How are people affording these crazy home prices?

[KsRancher]

This thread got me curious about my place. Bought it in 2014 for $107,000. Its a 1750sq/ft on 2 acres. We added on 400sq/ft and bought another acre beside it. Just looked it up on Zillow and it says it's worth $164,000. And it doesn't know about the 400sq/ft addition or the additional acre. Property taxes are $1600/yr and insurance is $1700/yr. Financed it at 4% for 30yrs when we bought. I know it wasn't the smartest move money wise. But the first 5yrs we put extra on the payment. Took 8yrs off of the end of the loan.

 

[fngTony]

Out of curiosity, for those that are older than me, when did buying a house start to get advertised as an investment? Has it always been that way or is that something newer?

I was born in 91 and I cant remember a time when someone said you buy a house to live in it. You buy a house to make money is all I have ever heard.

I was born in 79 so not that much older. Living in the Midwest as kid the idea was to buy a house to live in. Most of your equity was from paying down the mortgage not skyrocketing home values. Moved to Colorado in 90 that had a similar vibe until about 2000 when it started becoming an investment to flip until you get into your ideal home then downsize for retirement.

 

[NRA4LIFE]

I never really thought of our house as an investment until it quadrupled in value. That's over 25 years.

 

[bojangles808]

If you do the money market option, near zero. All you are doing is taking the money you would be paying more on your mortgage and putting it in a savings account that is producing more interest than your mortgage is costing you.

If you fall on hard times, you start pulling from that savings to pay the mortgage.

The other major advantage to do this is you keep your cash liquid for other opportunities or needs. You pay 500 more on your mortgage and you can’t really get it back easily. You put it in a savings and you can access it when you need/want.

The current economic/financial market we are in is the best opportunity to make money while taking little to no risk we have seen in the last decade plus. You are talking making five percent on money sitting in the bank.

which banks money market accounts are paying 5%? these are just savings accounts?

 

[UtahJimmy]

which banks money market accounts are paying 5%? these are just savings accounts?

Fidelity is paying 5%
SPAXX
FZFXX

 

[HuntHarder]

4 week T-bills are paying 5.3+%. I suggest this over MM's because you also do not pay state income taxes (2.5% in AZ) on the interest earned. I have been able to offset my mortgage all year on the Tbill interest earned.

 

[MattB]

Let’s say I still owe 100k at 2.5% on my house and am starting at $0 in saving at 5% but have an extra $500 a month to put into either. Is there an online calculator or something that kind of shows you the different outcomes? Thanks

So long as you are actually saving the dollars that you would otherwise pay against your mortgage, save/invest that money all day long vs pre-paying 2.5% debt.

Out of curiosity, for those that are older than me, when did buying a house start to get advertised as an investment? Has it always been that way or is that something newer?

I was born in 91 and I cant remember a time when someone said you buy a house to live in it. You buy a house to make money is all I have ever heard.

I have always looked at my house as a non-financial investment. It is nice when they appreciate, but IMO folks who are looking at their home as a primary investment may be in for a shock when they are later in life and are faced with the few options to harvest the equity from it.

 

[CorbLand]

which banks money market accounts are paying 5%? these are just savings accounts?

UtahJimmy posted the two that are probably the best at the moment.

Capital One has a HYSA that is 4.3 I believe. They also have some CDs that are in the high 4s and are around a year to maturity.

Yes, they are basically a savings account in the sense that you put money in them and collect the interest.

Plenty of very low risk 4.5-5 percent return options right now. It’s a risk adverse persons playground right now.

 

[Meathead]

I never really thought of our house as an investment until it quadrupled in value. That's over 25 years.

It's nuts, our house has doubled in value and we've only lived here for 7 yrs.

 

[Rob5589]

which banks money market accounts are paying 5%? these are just savings accounts?

We use Ally and are completely happy with them. There are others as well. Ally is 4.5, our credit union is .15. It is online only although they do send you a debit card. What that means it deposits in and out take 3 business days, give or take. So if you need immediate access to cash online may not be your best choice.

 

[ztc92]

Fidelity is paying 5%
SPAXX
FZFXX

UtahJimmy posted the two that are probably the best at the moment.

Capital One has a HYSA that is 4.3 I believe. They also have some CDs that are in the high 4s and are around a year to maturity.

Yes, they are basically a savings account in the sense that you put money in them and collect the interest.

Plenty of very low risk 4.5-5 percent return options right now. It’s a risk adverse persons playground right now.

I’ve been using E-Trade (Now Morgan Stanley) for the last few years as they were previously the highest but now are a bit low at 4.25%. Have been very happy with their platform overall and can usually get money out in 2-3 business days if I need it.

 

[dylanvb]

i am 28 and just bought my first home back in February, its been a struggle but the wife and I have decided that we wanted a home to grow our family instead of throwing it away on rent. Invest in your dreams and not someone else's.

 

[Beendare]

Us debt is poised to rise $5.2 Billion a Day according to B of A’s Michael Hartnett

You read that right

World food prices took another huge jump

In the U.S., public debt-to-GDP is set to reach a record 134% by 2027. The sharp rise in interest rates is increasing net debt servicing costs, which stood at $475 billion last year. Over the next 10 years, net interest costs on U.S. debt are projected to total $10.6 trillion.

Inflationary policy with no end in sight. Owning Real Estate historically has been a good hedge to these Tax and Spend politicians.

 

[CorbLand]

I’ve been using E-Trade (Now Morgan Stanley) for the last few years as they were previously the highest but now are a bit low at 4.25%. Have been very happy with their platform overall and can usually get money out in 2-3 business days if I need it.

I keep about 5000 in a standard bank that I can have access to that day and then the rest is in online stuff for the higher interest.

My emergency fund and other savings are split between capital one and SPAXX right now.

 

[pacoalcracker]

we have a house shortage right now of about 4 million homes.....and have an influx of over 1 million immigrants per year...those people need to live somewhere. home prices will not be coming down anytime soon, regardless of the interest rates. I bought my first home in 1979 at 12%.............the current 7% is a bargain in comparison and in-line with the long term averages. Get used to it.

 

[5MilesBack]

I have a couple Treasury I-bonds, one is currently paying 9.58% and the other is paying 6.48%. But you're limited to purchasing up to one $10k bond a year. I have no idea why there's a such a gap between the two, except one is much older than the other.

 

[Happy Antelope]

This is a huge problem for the younger generation just out of school. Both my 20 something kids live at home because there is no way to buy and no where to rent here.

It's up to us as parents I guess to help them sadly I guess. Still better than 80% of the rest of the world where there really is no hope at all.

 

[Dos Perros]

Tangentally, I read an article recently that referenced the mean and median net worth of the average American. I was surprised to see the mean being 6x+ the median. That is a sad commentray on where we are going as a country, with wealthy becoming increasingly concentrated in the hands of the few.

What is the multiplier trend over time?

Obviously the mean will be influenced by the upper upper reaches, top 1% or 0.1% or 0.01%.

It has been my understanding that, when looking at the boomers' parents who were middle class, a lot of their children (the boomers themselves) were able to ascend into the upper class. So the middle class has shrank because the upper class got bigger, not because the lower class got bigger. I think this is a sign of at least some success.

 

[MattB]

What is the multiplier trend over time?

Obviously the mean will be influenced by the upper upper reaches, top 1% or 0.1% or 0.01%.

It has been my understanding that, when looking at the boomers' parents who were middle class, a lot of their children (the boomers themselves) were able to ascend into the upper class. So the middle class has shrank because the upper class got bigger, not because the lower class got bigger. I think this is a sign of at least some success.

From a Pew Research article:

“The wealth gap between upper-income and lower- and middle-income families has grown wider this century. Upper-income families were the only income tier able to build on their wealth from 2001 to 2016, adding 33% at the median. On the other hand, middle-income families saw their median net worth shrink by 20% and lower-income families experienced a loss of 45%. As of 2016, upper-income families had 7.4 times as much wealth as middle-income families and 75 times as much wealth as lower-income families. These ratios are up from 3.4 and 28 in 1983, respectively.”

You need to scroll down a bit to get past the section on income to the net worth discussion.

1. Trends in income and wealth inequality

Barely 10 years past the end of the Great Recession in 2009, the U.S. economy is doing well on several fronts. The labor market is on a job-creating

www.pewresearch.org

 

[joslinbd]

A lot of people are going into this with reckless abandon. I'm just waiting on the crash like in 2008 so I can swoop up a new house for cheap.