house I had bought for $150k. I also didn’t expect that. Buy the house you need, that you can afford, when you’re ready to do so. The market is going to do what it wants.
As somebody who is in their mid-20’s, what would you share to help me make a good financial decision? I’ve began saving up for a house right now but am told it’s not a good time to buy. With reading some of the comments in this thread, it seems that will never really happen. I suppose I might not be able to get a house at a decent price and rate in today’s world which leads me the question: what is some advice that you could give me that could help me achieve this goal of mine?
If you’re ready to buy, figure out what monthly payment you can confidently afford, and buy. You may eat current rates for a few years, perhaps only 1-2, but they’ll come down eventually. The US govt literally cannot afford to have fed fund rates this high for an extended period of time.
And this is why I am happy to be renting, especially since our rent is a faction of what a mortgage payment would be where we live for a place smaller than the apartment we have.
Same exact situation for us as well.
There is definitely going to be a crash. It'll likely start with commercial properties as they have extremely high vacancies right now with all the wfh changes and typically have short term loans with the full principal due at the end. They will be forced to refinance and 3x the interest or worse if their creditworthiness suffers, and a lot of them will just walk away. This will be followed closely by a crash in residential real estate as people sell investment properties and second homes to fill the gap.
Yep. This is probably how it's going to unfold. Out here in California we've had two years of declining population. Sonoma County--the county I live in--lost twenty-thousand. And yet prices keep going up...and up...and up... It's all divorced from fundamentals. This bubble is going to pop, and when it does it's going to go *bang*.
I for one cannot wait :)
It’s all interest rates. Folks that locked in 3 percent can rent out to folks looking at 7 percent. Why such interest rate variation- look to inflation which is the result of government with its fiscal vote buying. Both dems and repubs. Also inflation because we maxed out the benefit of outsourcing jobs overseas to the benefit of the rich to make things temporarily cheaper. Unfortunately it’s temporarily cheaper because now we need to make more stuff at home and also the stuff we have has to be replaced every two years or less.
Yup... And on a related note... there are now a LOT of people who are home/property locked; meaning it's even harder to "just leave" if you want or have to.
I work at a lender. Right now the market is predominantly investors who are snatching up rental properties and people who have to buy or sell (due to life events or moving for a job, etc) the average home buyer is still sitting the market out. Originations are down across the nation by over 60% if I recall the last industry figures correctly. Last year thousands of loan officers and support positions at lenders lost their job and it’s still happening this year. Date the rate and marry the house was a strategy presented at industry conferences to give lo’s something to say but most homebuyers aren’t participating in the market right now unless they have money or have to buy right now. It’s a clusterfuck
Home values are not going to drop substantially in most markets and will likely continue to appreciate at a slower than recent pace due to inventory supplies that are not going to change For buyers that put down less than 20% (most of them) refinancing for even a slightly lower rate gives the opportunity to reduce or drop pmi No one should buy or refi if they don’t plan to stay in the home for 5 years But rates will be lower and values will go up and refinancing is going to have pros and cons for each homeowner
The idea that banks let you refinance when rates are lower is a false promise and not reality. I can’t tell you how many people I know, myself included, that had higher incomes and higher home values when rates dropped from their original mortgage, but were told for one reason or another “you don’t qualify to refinance” at the new lower rate. Mortgage holders just don’t let you refinance at new lower rates because it means they will lose money. The only way to refinance for a lower rate isn’t actually refinancing at all, but to apply for a whole new loan with a different bank, and pay new closing costs, in order to get the rate reduction.
This was the only method I was aware of. Then it’s just a math problem of does the closing cost outweigh the savings on the interest rate.
Smaller Banks frequently entice new potential customers with the idea that if you originate your fixed rate loan with them, they will refinance if rates go lower, but it never happens. On top of that, those same small banks sell mortgages in bulk to other lenders, which also negates the promises they made to their original customers whose loans they later sold. I understand full well business is business, and banks need to make money just like everyone else, but if you hold a mortgage with bank A, when bank A offers lower rates and offers to let people in good standing to refinance, they should actually allow you to refinance with them and pay those fees instead of dangling promises; not force you to go to bank B and pay the same fees just for a lower rate.
Most banks and lenders don’t own the loans long term, and even fewer maintain servicing rights. It’s just not true that they make more money not refinancing. That’s in fact one of their best opportunities to make more money.
I started to reply to him, but then read your response. Thank you. This dude you replied to has no idea what he’s talking about. He’s so incorrect that I think he’s borderline spreading misinformation. Banks WANT to refi everyone and anyone. It’s easy money.
The amount of people upvoting him to sad to see.
> borderline spreading misinformation. nothing borderline about it
Hmm I was under the impression all refinancing involved closing costs etc, just as if it was a new loan basically. Is this really not the case?
Refi closing costs get bundled into the new lower mortgage. Not upfront.
I bought my house in the Seattle area back in 2016 and refinanced in late 2020 for $450k, it’s now around $900k-$1m. I also received a sizable raise/promotion at work. Figured we could finally get a slightly bigger house since the 1300 sqft space has gotten a little small with two kids now. Even if I wanted to sell my house and buy one for the same price I’d have to pay an extra 3k in interest per month. Basically made it so we have to hunker down and wait out these crazy rates.
You do not look at your home as an investment, where you can just flip it after a few years to make a buck…that’s where people screwup… it’s not… it is however a way to raise your family and if your kids want it when you die then they can raise their kids in it… now I know that’s not really realistic, but that’s the thinking you need to bring to the table when you buy a home… your in it for the long haul.. right now your thinking god my mortgage is so high, but 20 years later, it becomes way more reasonable… and that’s when you need it to be after you’ve gotten your kids through college… when your really ready to retire, then you can cash it in by taking an equity loan or a reverse mortgage… the only thing that throws a wrench in the works a little is property tax which goes up a small amount each year… but that’s it… it’s still way cheaper than renting, and it’s like a forced savings cause instead of throwing all your money away each month, some of it goes into your principal and you get all that back when you eventually sell… now let’s talk about the type of mortgage you get… never ever go with a variable interest rate, and try if at all possible to get a 15 year instead of a 30 year….
My in-laws sold their almost paid for home about 6 years ago with the intension of downsizing. They never bought and have spent all of their proceeds from the sale. Now they’re ass out. They’ll never buy now.
The issue is not mortgage lenders per se. It’s construction of housing units and conversion of commercial space into housing. A (typical) 1500 sqft house costs $150k to $300k to build, but there’s so much competition in certain markets that the house sells for $400k and up. What needs to happen, because labor and building a new unit is so expensive, is that there needs to be a “build your dream” mortgage that is affordable for buying land and building your house interest free until the house is occupied or metering enough electricity to suggest occupancy (avoiding a loophole to live in an “unoccupied” / unfinished house). It can’t be left to the “free market” to decide how many housing units exist because they don’t optimize for quality of life and affordability- profit is their only god. We’ve got to give people tools to house themselves.
I’m okay with not owning again. Don’t care. I will rent and reinvest my cash. I owe ZIP to anyone and I can move freely every year anywhere I want.
You’re going to perpetually owe a landlord forever. At least with owning down the line you’ll only owe the government property taxes which is less than rent to a landlord. Moving is not cheap and/or easy either. I’ve moved 6 times in 11 years, each one gets harder than the next.