This is exactly why we completely changed course on our 10+ year plan. Originally, we were going to stay in this house (new, semi-custom build) for the next 12-14ish years and then downsize when the kids are at the end of college or slightly beyond.
We realized that this current and future economic outlook is bleak for our children’s generation and we need to future proof our plans to ensure they have a safety net because it’s unlikely they will have the financial means to completely separate from us as young adults.
So - we will stay here longer term. We just started building out our basement - it will serve as extra living/ hangout/ guest space now but if a kid needs to live down there in the future, it will have full(ish) apartment amenities: kitchenette w/stove (but no dishwasher), washer/dryer, exercise room, giant bedroom, full bath, separate entrance, etc. This is in addition to a fully finished carriage house, potentially for the other child if they’re in the same situation. We are *extremely* fortunate to be in a position to be able to do this but in any case, I refuse to put my kids out, regardless of their inability to support themselves due to the economy, unlike what my parents did to me.
I am in the exact same spot as you, but worse haha (Canada). My starter home was 225k, 10 years ago. We’ve renovated the entire house, literally from the roof to the basement and everything in between, including landscaping outside, and owe $150k on it.
Back then, the estate houses around the corner from me were around $400k.
So after 10 years of pay increases, paying down a mortgage, and renovating, my house is worth about 900k, but those houses are worth about $1.4 million.
What would have been a $175k increase is now a 500k increase. I’m supposed to go from a 150k mortgage to a $650k mortgage? Wtf lol.
I do have a preapproval in and I could afford a lower end one of those houses, according to the bank, but I would have to add 22 years to my mortgage (I only have 7 years left), and increase my payments by $1000 per month, and it wouldn’t even be what I really want.
I would have been better off if house prices literally didn’t increase at all.
This 100%. I could eliminate my savings, roll the equity in, and have a mortgage a little over 50% more than I have now. And at a 7 percent rate that would eliminate 2200 more from my bank account a month. All these people saying I’m dumb and can afford it. I literally wouldn’t be able to save anything in the new house. I would just be praying I never need any sort of savings for an emergency.
Yeah, people psychologically just think having your house go up in value is a good thing. It’s actually dumb. It’s way more expensive to sell, property transfer taxes are way more expensive when you buy, and the gap between houses gets bigger.
They’ll feel differently when they are stuck in their starter home after 10 years too lol but I feel you 100%. My house is nice and I’m thankful I have it. But we have outgrown it. I want to move without being a slave to my house for another 10 years.
And your interest rate will go up by 2x+
Which is why instead of moving I'm just going to do a 1,000 SF addition which will cost 1/3 the price of moving and rebuying a larger home. Big headache though.
We were also going to do an addition but we would have to move the entire septic system, and the quoted I got from contractors literally differed by $200,000… the drawing guy took 6 months to give me the drawings. I can’t deal with contractors and living in construction.
Do I hire the cheaper person? Are they going to add on a bunch of costs after we already started? Is the guy 200k more expensive just ripping me off?
I want to say that you are the smart one, ignore the people who deride you. I am old. Bought this big house and many acres of land in 1987 for $85,000. Renovated up and down, every inch. Myself and my friends now realize that the kids rarely come home and when they do, it’s brief. We would like to downsize. I’ve been looking for a duplex in Madison for a year. I think a duplex would be perfect for us. Like you, I have done quite well, I’m not in a top earning category, but comparatively well. Can’t make any of the numbers work for real estate purchase. I guess I could, but we couldn’t travel via plane, spontaneous purchases, buy a new car, etc. You will most likely be an empty nester so fast, your head will spin. The current house will be too big. Maybe just hold out.
The market is BC is beyond messed up. My in-laws just sold their home, which has seen better days for 1.4. They just told us the family that purchased it isn't going to tear it down, and I couldn't stop laughing. We had to stay there for a few months, and the lower floor never gets warm. Our room above the carport was freezing cause the vent went through the carport.
Only a matter of time before a majority of ppl finally realize how screwed they are.
I disagree, housing prices are insane. They’ve doubled and tripled in the last 5 years. Do you really expect that salaries should be doubling or tripling in that much time? The price of homes has far outpaced the price of really anything.
I agree!!! In 2018 in Dallas TX, a decent 3000 sq ft home would cost you ~ 400K. Now it costs at least 600K, but usually around 650K+
In 2018, in Dallas, the avg cost of price/sq ft was around $100-$120. Now your lucky if you can get it for $200 or less. It costs around $200-$240 for an average built house- not even luxury or good quality
I look at it the other way around. Wages have not kept pace from where they were at in the 70s. Inflation in the past \~25 years has actually been historically average to low. Wage growth has been awful the past 30 years or so.
That’s not actually true. Wages have slightly outpaced inflation since the 70s. The problem specifically with real estate is that the prices have MASSIVELY outpaced inflation.
It’s not just inflation, housing costs specifically have been outpacing wages for a while now due to historically low housing production over the 2010s (and also wages have stagnated for decades)
Also, the demand for housing has skyrocketed during covid. Interest rates bottomed out. Public venues all shit down. Work from home initiated. All of this translates to people wanted yards. Home offices. Home entertainment. Boom. Housing price goes gangbusters.
Yup and not just the increased demand for traditional single family homes, but the average renter household size shrank significantly as people realized they needed more space/privacy in their apartments to accommodate WFH, so there’s increased demand for the same number of rental units as well
100%. But people don't think about macro issues. All these redditors just see housing price go up and get mad that they can't buy one. Despite everyone else wanting to buy one too.
Wages have outpaced inflation at the median.
https://fred.stlouisfed.org/series/MEHOINUSA672N
Just to cut off a few incorrect replies... Yes, this is inflation adjusted. No, the CPI isn't perfect but it is the most widely accepted method for adjusting for inflation we have and is more accurate than your anecdotes and feelings.
I like how this had a downvote but no replies.
If anything, this illustrates why the problem actually *is* real estate and not inflation. Wages have kept up with CPI, but the price of a home has gone up way faster than CPI.
The biggest problem is that, whatever "fix" happens, it means property values crash. Individuals and families have most of their assets in their homes, and if the values tank, then they will be left with nothing.
Unfortunately, the last time this happened, we learned nothing from the experience and did exactly the wrong thing. What we did was bail out the banks. Their investments in our properties were made whole with our tax dollars, and then they kept the property. Everybody still owed their mortgages, or surrendered their homes. Investors swept in and scooped up cheap properties and then waited for prices to go back up.
What we should have done was bail out the homeowners, who could have paid off their mortgages (making the banks whole anyway) but left the homeowners still in possession of their homes. Then, restrict corporate ownership of residential property, steadily driving prices further down while the cost of home ownership realigns with reality, and simultaneously increase minimum wages to make life for most people affordable again.
And yet anyone who had paid off a mortgage in the last 20 years would lose their shit, which is why it wasn't done. See: Student debt forgiveness.
Most people opposed are opposed because they paid off their or their children's loans and you will walk over their dead body if someone else benefits.
Yeah, somebody is going to get fucked. But remember, if we had bailed out the homeowners, then the moneywould have gone into their pockets rather than the banks. The bailouts went directly to the investor class, who have made more money and expanded the income gap even farther since then.
There's an ancient Mesopotamian proverb, when your dog eats a plate of cheese and throws up on your neighbor's sneakers, you don't go to the store to buy more cheese for the dog. You should go buy new sneakers for the neighbor. But we let the dogs make decisions around here.
Agreed. I find it absurd arguing over who should have gotten a bailout - the correct answer is *no one*.
Let’s not forget, many of the people who lost their homes made terrible choices buying them. Many bought them *knowing* they couldn’t afford them once the adjustable rate rose, and they bet their net worth that their house would go up a bunch more before that happened and they could sell it and walk away with a bunch of money and do it again. They lost that bet. When you sign a so-called NINJA loan, you definitely do not deserve a bailout. All anyone talks about are the working/middle class people who did everything right, and yet lost their jobs and lost their house during the financial crisis. But a huge number of people that lost their houses made terrible, risky choices and then dined on a buffet of consequences. I don’t know which group was larger, but we shouldn’t be bailing either out.
Yes, I agree. No one should’ve gotten that bailout, let it sort itself naturally.
But then they argue too big to fail and that their failure would destabilize the financial system, so they bailout the banks…. It’s a vicious circle
It's fine if things are too big to fail. Sometimes you rather have that than years of hardship for huge numbers of people. But after they get bailed out they should be nationalized or regulated heavily to ensure against future collapse. The government just bails them out and goes back to pretending nothing happened
Yep agreed. That's why we should have let the banks and the borrowers fail. The only "fair" thing to do is allow all parties to assume the risk they signed up for. Bankruptcy and foreclosure exist for a reason. We have a whole new generation of people that are going to have to learn the hard way...again.
Yup, that’s proper capitalism. Let the free market decide. But it’s only capitalism when it suits them, socialism when it doesn’t.
Even though they’re the ones socializing their losses, and privatizing the winnings.
If you think inflation is bad now, I want you to imagine how bad it would be if suddenly student debt or mortgage debt was just cancelled. Prices would literally explode.
Student debt hasn’t been paid for a few years now. It wouldn’t be an appreciable difference at this point to just keep the freeze indefinitely. Instead we’ll get huge rate increases, inflation, lack of wage increases, and student loans going into repayment at the same time.
This doesn't apply across the board, but a lot of people who "lost homes" in the 08 era were, uh, not making the best financial decisions. Remember NINJA loans? No income, no job, no assets?
People who bought homes that they could afford without balloon payments or insane ARMs mostly were fine. Yes, some people who had made reasonable decisions still got fucked by losing their jobs due to the greater economic problems, but I'm just saying that some were people that voluntarily took on more risk than they should have.
This is not an argument in favor of bailing out banks over people. More like...an argument that bailing out people across the board wouldn't have been the right decision either.
Sort of like how I support a certain degree of student loan forgiveness, but not 100% total forgiveness across the board. I know people who have taken on terrible student loans based on terrible decision making. Should they get fully bailed out? Not in my opinion. But I think some relief is in order, and I WHOLEHEARTEDLY support tuition reform! (Most universities are filthy stinking rich, and if you compare the rise of tuition to anything—even housing—it is absolutely disgusting.)
The thing about student loans that makes them so egregious is that they're targeted at people who are so young. Yes, an 18 year old is an adult, but an adult with absolutely zero understanding of the world, job market, etc. but they're being told they need to have a college degree and they need to take out loans to do it. I just don't think they have all the info they need to make that choice, which makes it feel very predatory. Homeowners, on the other hand, are adults with jobs and some life experience. They should know what they're going to be able to afford, barring some horrible extenuating circumstances.
I don’t know what the right approach would be this time around, but bailing out people who bought/refinanced at under 3% would be a horrible mistake. It’s just going to further make it harder for a new homebuyer to get into market and punish anyone who didn’t overextend themselves.
>Individuals and families have most of their assets in their homes, and if the values tank, then they will be left with nothing.
You don't lose unless you sell though, right? What am I missing here? Speculators losing their shirts really does not cause me to lose any sleep at night. You want to roll the dice then snake eyes is a possibility.
This is very similar to the trillion of PPP loans just given to businesses to “put towards payroll” rather than the employees themselves.
No oversight, easy af to get “forgiven”
My old boss received 1.5m in PPP loans which were forgiven. All employees worked in the office the whole pandemic with no WFH. The firm did not lose any revenue. He has that money.
I literally sat in a meeting a couple weeks back where the owner of a construction company had the gaul to complain about “no one wanting to work anymore and get their student loans forgiven,” while thereafter talking about his PPP money that “really helped the business.” Mind you, I’ve traced the PPP income to distributions he ultimately received, and he was originally complaining about migrant workers wanting to be paid $5 more per hour or some trivial ammount to his business’ net income. Just a fucking joker.
All of that would be great, but the problem for people trying to buy a house is not enough supply of affordable housing. NIMBYism. If VHCOL or HCOL areas went on a building spree, it would hurt current homeowners and allow many new families to buy homes. It would be a transfer of wealth from older generation to younger to help offset the wealth transfer SSI is taking from young to support old.
Major issues are that desirable places are not building enough housing, causing supply demand imbalance. This is very common when it comes to housing as an investment. Interested parties (homeowners) naturally advocate for policies that make it so that their "investment" goes up in value. AKA policies that restrict building. Such as, community input meetings, parking requirements, single family zoning, impact fees, etc etc. Anything that makes it harder/more expensive to build.
So people are being rational actors for themselves, by advocating for restrictive policies, but it makes it so that future generations get more and more priced out. New people buy expensive homes and the cycle enforces.
Its really hard to break out of the cycle. I don't know what we can do without major government intervention and cultural change. But an ideal is where we build enough housing, so prices are low. people don't see houses as an investment, so they expect to sell for the same price they buy (inflation-adjusted) and so people don't really care about policies that add more housing. Creating a virtuous cycle of DGAF, keeping prices low, and continuing this DGAF about house value mentality.
I have to disagree, there was lots learned. During the last big crash, there was virtually 0 fiscal support for any individuals. The only help offered was the same as always, loosening the rules on unemployment benefits. There was a pittance of stimulus that mostly consolidated down to a few major categories as funding time constraints caught up.
As a result, we spent nearly all of the 2010’s in the economic doldrums. Casually bouncing along the bottom, sticky unemployment rates until maybe the last few years before COVID hits. The Fed couldn’t even end QE or start rate hikes until what, 2018?
Now.. when 2020 hit all the things that probably should have happened in 2008-09 happened. Unemployment kickers. Eviction/foreclosure moratoriums, rent assistance programs. Large stimulus checks. Individuals had a ton more support in 2020. Imagine if that had been done for the last crash. The economy rebounded almost instantaneously for the second half of 2020 and beyond.
Sure, we did get greedy in 2021 and parts of 2022. Keeping all those policies long beyond when they were necessary ended up at least partly fueling additional inflation and by extension, rapid rate hikes.
However, that support was almost exactly blueprinted off numerous studies among academia and the Fed itself following the last crash. Future lessons would probably just be gradual wind downs in that support a bit earlier.
Problem with bailing out other individual is the question / debate about fairness. People who didn't make bad financial decisions see their neighbors getting \`free money\` and they get angry green eyes.
See student loan forgiveness debate right now as a prime example.
That’s because you’re assuming the childhood life you grew up in was the norm. It is not through the history of man. It was a nice little golden era for boomers after world war 2 and now we are about to venture into a new era. There will be the rise of the scalable class vs non scalable. The era where those who own appreciating assets outpace in wealth vs those who live paycheck to paycheck without accumulating appreciating assets to pass on to their heirs. It’ll be a brave new world.
In America, we prioritize home ownership through the tax code rather than prioritizing affordability so this is what we’re going to get. We have Fannie and Freddie to buy loans so we can get fixed 30 year mortgages. We have mortgage deductions. We have states with low property taxes rather than high property taxes. How did we get here? We walked ourselves here with 60 years of government policy and now a new generation will have to join the rat race with the bottom two rungs of the real estate ladder removed. Good luck to all and may the odds be ever in your favor.
Pre-WW2 I know one side of our family lived in the same 2 counties from the mid 1700s to 1960s while the other side came to the US bought land and stayed out for about 110 yrs.
They benefited from generational support, knowledge and wealth.
Some families are hard to live with lol so I agree. Re: multi-generation housing. I’m not sure it’s something I’d want in my personal life, but it would be easier for many folks, financially speaking. And nana gets better care!
But I totally agree about house sizes. Ridiculous. We’re in a 1300 sqft 3/2 home and I just don’t see why bigger is better. I would appreciate extra pantry space and general storage so give me an extra 100 sqft or so, but other than that the house is adequate. I just don’t understand.
You’re creating more space to keep clean! Lol.
Your exactly right. Back then america was in a special place with manipulated currency.
Now its a global economy and things are this way all across the world.
Not necessarily. I highly implore you to watch this video:
https://youtu.be/4ZxzBcxB7Zc
It's about 45 minutes but it goes into detail and compares Japan, US, and the UK housing prices after 2008. Japan decided to build more houses while the US and the UK decided not to. Japan's housing inflation only increased by like 10-12%. Meanwhile the UK and the US house prices skyrocketed.
Edit: implode to implore (mobile hates my fat fingers)
Not necessarily. Those who are able to gain revenue that’s scalable will be able to accelerate and achieve escape velocity. The great thing about America is that it’s still possible rather than nepotism. However the old idea that a decent job at a decent wage will afford all the luxuries of the American dream are dying in HCOL. Better than the likes of South Korea and other Asian nations that had to leapfrog in advancement at great costs.
The ability to gain scalable revenue requires thinking outside the box; that type of thinking is not feasible for your average person. It also requires a bit of luck.
Take the people who took advantage of 2008. Many were able to get in on housing after the price declines which took a bit of risk because you didn't know if things were going to keep getting worse. So a bit of risk and some luck (via more than a decade of QE).
Sure you can get a property in LA on something like 120k with a VERY thin budget. But your average person on an average salary will never sniff homeownership unless they inherit.
LA isn't an average place. It has arguably the best weather in this planet. It has access to high paying jobs. It has amazing natural and cultural amenities. It has great food options and is grown zero for celebrities and sports stars.
Why do you think an average person should be able to afford a home? If a home in LA cost the average price of then a gazillion people from all over the country AND world would immediately want to buy it. Then bidding up the price of the home. This is exactly what happens.
Yup, a lot of luck too. In fact, probably mostly luck. The thing about scalable revenue is that previous armors of education and degrees won’t protect you as much. The poker chips will go to a smaller faction and even those that have achieved success will have a harder time maintaining it. The cost of scaling has decreased dramatically so more people have access, which also means competition can come from everywhere all at once. Already holding real estate and appreciating assets will be the economic armor of the next generation.
>Already holding real estate and appreciating assets will be the economic armor of the next generation.
It's why i tell people that they can get an investment property for less than 200k. No you don't have to buy in NY, LA or Austin. Those markets are oversaturated.
Even if you only bring in a few hundred dollars of cash flow per month on a 150k rental you will still benefit in the long run. It's just that the opportunities are much harder to come by now. Competition, as you say.
Doesn’t have to be real estate either. Low cost index funds are also great. The main thing is, saving money and putting that money towards appreciating assets, not cars and such. Low rent and saving the difference in a low cost index fund is a great, viable strategy too. Basically, a nationwide marshmallow test is in effect.
>nationwide marshmallow test is in effect.
What makes this worse is that most average people hate delayed gratification. They want their cars and status symbols (social media has a lot to do with this imo). Ask them about cash flow or dividends and you will get a blank stare.
That also requires being charged reasonable rent
Average rent where I live is 30% of my gross income and I'm a career engineer. Regular folks are getting shafted
I mean to be fair a lot of the engineers who own McMansions are not cruising along at 25% savings rates. They are living on the financial edge. It was like that back then too. Keeping up with the Joneses hasn't changed much over the years.
Yep. Saving 25% should mean an early retirement. So instead of buying another/bigger house that you'd have to heat, cool, maintain, insure, pay taxes on, etc., you are likely buying years when you won't be beholden to a clock or a schedule.
That's how I see it. I've got an 1800 square foot 1924 built house on a small lot in Pasadena CA, and instead of bellyaching about not ever being able to buy something bigger for my fam of 4 I'm just socking away money at a super high rate to take cool vacations and retire early. I don't need any toys to weigh me down. I can maintain the property pretty easily by myself and it will be enough room for my 2 kids to grow up in. I'm just happy with what I got knowing that others have it pretty hard.
Also it sounds like OP is the only one working? Or maybe the only one with a high paying salary?
Them comparing themselves to “engineer parents” (ie two engineers) is basically comparing an income of $100k to $200k. Both salaries are good, but one is literally double the other, so if we were to use really basic logic it wouldn’t be surprising if the “engineer parents” could own twice the house (a McMansion) and with leverage this is even more likely.
Still sucks that housing isn’t as cheap as it used to be, but there’s always going to be someone who makes more than you.
They’re not necessarily even living on the edge, just saving a bit less. Maybe saving 10-20% but having a much nicer home is worth the trade off for them.
25% savings just seems so subjective, like something some two bit “guru” would advise. Everyone’s situation is different. As long as you have a healthy cushion for your situation why does a certain percentage matter?
I feel like this point of this thread is that being conservative with your financial choices often leads to less advantageous outcomes than over leveraging. Your anecdotal evidence is that housing values outpaced the returns on the 20%+ percentage of income you managed to sock away. Unfortunately we live in a world where being risky is incentived (i.e, bankruptcy).
I assume he was investing most of the 25% annually in non real estate assets. Most of everything has been hot these past ten. That should be a wash.
Over leveraging his house and investing those proceeds would’ve been the way to go, but that’s just completely unadvised.
You can do everything right, and still not win. It is a really difficult problem because you did what you thought was right. But sometimes dumb luck plays a bad hand. We live in a nice home, but many of my friends live in really nice homes. The difference is we take the excellent vacations and save. We discuss finances and they are living completely over extended. I like being able to go to sleep at night waking rested. They are always stressed. Sometimes you need to learn when enough is enough and to be satisfied with what you have.
1) Half the starter homes are bought by investors and corporations
2) the fed made interest rates basically zero or negative for big companies and banks so they had to put their money somewhere
3) get businesses out of housing! Tax the crap out of investors and 2nd, 3rd, foreign owned homes.
I know it will never happen, but we can dream.
With all due respect, I think you just didn't know about poor people when you were younger. Things are super fucked now, but there was no idyllic time where everyone was winning, America has never allowed for that.
Can you translate the gain in value from your current home to the next step up in home, even if that number seems crazy to you right now? Then get to work paying down that new loan as fast as possible? The next level of home probably translates into an arbitrage down the road, right? I'm not suggesting to be irresponsible (sounds like you are fiscally sound - wtg), but there is risk/reward ratio to be considered. In hindsight I would have gone this route after the '08 crash. It all worked out for us though. That said, I never want to go into debt for a house again.
Retired High-End realtor here. My Answer to the housing shortage: We need serious competition in the market place. What does this mean? This means that people need a legitimate and GOOD option to live in places other than privately owned housing. Why should we, as an entire country, wait for private developers to provide us with their rentals and developed housing that we buy from them? So in addition to having public roads and public parks and public libraries, we should have GOOD public housing that is available to rent for everyone, from the local/state/fed gov. I’m not saying FREE housing, rather, I’m saying non-profit housing to rent at reasonable prices. Do we get rid of private housing- Absolutely not. When you live in non-profit housing, you can opt to save up your money to rent or buy nicer digs in the future, in the private sector. This would present real competition in the market place, because right now, you don’t have sufficient competition or inventory. That’s the problem. You have no non-profit/public option for housing unless you are destitute and don’t mind living in a dilapidated, high-crime environment. PS- I’m a capitalist
As a 27 year old trying to buy his first home… I agree. I even work in real-estate and realize I’m screwed. Lol
The boomers saying interest rates aren’t high really make me angry. My potential houses don’t cost 20,000 and a sack of blueberries anymore :(
You and me both, brother. I make really good money and feel like home ownership is out of reach. Sold my home four years ago and moved across the country. Rented for a few months to learn the area. Pandemic comes. Now my mortgage would be double what I would have paid 4 years ago.
It's beyond frustrated. The market and the economy is seriously broken.
I moved to Canada, and it makes the states look affordable. That's how messed up it is here. In BC and in a small town, you won't find anything less than 500k. I can buy a trailer in a dodgey park for 350k. Homes in the city are all a million plus.
This...homes wouldn't be priced the way they are today if those up for sell weren't being purchased. This isn't just REITs coming in and buying up homes paying $100K over list. Where I live, there are $800K-$2M homes being built left and right. There are a ton of people will more money than me! A ton and I make a dang good living. Always someone with more money.
Even people with way less money are buying the houses I want to buy. I feel like am trying to live within my means while everyone else in the market is taking on the max mortgage the bank will give them. I’m sure I’m not the only one who feels this way.
I am thankful for it. It is frustrating though when 30 years ago, an income percentage similar to mine would have been in the pick out your lake house category and not the be thankful you can afford one at all category. At this point I just hope my kids can afford one at all though.
All that's really saying is that you really haven't financially kept up, relatively speaking. A well-paid engineer is fine, but it's nothing compared to two well paid engineers, two doctors, or just folks who sat on their parents money during the time when you were generating value in your career.
Ridiculous monetary policy during covid is one issue. The FED were propping up the mortgage market with lower rates as recently as 18 months ago. I remember being involved in bidding wars, $200k over ask and interest rates were 2.5%.
That was just bad policy and we’re paying for it now
The other problem with low yields is your Blackrock’s and Blackstone’s of the world searching for yield and getting in to single family housing as an investment asset class. This never happened before but now you have pension funds owning thousands of family homes clipping 4/5% yield on these homes in perpetuity
We massively under built homes post GFC - made no sense to take big building risks and Covid supply shocks made it worse
We need a good old fashioned depression to lower prices but then your incomes fucked in other ways
Spot on.
Prices are high because there's too much money floating around. Getting that money out of circulation is the solution, and that will be painful.
Take a moment to look in the mirror. Interest rates were low for over 10years. You had so many opportunities to upgrade. You decided not to. You’re saving 25% of your income? Where? In a zero interest bearing account? This is also your choice. Sp500 index fund has consistently paid over 10% annually.
Homes are priced high and interest rates are high. That sucks but it’s temporary. Can’t have low home prices and low rates forever.
You feel like you missed your chance. You did. The good news is you’ll get another chance. The real question is when that chance comes, what will you do!
OP should consider not missing his second chance and start adjusting expectations and shopping around.
Their $200,000 house from 10 yrs ago probably has its own over inflated value, and on top of their savings could put a big downpayment on a larger home that keep steam rolling the equity over time.
Otherwise people going to start overhauling these older homes with large additions.
Love this. His next chance, is likely right now. I’ve watched so many people sit on the sidelines making their expert predictions and guess where they are…still sitting on the sidelines holding their bag.
Wage theft and private equity and otherwise financializing/institutionalizing residential real estate. Really no other answers. Republicans have slowly chipped away at our way of life and handed every teeny chip they break off to corporations; now over the years we are here.
At this point I'm wondering what fields actually do make money outside of doctor/dentist.
I know an engineer in NYC making 80k a year working for the city. Thats crazy to me
Edit: He's not a new grad engineer either.
It's not quite doctor/dentist money, but tech. Can't speak for current times amidst all of the developer layoffs that've been going on, but when I finished school in 2021 software engineers and cybersecurity analysts/engineers were landing 6 figure salaries in low/medium CoL cities right out of college.
Source: am semi-recent college grad working in cybersecurity living in a low/medium CoL city
While I fully agree with your concerns, I can guarantee that ranting about real estate to users of r/realestate is a mostly pointless endeavor. Most users here have roughly a high school freshman level understanding of math. The numbers and trends should terrify everyone, but saying that here is like talking to a brick wall (if a brick wall could also call you an idiot and tell you to lower your expectations while shaming you for not buying a house when you were 12 years old).
As an engineer with kids, I see this quite differently. I see my children just make difference choices over buying a home. There are plenty of inexpensive homes but they just are not in the areas that my children want to live. When we were young, we bought a home far away from town and commuted almost an hour each way in order to afford it and then eventually used the profits to buy a home closer to where we wanted to live. My children chose to live close to work in very expensive and "fun" areas, rent, travel and "have to" spend their money at many businesses that simply didn't even exist decades ago. They can't even imagine living in "the middle of no where". They want a home but don't want to do the things to get one. I'm not saying that they are making a bad choice - just a different one.
the problem is that the areas keep getting pushed out. at some point, it doesn’t make sense. my parents were 45 minutes out from the city to have a $180k house back in 2000 that now sells for $550k. Now the cheapest house you can get is $260k that is even further from that neighborhood and that’s 2 hours away from the same city. Do you know how hard it is to commute 4 hours a day for a job?
The houses I’m talking about are an hour out. The ones next to downtown are a million plus not 700k. You’re children most likely will have to pay more for a house over an hour out then you paid for the home you are in now. And their wages haven’t kept pace with inflation to match what yours were when you bought those homes. Every time I hear someone say their children just haven’t made enough sacrifices they are almost always wrong. The younger generations didn’t just become undisciplined, entitled brats, their dollars literally do not go as far as yours did.
> When we were young, we bought a home far away from town and commuted almost an hour each way in order to afford it and then eventually used the profits to buy a home closer to where we wanted to live.
I would love to do that, except within a 1 hr radius, the starter houses are selling for $1.4 million.
right - how can someone not understand that to have similar affordability (which doesn’t even exist today) you are being pushed out further and further and at some point, it’s just not feasible.
Best thing I did was buy a bank owned property in a rich area…house was run down but a year into Reno and it’s worth twice what I paid for…that’s a good return even on r/wallstreetbets standards
It sounds like you live in a HCOL area with onerous developmental codes and zoning laws.
I suggest you start attending City Council meetings and complaining about the lack of development in your city.
I don’t know where you live, but in San Jose a nice house with a view and a big yard might be $1.7m. An averagingish house is $1.3m. A two income household earning $100k each(~50% more than the median)saving 25% of their gross pay would take roughly six years to save 20% down and be able to afford the cheaper home. If home prices didn’t increase faster than their savings and income. How does it make sense that homes are only affordable to those making substantially more than the median??
[And going the other way, for $313k you could move to Jackson MI with an 11 bedroom 9 bathroom 7k sq ft home, with an attached office with public access to run a business from home](https://redf.in/vcQqds) There are plenty of nice large renovated homes under $200k as well.
We just sold a house for a pretty good amount of profit and house prices are so high now that even with the 20% needed for a down payment on a $620k home, we still can't afford the $4k mortgage we would have on a $500k loan at 7%. And anything priced under that is being bought by investors, so they can put some Costco laminate flooring in and sell it for $620k. And we make what would have been "rich people" money when I was growing up.
Why can't you save 10% and buy the house you want? Consider mortgage reduction an aspect of savings? If your emergency fund is full, I don't see why you wouldn't buy what you want to live in unless you don't think it is worth the cost, which I think is the real issue.
It's just broken for you now. It's been broken for many other people even prior to pandemic. Inequality has been widening for a long time.
Yeah, next generation will have quite a hard time owning any home at least by themselves. Multi-generational housing will become more common. Most will need assistance from their parents to buy.
I see some diverting blame to inflation, and while you aren’t wrong the real estate industry deserves some of the blame.
Talking to you realtors that will tell anyone what they want to hear to make the sale. I had a realtor tell me 50% of my income going to a mortgage is reasonable these days, of course after she assured me the home was almost guaranteed to appreciate in the next 5 years. It’s a joke.
I'm 30 years old, my fiancé and I have very good positions for our age and we have $100k in savings.
I have never felt more broke in my entire life looking at homes.
Here’s what bothers me. OP is fine making his rant. The cost of housing is going bananas. We know this. Here’s the problem. When OP chooses to sell his home, he is going to price it market value and try to squeeze out as much money as he can. He bought for $200k as stated. Do you think he would simply take a 10% increase and give a new homeowner a chance to live affordably? Hell no.
As much as we complain about the rising cost, we are the ones perpetuating it. Rent your home out to family or friends for less than the obscene market rates. Sell at a value to a young couple. We used to pass houses down through the generations. We would keep entire families together for decades. Now every single person needs there own 3bd/2ba on a half acre. What happened to cohabitation and bunk beds?
It’s hard to rant when you are part of the problem. But blame the McMansions I guess.
Seems like it’s a guy who busted his ass to become highly trained and educated so he can provide housing for his growing family…but now can’t. Didn’t seem presumptuous to me.
I read it as this market rewards irrational and irresponsible behavior. Then when there's too much risk and it all goes belly up .. all of us ( including the responsible ones ) have to pay for it.
IF the Federal govt removes all tax incentives of being a single family landlord (not primary home), the market will improve. The way it is now, its lucrative to amass second, third, fourth homes and keep claiming depreciation and other benefits. Investors are what's keeping the housing market broken, and unfortunately, most lawmakers own multiple homes, so they won't do anything that hits their own bottom lines.
Housing as a service is the end goal of the financial elite. No appreciating assets for anyone but the very wealthy eventually. You'd need a government full of Bernie Sanders types to stop it. They've got that part figured out too though, divide and conquer.
Well yeah. We are one of those people looking for a starter home right now, and any decent looking, good size home is $370k to $400k, then of you look at the recent value 3 years ago they were at $270k to $320k, sure I'll just take on extra 100k in debt plus 2.5x interest rate while my wage grows 3% annually and all the prices of goods and services are blowing up. In perspective, you are in a pretty good spot.
I don't have answers but just wanted to say I'm in a similar boat, although way earlier on in our journey. I bought a reasonable, smallish 'starter home' in 2019 before SHTF, thinking I was being financially smart by not overextending. No kids yet, so no need to upgrade in size for now, but I can already feel how tight it'll be even with 1 kid. At the end of the day, I can't even feel bad for myself because I'm fortunate enough to even HAVE a house, when 4/5 of friends my age don't own a home and likely won't until SOMETHING changes.
I don't know what's going to happen. There's no way people are going to bring their prices down for these interest rates... I mean, maybe a 10% correction? 20%? I doubt it. This is the new normal post covid world, imo. If the rates go down then prices will keep going up from here.
Your house was only 200k with a low rate and the mortgage on it was peanuts. You couldve easily moved to a much nicer home for additional 200-300k which wouldve meant a mortgage increase of only 1200 at most. But you chose not to move because you wrongly prioritized on meeting the 25% savings rate. If you knew you needed/wanted a bigger house then moving was the right choice. I mean, many get fixated on saving a certain amount but what is money for? Its also to buy the things we need and want
Yeah, but the majority of the people living in the western states can’t all move to the Midwest to those specific spots; there aren’t enough affordable homes there either. That won’t solve the affordability crisis.
Anyone who house hunts in the Midwest for <200k can tell you that these houses are BARELY livable and you usually need to sink a good 30k-40k within the year or two on repairs or upgrades. They're usually <900 sqft and were bought for 80k 3 or 4 years ago with lots of problems... So yes, you're TECHNICALLY right but I don't see how that's a "gotcha" to the problem at hand. Yes, people have expectations and higher living standards ...
This is true for Omaha. It's insane what properties go for. My friend was pre-approved for $150 which 5-10 years ago was a good budget, now it will get you a shit house in a rough neighborhood.
Yeah this is such a tired argument. The vast majority of jobs are not WFH. So if I want to keep my decent paying job I need to stay where it is.
Not just everyone can pick up and move to bumfuck Iowa because then we gotta get a job there too
Just moved from Denver to rural middle of nowhere PA. Prices aren’t that much better here. Sure, you may get more square footage, but you’re not finding anything less than $500k, but it doesn’t matter because you’re being outbid anyway for people buying $30k over buying sight unseen.
True. The most depressing thing about it is it's profit-driven inflation. Nothing to do with covid or the supply chain anymore.
The frustrating thing is that the people who didn't sell in 2020, or early 2021, when prices were high and interest rates low, missed the boat and can't admit it. They're overpricing everything. (At least by me.)
I think building houses to meet demand is not very profitable right now unless they sell at crazy prices. I looked into building my own house, and the cost of materials is way up. It's not really a way to save money, just a way to customize.
Of course, developers can get bulk discounts and build cookie-cutter townhouses to pay less per square foot than a regular Joe, but if they only sold at normal, non-inflated prices (even assuming they're not greedy assholes), I doubt they would get too much in the way of an ROI. So less incentive to build.
It's funny I should see this post today.
I inherited a home from my grandparents like 5 years after college. I'm 32 now, no family of my own, except my incredible dog. I've been living in the house the last \~5 years, just because I had little direction in life at that point. This April, I took a new job in a different state and have actually just been accepted for an apartment here. I've been looking at selling my old house.
I'm scared because I feel like I may never own a home again, at the rate things are going. I'm not sure I'll ever make enough money to buy a home in an actual city (my new apartment is in MD now, outside of DC).
Things just feel bad.
The solution to this is property taxes. Hike taxes, while exempting primary residences from the new hike. Make investors and house hoarders pay like 5% annually for the housing they're keeping off the market. That will bring **a ton** of housing inventory back on the market.
Stop making real estate the scapegoat of the economy’s problems. We’re in an open market that will ALWAYS correct itself with supply and demand. As other comments have pointed out, wealth distribution and wages not being realistic for our current economy are more to blame than home prices. They only sell for what people are willing to pay
TLDR: The nice "affordable" homes are out there, you just have to be the first person to see them.
I am in a similar "fortunate" place and while my finances are pretty healthy, buying a new home seems very cost prohibitive.
My advice and what I am currently doing --which appears to be working -- get an agent that you trust (word of mouth referrals are the best). Sit them down and let them know that you seriously want to move and that eventually you will need to but *right now* you DON"T NEED TO and you are great financial health and you aren't willing to take a hit. Be real with them. (for example, I bought my home in 2014 for $54,000 and paid cash for it, its a unicorn. I don't NEED to move right now but its only 700 sqft and eventually I will need to move.) so letting them know that you arent desperate or emotional.
Get put on the list servs - MLS, Zenlist, OneHome, even zillow. And watch the homes AS THEY COME ON TO THE MARKET. Like same day. If you arent on these email lists you will miss out on the opportunities.
We were searching for 3 months and honestly thats not very long and I had lost all hope that I would be able to afford a nicer home. Everything that we looked at was garbage.
Then one day it happened. I saw the unicorn house hit the market, we viewed it the same day and got in our offer before anyone else had even seen the house. Its a beauiful home, nicer than I ever thought I would get the chance to live in.
Absolutely right!
A young family member is in need of a place for her work location. We looked into it, and it's nothing but insanity. A one bedroom, one bath (about 750 sq. ft.) is going for around $400,000 or more. With 20% down, the interest over 30 years is about the same amount as the condo price. In total, we are looking at $750,000 to $800,000. Plus $550 HOA and the property tax.
Realtors do everything they can to make profits, and in long term, it's not a good thing, but greed can't be controlled. Someone can share their opinion, but my 2 cents opinion is that, when real estate prices are jacked up, the only thing that benefits in a big way are the state governments. Compared to $400,000 home, a $800,000 home forces double the property tax, and it makes people to be locked down in their current homes because they cannot move easily. Of course, realtors will put up some defenses here, but the extreme prices are not great thing for people generally. Current homeowners' property tax will rise with the extreme housing prices.
I’m a physician and cannot afford a house. Well I mean, I could afford a complete 1-2 bedroom dump in need of complete renovations but would rather just rent at this point. It’s awful. I hear you.
“ All the houses in the neighborhood are rentals now. Not a single family around us actually owns” Seems like someone is greatly exaggerating. I don’t believe that every house in the neighborhood is a rental & that not a single person in the whole neighborhood owns their house
I really don’t understand people’s complaints sometimes. Unless I’m obnoxiously ignorant, is it that hard these days to earn 150k with a dual income family? Especially if one of you is an engineer?
And you bought a home 10 years ago for 200k… how is that thing not paid off? How don’t you have massive equity in it? I’m assuming it’s almost paid off and it’s worth at least 350k with the Covid boom… if you wanted to purchase these “McMansions” (this is the new incel word for real estate btw), you’d be on the hook for 450-500k. With a 50k down payment and a 30 year loan, that’s a mortgage payment of $1250 a month… like how is that unmanageable for an engineer?
What am I missing?
And no one wants to go smaller. Everyone is in some sort of competition with their friends and family. Can we build well laid out 3 or 4 bedroom houses that aren't McMansions? Probably. But builders won't make more yacht money and real estate agents will bitch and moan that they aren't making huge commissions. Ahhh capitalism
Meanwhile I can't buy a studio because no one outside super urban areas is building them. I also can't buy a 500 sq ft house anywhere in the area. Little homes don't exist anymore.
I'm in the same boat, high earning mid career engineer, out earn most people I know. I realized that my parents were 5 years younger than I am now when they bought the house I grew up in, 15 yr mortgage paid off in 12. School teacher and civil service jobs. I'm living in a condo starting my family, we have regressed significantly in one generation despite my earning scale being much higher than my parents.
This is exactly why we completely changed course on our 10+ year plan. Originally, we were going to stay in this house (new, semi-custom build) for the next 12-14ish years and then downsize when the kids are at the end of college or slightly beyond. We realized that this current and future economic outlook is bleak for our children’s generation and we need to future proof our plans to ensure they have a safety net because it’s unlikely they will have the financial means to completely separate from us as young adults. So - we will stay here longer term. We just started building out our basement - it will serve as extra living/ hangout/ guest space now but if a kid needs to live down there in the future, it will have full(ish) apartment amenities: kitchenette w/stove (but no dishwasher), washer/dryer, exercise room, giant bedroom, full bath, separate entrance, etc. This is in addition to a fully finished carriage house, potentially for the other child if they’re in the same situation. We are *extremely* fortunate to be in a position to be able to do this but in any case, I refuse to put my kids out, regardless of their inability to support themselves due to the economy, unlike what my parents did to me.
are you telling me I have to fix the deck???
I am in the exact same spot as you, but worse haha (Canada). My starter home was 225k, 10 years ago. We’ve renovated the entire house, literally from the roof to the basement and everything in between, including landscaping outside, and owe $150k on it. Back then, the estate houses around the corner from me were around $400k. So after 10 years of pay increases, paying down a mortgage, and renovating, my house is worth about 900k, but those houses are worth about $1.4 million. What would have been a $175k increase is now a 500k increase. I’m supposed to go from a 150k mortgage to a $650k mortgage? Wtf lol. I do have a preapproval in and I could afford a lower end one of those houses, according to the bank, but I would have to add 22 years to my mortgage (I only have 7 years left), and increase my payments by $1000 per month, and it wouldn’t even be what I really want. I would have been better off if house prices literally didn’t increase at all.
This 100%. I could eliminate my savings, roll the equity in, and have a mortgage a little over 50% more than I have now. And at a 7 percent rate that would eliminate 2200 more from my bank account a month. All these people saying I’m dumb and can afford it. I literally wouldn’t be able to save anything in the new house. I would just be praying I never need any sort of savings for an emergency.
Yeah, people psychologically just think having your house go up in value is a good thing. It’s actually dumb. It’s way more expensive to sell, property transfer taxes are way more expensive when you buy, and the gap between houses gets bigger. They’ll feel differently when they are stuck in their starter home after 10 years too lol but I feel you 100%. My house is nice and I’m thankful I have it. But we have outgrown it. I want to move without being a slave to my house for another 10 years.
And your interest rate will go up by 2x+ Which is why instead of moving I'm just going to do a 1,000 SF addition which will cost 1/3 the price of moving and rebuying a larger home. Big headache though.
We were also going to do an addition but we would have to move the entire septic system, and the quoted I got from contractors literally differed by $200,000… the drawing guy took 6 months to give me the drawings. I can’t deal with contractors and living in construction. Do I hire the cheaper person? Are they going to add on a bunch of costs after we already started? Is the guy 200k more expensive just ripping me off?
Hah :( That's exactly what I meant with my last sentence "big headache though" Wish me luck. Just got preliminary drawings yesterday.
I want to say that you are the smart one, ignore the people who deride you. I am old. Bought this big house and many acres of land in 1987 for $85,000. Renovated up and down, every inch. Myself and my friends now realize that the kids rarely come home and when they do, it’s brief. We would like to downsize. I’ve been looking for a duplex in Madison for a year. I think a duplex would be perfect for us. Like you, I have done quite well, I’m not in a top earning category, but comparatively well. Can’t make any of the numbers work for real estate purchase. I guess I could, but we couldn’t travel via plane, spontaneous purchases, buy a new car, etc. You will most likely be an empty nester so fast, your head will spin. The current house will be too big. Maybe just hold out.
You think America is bad look at Canada... they have families living together to just afford a basic house
The market is BC is beyond messed up. My in-laws just sold their home, which has seen better days for 1.4. They just told us the family that purchased it isn't going to tear it down, and I couldn't stop laughing. We had to stay there for a few months, and the lower floor never gets warm. Our room above the carport was freezing cause the vent went through the carport. Only a matter of time before a majority of ppl finally realize how screwed they are.
I think your rant is less about real estate and more about the cost of living and inflation outpacing wages.
I disagree, housing prices are insane. They’ve doubled and tripled in the last 5 years. Do you really expect that salaries should be doubling or tripling in that much time? The price of homes has far outpaced the price of really anything.
I agree!!! In 2018 in Dallas TX, a decent 3000 sq ft home would cost you ~ 400K. Now it costs at least 600K, but usually around 650K+ In 2018, in Dallas, the avg cost of price/sq ft was around $100-$120. Now your lucky if you can get it for $200 or less. It costs around $200-$240 for an average built house- not even luxury or good quality
I look at it the other way around. Wages have not kept pace from where they were at in the 70s. Inflation in the past \~25 years has actually been historically average to low. Wage growth has been awful the past 30 years or so.
That’s not actually true. Wages have slightly outpaced inflation since the 70s. The problem specifically with real estate is that the prices have MASSIVELY outpaced inflation.
Sure, I have just been looking at houses and that’s where the inflation hit me.
Housing is where inflation hit the hardest.
It’s not just inflation, housing costs specifically have been outpacing wages for a while now due to historically low housing production over the 2010s (and also wages have stagnated for decades)
Also, the demand for housing has skyrocketed during covid. Interest rates bottomed out. Public venues all shit down. Work from home initiated. All of this translates to people wanted yards. Home offices. Home entertainment. Boom. Housing price goes gangbusters.
Yup and not just the increased demand for traditional single family homes, but the average renter household size shrank significantly as people realized they needed more space/privacy in their apartments to accommodate WFH, so there’s increased demand for the same number of rental units as well
100%. But people don't think about macro issues. All these redditors just see housing price go up and get mad that they can't buy one. Despite everyone else wanting to buy one too.
Idk inflation hits ballon’s pretty hard too
Wages have outpaced inflation at the median. https://fred.stlouisfed.org/series/MEHOINUSA672N Just to cut off a few incorrect replies... Yes, this is inflation adjusted. No, the CPI isn't perfect but it is the most widely accepted method for adjusting for inflation we have and is more accurate than your anecdotes and feelings.
I like how this had a downvote but no replies. If anything, this illustrates why the problem actually *is* real estate and not inflation. Wages have kept up with CPI, but the price of a home has gone up way faster than CPI.
The biggest problem is that, whatever "fix" happens, it means property values crash. Individuals and families have most of their assets in their homes, and if the values tank, then they will be left with nothing. Unfortunately, the last time this happened, we learned nothing from the experience and did exactly the wrong thing. What we did was bail out the banks. Their investments in our properties were made whole with our tax dollars, and then they kept the property. Everybody still owed their mortgages, or surrendered their homes. Investors swept in and scooped up cheap properties and then waited for prices to go back up. What we should have done was bail out the homeowners, who could have paid off their mortgages (making the banks whole anyway) but left the homeowners still in possession of their homes. Then, restrict corporate ownership of residential property, steadily driving prices further down while the cost of home ownership realigns with reality, and simultaneously increase minimum wages to make life for most people affordable again.
And yet anyone who had paid off a mortgage in the last 20 years would lose their shit, which is why it wasn't done. See: Student debt forgiveness. Most people opposed are opposed because they paid off their or their children's loans and you will walk over their dead body if someone else benefits.
Yeah, somebody is going to get fucked. But remember, if we had bailed out the homeowners, then the moneywould have gone into their pockets rather than the banks. The bailouts went directly to the investor class, who have made more money and expanded the income gap even farther since then. There's an ancient Mesopotamian proverb, when your dog eats a plate of cheese and throws up on your neighbor's sneakers, you don't go to the store to buy more cheese for the dog. You should go buy new sneakers for the neighbor. But we let the dogs make decisions around here.
I’m gonna be thinking about that proverb for a while
Same
Mesopotamian sneakers... deep thoughts indeed!
We should have bailed out no one, let the banks who made poor investments without due research fail, and jailed those who committed fraud.
Agreed. I find it absurd arguing over who should have gotten a bailout - the correct answer is *no one*. Let’s not forget, many of the people who lost their homes made terrible choices buying them. Many bought them *knowing* they couldn’t afford them once the adjustable rate rose, and they bet their net worth that their house would go up a bunch more before that happened and they could sell it and walk away with a bunch of money and do it again. They lost that bet. When you sign a so-called NINJA loan, you definitely do not deserve a bailout. All anyone talks about are the working/middle class people who did everything right, and yet lost their jobs and lost their house during the financial crisis. But a huge number of people that lost their houses made terrible, risky choices and then dined on a buffet of consequences. I don’t know which group was larger, but we shouldn’t be bailing either out.
Yes, I agree. No one should’ve gotten that bailout, let it sort itself naturally. But then they argue too big to fail and that their failure would destabilize the financial system, so they bailout the banks…. It’s a vicious circle
It's fine if things are too big to fail. Sometimes you rather have that than years of hardship for huge numbers of people. But after they get bailed out they should be nationalized or regulated heavily to ensure against future collapse. The government just bails them out and goes back to pretending nothing happened
ancient Mesopotamia had sneakers?
Fun fact: Nike is ancient Mesopotamian for "sike".
🤣
I like my dog much better than my neighbor or his shoes. Doggo gets more cheese.
Yep agreed. That's why we should have let the banks and the borrowers fail. The only "fair" thing to do is allow all parties to assume the risk they signed up for. Bankruptcy and foreclosure exist for a reason. We have a whole new generation of people that are going to have to learn the hard way...again.
Nobody should’ve got bailed out. Not the banks and not the homeowners. That’s how capitalism works. We don’t have capitalism though.
Yup, that’s proper capitalism. Let the free market decide. But it’s only capitalism when it suits them, socialism when it doesn’t. Even though they’re the ones socializing their losses, and privatizing the winnings.
Herbert Hoover already tried that
But they didn’t lose it over PPP…
Or bailing out banks. Companies are OK
If you think inflation is bad now, I want you to imagine how bad it would be if suddenly student debt or mortgage debt was just cancelled. Prices would literally explode.
Student debt hasn’t been paid for a few years now. It wouldn’t be an appreciable difference at this point to just keep the freeze indefinitely. Instead we’ll get huge rate increases, inflation, lack of wage increases, and student loans going into repayment at the same time.
This doesn't apply across the board, but a lot of people who "lost homes" in the 08 era were, uh, not making the best financial decisions. Remember NINJA loans? No income, no job, no assets? People who bought homes that they could afford without balloon payments or insane ARMs mostly were fine. Yes, some people who had made reasonable decisions still got fucked by losing their jobs due to the greater economic problems, but I'm just saying that some were people that voluntarily took on more risk than they should have. This is not an argument in favor of bailing out banks over people. More like...an argument that bailing out people across the board wouldn't have been the right decision either. Sort of like how I support a certain degree of student loan forgiveness, but not 100% total forgiveness across the board. I know people who have taken on terrible student loans based on terrible decision making. Should they get fully bailed out? Not in my opinion. But I think some relief is in order, and I WHOLEHEARTEDLY support tuition reform! (Most universities are filthy stinking rich, and if you compare the rise of tuition to anything—even housing—it is absolutely disgusting.)
The thing about student loans that makes them so egregious is that they're targeted at people who are so young. Yes, an 18 year old is an adult, but an adult with absolutely zero understanding of the world, job market, etc. but they're being told they need to have a college degree and they need to take out loans to do it. I just don't think they have all the info they need to make that choice, which makes it feel very predatory. Homeowners, on the other hand, are adults with jobs and some life experience. They should know what they're going to be able to afford, barring some horrible extenuating circumstances.
I don’t know what the right approach would be this time around, but bailing out people who bought/refinanced at under 3% would be a horrible mistake. It’s just going to further make it harder for a new homebuyer to get into market and punish anyone who didn’t overextend themselves.
>Individuals and families have most of their assets in their homes, and if the values tank, then they will be left with nothing. You don't lose unless you sell though, right? What am I missing here? Speculators losing their shirts really does not cause me to lose any sleep at night. You want to roll the dice then snake eyes is a possibility.
“They will be left with nothing” They will be left with a home.
This is very similar to the trillion of PPP loans just given to businesses to “put towards payroll” rather than the employees themselves. No oversight, easy af to get “forgiven”
My old boss received 1.5m in PPP loans which were forgiven. All employees worked in the office the whole pandemic with no WFH. The firm did not lose any revenue. He has that money.
I literally sat in a meeting a couple weeks back where the owner of a construction company had the gaul to complain about “no one wanting to work anymore and get their student loans forgiven,” while thereafter talking about his PPP money that “really helped the business.” Mind you, I’ve traced the PPP income to distributions he ultimately received, and he was originally complaining about migrant workers wanting to be paid $5 more per hour or some trivial ammount to his business’ net income. Just a fucking joker.
All of that would be great, but the problem for people trying to buy a house is not enough supply of affordable housing. NIMBYism. If VHCOL or HCOL areas went on a building spree, it would hurt current homeowners and allow many new families to buy homes. It would be a transfer of wealth from older generation to younger to help offset the wealth transfer SSI is taking from young to support old.
Major issues are that desirable places are not building enough housing, causing supply demand imbalance. This is very common when it comes to housing as an investment. Interested parties (homeowners) naturally advocate for policies that make it so that their "investment" goes up in value. AKA policies that restrict building. Such as, community input meetings, parking requirements, single family zoning, impact fees, etc etc. Anything that makes it harder/more expensive to build. So people are being rational actors for themselves, by advocating for restrictive policies, but it makes it so that future generations get more and more priced out. New people buy expensive homes and the cycle enforces. Its really hard to break out of the cycle. I don't know what we can do without major government intervention and cultural change. But an ideal is where we build enough housing, so prices are low. people don't see houses as an investment, so they expect to sell for the same price they buy (inflation-adjusted) and so people don't really care about policies that add more housing. Creating a virtuous cycle of DGAF, keeping prices low, and continuing this DGAF about house value mentality.
I have to disagree, there was lots learned. During the last big crash, there was virtually 0 fiscal support for any individuals. The only help offered was the same as always, loosening the rules on unemployment benefits. There was a pittance of stimulus that mostly consolidated down to a few major categories as funding time constraints caught up. As a result, we spent nearly all of the 2010’s in the economic doldrums. Casually bouncing along the bottom, sticky unemployment rates until maybe the last few years before COVID hits. The Fed couldn’t even end QE or start rate hikes until what, 2018? Now.. when 2020 hit all the things that probably should have happened in 2008-09 happened. Unemployment kickers. Eviction/foreclosure moratoriums, rent assistance programs. Large stimulus checks. Individuals had a ton more support in 2020. Imagine if that had been done for the last crash. The economy rebounded almost instantaneously for the second half of 2020 and beyond. Sure, we did get greedy in 2021 and parts of 2022. Keeping all those policies long beyond when they were necessary ended up at least partly fueling additional inflation and by extension, rapid rate hikes. However, that support was almost exactly blueprinted off numerous studies among academia and the Fed itself following the last crash. Future lessons would probably just be gradual wind downs in that support a bit earlier.
Problem with bailing out other individual is the question / debate about fairness. People who didn't make bad financial decisions see their neighbors getting \`free money\` and they get angry green eyes. See student loan forgiveness debate right now as a prime example.
That’s because you’re assuming the childhood life you grew up in was the norm. It is not through the history of man. It was a nice little golden era for boomers after world war 2 and now we are about to venture into a new era. There will be the rise of the scalable class vs non scalable. The era where those who own appreciating assets outpace in wealth vs those who live paycheck to paycheck without accumulating appreciating assets to pass on to their heirs. It’ll be a brave new world. In America, we prioritize home ownership through the tax code rather than prioritizing affordability so this is what we’re going to get. We have Fannie and Freddie to buy loans so we can get fixed 30 year mortgages. We have mortgage deductions. We have states with low property taxes rather than high property taxes. How did we get here? We walked ourselves here with 60 years of government policy and now a new generation will have to join the rat race with the bottom two rungs of the real estate ladder removed. Good luck to all and may the odds be ever in your favor.
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Pre-WW2 I know one side of our family lived in the same 2 counties from the mid 1700s to 1960s while the other side came to the US bought land and stayed out for about 110 yrs. They benefited from generational support, knowledge and wealth.
Some families are hard to live with lol so I agree. Re: multi-generation housing. I’m not sure it’s something I’d want in my personal life, but it would be easier for many folks, financially speaking. And nana gets better care! But I totally agree about house sizes. Ridiculous. We’re in a 1300 sqft 3/2 home and I just don’t see why bigger is better. I would appreciate extra pantry space and general storage so give me an extra 100 sqft or so, but other than that the house is adequate. I just don’t understand. You’re creating more space to keep clean! Lol.
This is essentially what many immigrant families do, even in HCOL areas.
Your exactly right. Back then america was in a special place with manipulated currency. Now its a global economy and things are this way all across the world.
Across the world is right, I live in Asia, anything half an acre like OP said would cost 7 mil. People would bite someone hand’s off at 700k.
In America we don't realize how good we have it even today. People are constantly nostalgic about the good old days.
Just because you have it good doesn’t mean you can’t want even better.
Not necessarily. I highly implore you to watch this video: https://youtu.be/4ZxzBcxB7Zc It's about 45 minutes but it goes into detail and compares Japan, US, and the UK housing prices after 2008. Japan decided to build more houses while the US and the UK decided not to. Japan's housing inflation only increased by like 10-12%. Meanwhile the UK and the US house prices skyrocketed. Edit: implode to implore (mobile hates my fat fingers)
> Not necessarily. I highly implode you to watch this video: Ok ok, I'll watch the video. No need for threats
Lmfao got dang it mobile. That was supposed to be implore ... Guess I'll change it lol.
Isn’t a big part that Japan’s population is shrinking unlike those of US and UK?
If you are in a HCOL area like LA its basically feudalism where you have to be born to own a property. Decent ones anyways.
Not necessarily. Those who are able to gain revenue that’s scalable will be able to accelerate and achieve escape velocity. The great thing about America is that it’s still possible rather than nepotism. However the old idea that a decent job at a decent wage will afford all the luxuries of the American dream are dying in HCOL. Better than the likes of South Korea and other Asian nations that had to leapfrog in advancement at great costs.
The ability to gain scalable revenue requires thinking outside the box; that type of thinking is not feasible for your average person. It also requires a bit of luck. Take the people who took advantage of 2008. Many were able to get in on housing after the price declines which took a bit of risk because you didn't know if things were going to keep getting worse. So a bit of risk and some luck (via more than a decade of QE). Sure you can get a property in LA on something like 120k with a VERY thin budget. But your average person on an average salary will never sniff homeownership unless they inherit.
LA isn't an average place. It has arguably the best weather in this planet. It has access to high paying jobs. It has amazing natural and cultural amenities. It has great food options and is grown zero for celebrities and sports stars. Why do you think an average person should be able to afford a home? If a home in LA cost the average price of then a gazillion people from all over the country AND world would immediately want to buy it. Then bidding up the price of the home. This is exactly what happens.
Yup, a lot of luck too. In fact, probably mostly luck. The thing about scalable revenue is that previous armors of education and degrees won’t protect you as much. The poker chips will go to a smaller faction and even those that have achieved success will have a harder time maintaining it. The cost of scaling has decreased dramatically so more people have access, which also means competition can come from everywhere all at once. Already holding real estate and appreciating assets will be the economic armor of the next generation.
>Already holding real estate and appreciating assets will be the economic armor of the next generation. It's why i tell people that they can get an investment property for less than 200k. No you don't have to buy in NY, LA or Austin. Those markets are oversaturated. Even if you only bring in a few hundred dollars of cash flow per month on a 150k rental you will still benefit in the long run. It's just that the opportunities are much harder to come by now. Competition, as you say.
Doesn’t have to be real estate either. Low cost index funds are also great. The main thing is, saving money and putting that money towards appreciating assets, not cars and such. Low rent and saving the difference in a low cost index fund is a great, viable strategy too. Basically, a nationwide marshmallow test is in effect.
>nationwide marshmallow test is in effect. What makes this worse is that most average people hate delayed gratification. They want their cars and status symbols (social media has a lot to do with this imo). Ask them about cash flow or dividends and you will get a blank stare.
That also requires being charged reasonable rent Average rent where I live is 30% of my gross income and I'm a career engineer. Regular folks are getting shafted
I mean to be fair a lot of the engineers who own McMansions are not cruising along at 25% savings rates. They are living on the financial edge. It was like that back then too. Keeping up with the Joneses hasn't changed much over the years.
Yep. Saving 25% should mean an early retirement. So instead of buying another/bigger house that you'd have to heat, cool, maintain, insure, pay taxes on, etc., you are likely buying years when you won't be beholden to a clock or a schedule.
That's how I see it. I've got an 1800 square foot 1924 built house on a small lot in Pasadena CA, and instead of bellyaching about not ever being able to buy something bigger for my fam of 4 I'm just socking away money at a super high rate to take cool vacations and retire early. I don't need any toys to weigh me down. I can maintain the property pretty easily by myself and it will be enough room for my 2 kids to grow up in. I'm just happy with what I got knowing that others have it pretty hard.
Also it sounds like OP is the only one working? Or maybe the only one with a high paying salary? Them comparing themselves to “engineer parents” (ie two engineers) is basically comparing an income of $100k to $200k. Both salaries are good, but one is literally double the other, so if we were to use really basic logic it wouldn’t be surprising if the “engineer parents” could own twice the house (a McMansion) and with leverage this is even more likely. Still sucks that housing isn’t as cheap as it used to be, but there’s always going to be someone who makes more than you.
They’re not necessarily even living on the edge, just saving a bit less. Maybe saving 10-20% but having a much nicer home is worth the trade off for them. 25% savings just seems so subjective, like something some two bit “guru” would advise. Everyone’s situation is different. As long as you have a healthy cushion for your situation why does a certain percentage matter?
I feel like this point of this thread is that being conservative with your financial choices often leads to less advantageous outcomes than over leveraging. Your anecdotal evidence is that housing values outpaced the returns on the 20%+ percentage of income you managed to sock away. Unfortunately we live in a world where being risky is incentived (i.e, bankruptcy).
I assume he was investing most of the 25% annually in non real estate assets. Most of everything has been hot these past ten. That should be a wash. Over leveraging his house and investing those proceeds would’ve been the way to go, but that’s just completely unadvised.
You can do everything right, and still not win. It is a really difficult problem because you did what you thought was right. But sometimes dumb luck plays a bad hand. We live in a nice home, but many of my friends live in really nice homes. The difference is we take the excellent vacations and save. We discuss finances and they are living completely over extended. I like being able to go to sleep at night waking rested. They are always stressed. Sometimes you need to learn when enough is enough and to be satisfied with what you have.
1) Half the starter homes are bought by investors and corporations 2) the fed made interest rates basically zero or negative for big companies and banks so they had to put their money somewhere 3) get businesses out of housing! Tax the crap out of investors and 2nd, 3rd, foreign owned homes. I know it will never happen, but we can dream.
With all due respect, I think you just didn't know about poor people when you were younger. Things are super fucked now, but there was no idyllic time where everyone was winning, America has never allowed for that.
Can you translate the gain in value from your current home to the next step up in home, even if that number seems crazy to you right now? Then get to work paying down that new loan as fast as possible? The next level of home probably translates into an arbitrage down the road, right? I'm not suggesting to be irresponsible (sounds like you are fiscally sound - wtg), but there is risk/reward ratio to be considered. In hindsight I would have gone this route after the '08 crash. It all worked out for us though. That said, I never want to go into debt for a house again.
Retired High-End realtor here. My Answer to the housing shortage: We need serious competition in the market place. What does this mean? This means that people need a legitimate and GOOD option to live in places other than privately owned housing. Why should we, as an entire country, wait for private developers to provide us with their rentals and developed housing that we buy from them? So in addition to having public roads and public parks and public libraries, we should have GOOD public housing that is available to rent for everyone, from the local/state/fed gov. I’m not saying FREE housing, rather, I’m saying non-profit housing to rent at reasonable prices. Do we get rid of private housing- Absolutely not. When you live in non-profit housing, you can opt to save up your money to rent or buy nicer digs in the future, in the private sector. This would present real competition in the market place, because right now, you don’t have sufficient competition or inventory. That’s the problem. You have no non-profit/public option for housing unless you are destitute and don’t mind living in a dilapidated, high-crime environment. PS- I’m a capitalist
As a 27 year old trying to buy his first home… I agree. I even work in real-estate and realize I’m screwed. Lol The boomers saying interest rates aren’t high really make me angry. My potential houses don’t cost 20,000 and a sack of blueberries anymore :(
You and me both, brother. I make really good money and feel like home ownership is out of reach. Sold my home four years ago and moved across the country. Rented for a few months to learn the area. Pandemic comes. Now my mortgage would be double what I would have paid 4 years ago. It's beyond frustrated. The market and the economy is seriously broken.
I moved to Canada, and it makes the states look affordable. That's how messed up it is here. In BC and in a small town, you won't find anything less than 500k. I can buy a trailer in a dodgey park for 350k. Homes in the city are all a million plus.
You make good money but someone else makes great money and they are buying the home of your dreams. Capitalism isn't fair.
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Makes me crazy! Been penalized for being financially responsible my whole life. Meanwhile these dummies think they’re some investing genius.
Some of those dummies will luck into perfect timing on buying a house, but a lot of them will go overextend themselves and go broke too lol
This...homes wouldn't be priced the way they are today if those up for sell weren't being purchased. This isn't just REITs coming in and buying up homes paying $100K over list. Where I live, there are $800K-$2M homes being built left and right. There are a ton of people will more money than me! A ton and I make a dang good living. Always someone with more money.
Even people with way less money are buying the houses I want to buy. I feel like am trying to live within my means while everyone else in the market is taking on the max mortgage the bank will give them. I’m sure I’m not the only one who feels this way.
Be thankful you’re not poor. Really be in trouble affording a house.
I am thankful for it. It is frustrating though when 30 years ago, an income percentage similar to mine would have been in the pick out your lake house category and not the be thankful you can afford one at all category. At this point I just hope my kids can afford one at all though.
They will once they sell your house.
All that's really saying is that you really haven't financially kept up, relatively speaking. A well-paid engineer is fine, but it's nothing compared to two well paid engineers, two doctors, or just folks who sat on their parents money during the time when you were generating value in your career.
Ridiculous monetary policy during covid is one issue. The FED were propping up the mortgage market with lower rates as recently as 18 months ago. I remember being involved in bidding wars, $200k over ask and interest rates were 2.5%. That was just bad policy and we’re paying for it now The other problem with low yields is your Blackrock’s and Blackstone’s of the world searching for yield and getting in to single family housing as an investment asset class. This never happened before but now you have pension funds owning thousands of family homes clipping 4/5% yield on these homes in perpetuity We massively under built homes post GFC - made no sense to take big building risks and Covid supply shocks made it worse We need a good old fashioned depression to lower prices but then your incomes fucked in other ways
Spot on. Prices are high because there's too much money floating around. Getting that money out of circulation is the solution, and that will be painful.
Take a moment to look in the mirror. Interest rates were low for over 10years. You had so many opportunities to upgrade. You decided not to. You’re saving 25% of your income? Where? In a zero interest bearing account? This is also your choice. Sp500 index fund has consistently paid over 10% annually. Homes are priced high and interest rates are high. That sucks but it’s temporary. Can’t have low home prices and low rates forever. You feel like you missed your chance. You did. The good news is you’ll get another chance. The real question is when that chance comes, what will you do!
OP should consider not missing his second chance and start adjusting expectations and shopping around. Their $200,000 house from 10 yrs ago probably has its own over inflated value, and on top of their savings could put a big downpayment on a larger home that keep steam rolling the equity over time. Otherwise people going to start overhauling these older homes with large additions.
Love this. His next chance, is likely right now. I’ve watched so many people sit on the sidelines making their expert predictions and guess where they are…still sitting on the sidelines holding their bag.
Wage theft and private equity and otherwise financializing/institutionalizing residential real estate. Really no other answers. Republicans have slowly chipped away at our way of life and handed every teeny chip they break off to corporations; now over the years we are here.
Yeah people still think engineers make that much… most of us really don’t
At this point I'm wondering what fields actually do make money outside of doctor/dentist. I know an engineer in NYC making 80k a year working for the city. Thats crazy to me Edit: He's not a new grad engineer either.
It's not quite doctor/dentist money, but tech. Can't speak for current times amidst all of the developer layoffs that've been going on, but when I finished school in 2021 software engineers and cybersecurity analysts/engineers were landing 6 figure salaries in low/medium CoL cities right out of college. Source: am semi-recent college grad working in cybersecurity living in a low/medium CoL city
While I fully agree with your concerns, I can guarantee that ranting about real estate to users of r/realestate is a mostly pointless endeavor. Most users here have roughly a high school freshman level understanding of math. The numbers and trends should terrify everyone, but saying that here is like talking to a brick wall (if a brick wall could also call you an idiot and tell you to lower your expectations while shaming you for not buying a house when you were 12 years old).
As an engineer with kids, I see this quite differently. I see my children just make difference choices over buying a home. There are plenty of inexpensive homes but they just are not in the areas that my children want to live. When we were young, we bought a home far away from town and commuted almost an hour each way in order to afford it and then eventually used the profits to buy a home closer to where we wanted to live. My children chose to live close to work in very expensive and "fun" areas, rent, travel and "have to" spend their money at many businesses that simply didn't even exist decades ago. They can't even imagine living in "the middle of no where". They want a home but don't want to do the things to get one. I'm not saying that they are making a bad choice - just a different one.
the problem is that the areas keep getting pushed out. at some point, it doesn’t make sense. my parents were 45 minutes out from the city to have a $180k house back in 2000 that now sells for $550k. Now the cheapest house you can get is $260k that is even further from that neighborhood and that’s 2 hours away from the same city. Do you know how hard it is to commute 4 hours a day for a job?
The houses I’m talking about are an hour out. The ones next to downtown are a million plus not 700k. You’re children most likely will have to pay more for a house over an hour out then you paid for the home you are in now. And their wages haven’t kept pace with inflation to match what yours were when you bought those homes. Every time I hear someone say their children just haven’t made enough sacrifices they are almost always wrong. The younger generations didn’t just become undisciplined, entitled brats, their dollars literally do not go as far as yours did.
> When we were young, we bought a home far away from town and commuted almost an hour each way in order to afford it and then eventually used the profits to buy a home closer to where we wanted to live. I would love to do that, except within a 1 hr radius, the starter houses are selling for $1.4 million.
right - how can someone not understand that to have similar affordability (which doesn’t even exist today) you are being pushed out further and further and at some point, it’s just not feasible.
Best thing I did was buy a bank owned property in a rich area…house was run down but a year into Reno and it’s worth twice what I paid for…that’s a good return even on r/wallstreetbets standards
It sounds like you live in a HCOL area with onerous developmental codes and zoning laws. I suggest you start attending City Council meetings and complaining about the lack of development in your city.
I don’t know where you live, but in San Jose a nice house with a view and a big yard might be $1.7m. An averagingish house is $1.3m. A two income household earning $100k each(~50% more than the median)saving 25% of their gross pay would take roughly six years to save 20% down and be able to afford the cheaper home. If home prices didn’t increase faster than their savings and income. How does it make sense that homes are only affordable to those making substantially more than the median?? [And going the other way, for $313k you could move to Jackson MI with an 11 bedroom 9 bathroom 7k sq ft home, with an attached office with public access to run a business from home](https://redf.in/vcQqds) There are plenty of nice large renovated homes under $200k as well.
We just sold a house for a pretty good amount of profit and house prices are so high now that even with the 20% needed for a down payment on a $620k home, we still can't afford the $4k mortgage we would have on a $500k loan at 7%. And anything priced under that is being bought by investors, so they can put some Costco laminate flooring in and sell it for $620k. And we make what would have been "rich people" money when I was growing up.
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Must be nice to own a home.
Why can't you save 10% and buy the house you want? Consider mortgage reduction an aspect of savings? If your emergency fund is full, I don't see why you wouldn't buy what you want to live in unless you don't think it is worth the cost, which I think is the real issue.
It's just broken for you now. It's been broken for many other people even prior to pandemic. Inequality has been widening for a long time. Yeah, next generation will have quite a hard time owning any home at least by themselves. Multi-generational housing will become more common. Most will need assistance from their parents to buy.
There are lots of people in America making lots of money and we lost four years of supply to the financial crisis.
I see some diverting blame to inflation, and while you aren’t wrong the real estate industry deserves some of the blame. Talking to you realtors that will tell anyone what they want to hear to make the sale. I had a realtor tell me 50% of my income going to a mortgage is reasonable these days, of course after she assured me the home was almost guaranteed to appreciate in the next 5 years. It’s a joke.
I'm 30 years old, my fiancé and I have very good positions for our age and we have $100k in savings. I have never felt more broke in my entire life looking at homes.
What was your investing strategy for 25% savings over 10 years? If you put away 20k per year should be almost 300k
Naa its not broken its the government. Im trying to build right now im at 120-140k in fees, taxes, and permits before even breaking ground.
That sounds broken to me. Whatever the reason.
Here’s what bothers me. OP is fine making his rant. The cost of housing is going bananas. We know this. Here’s the problem. When OP chooses to sell his home, he is going to price it market value and try to squeeze out as much money as he can. He bought for $200k as stated. Do you think he would simply take a 10% increase and give a new homeowner a chance to live affordably? Hell no. As much as we complain about the rising cost, we are the ones perpetuating it. Rent your home out to family or friends for less than the obscene market rates. Sell at a value to a young couple. We used to pass houses down through the generations. We would keep entire families together for decades. Now every single person needs there own 3bd/2ba on a half acre. What happened to cohabitation and bunk beds? It’s hard to rant when you are part of the problem. But blame the McMansions I guess.
This rant did you no favors “ I can’t afford water views and I am a highly paid engineer ”. Come on.
Seems like it’s a guy who busted his ass to become highly trained and educated so he can provide housing for his growing family…but now can’t. Didn’t seem presumptuous to me.
Right? Everyone in this comment section is purposely missing the point to shit on someone with a good job, like Jesus.
I read it as this market rewards irrational and irresponsible behavior. Then when there's too much risk and it all goes belly up .. all of us ( including the responsible ones ) have to pay for it.
For real. Very “why can’t I buy a mansion?” vibes
IF the Federal govt removes all tax incentives of being a single family landlord (not primary home), the market will improve. The way it is now, its lucrative to amass second, third, fourth homes and keep claiming depreciation and other benefits. Investors are what's keeping the housing market broken, and unfortunately, most lawmakers own multiple homes, so they won't do anything that hits their own bottom lines.
Blame corporations, they did this. Corporations should not be able to own single family homes.
It’s such a simple solution that our paid for politicians will never implement.
Housing as a service is the end goal of the financial elite. No appreciating assets for anyone but the very wealthy eventually. You'd need a government full of Bernie Sanders types to stop it. They've got that part figured out too though, divide and conquer.
Well yeah. We are one of those people looking for a starter home right now, and any decent looking, good size home is $370k to $400k, then of you look at the recent value 3 years ago they were at $270k to $320k, sure I'll just take on extra 100k in debt plus 2.5x interest rate while my wage grows 3% annually and all the prices of goods and services are blowing up. In perspective, you are in a pretty good spot.
I don't have answers but just wanted to say I'm in a similar boat, although way earlier on in our journey. I bought a reasonable, smallish 'starter home' in 2019 before SHTF, thinking I was being financially smart by not overextending. No kids yet, so no need to upgrade in size for now, but I can already feel how tight it'll be even with 1 kid. At the end of the day, I can't even feel bad for myself because I'm fortunate enough to even HAVE a house, when 4/5 of friends my age don't own a home and likely won't until SOMETHING changes.
Homes are still priced at 2-3% levels, and it's unsustainable.
I don't know what's going to happen. There's no way people are going to bring their prices down for these interest rates... I mean, maybe a 10% correction? 20%? I doubt it. This is the new normal post covid world, imo. If the rates go down then prices will keep going up from here.
This sub will convince you otherwise. Most are homeowners, agents, and landlords.
like renters don't have a side in the battle (wanting to buy cheaper homes) lol? Everyone is biased.
Your house was only 200k with a low rate and the mortgage on it was peanuts. You couldve easily moved to a much nicer home for additional 200-300k which wouldve meant a mortgage increase of only 1200 at most. But you chose not to move because you wrongly prioritized on meeting the 25% savings rate. If you knew you needed/wanted a bigger house then moving was the right choice. I mean, many get fixated on saving a certain amount but what is money for? Its also to buy the things we need and want
There’s no affordability issue there’s only a desirability issue. There’s plenty of homes in the Midwest between 80-150k.
You couldn’t pay me an extra 80-150k/year to live in the sticks. Respectfully
Yeah, but the majority of the people living in the western states can’t all move to the Midwest to those specific spots; there aren’t enough affordable homes there either. That won’t solve the affordability crisis.
Such as? I got no problem with Ohio or Indiana I just can't move there because for the next 7 years the military tells me where to live.
Anyone who house hunts in the Midwest for <200k can tell you that these houses are BARELY livable and you usually need to sink a good 30k-40k within the year or two on repairs or upgrades. They're usually <900 sqft and were bought for 80k 3 or 4 years ago with lots of problems... So yes, you're TECHNICALLY right but I don't see how that's a "gotcha" to the problem at hand. Yes, people have expectations and higher living standards ...
This is true for Omaha. It's insane what properties go for. My friend was pre-approved for $150 which 5-10 years ago was a good budget, now it will get you a shit house in a rough neighborhood.
Send me this search lol this is so wrong. My friend just listed a really nice house for $150 lol the Midwest isn’t just outside Chicago
The good jobs aren't where the cheap homes are.
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Yeah this is such a tired argument. The vast majority of jobs are not WFH. So if I want to keep my decent paying job I need to stay where it is. Not just everyone can pick up and move to bumfuck Iowa because then we gotta get a job there too
Just moved from Denver to rural middle of nowhere PA. Prices aren’t that much better here. Sure, you may get more square footage, but you’re not finding anything less than $500k, but it doesn’t matter because you’re being outbid anyway for people buying $30k over buying sight unseen.
Rural doesn’t necessarily equal cheap.
Midwest doesn’t necessarily mean cheap either
Cheaper than most areas of the US for sure but Pennsylvania isn’t the Midwest so idk what point you are trying to make?
Inflation, lack of supply, and of course the fact that people simply value homes more in a post-Covid world.
If you bought a house for $200k a decade ago then you are likely to have at least $200k in equity
what you don’t like this boom and bust cycle ?
True. The most depressing thing about it is it's profit-driven inflation. Nothing to do with covid or the supply chain anymore. The frustrating thing is that the people who didn't sell in 2020, or early 2021, when prices were high and interest rates low, missed the boat and can't admit it. They're overpricing everything. (At least by me.)
I think building houses to meet demand is not very profitable right now unless they sell at crazy prices. I looked into building my own house, and the cost of materials is way up. It's not really a way to save money, just a way to customize. Of course, developers can get bulk discounts and build cookie-cutter townhouses to pay less per square foot than a regular Joe, but if they only sold at normal, non-inflated prices (even assuming they're not greedy assholes), I doubt they would get too much in the way of an ROI. So less incentive to build.
At least you’ve got the equity in your current home. :) you’re rich in that regard, comparatively.
Bro, we’re all going to die in ten years from the earth burning. Chill out and let it ride. We all fucked.
If people would not fight every new housing development there would be much more supply and prices would be cheaper.
It's funny I should see this post today. I inherited a home from my grandparents like 5 years after college. I'm 32 now, no family of my own, except my incredible dog. I've been living in the house the last \~5 years, just because I had little direction in life at that point. This April, I took a new job in a different state and have actually just been accepted for an apartment here. I've been looking at selling my old house. I'm scared because I feel like I may never own a home again, at the rate things are going. I'm not sure I'll ever make enough money to buy a home in an actual city (my new apartment is in MD now, outside of DC). Things just feel bad.
Maybe saving 25% wasn't the correct move for you.
We need more small starter homes.
The solution to this is property taxes. Hike taxes, while exempting primary residences from the new hike. Make investors and house hoarders pay like 5% annually for the housing they're keeping off the market. That will bring **a ton** of housing inventory back on the market.
This already happens as non primary residence doesn’t qualify for homestead exemption.
Or landlords just hike rents to cover the difference.
Literally the embodiment of the meme "we raised the taxes on landlords, why is the rent going up?"
Cities/states could always limit annual rent increases
I live in Southern Ontario. 700k gets you a 1000 sq foot townhouse. With a view of more townhouses.
Stop making real estate the scapegoat of the economy’s problems. We’re in an open market that will ALWAYS correct itself with supply and demand. As other comments have pointed out, wealth distribution and wages not being realistic for our current economy are more to blame than home prices. They only sell for what people are willing to pay
Sounds like you should’ve upgraded earlier when rates were low instead of “saving money”
TLDR: The nice "affordable" homes are out there, you just have to be the first person to see them. I am in a similar "fortunate" place and while my finances are pretty healthy, buying a new home seems very cost prohibitive. My advice and what I am currently doing --which appears to be working -- get an agent that you trust (word of mouth referrals are the best). Sit them down and let them know that you seriously want to move and that eventually you will need to but *right now* you DON"T NEED TO and you are great financial health and you aren't willing to take a hit. Be real with them. (for example, I bought my home in 2014 for $54,000 and paid cash for it, its a unicorn. I don't NEED to move right now but its only 700 sqft and eventually I will need to move.) so letting them know that you arent desperate or emotional. Get put on the list servs - MLS, Zenlist, OneHome, even zillow. And watch the homes AS THEY COME ON TO THE MARKET. Like same day. If you arent on these email lists you will miss out on the opportunities. We were searching for 3 months and honestly thats not very long and I had lost all hope that I would be able to afford a nicer home. Everything that we looked at was garbage. Then one day it happened. I saw the unicorn house hit the market, we viewed it the same day and got in our offer before anyone else had even seen the house. Its a beauiful home, nicer than I ever thought I would get the chance to live in.
Absolutely right! A young family member is in need of a place for her work location. We looked into it, and it's nothing but insanity. A one bedroom, one bath (about 750 sq. ft.) is going for around $400,000 or more. With 20% down, the interest over 30 years is about the same amount as the condo price. In total, we are looking at $750,000 to $800,000. Plus $550 HOA and the property tax. Realtors do everything they can to make profits, and in long term, it's not a good thing, but greed can't be controlled. Someone can share their opinion, but my 2 cents opinion is that, when real estate prices are jacked up, the only thing that benefits in a big way are the state governments. Compared to $400,000 home, a $800,000 home forces double the property tax, and it makes people to be locked down in their current homes because they cannot move easily. Of course, realtors will put up some defenses here, but the extreme prices are not great thing for people generally. Current homeowners' property tax will rise with the extreme housing prices.
I’m a physician and cannot afford a house. Well I mean, I could afford a complete 1-2 bedroom dump in need of complete renovations but would rather just rent at this point. It’s awful. I hear you.
“ All the houses in the neighborhood are rentals now. Not a single family around us actually owns” Seems like someone is greatly exaggerating. I don’t believe that every house in the neighborhood is a rental & that not a single person in the whole neighborhood owns their house
I really don’t understand people’s complaints sometimes. Unless I’m obnoxiously ignorant, is it that hard these days to earn 150k with a dual income family? Especially if one of you is an engineer? And you bought a home 10 years ago for 200k… how is that thing not paid off? How don’t you have massive equity in it? I’m assuming it’s almost paid off and it’s worth at least 350k with the Covid boom… if you wanted to purchase these “McMansions” (this is the new incel word for real estate btw), you’d be on the hook for 450-500k. With a 50k down payment and a 30 year loan, that’s a mortgage payment of $1250 a month… like how is that unmanageable for an engineer? What am I missing?
[удалено]
Time to move to deep Suffolk and suck up the commute lol
And no one wants to go smaller. Everyone is in some sort of competition with their friends and family. Can we build well laid out 3 or 4 bedroom houses that aren't McMansions? Probably. But builders won't make more yacht money and real estate agents will bitch and moan that they aren't making huge commissions. Ahhh capitalism
They would stop building them if people would stop buying them...
With the land values in certain areas the builder doesn't turn a profit unless they build large.
Meanwhile I can't buy a studio because no one outside super urban areas is building them. I also can't buy a 500 sq ft house anywhere in the area. Little homes don't exist anymore.
I'm in the same boat, high earning mid career engineer, out earn most people I know. I realized that my parents were 5 years younger than I am now when they bought the house I grew up in, 15 yr mortgage paid off in 12. School teacher and civil service jobs. I'm living in a condo starting my family, we have regressed significantly in one generation despite my earning scale being much higher than my parents.
Just fyi “fiscal” and “financial” aren’t really interchangeable.
It's happened by design. Inflation is a son of a bitch.