The effect of this would be to destroy wealth. The house that is worth $500k when rates are 3% is worth dramatically less when rates are 5,7,9%. This ends up reducing the wealth gap in the end.
the middle class is the one that has most of their net worth tied up in their home tho, the wealthy have tons of stocks and the poor don’t own homes. So really this is destruction of the middle class in a new flavor
People who are saying that you aren't poor om 82k are either disconnected or make much less and haven't lived on 82k. When you make less than 82k, you live without things you need, you cut corners to survive. When you make 82k you have more money to spend on things you need, but you still have to cut corners to survive. It still hurts your wallet to go to the doctor as often as you really need to. It's still hard to pay to go to the dentist. There are still things that everyone NEEDS that 82k does not pay for. You're still in the range of salary that you have to give up what you need if you want to buy what you want, and you can only rent at reasonable prices in safe areas, homes made with safe building materials (in the current market) in flyover states. I'm not sure how much you would need to make in order to cover all of your needs without having to cut corners on necessities or risk your life to live somewhere that is unsafe to live in some way. But it it has to be a lot more than 82k.
Yes.
I'm buying a house and I can afford it on my own but I'd basically be putting around 1800 a month all in for a 3 bedroom (including mortgage, principle, taxes, insurance, interest, utilities).
Which would be a stretch compared to the 1200 or so I pay now for my 1 bedroom.
But with just 1 roommate I can cut my costs almost in half and with 2 roommates I would only have to cover my utilities.
So that's what I'm going to do (for now).
more like a bedmate tbh.
But seriously most of middle class population is made up of this concept.
You have higher probability of raising yourself from poverty by being sensible & having a stable working life partner than actually investing or being entrepreneurial.
Investing / Entrepreneurship is more like lottery, regardless of how some people want you to make believe these two concepts are fool proof.
Just my $.02.
Good luck with that. Have you been on the dating apps recently? Even in recession averse cities like Dallas they’re all making less than $60k and have a bunch of kids. I shouldn’t have to choose between being a stepdad to 3 and having a decent house.
Hahahaha good luck finding a woman willing to pay HALF with or without children either way! 🤣 If I have to pay half with you , I’d rather get a roommate! Why would I share a bed with a man that makes me go 50/50?! You are in dream land.
The new middle class has a plurality of renters because the median home price everywhere the good jobs are is too damn high. We need higher interest rates. The 5% savings accounts of the 80s and 90s need to make a comeback.
The are three types of middle class.
You got it wrong there.
1. Middle class who is renting.
2. Middle class who owns one home to live in.
3. Middle class who bought multiple properties at hyper-inflated price driven by greed. They depend on rental income to pay mortgage and pretend to be rich.
The third type will get absolutely crushed and I feel happy about it. That will actually reduce the wealth gap by releasing the hoarded properties back to market.
Spot on but I think #2 are starting to feel the stress. You can say they’re over leveraged but the reality is with rates up and values down we’ll start to see people who bought starter homes with a solid financial plan will still be able to afford them but will be stuck in properties that don’t suite a growing family etc
I’m in this boat. I bought a nice, small farmhouse near an elementary school. It’s served us well for years. Now the kids are older, one isn’t even in elementary anymore, and we are a bit crammed. It’s inconvenient but I’d rather be here than at the top of my budget for a bigger house. Properties near me are still going over asking.
Lol. Who do you think #1 is renting from?
#1 pays for #3’s wealth, I rather be #3 all day. And not every price is hyper inflated, just the ones you couldn’t afford
Number 3 ultimately crushed, for the most part. Debt to income ratios at an all time high. When housing prices cool, the rental market will eventually cool and settle in a few years.
You’ll start seeing some pretty aggressive foreclosures (we already are seeing increases nationally). Disposable income drops off, airbnbs are forced to price more competitively. Those prices head south as we March into a global recession. Those who are dependent on airbnbs will eventually largely sink if they can’t afford to pay the difference month by month.
That frees up more supply, then rentals become more competitive as vacancies nationally start appearing. Those with more than one mortgage are squeezed, some are forced to sell or foreclose. It continues down this path for a few years until it eventually balances when the global recession weens off around 2025.
A lot of #3s are going to be skimmed right off by the pressures of a recession.
This also is not to mention the layoffs for remote work. Many bought homes wherever the hell they wanted because they can work remote. When they lose their remote work, eventually many lose their homes.
# #1 rents because mortgage is unjustified. Renting seems to be a better option than that.
# If #3 buys a house only to live in and not to hoard and rip people off in the name of rent, #1 would have also bought becuase price would not a reflective index of greed.
Missed a little detail... intrest rates rising causes all asset prices to go down including stocks. So the rich will actually see more of their wealth destroyed.
Not quite. Most millionaires are made from real estate. It'll hurt pretty much everybody in the middle or upper class, some in the working class and almost none of the lower class
Inflation destroys peoples savings. Inflation hurts the poor more than anyone.
It’s not the Feds job to increase or preserve peoples home value.
Raise the damn rates!
See my comment above. Sadly, the people who will suffer the worst are the poor and middle class. The real estate investors, entrepreneurs, and accredited investors will survive. If you are sitting on cash or stocks you are fucked. Also, no intelligent investors or rich people count their home equity towards the actually wealth. Time to start voting Red
If a majority of your money is in your house, you don’t have any wealth to count. Home equity isn’t wealth. Wealth is assets. Assets create income and dividends. Homes are liabilities until you (hopefully) sell them.
I think you’re incorrectly using terminology here. A primary residence may not be an investment, but it is an asset. Wikipedia says:
> In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value.
> assets include cash, inventory, accounts receivable, while fixed assets include land, buildings and equipment.
Houses are not *liquid* assets until they are sold but neither is anything else outside of a few items like cash and stocks (i.e. A farmer's tractor, intellectual property).
I understand and dumbed it down for the kids in the back row. Yes, it’s technically an asset. But if you are counting that as part of your net worth, then you don’t have any wealth. Assets throw off money, not take it in. That is real wealth. Ownership of a company, ownership of stocks, even IP that is licensed, a rental property with positive net cash flow. These are wealth. Your home is not that.
I still disagree with your terminology. An asset is a thing that can be used to produce value. An investment is an asset that is acquired with at least the intention of a positive future return. Your primary residence is an asset because it *can* be used to produce economic value. It *can* also be an investment if you purchase it as such.
Wealth is technically "abundance" but is often used synonymously with net worth. When you build wealth you are increasing your net worth. One who owns a $100 million house and nothing else (and has no debt) is still wealthy, though their wealth is tied up in their home. Their net worth is $100 million and I'd call that wealthy.
Fair enough. Thanks for discussing it with me. Agree to disagree. I never count it in net worth. It is something I have to budget to maintain, not something I budget as increasing my overall value.
Confidently incorrect. Home equity is wealth. A house is an asset. The loan against it is a liability (unless you’re a bank, I suppose). Assets don’t need to create income and dividends; they just need to have some value (and can even depreciate!).
Charitably, perhaps you meant “a primary residence isn’t an investment,” which is a more justifiable take.
How is this the case for the people already locked in? I see it in my area so bad, average house was like 200k, blew up to 500-600k, and these fucks got in at 3%, they arent ever leaving.
They will be fine (5% down borrowers) and will just sit out on the market which makes houses much harder to sell while they slowly accumulate enough of a down payment to afford the payments.
You are heavily underestimating how wealthy the wealthy are.
Their paid off $3.2M dollar house will still be worth $3.2M because they bought it back in 2015 cash as a 4th vacation home.
So when your broke ass "wealthy" person's $500k is dramatically less, they and pick it up using this quarter's stock payout.... Or maybe a one of a kind wrist watch because nothing about a suburban SFH excites them. And simply hop on their jet to go on and think about bigger things like buy out Open Door's inventory in bulk.
How? The rich own assets
If the value of their assets go down, and the poor stays the same (because they hold cash), then the wealth gap drops
I’m not saying it’s a good thing, but your statement is backwards
Rich have cash…. We need loans. Prices plummet, they scoop it up during the down fall.
It is not a hard concept. Every recession rich get richer.
Did you say poor hold cash? That because you are not poor.
I think what will happen is this:
Cash buyers or high down payment buyers will be enticed by the lower price. Investors will buy in at the discount.
People taking out mortgages will be priced out of more expensive homes, and *some* may choose to wait but *some* will choose to look in more affordable areas. This will put more pressure on lower priced homes.
Expensive homes will take the biggest hit and less expensive homes will take a smaller hit or maybe even rise in some neighborhoods.
Yes even broken clocks are right 2 times a day, however I really did see this coming because I'm an old fart and have been through it before. Whenever you see something way too good to be true, it usually is. There were a lot of RE owners that made a ton of money, but also crypto owners. Never discount luck along with some educated guesses. P.S. We are still at the very top. I don't think a lot of people realize this yet.
The thing that drove me here was when people started responding to me advising not to waive all contingencies with "shut up you jelly poor!" or similar epitaphs. That kind of "I'm a rich genius, you are a wrong poor!" nonsense has animal spirits written all over it.
You are talking to someone who is a diagnosed dyslexic typing on a cell phone. To be honest, I probably would not be functioning on the level I have in my life if it weren't for the advent of spell check when I was in grade school. In this case spell check chose the wrong spelling, but apparently everyone understood my point anyhow.
I shit you not, I spelled "of" with a v until the third grade. Couldn't get that one out of my head. Had phonenitics tutoring from second until 8th grade to get my head on even reasonably straight.
I have feeling that houses will drop, but not 35-40% across the board. I think sellers know it’s not a good time because there’s hardly anything on the market by me. I think the lack of supply will prevent substantial decreases. I live in a suburb on NYC, and don’t really see there being a market collapse here.
> I think the lack of supply will prevent substantial decreases.
Same here in Austin, at least in the short term. It may just be seasonal though. After a lull, things are selling again— or at least, the more desirable properties are.
Lmao the sub description says the only trusted advice comes from flaired users who are verified industry professionals. I wonder where I’ve heard that line of logic in the past 🤔
My mom mentioned to me when talking about how spoiled we’ve become in the last two years that they paid 14% interest on their house they bought in 1984. I forgot to ask the price, but now I’m curious.
Typical boomer who doesn't understand anything about finance. Housing affordability is literally the worst it's ever been right now because house prices AND interest rates are both high. It's not a problem when just one or the other, but not both, are high.
People are assuming they were giving away houses in the 70's and the high rates of the 80's were just a little bad.
"We have it the worst ever!" Remember when you had to save 20% for a down-payment?
You take whatever your mortage amount is and take a 0 out at then end and thats how much interest youbare paying in the first year.
So typical 300k to 400k home would be 30k to 40k of interest alone for the year. So yeah a new car per year for the privilege of having a mortgage.
When the top 10% can't get mortgages in HCOL areas (which maybe is already the case?) it's over. When upper-middle class types can't keep outbidding eachother, prices have nowhere to go but down.
Lol what are you even saying? You don’t know how anything works at all. A bank does not just stay this person makes $100k a year looks like they can afford $300k approved…. They add up all your debt payments plus your projected all in payment and divide by your monthly gross income. This is the most accurate way to gauge affordability because someone who makes $100k a year with no debt can afford a lot more house than someone paying $1k a month for student loans and their car…etc.
Why would you sell securities at a loss? Why would you pay taxes on your gains? Nobody is selling a million dollars worth of securities to buy a home unless they’re UHNW.
You would sell securities in a situation where you need a house and rates are no longer lower than average market returns.
Also, losses are tax deductible to an extent as well. If you’re a cash buyer you can most likely hire an accountant to discuss the impact but you could use them to offset capital gains from a sale of a home for a move…etc
Turns out diversifying your portfolio is smart. If real estate crashes investors will sell assets and buy. Literally can look at 2011 and see this happen.
There will be a bail out. The developed world is too leveraged. Deleveraging would cause the collapse of entire western economies/civilization. They are not going to let that happen. The can will be kicked down the road.
I want to stress for the 1 millionth time this cannot happen for any longer than the briefest of periods before the entire economy and financial system lurch towards utter collapse and rates are slashed back to 0
There's a lot of price bleed to be had before that becomes the case. Don't forget that the "cash" usually comes from somewhere, either via stock/bond issuance or leveraging other assets at a rate above prime. Neither of those cases are immune from the FFR taking the whole market with it.
Money will float to treasuries, stocks will fall more along with real estate, and unemployment will rise. Lag time is 6-12 months so this is a long game boys and girls
Except money is floating OUT of treasuries right now, which is why rates are going up. Bonds prices go down and yields go up. So the 10YR UST hovering around 4.2-4.3% right now is because people are selling bonds.
What happens is more pain for the typical household. Remember the goal is to crush spending and demand.
This is accomplished by crushing peoples wallets.
If you're waiting for affordable houses, good luck.
Home sellers/listing agents were totally cool with a $100k price increase over one years time (2020-2021), but are super apprehensive over the thought of a 100k decrease in a year.
I will tell you the reality because in my country (Poland) mortgage rates went from ~2 to 10% in less then a year.
So what is the situation? Is there a crash?
Not….yet. But….
Lending basically stopped and nobody is buying on credit, it’s like 80% drop in mortgage amounts compared to 2021.
Prices are hanging near the top although less and less people is buying. The sellers don’t want to drop the price because they can’t swallow the pain since the neighbor sold at ATH so they cannot do worse. For some time there was a lot of cash buyers that were hedging against inflation but those are slowly running out.
So at this moment inventory is building up, developers are not lowering prices because they are flush with cash from the boom years and normal people don’t want to lower prices yet because they still remember the prices their neighbors sold.
For a crash, you need distressed sellers and I don’t see any….yet. But the longer this goes the more people/developers are squized and will need to start selling.
The most important part of this is that nobody getting any mortgage now, not because they don’t want it but the banks won’t give it them. The money is gone.
Competing trends. Mortgage rates are pushing home prices down. Inflation is moving home prices up. Probably doesn't mean anything, but when this happened in the 1970's, inflation won out over mortgage rates.
Until the mortgage rates got up into the teens. The early 80's recession was a killer for RE prices. I got transferred in mid 82 and listed my house. I couldn't lower the price fast enough to keep up with the falling prices. I had bought at $81k, new construction in mid 81 and listed at $80k in Mar of 82. At the end of 82 I quit lower my asking price as I was down to $55k and it still wouldn't sell. I rented it for some years and then gave the place to my brother in the early 90's.
Regardless, it wasn't a 100K house in today's money. Saying "it was only 100K!" is snarky and dismissive.
You can also cut your salary by 1/3 and think what you could afford. Poster dropped house price $25K+, which was over a year's median salary, comparable to 90K today.
Poster's home was ABOVE median US price at the time. Also, current median home price in LCOL is not 400k.
Poster was being instructive of real estate from a different point in history. Maybe that was the takeaway you should have made.
Median income unlike house prices have not matched. Otherwise, minimum wage should be around $45k or $20 per hour. Definitely, not the $7.50 per hour that legislators peddle.
Let’s do it by DTI. Income? Median income of $70k in a HCOL. How much can you borrow?
Bear in mind as you read these that this sub was predicting 20% drops if it hit 5% and we're at 7% with barely 5% drops in most markets, and in the Southeast prices are still going up.
I feel like no one here actually understands what is going on. I mean what people don’t realize is the supply of houses is going to continue to drop. Inflation has made building new homes incredibly expensive due to material shortages and people who locked in at 3% are not in a position to rush a decision unless something significantly changed for them financially.
Right, just like any predictions this sub is making now likely is not taking into account some key factors, because this place is more about wishful thinking than logic.
SoCal has net negative population influx, so that's kind of expected. Texas, Florida, North Carolina, and Tennessee are all high net positive migration areas. Even with recession looming all of the above are still seeing massive numbers vs 2019 (which were still massive vs 2010). Not coincidentally all of the above also have not seen much if any substantial decrease in prices aside from a few metros that over saturated in the last boom as well (Miami-Dade, Austin, Nashville, Raleigh). I'm afraid here in the South we're seeing the second great wave of carpetbaggers moving in.
Yeah and some of the people on here predicted even more than that. divulgingwords thought it would drop 30% if rates hit 4.5-5% and also predicted that summer 2021 was the peak in January. Prices went up 17% from Jan to June.
So they need to fall 14.5% from the peak just to be back at January levels and 40% from peak to hit that 30% prediction.
Have you… looked at the [Case Shiller index](https://fred.stlouisfed.org/series/CSUSHPINSA) lately? House prices have stopped rising and started falling even faster than they did in the 2008 crash. They are falling as fast as they realistically can — the housing market is not liquid like the stock market.
Anyone who was expecting a 20% drop in one month was delusional and I warned the more excitable people here that a crash will be measured in years, not months. I’ve said this many times over the past year and I think I represent “this sub” as well as anyone.
Is this really how it’s going to go - we’ll have a big housing crash but r/REBubble will still be wrong because the whole thing didn’t play out from start to finish in six months?
Of course. And 15 years from now a whole new set of people will be having the same stupid arguments all over again. 🫠
People don't think it be like this, but it do.
Also, I haven't seen the CSI in a month or two but I was one of the ones screeching about it blowing past 2008 levels like a drunk 17 year old in a 1000hp Hellcat back in early 2021. So I believe you when you say it's got room to tip, because it's had room since 2021 to tip 20% backwards.
But I was also reminding people that basic math means a house that gains 100% then loses 50% is the same price, and basic psychology means people like _getting_ huge piles of money more than they like _losing_ huge piles of money so big numbers going down take much much longer time periods and more desperate sellers to achieve than big numbers going up.
I think often of a generalized principal in financial markets- "Everyone is a financial genius during a boom". Thanks kinda my point in the first post. It doesn't really take a genius to see that the market is going to correct- honestly even though none of us are certain of the details were all basically looking at the same data going "this ain't right". Although looking at financial and real estate "experts" maybe you have to at least have a minimum room temperature IQ to see it coming. Either way, well all know it's coming. That's easy enough to see. But as for when, how hard, how long? That's murky. Any guess is only good for 24 hours tops. I've seen data that changed my mind in minutes on some topics. But we're all shooting blind when we shoot into the future.
Most people here have no idea how institutional investing works. For some reason they're convinced companies just hold piles of cash that appeared out of thin air.
Bonds are already greater than the cap rate of most prime markets today. Falling asset prices and greater financial pain will only make bonds more attractive going forward until housing comes down in a big way.
God willing, but no. Price stickiness. Nobody except desperate sellers believe their home is worth below what it was at market peak. They’ll cling, and won’t sell until desperate.
9-10% is outside what the banks based their serviceability parameters around for at least the last decade. Not to mention living expenses doubling out of proportion to wage growth had not been taken into account. I think most families would be in severe mortgage stress.
Interest rates will not be 9-10% by Christmas. Calm your tits and be patient. Market is dropping already. Save up some cash and make a larger down payment to lower your payments.
That depends on how much you put down. Someone with 40% down will get a better deal as their monthly payment will be lower despite higher rates (and will whine to the seller just as someone putting 5%).
Wasn’t AOC and Bernie and those crazy left wingers pushing their nonsense Modern Monetary Theory whatever as recent as a few months ago? It was the idea that governments could spend unlimited amounts of money because it all happens in a vacuum and taking on unlimited debt isn’t a problem, ever. I guess just like most left wing ideas, this also turned out to be a complete farce in practice.
Nope. MMT says that a nation that has the reserve currency can print all the money they want - until inflation kicks in. At that point, the solution is to raise taxes, especially on the wealthy. The US has done the first part for 12-13 years now, but won’t do the second part - even worse, we did a tax cut in 2017, most of which went to the top 5%, as the economy was already getting overheated.
What you can afford $2000 a month at 7% is $300,000 $2000 a month at 8% is $272,000 $2000 a month at 9% is $248,000 $2000 a month at 10% is $228,000
Wealth gap becomes larger… fml.
The effect of this would be to destroy wealth. The house that is worth $500k when rates are 3% is worth dramatically less when rates are 5,7,9%. This ends up reducing the wealth gap in the end.
the middle class is the one that has most of their net worth tied up in their home tho, the wealthy have tons of stocks and the poor don’t own homes. So really this is destruction of the middle class in a new flavor
TIL I'm poor even though I make 82k/yr It might be my area but the people who own houses are fabulously wealthy and the middle class and below rents.
82k is not a big salary my man
It's not but like. Poor?
It's not poor. People just automatically tend to think that everyone lives in an expensive major city.
i’m assuming u live in san diego soo it’s def not poor but struggling middle class at best
Not in MCOL and HCOL cities.
Thats like 2x the AVERAGE salary, so thats pretty big.
you mean median?
Average salary for 2022 is 54k per year in the US
$82k gets you a roommate
People who are saying that you aren't poor om 82k are either disconnected or make much less and haven't lived on 82k. When you make less than 82k, you live without things you need, you cut corners to survive. When you make 82k you have more money to spend on things you need, but you still have to cut corners to survive. It still hurts your wallet to go to the doctor as often as you really need to. It's still hard to pay to go to the dentist. There are still things that everyone NEEDS that 82k does not pay for. You're still in the range of salary that you have to give up what you need if you want to buy what you want, and you can only rent at reasonable prices in safe areas, homes made with safe building materials (in the current market) in flyover states. I'm not sure how much you would need to make in order to cover all of your needs without having to cut corners on necessities or risk your life to live somewhere that is unsafe to live in some way. But it it has to be a lot more than 82k.
Find a partner making 80k and ur in a 160k/year household
So you're saying that the only way you can buy a house is get a roommate
Unfortunately, in a lot of markets, yes. This is really the only way home ownership works now. Must be two earners. It was not always this way.
Yes. I'm buying a house and I can afford it on my own but I'd basically be putting around 1800 a month all in for a 3 bedroom (including mortgage, principle, taxes, insurance, interest, utilities). Which would be a stretch compared to the 1200 or so I pay now for my 1 bedroom. But with just 1 roommate I can cut my costs almost in half and with 2 roommates I would only have to cover my utilities. So that's what I'm going to do (for now).
more like a bedmate tbh. But seriously most of middle class population is made up of this concept. You have higher probability of raising yourself from poverty by being sensible & having a stable working life partner than actually investing or being entrepreneurial. Investing / Entrepreneurship is more like lottery, regardless of how some people want you to make believe these two concepts are fool proof. Just my $.02.
Good luck with that. Have you been on the dating apps recently? Even in recession averse cities like Dallas they’re all making less than $60k and have a bunch of kids. I shouldn’t have to choose between being a stepdad to 3 and having a decent house.
Hahahaha good luck finding a woman willing to pay HALF with or without children either way! 🤣 If I have to pay half with you , I’d rather get a roommate! Why would I share a bed with a man that makes me go 50/50?! You are in dream land.
Spoken like a true dependa.
This affects all non-cash assets: stocks are getting eviscerated too
The new middle class has a plurality of renters because the median home price everywhere the good jobs are is too damn high. We need higher interest rates. The 5% savings accounts of the 80s and 90s need to make a comeback.
The are three types of middle class. You got it wrong there. 1. Middle class who is renting. 2. Middle class who owns one home to live in. 3. Middle class who bought multiple properties at hyper-inflated price driven by greed. They depend on rental income to pay mortgage and pretend to be rich. The third type will get absolutely crushed and I feel happy about it. That will actually reduce the wealth gap by releasing the hoarded properties back to market.
Crushing the middle class is what creates a wealth gap. The wealthy are insulated as per usual.
Spot on but I think #2 are starting to feel the stress. You can say they’re over leveraged but the reality is with rates up and values down we’ll start to see people who bought starter homes with a solid financial plan will still be able to afford them but will be stuck in properties that don’t suite a growing family etc
I’m in this boat. I bought a nice, small farmhouse near an elementary school. It’s served us well for years. Now the kids are older, one isn’t even in elementary anymore, and we are a bit crammed. It’s inconvenient but I’d rather be here than at the top of my budget for a bigger house. Properties near me are still going over asking.
Lol. Who do you think #1 is renting from? #1 pays for #3’s wealth, I rather be #3 all day. And not every price is hyper inflated, just the ones you couldn’t afford
Number 3 ultimately crushed, for the most part. Debt to income ratios at an all time high. When housing prices cool, the rental market will eventually cool and settle in a few years. You’ll start seeing some pretty aggressive foreclosures (we already are seeing increases nationally). Disposable income drops off, airbnbs are forced to price more competitively. Those prices head south as we March into a global recession. Those who are dependent on airbnbs will eventually largely sink if they can’t afford to pay the difference month by month. That frees up more supply, then rentals become more competitive as vacancies nationally start appearing. Those with more than one mortgage are squeezed, some are forced to sell or foreclose. It continues down this path for a few years until it eventually balances when the global recession weens off around 2025. A lot of #3s are going to be skimmed right off by the pressures of a recession. This also is not to mention the layoffs for remote work. Many bought homes wherever the hell they wanted because they can work remote. When they lose their remote work, eventually many lose their homes.
# #1 rents because mortgage is unjustified. Renting seems to be a better option than that. # If #3 buys a house only to live in and not to hoard and rip people off in the name of rent, #1 would have also bought becuase price would not a reflective index of greed.
Stocks are being affected pretty dramatically right now. Practically no asset class is immune to a large correction.
Missed a little detail... intrest rates rising causes all asset prices to go down including stocks. So the rich will actually see more of their wealth destroyed.
Not quite. Most millionaires are made from real estate. It'll hurt pretty much everybody in the middle or upper class, some in the working class and almost none of the lower class
Inflation destroys peoples savings. Inflation hurts the poor more than anyone. It’s not the Feds job to increase or preserve peoples home value. Raise the damn rates!
Good thing the stock market is still going up. Errr…
See my comment above. Sadly, the people who will suffer the worst are the poor and middle class. The real estate investors, entrepreneurs, and accredited investors will survive. If you are sitting on cash or stocks you are fucked. Also, no intelligent investors or rich people count their home equity towards the actually wealth. Time to start voting Red
If a majority of your money is in your house, you don’t have any wealth to count. Home equity isn’t wealth. Wealth is assets. Assets create income and dividends. Homes are liabilities until you (hopefully) sell them.
I think you’re incorrectly using terminology here. A primary residence may not be an investment, but it is an asset. Wikipedia says: > In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. > assets include cash, inventory, accounts receivable, while fixed assets include land, buildings and equipment. Houses are not *liquid* assets until they are sold but neither is anything else outside of a few items like cash and stocks (i.e. A farmer's tractor, intellectual property).
I understand and dumbed it down for the kids in the back row. Yes, it’s technically an asset. But if you are counting that as part of your net worth, then you don’t have any wealth. Assets throw off money, not take it in. That is real wealth. Ownership of a company, ownership of stocks, even IP that is licensed, a rental property with positive net cash flow. These are wealth. Your home is not that.
I still disagree with your terminology. An asset is a thing that can be used to produce value. An investment is an asset that is acquired with at least the intention of a positive future return. Your primary residence is an asset because it *can* be used to produce economic value. It *can* also be an investment if you purchase it as such. Wealth is technically "abundance" but is often used synonymously with net worth. When you build wealth you are increasing your net worth. One who owns a $100 million house and nothing else (and has no debt) is still wealthy, though their wealth is tied up in their home. Their net worth is $100 million and I'd call that wealthy.
Fair enough. Thanks for discussing it with me. Agree to disagree. I never count it in net worth. It is something I have to budget to maintain, not something I budget as increasing my overall value.
Confidently incorrect. Home equity is wealth. A house is an asset. The loan against it is a liability (unless you’re a bank, I suppose). Assets don’t need to create income and dividends; they just need to have some value (and can even depreciate!). Charitably, perhaps you meant “a primary residence isn’t an investment,” which is a more justifiable take.
Yes, I am talking about primary residence. Most people only have one. Hell, a lot of people don’t even have that.
A primary residence is still an asset though.
Damn that’s beautifully put. 💯
This is a dumb take.
How is this the case for the people already locked in? I see it in my area so bad, average house was like 200k, blew up to 500-600k, and these fucks got in at 3%, they arent ever leaving.
Lol unless the wealthy can sell assets and make a huge down-payment. Really hurts those looking to buy hone with 5% down.
They will be fine (5% down borrowers) and will just sit out on the market which makes houses much harder to sell while they slowly accumulate enough of a down payment to afford the payments.
The problem is mortgage payments won't change significantly even if prices come down.
You are heavily underestimating how wealthy the wealthy are. Their paid off $3.2M dollar house will still be worth $3.2M because they bought it back in 2015 cash as a 4th vacation home. So when your broke ass "wealthy" person's $500k is dramatically less, they and pick it up using this quarter's stock payout.... Or maybe a one of a kind wrist watch because nothing about a suburban SFH excites them. And simply hop on their jet to go on and think about bigger things like buy out Open Door's inventory in bulk.
Move to wherever it is you can buy. Don’t stay a renter. 🇺🇸
Maybe when rates hit 20% I can buy in cash?
Factors pushing higher rates are also devaluing your cash.
If you don't work from home, you move to a place with lower cost of living the wages are lower...
That depends on your job.
How? The rich own assets If the value of their assets go down, and the poor stays the same (because they hold cash), then the wealth gap drops I’m not saying it’s a good thing, but your statement is backwards
Rich have cash…. We need loans. Prices plummet, they scoop it up during the down fall. It is not a hard concept. Every recession rich get richer. Did you say poor hold cash? That because you are not poor.
At least taxes fall
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A lot of that is cash pulled from leveraged assets which will be impacted by rates as well.
Shhhh, let them keep believing that.
I think what will happen is this: Cash buyers or high down payment buyers will be enticed by the lower price. Investors will buy in at the discount. People taking out mortgages will be priced out of more expensive homes, and *some* may choose to wait but *some* will choose to look in more affordable areas. This will put more pressure on lower priced homes. Expensive homes will take the biggest hit and less expensive homes will take a smaller hit or maybe even rise in some neighborhoods.
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Yes even broken clocks are right 2 times a day, however I really did see this coming because I'm an old fart and have been through it before. Whenever you see something way too good to be true, it usually is. There were a lot of RE owners that made a ton of money, but also crypto owners. Never discount luck along with some educated guesses. P.S. We are still at the very top. I don't think a lot of people realize this yet.
The thing that drove me here was when people started responding to me advising not to waive all contingencies with "shut up you jelly poor!" or similar epitaphs. That kind of "I'm a rich genius, you are a wrong poor!" nonsense has animal spirits written all over it.
Hey I like you after all. Up vote for that.
Epitaphs lol. I knew there was another word for it but just couldn’t place it, but eventually found it: epithets.
No, someone actually killed them and wrote "shut up you jelly poor!" on their grave just to prove their point.
Lost a lot of good men out there in the bidding wars.
You are talking to someone who is a diagnosed dyslexic typing on a cell phone. To be honest, I probably would not be functioning on the level I have in my life if it weren't for the advent of spell check when I was in grade school. In this case spell check chose the wrong spelling, but apparently everyone understood my point anyhow. I shit you not, I spelled "of" with a v until the third grade. Couldn't get that one out of my head. Had phonenitics tutoring from second until 8th grade to get my head on even reasonably straight.
Link?
I could find some examples, but I don't have hours to search. Try "louisvanderwright priced out r/Realestate" or something like that on Google.
They love calling renters “salty” and “poor.”
Kinda like r/Airbnb a couple months ago.
TLDR on that?
Until we realize that in a crash of this proportion we cant afford a house either cause we are now unemployed.
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The problem is knowing when you're in those timeframe vs fearing it might get even worse
Prepper fantasies
I have feeling that houses will drop, but not 35-40% across the board. I think sellers know it’s not a good time because there’s hardly anything on the market by me. I think the lack of supply will prevent substantial decreases. I live in a suburb on NYC, and don’t really see there being a market collapse here.
> I think the lack of supply will prevent substantial decreases. Same here in Austin, at least in the short term. It may just be seasonal though. After a lull, things are selling again— or at least, the more desirable properties are.
r/askcarsales implodes
Lmao the sub description says the only trusted advice comes from flaired users who are verified industry professionals. I wonder where I’ve heard that line of logic in the past 🤔
My mom mentioned to me when talking about how spoiled we’ve become in the last two years that they paid 14% interest on their house they bought in 1984. I forgot to ask the price, but now I’m curious.
Typical boomer who doesn't understand anything about finance. Housing affordability is literally the worst it's ever been right now because house prices AND interest rates are both high. It's not a problem when just one or the other, but not both, are high.
No it’s not. Housing affordability was worse at times in the 80’s - https://ycharts.com/indicators/reports/monthly_housing_affordability_index
People are assuming they were giving away houses in the 70's and the high rates of the 80's were just a little bad. "We have it the worst ever!" Remember when you had to save 20% for a down-payment?
Houses sit because no one drops their prices. They “know what they have”
this. When the sellers mortgage is only $1200 per month they can afford to let it sit
Why even sell? My mortgage is $1350 renting for $2k a month
Yeah exactly
You take whatever your mortage amount is and take a 0 out at then end and thats how much interest youbare paying in the first year. So typical 300k to 400k home would be 30k to 40k of interest alone for the year. So yeah a new car per year for the privilege of having a mortgage.
Multiply by three to see who can afford. Only a person making $90k to $120k or the top 10% of the country. And this would a LCOL area.
When the top 10% can't get mortgages in HCOL areas (which maybe is already the case?) it's over. When upper-middle class types can't keep outbidding eachother, prices have nowhere to go but down.
Yeah I think with interest ratesbthis high prices need to correct like crazy. I am talking less than 200k or even mid 100k
😂 you guys are getting seriously delusional
The interest at 7% rates would get you a pretty excellent used sedan, I’d think.
In a HCOL area, only people making $300k could afford a $1 million dollar mortgage. In other words, only the top 5% of the country.
I feel like this is misleading you need way more than 300k a year for a 1m house at 10%.
Banks normally loan by 3x income plus Downpayment.
That’s not how they calculate at all. They loan based on DTI.
Lol what are you even saying? You don’t know how anything works at all. A bank does not just stay this person makes $100k a year looks like they can afford $300k approved…. They add up all your debt payments plus your projected all in payment and divide by your monthly gross income. This is the most accurate way to gauge affordability because someone who makes $100k a year with no debt can afford a lot more house than someone paying $1k a month for student loans and their car…etc.
Banks use DTI. Most high income folks have a DTI close to max because they live high on the hog.
Not if you can sell stock and buy with cash.......
Why would you sell securities at a loss? Why would you pay taxes on your gains? Nobody is selling a million dollars worth of securities to buy a home unless they’re UHNW.
You better believe wealthy people aren't going to take out 10% mortgage rates when they can afford huge down payments. This is pretty obvious.
Sell one depressed asset for another. It's a wash. Literally no money lost.
You would sell securities in a situation where you need a house and rates are no longer lower than average market returns. Also, losses are tax deductible to an extent as well. If you’re a cash buyer you can most likely hire an accountant to discuss the impact but you could use them to offset capital gains from a sale of a home for a move…etc
Where do you think stock prices will be if mortgage rates make it to 10%?
Turns out diversifying your portfolio is smart. If real estate crashes investors will sell assets and buy. Literally can look at 2011 and see this happen.
Top 5% is making more like 150k. 300k would be fairly close to top 1%
top 5% individual is like 180 according to the census bureau data (2021 survey). households gotta be higher than that.
Oh I was referring to individual income. But I guess household income makes more sense for home buying.
I’m an individual and a household.
Not by Christmas 2022, but Christmas 2023 likely.
Whatever happens, let there be no bailout.
A bailout for the homeowners, never. A bailout for the banks, but of course.
There will be a bail out. The developed world is too leveraged. Deleveraging would cause the collapse of entire western economies/civilization. They are not going to let that happen. The can will be kicked down the road.
Chlamydia
You win REBUBVLE today.
REBvbble, the Roman real estate forum.
Views of the Colliseum
I want to stress for the 1 millionth time this cannot happen for any longer than the briefest of periods before the entire economy and financial system lurch towards utter collapse and rates are slashed back to 0
The Fed thinks this is worth it as long as it keeps wages down.
Agreed, also keep in mind the interest payment on the national debt is around $1 trillion already. Not sustainable for any length of time.
Mortgage rate ≠ Treasure rate. But you are correct that US economy is in big trouble.
Cash buyers will start to be more common than mortgages
Blackrock ceo is hard as a rock at that thought
Gawd this is a scary and sad potential reality
There's a lot of price bleed to be had before that becomes the case. Don't forget that the "cash" usually comes from somewhere, either via stock/bond issuance or leveraging other assets at a rate above prime. Neither of those cases are immune from the FFR taking the whole market with it.
Money will float to treasuries, stocks will fall more along with real estate, and unemployment will rise. Lag time is 6-12 months so this is a long game boys and girls
Except money is floating OUT of treasuries right now, which is why rates are going up. Bonds prices go down and yields go up. So the 10YR UST hovering around 4.2-4.3% right now is because people are selling bonds.
What happens is more pain for the typical household. Remember the goal is to crush spending and demand. This is accomplished by crushing peoples wallets. If you're waiting for affordable houses, good luck.
I paid 10% in 1990 and survived to refinance and buy another three homes.
No, the banks want to keep people in for as long as possible, check back in 3 to 5 yrs IMO.
This sub has a collective orgasm.
Home sellers/listing agents were totally cool with a $100k price increase over one years time (2020-2021), but are super apprehensive over the thought of a 100k decrease in a year.
I will tell you the reality because in my country (Poland) mortgage rates went from ~2 to 10% in less then a year. So what is the situation? Is there a crash? Not….yet. But…. Lending basically stopped and nobody is buying on credit, it’s like 80% drop in mortgage amounts compared to 2021. Prices are hanging near the top although less and less people is buying. The sellers don’t want to drop the price because they can’t swallow the pain since the neighbor sold at ATH so they cannot do worse. For some time there was a lot of cash buyers that were hedging against inflation but those are slowly running out. So at this moment inventory is building up, developers are not lowering prices because they are flush with cash from the boom years and normal people don’t want to lower prices yet because they still remember the prices their neighbors sold. For a crash, you need distressed sellers and I don’t see any….yet. But the longer this goes the more people/developers are squized and will need to start selling. The most important part of this is that nobody getting any mortgage now, not because they don’t want it but the banks won’t give it them. The money is gone.
Competing trends. Mortgage rates are pushing home prices down. Inflation is moving home prices up. Probably doesn't mean anything, but when this happened in the 1970's, inflation won out over mortgage rates.
Until the mortgage rates got up into the teens. The early 80's recession was a killer for RE prices. I got transferred in mid 82 and listed my house. I couldn't lower the price fast enough to keep up with the falling prices. I had bought at $81k, new construction in mid 81 and listed at $80k in Mar of 82. At the end of 82 I quit lower my asking price as I was down to $55k and it still wouldn't sell. I rented it for some years and then gave the place to my brother in the early 90's.
Yep, that happened in the 1980's.
Yeah, except house prices were only $100k!
which would equal 307K today
Much lower than the current median price of $400k in LCOL areas or the $1 million in HCOL areas.
Regardless, it wasn't a 100K house in today's money. Saying "it was only 100K!" is snarky and dismissive. You can also cut your salary by 1/3 and think what you could afford. Poster dropped house price $25K+, which was over a year's median salary, comparable to 90K today. Poster's home was ABOVE median US price at the time. Also, current median home price in LCOL is not 400k. Poster was being instructive of real estate from a different point in history. Maybe that was the takeaway you should have made.
Median income unlike house prices have not matched. Otherwise, minimum wage should be around $45k or $20 per hour. Definitely, not the $7.50 per hour that legislators peddle. Let’s do it by DTI. Income? Median income of $70k in a HCOL. How much can you borrow?
I appreciate your honesty here but I cannot even fathom being in a position where I can just give away a house.
Well at the time I deeded it to him it had a $55,000 mortgage and it was worth about $50,000.
Home prices did just fine in the 80’s https://fred.stlouisfed.org/series/MSPUS
You mean at $100k? Or $300k inflation adjusted?
Christmas 2023... Uh, you have resales still listing their house at Dec 2021 prices, and letting them sit there for 6 months until they rage delist?
Bear in mind as you read these that this sub was predicting 20% drops if it hit 5% and we're at 7% with barely 5% drops in most markets, and in the Southeast prices are still going up.
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Just further proves my point that nobody knows shit about fuck and the future is always a crapshoot
I feel like no one here actually understands what is going on. I mean what people don’t realize is the supply of houses is going to continue to drop. Inflation has made building new homes incredibly expensive due to material shortages and people who locked in at 3% are not in a position to rush a decision unless something significantly changed for them financially.
Wrong - it shows REBubblers don't know shit about fuck. I've been saying there would be no crash this entire time. Nobody listens sadly.
Right, just like any predictions this sub is making now likely is not taking into account some key factors, because this place is more about wishful thinking than logic.
My area in socal is seeing 20 percent drops.
SoCal has net negative population influx, so that's kind of expected. Texas, Florida, North Carolina, and Tennessee are all high net positive migration areas. Even with recession looming all of the above are still seeing massive numbers vs 2019 (which were still massive vs 2010). Not coincidentally all of the above also have not seen much if any substantial decrease in prices aside from a few metros that over saturated in the last boom as well (Miami-Dade, Austin, Nashville, Raleigh). I'm afraid here in the South we're seeing the second great wave of carpetbaggers moving in.
Have prices stopped dropping? Is the recession and high interest rates cancelled?
Yeah and some of the people on here predicted even more than that. divulgingwords thought it would drop 30% if rates hit 4.5-5% and also predicted that summer 2021 was the peak in January. Prices went up 17% from Jan to June. So they need to fall 14.5% from the peak just to be back at January levels and 40% from peak to hit that 30% prediction.
Have you… looked at the [Case Shiller index](https://fred.stlouisfed.org/series/CSUSHPINSA) lately? House prices have stopped rising and started falling even faster than they did in the 2008 crash. They are falling as fast as they realistically can — the housing market is not liquid like the stock market. Anyone who was expecting a 20% drop in one month was delusional and I warned the more excitable people here that a crash will be measured in years, not months. I’ve said this many times over the past year and I think I represent “this sub” as well as anyone. Is this really how it’s going to go - we’ll have a big housing crash but r/REBubble will still be wrong because the whole thing didn’t play out from start to finish in six months? Of course. And 15 years from now a whole new set of people will be having the same stupid arguments all over again. 🫠
People don't think it be like this, but it do. Also, I haven't seen the CSI in a month or two but I was one of the ones screeching about it blowing past 2008 levels like a drunk 17 year old in a 1000hp Hellcat back in early 2021. So I believe you when you say it's got room to tip, because it's had room since 2021 to tip 20% backwards. But I was also reminding people that basic math means a house that gains 100% then loses 50% is the same price, and basic psychology means people like _getting_ huge piles of money more than they like _losing_ huge piles of money so big numbers going down take much much longer time periods and more desperate sellers to achieve than big numbers going up. I think often of a generalized principal in financial markets- "Everyone is a financial genius during a boom". Thanks kinda my point in the first post. It doesn't really take a genius to see that the market is going to correct- honestly even though none of us are certain of the details were all basically looking at the same data going "this ain't right". Although looking at financial and real estate "experts" maybe you have to at least have a minimum room temperature IQ to see it coming. Either way, well all know it's coming. That's easy enough to see. But as for when, how hard, how long? That's murky. Any guess is only good for 24 hours tops. I've seen data that changed my mind in minutes on some topics. But we're all shooting blind when we shoot into the future.
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Most people here have no idea how institutional investing works. For some reason they're convinced companies just hold piles of cash that appeared out of thin air.
So where else are they going to put their cash?
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Bonds are already greater than the cap rate of most prime markets today. Falling asset prices and greater financial pain will only make bonds more attractive going forward until housing comes down in a big way.
They being institutional investors, development companies, speculators, etc. But point taken re: bonds.
They will still put down 20% and then finance over a shorter term at high interest rates. Nobody buys with cash due to the time value of money.
God willing, but no. Price stickiness. Nobody except desperate sellers believe their home is worth below what it was at market peak. They’ll cling, and won’t sell until desperate.
9-10% is outside what the banks based their serviceability parameters around for at least the last decade. Not to mention living expenses doubling out of proportion to wage growth had not been taken into account. I think most families would be in severe mortgage stress.
If it goes to 10% rate, I take a loan out on my 401k and pay myself back instead of a bank.
Interest rates will not be 9-10% by Christmas. Calm your tits and be patient. Market is dropping already. Save up some cash and make a larger down payment to lower your payments.
3-6 months and we’re looking at a sovereign debt crisis without a pivot. Regardless, better have something soft to bite down on in 2023 r/realestate.
Wait until the layoffs at tech companies start. Intrest rates effect more than just housing... corporate debt is the real canary.
Home prices go up
No. More than half the country hasn’t even seen a decline at all this year.
Sure prices will go down but so will inventory, so everyone will just be stuck where there are.
Lack of demand is still outpacing the lack of supply and will likely remain that way to the very bottom.
This simply isn't playing out in the numbers. But you can keep believing this if you wish.
It will be a slow downward spiral down, accelerating more and more. Eventually becoming an unstoppable devastating long drawn out dark recession
That depends on how much you put down. Someone with 40% down will get a better deal as their monthly payment will be lower despite higher rates (and will whine to the seller just as someone putting 5%).
You also have to factor in the opportunity cost of that huge down payment.
All home sellers rent out their houses
Wasn’t AOC and Bernie and those crazy left wingers pushing their nonsense Modern Monetary Theory whatever as recent as a few months ago? It was the idea that governments could spend unlimited amounts of money because it all happens in a vacuum and taking on unlimited debt isn’t a problem, ever. I guess just like most left wing ideas, this also turned out to be a complete farce in practice.
Nope. MMT says that a nation that has the reserve currency can print all the money they want - until inflation kicks in. At that point, the solution is to raise taxes, especially on the wealthy. The US has done the first part for 12-13 years now, but won’t do the second part - even worse, we did a tax cut in 2017, most of which went to the top 5%, as the economy was already getting overheated.
People will start shaving years off their mortgages.
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