How are people affording these crazy home prices?

[Newtosavage]

While this seems true I know many municipalities have restrictions on the size of new construction. In the town I live near the they are requiring something like 2200 or 2400 sf and a two car garage.

These municipalities/county ordinances are designed to raise the tax base by forcing bigger houses to be built. Not sure how wide spread this is but it’s happening.

Sounds about right.

We raised three kids and never had a home over 2k sq. ft. Two homes ago was the biggest (1970 sq. ft.) it was a 4 bd 2 ba with two living areas. It was bigger than we really needed. Kids left for college and we downsized to 1700 sq. ft. out in the country. Still bigger than my wife and I needed, even when the kids came to visit. These idiots that are building and buying 3k sq. ft. homes for 2 kids are just trying to keep up with the Jones' and the shows they see on TV. The greed and debt is going to ruin this country. My mother raised 5 kids in homes that averaged about 1300-1500 sq. ft. We shared bedrooms and had bunkbeds. All of us turned out okay. Hell, we even got one gift for Christmas and were happy to get it.

Damn I'm sounding old now. LOL

 

[Beendare]

They bring a different value system that's tough on small town New England. Example: My friend's house is in the middle of a major remodel. This summer his contractor quit because one of these new arrivals offered to pay double his rate and in cash if he could start that week. Contractor jumped ship the next day. My friend is pretty screwed.

interesting that you are blaming the new folks…..

When its the Slimy local contractor that owns a big share of the blame there….

 

[5MilesBack]

Below is that first house I sold in 2012
You can see the rental value is $2995.00 right now. Pretty confident that is within a couple hundred dollars of what you could get for rent if not right in the money.

Wow, where do you live? Our house here is bigger, worth more, and rent estimate is only $2k. And they keep saying rental rates are ridiculously high here.

Kind of funny about home sizes......my wife and I are two years out from being empty-nesters, and I'm putting in an offer today on a place that is almost twice as big as our current home. But I'm doing that for the acreage, a barn, and the extra garage/shop space. The house is what it is. But I do like my space.

 

[Szwampdonkey]

In I way, I agree with you both. Watching my kids rent vs. buy is very eye opening. No, they don't have any equity built up in a house, but they also don't have any debt and routine payments to repair a house or taxes related to that house.

My wife and I have both worked for over 30 years, both have college degrees (two in the case of my wife) and have always had good, but not necessarily high paying jobs. In the small towns we live in, we would probably be solid in the middle of the middle income bracket.

That said, we have always bought reasonably sized homes (never over 2k square feet despite having 3 kids) in reasonably priced locations. And yet, 20 years after buying our first home, we still owe half of what it cost. We are not extravagant spenders. We don't buy expensive toys or go on expensive trips or decorate our home or property in expensive ways. So it does feel like we've been tricked after doing everything right and still not owning more than half our home after 20 years. Meanwhile our young professional kids are debt free. It's been eye opening for sure.

I'm not sure I'd give my kids the advice to go buy a home. I don't see the up side for them so long as they don't have kids. Financially I think they just might be better off renting and investing in their retirement.

This topic really makes me wonder what percentage of Western Europeans own their home vs. rent, and how that affects their cash flow and retirement age. Some days I put on the tinfoil hat and think we've all been sold a story about the "American dream" of owning a home and land by people who are laughing all the way to the bank.

Lets say you buy a home at 20, 30 year mortgage at $2000/month, and you plan to live in it until 75. That $2000/month mortgage goes away at the age of 50 and you paid $720000 total to live there and are sitting on a pile of equity from 50-75 without making any payments for 25 years.

Rent a similar home from 20 to 75 for $2000/month it would cost you $1,320,000 and your payment never goes away.

Very basic example of course but the point is youre ever ahead renting.

 

[dutch_henry]

interesting that you are blaming the new folks…..

When its the Slimy local contractor that owns a big share of the blame there….

Naw, honestly it's just the way things work.

But to appease, the contractor has also burned bridges and will most likely have a settlement to tend to that will eat through his gain.

Meanwhile the new family has already made pariahs of themselves.

 

[dlee56]

As long as I can remember at any given time houses were too much, and the stock market was too high.

Also my post was not just about the last 23 years, it included the next 12 years.

HOUSING VALUES HAVE NOT EXPLODED 15X WHERE I LIVE IN 23 YEARS.


Not sure where you came up with that. My first house was bought for 145000, and sold for $268000 with about $6000 in work done in the deal to get that price. Zillow now says $515000. That is a value that went up by about 3.5X not 15.

You need a roof over your head your entire life.

Do you really think you’ll be money ahead renting your entire life?

My post was about the long term, not short term 1,2,3 years

You MIGHT be able to win short term trying to time the market, bust most win by being in it. It’s pretty much the same for the stock market or real estate.

Below is that first house I sold in 2012
You can see the rental value is $2995.00 right now. Pretty confident that is within a couple hundred dollars of what you could get for rent if not right in the money.

If a person can afford a current mortgage, I’m extremely confident they will be money ahead 25-35 years from now buying versus renting.

View attachment 583334

You’re right I was being dramatic about the 15x and I’m not trying to argue against buying just to convey that it’s a different situation now. I bought a 1200sf 2/2 for $315k this year, my first house. I prefer ownership so that I can have animals and I enjoy having the opportunity to work on my place and make it how I like. I also enjoy shouldering the responsibility of the commitment.

BUT if you tell me that I will be able to sell this for $1.1million (3.5x as your house seen) by 2046 I’d call you insane. I hope I’m wrong but I have a hard time seeing another era like the last 23 years have had.

 

[Newtosavage]

It's just nuts to compare where we are today with where the boomers were when they were in their 20's. Not even close. My wife's parents bought their first home in the late 60's - a very nice 3 bed 2 bath 2 story house in the Houston suburbs - on just one salary and her dad was an entry level accountant for a newspaper. He paid off his college just by working part time (try that today) - so no student loan debt. They had enough money to take the kids on a 2-week vacation every summer. Then, they were making good money in the early 90's when the stock market went nuts, and were able to invest a couple hundred thou because they didn't have a mortgage. No other generation ever had it so easy financially. That was the peak and we've been going downhill since. So much for leaving the place better than you found it.

 

[Dos Perros]

It's just nuts to compare where we are today with where the boomers were when they were in their 20's. Not even close. My wife's parents bought their first home in the late 60's - a very nice 3 bed 2 bath 2 story house in the Houston suburbs - on just one salary and her dad was an entry level accountant for a newspaper. He paid off his college just by working part time through college - so no student loan debt. They had enough money to take the kids on a 2-week vacation every summer. Then, they were making good money in the early 90's when the stock market went nuts, and were able to invest a couple hundred thou because they didn't have a mortgage. No other generation ever had it so easy financially. That was the peak and we've been going downhill since. So much for leaving the place better than you found it.

I think there's some paper house kinda stuff going on with the boomers. A lot of older folks have company pensions they are counting on that will be whittled away over time with bankruptcies and renegotiation of debt.

 

[5MilesBack]

I hope I’m wrong but I have a hard time seeing another era like the last 23 years have had.

The actual growth of home prices didn't take off until about 2014-2015.....at least around here. There was some appreciation up until 2006, but then 2008-2009 completely wiped that out and then some. Homes here didn't recover all that until that '14-'15 timeframe, and then have doubled since then, with a peak right around the beginning to the middle of '22. They've been dropping since then, but who knows how long that will last, or how low they will go.

 

[Newtosavage]

I think there's some paper house kinda stuff going on with the boomers. A lot of older folks have company pensions they are counting on that will be whittled away over time with bankruptcies and renegotiation of debt.

I'm sure you're right about some of them. In my in-law's case, probably because of his accounting background, my FIL made some very lucrative investments in the last 80's and early 90's that has his widow now wondering what to do with all the $. Meanwhile, her grandkids struggle to afford a house. The disconnect is astounding.

 

[mlevimadden]

I didn't read the entire thread, so I'm not sure if it's already been posted, but this is a useful calculator for rent vs. buy.

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

Of course it takes into account some future values that you can't be sure of, but it's at least a starting point.

 

[KurtR]

Boy my new 1288 sqft house I built 7 years ago with a fully finished basement and big three stall heated garage for 160k sure feels like a deal with house prices now. I had a realtor ask if we wanted to sell said he could double our money but looking at other properties it would not be worth it. Have it paid for in 10 years and live the good life.

 

[Dos Perros]

I'm sure you're right about some of them. In my in-law's case, probably because of his accounting background, my FIL made some very lucrative investments in the last 80's and early 90's that has his widow now wondering what to do with all the $. Meanwhile, her grandkids struggle to afford a house. The disconnect is astounding.

Next problem: all the boomers and their money is going to fuel REAL inflation, further whittling away their savings, further making it harder for your kids (mine too).

 

[todd238]

I’m that guy that was an idiot and sold my house in 2019 when the market was at an all time high where I live in Southern Utah and had decided that it was a good time to sell. We had a 4900sq/ft custom built home and our 2 oldest had just moved out so it left us with 1 kid at home. I talked my wife into selling because it seemed like we were due for a correction in my mind since it had been over 10 years since the last dip and we never planned on retiring in this home. Also with only 1 son at hike we didn’t need a hike the size of what we were living in. We had planned on buying property after we rented for a year or so and building our next home that would take us into retirement and live in until we die. So we ended up selling for $570k which at that time seemed like a ton since we had bought it 9 years earlier for $350k. Used some of the equity to pay off all our debt so we were debt free and kept a nice chunk of money in the bank. Now we have literally priced ourselves out of the market where we live and this is we’re we want to retire. Our house would have easily sold for a million right now. That’s over $400k that we have lost by selling. I’m so sick about how this has all worked out and not even sure what to think or do anymore. I make a great 6 figure salary but can’t imagine what people do to afford these $700k + mortgages. Are people in serious debt or is the rest of the country just making more money than I can even imagine. Talking to the realtors around here they are saying that many of the people buying the homes where we live in St. George are buying them as second homes and many paying cash. That’s just crazy. Also they say these are well qualified loans and have income to pay the mortgages unlike the 2008 housing crisis where they gave anyone a loan even without income verification.

What’s the end game here. Are these high prices here to stay (new normal) or is something catastrophic gonna happen or will there just be a small dip in real estate? I don’t know what or who to believe anymore. All I know is I’m always second guessing myself for selling but on the other hand happy I’m 100% debt free. My biggest concern is I had planned on retiring in 5 years. (Age 55). Now not owning a home I know that’s most likely a pipe dream and not gonna happen. I can’t go into retirement with a $3k a month mortgage. What are your thoughts. Should I buy now or wait it out at this point? My next home will be my forever home more than likely.


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I think the prices will pull back some but not to what they were before especially if you live in a desirable area.

 

[TheGDog]

Prop 13 is anti-competitive. Ends up driving up home prices and decreases home turnover by a huge amount, and costs everyone else more money, by protecting those who came first. It's California's version of rent control in NYC.

I can't see anyone who isn't benefiting by policies such as these being for them. Or people who are against gentrification and have societal/political arguments that are - lets say this nicely and you can read between the lines - anti free market.

It's needeed, it came into being for a reason, because these unscrupulous people would just willfully choose to tax old folks out of their homes, so they can then have it sell in the current markets, effectively rasing their tax-base of new "play-money" for the criminals voted into office.

For example.. when Gavin Newscum got on TV talking about our hearts go out to the people in Montecito when the good rains brought mud/debris flows that plagued their little area. Knowing how sheistery Newscum is... I'm all over here thinking to mysel f"Why is this bassturd going on air to show this feigned solidarity? Hrmm..." Then.. knowing how he works.. I had a hunch, so hopped onto Zillow.com and looked at the home prices around that area... THEN his fiegned solidarity all made sense. The homes in that coastal community were like 17-33 Million... so then it clicked "This is where he gets a lotta "play money" from to do all the things like his stupid bullet train thing in the middle of nowhere.

 

[Geewhiz]

All of us turned out okay.

LOL

 

[Newtosavage]

Boy my new 1288 sqft house I built 7 years ago with a fully finished basement and big three stall heated garage for 160k sure feels like a deal with house prices now. I had a realtor ask if we wanted to sell said he could double our money but looking at other properties it would not be worth it. Have it paid for in 10 years and live the good life.

We built a place like that in Illinois, right before the bubble burst in 2008. $139k I think was our final quote from the builder. 2 car attached garage, built to my floor plan with hardi siding and a concrete driveway on 3 acres. What I wouldn't give to be able to build that for under $300k today.

 

[tyler75]

70% of EU folks own versus rent. In the US it’s slightly less.

A while back I did some research on home loans and found that in Europe there loans are structured different then ours. They don’t pay as much money in interest, but there interest rates may be higher. I would recommend checking out the details for yourself.


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[calfroper81]

Its definitely harder to afford them now

 

[bozeman]

LOL

Beat me to it…..