How are people affording these crazy home prices?

[DavyCrockett]

I hope you're right but a 35 year old single wide in my neighborhood just listed for 390k

Like I said, it'll take a while for the market to catch up with fundamentals and also doesn't mean prices will go back to precovid, but I think they will retreat some at least.

 

[DavyCrockett]

I feel like some of you guys need to give yourself some grace for renting. It's not as much "throwing money away" as you think. An example above was looking at 420K home with 50K down.

Even being really generous with a 2.75% rate, that's still 10K a year in interest. Gone. That 2.75 rate isn't exactly free money when you pencil it out. Tack on another $300-$400 a month in taxes and another $100 a month for home insurance. Plus another $100 or so for PMI. You're looking at basically $1300-$1400 a month that's not going towards principal. Throw away money to the bank, government, and insurance companies. That doesn't cover upgrades and things that just always break. So if you're renting for around $2K, you're only "throwing away" about maybe $500. That's with no liabilities and no risk. Seems like a good deal to me.

It was hard for us to justify not renting until we bought our house at 32 years old. And when we did, our realtor and mortgage company laughed at what we put our max loan amount at. I just can't stand paying huge chunks of interest to the bank. I hope it all works out for guys looking to buy, and I know everyone wants something that's theirs, but I personally wouldn't chase something. So you could over pay $50K for a house now to save that $500 a month; Or wait a year or so and "throw away" that $6K worth of rent money and potentially save $50K on your house (probably save that 6k in interest payments). Just giving an example to hopefully ease some stress. And obviously that assumes the market comes down. But I have little faith in our economy right now.

There are a lot of big money guys that look at a house as a trap the bank has set on the middle class and a huge liability. They will never own a house. They would rather have that $500K in an investment and have it pay their rent with no liability. Some of them have a very good argument. Grant Cardone and Robert Kiyosaki are a couple guys worth listening to their thoughts on home ownership.

I wouldn't call myself big money but we rent for our primary but have investment properties. I struggle with the thought of using 100's of thousands of my leverage powder on something that isn't bringing me cashflow.

 

[BroncoAZ]

My story is similar to others here, starting low on the totem pole and working my way up. I bought my first home in 2003 for $115K @5.35% 30 year while earning $32K per year, 3% down and paid PMI. My wife was in law school and we were going into more debt monthly. I sold that house for $179K in 2006 and used the proceeds to start paying off debt. We rented from 2006 to 2016, paid off all our debt but I missed some nice opportunities to buy something cheap in 2010-2013. The house across the street from our rental sold for $185K in 2011, when we left the neighborhood in 2016 it was worth $400K. In late 2017 we purchased again for $465K @4% 30 year with 20% down while earning $165K, refinanced to 2.25% for 15 years in 2020. We have $400K in equity in the current market, but we moved across country in late 2020 and kept it as a rental/investment. We are looking to buy now in an expensive market without the benefit of the $400K in equity from the old house. We saved the 20% for what we are looking at price wise, but it’s still daunting to face a $600K+ jumbo mortgage to buy here. We are probably in a position to wait out the market, so we can be picky.

 

[mhabiger]

Here are my two cents on how people are affording these prices.

Interest rates and a transitory preference for housing seem to be the biggest drivers in running up house prices. From a national perspective median household income relative to median home price is peaking.





While COVID related policies are definitely driving people to change their preference for housing, it's hard to believe people's preference for housing has changed so much that they'd trade purchasing a lot of other goods and services for homes.

But take away the tradeoff by reducing interest rates to ridiculously low levels and we pretty much end up in the situation we are in. However, prices have nearly caught up to low interest rates.





Still might have a little room for prices to grow all else held constant.

 

[Gobbler36]

I really wish it would. The longer they keep this up the worse off as a nation we will be in my opinion. You can only kick the can so far down the road. And they have been kicking it for along time. How do they even get away with it. How do we even allow them to be so stupid with our money. I just don’t get it.


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this guy talks super fast and is a little weird but has some great understanding of economics and different markets. He says what you say as well

 

[Jason K.Y. Wild]

I’m in the process of purchasing my first house. I’m south of Indianapolis and offer 15K over a house asking of 220 to get my offer accepted. I’m pretty butt hurt about it being sold for 75 back in 2005 and then 114 in 2012 but hell my mortgage will still be cheaper than what I was paying for rent. It’s very frustrating seeing what I could have gotten just a few years ago for the same money.


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[jesseward01]

Not sure about your area, but here in Southern Colorado there seems to be no shortage of wealthy Texans more than willing to overpay for vacation homes right now. Plenty of other "well qualified buyers" from all over are transplanting to live fulltime, many being the classic "just sold my home in California for 1.5 mil and paying cash for 700k home in Colorado" crowd.
At work I talk with tourists and visitors to the area regularly and I'm blown away at how many tell me they are here to meet with a realtor, at times I've wondered if there are even enough realtors in the area to meet with all these potential buyers. Properties with asking prices that would have made me laugh or scratch my head 3 years ago are actually selling. Just down the road from me a neighbor's 2 acre property with a double-wide next to a stream sold for a half million dollars. The last time it was for sale in 2016 it sold for 150k. I bet the new owner scrapes the double wide and builds a 4,000 sq ft home. It's definitely a seller's market right now.

Also in S CO and it’s 100% a sellers market for all the reasons described above.

 

[rtaylor]

In my neck of the woods in Tennessee we have seen home prices go through the roof in the last year and a half. Things have literally double in price in that time. We are seeing alot of people moving here from places like California where our doubled home prices seem like a good deal. They have driven up our prices and the locals here are buying at inflated prices only to find out down the road they couldn't afford what they bought. Homes are like buying an individual stock. You can't time the market perfectly. I think it is safe to say, at least where I am at, that the real estate market will certainly tank with all these millennials that bought outside their paygrade and deals will start showing up at some point. I say rent and be patient because it can't continue at the current pace.

 

[Broomd]

That's typical for CA, which I believe he lives in So California.

..
Public employee pensions are killing cities in California.

They are killing many cities and states. Illinois is a complete chithole due to public employee pensions.
It's why those blue-state insect governors want to tap fed $ (aka covid stimulus etc.) to cover their fat asses. They should all be strung up, including the greedy employees who get 44 days a year off and 90% are worthless anyway.
This isn't a condemnation of good cops, firemen etc. Those workers are mostly essential.

It all makes a guy want to kiss the debt-free ground he lives on--far removed from greedy clown world.

 

[TheGDog]

Ah yes... greedy clown world... as in the dark damp arm-pit of the world that creatures like Newsom crawl out from.

 

[Beendare]

I hear the worry in some of the first time buyers commentary about buying now.

If mortgage interest rates go up significantly ( they will) then there will be a lot less buying pressure for sure making it a buyers market vs todays sellers market.

This only affects the new buyer if they dont have staying power, ie they have to sell…or need the equity for something. You have a home, you locked in a very low interest rate ( fixed rate) which should make for a payment you can afford- no problems, sit tight. If the market for homes drops 5-10% so what, you arent selling for many years. …it doesn’t matter.

.

 

[TheGDog]

Well.. they kind of screwed their own pooch in terms of the housing lending market... if ya think about it.

Because THEY allowed unscrupulous lending officers to push thru people that had no damn business taking out the kinds of stupid loans they were taking out.... once enough of their chronies were able to make money of the sales of those loans, and it was starting to look like the jig was up.. then the govt. to try to make THEMSELVES look altruistic.. they THEN go and pass revamped loan qualifying restrictions that are just ridiculous nowadays. Like I forget what the new down payment amount is supposed to be now... but it's like yeah right! Dude most people ARE NOT gonna be able to struggle and strive and live on "E" for a minimum of two decades at least just to be able to come up with a damn down for freaking house. Their whole thing of doing anyway with 0-down type of lending is just dumb. You don't do away with it.... you adjust it to make it more real-world savvy, DUH! AND you don't go giving the damn loans to undeserving nimrods who are so stupid they don't comprehend that the TYPE of loans they allowed themselves to agree to are ones where when the market fluctuates you're gonna be screwed. So don't be dumb and remove the 0-down concept.... be smart and put in place just enough conditional statements in the process to where you have a good idea the buyer is likely not making a choice that will get them in over their heads. I mean oh my goodness, it's retarded the KINDS of loans all those people were willfully entering in to before Obama stepped in with tweaks to the lending rules. AND it soo totally screwed over a lot of us! They sold it as if you're the guy who has been making your payments all along, boy they've got this great program that's gonna help you! They just neglected to mention they could only do this if your loaned was backed by their two organizations.... Fannie Mae or Freddie Mac.

It was soo EFF'd up man... lots of other people were getting all this help.. you know... because they were losers even BEFORE the situation started to become a problem once they all realized they'd gotten themselves into STUPID loans. Even though I sound EXACTLY like whom Obama was talking about.... the guy who didn't over-extend himself, etc. It was VERY unfair that a bunch of undeserving people got this help where mortgages where re-negotiated to crazy low interest rates... then... meanwhile.. me.... guy who sounds just like whom Obama is talking about... never late on payments.... but the expense had me running soo very thin in terms of keeping my head above water. It's a scary feeling that you're just one unplanned dilemma away from running into a serious financial bind. (at the time the kid was young and still in daycare so that was eating up a lot of household income too). BUT... because of all these rule changes they then go and implement AFTER I've already bought and gotten into my home just a little before all that goes down... they THEN up and tell me... "uh gee.... sorry there... but now you have to have at least a 90 Loan-to-value ratio before we're allowed to refi you anymore." So yeah "Thanks Obama!" (with full sarcastic rage in effect).

So here I am... needlessly being made to follow thru on my promise I made with my loan.. while allllll these other straight out retards... are just like given these basically "Get outta Jail Free" cards.

And also... I now some folks who gambled and purposefully had to elect to let their loans go unpaid on purpose so that they could then possibly be considered for that loan help!

Remember the whole idea was SUPPOSE to be We see and understand you're this good hard worker who just happened to be duped by this unscrupulous lender guy. And that, over time, and with market fluctuation, you're now trapped in a dumb kind of loan you'll never get out of. The whole idea was touted as, we're gonna help these responsible people who just got suckered into these bad loan products.

But.. with the high amounts of money you could stand to save if you managed to get help from them in lowering to a negotiated new mortgage rate... I mean hell... it even made people willfully choose to employ the risky move of purposefully letting your credit take on the appearance of you needing that help drastically, and taking on the 7 years of credit report ding that comes with it! On some level it was great that they decided to offer this help or correction if you will. But... they were lying S.O.B.'s in terms of who they were saying they were gonna help. If you're a responsible person he keeps your head above water... naw... they don't want to hear from you.... they only care about helping the total losers.... even though on TV... when they described whom they were going to help... they described YOU to a T.

 

[Rob5589]

For those buying now, at low interest rates and high home prices, don't expect to sell in the next 5-10 or more years after the rates go up. Better have purchased your "forever" home

 

[TheGDog]

And notice the govts answer to this "housing crisis" as they are calling it.

"Oh well we'll just go over here and manipulate things (without worrying about tomorrow) so you can still get a crazy low interest rate, so it'll all workout see!"

Because THAT way... now they've got ya on the hook in all those states in terms of your property taxation!

Because think about it. They totally COULD elect a solution that involves doing something to bring the prices down themselves. But instead? What solution do they elect to offer up instead? Continue to sell it to you at that wildly high price.... but just give you this perceived help of a low interest rate. They choose the later because in the end it gets their desired long-term result. Make it look like they did this great thing to help... all the while strengthening the tax base by increasing that yearly revenue stream.

And ooh....in CA? This kinda stuff makes the govt froth at the mouth because it's about the only way they will see an opportunity to crank up the property taxation revenue stream... se we have the Prop 13 Property Tax protections in place (which they are constantly trying to EFF with too with new legislative action always trying to propose amendments to prop13, by lying to you and stating it's only gonna be changes in how businesses/industrial properties are taxed) To that I say "Don't fall for it dude. Don't believe the Hype!"

Yeah... year or so ago... we had some heavy rains that happened just after some fires... and I thought it was odd/weird here to see Newscum making this odd press conference where he's all sounding like his heart is bleeding for these people in the area where this harsh mudslide/debris flows happened (Montecito, CA).

I was like.. I've never heard of this city/area before....hrmmph.... I have a hunch why he must be kissing their a$$e$ so blatantly in this press conference... so I hopped onto Zillow and checked out that area of the debris flows.... yup...ok.. yeah.... just like I thought.. the house prices all in that area were like 35Mil$ to 17Mil$... so then yeah... it strikes me.... Duh! Well of course his (blackened) heart goes out to them... you see these home prices? This is where he gets all his money to play with from!

 

[jlh42581]

And notice the govts answer to this "housing crisis" as they are calling it.

Breathe dude, you are way down the rabbit hole. Yes the govt is corrupt but they are living so rent free in your head they are going to drive you insane.

 

[Savage99]

I hear the worry in some of the first time buyers commentary about buying now.

If mortgage interest rates go up significantly ( they will) then there will be a lot less buying pressure for sure making it a buyers market vs todays sellers market.

This only affects the new buyer if they dont have staying power, ie they have to sell…or need the equity for something. You have a home, you locked in a very low interest rate ( fixed rate) which should make for a payment you can afford- no problems, sit tight. If the market for homes drops 5-10% so what, you arent selling for many years. …it doesn’t matter.

.

I agree with this, but the jump that homes here took effectively priced us out. It’s not just wishing homes were cheaper and not wanting to buy high or 10% more now than in a year. You have good insight though in thinking about the long term.


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[NDGuy]

If you have the equity to roll its a great time to buy. Plus the super low interest rates make it very appealing. Most people I know are getting 2.5-2.7% interest rates. That's pretty much free money at that point. The people this is really killing is first time home buyers like myself.

You are doing the right thing man just keep hammering and saving best you can. It'll happen!

First time home buyers are definitely the most in the hole right now. We were lucky and got into our last house for 5k down and it grew 75k in value in 4 years. Our new house we bought is a forever home for us and it was just luck we got in early.

 

[ewade07]

First time home buyer here. I closed on my house July 2020, right before everything started to take off. I bought a 5 bed, 2 bath older home (1946) for 250k (2.9-3% interest rate). The house was completely redone inside and out and was set up for renting as the bottom level has a separate entrance and its own kitchen and laundry. So I rent out the bottom to PA students and my girlfriend and I only end up splitting the left over 500$ towards the mortgage. Looking around at the housing scene today I realize I am damn lucky. I texted my realtor out of curiosity to see what she thought i could sell my house for now, she said at least 325k. Crazy times. My girlfriend and I are well off (in my eyes) and the only debt i have at 32 years old is my house payment. You look around and see whats for sale and the price and i feel bad for people looking to buy now.

 

[NDGuy]

This only affects the new buyer if they dont have staying power, ie they have to sell…or need the equity for something. You have a home, you locked in a very low interest rate ( fixed rate) which should make for a payment you can afford- no problems, sit tight. If the market for homes drops 5-10% so what, you arent selling for many years. …it doesn’t matter.

This is what we did, we weren't first time home buyers but with our equity and finding a long term home (20+ years) even paying a bit more than we were hoping feels worth it. We significantly updated our home that meets all our needs and pay $350 more a month. We are both younger than 30 so wages should surpass that soon and my daughter will be out of daycare next year. Everyone's situation is different but unless you are moving in the short term home buying is rarely a "bad choice" as long as you are comfortable and have the excess cash for repairs as needed.

 

[Baddog]

I don’t see how the government can ever raise interest rates back up much. It’ll set off a crisis and they’ll promptly lower them back