How are people affording these crazy home prices?

[cougarred]

I don't get it either. I've been self employed for 25 yrs and it's dang near impossible for me to get a loan without signing over my first child. Then I see these other's with jobs making lot less than I have been for 30years and bam they get loaned whatever they want. Just sign here.

 

[NDGuy]

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.

People forget about this. Hell to replace anything in a house nowadays is 10k+

Need new windows? 15-30k

Need a new roof? 12k

Need a new AC/Furnace 4-6k each

What young single person or even a couple has that kind of cash laying around? Not many, so comes a point where affordability to get a mortgage is only part of it.

 

[Macintosh]

I didnt read pages 5-30 so maybe this has been mentioned, but covid caused this in lots of places. The whole world suddenly figured out that most offices can work remotely and not pay the $$ for office space, etc in a city. Not to mention a whole lot of people retired to not have to deal with the sh$$show that was working then. Anyway, places that are desireable to live but have housing that looks affordable if you are on a NYC, Boston, DC, Philly, etc salary, are getting bought at bidding-war pricing (i.e. well above asking price) sight-unseen, often in cash. My theory is that based only on relative numbers, in a small place like where I live (entire state population only 600,000) it only takes a tiny, tiny fraction of people from a big city selling a $1.5million house to buy a $750k house in cash with $ in the bank, to make a huge difference in pricing, crowding, etc. We can blame high-speed internet, remote working, and related topics for this phenomena, and I dont think a market correction will affect this part of the market nearly as much as people think--even if it prices 75% of the people out of the market, that's still more than capacity.

 

[WyoBowhunter21]

My wife and I are trying to prepare to sell our home in the next 1-2 years to "cash" in on our equity and buys some land. I did the math the other day on "equity" that we have in our home. We have owned our home for 10 years. I looked at our interest that we have paid, I will say we refinanced to a 15 year mortgage so it is slightly skewed. We bought our house for around $230K, house is worth around $400k now. After all the upgrades, maintenance and interest we will make around $40k. If we would have stuck with a 30 year mortgage, that number would go down. Long story, I think owning land is worth it but if I had to live in a city, I would probably just rent.

 

[scattergun]

Its sad that people are losing their connection to the land. Cant imagine someone who hunts or spends any time outdoors doing anything wouldnt understand how sad the increasing urbanization of America and the increasing disconnect people have with the land is. When you own land you are connected to that land, you see the intrinsic value it holds.

Once that disconnect occurs the land becomes increasingly devalued to them. They then have no problem turning that piece of land YOU value into a parking lot for Walmart or a subdivision in the name of "progress". Look to areas like Chicago for an example of people being obsessed with things that dont matter while laying waste to things that do.

I agree with that sentiment for sure, but I’d say that it’s suburbanization and all its associated sprawl, consumerism and emptiness that really alienates people both from the land and from each other.

A well-designed city (e.g. Amsterdam, Vienna, Copenhagen…) is a beautiful, lively and efficient place that can provide a very high quality of life in a compact area.

What’s sad is that this model has been almost completely ignored and instead we sacrifice a staggering amount of space and resources to ever-expanding generic suburbs that have no real connection to either nature or well-functioning human society.

 

[HuntHarder]

That depends on where and what you buy

Do you have any examples of houses that were bought 20 years ago that did not appreciate?

 

[bigeyedfish]

A home doesn't have to just not appreciate for renting to make sense. It has to appreciate less than the total cost delta invested elsewhere appreciates.

For example, the Vanguard Total Index fund has increased about 4.7x in the last 20 years. If the cost of renting was half of the total cost of home ownership, the remaining half gets invested. The house value has to increase at least 2.35x to break even. Obviously this is just an example, and rent vs. ownership cost ratios will be wildly different based on location, but this shows the process.

 

[JVS]

People buying expensive houses in your area are moving from places where they are selling homes for 1 and 2 million.

They are either newly retired or can work from home.

Roadrunner hit the nail on the head.

This is happening in rural Missouri like crazy. Many from the east coast buying up ground. Overpaying like crazy intern driving up the comps. Sucks

I would rent for now then consider downsizing significantly and relocating to a tax friendly state like Arizona for retirement

 

[scattergun]

A home doesn't have to just not appreciate for renting to make sense. It has to appreciate less than the total cost delta invested elsewhere appreciates.

Which is exactly why so many companies lease their buildings instead of buying.

 

[Szwampdonkey]

I agree with that sentiment for sure, but I’d say that it’s suburbanization and all its associated sprawl, consumerism and emptiness that really alienates people both from the land and from each other.

A well-designed city (e.g. Amsterdam, Vienna, Copenhagen…) is a beautiful, lively and efficient place that can provide a very high quality of life in a compact area.

What’s sad is that this model has been almost completely ignored and instead we sacrifice a staggering amount of space and resources to ever-expanding generic suburbs that have no real connection to either nature or well-functioning human society.

I can get on board with that. Suburbanization is just as bad, a sterile way to live imo. Id imagine not many people in those sprawling cookie cutter subdivisions have much connection to anything other than the consumerism you mention.

 

[PNW bow hunter]

Well I guess it really is true that a bunch of big corporations are in the residential real estate market to rent to people.

#freedom
#not being tied down
#no maintenance
#no responsibilities
#homeownershipisatrap

They must be spending a fortune on social media convincing everyone renting is the way to go

 

[aftriathlete]

I was in the house market very briefly about 3-4 months ago here in Oahu. Wanted to at least see for myself what the state of prices vs. interest rates/mortgage payments were as our rental lease was approaching time to renew. It was obvious that it did not make sense to buy here right now, the online calculators on should you rent vs. should you buy (I used same one I saw someone shared on this thread a couple pages ago) were telling me that the monthly breakeven in this market was $6300 a month, so if you can find a comparable house to rent for less than $6300 a month then you should rent.

Now I will add that houses are still flying off the shelves here, they are not sitting on the market long. So someone is buying. Both lenders and both realtors we briefly worked with were pushing temporary rate buydowns hard because "you'll definitely be able to refinance in the next 2 years," "prices here always go up," "the rental market here is strong so you'll definitely be able to rent it when you leave." Yeah well the mortgage on this house we looked at would have been $2000 a month above what the houses on that street are renting for. I expect there are a lot of people moving here right now that are buying what these lenders and realtors are selling on all those tropes and 2 years from now, or maybe sooner, there's going to be another 2008, ARM-like housing crisis because that's basically what these temporary rate buydowns are.

I’m also not willing to bet a bankruptcy on what I *think* the Fed is gonna do with interest rates over the next two years.

 

[CJohnson]

I think a lot of people act like they own their home when they don’t. Try not paying taxes on your property and see what happens. And then wait until a bunch of blue state people move to your county and watch what happens to your property taxes. It varies from situation to situation but I feel like there’s a lot of people who bought a home they didn’t really want as an “investment” in the past two years are starting to realize they’re going to be stuck there for a while.

 

[11boo]

I think a lot of people act like they own their home when they don’t. Try not paying taxes on your property and see what happens. And then wait until a bunch of blue state people move to your county and watch what happens to your property taxes. It varies from situation to situation but I feel like there’s a lot of people who bought a home they didn’t really want as an “investment” in the past two years are starting to realize they’re going to be stuck there for a while.

1200 a year in taxes, on a 2k SF home on an acre bordering a National monument. instead of paying rent, I made mortgage payments. All of them.
Even the dog says it was a good choice.



Seems like a good “investment” to me.

 

[HuntHarder]

I think a lot of people act like they own their home when they don’t. Try not paying taxes on your property and see what happens. And then wait until a bunch of blue state people move to your county and watch what happens to your property taxes. It varies from situation to situation but I feel like there’s a lot of people who bought a home they didn’t really want as an “investment” in the past two years are starting to realize they’re going to be stuck there for a while.

What does "acting like they own" look like? If you rent and "blue state people move to your county and raise your property taxes," do you not think that will get passed on to the renter? All costs associated with owning or renting get passed on to the purchaser or renter. Moot point imo. Owning vs. renting I will agree, is situational, and one makes more sense than the other at different times, for different people.

 

[CJohnson]

What does "acting like they own" look like? If you rent and "blue state people move to your county and raise your property taxes," do you not think that will get passed on to the renter? All costs associated with owning or renting get passed on to the purchaser or renter. Moot point imo. Owning vs. renting I will agree, is situational, and one makes more sense than the other at different times, for different people.

Renting is having the option to move without having a ton of capital tied up in a house.

I’m not saying one is always better than the other. Just saying that as long as you have to pay taxes, you don’t really own your house. Try not paying taxes and see what happens to “your” home.

 

[william schmaltz]

Now I will add that houses are still flying off the shelves here, they are not sitting on the market long. So someone is buying. Both lenders and both realtors we briefly worked with were pushing temporary rate buydowns hard because "you'll definitely be able to refinance in the next 2 years," "prices here always go up," "the rental market here is strong so you'll definitely be able to rent it when you leave." Yeah well the mortgage on this house we looked at would have been $2000 a month above what the houses on that street are renting for. I expect there are a lot of people moving here right now that are buying what these lenders and realtors are selling on all those tropes and 2 years from now, or maybe sooner, there's going to be another 2008, ARM-like housing crisis because that's basically what these temporary rate buydowns are.

You see a lot of similar messaging on real estate social media pages. They claim buy your $500K house now and deal with a couple years of high mortgage payments and refinance it in 2 years when rates drop. And once rates drop, it will be worth it since the value will sky rocket to $700K because of all the new buyers in the market taking advantage of long-awaited lower rates. On the surface it seems to make sense. But buying it at $500K @ 7% is about the same payment as buying it at $700K @ 3%. So on that logic, not sure why buyers would show up in the second example but not the first for the same house. We also have 3 years worth of housewives waiting on that house upgrade and if it takes a couple more years to drop rates enough, we will have 5-6 years worth of antsy buyers ready to move up in house. We could very well see a higher demand for the upper end of the market and have an absolute over saturation in what would be considered lower middle class or starter homes and those prices may really drop. We will see. Noone knows (certainly not me!), everyone is just playing speculative games.

I'm a numbers nerd. I track everything. Thank God we bought in 2019. Our mortgage is the same as what our rent was. We have gained about $120K in house value plus what we've paid down. In that time, we're at about $50K in "lost" money form interest, insurance, and taxes. In the same time, we would simply be out nearly $80,000 if paying rent with no added value to our net worth. And that's IF our rent stayed the same, it would likely be at least a few grand more a year by now. Location Location Location; we bought medium value in our neighborhood in an excellent commute location. Roof and structure are good for at least another 10-15 years. As far as major appliances, I've found warranties to be worth it for how much they cost to replace and repair. I've already got a new washing machine and two emergency heater repairs off my home warranty. Basically the cost of those replacements/and repairs have paid my warranty for nearly 10 years.

 

[HuntHarder]

I mean... if you don't pay taxes on anything it won't be yours.. Food, vehicles, fuel, toilet paper, the list goes on... Taxes, unfortunately, are a part of life.

 

[william schmaltz]

I’m not saying one is always better than the other. Just saying that as long as you have to pay taxes, you don’t really own your house. Try not paying taxes and see what happens to “your” home.

I guess how far do we want to stretch out this game? Try not paying your taxes in general and the government will take all of "your" stuff. Your vehicles, guns, etc will be hauled off as you sit in the back of the police cruiser. Does that mean we don't really own anything? By that logic, we don't. As they say, every law in the country is punishable by death. That same logic says every law in the country is punishable by all of "your" stuff being confiscated if you decide to take it that far.

Edit: I see I was beat to it by a minute!

 

[ODB]

I agree with that sentiment for sure, but I’d say that it’s suburbanization and all its associated sprawl, consumerism and emptiness that really alienates people both from the land and from each other.

A well-designed city (e.g. Amsterdam, Vienna, Copenhagen…) is a beautiful, lively and efficient place that can provide a very high quality of life in a compact area.

What’s sad is that this model has been almost completely ignored and instead we sacrifice a staggering amount of space and resources to ever-expanding generic suburbs that have no real connection to either nature or well-functioning human society.

Good post.