It's not so much that the rates are high, but the prices are insane. I feel bad for the younger first time home buyer. They're going to get annihilated.
We're all just begrudgingly re-signing our leases at this point. We planned to live in our current place for a year and buy this summer but obviously that wasn't in the cards. Now we're here until at least next July and we'll have to reassess then I guess. It sucks to finally be at the age/place in your life where you want to "start" your life and have all these external forces change your plans.
Yep. I was a FTHB in ‘05. And yep…got annihilated. I’d estimate it set me back financially for 10 years. Also was heart breaking to see people in my neighborhood buying houses twice the size of mine for 100k less than i paid after the bubble popped.
I bought my home in 2007. It was devastating TBH. I was too young to know it but reality hit later. This market is going to do more damage to first time buyers IMO than the 2008 debacle. Here's how I see it playing out:
Regardless of higher rates, prices will stay high due to supply/demand imbalance. Affordability will be a barrier to entry. Although I do not see anymore price appreciation like we've seen the last few years. (See below)
Longer-term owners will be loath to move due to higher rates essentially locking up the existing housing market. Adding to the supply/demand imbalance hurting first time buyers.
New buyers over the last few years will see their property taxes increase due to the valuation increases they paid at. They will be surprised when they get their escrow shortage letters. They will not be able to refinance out of the higher payments due to higher rates.
Higher rates and higher property taxes will limit the resale value and destroy equity. Very similar to 2009.
In summary, prices will stay higher due to supply/demand imbalance but they will flatten out due to higher rates and higher taxes. (Hurting FTHB) New owners will not see much equity for many years while simultaneously dealing with higher property taxes. This combination will destroy equity.
I know some of these seem contradictory but I just can't envision a different scenario for the majority of people who bought over the last few years. Of course all real estate is local and there's always markets with strength but I think generally this is how it will tend to play out. 🤷♂️
I'm kicking myself for not having bought a home in 2019. I had a steady job and a down payment, but I was saving to buy in cash, despite the historically low interest rates (and in hindsight, much better prices)
2020, I became unemployed and watched homes soar amid supply drying up. Supply began to move again in 2021 but by then it was too late to buy a middle class house. That said, the writing on the wall was that it was only going to get harder..
I bought the best home I possibly could for $35k by opening myself to fixers and such. I found a vintage mobile home that predates the HUD code and is in city limits on private land, included. Good condition, clean cool and dry.
It's not what I set out to find, but I think your points are valid.. even if I had squeaked by, and gotten a large home 2019 or so. Property taxes, and cost to insure would have penalized me. Rates, not so much. I would probably still rather be in that large house. And yet, given my options in 2021 and now, the best thing I can do is save and stay where I am, since my home is so far outside the mainstream, it's taxed at almost nothing, paid off etc. I live in the midwest, but when I'm looking at 170k-200k to find something bigger than what I have.. it's really hard to say that's the right move. Maybe its best to hang tight, invest the money, and be ready if/when housing were to collapse. I'm not banking on it, but I also don't want to chase an average sized house (when upper middle class homes haven't seen the same rate of appreciation post 2020)
Hi, I am here. 32 YO, ~$75k gross income in Ohio and can't afford a home because the mortgage would be nuts even after forking out a large down-payment. I moved back into my parent's home and pay them rent because apartments are also absurd. I stopped being ashamed by that. Unless I want to risk my personal property/mental health/life and live in a high crime area, I cannot buy a home and live comfortably.
I honestly feel very bad for people my age that make less. I do not know how they are getting by.
Whoever says that this market is still affordable is extremely selfish and doesn’t care about the average working class household that will have to keep renting because of a few others’ greed.
People who need/want housing. All the people on here talking about 'sometimes you don't have a choice' in terms of selling a house - yeah, those are the people buying at these rates. They have enough equity, usually, to still be buying a home, but also usually have a reason to also not want to rent, if possible. Things like a large family, large dogs, etc, etc can keep people from renting, especially if they come with equity in a former home. People have gotten new jobs, divorces, or just straight up no longer like the area they live in. Historically, the current rates are still really low, comparatively, too.
That's us! Been in our starter home for 11 years. We've had 5 kids since. Found our move up home. Our home price has doubled so we have the equity for a huge down payment.
Well said! If it weren’t for a home I bought years ago we wouldn’t be trying to buy right now. I bought when I was a single woman, not worried about school districts.
Fast forward to 2023, I’m married w a baby and we need more space, a better school district (before he gets to Kindergarten), and a place that is “ours.” So only bc of the house profits we were able to put down 20%, add to emergency savings, etc. even though buying isn’t the most ideal w prices it still gave us what we needed. I suspect many more middle class folks in our same position.
You have zero logical reason to think interest rates will decline, the FED is telling you they don't expect interest rates to decline for atleast 2 years.
Everyone needs housing. If a rental costs the same or no available rental has what you want (different than *need*), then do a cost/benefit analysis and don't be an idiot about risk management and tolerance. Future job security & wages, appreciation, ownership & rent cost increases all have uncertainty. The best you can do is some educated scenario planning.
Everyone needs housing but not everyone will be able to afford a home. The society and jobs are set up this way. You can't expect somebody making $20 or $25 an hr. to be able to buy a house. Everyone seems to think that owning a house is the end game. A large majority of the population who have houses don't own them the bank does until the mortgage is paid off.
At least Monopoly is a game where your wealth is based on your own roll of the dice. These days, your ability to roll doesn't even matter most of the time, it's mostly how well your grandpa or dad rolled. Monopoly wouldn't be a very good game if one player started with 100x the starting money as the other players.
Eh. If you're born into a roughly middle class family in the US, and they don't lose everything before you're an adult, you'll probably end up fine. You don't need to be from a "rich" family to have a sustainable existence. It would be nice to have a family that could hand everything to you, but that middle class-ish upbringing and level of resources is enough to have a pretty good chance of being an independent adult.
I lived in apartments with my single mother and little brother growing up. She did end up marrying into middle class towards my junior or senior year of high school. They did kick me out when i turned 18 but i joined the navy that ended up putting me through college after i got out. My twenties, i made $5 an hour as a workstudy and eventually 30k a year after i graduated. My salary went up exponentially as i hopped jobs every few years to get better pay. I'm 40 and do pretty well. Bought a triplex in 2017 and a house in 2020. Married and I'm pretty much middle to upper middle class now.
I think you're pretty much right, even those who grew up in poverty could end up fine. My family gave me a shitty car that I crashed a year later and that's about it. The military benefits are what really helped. That VA loan is what got me a triplex that paid me when I bought it. It was insane!
When? As in the last few years? Or over the last few decades. As a Gen x I feel it was tough but Ive been able to accrue. The young generation face a much tougher landscape in my opinion. But thats just my view. Not that it matters.
I don’t think it’s just born into money. Born into an environment where money concepts are taught is a big thing. My parents didn’t have money but they taught the shit out of me about money concepts. It has served me better than any loan or financial gift ever will.
The number one predictor of a person's economic standing as an adult is the economic standing of their parents. Full stop.
It's not guaranteed, but it is the #1 thing in common.
Rich people buying property for cash is a lot more like Monopoly than a healthy housing market.
In the sense that when Monopoly was made, home loans weren’t really a thing. People paid cash, maybe a five year loan. A “mortgage” then is what we call a HELOC or title loan now. The old sense is still around figuratively (“we’ve mortgaged our future for…”).
But then loan lengths shot up to 30 years and hey, wouldn’t ya know it, home prices shot up, too. Must be correlation, not causation.
In muh market, llc’s are usually investors. Wealthy families use trusts. The difference is that trusts are usually eligible for homestead exemptions (same as individual buyers), while llc’s and corporations are not as they are presumed to be investors.
Of course, states and counties vary in how they manage this.
To your larger point, though, I see llc’s and investors continuing to buy. They use 1031’s and are very much keeping the party going. In fact, at a certain higher price point investors are nearly the only buyers lately.
hahaha exactly!!! I don't make the most money in the world, but was pre-approved for $400k and of the 5 homes I was ready to put an offer in on, they were swept up before my ass even made it home to simply think about the purchase. Google, Amazon, Microsoft, and now Intel all moving into the area is becoming a big Fuckin problem around here
It’s not historically normal for that rate to be applied to such crazy high prices. Last time rates were over 6, prices were a much lower multiple of average wages.
“6 isn’t historically high” is an out of touch boomer talking point lol.
I just bought a house this week and locked in just before the recent bump in rates. I can't say I'm wealthy by any means but I did move from Seattle to Minneapolis and the market is quite a bit more affordable here than Seattle. Sold my little condo in Seattle and had just enough for 20% down on a good size house out here. But my rate now compared to my COVID refi rate is pretty nuts lol
Best way to explain is based on the perspective property owner's financials. Google for news on "florida home insurance" and the picture is quite ..bleak.
My wife and I are looking, but are being super picky.. if we are going to buy at these rates and prices, we are only buying a forever home. The problem is, those fully updated, nice, fully move in ready homes are still selling like hot cakes by us... Everything else is slowing down, except those..
Same. Still looking, but definitely not going to just buy something to buy something at these prices and rates. To buy something now, we need to fall in love with the home enough to stay there long-term.
But even the trash that probably just needs to be torn down and rebuilt is still selling crazily over list. It's insane. This is a clown economy, and I'm about ready to stop attending open houses and start attending townhalls and protests.
I was going to ask why not don’t you guys buy a fixer upper, and by that I mean still liveable but dated? Then I figured you’re right with the high rates and prices it should be move-in ready and not need a renovation.
We've been trying this. We have lost to all cash every time. We are seeing prices increase 10-20% since the beginning of last year. Inventory doesn't exist. Everything is estate sales. The feds completely destroyed the market.
Where I am retail buyers can't even touch fixers. Think about it...a normal buyer has to hire a contractor and pay double the cost to flip or fix it that a contractor does. So all of the fixers are being bought in cash by people who can overbid retail bids because they are doing the work themselves (like contractor-flippers and investors) and can come in higher than the number that would pencil out for a retail buyer.
I’m looking for a fixer and much prefer something dated that hasn’t been remodeled. The main issue is things that would need major layout changes just to get what I want or things that look like they have structural issues (sinking floorboards). Layout issues have usually been small closed off kitchens or weird bedroom/bath situations.
People maybe different meanings of “fixer upper” like some would consider only houses with laminate floors and marble counters as move in ready, but some of us are ok with cheaper wood block or tile counters and a kitchen that hasn’t been updated since the 90s as long as everything is working and there’s no mold or serious issues that need repairing.
But tbh if your paying upwards of half a million it should be newly renovated cuz half a million for a fixer upper that can’t be flipped for over a million is just Ludacris.
Historically these rates are not outrageous. What crazier to me is that prices have barely come down and people are still buying at high principal pricing, and high rates.
I bought at 6.1%
Renting out one of my spare rooms for $800 a month to bring my mortgage to a more manageable amount. Probably quite a few people doing so as well.
Prices will probably never come down in a meaningful way. It’s lost hope at this point . We’re going to see a decade + of stagnant prices as wages catch up to inflation.
Yeah, people are way too emotionally attached to their home values, and economically attached to their interest rates.
Bob bought a house in 2019 for $290k and 4.1%. Zillow now tells him his house is worth $420k, and he regularly gets letters from corporations offering him $365k in cash for his home. He is never going to let that home go for $290k or even $350k, *especially* not when he will get hit by 7% interest rates wherever he goes next.
Prices aren’t going back.
I mean it is transitory to even higher rates, being realistic about the mess we’re in, double digit rates are coming. I don’t think most realize how bad it is for an economy to have housing become so unaffordable
Historically rates have been around 7% people just got spoiled and economists were warning people for years that rates would not stay this low but apparently no one listened or believed them . So why is everyone so surprised.
This is true, but there are also plenty of dual-income couples earning $250-500k/year buying properties on their own without any financial assistance from family.
Generational wealth transfer is the biggest secret weapon that people in the real estate bubble subreddits never care to admit to.
There is a fuck load of cash sitting around waiting or being transferred down.
This “bubble” isn’t going to pop. It may slow, but won’t pop. Not IMO at least.
And people with equity that sell and buy again somewhere else. There are also a lot of professional couples that have solid incomes. My spouse and I are like that. We both work in tech sales and make good money. We work from home, so we can buy in a cheaper area with SFHs in the 500s and it’s very affordable.
Lots of people. I was talking to a realtor who was telling me they’re still seeing cash offers. We live in a VHCOL area so this has got to be a significant amount of cash.
It’s not really ‘lots’ of people. There’s just such limited supply on the market that what does list, is still selling regardless of how egregious the price. Sellers won’t sell unless they get their desired price, which means the only cohort of people that can buy currently are those with a lot of money. The limited inventory is acting against interest rates and keeping prices high.
And the prices sold metric stays high as a result. If you include houses that aren’t selling due to no bid, then what’s the price? Metric looks different.
Not trying to speak for your friend or his experience in this case specifically, but some times an offer can be from a bank and still be ‘a cash offer’. The key really is no contingencies. Here anyways.
I did this for my last house. Went with a form where they front the money and give me a hard money loan. It’s effectively a cash closing for the seller. It was the only way I could win a house in 2022
I know my opinion will be downvoted but my wife and I was house poor for the first 3 yrs after we purchased. We brought in 2009 and questioned if we make the right decision. We were laughed at for buying when the neighbor that rented only paid $1,200/mos when our mortgage is $1,400 with 20% down. I’m still paying $1,400/mos and pretty low property tax due to Prop13 in CA and the condo next to ours are renting it for $3,000/mos. If we “listen” to all those around us that told us not to buy in 2009, we will be in their shoe right now - complaining about rent and constantly moving (well we did move couple of times afterward but was due to upgrading - we still currently have our first condo).
Tbf, you purchased a home during a high affordability period. California Association of Realtors has historical data that shows almost 70% of CA households could afford an entry level home back in 2009. That number is down to 36% for 2023 q1. Most people in CA aren't able to buy a house even if they wanted to right now.
To further illustrate the financial difficulties of owning a home today, I'll use your numbers above to try and give a rough breakdown. Mortgage rates were about 5% in 2009 and a 1400 mortgage after 20% down (65K) puts your home at about 325k. This was the CA average house price at the beginning of 2009 according to zillow. The median household income in CA in 2009 was 56k according to stlouis fed data. that puts the mortgage at about 30% of the median household income.
CA average house is currently at 740k which would require a down payment of almost 150k. At 7% mortgage would be 3940. Latest St Louis fed data shows median household income for 2021 to be 81500. Mortgage would be 58% of median income.
For easy math, I'll use today's tax code for some raw net income calculations. 56000 gross income comes out to 49000 net income after fed and CA taxes. After subtracting 1400 * 12 months, you're left with 32200 for the year(2009). 81500 gross income comes out to 66700 post fed/ca taxes (forbes tax calculator). After subtracting the 3940 *12 months you're left with 19420 for the year (2023).
People need to save a lot more, pay a lot more of their earnings, and will have less money left over after mortgage in an inflationary environment. The "complaining" with the housing market isn't a matter of timing for value. Affordability is so bad, people literally cannot make the same decision you were able to make.
Yes. Trust me when I say you just have to ignore everyone (including family) that question your decision because they probably went with another direction in this housing market. You have to believe in yourself (as well as work your ass off) that you will make more in salary in the future. Both my wife and I work hard and find ourselves making more every year and in just a few short years we can easily afford our mortgages and could buy another house. I know this is a different market than what we had back in 2009 but I still believe the market will be higher in 10yrs from now and rent won’t be at current level. Good luck.
I work in mortgage. The answer - people. Tbh, the cash sales to investment groups have slowed down. The majority of our buyers currently are millennials. Lots of young people buying their first houses and lots of people moving up to larger houses because they're starting families. June was our busiest month in a while - not at the level of the 2020 craziness, but on par with where the market was for us in 2019.
Reddit is an awful example of the financial situation of the average person. While r/antiwork and r/workreform have massive numbers, there is an inherent bias to them - people with low paying jobs who have not been successful in their careers are drawn to communities of others in similar situations. For every r/antiwork user, there's someone that is successful in their career and financially stable enough to buy right now. The folks I'm seeing in their late 20s early 30s have very healthy incomes and aren't having trouble qualifying. These are people with real jobs too - not mommy and daddy money. Observe enough and one of the things you'll eventually find is that the people who sit online 24/7 complaining about being broke are the people that will always stay broke.
There are still people relocating for work
We recently hired for engineering roles in the Southeast. Filled 5 of 8 with new hires from CA and WA. 2 of them bought new builds. 1 went the fixer upper route and I'm assuming the rest are renting.
A lot of people are buying with cash and skipping the loan process all together. Who are these people and how the hell do they have so much money? No idea🫠
When rates were low, you could get 15-year mortgages so I expect a lot of people with tech jobs were able to pay them off quickly. Not counting institutional buyers, there are plenty of people with paid off mortgages that are moving across the country. And a lot of Boomers and early Gen X (like me) are downsizing with paid off or almost paid off houses. And a lot of kids are starting to get their Boomer parent's houses.
I’m set to close tm at 6.375%. Even with 8.5% down (meaning $100/mo PMI) my monthly payment comes out lower than rent would be next lease plus I’m getting and extra ~700 sq ft than my current apartment. As awesome as 2% would have been buying $176k home is still much better than my $1500 1b/1b apartment. Hopefully one day I can refinance for better but still, I feel I’m in a good spot.
Also 2-3% are historical lows no? Whoever got in then should feel lucky and who ever is waiting for that to happen again is living with their heads in the clouds imo.
Don't forget boomers who took ppp loans and bought second homes. My current landlord falls into that category. There's multiple homes near me that were bought with ppp funds. You can look up the owner and then look at the ppp databaseb and see they all received huge windfalls from the govt.
First time home buyer soon, and honestly my neighbors have made my life such a living hell I would rather put myself into the hole hundreds of thousands than worry constantly if this is the night I’m staying up until 3 am because they decide they want to drink beer and blast music.
That and add in the fact I’ve been waiting for years for this bullshit to crash so I could buy and it won’t fucking drop and it’s to the point of “do I just jump in at this point?” Because it just keeps climbing
Not to say you can't lose hundreds of thousands over timing the market, but just like the stock market, after any crash, it will still come back and be higher than before eventually. My house (before I bought it) was worth $550k before the 2007-2008 crash. I bought it in foreclosure for $280k in 2010 and it's $675k now. Obviously, if one can time the market (which isn't easy although I did it last time) it's better, but if not, you'll still end up with equity if you hold long enough.
Thank you that actually does make me feel a lot better. We’re shopping this weekend and part of me wanted to self sabotage just to hold out until the fall
We're in a 1BR apartment, with no 2BR options available for anything under $2k within a 30 min radius. We're looking to have a child, already have a dog. We've put in 9 offers on houses which would have monthly payments about $500 over what we'd pay in rent to get a 2BR. We don't feel like we have any good options, but of the crappy options -- buying seems like our best bet.
For everyone who says prices are insane - I get it. But I’m also trying to build, and THOSE prices are insane. Materials are hard and expensive. Labor is very expensive, insurance and tools, it’s all much higher. Our dollar is loosing value every which way and I’m not sure what to do about it
We just were able to buy after my SO had a relative die and ended up getting a check from a life insurance policy (almost $100k) plus we had a some savings already and our parents chipped some too. $340k with $180k down and $160,000 mortgage means our monthly payment is $1595 (same as monthly rent at our last house). We are at 6% interest and will refinance when/if rates drop.
We only bought because we had generous family and the life insurance was tax free also which of course saves us a couple bucks.
could not have done any of it without family help.
I caved a few months ago. While it's certain that we are in a bubble, I didn't have time for it to pop, I know this is my final area I'll live in, and I could afford it. Household income is ~400k, and bought a 600k house. Bought "less" house than I qualified for (1.5M) to minimize the damage, and plan is to very aggressively pay it off.
In a somewhat similar situation. We made the distinct choice to buy less than we can afford. Household income is roughly 220k, and my partners income will climb steeply in the coming years, and we bought a 400k house. I’m sure we could have been approved for 650k or more, but we wanted something we could afford on only one income if necessary.
I just bought one off market. The seller and I split the realtor's fees. They paid my closing costs and bought my rate down below 5%, and they still walked away with more than they would have, if they listed it with a realtor.
Finding a house is a pain. Most people are scared off. So you buy in at 6.75% and shoot to refinance when the mortgage rates come down. Is it a gamble? Yep, but so is thinking that you can find the house you want when the rates go down. How many people are sitting on the sidelines waiting? It’s going to be two years ago all over again. 30-45k over asking and still getting outbid.
Honestly probably not a lot of people outside of those who are downsizing to get rid of mortgages.
Mainstream media is trying to once again sell us the narrative. I often wonder why big news organisations run with these narrative even when data doesn’t support it. It’s a self fulfilling lie - people get fomo from the articles and they start buying. I first noticed this during covid, the msm went wild with fomo articles and all of a sudden buyer behaviour shifts and housing market boomed.
The current Federal Funds rate of around 5.25% is actually on the low side when compared to the historical average. Mortgage rates were 13-18% in the 80’s. Rates can go much higher from here. This is a normal interest rate environment. The past 13 years were subsidized big time by money printed out of thin air by our government, which is why we now have a national debt too big to comprehend Rates are not going down any time soon. Two more hikes are predicted for this year alone.
I’m waiting a year and then I’m buying. It could be the worst time ever to buy (probably will be with my luck) but I’m done waiting for my life to start.
My first house was in 2005 or so. I was very pleased to get an 8% interest rate. 7% seems high only because they were artificially low for almost 20 years.
People need to realize that having a 3 bed, 2 bath household in a good part of town, close to everything with good schools is going to be expensive as fuck. It always has been. If you want a house, you’ll have to sacrifice some things. Move outside of metropolitan areas and you’ll see prices drop.
*Raises hand*
We were ready to move to our forever home. We closed about two weeks ago at 7% with zero points.
We even sold our old house that had a 2.7% interest rate bought at the height of COVID.... For a very decent profit.
The interest rate isn't the /only/ peice of the puzzle. Also, we have the option to refinance for free when rates drop. As long as it drops to at least 5.5% within 36 months, we saved money over buying the rate down with points.
I strongly feel that when rates drop the people currently on the sidelines are going to jump back in causing even more competition (so higher bids) with already non existent inventory.
Hi there, 25 yr old who just bought a $350k house with 6.25% mortgage. It’s tough but not impossible. I work multiple jobs and have a side hussle and I managed to buy us a house, a new car, and support my wife as she goes to school. I make around 14k a month from my multiple jobs and passive income. At the moment things are tight but that’s cause the ac went out along with some other surprise expenses. I’m not rich, I work 14-16 hour days to keep this train on the tracks (which I am currently procrastinating). It is totally doable for my fellow Gen zers but you need to be willing to change. I left a field I love last year (construction) for tech. I broke in and immediately picked up multiple jobs because 1 job wouldn’t cut it. I also left my home state which is far too expensive so I could afford a house.
Not saying it’s the same, you’re totally right — but just saying the even now the finances aren’t totally off to buy in a lot of cases, if you have that extra few hundred wiggle room to out into savings each month for repairs.
In other cases and locations where rents aren’t crazy, that makes much more sense.
People who buy without taking a mortgage loan. They may have generational wealth or they might have a home that is already paid off that they sell to buy the new house.
My house is paid for but I won’t sell and then buy because I would never get the same quality home without taking a loan. I can’t have a mortgage payment on SS income! Sux
Easy answer really. Interest rates are for poor people to buy things and don't apply to rich people with cash. Raising interest rates only prices poor people out of housing and into the rentals that rich people own. Easy
6-7 % is historically average, and if you can refinance and / or right off the interest on taxes it’s not really a big deal. Prices should come down but they aren’t which is really the bigger issue.
Just heard a friend bought a home with a $8k mortgage. They can’t afford it but sold there last home for enough money that it can float them for a year or two before there savings are depleted. They are betting on interest rates dropping and refinancing…
Remember its the dollar rapidly losing purchasing power. As more and more dollars are printed and dumped on the open market more and more dollars chasing few goods pushing prices up.
So people are rushing to spend every dollar because tomorrow that dollar buys less.
Its a stealth hyperinflation causes by the massive printing since 2008 used to bail out wall street and the printing never stopped it just accelerated. Yet wages are not moving up to make up for this hyperinflationary effects.
People who have more money than you are buying..that's the fact. There will always be people with more money than you, doesn't matter how much money you have.
"Who the hell has this kind of money?"
The last of the FOMO idiots that just don't know any better. The economy is cracking, unemployment will be ramping, rates will stay higher, longer, and the giant ponzi scheme will once again crash for multiple years just like last time.
The wealth effect will end soon, as people figure out they've spent themselves into giant holes and need to cut down on consumption and asset purchases to get those massive existing bills paid off.
Same old, same old, when rates go from historically ultra-low to something akin to historical-norms. Only once dummies have used up all their cash and credit do they realize they can't pay it off once rates rise and they get stuck making interest-only payments with zero reduction in principal.
Your getting downvoted but the fomo right now is off the charts. Everyone I know who doesn’t own is talking about how they have to buy a house ASAP and I see it all over social media and Reddit. People are stressing themselves financially because of this.
Yeah, the downvoting doesn't bother me, it's probably from all the sales-side used-house-salesmen, or other indebted clowns that refuse to accept reality. Things don't expand forever. I know what's coming. Problem with home loans now is hardly anyone can qualify with rates at 7%, hence the reason affordability is at all-time lows. Either prices crash or we all get 100% pay raises. What's more likely?
The idiot herd mentality is difficult to break, but eventually the FOMO-clowns wake up to the fact they're screwed financially, just about the time they realize they can't keep up with any of their loan payments. Look at used car loan defaults, etc, as they're already ramping. CRE is cratering for the same reasons. AirBnBusters are getting worried now. Their income isn't keeping up with their outflows, so either they suck it up or default/foreclose. Speculators will get pounded again, just like last time.
Compound this with eventual job losses (remembering rate raises take many months to affect the economy), and that massive loss of income/consumption means the vicious cycle of unemployment from malinvestment will continue for years till the Fed ZIRPs again and the virtuous debt-loading cycle can begin again.
Speaking of AirBnBusters and newly-minted landlords. I recently had a convo with a woman who moved to southern AZ, where I am, when her active-duty army husband transferred out of the Honolulu area.
They rented out their HI house, but with rents already dropping in HI, they're losing $800 a MONTH over the mortgage payments by keeping it.
She told me she wanted to sell it, but hubby refuses, saying it's a long-term investment and they'll make out like bandits once property prices started going back up. That'll take years since the economy is just now slowing.
They're going to bleed a long time unless they realize it's better to cut bait.
Always look at the Fed's FFR policy. People will borrow and spend more when rates are at historic lows, then shit crashes when rates get raised. Again, just like last time. It's not rocket science, just basic math with some FOMO calculus. Typical boom/bust cycle the Fed has purposely designed via their stupidity.
Look at what happened the last time this occurred. Fed raised rates to just over 5% by 2006, and a year later the economy started to crash, so the Fed started cutting again and ZIRP'd by the end of 2008, yet home prices continued to crash till 2012.
Anyone thinking this time will be different needs to wake up.
[https://fred.stlouisfed.org/series/FEDFUNDS](https://fred.stlouisfed.org/series/FEDFUNDS)
Upvotes for you. Another angle I’d add — A lot of the distribution companies I speak with are already signaling weakening demand in their client bases, so this likely catalyzes unemployment somewhat. People may not sell their homes for now, but usually job losses/job changes will trigger either a sale or a conversion to a rental.
This cycle might be slightly different in that people refuse to sell because they locked in such low rates, and instead convert homes to rentals when they’re forced to move… but that will quickly ramp rental housing supply. Couple that with massive new multifamily supply coming online to compete with SFHs converting to rental… rent vs buy decision is going to start looking very, very good.
That's impossible everyone knows no one makes more than i do. And if they make more money than i do there are stupid for buying at the top. You're supposed to live with parents until the market crashes.
>surely 6%-7% at these prices is unrealistic.
Historically this isn't god-awful, to be honest. What sucks is the skyrocketing rates paired with prices that inexplicably keep climbing.
I got into a USDA 502 Rural Development loan that has 4.00% interest which was quite appealing considering the market right now.
I am currently buying due to selling my house in a divorce. I am having to move to a much lower cost of living area to be able to afford a similar quality home. My house sold for substantially more than I bought for and is worth a lot more than any home I can buy now, but with interest rates my mortgage is still going to go up.
There is rich and there is rich. They are in the other rich!
We once hosted a family that used to gamble apartment flats when playing mah jong. That kind of rich.
I'm old enough to remember 2021 when ReBubble was rooting for higher interest rates so prices would "come down." Financial savvy is not always the dominant feature of this sub.
People with a lot of cash.
**At peak:**
Home Price: $500,000
20% down: $100,000
Loan Amount: $400,000
At 3.5% rate that is $1020 a month of interest
**Now:**
Home Price: $450,000
Same down payment as before: 22.2% down
Loan Amount: $350,000
At 6.5% rate that is $1895 a month of interest
Since home prices are not inflation adjusted, we just look at the raw number, we can look at the raw number for wages, which are up with inflation too. So lower loan amount plus higher income = more affordable house. The $800 higher monthly payment is rough yes, but if your income in the last two years rose by say $400 a month you could maybe be okay locking in an extra $400 a month if you can afford the next few years of high rates to refinance later.
Wish counties could/would do something like cap property tax or temporarily lower the rate. It sucks if you buy now and have to pay double or triple the property tax your neighbor with the exact same house pays.
Story time: In the 70's, my dad bought a fourplex at about 20% apr. Refinanced throughout the years and sold it a few years ago for a huge profit. YMMV but on a long enough timeline appreciation may outpace your initial interest rate.
I did. I signed the contract in January and closed in March. The house was perfect, and my wife and I could comfortably afford it. If we were to rent it, we would probably would need to put money out of pocket to cover the mortgage. Still, we would rather pay a little more and get equity than paying rent. Also, fiscally speaking, having a high interest rate can be beneficial, as it is all tax deductible, and it puts us in a lower tax braket.
If one day the interest rates cool down to 5%, we will probably refinance. Also, the fact that so many homes were bought or were refinanced at insane low rates makes it more difficult for others to have an incentive to sell, thus allowing the prices to be high. Also, labor is much more expensive now, and construction loans have high interest rates, making it unlikely that prices would cool down.
In any case, we are in this house for the long run. I do not plan to sell it until I die.
I know you would downvote me to oblivion, but you might need a slap with some reality in this echo chamber.
My rent went up the states maximum allowed 13%, and I couldn't negotiate it down. I haven't lived in the same place for more than 2 years for almost 15 years now. I have no sense of "home," as I constantly escape rent increases, and move further and further away from where I work.
The nearly $200 a month increase broke me. I lost my shit and got pre-approved right away for way more than I'd ever be able to afford.
Settled on a fixer upper out in the woods at 7.1% interest.
I'll have an actual place to call home for the first time since I was 17 years old.
I graduated college in the 1980s. Houses in my area cost $125,000 and interest rates were about 6.5%. I was making about $12,000 a year. Then I got a switched jobs and was making $24,000 a year while attending graduate school. The cost of a house was about 5X my salary. Didn't buy my first house until I was 38 when I got married and needed to settle down. If I didn't have the income with my wife I would not have been able to afford to buy a house.
Where we lived (metropolitan Boston area) there was no way we could have purchased a house on our income. We had move cross country from a very expensive HCOL area to a little sleepy city in Washington called Seattle where we were able to buy a house for $90,000. There were almost jobs when we moved here and we struggled for two years to find permanent employment.
The average cost of house in the US in 2023 is 436,600. The average salary is $58,260. That is about 7.5 times the average salary. Now if you have a couple that increases to $116,520 or about 3.74 times your salary. Getting married to someone with a good income will really help or moving away from a HCLA.
It's not so much that the rates are high, but the prices are insane. I feel bad for the younger first time home buyer. They're going to get annihilated.
Present :(
Same
Fuck I should have been buying a house in 2008 when I was in the third grade.
Exactly. High rates when you can buy a house under 200k is no problem. But now that house is 400k or more
We're all just begrudgingly re-signing our leases at this point. We planned to live in our current place for a year and buy this summer but obviously that wasn't in the cards. Now we're here until at least next July and we'll have to reassess then I guess. It sucks to finally be at the age/place in your life where you want to "start" your life and have all these external forces change your plans.
Present, but the bullet and accepted that I’ll regret my purchase until interest rates drop
Yep. I was a FTHB in ‘05. And yep…got annihilated. I’d estimate it set me back financially for 10 years. Also was heart breaking to see people in my neighborhood buying houses twice the size of mine for 100k less than i paid after the bubble popped.
I bought my home in 2007. It was devastating TBH. I was too young to know it but reality hit later. This market is going to do more damage to first time buyers IMO than the 2008 debacle. Here's how I see it playing out: Regardless of higher rates, prices will stay high due to supply/demand imbalance. Affordability will be a barrier to entry. Although I do not see anymore price appreciation like we've seen the last few years. (See below) Longer-term owners will be loath to move due to higher rates essentially locking up the existing housing market. Adding to the supply/demand imbalance hurting first time buyers. New buyers over the last few years will see their property taxes increase due to the valuation increases they paid at. They will be surprised when they get their escrow shortage letters. They will not be able to refinance out of the higher payments due to higher rates. Higher rates and higher property taxes will limit the resale value and destroy equity. Very similar to 2009. In summary, prices will stay higher due to supply/demand imbalance but they will flatten out due to higher rates and higher taxes. (Hurting FTHB) New owners will not see much equity for many years while simultaneously dealing with higher property taxes. This combination will destroy equity. I know some of these seem contradictory but I just can't envision a different scenario for the majority of people who bought over the last few years. Of course all real estate is local and there's always markets with strength but I think generally this is how it will tend to play out. 🤷♂️
I'm kicking myself for not having bought a home in 2019. I had a steady job and a down payment, but I was saving to buy in cash, despite the historically low interest rates (and in hindsight, much better prices) 2020, I became unemployed and watched homes soar amid supply drying up. Supply began to move again in 2021 but by then it was too late to buy a middle class house. That said, the writing on the wall was that it was only going to get harder.. I bought the best home I possibly could for $35k by opening myself to fixers and such. I found a vintage mobile home that predates the HUD code and is in city limits on private land, included. Good condition, clean cool and dry. It's not what I set out to find, but I think your points are valid.. even if I had squeaked by, and gotten a large home 2019 or so. Property taxes, and cost to insure would have penalized me. Rates, not so much. I would probably still rather be in that large house. And yet, given my options in 2021 and now, the best thing I can do is save and stay where I am, since my home is so far outside the mainstream, it's taxed at almost nothing, paid off etc. I live in the midwest, but when I'm looking at 170k-200k to find something bigger than what I have.. it's really hard to say that's the right move. Maybe its best to hang tight, invest the money, and be ready if/when housing were to collapse. I'm not banking on it, but I also don't want to chase an average sized house (when upper middle class homes haven't seen the same rate of appreciation post 2020)
Hi, I am here. 32 YO, ~$75k gross income in Ohio and can't afford a home because the mortgage would be nuts even after forking out a large down-payment. I moved back into my parent's home and pay them rent because apartments are also absurd. I stopped being ashamed by that. Unless I want to risk my personal property/mental health/life and live in a high crime area, I cannot buy a home and live comfortably. I honestly feel very bad for people my age that make less. I do not know how they are getting by.
Whoever says that this market is still affordable is extremely selfish and doesn’t care about the average working class household that will have to keep renting because of a few others’ greed.
I'm not the younger but I'm first time buyer too. Don't forget to feel bad about the not so young too.
People who need/want housing. All the people on here talking about 'sometimes you don't have a choice' in terms of selling a house - yeah, those are the people buying at these rates. They have enough equity, usually, to still be buying a home, but also usually have a reason to also not want to rent, if possible. Things like a large family, large dogs, etc, etc can keep people from renting, especially if they come with equity in a former home. People have gotten new jobs, divorces, or just straight up no longer like the area they live in. Historically, the current rates are still really low, comparatively, too.
That's us! Been in our starter home for 11 years. We've had 5 kids since. Found our move up home. Our home price has doubled so we have the equity for a huge down payment.
Well said! If it weren’t for a home I bought years ago we wouldn’t be trying to buy right now. I bought when I was a single woman, not worried about school districts. Fast forward to 2023, I’m married w a baby and we need more space, a better school district (before he gets to Kindergarten), and a place that is “ours.” So only bc of the house profits we were able to put down 20%, add to emergency savings, etc. even though buying isn’t the most ideal w prices it still gave us what we needed. I suspect many more middle class folks in our same position.
Too true! I expect to be in the same position in a few years, but, by then, we'll have nearly a decade in this house and plenty of equity.
But the current prices are really high, comparatively, too.
Yep. Was just recalling earlier today how thrilled I remember my dad being when he was able to refinance into a 7% mortgage circa 2000.
My sister and brother in law bought their first house and were excited to get a mortgage rate of 18.5%
And those that are just willing to pay extra for a year or two, and refinance later. Mortgages aren’t permanent.
You have zero logical reason to think interest rates will decline, the FED is telling you they don't expect interest rates to decline for atleast 2 years.
Everyone needs housing. If a rental costs the same or no available rental has what you want (different than *need*), then do a cost/benefit analysis and don't be an idiot about risk management and tolerance. Future job security & wages, appreciation, ownership & rent cost increases all have uncertainty. The best you can do is some educated scenario planning.
Everyone needs housing but not everyone will be able to afford a home. The society and jobs are set up this way. You can't expect somebody making $20 or $25 an hr. to be able to buy a house. Everyone seems to think that owning a house is the end game. A large majority of the population who have houses don't own them the bank does until the mortgage is paid off.
Rent around me is as much as a mortgage so it was a bo brained to buy
We are in exactly this position as well. Will be selling soon and relocating down South.
Rich people. We do insurance so we insure property and almost all of the new purchasers are rich people in llc or young people with old money.
Basically the game of monopoly is being played in front of our eyes
It’s exactly monopoly ; the only difference being that when the game starts, all the properties are already owned and have hotels on them.
No. The game started a century ago.
At least Monopoly is a game where your wealth is based on your own roll of the dice. These days, your ability to roll doesn't even matter most of the time, it's mostly how well your grandpa or dad rolled. Monopoly wouldn't be a very good game if one player started with 100x the starting money as the other players.
Sadly that's the reality. Unless your born into money you will struggle.
Eh. If you're born into a roughly middle class family in the US, and they don't lose everything before you're an adult, you'll probably end up fine. You don't need to be from a "rich" family to have a sustainable existence. It would be nice to have a family that could hand everything to you, but that middle class-ish upbringing and level of resources is enough to have a pretty good chance of being an independent adult.
I lived in apartments with my single mother and little brother growing up. She did end up marrying into middle class towards my junior or senior year of high school. They did kick me out when i turned 18 but i joined the navy that ended up putting me through college after i got out. My twenties, i made $5 an hour as a workstudy and eventually 30k a year after i graduated. My salary went up exponentially as i hopped jobs every few years to get better pay. I'm 40 and do pretty well. Bought a triplex in 2017 and a house in 2020. Married and I'm pretty much middle to upper middle class now. I think you're pretty much right, even those who grew up in poverty could end up fine. My family gave me a shitty car that I crashed a year later and that's about it. The military benefits are what really helped. That VA loan is what got me a triplex that paid me when I bought it. It was insane!
Not true. I made it on my own. It can be done especially if you’re born in the US, but it’s not easy.
When? As in the last few years? Or over the last few decades. As a Gen x I feel it was tough but Ive been able to accrue. The young generation face a much tougher landscape in my opinion. But thats just my view. Not that it matters.
Right. It's how you discipline yourself that matters
I don’t think it’s just born into money. Born into an environment where money concepts are taught is a big thing. My parents didn’t have money but they taught the shit out of me about money concepts. It has served me better than any loan or financial gift ever will.
The number one predictor of a person's economic standing as an adult is the economic standing of their parents. Full stop. It's not guaranteed, but it is the #1 thing in common.
In the end of a game of Monopoly, no one is left to pay the rent.
Rich people buying property for cash is a lot more like Monopoly than a healthy housing market. In the sense that when Monopoly was made, home loans weren’t really a thing. People paid cash, maybe a five year loan. A “mortgage” then is what we call a HELOC or title loan now. The old sense is still around figuratively (“we’ve mortgaged our future for…”). But then loan lengths shot up to 30 years and hey, wouldn’t ya know it, home prices shot up, too. Must be correlation, not causation.
In muh market, llc’s are usually investors. Wealthy families use trusts. The difference is that trusts are usually eligible for homestead exemptions (same as individual buyers), while llc’s and corporations are not as they are presumed to be investors. Of course, states and counties vary in how they manage this. To your larger point, though, I see llc’s and investors continuing to buy. They use 1031’s and are very much keeping the party going. In fact, at a certain higher price point investors are nearly the only buyers lately.
> Wealthy families use trusts yep. Unitrusts + Fake charities
Yep. It could be 25% interest rate loans, doesn't fucking matter when you pay cash.
I just bought a house and def not rich lol middle class. Plus isn’t 6 percent historic average?
Yeah, but the 200% inflated cost of the property is not.
Right! I see so many shitboxes that people are trying to peddle for the same cost as a condo smack dab downtown in Columbus and its laughable
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hahaha exactly!!! I don't make the most money in the world, but was pre-approved for $400k and of the 5 homes I was ready to put an offer in on, they were swept up before my ass even made it home to simply think about the purchase. Google, Amazon, Microsoft, and now Intel all moving into the area is becoming a big Fuckin problem around here
Yeah 6% on a $200K loan is veeerrryyyy different from a 6% on a 750K loan
It’s not historically normal for that rate to be applied to such crazy high prices. Last time rates were over 6, prices were a much lower multiple of average wages. “6 isn’t historically high” is an out of touch boomer talking point lol.
I just bought a house this week and locked in just before the recent bump in rates. I can't say I'm wealthy by any means but I did move from Seattle to Minneapolis and the market is quite a bit more affordable here than Seattle. Sold my little condo in Seattle and had just enough for 20% down on a good size house out here. But my rate now compared to my COVID refi rate is pretty nuts lol
What fields are these people usually in?
Vandelay Industries
Finance, real estate, and import/export.
Mostly latex products. Mostly.
But are they taking loans at that interest rate?
Generally no. The very large ones, like owning 1,000 units tend to have a spouse that was a former attorney lawyer.
Came here to say “people with money”
poor man's question - what does insurance has to do with paying high cost for a house ?
Best way to explain is based on the perspective property owner's financials. Google for news on "florida home insurance" and the picture is quite ..bleak.
How can you possibly know this simply by insuring the dwelling, do you really ask what their net worth Is, or how much money their family has?
My wife and I are looking, but are being super picky.. if we are going to buy at these rates and prices, we are only buying a forever home. The problem is, those fully updated, nice, fully move in ready homes are still selling like hot cakes by us... Everything else is slowing down, except those..
Same. Still looking, but definitely not going to just buy something to buy something at these prices and rates. To buy something now, we need to fall in love with the home enough to stay there long-term. But even the trash that probably just needs to be torn down and rebuilt is still selling crazily over list. It's insane. This is a clown economy, and I'm about ready to stop attending open houses and start attending townhalls and protests.
> not going to just buy something to buy something This.
I was going to ask why not don’t you guys buy a fixer upper, and by that I mean still liveable but dated? Then I figured you’re right with the high rates and prices it should be move-in ready and not need a renovation.
We've been trying this. We have lost to all cash every time. We are seeing prices increase 10-20% since the beginning of last year. Inventory doesn't exist. Everything is estate sales. The feds completely destroyed the market.
Where I am retail buyers can't even touch fixers. Think about it...a normal buyer has to hire a contractor and pay double the cost to flip or fix it that a contractor does. So all of the fixers are being bought in cash by people who can overbid retail bids because they are doing the work themselves (like contractor-flippers and investors) and can come in higher than the number that would pencil out for a retail buyer.
I’m looking for a fixer and much prefer something dated that hasn’t been remodeled. The main issue is things that would need major layout changes just to get what I want or things that look like they have structural issues (sinking floorboards). Layout issues have usually been small closed off kitchens or weird bedroom/bath situations.
Not sure of your location but where I live our fixer uppers are incredibly expensive. It’s absolutely wild.
People maybe different meanings of “fixer upper” like some would consider only houses with laminate floors and marble counters as move in ready, but some of us are ok with cheaper wood block or tile counters and a kitchen that hasn’t been updated since the 90s as long as everything is working and there’s no mold or serious issues that need repairing. But tbh if your paying upwards of half a million it should be newly renovated cuz half a million for a fixer upper that can’t be flipped for over a million is just Ludacris.
Yeah I did this last year. We went from starter home to functional forever home.
Stock market hasn't crashed. Softened a bit, but then came back. Thus, people still have lots of money.
Historically these rates are not outrageous. What crazier to me is that prices have barely come down and people are still buying at high principal pricing, and high rates.
This☝️. No movement in pricing in my area just a doubling of mortgage payments in one year. Baffled people are buying still.
I bought at 6.1% Renting out one of my spare rooms for $800 a month to bring my mortgage to a more manageable amount. Probably quite a few people doing so as well.
Prices will probably never come down in a meaningful way. It’s lost hope at this point . We’re going to see a decade + of stagnant prices as wages catch up to inflation.
Yeah, people are way too emotionally attached to their home values, and economically attached to their interest rates. Bob bought a house in 2019 for $290k and 4.1%. Zillow now tells him his house is worth $420k, and he regularly gets letters from corporations offering him $365k in cash for his home. He is never going to let that home go for $290k or even $350k, *especially* not when he will get hit by 7% interest rates wherever he goes next. Prices aren’t going back.
Employers could shed a ton of jobs without productivity loss. The US govt could shed way more than the private.
People who think 7% is transitory.
I mean it is transitory to even higher rates, being realistic about the mess we’re in, double digit rates are coming. I don’t think most realize how bad it is for an economy to have housing become so unaffordable
Historically rates have been around 7% people just got spoiled and economists were warning people for years that rates would not stay this low but apparently no one listened or believed them . So why is everyone so surprised.
Boomers flush with cash and young people with generational wealth.
This is true, but there are also plenty of dual-income couples earning $250-500k/year buying properties on their own without any financial assistance from family.
Yep, we fall into that category
Generational wealth transfer is the biggest secret weapon that people in the real estate bubble subreddits never care to admit to. There is a fuck load of cash sitting around waiting or being transferred down. This “bubble” isn’t going to pop. It may slow, but won’t pop. Not IMO at least.
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And people with equity that sell and buy again somewhere else. There are also a lot of professional couples that have solid incomes. My spouse and I are like that. We both work in tech sales and make good money. We work from home, so we can buy in a cheaper area with SFHs in the 500s and it’s very affordable.
Lots of people. I was talking to a realtor who was telling me they’re still seeing cash offers. We live in a VHCOL area so this has got to be a significant amount of cash.
It’s not really ‘lots’ of people. There’s just such limited supply on the market that what does list, is still selling regardless of how egregious the price. Sellers won’t sell unless they get their desired price, which means the only cohort of people that can buy currently are those with a lot of money. The limited inventory is acting against interest rates and keeping prices high.
And the prices sold metric stays high as a result. If you include houses that aren’t selling due to no bid, then what’s the price? Metric looks different.
Not trying to speak for your friend or his experience in this case specifically, but some times an offer can be from a bank and still be ‘a cash offer’. The key really is no contingencies. Here anyways.
I did this for my last house. Went with a form where they front the money and give me a hard money loan. It’s effectively a cash closing for the seller. It was the only way I could win a house in 2022
People who went all in on TSLA 6 months ago
Or NVDA or META or NFLX
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I know my opinion will be downvoted but my wife and I was house poor for the first 3 yrs after we purchased. We brought in 2009 and questioned if we make the right decision. We were laughed at for buying when the neighbor that rented only paid $1,200/mos when our mortgage is $1,400 with 20% down. I’m still paying $1,400/mos and pretty low property tax due to Prop13 in CA and the condo next to ours are renting it for $3,000/mos. If we “listen” to all those around us that told us not to buy in 2009, we will be in their shoe right now - complaining about rent and constantly moving (well we did move couple of times afterward but was due to upgrading - we still currently have our first condo).
Tbf, you purchased a home during a high affordability period. California Association of Realtors has historical data that shows almost 70% of CA households could afford an entry level home back in 2009. That number is down to 36% for 2023 q1. Most people in CA aren't able to buy a house even if they wanted to right now. To further illustrate the financial difficulties of owning a home today, I'll use your numbers above to try and give a rough breakdown. Mortgage rates were about 5% in 2009 and a 1400 mortgage after 20% down (65K) puts your home at about 325k. This was the CA average house price at the beginning of 2009 according to zillow. The median household income in CA in 2009 was 56k according to stlouis fed data. that puts the mortgage at about 30% of the median household income. CA average house is currently at 740k which would require a down payment of almost 150k. At 7% mortgage would be 3940. Latest St Louis fed data shows median household income for 2021 to be 81500. Mortgage would be 58% of median income. For easy math, I'll use today's tax code for some raw net income calculations. 56000 gross income comes out to 49000 net income after fed and CA taxes. After subtracting 1400 * 12 months, you're left with 32200 for the year(2009). 81500 gross income comes out to 66700 post fed/ca taxes (forbes tax calculator). After subtracting the 3940 *12 months you're left with 19420 for the year (2023). People need to save a lot more, pay a lot more of their earnings, and will have less money left over after mortgage in an inflationary environment. The "complaining" with the housing market isn't a matter of timing for value. Affordability is so bad, people literally cannot make the same decision you were able to make.
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Yes. Trust me when I say you just have to ignore everyone (including family) that question your decision because they probably went with another direction in this housing market. You have to believe in yourself (as well as work your ass off) that you will make more in salary in the future. Both my wife and I work hard and find ourselves making more every year and in just a few short years we can easily afford our mortgages and could buy another house. I know this is a different market than what we had back in 2009 but I still believe the market will be higher in 10yrs from now and rent won’t be at current level. Good luck.
I work in mortgage. The answer - people. Tbh, the cash sales to investment groups have slowed down. The majority of our buyers currently are millennials. Lots of young people buying their first houses and lots of people moving up to larger houses because they're starting families. June was our busiest month in a while - not at the level of the 2020 craziness, but on par with where the market was for us in 2019. Reddit is an awful example of the financial situation of the average person. While r/antiwork and r/workreform have massive numbers, there is an inherent bias to them - people with low paying jobs who have not been successful in their careers are drawn to communities of others in similar situations. For every r/antiwork user, there's someone that is successful in their career and financially stable enough to buy right now. The folks I'm seeing in their late 20s early 30s have very healthy incomes and aren't having trouble qualifying. These are people with real jobs too - not mommy and daddy money. Observe enough and one of the things you'll eventually find is that the people who sit online 24/7 complaining about being broke are the people that will always stay broke.
>people who sit online 24/7 complaining about being broke are the people that will always stay broke. Nailed it
There are still people relocating for work We recently hired for engineering roles in the Southeast. Filled 5 of 8 with new hires from CA and WA. 2 of them bought new builds. 1 went the fixer upper route and I'm assuming the rest are renting.
A lot of people are buying with cash and skipping the loan process all together. Who are these people and how the hell do they have so much money? No idea🫠
When rates were low, you could get 15-year mortgages so I expect a lot of people with tech jobs were able to pay them off quickly. Not counting institutional buyers, there are plenty of people with paid off mortgages that are moving across the country. And a lot of Boomers and early Gen X (like me) are downsizing with paid off or almost paid off houses. And a lot of kids are starting to get their Boomer parent's houses.
So basically the monopoly board is bought up multiple times over lol
I’m set to close tm at 6.375%. Even with 8.5% down (meaning $100/mo PMI) my monthly payment comes out lower than rent would be next lease plus I’m getting and extra ~700 sq ft than my current apartment. As awesome as 2% would have been buying $176k home is still much better than my $1500 1b/1b apartment. Hopefully one day I can refinance for better but still, I feel I’m in a good spot. Also 2-3% are historical lows no? Whoever got in then should feel lucky and who ever is waiting for that to happen again is living with their heads in the clouds imo.
People that have no other choice and don't want to rent...
I think you meant “at these prices” 😀
Corporations looking to rent out entire neighborhoods at inflated rates forever
On my street alone 11 of 19 houses are rentals, most bought in the last 4 years
Don't forget boomers who took ppp loans and bought second homes. My current landlord falls into that category. There's multiple homes near me that were bought with ppp funds. You can look up the owner and then look at the ppp databaseb and see they all received huge windfalls from the govt.
Baby boomers. Every time I've gone to an open house, sure enough it's filled with silver heads.
Downsizing but in some cases looking for that trophy home, with all the bedrooms they will never use
First time home buyer soon, and honestly my neighbors have made my life such a living hell I would rather put myself into the hole hundreds of thousands than worry constantly if this is the night I’m staying up until 3 am because they decide they want to drink beer and blast music. That and add in the fact I’ve been waiting for years for this bullshit to crash so I could buy and it won’t fucking drop and it’s to the point of “do I just jump in at this point?” Because it just keeps climbing
Not to say you can't lose hundreds of thousands over timing the market, but just like the stock market, after any crash, it will still come back and be higher than before eventually. My house (before I bought it) was worth $550k before the 2007-2008 crash. I bought it in foreclosure for $280k in 2010 and it's $675k now. Obviously, if one can time the market (which isn't easy although I did it last time) it's better, but if not, you'll still end up with equity if you hold long enough.
Thank you that actually does make me feel a lot better. We’re shopping this weekend and part of me wanted to self sabotage just to hold out until the fall
We're in a 1BR apartment, with no 2BR options available for anything under $2k within a 30 min radius. We're looking to have a child, already have a dog. We've put in 9 offers on houses which would have monthly payments about $500 over what we'd pay in rent to get a 2BR. We don't feel like we have any good options, but of the crappy options -- buying seems like our best bet.
You can refinance later. 🤷 These mortgage interest rates used to be “the norm” pre-mid 90s.
For everyone who says prices are insane - I get it. But I’m also trying to build, and THOSE prices are insane. Materials are hard and expensive. Labor is very expensive, insurance and tools, it’s all much higher. Our dollar is loosing value every which way and I’m not sure what to do about it
Everyone I know buying has kids, at some point you just can’t wait any longer. 2 kids and a 1 bedroom condo… good luck
I think it’s a more normal rate than 3%. Got a mortgage 30 years ago and the rate was 7.67%. Seemed very normal at the time
[удалено]
We just were able to buy after my SO had a relative die and ended up getting a check from a life insurance policy (almost $100k) plus we had a some savings already and our parents chipped some too. $340k with $180k down and $160,000 mortgage means our monthly payment is $1595 (same as monthly rent at our last house). We are at 6% interest and will refinance when/if rates drop. We only bought because we had generous family and the life insurance was tax free also which of course saves us a couple bucks. could not have done any of it without family help.
I caved a few months ago. While it's certain that we are in a bubble, I didn't have time for it to pop, I know this is my final area I'll live in, and I could afford it. Household income is ~400k, and bought a 600k house. Bought "less" house than I qualified for (1.5M) to minimize the damage, and plan is to very aggressively pay it off.
In a somewhat similar situation. We made the distinct choice to buy less than we can afford. Household income is roughly 220k, and my partners income will climb steeply in the coming years, and we bought a 400k house. I’m sure we could have been approved for 650k or more, but we wanted something we could afford on only one income if necessary.
Ask on r/realtors or RE
Area dependent but I was able to buy and get some seller concessions to buy down the rate, lower asking price a bit and fix a bunch of stuff.
I just bought one off market. The seller and I split the realtor's fees. They paid my closing costs and bought my rate down below 5%, and they still walked away with more than they would have, if they listed it with a realtor.
Finding a house is a pain. Most people are scared off. So you buy in at 6.75% and shoot to refinance when the mortgage rates come down. Is it a gamble? Yep, but so is thinking that you can find the house you want when the rates go down. How many people are sitting on the sidelines waiting? It’s going to be two years ago all over again. 30-45k over asking and still getting outbid.
Honestly probably not a lot of people outside of those who are downsizing to get rid of mortgages. Mainstream media is trying to once again sell us the narrative. I often wonder why big news organisations run with these narrative even when data doesn’t support it. It’s a self fulfilling lie - people get fomo from the articles and they start buying. I first noticed this during covid, the msm went wild with fomo articles and all of a sudden buyer behaviour shifts and housing market boomed.
The current Federal Funds rate of around 5.25% is actually on the low side when compared to the historical average. Mortgage rates were 13-18% in the 80’s. Rates can go much higher from here. This is a normal interest rate environment. The past 13 years were subsidized big time by money printed out of thin air by our government, which is why we now have a national debt too big to comprehend Rates are not going down any time soon. Two more hikes are predicted for this year alone.
I’m waiting a year and then I’m buying. It could be the worst time ever to buy (probably will be with my luck) but I’m done waiting for my life to start.
if the house is priced right even with a terrible interest rate can be a good deal.
My first house was in 2005 or so. I was very pleased to get an 8% interest rate. 7% seems high only because they were artificially low for almost 20 years.
Reminder that if rates go back down, demand will surge, and prices will continue to go up. There's no getting off this train.
People need to realize that having a 3 bed, 2 bath household in a good part of town, close to everything with good schools is going to be expensive as fuck. It always has been. If you want a house, you’ll have to sacrifice some things. Move outside of metropolitan areas and you’ll see prices drop.
*Raises hand* We were ready to move to our forever home. We closed about two weeks ago at 7% with zero points. We even sold our old house that had a 2.7% interest rate bought at the height of COVID.... For a very decent profit. The interest rate isn't the /only/ peice of the puzzle. Also, we have the option to refinance for free when rates drop. As long as it drops to at least 5.5% within 36 months, we saved money over buying the rate down with points. I strongly feel that when rates drop the people currently on the sidelines are going to jump back in causing even more competition (so higher bids) with already non existent inventory.
Hi there, 25 yr old who just bought a $350k house with 6.25% mortgage. It’s tough but not impossible. I work multiple jobs and have a side hussle and I managed to buy us a house, a new car, and support my wife as she goes to school. I make around 14k a month from my multiple jobs and passive income. At the moment things are tight but that’s cause the ac went out along with some other surprise expenses. I’m not rich, I work 14-16 hour days to keep this train on the tracks (which I am currently procrastinating). It is totally doable for my fellow Gen zers but you need to be willing to change. I left a field I love last year (construction) for tech. I broke in and immediately picked up multiple jobs because 1 job wouldn’t cut it. I also left my home state which is far too expensive so I could afford a house.
Awesome! What is your side hustle if you don’t mind sharing?
Thanks! I mow lawns, just on the side. It pays about $800-$1000 a month and gives me a chance to be active.
What do you do in tech? We work in tech too and love our side hustles for extra $$
I did. My family needed a house. We have high interest (7.25) but it's only $200 more a month than our rent on our apartment.
Exactly. Rents are wild too. Renting a 2br apartment here is over $2k a month, or you can buy a 2br house for $2.5k.
Not the same!Homes need repairs.
Not saying it’s the same, you’re totally right — but just saying the even now the finances aren’t totally off to buy in a lot of cases, if you have that extra few hundred wiggle room to out into savings each month for repairs. In other cases and locations where rents aren’t crazy, that makes much more sense.
Cash buyers. No reason to care about interest rates if you're not borrowing money to buy.
People who buy without taking a mortgage loan. They may have generational wealth or they might have a home that is already paid off that they sell to buy the new house.
My house is paid for but I won’t sell and then buy because I would never get the same quality home without taking a loan. I can’t have a mortgage payment on SS income! Sux
People with 25% down in CA...thanks dad (x2)...
Easy answer really. Interest rates are for poor people to buy things and don't apply to rich people with cash. Raising interest rates only prices poor people out of housing and into the rentals that rich people own. Easy
6-7 % is historically average, and if you can refinance and / or right off the interest on taxes it’s not really a big deal. Prices should come down but they aren’t which is really the bigger issue.
Just heard a friend bought a home with a $8k mortgage. They can’t afford it but sold there last home for enough money that it can float them for a year or two before there savings are depleted. They are betting on interest rates dropping and refinancing…
When they forclose, i will buy their house.
$8,000 mortgage??!!!
This is in the Bay Area, it’s not even a nice house or a nice area
Remember its the dollar rapidly losing purchasing power. As more and more dollars are printed and dumped on the open market more and more dollars chasing few goods pushing prices up. So people are rushing to spend every dollar because tomorrow that dollar buys less. Its a stealth hyperinflation causes by the massive printing since 2008 used to bail out wall street and the printing never stopped it just accelerated. Yet wages are not moving up to make up for this hyperinflationary effects.
Just closed on home today! 6.375% no points
People who have more money than you are buying..that's the fact. There will always be people with more money than you, doesn't matter how much money you have.
"Who the hell has this kind of money?" The last of the FOMO idiots that just don't know any better. The economy is cracking, unemployment will be ramping, rates will stay higher, longer, and the giant ponzi scheme will once again crash for multiple years just like last time. The wealth effect will end soon, as people figure out they've spent themselves into giant holes and need to cut down on consumption and asset purchases to get those massive existing bills paid off. Same old, same old, when rates go from historically ultra-low to something akin to historical-norms. Only once dummies have used up all their cash and credit do they realize they can't pay it off once rates rise and they get stuck making interest-only payments with zero reduction in principal.
Your getting downvoted but the fomo right now is off the charts. Everyone I know who doesn’t own is talking about how they have to buy a house ASAP and I see it all over social media and Reddit. People are stressing themselves financially because of this.
Yeah, the downvoting doesn't bother me, it's probably from all the sales-side used-house-salesmen, or other indebted clowns that refuse to accept reality. Things don't expand forever. I know what's coming. Problem with home loans now is hardly anyone can qualify with rates at 7%, hence the reason affordability is at all-time lows. Either prices crash or we all get 100% pay raises. What's more likely? The idiot herd mentality is difficult to break, but eventually the FOMO-clowns wake up to the fact they're screwed financially, just about the time they realize they can't keep up with any of their loan payments. Look at used car loan defaults, etc, as they're already ramping. CRE is cratering for the same reasons. AirBnBusters are getting worried now. Their income isn't keeping up with their outflows, so either they suck it up or default/foreclose. Speculators will get pounded again, just like last time. Compound this with eventual job losses (remembering rate raises take many months to affect the economy), and that massive loss of income/consumption means the vicious cycle of unemployment from malinvestment will continue for years till the Fed ZIRPs again and the virtuous debt-loading cycle can begin again.
Speaking of AirBnBusters and newly-minted landlords. I recently had a convo with a woman who moved to southern AZ, where I am, when her active-duty army husband transferred out of the Honolulu area. They rented out their HI house, but with rents already dropping in HI, they're losing $800 a MONTH over the mortgage payments by keeping it. She told me she wanted to sell it, but hubby refuses, saying it's a long-term investment and they'll make out like bandits once property prices started going back up. That'll take years since the economy is just now slowing. They're going to bleed a long time unless they realize it's better to cut bait.
I’ve been waiting for this scenario for a few years. Any idea on when this will happen?
Always look at the Fed's FFR policy. People will borrow and spend more when rates are at historic lows, then shit crashes when rates get raised. Again, just like last time. It's not rocket science, just basic math with some FOMO calculus. Typical boom/bust cycle the Fed has purposely designed via their stupidity. Look at what happened the last time this occurred. Fed raised rates to just over 5% by 2006, and a year later the economy started to crash, so the Fed started cutting again and ZIRP'd by the end of 2008, yet home prices continued to crash till 2012. Anyone thinking this time will be different needs to wake up. [https://fred.stlouisfed.org/series/FEDFUNDS](https://fred.stlouisfed.org/series/FEDFUNDS)
We all know 2006 crash didn’t happen because Fed raise rate. Any other event besides 2006?
Upvotes for you. Another angle I’d add — A lot of the distribution companies I speak with are already signaling weakening demand in their client bases, so this likely catalyzes unemployment somewhat. People may not sell their homes for now, but usually job losses/job changes will trigger either a sale or a conversion to a rental. This cycle might be slightly different in that people refuse to sell because they locked in such low rates, and instead convert homes to rentals when they’re forced to move… but that will quickly ramp rental housing supply. Couple that with massive new multifamily supply coming online to compete with SFHs converting to rental… rent vs buy decision is going to start looking very, very good.
>unemployment will be ramping Why exactly? Its been unchanged even though Jpow rose rates sharply.
People say anything with no logic behind it. It's usually from the goalpost-moving permabears who preach doom and gloom.
The government flooded the system with cash over the last three years, welcome to the everything bubble
That doesn’t trickle down to individuals. Median wages have still not gone up much.
People with more money than you.
That's impossible everyone knows no one makes more than i do. And if they make more money than i do there are stupid for buying at the top. You're supposed to live with parents until the market crashes.
>surely 6%-7% at these prices is unrealistic. Historically this isn't god-awful, to be honest. What sucks is the skyrocketing rates paired with prices that inexplicably keep climbing. I got into a USDA 502 Rural Development loan that has 4.00% interest which was quite appealing considering the market right now.
I am currently buying due to selling my house in a divorce. I am having to move to a much lower cost of living area to be able to afford a similar quality home. My house sold for substantially more than I bought for and is worth a lot more than any home I can buy now, but with interest rates my mortgage is still going to go up.
There is rich and there is rich. They are in the other rich! We once hosted a family that used to gamble apartment flats when playing mah jong. That kind of rich.
I'm old enough to remember 2021 when ReBubble was rooting for higher interest rates so prices would "come down." Financial savvy is not always the dominant feature of this sub.
They promised a 40% - 50% price crash would happen 6 months ago.
And now they are gone… it’s bullshit
Reddit is not exactly the gold mine of financial genius.
Ask the buyers. Plenty of them are sitting on the side line waiting to pounce.
Not me
Lots of people made a ton of money during the pandemic, so cash is slushing around. And don’t call me Shirley
People with a lot of cash. **At peak:** Home Price: $500,000 20% down: $100,000 Loan Amount: $400,000 At 3.5% rate that is $1020 a month of interest **Now:** Home Price: $450,000 Same down payment as before: 22.2% down Loan Amount: $350,000 At 6.5% rate that is $1895 a month of interest Since home prices are not inflation adjusted, we just look at the raw number, we can look at the raw number for wages, which are up with inflation too. So lower loan amount plus higher income = more affordable house. The $800 higher monthly payment is rough yes, but if your income in the last two years rose by say $400 a month you could maybe be okay locking in an extra $400 a month if you can afford the next few years of high rates to refinance later.
If you can pay with cash, the interest rate does not matter to you.
Same people, they’re just buying less expensive crappier homes because it’s all they can get. Source: It me.
Wish counties could/would do something like cap property tax or temporarily lower the rate. It sucks if you buy now and have to pay double or triple the property tax your neighbor with the exact same house pays.
Story time: In the 70's, my dad bought a fourplex at about 20% apr. Refinanced throughout the years and sold it a few years ago for a huge profit. YMMV but on a long enough timeline appreciation may outpace your initial interest rate.
inflation at 5%. makes real rates only 2%.
People that have cash and people that are desperate.
It seems like plenty of people have money. I don’t know how or I’d have it too
I did. I signed the contract in January and closed in March. The house was perfect, and my wife and I could comfortably afford it. If we were to rent it, we would probably would need to put money out of pocket to cover the mortgage. Still, we would rather pay a little more and get equity than paying rent. Also, fiscally speaking, having a high interest rate can be beneficial, as it is all tax deductible, and it puts us in a lower tax braket. If one day the interest rates cool down to 5%, we will probably refinance. Also, the fact that so many homes were bought or were refinanced at insane low rates makes it more difficult for others to have an incentive to sell, thus allowing the prices to be high. Also, labor is much more expensive now, and construction loans have high interest rates, making it unlikely that prices would cool down. In any case, we are in this house for the long run. I do not plan to sell it until I die. I know you would downvote me to oblivion, but you might need a slap with some reality in this echo chamber.
well my friend is selling. it’s been on market for TWO DAYS. they had 11 showings. ELEVEN. wtf is going on
My rent went up the states maximum allowed 13%, and I couldn't negotiate it down. I haven't lived in the same place for more than 2 years for almost 15 years now. I have no sense of "home," as I constantly escape rent increases, and move further and further away from where I work. The nearly $200 a month increase broke me. I lost my shit and got pre-approved right away for way more than I'd ever be able to afford. Settled on a fixer upper out in the woods at 7.1% interest. I'll have an actual place to call home for the first time since I was 17 years old.
I graduated college in the 1980s. Houses in my area cost $125,000 and interest rates were about 6.5%. I was making about $12,000 a year. Then I got a switched jobs and was making $24,000 a year while attending graduate school. The cost of a house was about 5X my salary. Didn't buy my first house until I was 38 when I got married and needed to settle down. If I didn't have the income with my wife I would not have been able to afford to buy a house. Where we lived (metropolitan Boston area) there was no way we could have purchased a house on our income. We had move cross country from a very expensive HCOL area to a little sleepy city in Washington called Seattle where we were able to buy a house for $90,000. There were almost jobs when we moved here and we struggled for two years to find permanent employment. The average cost of house in the US in 2023 is 436,600. The average salary is $58,260. That is about 7.5 times the average salary. Now if you have a couple that increases to $116,520 or about 3.74 times your salary. Getting married to someone with a good income will really help or moving away from a HCLA.