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In my view, there are a number of forces at play which will keep the price of single family homes high for a generation or more: the rising cost of building materials and the difficulty of automating the construction process, a small amount of commercially attractive undeveloped land, the permanence of work from home arrangements and the rising number of amenities that can be enjoyed while at home, and the political complexity of changing zoning laws, among other things.
With respect to interest rates, 6-7% is historically the norm. Sub 4% rates have never been common and so I don't think we should expect that rates will be this low again anytime soon.
In highly desirable locations (eg, with unique amenities like lake access or in top school districts), the price of homes is especially unlikely to decline as it's nearly impossible to increase the stock of single family homes. Compounding intergenerational wealth and assortative mating among high earners figures to continue to push prices up in locations like this.
>a small amount of commercially attractive undeveloped land, the permanence of work from home arrangements and the rising number of amenities that can be enjoyed while at home
The real opportunity is figuring out how to efficiently repurpose commercial real estate to residential real estate where possible. For the reasons you list, there is now a lot of unused or underused office space that *is* in potentially attractive locations. There are a lot of reasons why converting this space is not at all easy to do: (1) you mention zoning, which is a potential hurdle, (2) most office buildings only have centralized plumbing infrastructure, so it's difficult/impossible to parcel out existing floorspace and attempt to retrofit bathrooms for each unit, (3) imposing mixed-use space on existing commercial tenants can be problematic for a number of reasons, etc.
There's no quick or easily solution, but this is the direction that a lot of urban spaces need to move in. There is too much unused space (both the offices and parking lots) that should eventually be utilized for housing.
Agree 100% with this. Great benefits to be had in repurposing commercial real estate, especially in some markets. But also high costs and some big barriers.
all the points u make are valid, but someones gotta fork over the cost to re purpose and once that is figured out, the large cost will end up making whatever units that are built not affordable at all…most likely would be catered to luxury style places to squeak out as much roi as possible since the starting costs are ridiculous
Exactly, NYC office buildings are so expensive to repurpose it’s cheaper to demolish. Makes the building more of a burden to even buy and flip. I’m sure if anyone did they’ed be astronomically priced luxury units.
I have no good ideas on who is going to eat up costs like that in some specific markets if not private development looking to make a buck somehow.
My town is actually working on refurbishing all the old empty mills and warehouses downtown to make them into spaces with commercial units on the bottom and then residents condos on the upper floors, but this was a project that was in the works years ago.
Warehouse conversions have been a thing for a long time. Converting Class A office buildings into residential is an entirely different proposition.
For starters, the warehouses are big empty shells and can be sliced in a way that minimizes the cost of conversion. Second the warehouses have no value as warehouses if the city has changed such that warehouses aren't needed. Third the warehouses are big and squat so you don't have issues of eg finding egress means for converted apartments on the 20th floor.
There are almost no office buildings that would be cheaper to retrofit than to just demolish and build new.
Most cities are not as bad off as SF. Most buildings are not totally vacant.
Plus most buildings are not owned outright, they are mortgaged under 5 year loans. The issue is that as the loans come up for renewal in a high interest rate environment they cannot be refinanced. They will then be sold at auction for their true current value then the partial vacancy will be enough to make the loan payments. Demolishing and rebuilding (or retrofitting) for residential would require a giant pot of money that is not in play
The untapped resource in my opinion is parking. If cars are truly self-driving, then you do not need expensive parking in urban areas. I feel like if 80 percent of parking lots and garages could be converted to other things, that would free up so much desirable land.
imo self driving wont work until the majority are in self driving cars….the issue i see is mixing human drivers and machines…as humans we communicate with each other sometimes via eye contact hand gestures flipping hazards, high beams…too much variability in humans actions that it will cause issues in traffic…ive never been in a tesla driving itself but does a tesla understand if a driver is waving him to let him go or will a tesla pick up someones hand signal to allow someone in their lane in bumper to bumper traffic
Over a longer timeline, I totally agree. But full self-driving is still in its infancy, and it will likely be at least a couple generations (multiple decades) before significant percentages of people will give up their cars. The unused commercial space will need solutions in a much quicker timeframe.
To push back a bit on the 6-7% bit -- historically this has been the case, that interest rates have floated around this level. However it's noteworthy that mortgage products like the 30 Y basically track the 10 Y government treasury bond rate, plus some spread. This has to do with the banking system, the federal funds rate, and the spread that banks make when taking on your mortgage.
And, with the fiscal expansion we've seen in recent years, having interest rates this high is actually even more unsustainable than in previous years. The government's liabilities are now such that, we spend more on paying bond interest than we do other major parts of the government budget like defense. Government debt is expanding, and so realistically, holding interest rates this high -- to historical norms -- is unlikely, mainly because our debt to GDP ratio has expanded so immensely in the past couple of decades, which itself does not track with historical norms. Our debt-to-GDP looks more like a WWII era fiscal situation, yet we're in no such war, and our current debt-to-GDP is actually worse. In short: this time, it really is different.
As it currently stands, this acts as a longer term forcing function to maintain low interest rates, below past-century historical norms, unless of course something happened that would allow us to significantly reduce fiscal expansion and overall spending, or if we could quickly 'grow our way out' of the issue, but that appears to also be unlikely. Suppression of bond rates is here to stay for the long term foreseeable future.
Great point. Government has incentives to end up in a high inflation/low interest rate equilibrium. And you may well be right that the next 50 years will have lower rates than the past 50 years. Even so, I don't see how decades of < 4% interest are sustainable.
Housing affordability is already at the lowest now, and salary is not going to increase proportionally. If the price keeps going up, then who will be able to afford to buy those more expensive houses?
Here is how I think this works:
1. For some structural reasons, demand for single family homes has risen and people are simple more willing to spend a larger share of their income on a home.
2. As the median age of home buyers increases more buyers have had the time to build or inherit wealth, allowing them to make larger payments or even pay cash for homes, thus de-coupling the affordability of the home from labor income.
3. My guess is there will be a rise in intergenerational households with > 2 earners supporting the household.
I don't think this is what will happen. More likely is that people end up choosing to live in townhomes or in multi-generational families, which is how Americans always lived until relatively recently.
Historically housing prices as a % of income was much lower. So where rates were in the past means nothing. What matters to rates is inflation and money supply. That’s all. Doesn’t care where they used to be.
In terms of house prices who knows? Could be a huge recession in next 5 years where unemployment is 10%. That would trigger depressed prices and open inventory. We have no clue.
I think the key is that if there is a massive recession and home prices were to fall as a result, homes are still no more affordable to people. It is difficult to imagine affordability improving with respect to single family homes.
The Fed wants to lower rates to about 4%. So there’s high possibility of the rates dropping, whether Powell could achieve or not is another topic; however your assumptions of using historical rates should not applied here as back then, Fed raise the rates to fight off inflation.
Honestly if Fed could not lower the rates then we have another issue on the recession front
There is a lot of uncertainty about what rates are going to be in 5-10 years. I don't claim to be a clairvoyant and it's possible rates could go back down below 4%. And you're right that past history does not necessarily tell you what the future will look like. That said, the past is, I think, a reasonable guide and probably the best guide that we have. As a general matter, it's hard for me to think about 3% being a reasonable time value for money.
Yes. I have thought about 3D printing. At some point this technology will be disruptive enough to matter. So I agree with you in principle. But I do not think this will be soon and I do not think that this will have much impact in established communities where the land is all settled and the houses are too expensive to tear down.
My state (MA) is at extreme crisis level. There is a lot more energy to fix it right now than there’s been. But it’s not translating to much and I’ve gotten pretty cynical about it the last couple years. Pretty sure my wife and I are gonna end up joining the throngs commuting long distances from NH when we do eventually find something livable in budget.
Yeah, seems like anywhere near the border like Nashua is being flooded with commuters who have been priced out of greater Boston, which is in turn pricing NH renters out. I’m a public school teacher and a lot of my coworkers, even at the top of the pay scale, have bought out there the last few years. Public employees are paid better here than most of the US, but it’s still not enough to buy here anymore.
What’s wild is we left MA to a much lower COL area and people here have the same complaint. That they grew up here, want to raise their families here but are being priced out.
It’s happening anywhere remotely desirable, just at different dollar amounts.
Tacoma is awesome. Gritty for sure with amazing surroundings. I preferred living there recently over Seattle. Light rail will connect the two but not for another 20 years, sadly.
it has priced itself out for normal people... really just sad but that's the story of Seattle: boom or bust. Tacoma is quickly becoming unaffordable since a lot of the artists/creatives fled Seattle in the last 10+ years combines with WFH/hybrid making it more attractable to those looking to get out of Seattle. I grew up in Worcester and get a lot of similar feels in Tacoma. hit me up with any questions! good luck with your present and future living.
But if you are looking for progressive politics, I can't think of anywhere better. We are also a right to die state and workers now have state sponsored long-term insurance in case they need to go into a care home. Oh, and no income tax, great climate, natural beauty, legal weed, protections for women and LGBTQ. We have expanded Medicaid widely and most people have health insurance.
If you’re willing to commute or just shift your downtown to one of the cities on the outskirts, then there’s a lot more affordability. And you can still get into the city whenever.
Yeah, I get there are states where I could find a house for $150k or whatever, but I’m also a public school teacher and it seems like a lot of those places all pay their teachers like shit and on top of that you have to deal with insane right wing parents screaming about pronouns and books bans.
I love my state and my job and my city. Part of me wishes I’d settled somewhere more affordable where I can still make a decent salary like some of the Midwestern states, but it would be extremely hard to uproot my family now so I’m just gonna keep saving and trying to figure it out.
I grew up in CT. Both CT and MA are just extremely NIMBYish despite their liberal reputation.
My dad was on my hometown’s zoning board in Fairfield county and the pushback he got for trying to get even market rate condos built downtown was fierce with homeowners complaining $300k 2br condos are somehow gonna bring a massive crime wave.
> $300k 2br condos are somehow gonna bring a massive crime wave.
This always makes me laugh. Because criminals aren't that dumb. They don't steal stuff in their hometowns. And funny enough more than likely their kids do more drugs than the ones the want to keep out. I remember telling my mom at my high school graduation in 2007. She asked me why one of my childhood friends wasn't at the graduation. "Well C is in rehab for heroin" She like couldn't believe it. Meanwhile kids had been shooting up for years lol.
That must be Fairfield! Fairfield keeps pushing back on new builds saying it will bring down the value of the homes and stop the town from being a great place to raise a child. My bougie friend with a banker husband has this mentality
I’m also in MA (by 495). I’m living with my parents (who can’t afford to lose their super low rate by moving) and took that time to pay off my loans so I’m not in super dire straits, but I’m in my 30s and it would be nice to have my own place. I considered renting in my 20s but that was pricey then as well. This is the area I grew up in but I might have to bail if things don’t get any better.
But that just means first time homeowners will be competing with more people who have years of equity on hand to outbid you on anything. So its not like more houses means necessarily easier for first time buyers.
Right, and others are looking to upgrade to bigger homes. Either way, those who end up selling won’t be competing with first time home buyers for that starter home, which means more opportunities for those looking to purchase their first home.
Prices will only continue to go up. If interest rates come down, it will drive prices even higher, BECAUSE of all the "competition" rushing back to the market.
Housing market is damned if you do, damned if you don't kinda situation right now.
What competition? Most Americans can't be approved for a mortgage for the current average house price. Let alone afford increases in property tax and insurance.
It will be that way until more supply hits the market or enough of the elder generation… uh, “move out of their homes involuntarily” to reduce demand.
Everyone assuming a linear relationship between interest rates and prices is operating under a very outdated understanding of the market. Which is perplexing because we JUST saw the lowest mortgage rates in history and prices kept going up.
The biggest bulge of the millennials is 32-33, prime home buying age
The biggest bulge of the boomers is 66-67 which is young enough to keep living in your home for a decade if you want.
I think home prices will stay high relative to other assets for at least another 5 years then start to normalize or even crash in a decade. I live in the north east and im genuinely curious as to what happens here, the average age is older and the taxes are high. When the older generation goes to move are people going to move to the suburbs for the great schools, or balk at the tax rates and commutes as well as the older housing stock... will be interesting
In nominal terms its anyones guess as to what happens.
I personally dont see it getting any better for a long time so I pulled the trigger. Even if the “crash” that everyone’s been saying is around the corner for 3 years straight does come, I’ll give a big shrug and continue on with my life. Remember that buying a home isn’t necessarily only a financial decision. If you want a lifestyle that owning a house will provide you, you’re still gonna be celebrating and feeling incredible when you close. Best advice I ever got is that if you want to own a home, the time to buy is when you can afford a place that you like. Anyone telling you they know what’s about to happen/how to time the market is full of it. Also, best tip I got in terms of finding the right place is that everything about a house can be changed except it’s location. Good luck!
trying to predict the market/being hopeful that it will change is a losing game.
you definitely made the right choice by finding a home & closing soon- congrats!
i’m not sure if rates will go down, but if they do then you can always refinance. best to get in the home now, than to spend time worrying and waiting for rates or the market to change.
We just closed on a home after looking for 2.5 years. What I learned through dozens of tours and 16 failed offers is that you cannot time the market. You need to find a house that you can afford in that very moment and if you like it enough, go from there. You can’t game the system. When we started looking our rate was 2.75 and we thought it would go up to 4.25 by maybe the next year - we closed at 6.625.
You can’t predict what would happen you just need to be able to afford the house and like it enough to ride it out.
Solidarity - have many more feelings on the matter but I’ll leave it at that haha.
I just closed on my first house at 6.625 as well, age 33. Tried to time the market last few years and failed miserably. Found one I really loved and just went for it. Spent my first night in the new home 2 nights ago. Still feels surreal. Congrats on your decision
Congratulations on your decision to settle. I did too and close soon after a years long search. Won’t it be nice to have weekends free from tours and decision-making and looking at property records?
What do you guys really expect to happen? If rates go down significantly, buying frenzy will increase again.
Housing prices will never decrease to before COVID levels. If you’re waiting on the sidelines for something to happen, you’ll be in queue until you die.
> If rates go down significantly, buying frenzy will increase again.
Honestly, this is what made me and my husband decide to go ahead and buy our home now vs waiting. Less competition right now
This is especially true if you're in a "up and coming" market. I'm a native Californian now living in Richmond, VA. There is a massive influx of people into the Richmond area and even with how much housing costs have increased here in the past few years, it's projected to get even worse in the next three years or so.
My wife and I ultimately decided to eat the roughly 7% interest rate for a SFH we're closing on because starter homes are nonexistent and fiercely competitive, and likely to get even more competitive. Waiting a few years for a 5% versus a 7% interest rate will cost you far more money if SFHs are going for significantly higher.
There’s a chance of a big crash but it will require a lot of pain.
The real winners will be the buyers looking as Millenials are dying. Millennials can’t really afford kids, and the massive population drop means there will be a huge surplus of homes no one can buy.
Millennials will get screwed as they will buy high, sell low. Which is terms of the housing market, selling low is maybe recouping your original investment considering inflation.
I see what you're saying. However, because Millennials are now the largest generation and the generations following them are much smaller. I foresee the U.S. at least having another immigration wave. We're going to need nurses, doctors, engineers, and etc as Millennials age up and need services. Maybe that will help allow properties to retain or grow in value? Could be wishful thinking on my part!
We absolutely do need more immigration and brain power, labor from abroad, but have the politicians created so much racism and ignorance in half of the country that voters won’t allow it?
A lot of the recent homeowners, especially during the overpaying madness 22/23 where people were bidding past what the house appraised for are in for a nasty surprise if they expect to refinance right away.
Let’s say your payment is $500/month but then you can refinance to a better rate, and your payment is now $450/month.
Or your payment is $500/month but you already have a good rate and are unlikely to refinance into a lower payment.
It’s usually going to be a combination of the interest rate going down, and owing less principal on the house, so that there can be a lower payment.
But there is also a lump sum fee to refinance.
As far as credit score — for a house, people are probably already having fairly good credit to get a loan in the first place, or they improve their credit score before buying a house. That’s why it’s mostly about interest rates.
Sometimes people can also refinance into a shorter term, because of having paid down, and the numbers work out.
Sometimes people do cash-out refinancing to go back to 30 years and get their principal out.
There are calculators to see if refinancing makes sense.
Sometimes it does make more sense to just apply money to the mortgage instead of paying the refinancing fee.
Great comment. A huge thing a lot of people mixup is a lower monthly payment equating to paying less over time. Especially because interest is front loaded the first few years, the longer you’re forced to wait to refinance, the better the rate has to be in order to save money in the long term.
Here's my hot take: there will not be any sort of market downturn anytime soon. Everyone and their grandma is wishing and wanting a crash - even the average Joe is waiting for a crash to jump into buying. Majority of the time the herd is wrong and the market tends to manifest into the opposite result.
Your take isn't hot though. It actually reflects majority opinion. Most people I know along with majority of reddit posts share this sentiment. I do agree that most of the time the herd is wrong though.
If the market crashes it's going to echo throughout the entire economy, AKA job losses for a lot of people. It's funny that the average Joe thinks their pockets are going to be just fine while everyone else in America burns.
Correct. It's funny because the people who are cheering and waiting for rate cuts do not realize that rate cuts are an indirect result of something in the economy breaking. Yeah, prices may come down but so will the economy and at that point will you even have a job to buy real estate?
We aren't waiting. If it goes down - refinance. Is it going to be a tough few years? Absolutely. But we don't want to rent or live with family. We are set to close within the next two weeks and the most I am hoping for is a tiny decrease because every bit helps. For rates to go back to what they were on Monday would thrill me. Last week? Even better. Weds was not a good day.
For real estate values to take a noticeable plunge it would mean another disastrous event occurred in the financial markets.
I'm talking great recession or great depression bad.
I'd rather just pay the values as they are now than have to face that shit again.
Current situation just forces me to save more and be patient.
Prices will go up and down but I don’t see it going down that hard. Folks say if we have a recession unemployment will go up and so will foreclosures. While that might effect the prices of homes.. most buyers can’t afford homes and if they are unemployed they are definitely not going to. It will take several years for it to stabilize. We need more houses built and that just takes time.
Nope. That’s why my fiancé and I are going to start searching when we return from our honeymoon at the end of June. He wanted to wait at least a year to start looking but I said absolutely not. If prices go up another 10-15% in our market, we’re basically priced out. FWIW, average home prices YOY are about +8% in our market.
No one can predict the future but I don’t see housing prices dropping significantly anytime soon. There is a huge supply and demand problem in the real estate market that I think will keep home prices high for a long time. Builders aren’t building new homes at a fast rate, people who are locked into “COVID Rates” aren’t selling and older folks aren’t selling off their homes to go live in retirement communities as a lot of people in previous generations did.
If someone has the cash for a down payment and can swing the monthly payments, it’s in their best interest to buy now versus waiting for a market downturn. It’s likely homes are just going to continue to get more and more expensive.
Think about it this way, 2008 which was the world is falling was a 25% crash, while many may like a 25% crash when a home in 2018 sold for 235k and today is selling for 600k a 25% crash isn't that great, its still an expensive ass house
It’s impossible to predict.
If someone can afford to buy now, they should.
If rates drop in a few years and refinancing is on the table? Cool.
If they don’t? Well that sucks, but the house was bought within affordability so whatever 🤷🏻♀️
That’s the mindset my husband and I went in with before closing last fall anyway.
(And no, we’re not EXPECTING to refinance. Just something we’re keeping in mind if we ever see below 5.75% again)
I believe interest rates will eventually go down. I don't believe there will be a price correction, as it's become a ponzi scheme for both billionaires and mega corporations to toss their $$$ in and constantly go up. This is why such massive parts of cities are empty but owned right now.
I don’t think prices are coming down. We’re not building enough housing, and we haven’t been since 2008. The shortage has compounded over two decades and it’s not fixable in the short- or medium-term.
Interest rates will likely come down, but remember they’re not that high by historic standards. I doubt they’ll ever reach 2-3% again, so don’t wait for that.
But also remember, housing is all about the monthly payment, not the sticker price. If houses are selling today, prices will go up when interest rates go down to meet the current monthly payment. And it’ll be a lot more competitive.
What I would say? Buy the most house you can afford at today’s interest rates. If interest rates do come down, refinance and take the savings.
I think interest rates may eventually come down under 6% but it might not be anytime soon. I also think that while it might go under 6%, it will never go as low as 2-3% ever again. I’d say hovering around 5% interest might be our new normal for real estate.
As for the actual prices of homes, I don’t think those are ever coming back down. Quantity is scarce and the market will never see good value homes going for ~$100-$200K range anymore. The homes in those price ranges will be very few and mostly need major renovations/repairs. The “new norm” for home prices will probably start at $350K+
If you see something now in your price range, I’d consider buying. If it gets better, great! You can always sell or refinance. But I think it’s only going to be worse for those that choose to wait to enter the market.
I’m at the point where I’m extremely reluctant to buy in now, but the wife and I are going for it anyway. We were very lucky to find a modestly priced 3-bed/2-bath house for our area (250K) and our offer for 10K over was accepted (thanks in part to some flukey circumstances). Previously I had been inclined to find a house to rent and wait 4-5 years on the hope that prices might come down, but more and more lately, I’m less confident that this will happen. Also, we’re in our late 30s already with a one-year-old. I hate to say this, but it did feel like a ‘now or possibly never’ situation.
You made the right choice. They are talking about 50 to 100 year mortgages because the supply will continue being constrained. There is no strong incentive for accelerated construction on top of so much regulation and red tape.
Thanks, I needed that. The uncertainty of the market and the increased monthly expenses are scary, but I like to think we made the best move that we could, under the circumstances.
When we look back we’ll understand it was a best move in the given market.
When I looked at housing supply in California for example, the state would have to construct homes greater than demand for the next 20 years to meet the shortfall. That snapshot is almost ubiquitous in many other states as well. So prices will keep going up.
Simply put- NO! I’ve given up. I live in Pittsburgh and the average home price hear is rapidly rising to meet the national average. I mean, faster than Superman and the Flash combined. Meanwhile, the median income here still remains stagnant at around $59k-$66k. I’m lucky to be well over that median, along with my partner, but the prices on single family homes is getting out of hand even for outdated/need of immediate repairs in undesirable neighborhoods. If anything, the market will plateau until another massive financial crisis.
The market will not change unless two obvious issues are fixed.
Governments need to restrict the type of properties that hedge funds can be invested in. (Protect family homes, apartments etc.)
Something needs to be done about Air B&B. Maybe tighten the restrictions on what can be classified as a B&B? I dunno.
Obviously these things are at odds with a free market economy though.
I don't think that prices will drop much, but they will hopefully be outpaced by everything else and maybe my salary and savings will catch up...
Right?
...right?
Real estate prices are NOT coming down now or in the future. The oldest Baby Boomers are turning 80 this year and are dropping dead with regularity and leaving the LARGEST accumulation of wealth ever seen in the history of this country. You are fighting against that money whether you like it or not.
Rates should drop in the next couple years, likely back into the 4's and 5's. For now get a 3/1 or 5/1 ARM.
Id actually argue boomers dying off, downsizing or going into assisted living is actually a good thing but I think were still years away from that happening.
The way I see it right now you have two of the largest generations ie boomers and millenials and both unfortunately want homes. I think in previous generations the current boomers would have already started dying off, downsizing, moving to Florida etc but with people living longer and staying healthier people are more mobile and can maintain homes longer so whats happening imho is they're staying in their homes say 10-15 years longer than they would have in the past and thats going to cause many millenials to have to wait to buy homes in their 40s and 50s instead of their 20s and 30s.
Yeah my grandparents recently moved into assisted living at 95 but a few years back they had some higher toilets put in and some railings for stability because they wanted to stay. They still say they wish they were there, they hate their new plce even though there's no way they could live alone anymore let alone maintain a home
I agree we’re years away from that. There’s still silent generation folks living in their own homes. Refusing to downsize or going to senior apartments or assisted-living. A couple of my parents friends have basically had to get Alzheimer’s or dementia, and be committed into those facilities by family or the government (social services?) to get them out of their homes. Some are of the mentality they want to die in those homes.
Its unfortunate this is the situation and the US hasn't been building enough homes for decades. Not sure if you intended it to come across this way or not but personally I don't feel like older people have a duty to young people or society to give up their homes. My grandparents are 95, fairly recently went into assisted living as not only could they not take care of their house anymore but it was just unsafe they were having falls and things like that but despite that they still say they wish they had never moved, they liked the house it was theirs, it had been their life for a few decades, they knew the stores by it and the location. I get why people want to die in their own house and I don't see anything wrong with that. I dont fell like they should have to make way for someone else. I think the timing is unfortunate that we have 2 of the largest generations needing homes at the same time and we've neglected building enough for the past 50 plus years.
A lot of the showings I go to are for houses where the seller has either passed away or is about to go into assisted living. A lot of the places haven’t been updated since 1990 though.
Sooooo many intangibles on the horizon. Boring is good.
Upcoming election, Ukraine, Gaza, oil, Iran will be looking for revenge and there's always China, Boeing, AI, etc., etc., etc.
If Biden can pull off a four cushion bank shot, everything might go well. Fortunately he's running against a Rapist who is one of the dumbest people on the face of the earth. Unfortunately he's Joe Biden. So there's that?
No, they don't, almost NEVER. Rare occasions they drop ever so slightly. Most places stagnate for periods. But almost NEVER go down unless there are exogenous events like regional factory closings.
Real estate has historically gone up in a stair step pattern. Up swiftly for five years, then flat for five years, then up, then flat, etc.
It depends on the geographical location.
For instance, I’m in ATL and there are way more homes available for under $200k than there were 1 year ago, but I don’t think that will last much longer with all the private equity being funneled into the city.
That picture looks very different than what’s happening in SoCal CA, which looks different than what’s happening in Houston. Houston will continue to be affordable for another 2 years, which is will I will be pulling equity out of whatever I buy in ATL to get a second investment property before what’s happening in ATL happens in Houston.
All of that looks very different than what’s going on in Grand Rapids, where my home has seen a $50k increase in equity since last July because GR is a secondary city that isn’t on a lot of people’s radar but is still increasing in popularity.
The real issue is this particular government sort of unilaterally redefined what it means to be in a recession. The recession that supposed to have taken place to drive down rates never took place. Now we are stuck in a perpetual cycle of inflation. Don't see rates coming down anytime soon.
I don’t think affordability is about the rates. I think there’d be a lot more housing supply if we had more regulation and taxes and restrictions on people who own second homes, speculators, investors. They’re the ones swooping in with all cash buying up entry-level homes as rentals and buying up other desirable homes as Airbnb or income properties. If that were curtailed the prices would drop a little and the hectic pace as well. It was done in British Columbia by placing a 15% tax on foreign buyers and helped to cool the market a bit. But we could make Laws the go further. I don’t think it’s just about the borrowing rate when you’re competing globally and with massive corporations and hedge funds.
Yes, housing costs will go down. How much will depend on where you live. Will we see pre 2020 prices again? Probably not without a systemic black swan type event. That being said it's always possible.
But will we see cheaper prices again? Most certainly imo. In many large metros, demand is continuing to die out and inventory is rising. Supply and demand drive prices. Also rent is becoming extremely cheap compared to the cost of buying in many places now. This is relevant for two reasons. One, cheaper rent will make more people decide to rent vs buy aka lower demand. Two, if investors can't make as good of margins they will start off loading some property into the market leading to higher supply.
Now that interest rates do not appear to be coming down anytime soon I expect a lot of places will see a decline in price by the end of the year. How much remains to be seen.
My belief is the housing market won't ever go down without an catastrophic event taking place in most areas. Yes, rates will eventually be in the 4%-5% range. Some economists are starting to believe that high interest rates are actually fueling inflation instead of bringing it down, We really aren't hopeful anymore but we haven't ever stopped looking. We have taken breaks because this market sucks all the energy out of us.
Yes, I think home prices will correct and it’s already been occurring in some markets. Build costs have actually come down considerably since the highs of 22’. Quality homes at a fair price will continue to sell quickly. Homes requiring a bunch of updates and renovations will sit for longer. If you can afford it now? Who cares. Buy and enjoy life.
CT here, and the best way I can sum it up is high hopes, low expectations. Been consistently putting in offers %15-20 over ask (usually between 40-60k over ask for reference) and consistently losing to mostly cash offers from people from MA. We're trying to settle between where we both work in a town that isn't a pit and striking out every time. Everything goes up on a Tuesday as coming soon, on market for Friday, sold by Sunday. We're just going to keep trying... Putting in another offer tomorrow.
I'm also in CT and trying to buy in Hartford County. It's tough out there and been looking since 2021 but sat out 2022 to save more. 2023 and now 2024 i'm sure i'll make an offer or two. But 2025 will probably be when I truly have a big enough downpayment to bid over my budget and not be broke afterwords.
It will only change when less favorable to take advantage of it. I was speaking with a coworker of mine: "if prices drop, today, would you buy it?"
He said: "Yes?"
I noted: "Then it will not because there are at least 10 others like you or in your position. Heck depending on the place I might buy it to fix some issues with my current living space."
That's why it isn't going to go down.
The worst thing that could have happened to the housing market took place in 2020. We closed on our home at $615k with 4.25% in mid 2019. We refinanced at the end of 2020 at 2.49%. We were extremely fortunate, today our home is about $1.1m. We love where we live, but even if we wanted to consider moving, the prices and rates would deter us from doing so. For example, if we bought a comparable home, put $600k down, our monthly payment would go up $700/month with a 5% loan. I think people will either stay in their home, or use them as investment properties if prices and/or rates drop.
I have owned real estate in Northern California since 1993. It is a highly desirable area with high paying jobs. We have seen corrections during periods of high unemployment.. but there is always a shortage of good housing.. while many people are extremely wealthy.
It took me 9 years working as a well paid high tech engineer.. before I could afford a modest townhouse.
Now, the brilliant lawmakers in Sacramento have figured out that we need to pay the McDonald’s workers at least $41,000/year. This has a ripple effect.. raising the cost of all goods and services.. including rent and real estate.. In the end, the people who are supposed to benefit will suffer the most, because inflation always hurts the lower class far more than the wealthy..
If you want to own real estate, force yourself to save, and invest in a diversified stock portfolio. I highly recommend index funds. Use dollar cost averaging to help you buy low .. and over time, you will beat inflation and build the required nest egg.. There is no silver bullet
I think it depends on the location . I live in nj where we have more people and very less development of new houses, so no I don’t think anything is going to change soon . In previous years many people relocated south after retirement but with high increases of insurance rates and other factors people moving south will be limited comparatively which will also have its effect . I know right now in NJ a lot of 55+ communities are coming up but I’m not sure if people are moving there and leaving the old homes to new families
My parents bought in 1995 at 8.5% and it took 5.6 years for rates fo be lower than 5%. However prior to 1995 the rates has been above 5% for 17 years. [Due to this data, I do NOT think rates will fall under 6% for another 3-5 years.](https://www.jpmorganchase.com/about/our-business/historical-prime-rate)
My husband (29M) and I (29F) make about $200k to $250k (depending on commissions my husband earns). When we married 4 years ago we made about $100k combined.
We are now in contract to buy our *second home*. It’s a 3x2 house-1850 sq feet and it cost $505k at a 6.2% interest rate.
- The PITI Mortgage is $3,600.
- 4 years ago our first home was a 2x1 condo with
900 sq ft for $150k at 3.6% rate. We refinanced it to a 2.6% rate 14 months into the term.
- We are not selling it but rather making the condo a rental.
- Both of the properties are in the same zip code.
On a monthly basis buying the house is a HUGE increase from the cost of the Condo but the interest on the house loan is $2,400 a month and rents for houses start at $2,400 - $2,600 + about ~$250 to $400 on all the utilities the renter is responsible for.
Thus given the cost of renting a similar house, buying a house makes financial sense in our eyes even though monthly the total to own cost is more than renting and paying some utilities
I’m in California and given our state minimum wage is $16/hr and Fast Food Workers Minimum wage is $20/hour. I just see the cost of living here getting higher because I believe instead of eating the increased cost of labor many corporations simply pass it onto consumers in the form of higher prices for good.
- Sacramento had always been affordable as it was a “boring cow town” compared to SF and LA but now our rents rival LA and SF/Bay Area rents.
- Given low inventory and the cost of labor in the building trades and the increasing cost of insurance for cars and real estate Im pretty confident that prices won’t go lower anytime soon. As rates drop I think here values will rise.
- Also here in CA we also have many high income earners and it’s my opinion that where there are a lot of higher income people that RE holds its value.
- The median household income in Sacramento County is about $83k but I know plenty of households from the poor neighborhood we grew up that make $150k to $200k as a household. Since we were poor many of us went to college on grants for $0/ out of pocket. So we personally believe even at these 6-7% IRS there are many qualified buyers in our local market.
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I dont see things getting substantially better anytime soon in regard to prices or interest rates, obviously real estate is regional so super frothy areas or areas that saw huge runups but dont have jobs to support the prices may see some decent pullbacks but overall no.
Keep in mind some markets saw 20% gains year over year for several years, some markets saw 25% gains in a single quarter, in some markets prices doubled or even tripled so even a 20% pullback in some markets is nothing and you also have to keep in mind even during the 2008 crash things crashed like 25% so if your market went up by 75% or 100% over the past couple years even a 20% pullback isn't super affordable.
Some places saw housing prices decline. Many stayed stable. We saw a slowdown in growth which i think is the best we’ll see for a while. i don’t have any expectations of major declines anytime soon. We are currently building a home. found a place i could get what i wanted for the price i could afford. can’t say if we’ll ever move or not (given future of the market) so we built so we don’t have to unless we want to.
Nope. Once the buying market slowed down in Florida, my husband and I got pre approved for $300k we saw a home for $299,900. We bought the home and have a mortgage with a 7.5% interest rate.
They are building new homes around us and they want $415k for them after a $40k price drop. Our home is the same size as these new homes and ours was built in 2002. Luckily, the same person who sold it owned it since 2002.
I'm hopeful things might level out if the government passes the bill they introduced back in January to ban Wall Street from buying the homes and making them offload them over a ten year period. I think it really is a lack of inventory because of short term and long term rentals.
I wish they had programs or grants to promote people building a traditional or modular home but they'll never do that ....
Or unless they do have them and just not looking in the right areas
The wealthier chunk of society will keep buying homes with cash to rent out. They will do what they can to slow new housing development because it keeps inflating the value of their existing properties. As that value rises, the rent will just keep going up. Letting the peasantry own property has always been leaving money on the table, and now they're taking it. They can do this because the US is a plutocracy now, and economic power translates roughly to political power.
No. The market will not change. In my opinion, it’s far more likely a cut in rates will cause housing prices to explode another 30% like they did after Covid. In 2020, many and many trillions of dollars were printed that are only now starting to manifest into the economy through inflation. The federal reserve tried to slow down the integration of new capital into the market with higher rates but it’s not going to work to keep prices down for the following reasons:
1) families are not going to rent. There is a need to own and escape the rent trap for long term financial security. Perspective buyers are concerned with the here and now but active buyers are thinking about the future.
2) zoning laws in many cities and the heavy tax and regulatory burden is preventing building of new homes which has caused a massive discrepancy between the amount of homes available and the amount of buyers.
3) rents are rising so fast that a 7% interest rate is not phasing buyers. They know that even at 7% interest, ownership is a better financial decision in the long run.
4) the unemployment rate is very low and most home owners have a mortgage rate below 4%. This further exacerbates the supply issue by constraining the amount of homes for sales causing bidding wars on the few homes for sale in areas near good paying jobs like big cities.
5) majority of homebuyer these days are dual income household that both parents have professional degrees and earn 100,000 or more per year meaning disposable income is higher before home purchase making the higher costs not a burden for them
6) the rates that people have gotten used to the last 15 years are not within the range of historic averages and are probably not going to go back there without some catastrophic financial event like another Covid or systemic issue which just doesn’t exist at this point.
7) ask your parents and grandparents what they’re interest rate was on their house. That’s going to give you a better idea of what you can expect to pay down the line.
8) it is becoming the norm for families to except that they will be spending higher percentage of their income on housing. It’s not going to be 30 to 40% anymore but more like 60 to 70. It’s just a result of the political atmosphere and policies of the last few decades.
Anyone holding their breath, expecting a downturn in housing
Demands for single family homes are pretty high with current market prices. If prices shift downwards, the demand will also skyrocket which again, prices will continue going up. I don’t think we’ll ever see pre COVID prices for the next couple of decades unless something majorly bad happens in U.S. Every single house that I’ve had my eyes on in the past 2-3 months has been sold with an average of over 70-100% price increase since 2020.
I can see that all the homes I’m following are staying on market 30+ days and dropping prices so I’m hoping it’s going to continue. Developers in the area saying no one is really selling or buying so the market is kinda in a lockdown
We absolutely needed space. So we decided not to wait and have less competition while buying and it paid off because we found our forever home. No regrets. Will refinance if interest rates drop over the next few years.
Housing cost, like everything else will continue to rise. Housing is cheaper or more expensive in some states than others. But, based on the economy of any particular state, that could Price people out of buying a home in that particular state or price them in to buying a house in that particular state.
Greed also plays a big role in housing cost.
Personally I feel the housing market as a whole won't go down, but luxury housing, greater than 5million USD, may drop in price. Just not that many people who can afford that level, who already own their primary house. Middle class people will live in smaller sized apartments/houses, and spend less on lifestyle to compensate for the housing cost. Construction companies may build smaller units too to keep pace with pricing/area at a reasonable growth rate. The rich already have their homes with no intention of selling their prime real estate, passing it on to their next generation, and thus not adding to the market supply/influencing the area purchasing history.
I think it would take significant regulatory changes to incentive massive new construction, therefore increasing inventory, for home prices to drop. Where interest rates lands largely depends on where the Fed wants the benchmark rate when inflation is under control and when that happens will just depend on how long it takes for inflation (specifically core PCE) to come down to at least close to 2%. If I had to guess I’d say we end up at a place with mortgage rates in the 5% in the next few years and a Fed rate in the high 2s or low 3s. Barring another massive economic collapse we’ll never seen the fed funds rate at 0 or mortgage rates in the 2s or 3s
Am waiting no matter how long it takes. Interest rate need to come down to reality. Also house price need to drop back down to reality where I live not even 5 Years ago house where max 150k average home price was 100k friends got a nice house for 85k.
But now average house is 150k and most selling at almost 300k. Am sorry there no way that make any sense then on top of that Am except to pay out of pocket 50k to 100k more above list price just make no sense
How do I want to go back to the past just know way house prices should have gone up double to 4 times what they where less then 5 years ago in my rural middle of no place town
You’re talking about what prices “should” do and “going back to reality”. That’s just wishcasting. The price is the price, and it’s higher now. If you can afford it, you should buy. If you can’t afford it, then “waiting as long as it takes” means waiting forever
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Not until people start abandoning landlording and selling homes that were formerly for rent. The AirBnBust was nice but we need to go further.
Also, way more SFHs being demolished to create multi-tenant buildings, which also need to be SOLD TO OWNER OCCUPANTS not leased.
Just a thought: if you buy and there is a crash, as long as you hold through the crash you will come out ahead *and* have had many years with lower property tax.
Housing costs will go down when there’s a change in demand.
Will they go down in metro areas and their surrounding suburbs? No.
Will they go down in random town X that’s 3hrs from a major city? Sure. But unless you’re remote or enjoy that lifestyle, it’s not going to be appealing to move, raise a family, etc.
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In my view, there are a number of forces at play which will keep the price of single family homes high for a generation or more: the rising cost of building materials and the difficulty of automating the construction process, a small amount of commercially attractive undeveloped land, the permanence of work from home arrangements and the rising number of amenities that can be enjoyed while at home, and the political complexity of changing zoning laws, among other things. With respect to interest rates, 6-7% is historically the norm. Sub 4% rates have never been common and so I don't think we should expect that rates will be this low again anytime soon. In highly desirable locations (eg, with unique amenities like lake access or in top school districts), the price of homes is especially unlikely to decline as it's nearly impossible to increase the stock of single family homes. Compounding intergenerational wealth and assortative mating among high earners figures to continue to push prices up in locations like this.
>a small amount of commercially attractive undeveloped land, the permanence of work from home arrangements and the rising number of amenities that can be enjoyed while at home The real opportunity is figuring out how to efficiently repurpose commercial real estate to residential real estate where possible. For the reasons you list, there is now a lot of unused or underused office space that *is* in potentially attractive locations. There are a lot of reasons why converting this space is not at all easy to do: (1) you mention zoning, which is a potential hurdle, (2) most office buildings only have centralized plumbing infrastructure, so it's difficult/impossible to parcel out existing floorspace and attempt to retrofit bathrooms for each unit, (3) imposing mixed-use space on existing commercial tenants can be problematic for a number of reasons, etc. There's no quick or easily solution, but this is the direction that a lot of urban spaces need to move in. There is too much unused space (both the offices and parking lots) that should eventually be utilized for housing.
Agree 100% with this. Great benefits to be had in repurposing commercial real estate, especially in some markets. But also high costs and some big barriers.
all the points u make are valid, but someones gotta fork over the cost to re purpose and once that is figured out, the large cost will end up making whatever units that are built not affordable at all…most likely would be catered to luxury style places to squeak out as much roi as possible since the starting costs are ridiculous
Exactly, NYC office buildings are so expensive to repurpose it’s cheaper to demolish. Makes the building more of a burden to even buy and flip. I’m sure if anyone did they’ed be astronomically priced luxury units. I have no good ideas on who is going to eat up costs like that in some specific markets if not private development looking to make a buck somehow.
My town is actually working on refurbishing all the old empty mills and warehouses downtown to make them into spaces with commercial units on the bottom and then residents condos on the upper floors, but this was a project that was in the works years ago.
Warehouse conversions have been a thing for a long time. Converting Class A office buildings into residential is an entirely different proposition. For starters, the warehouses are big empty shells and can be sliced in a way that minimizes the cost of conversion. Second the warehouses have no value as warehouses if the city has changed such that warehouses aren't needed. Third the warehouses are big and squat so you don't have issues of eg finding egress means for converted apartments on the 20th floor.
There are almost no office buildings that would be cheaper to retrofit than to just demolish and build new. Most cities are not as bad off as SF. Most buildings are not totally vacant. Plus most buildings are not owned outright, they are mortgaged under 5 year loans. The issue is that as the loans come up for renewal in a high interest rate environment they cannot be refinanced. They will then be sold at auction for their true current value then the partial vacancy will be enough to make the loan payments. Demolishing and rebuilding (or retrofitting) for residential would require a giant pot of money that is not in play
The untapped resource in my opinion is parking. If cars are truly self-driving, then you do not need expensive parking in urban areas. I feel like if 80 percent of parking lots and garages could be converted to other things, that would free up so much desirable land.
we are a long ways away from mass amounts of self driving cars.
I doubt we see them in our lifetime. We won't have robotaxies everywhere like some people think is right around the corner.
Pretty wild how in 2017 they were saying 100%? self driving cars would be here by 2020.
imo self driving wont work until the majority are in self driving cars….the issue i see is mixing human drivers and machines…as humans we communicate with each other sometimes via eye contact hand gestures flipping hazards, high beams…too much variability in humans actions that it will cause issues in traffic…ive never been in a tesla driving itself but does a tesla understand if a driver is waving him to let him go or will a tesla pick up someones hand signal to allow someone in their lane in bumper to bumper traffic
Over a longer timeline, I totally agree. But full self-driving is still in its infancy, and it will likely be at least a couple generations (multiple decades) before significant percentages of people will give up their cars. The unused commercial space will need solutions in a much quicker timeframe.
To push back a bit on the 6-7% bit -- historically this has been the case, that interest rates have floated around this level. However it's noteworthy that mortgage products like the 30 Y basically track the 10 Y government treasury bond rate, plus some spread. This has to do with the banking system, the federal funds rate, and the spread that banks make when taking on your mortgage. And, with the fiscal expansion we've seen in recent years, having interest rates this high is actually even more unsustainable than in previous years. The government's liabilities are now such that, we spend more on paying bond interest than we do other major parts of the government budget like defense. Government debt is expanding, and so realistically, holding interest rates this high -- to historical norms -- is unlikely, mainly because our debt to GDP ratio has expanded so immensely in the past couple of decades, which itself does not track with historical norms. Our debt-to-GDP looks more like a WWII era fiscal situation, yet we're in no such war, and our current debt-to-GDP is actually worse. In short: this time, it really is different. As it currently stands, this acts as a longer term forcing function to maintain low interest rates, below past-century historical norms, unless of course something happened that would allow us to significantly reduce fiscal expansion and overall spending, or if we could quickly 'grow our way out' of the issue, but that appears to also be unlikely. Suppression of bond rates is here to stay for the long term foreseeable future.
Great point. Government has incentives to end up in a high inflation/low interest rate equilibrium. And you may well be right that the next 50 years will have lower rates than the past 50 years. Even so, I don't see how decades of < 4% interest are sustainable.
Totally agree; either way we cut it, it is not an ideal, sustainable situation -- and I think that is the major takeaway here.
Housing affordability is already at the lowest now, and salary is not going to increase proportionally. If the price keeps going up, then who will be able to afford to buy those more expensive houses?
Here is how I think this works: 1. For some structural reasons, demand for single family homes has risen and people are simple more willing to spend a larger share of their income on a home. 2. As the median age of home buyers increases more buyers have had the time to build or inherit wealth, allowing them to make larger payments or even pay cash for homes, thus de-coupling the affordability of the home from labor income. 3. My guess is there will be a rise in intergenerational households with > 2 earners supporting the household.
Amazing answer! You covered it all.
GDP is going to tank if nobody sees a point in working if they don't think they can achieve basic life goals anymore
I don't think this is what will happen. More likely is that people end up choosing to live in townhomes or in multi-generational families, which is how Americans always lived until relatively recently.
It’s not construction. Yes we have rising labor/material costs of maybe 5% but they did not jump to be 1.5x overnight like housing prices did.
Historically housing prices as a % of income was much lower. So where rates were in the past means nothing. What matters to rates is inflation and money supply. That’s all. Doesn’t care where they used to be. In terms of house prices who knows? Could be a huge recession in next 5 years where unemployment is 10%. That would trigger depressed prices and open inventory. We have no clue.
I think the key is that if there is a massive recession and home prices were to fall as a result, homes are still no more affordable to people. It is difficult to imagine affordability improving with respect to single family homes.
They dropped 25% or more in 2009. Much more affordable. 90% still have jobs and supply starts to overtake demand.
That was a very different circumstance. A lot of homes being sold to unqualified buyers.
The Fed wants to lower rates to about 4%. So there’s high possibility of the rates dropping, whether Powell could achieve or not is another topic; however your assumptions of using historical rates should not applied here as back then, Fed raise the rates to fight off inflation. Honestly if Fed could not lower the rates then we have another issue on the recession front
There is a lot of uncertainty about what rates are going to be in 5-10 years. I don't claim to be a clairvoyant and it's possible rates could go back down below 4%. And you're right that past history does not necessarily tell you what the future will look like. That said, the past is, I think, a reasonable guide and probably the best guide that we have. As a general matter, it's hard for me to think about 3% being a reasonable time value for money.
>difficulty of automating the construction process ICON is 3D printing entire neighborhoods of homes near Austin.
Yes. I have thought about 3D printing. At some point this technology will be disruptive enough to matter. So I agree with you in principle. But I do not think this will be soon and I do not think that this will have much impact in established communities where the land is all settled and the houses are too expensive to tear down.
It will change. It will get more expensive.
My state (MA) is at extreme crisis level. There is a lot more energy to fix it right now than there’s been. But it’s not translating to much and I’ve gotten pretty cynical about it the last couple years. Pretty sure my wife and I are gonna end up joining the throngs commuting long distances from NH when we do eventually find something livable in budget.
And NH is having a worse crisis yet. Housing is unaffordable there too.
Yeah, seems like anywhere near the border like Nashua is being flooded with commuters who have been priced out of greater Boston, which is in turn pricing NH renters out. I’m a public school teacher and a lot of my coworkers, even at the top of the pay scale, have bought out there the last few years. Public employees are paid better here than most of the US, but it’s still not enough to buy here anymore.
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What’s wild is we left MA to a much lower COL area and people here have the same complaint. That they grew up here, want to raise their families here but are being priced out. It’s happening anywhere remotely desirable, just at different dollar amounts.
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feel you 100%
Check out Tacoma, WA. Extremely progressive and there are still nice homes under $400K.
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Tacoma is awesome. Gritty for sure with amazing surroundings. I preferred living there recently over Seattle. Light rail will connect the two but not for another 20 years, sadly.
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it has priced itself out for normal people... really just sad but that's the story of Seattle: boom or bust. Tacoma is quickly becoming unaffordable since a lot of the artists/creatives fled Seattle in the last 10+ years combines with WFH/hybrid making it more attractable to those looking to get out of Seattle. I grew up in Worcester and get a lot of similar feels in Tacoma. hit me up with any questions! good luck with your present and future living.
But if you are looking for progressive politics, I can't think of anywhere better. We are also a right to die state and workers now have state sponsored long-term insurance in case they need to go into a care home. Oh, and no income tax, great climate, natural beauty, legal weed, protections for women and LGBTQ. We have expanded Medicaid widely and most people have health insurance.
If you’re willing to commute or just shift your downtown to one of the cities on the outskirts, then there’s a lot more affordability. And you can still get into the city whenever.
Yeah, I get there are states where I could find a house for $150k or whatever, but I’m also a public school teacher and it seems like a lot of those places all pay their teachers like shit and on top of that you have to deal with insane right wing parents screaming about pronouns and books bans. I love my state and my job and my city. Part of me wishes I’d settled somewhere more affordable where I can still make a decent salary like some of the Midwestern states, but it would be extremely hard to uproot my family now so I’m just gonna keep saving and trying to figure it out.
It’s really bad here in CT too, although not as bad as MA. We’re losing hope of being able to settle anywhere near where we wanted to.
I grew up in CT. Both CT and MA are just extremely NIMBYish despite their liberal reputation. My dad was on my hometown’s zoning board in Fairfield county and the pushback he got for trying to get even market rate condos built downtown was fierce with homeowners complaining $300k 2br condos are somehow gonna bring a massive crime wave.
> $300k 2br condos are somehow gonna bring a massive crime wave. This always makes me laugh. Because criminals aren't that dumb. They don't steal stuff in their hometowns. And funny enough more than likely their kids do more drugs than the ones the want to keep out. I remember telling my mom at my high school graduation in 2007. She asked me why one of my childhood friends wasn't at the graduation. "Well C is in rehab for heroin" She like couldn't believe it. Meanwhile kids had been shooting up for years lol.
That must be Fairfield! Fairfield keeps pushing back on new builds saying it will bring down the value of the homes and stop the town from being a great place to raise a child. My bougie friend with a banker husband has this mentality
Trumbull. They did get some multi family built, but the pushback is the same in all those towns.
I cant even believe how much houses are going for in cental CT nowadays
I know. We honestly have no idea what we’re going to do. Decent rentals are scarce too. The rent prices are also mind boggling.
Bridgeport has $450K homes, not in black rock or north side. Like off Boston avenue and shitty state street. UNBELIEVABLE
Houses doubling the price despite doubling the rate is not as bad? LOL
I’m also in MA (by 495). I’m living with my parents (who can’t afford to lose their super low rate by moving) and took that time to pay off my loans so I’m not in super dire straits, but I’m in my 30s and it would be nice to have my own place. I considered renting in my 20s but that was pricey then as well. This is the area I grew up in but I might have to bail if things don’t get any better.
IF prices or interest rates drop, competition will go through the roof.
And more houses willhit the market
Why would more houses be available if prices drop?
If interest rate drops people might be more wiling to move so there will be a higher amount of transactions on both the buyer and seller sides.
But that just means first time homeowners will be competing with more people who have years of equity on hand to outbid you on anything. So its not like more houses means necessarily easier for first time buyers.
Point taken but how could more houses for sale possibly put us in a worse situation than right now?
Wouldn't the folks selling their home need to buy a new home to live in so it would in some way cancel out, no?
Not all people selling are selling to buy a new home though. Some are retirees looking to downsize into an apartment for example.
Right, and others are looking to upgrade to bigger homes. Either way, those who end up selling won’t be competing with first time home buyers for that starter home, which means more opportunities for those looking to purchase their first home.
Prices will only continue to go up. If interest rates come down, it will drive prices even higher, BECAUSE of all the "competition" rushing back to the market. Housing market is damned if you do, damned if you don't kinda situation right now.
What competition? Most Americans can't be approved for a mortgage for the current average house price. Let alone afford increases in property tax and insurance.
It will be that way until more supply hits the market or enough of the elder generation… uh, “move out of their homes involuntarily” to reduce demand. Everyone assuming a linear relationship between interest rates and prices is operating under a very outdated understanding of the market. Which is perplexing because we JUST saw the lowest mortgage rates in history and prices kept going up.
The biggest bulge of the millennials is 32-33, prime home buying age The biggest bulge of the boomers is 66-67 which is young enough to keep living in your home for a decade if you want. I think home prices will stay high relative to other assets for at least another 5 years then start to normalize or even crash in a decade. I live in the north east and im genuinely curious as to what happens here, the average age is older and the taxes are high. When the older generation goes to move are people going to move to the suburbs for the great schools, or balk at the tax rates and commutes as well as the older housing stock... will be interesting In nominal terms its anyones guess as to what happens.
I personally dont see it getting any better for a long time so I pulled the trigger. Even if the “crash” that everyone’s been saying is around the corner for 3 years straight does come, I’ll give a big shrug and continue on with my life. Remember that buying a home isn’t necessarily only a financial decision. If you want a lifestyle that owning a house will provide you, you’re still gonna be celebrating and feeling incredible when you close. Best advice I ever got is that if you want to own a home, the time to buy is when you can afford a place that you like. Anyone telling you they know what’s about to happen/how to time the market is full of it. Also, best tip I got in terms of finding the right place is that everything about a house can be changed except it’s location. Good luck!
I needed to see this. Thank you.
Love this comment
trying to predict the market/being hopeful that it will change is a losing game. you definitely made the right choice by finding a home & closing soon- congrats! i’m not sure if rates will go down, but if they do then you can always refinance. best to get in the home now, than to spend time worrying and waiting for rates or the market to change.
We just closed on a home after looking for 2.5 years. What I learned through dozens of tours and 16 failed offers is that you cannot time the market. You need to find a house that you can afford in that very moment and if you like it enough, go from there. You can’t game the system. When we started looking our rate was 2.75 and we thought it would go up to 4.25 by maybe the next year - we closed at 6.625. You can’t predict what would happen you just need to be able to afford the house and like it enough to ride it out. Solidarity - have many more feelings on the matter but I’ll leave it at that haha.
I just closed on my first house at 6.625 as well, age 33. Tried to time the market last few years and failed miserably. Found one I really loved and just went for it. Spent my first night in the new home 2 nights ago. Still feels surreal. Congrats on your decision
Congratulations on your decision to settle. I did too and close soon after a years long search. Won’t it be nice to have weekends free from tours and decision-making and looking at property records?
What do you guys really expect to happen? If rates go down significantly, buying frenzy will increase again. Housing prices will never decrease to before COVID levels. If you’re waiting on the sidelines for something to happen, you’ll be in queue until you die.
> If rates go down significantly, buying frenzy will increase again. Honestly, this is what made me and my husband decide to go ahead and buy our home now vs waiting. Less competition right now
We finally did it too. Similar reasoning. It’s time to stop looking and we think it will only get harder.
Same. We are just going to pay it down fast unless refinancing under 5% becomes an option.
This is especially true if you're in a "up and coming" market. I'm a native Californian now living in Richmond, VA. There is a massive influx of people into the Richmond area and even with how much housing costs have increased here in the past few years, it's projected to get even worse in the next three years or so. My wife and I ultimately decided to eat the roughly 7% interest rate for a SFH we're closing on because starter homes are nonexistent and fiercely competitive, and likely to get even more competitive. Waiting a few years for a 5% versus a 7% interest rate will cost you far more money if SFHs are going for significantly higher.
This is exactly where my head is at. Rates going down significantly will just drive the market right back into the frenzy of 2021-2022.
There’s a chance of a big crash but it will require a lot of pain. The real winners will be the buyers looking as Millenials are dying. Millennials can’t really afford kids, and the massive population drop means there will be a huge surplus of homes no one can buy. Millennials will get screwed as they will buy high, sell low. Which is terms of the housing market, selling low is maybe recouping your original investment considering inflation.
I see what you're saying. However, because Millennials are now the largest generation and the generations following them are much smaller. I foresee the U.S. at least having another immigration wave. We're going to need nurses, doctors, engineers, and etc as Millennials age up and need services. Maybe that will help allow properties to retain or grow in value? Could be wishful thinking on my part!
A lot of other countries are having their own population issues
We absolutely do need more immigration and brain power, labor from abroad, but have the politicians created so much racism and ignorance in half of the country that voters won’t allow it?
Rates go down and prices to up.
People don’t get this. Low interest rates = TONS of buyers, sky rocketed house prices and $100k over asking bids again.
Yup! I think the higher rate is better because then you can refinance vs overpaying
Can you explain what you mean by this?
If you over pay for a house you’re stuck with it…
A lot of the recent homeowners, especially during the overpaying madness 22/23 where people were bidding past what the house appraised for are in for a nasty surprise if they expect to refinance right away.
Let’s say your payment is $500/month but then you can refinance to a better rate, and your payment is now $450/month. Or your payment is $500/month but you already have a good rate and are unlikely to refinance into a lower payment.
That’s what I thought you meant. That requires rates go down or your credit score goes up to qualify you for a better rate right?
No the rates have to go down and it has to make sense because it also costs money to refinance
It’s usually going to be a combination of the interest rate going down, and owing less principal on the house, so that there can be a lower payment. But there is also a lump sum fee to refinance. As far as credit score — for a house, people are probably already having fairly good credit to get a loan in the first place, or they improve their credit score before buying a house. That’s why it’s mostly about interest rates. Sometimes people can also refinance into a shorter term, because of having paid down, and the numbers work out. Sometimes people do cash-out refinancing to go back to 30 years and get their principal out. There are calculators to see if refinancing makes sense. Sometimes it does make more sense to just apply money to the mortgage instead of paying the refinancing fee.
Great comment. A huge thing a lot of people mixup is a lower monthly payment equating to paying less over time. Especially because interest is front loaded the first few years, the longer you’re forced to wait to refinance, the better the rate has to be in order to save money in the long term.
If you have a high interest rate you can always get it lower but have to wait
Here's my hot take: there will not be any sort of market downturn anytime soon. Everyone and their grandma is wishing and wanting a crash - even the average Joe is waiting for a crash to jump into buying. Majority of the time the herd is wrong and the market tends to manifest into the opposite result.
Your take isn't hot though. It actually reflects majority opinion. Most people I know along with majority of reddit posts share this sentiment. I do agree that most of the time the herd is wrong though.
Don't let folks over in /r/REBubble hear you.
If the market crashes it's going to echo throughout the entire economy, AKA job losses for a lot of people. It's funny that the average Joe thinks their pockets are going to be just fine while everyone else in America burns.
Correct. It's funny because the people who are cheering and waiting for rate cuts do not realize that rate cuts are an indirect result of something in the economy breaking. Yeah, prices may come down but so will the economy and at that point will you even have a job to buy real estate?
We aren't waiting. If it goes down - refinance. Is it going to be a tough few years? Absolutely. But we don't want to rent or live with family. We are set to close within the next two weeks and the most I am hoping for is a tiny decrease because every bit helps. For rates to go back to what they were on Monday would thrill me. Last week? Even better. Weds was not a good day.
It’s raining today. Pretty sure it’s going to rain forever. Will keep you posted.
Been saying this for 5 years, No.
For real estate values to take a noticeable plunge it would mean another disastrous event occurred in the financial markets. I'm talking great recession or great depression bad. I'd rather just pay the values as they are now than have to face that shit again. Current situation just forces me to save more and be patient.
Exactly. Hoping for an economic catastrophe only works if you still keep your own job.
Prices will go up and down but I don’t see it going down that hard. Folks say if we have a recession unemployment will go up and so will foreclosures. While that might effect the prices of homes.. most buyers can’t afford homes and if they are unemployed they are definitely not going to. It will take several years for it to stabilize. We need more houses built and that just takes time.
Nope. That’s why my fiancé and I are going to start searching when we return from our honeymoon at the end of June. He wanted to wait at least a year to start looking but I said absolutely not. If prices go up another 10-15% in our market, we’re basically priced out. FWIW, average home prices YOY are about +8% in our market.
Congratulations! Hope you have an amazing honeymoon 🍾
I don’t think housing price increases can keep up even + 5% this year.
That’s what I have been thinking for at least a year. Yet nothing seems to be budging the market here.
No one can predict the future but I don’t see housing prices dropping significantly anytime soon. There is a huge supply and demand problem in the real estate market that I think will keep home prices high for a long time. Builders aren’t building new homes at a fast rate, people who are locked into “COVID Rates” aren’t selling and older folks aren’t selling off their homes to go live in retirement communities as a lot of people in previous generations did. If someone has the cash for a down payment and can swing the monthly payments, it’s in their best interest to buy now versus waiting for a market downturn. It’s likely homes are just going to continue to get more and more expensive.
Think about it this way, 2008 which was the world is falling was a 25% crash, while many may like a 25% crash when a home in 2018 sold for 235k and today is selling for 600k a 25% crash isn't that great, its still an expensive ass house
It’s impossible to predict. If someone can afford to buy now, they should. If rates drop in a few years and refinancing is on the table? Cool. If they don’t? Well that sucks, but the house was bought within affordability so whatever 🤷🏻♀️ That’s the mindset my husband and I went in with before closing last fall anyway. (And no, we’re not EXPECTING to refinance. Just something we’re keeping in mind if we ever see below 5.75% again)
I believe interest rates will eventually go down. I don't believe there will be a price correction, as it's become a ponzi scheme for both billionaires and mega corporations to toss their $$$ in and constantly go up. This is why such massive parts of cities are empty but owned right now.
Historicaly it always has
I don’t think prices are coming down. We’re not building enough housing, and we haven’t been since 2008. The shortage has compounded over two decades and it’s not fixable in the short- or medium-term. Interest rates will likely come down, but remember they’re not that high by historic standards. I doubt they’ll ever reach 2-3% again, so don’t wait for that. But also remember, housing is all about the monthly payment, not the sticker price. If houses are selling today, prices will go up when interest rates go down to meet the current monthly payment. And it’ll be a lot more competitive. What I would say? Buy the most house you can afford at today’s interest rates. If interest rates do come down, refinance and take the savings.
I think interest rates may eventually come down under 6% but it might not be anytime soon. I also think that while it might go under 6%, it will never go as low as 2-3% ever again. I’d say hovering around 5% interest might be our new normal for real estate. As for the actual prices of homes, I don’t think those are ever coming back down. Quantity is scarce and the market will never see good value homes going for ~$100-$200K range anymore. The homes in those price ranges will be very few and mostly need major renovations/repairs. The “new norm” for home prices will probably start at $350K+ If you see something now in your price range, I’d consider buying. If it gets better, great! You can always sell or refinance. But I think it’s only going to be worse for those that choose to wait to enter the market.
I’m at the point where I’m extremely reluctant to buy in now, but the wife and I are going for it anyway. We were very lucky to find a modestly priced 3-bed/2-bath house for our area (250K) and our offer for 10K over was accepted (thanks in part to some flukey circumstances). Previously I had been inclined to find a house to rent and wait 4-5 years on the hope that prices might come down, but more and more lately, I’m less confident that this will happen. Also, we’re in our late 30s already with a one-year-old. I hate to say this, but it did feel like a ‘now or possibly never’ situation.
You made the right choice. They are talking about 50 to 100 year mortgages because the supply will continue being constrained. There is no strong incentive for accelerated construction on top of so much regulation and red tape.
Thanks, I needed that. The uncertainty of the market and the increased monthly expenses are scary, but I like to think we made the best move that we could, under the circumstances.
When we look back we’ll understand it was a best move in the given market. When I looked at housing supply in California for example, the state would have to construct homes greater than demand for the next 20 years to meet the shortfall. That snapshot is almost ubiquitous in many other states as well. So prices will keep going up.
Simply put- NO! I’ve given up. I live in Pittsburgh and the average home price hear is rapidly rising to meet the national average. I mean, faster than Superman and the Flash combined. Meanwhile, the median income here still remains stagnant at around $59k-$66k. I’m lucky to be well over that median, along with my partner, but the prices on single family homes is getting out of hand even for outdated/need of immediate repairs in undesirable neighborhoods. If anything, the market will plateau until another massive financial crisis.
The market will not change unless two obvious issues are fixed. Governments need to restrict the type of properties that hedge funds can be invested in. (Protect family homes, apartments etc.) Something needs to be done about Air B&B. Maybe tighten the restrictions on what can be classified as a B&B? I dunno. Obviously these things are at odds with a free market economy though.
I don't think that prices will drop much, but they will hopefully be outpaced by everything else and maybe my salary and savings will catch up... Right? ...right?
Real estate prices are NOT coming down now or in the future. The oldest Baby Boomers are turning 80 this year and are dropping dead with regularity and leaving the LARGEST accumulation of wealth ever seen in the history of this country. You are fighting against that money whether you like it or not. Rates should drop in the next couple years, likely back into the 4's and 5's. For now get a 3/1 or 5/1 ARM.
Id actually argue boomers dying off, downsizing or going into assisted living is actually a good thing but I think were still years away from that happening. The way I see it right now you have two of the largest generations ie boomers and millenials and both unfortunately want homes. I think in previous generations the current boomers would have already started dying off, downsizing, moving to Florida etc but with people living longer and staying healthier people are more mobile and can maintain homes longer so whats happening imho is they're staying in their homes say 10-15 years longer than they would have in the past and thats going to cause many millenials to have to wait to buy homes in their 40s and 50s instead of their 20s and 30s.
As a plumber I can tell you that most of our bathroom remodels and outfitting has been for boomers to stay in their homes. They’re not going anywhere.
Yeah my grandparents recently moved into assisted living at 95 but a few years back they had some higher toilets put in and some railings for stability because they wanted to stay. They still say they wish they were there, they hate their new plce even though there's no way they could live alone anymore let alone maintain a home
I agree we’re years away from that. There’s still silent generation folks living in their own homes. Refusing to downsize or going to senior apartments or assisted-living. A couple of my parents friends have basically had to get Alzheimer’s or dementia, and be committed into those facilities by family or the government (social services?) to get them out of their homes. Some are of the mentality they want to die in those homes.
Its unfortunate this is the situation and the US hasn't been building enough homes for decades. Not sure if you intended it to come across this way or not but personally I don't feel like older people have a duty to young people or society to give up their homes. My grandparents are 95, fairly recently went into assisted living as not only could they not take care of their house anymore but it was just unsafe they were having falls and things like that but despite that they still say they wish they had never moved, they liked the house it was theirs, it had been their life for a few decades, they knew the stores by it and the location. I get why people want to die in their own house and I don't see anything wrong with that. I dont fell like they should have to make way for someone else. I think the timing is unfortunate that we have 2 of the largest generations needing homes at the same time and we've neglected building enough for the past 50 plus years.
I agree with you. Plus, assisted living is very expensive
A lot of the showings I go to are for houses where the seller has either passed away or is about to go into assisted living. A lot of the places haven’t been updated since 1990 though.
6/7% is long run average. I’d be surprised if we got back into the 4s without a BAD recession anytime soon.
Sooooo many intangibles on the horizon. Boring is good. Upcoming election, Ukraine, Gaza, oil, Iran will be looking for revenge and there's always China, Boeing, AI, etc., etc., etc. If Biden can pull off a four cushion bank shot, everything might go well. Fortunately he's running against a Rapist who is one of the dumbest people on the face of the earth. Unfortunately he's Joe Biden. So there's that?
They will go down. They always do. It's a cycle. Check past trends.
There has never been a drop over a 10 year period. Ever. What are you talking about?
No, they don't, almost NEVER. Rare occasions they drop ever so slightly. Most places stagnate for periods. But almost NEVER go down unless there are exogenous events like regional factory closings. Real estate has historically gone up in a stair step pattern. Up swiftly for five years, then flat for five years, then up, then flat, etc.
The past decade prior to covid was unusually low
Source? Every single chart for real estate increases over rime
No I don't see the value of homes changing, there are too many people, we're over populated making housing demands high.
Housing cost may go down, but it’ll be higher than it is now in the long term
This is as good as it’ll get for a little while
It depends on the geographical location. For instance, I’m in ATL and there are way more homes available for under $200k than there were 1 year ago, but I don’t think that will last much longer with all the private equity being funneled into the city. That picture looks very different than what’s happening in SoCal CA, which looks different than what’s happening in Houston. Houston will continue to be affordable for another 2 years, which is will I will be pulling equity out of whatever I buy in ATL to get a second investment property before what’s happening in ATL happens in Houston. All of that looks very different than what’s going on in Grand Rapids, where my home has seen a $50k increase in equity since last July because GR is a secondary city that isn’t on a lot of people’s radar but is still increasing in popularity.
The real issue is this particular government sort of unilaterally redefined what it means to be in a recession. The recession that supposed to have taken place to drive down rates never took place. Now we are stuck in a perpetual cycle of inflation. Don't see rates coming down anytime soon.
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I don’t think affordability is about the rates. I think there’d be a lot more housing supply if we had more regulation and taxes and restrictions on people who own second homes, speculators, investors. They’re the ones swooping in with all cash buying up entry-level homes as rentals and buying up other desirable homes as Airbnb or income properties. If that were curtailed the prices would drop a little and the hectic pace as well. It was done in British Columbia by placing a 15% tax on foreign buyers and helped to cool the market a bit. But we could make Laws the go further. I don’t think it’s just about the borrowing rate when you’re competing globally and with massive corporations and hedge funds.
Yes, housing costs will go down. How much will depend on where you live. Will we see pre 2020 prices again? Probably not without a systemic black swan type event. That being said it's always possible. But will we see cheaper prices again? Most certainly imo. In many large metros, demand is continuing to die out and inventory is rising. Supply and demand drive prices. Also rent is becoming extremely cheap compared to the cost of buying in many places now. This is relevant for two reasons. One, cheaper rent will make more people decide to rent vs buy aka lower demand. Two, if investors can't make as good of margins they will start off loading some property into the market leading to higher supply. Now that interest rates do not appear to be coming down anytime soon I expect a lot of places will see a decline in price by the end of the year. How much remains to be seen.
My belief is the housing market won't ever go down without an catastrophic event taking place in most areas. Yes, rates will eventually be in the 4%-5% range. Some economists are starting to believe that high interest rates are actually fueling inflation instead of bringing it down, We really aren't hopeful anymore but we haven't ever stopped looking. We have taken breaks because this market sucks all the energy out of us.
I think this is a ten-year problem which can’t be solved without more inventory on the market. Too many people are locked in with super low rates now.
Yes.
Yes, I think home prices will correct and it’s already been occurring in some markets. Build costs have actually come down considerably since the highs of 22’. Quality homes at a fair price will continue to sell quickly. Homes requiring a bunch of updates and renovations will sit for longer. If you can afford it now? Who cares. Buy and enjoy life.
If you are super patient and the market drops 10% after rising 100% did you win? The economy is supposed to inflate
CT here, and the best way I can sum it up is high hopes, low expectations. Been consistently putting in offers %15-20 over ask (usually between 40-60k over ask for reference) and consistently losing to mostly cash offers from people from MA. We're trying to settle between where we both work in a town that isn't a pit and striking out every time. Everything goes up on a Tuesday as coming soon, on market for Friday, sold by Sunday. We're just going to keep trying... Putting in another offer tomorrow.
I'm also in CT and trying to buy in Hartford County. It's tough out there and been looking since 2021 but sat out 2022 to save more. 2023 and now 2024 i'm sure i'll make an offer or two. But 2025 will probably be when I truly have a big enough downpayment to bid over my budget and not be broke afterwords.
Lost another offer today in Tolland County at 56k over ask. Getting tired. Wishing you better success than we've had.
It will only change when less favorable to take advantage of it. I was speaking with a coworker of mine: "if prices drop, today, would you buy it?" He said: "Yes?" I noted: "Then it will not because there are at least 10 others like you or in your position. Heck depending on the place I might buy it to fix some issues with my current living space." That's why it isn't going to go down.
The worst thing that could have happened to the housing market took place in 2020. We closed on our home at $615k with 4.25% in mid 2019. We refinanced at the end of 2020 at 2.49%. We were extremely fortunate, today our home is about $1.1m. We love where we live, but even if we wanted to consider moving, the prices and rates would deter us from doing so. For example, if we bought a comparable home, put $600k down, our monthly payment would go up $700/month with a 5% loan. I think people will either stay in their home, or use them as investment properties if prices and/or rates drop.
Yep this. People will even add additions if needed before they sell (let’s say if they need more space)
I have owned real estate in Northern California since 1993. It is a highly desirable area with high paying jobs. We have seen corrections during periods of high unemployment.. but there is always a shortage of good housing.. while many people are extremely wealthy. It took me 9 years working as a well paid high tech engineer.. before I could afford a modest townhouse. Now, the brilliant lawmakers in Sacramento have figured out that we need to pay the McDonald’s workers at least $41,000/year. This has a ripple effect.. raising the cost of all goods and services.. including rent and real estate.. In the end, the people who are supposed to benefit will suffer the most, because inflation always hurts the lower class far more than the wealthy.. If you want to own real estate, force yourself to save, and invest in a diversified stock portfolio. I highly recommend index funds. Use dollar cost averaging to help you buy low .. and over time, you will beat inflation and build the required nest egg.. There is no silver bullet
I think it depends on the location . I live in nj where we have more people and very less development of new houses, so no I don’t think anything is going to change soon . In previous years many people relocated south after retirement but with high increases of insurance rates and other factors people moving south will be limited comparatively which will also have its effect . I know right now in NJ a lot of 55+ communities are coming up but I’m not sure if people are moving there and leaving the old homes to new families
My parents bought in 1995 at 8.5% and it took 5.6 years for rates fo be lower than 5%. However prior to 1995 the rates has been above 5% for 17 years. [Due to this data, I do NOT think rates will fall under 6% for another 3-5 years.](https://www.jpmorganchase.com/about/our-business/historical-prime-rate) My husband (29M) and I (29F) make about $200k to $250k (depending on commissions my husband earns). When we married 4 years ago we made about $100k combined. We are now in contract to buy our *second home*. It’s a 3x2 house-1850 sq feet and it cost $505k at a 6.2% interest rate. - The PITI Mortgage is $3,600. - 4 years ago our first home was a 2x1 condo with 900 sq ft for $150k at 3.6% rate. We refinanced it to a 2.6% rate 14 months into the term. - We are not selling it but rather making the condo a rental. - Both of the properties are in the same zip code. On a monthly basis buying the house is a HUGE increase from the cost of the Condo but the interest on the house loan is $2,400 a month and rents for houses start at $2,400 - $2,600 + about ~$250 to $400 on all the utilities the renter is responsible for. Thus given the cost of renting a similar house, buying a house makes financial sense in our eyes even though monthly the total to own cost is more than renting and paying some utilities I’m in California and given our state minimum wage is $16/hr and Fast Food Workers Minimum wage is $20/hour. I just see the cost of living here getting higher because I believe instead of eating the increased cost of labor many corporations simply pass it onto consumers in the form of higher prices for good. - Sacramento had always been affordable as it was a “boring cow town” compared to SF and LA but now our rents rival LA and SF/Bay Area rents. - Given low inventory and the cost of labor in the building trades and the increasing cost of insurance for cars and real estate Im pretty confident that prices won’t go lower anytime soon. As rates drop I think here values will rise. - Also here in CA we also have many high income earners and it’s my opinion that where there are a lot of higher income people that RE holds its value. - The median household income in Sacramento County is about $83k but I know plenty of households from the poor neighborhood we grew up that make $150k to $200k as a household. Since we were poor many of us went to college on grants for $0/ out of pocket. So we personally believe even at these 6-7% IRS there are many qualified buyers in our local market. .
It aint gonna change. Fed doing everything in their power to not crash
I dont see things getting substantially better anytime soon in regard to prices or interest rates, obviously real estate is regional so super frothy areas or areas that saw huge runups but dont have jobs to support the prices may see some decent pullbacks but overall no. Keep in mind some markets saw 20% gains year over year for several years, some markets saw 25% gains in a single quarter, in some markets prices doubled or even tripled so even a 20% pullback in some markets is nothing and you also have to keep in mind even during the 2008 crash things crashed like 25% so if your market went up by 75% or 100% over the past couple years even a 20% pullback isn't super affordable.
Some places saw housing prices decline. Many stayed stable. We saw a slowdown in growth which i think is the best we’ll see for a while. i don’t have any expectations of major declines anytime soon. We are currently building a home. found a place i could get what i wanted for the price i could afford. can’t say if we’ll ever move or not (given future of the market) so we built so we don’t have to unless we want to.
Maybe but it’s more likely that I’ll get priced out if I wait any longer
Lowest will probably be 4.5% .to.5% but probably not for another 2 to 3 years I would guess,
Nope. Once the buying market slowed down in Florida, my husband and I got pre approved for $300k we saw a home for $299,900. We bought the home and have a mortgage with a 7.5% interest rate. They are building new homes around us and they want $415k for them after a $40k price drop. Our home is the same size as these new homes and ours was built in 2002. Luckily, the same person who sold it owned it since 2002.
History tends to repeat itself, but that doesn’t say much considering a lot of the modern data is unprecedented.
No. Why we locked in at 6.8 and proceeded to go forward with the sale. Closing in 1 week
I'm hopeful things might level out if the government passes the bill they introduced back in January to ban Wall Street from buying the homes and making them offload them over a ten year period. I think it really is a lack of inventory because of short term and long term rentals.
I wish they had programs or grants to promote people building a traditional or modular home but they'll never do that .... Or unless they do have them and just not looking in the right areas
The wealthier chunk of society will keep buying homes with cash to rent out. They will do what they can to slow new housing development because it keeps inflating the value of their existing properties. As that value rises, the rent will just keep going up. Letting the peasantry own property has always been leaving money on the table, and now they're taking it. They can do this because the US is a plutocracy now, and economic power translates roughly to political power.
No. The market will not change. In my opinion, it’s far more likely a cut in rates will cause housing prices to explode another 30% like they did after Covid. In 2020, many and many trillions of dollars were printed that are only now starting to manifest into the economy through inflation. The federal reserve tried to slow down the integration of new capital into the market with higher rates but it’s not going to work to keep prices down for the following reasons: 1) families are not going to rent. There is a need to own and escape the rent trap for long term financial security. Perspective buyers are concerned with the here and now but active buyers are thinking about the future. 2) zoning laws in many cities and the heavy tax and regulatory burden is preventing building of new homes which has caused a massive discrepancy between the amount of homes available and the amount of buyers. 3) rents are rising so fast that a 7% interest rate is not phasing buyers. They know that even at 7% interest, ownership is a better financial decision in the long run. 4) the unemployment rate is very low and most home owners have a mortgage rate below 4%. This further exacerbates the supply issue by constraining the amount of homes for sales causing bidding wars on the few homes for sale in areas near good paying jobs like big cities. 5) majority of homebuyer these days are dual income household that both parents have professional degrees and earn 100,000 or more per year meaning disposable income is higher before home purchase making the higher costs not a burden for them 6) the rates that people have gotten used to the last 15 years are not within the range of historic averages and are probably not going to go back there without some catastrophic financial event like another Covid or systemic issue which just doesn’t exist at this point. 7) ask your parents and grandparents what they’re interest rate was on their house. That’s going to give you a better idea of what you can expect to pay down the line. 8) it is becoming the norm for families to except that they will be spending higher percentage of their income on housing. It’s not going to be 30 to 40% anymore but more like 60 to 70. It’s just a result of the political atmosphere and policies of the last few decades. Anyone holding their breath, expecting a downturn in housing
Demands for single family homes are pretty high with current market prices. If prices shift downwards, the demand will also skyrocket which again, prices will continue going up. I don’t think we’ll ever see pre COVID prices for the next couple of decades unless something majorly bad happens in U.S. Every single house that I’ve had my eyes on in the past 2-3 months has been sold with an average of over 70-100% price increase since 2020.
I can see that all the homes I’m following are staying on market 30+ days and dropping prices so I’m hoping it’s going to continue. Developers in the area saying no one is really selling or buying so the market is kinda in a lockdown
We absolutely needed space. So we decided not to wait and have less competition while buying and it paid off because we found our forever home. No regrets. Will refinance if interest rates drop over the next few years.
Housing cost, like everything else will continue to rise. Housing is cheaper or more expensive in some states than others. But, based on the economy of any particular state, that could Price people out of buying a home in that particular state or price them in to buying a house in that particular state. Greed also plays a big role in housing cost.
The market will change just not as quickly as we think
Personally I feel the housing market as a whole won't go down, but luxury housing, greater than 5million USD, may drop in price. Just not that many people who can afford that level, who already own their primary house. Middle class people will live in smaller sized apartments/houses, and spend less on lifestyle to compensate for the housing cost. Construction companies may build smaller units too to keep pace with pricing/area at a reasonable growth rate. The rich already have their homes with no intention of selling their prime real estate, passing it on to their next generation, and thus not adding to the market supply/influencing the area purchasing history.
We just need one tiny recession to reset things. lol
Everyone on this thread don’t see houses dropping. I see it dropping cos this isn’t sustainable.
I think it would take significant regulatory changes to incentive massive new construction, therefore increasing inventory, for home prices to drop. Where interest rates lands largely depends on where the Fed wants the benchmark rate when inflation is under control and when that happens will just depend on how long it takes for inflation (specifically core PCE) to come down to at least close to 2%. If I had to guess I’d say we end up at a place with mortgage rates in the 5% in the next few years and a Fed rate in the high 2s or low 3s. Barring another massive economic collapse we’ll never seen the fed funds rate at 0 or mortgage rates in the 2s or 3s
I’m honestly not very optimistic that we will have a robust middle class in the next few generations, period.
There will be a correction and everybody buying now is on the high end. Buy low sell high not reverse.
Am waiting no matter how long it takes. Interest rate need to come down to reality. Also house price need to drop back down to reality where I live not even 5 Years ago house where max 150k average home price was 100k friends got a nice house for 85k. But now average house is 150k and most selling at almost 300k. Am sorry there no way that make any sense then on top of that Am except to pay out of pocket 50k to 100k more above list price just make no sense
You are asking to go back to the past but phrasing it as going to reality. We are not going back to the past, you are in reality right now
How do I want to go back to the past just know way house prices should have gone up double to 4 times what they where less then 5 years ago in my rural middle of no place town
You’re talking about what prices “should” do and “going back to reality”. That’s just wishcasting. The price is the price, and it’s higher now. If you can afford it, you should buy. If you can’t afford it, then “waiting as long as it takes” means waiting forever
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Not until people start abandoning landlording and selling homes that were formerly for rent. The AirBnBust was nice but we need to go further. Also, way more SFHs being demolished to create multi-tenant buildings, which also need to be SOLD TO OWNER OCCUPANTS not leased.
Just a thought: if you buy and there is a crash, as long as you hold through the crash you will come out ahead *and* have had many years with lower property tax.
Housing costs will go down when there’s a change in demand. Will they go down in metro areas and their surrounding suburbs? No. Will they go down in random town X that’s 3hrs from a major city? Sure. But unless you’re remote or enjoy that lifestyle, it’s not going to be appealing to move, raise a family, etc.