How are people affording these crazy home prices?

[Lowndes]

More than 30% of US sales were all cash from Jan. ‘21-April ‘21.

Share of Homes Bought With All Cash Hits 30% for First Time Since 2014

Cash is on the rise as affluent Americans benefit from a surging stock market and the flexibility to move to more affordable parts of the country.

www.redfin.com

As others says this can be misleading. We did this when we bought our most recent house but it was just an unsecured loan so we would be considered an all cash buyer. We put a mortgage on the house a couple weeks later.

 

[UtahJimmy]

I disagree with the third piece of advise regarding converting to traditional 401K contributions. With the way things are going politically it seems like we are going to move farther towards socialism and eventually higher tax rates over time as the gov’t pushes more people to be dependent on Uncle Sugar. I’m making the gamble that income taxes will continue to rise between now and when I want to retire in 20-25 years and that tax free growth will net me more money later. It all goes out the window if/when the government takes action to federalize (confiscate) the 401K’s to keep social security solvent for those who didn’t save.

Max both the 401k and IRA (*and maybe go Roth in the IRA when income goes up a bit).

The traditional over Roth 401k was just a temporary recommendation to help save more money immediately for the down payment.

But once that house is purchased, it does help in another area: allowing them to contribute to Roth IRA. @Zappaman - They make too much right now to do that.

By going traditional in the 401k, they can get their AGI down into the allowable income bracket to allow Roth IRA contributions. They also don't qualify for the credit on the traditional IRA because they have workplace plans and make too much. Can still max out the IRA but at 25 years old that money is untouchable for 35 years (assuming they don't change the rules on us). Might be better off growing it in a taxable account so you can leverage it while you're younger.

 

[Zappaman]

Tax penalty for withdrawing is still 10% right? That might be worth doing in RARE circumstances (I did it to buy poperty that made 100% return 5 years later)... not always wise, but an option IF the right property was to come along.

Still, its about saving more and spending less. As you build that retirement up, there are usually ways to borrow against it (again... when it REALLY makes sense). Maxing out savings (tax sheltered or not) is the goal to get what you want down the road.

 

[thinhorn_AK]

Glad I bought when I did, 2.09% on a 15 year note. Had enough of a down payment that our monthly payment is like 15% of our monthly income.

Renting sucks.

 

[big44a4]

I’ll add to this for people with the discipline. I use a 30 year for the cushion then once a year whenever I get my tax return I tax what I saved and make one large payment towards principle. I am on track for 15 years and it will cost me around 20k extra interest at the end of 15 years. But with a young family I’d rather have the cushion all year long for those years vs stuck making a 15 year payment. I could also pay it off faster than 15 if I choose.

 

[Ctitus25]

Housing is definitely crazy. Last year I got a job in Colorado and was able to sell me house in Washington State and buy a house in Colorado. It shocked me that it was nearly as competitive out here... just more inventory in Colorado made it easier to find a place then in Washington... I'm priced out now though if I ever had to move back.

 

[SURVEYOR]

It does seem crazy right now. I work in real estate and am seeing some weird stuff going on. I recently had a property for sale and the Realtor who worked with the buyer was representing her son. The house sold for 50k over asking price. The appraisal came back $10k short of the purchase price. Instead of renegotiating the price with the sellers, the Realtor (again, who is representing her son) convinced the appraiser to raise the appraisal value so they wouldn't lose the house! Just seems wrong to me...

And people wonder why realtors get a bad rap.

 

[commandoNate]

Home prices in the Denver/CO Springs/Ft. Collins metro areas have sure skyrocketed over the last 5 years. And with relatively low inventory of homes for sale we just had 1,000 people lose their homes in a fire! All of us contractors are so backed up its going to be years and years before those homes can be rebuilt. Up up and away go the housing prices! Glad I got my little place out in the country a few years ago when I did.

 

[Redangus]

My Grandparents paid $3,000 for their first home. My parents paid $30,000 for their first home, and I paid $300,000 for my first home (10 yrs ago). All in the same city. Looks like home values go up by an order of magnitude each generation.

 

[BroncoAZ]

I sold my home in Flagstaff, AZ yesterday. I listed it for double what I paid in 2017 and it sold for 7% over asking in hours. Buyers are all cash with no contingencies. I think I’m still in shock a little bit.

We moved 18 months ago and rented the house for a year. We planned on keeping the house long term as a retirement investment, but living 2900 miles away it didn’t really make sense. Selling now still avoids capital gains taxes. We’re trying to buy in to a very hot market in MA. The equity form Flagstaff will facilitate buying here with a relatively small mortgage.

Everyone wants to time the market just right, but nobody has a crystal ball. I don’t know how long before the bubble deflates, but it doesn’t seem like this can go on indefinitely.

 

[5MilesBack]

AZ is insane right now. My wife and I went to Scottsdale in Dec/Jan to look around at potential winter digs. Wow. I saw several homes listed that were last sold only a year previously and were listed at 35% higher than they last sold for. 35% in one year, and they will probably sell for above asking even. That's insane. I should have bought 8 years ago, but wasn't ready to commit to leaving CO every winter. Worst case scenario......we continue to live in CO through the winters. Best case scenario......home prices eventually tank in some of the areas we're looking. Until then, life goes on.

 

[TheGDog]

Shacking-up multi-family would be my first guess.

 

[timekiller13]

Sold my home in NC recently. We bought the house in 2011. It’s nothing special 3 bed 2.5 bath with a garage and unfinished basement on 4 acres. We did some remodeling over the years.

We listed it for double what we paid in 2011. We got 14 offers, sold for 30k over list in 2 days. Buyers put down 10k in due diligence money.

First buyers backed out about a week later (don’t know why they just did). We relist, sells in 2 days, cash offer, 25k over list no contingencies 10k in due diligence money.

 

[Dackdack]

I think I’m starting to see it soften slightly up here in BC. Instead of bidding wars on every place , some things are on the market a hair longer. It’s still insane though. We built 3 years ago for about 900k. It’s worth 1.8-2 million today .

 

[cjdewese]

I live in California so take it for what its worth. We bought my house in 2018, literally the highest a home had gone for in the neighborhood that we bought in at 270K. It's estimated at over 450 now, but it's my forever home so never selling.

I have friends who have mortgages for over $1m in orange county and I just can't imagine the stress of something like that. Both parents work and make over 6 figures to afford it.

I specifically moved where I did to avoid having to do that. I can keep my wife at home to take care of our son and are fairly comfortable. Very happy we bought in when we did. We actually have a chance of paying it off early and living our dream. We wouldn't be able to do that if we had to buy in the same neighborhood now.

 

[TheGDog]

At the time, I felt the price was a little on the high side, but this neighborhood I'm in is very cool and chill.

4th of July is AWESOME in this neighborhood! And they host these concerts in the park, which is literally 250yds from my front door. And everybody is cool with chillin' with their "beverage" on the D-Lo. And when the music is right you're up their dancin' it up barefoot on the grass with members of your community of all ages and sizes. They also have "Jingle-Jam" at Christmas, and OMG Halloween goes off the chain too!

I wish... I WISH... I could have grown up someplace like that as a kid!

It's very "Leave it to Beaver" here. When I came to look at this house... a car driving the other way... actually waved! The only time people do that out here is when you go dirtbike riding, out there people tend to waive at each other when they pass by cause it's like "Hi! You could end up saving me later!".

So to see that kind of gesture here, in just a regular ol' housing tract... blew my mind!

Turns out the one who waved? Is the amazing nice and humble and helpful gentleman that lives directly across the street from our place! A great resource to have so close by, as he's lived here 40+ yrs.

 

[CoStick]

So true, it feels like you have to work half of your life to get enough money for a decent house.

We stopped building them.

 

[def90]

Welcome to anywhere Colorado..

 

[stxhunter]

Prices in the Houston area are crazy. We’re not moving any time soon, but homes that used to be in the $400-$500k range are easily in to the $600-$800k range. $700k+ homes are everywhere!

Like you, I can’t imagine how everyone affords these mortgages! My wife and I make decent salaries, but I still can’t don’t see how we’d afford a home in that price range. With interest rates creeping up, I don’t imagine the situation lasting much longer.

 

[Wrench]

When I bought our latest place I stole it because it needed some work. Today the 100k needed work type homes are selling for 350k. Homes that were 300k a few years ago are over 1M. The sad part is how it's changing the area. I leave my truck running at the post office, the new folks lock their cars to check their po boxes.

I'm terrified how they're going to vote.