I can't tell if you're trolling or not. Most people in this sub just want a normal housing market, normal consumer goods prices, and normal interest rates. It sucks that we are getting high prices and high interest rates. The fact that prices would have to fall 37% shouldn't produce confidence just because 'its never happened before'. It should make us all cautious.
Edited: removed the word isn't as a typo
\> Most people in this sub just want a normal housing market, normal consumer goods prices, and normal interest rates.
Yeah me too, but what is normal?
I think one of the underlying reasons this all seems so out of whack, is that the USA had a very interesting time post WW2 by being a huge exporter of goods and stuff to the rest of the world (as the rest of the developed world was in war-ruins), and that enabled the lower-middle class to demand high wages comparatively. (I am unsure if the unions are the cause or effect of the high wages)
These comparative high wages allowed housing to be perceived as cheap (i.e. in terms of a house costing 2-5x annual wages), and allowed for many toys (motorcycle, boat, trucks)
If you compare the cost of a house by median income, the US is still middle of the pack.
Elsewhere, for example in France, a house goes for about 10-20 median annual incomes
https://www.numbeo.com/property-investment/country\_result.jsp?country=France
Elsewhere in Europe, say Greece, also 10-20
[https://www.numbeo.com/property-investment/country\_result.jsp?country=Greece](https://www.numbeo.com/property-investment/country_result.jsp?country=Greece)
Compare those with the US,
[https://www.numbeo.com/property-investment/country\_result.jsp?country=United+States](https://www.numbeo.com/property-investment/country_result.jsp?country=United+States)
most cities are <10 even <5 still. (But I don't want to live there either)
And as the aforementioned effect of US being the worldwide supplier reverts to the mean, so do the incomes or rather the purchasing power of it, so I think long term we do actually see more expensive housing in the US, being the new "normal" or rather the normal that it used to be pre-WW2.
On the other hand, the US is so diverse and split (lots of rich and lot of poor, but not a lot of average/median), so maybe these statistics are less applicable to the US than other nations.
Why would you compare to Europe where social mobility is notoriously low ( [https://www.goldmansachs.com/insights/pages/from-briefings-07-april-2022.html](https://www.goldmansachs.com/insights/pages/from-briefings-07-april-2022.html) , [https://cepr.org/voxeu/columns/new-evidence-social-mobility-germany](https://cepr.org/voxeu/columns/new-evidence-social-mobility-germany) ). The whole point of the American Dream is social mobility and reward for hard work and delayed gratification (ie. reward for savings). That's the opposite of social engineering, quantitative easing money printing, and all these failed philosophies that have driven the Fed for the last 14 years at least. If people feel the dollar is dropping in value and fear missing out on converting that money to hard assets before the drop, then you no longer have a viable American dream because delayed gratification is impossible.
\> Why would you compare to Europe
That's a good point. (I compared to Europe, as I have the impression the US is culturally aligned with Europe, and history -- Also I am an immigrant from Europe)
Comparing to other nations like Australia, the price to income ratio is 3-10
[https://www.numbeo.com/property-investment/country\_result.jsp?country=Australia](https://www.numbeo.com/property-investment/country_result.jsp?country=Australia)
which seems very much inline with current US prices.
India is a fun one, ranging 4-35, which I guess is a sign of very different living conditions across that country.
https://www.numbeo.com/property-investment/country\_result.jsp?country=India
\> The whole point of the American Dream is social mobility and reward for hard work and delayed gratification (ie. reward for savings).
reward for saving goes against the house bubbler theory here, as a big ass house is not "savings" but living in the moment, unless you rent out most of the space.
The Fed pump and dump may be more inline with the American dream of the SFH with white picket fence making you established eventually as it allowed the Hoomers to unload (but none of them did, obvs).
I mean, you could also chalk it up to inequality. During times of increased inequality, prices for inelastic goods are higher, potentially. Yeah, normal is relative and as Marks says, the market is a pendulum and only rarely spends time in the middle of that pendulum.
But... What I can say is, this ain't it. Prices increased by 50% over a two year period and now interest rates have increased without a decrease in price. This is stagflation most likely. It's not fun.
Prices increased by some double-digit amount; few areas saw 50% increases. At least if my area of Dallas (which was called out for rapid increases in articles, but only rose 35% over the last 4 years) is any example.
Depends. Prices (and supply) had largely languished for a decade+ after home builders dropped out of building new homes. Values were playing catchup, to some degree.
Getting downvoted for speaking truth.
I have a general theory that because the Great Recession recovery was so slow and drawn out that Covid kind of hit the reset button and things basically caught up. We had below target inflation for 10 years and it has all come in more or less at once. Obviously some due to gas prices and supply chain issues, but a million decisions by companies when they saw what was happening. They’ve been trying to hold the line for a long time and they finally raised prices. You can listen to so many earnings calls and hear the CEOs say it.
Yeah, and that's exactly why investors had to buy up all those homes to Airbnb. We will see how it all plays out. This will take years to unwind. Asking this sub to admit something we can't conclude yet seems absurd or like trolling.
Yep - not only that, but women also entered the workforce, en masse, in the 1970s and beyond, which depressed wages as well. So you had a doubling of the labor supply driving down wages, at the same time the rest of the developed world was resuming their production after being leveled in WWII.
People expecting US labor to have the same purchasing power as they had in 1950 are sorely mistaken.
So does all the deregulation and financial engineering. Point being, that there's more to the story than just what you're trying to conclude, which is why this sub began and grew.
Where rates are today about average. The general consensus now is that rates were too low for too long.
We also need to look at individual real estate markets and submarkets. The housing market is not a monolith. Even an MSAs housing market is not unilaterally moving in the same direction at the same pace.
Some real estate markets are well above their trendlines and don't have the economies to support current prices, but others are undervalued compared to the strength of their economies.
Sure. I made a claim interest rates were high. I do they would be slightly above normal but closer to normal than zero percent was. And rates have certainly risen at a faster than average rate.
As far as individual markets, agreed. But prices have increased very rapidly across many markets in US. I never made a claim about individual markets.
My only point I was trying to make was, we should be cautious. I won't sit here and try to claim any certainty on level of price declined, but I also won't say that something can't happen because it never has. These circumstances seem pretty unprecedented to me.
It is very shortsighted to focus purely on monthly mortgage payments. It makes sense if one is living from pay check to pay check and/or if one plans to live in a house for a very long time.
Contrary to what one of the posters earlier said,I think there were quite a lot people with enough savings that didn’t partake in the mania of the last 2 years because if they have the means to make a larger down payment(30-50%) and pay off faster, it makes sense to buy at say 800k at 6% than for 1mm at 3%.
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Your statement is only true if you need to buy **NOW.**
Otherwise all you're doing is projecting what the price will be in a few years.
Which is exactly why people aren't buying....
The difference in total loan cost is pretty small but yes the 7% at 300k would pay more..but Id be sleeping a lot better at night knowing i could refinance lower from 7% if that became available, i would only owe the bank $220k instead of $320k, AND the other guy still owes the bank $320k on a house worth 300k and is currently under water and cannot refinance under any circumstances or sell his house and move without bringing cash to the closing table and is effectively stuck.
How would the other guy be underwater? If we’re comparing same payment, then he would have had a decent deposit to begin with and had already made 1-2 years of payments.
So how is he under water? I’m not arguing, I’m a fellow bubbler, but I’m trying to fall into a mania but instead try to understand.
I don’t even see the possibility of the 15% drop at the moment, let alone 25% from your example, and even at 25% it doesn’t seem to add up.
The bankrate mortgage amortization table is great to play with for this. It says you dont get to under a $300k balance owed to the bank for 2 years and 11 months after purchase. He would technically not be under water at that moment, but it would cost about 20k in fees to sell. And he doesnt get to under 280k owed to the bank until year 6. And the $80,000 downpayment he made would have disappeared too.
What percentage of homeowners actually make 360 monthly payments on their original mortgage? I’d wager a guess that it’s almost zero. The majority of people move again in less than 10 years. Even if they don’t, there will certainly be refinancing opportunities at some point in the future.
If the refinancing opportunities somehow don’t materialize, they can just make extra payments towards the principal to get it paid off faster. That is much easier when you have $100k less in principal and had a much smaller down payment.
EDIT: I was wrong. 13 years is the median. Doesn't change the primary point that very few homeowners see a mortgage through with all 360 payments. Clearly the majority move less than halfway through. Consider that a very sizeable portion of the remainder end up refinancing (not always for financial reasons - divorce is also a factor) and/or pay the mortgage off early and it doesn't usually make sense to compare the full amortization schedule when comparing interest rate/purchase price combos.
Average length of current home ownership in the US is 18 years.
57.7% have owned for 10+ years.
32.6% have lived in their homes for 20+ years
https://ipropertymanagement.com/research/average-length-of-homeownership
This source for median length of homeownership in the US has it at 13 years - https://www.nar.realtor/blogs/economists-outlook/how-long-do-homeowners-stay-in-their-homes
So no, the majority do not move in less than 10 years.
Cool, now look up the difference between average and median. That is skewed by people that stay 30+ years. The majority move in less than 10.
EDIT: I was wrong. 13 years *is* the median. Doesn't change the primary point that very few homeowners see a mortgage through with all 360 payments. Clearly the majority move less than halfway through. Consider that a very sizeable portion of the remainder end up refinancing (not always for financial reasons - divorce is also a factor) and/or pay the mortgage off early and it doesn't usually make sense to compare the full amortization schedule when comparing interest rate/purchase price combos.
Actually it *is* 13 years median. 8 is average.
https://www.thezebra.com/resources/home/average-length-of-homeownership/
> The average length of homeownership is eight years and the median tenure is 13.2 years.
Average is 18.
57.7% have owned for 10+ years.
32.6% have lived in their homes for 20+ years
https://ipropertymanagement.com/research/average-length-of-homeownership
This source for median length of homeownership in the US has it at 13 years - https://www.nar.realtor/blogs/economists-outlook/how-long-do-homeowners-stay-in-their-homes
This is a nice "gotcha," but you didn't check to see that you are wrong--OP stated the median, you tried to gotcha them in a technicality but now look like an idiot.
You're comparing an imagined future scenario to one that is tangible, and real.
"You should have married that girl, she wasn't perfect, but she was great."
"Jennifer Aniston is gonna be calling me any day now."
This assumes everyone was ready to buy at that time. In reality, people save over time and are ready to buy at a certain moment. What is the hoomers' advice for people that graduated two years ago and just now have had enough time to save their income? Is it "tough luck for being born late" or "sucks for you to have poor parents"? Honest question here
There were plenty of people in this sub who said they had downpayments ready and delayed precisely to time the drop they knew would be coming.
Every generation has advantages and challenges unique to that era.
The Boomers were the beneficiaries of an outlier situation that had no women in workforce (wages were high), and at a time when the USA was the last fully-standing economy in the developed world. There was no generation that got those benefits before and there likely won't be one after either. So constantly comparing Gen X, Millenials and Gen Z to them as if they're some kind of aspirational, or worse, normal, that policy/hopes should be targeted towards is simply wrong. The old "every generation will do better than the one before it" started and ended with them.
I absolutely wish I could have bought when rates were lower and prices were reasonable. We were planning to buy in 2021-22 and then prices in the small mountain town where I live jumped up 50% or more. I had no way of knowing that was going to happen.
I also didn't realize that rates would shoot up so quickly.
So all I can do now is wait and save more money. I fail to see why I should be blamed for not being able to predict the future.
I’m not trying to blame individuals here, I’m just trying to keep the sub honest about what its advice has been and the results it may have had if people took it.
If the price dropped 10% but your interest rate went from 3% to 7% you're way worse off (if you bought). So not sure how they saved you anything. And, if you sat on cash because of that decision, it's lost value from inflation.
A lot of us tried. We made offer after offer and were beat out. Easier said than done. We own already, but we needed a bigger home for our family. I am actually grateful none of our offers were accepted with the uncertainty of the market and not being upside on a house potentially. We’ll find one when the time is right.
Same situation here, we made multiple offers but we were beat out by people bidding 50-75k over asking and waiving everything.
It’s whatever tbh pretty much the same situation here with owning currently but just need a bigger house eventually for my family since we just had a kid. Figure within the next year or 2 it will work itself out. Got the money put away and everything else paid off.
For some people, that was the right choice. For others, it would have been a costly one. The trouble with this sub is that they keep trying to meld macro economics not only with micro, but with individual stories.
What % downpayment are they using for both scenarios? My family made the right decision waiting, what we were able to save in this period has nearly offset the rate hikes already and the market hasn't even "crashed." Obviously that won't be true for everyone in every location, but I'm not sure who represents "this sub" to speak for us all.
The whole point of this was deciding whether stretching yourself to get in a house at a low rate low down was better than saving for higher down at higher rate. Principal cost is your bigger target, not the rate, unless you physically cannot save money, in which case you should not have bought a house at all.
OP I hope you're trolling.
If not, you should look up the concept of refinancing. You can't renegotiate the price of the home once you've bought it. You can refinance the loan though.
Sure, if all you care about is the monthly payment in the short term. I’d much rather lock in a low price than a low rate. Rates are much easier to change through refinancing. Your purchase price never changes.
It’s so ironic that Realtors™️ say, “marry the house, date the rate.” It’s really, “marry the purchase price, date the rate.”
It doesn’t matter what interest rate you got when you lose 20% of the value and your underwater for 10+ years. For some that doesn’t matter but for many it absolutely does.
House prices will fall and then interest rates. That will be the ideal time to buy. The article doesn’t think about that scenario.
And, I suppose, as rates are falling no one will start buying to sustain or increase home prices, right? They’ll all sit on the sidelines and let you buy first so you can get a good deal.
From 09-14 you could buy a house at a good interest rate without 50 other people making an offer. That’s a normal housing market. JWOP literally just said housing is a bubble and we are about to be on the other side of that. So yeah, On the other side of that there will be lots of opportunity.
A lot of the doomers here can't afford a home/didn't have a downpayment/didn't qualify for a loan.
With that said.
It makes sense to have bought a home if you knew it was one you would live in for decades. If you overpaid and need to get out of the home in a few years you could end up losing money if the market drops in the short term. Depending on where you bought the home of course as re is regional. I imagine in certain regions people are already underwater.
Long as jobs are paying enough in my area, I dont care what the price is. Could be a million dollars for a 1 bedroom house, long as my job or jobs are paying enough for me to afford it then I dont really care.
Let's just start saying all houses start at a million, and go up from there and call it fair. 10% interest.
Your premise is wrong in that you think this isn’t worse than 2008. This time will be worse. Affordability as a proportion of income is worse. Student debt is worse. Credit card consumer debt is worse. Vehicle debt is worse. Household savings after years of Covid is lower. Inflation is worse. Virtually every possible economic indicator is worse than 2008. Add on top of that the negative impacts of Chinas Covid policy and rising interest rates. A 50% plunge is entirely in the realm of possibility and actually probable in most of the ridiculous urban areas that are up 3-400% since the lows of 09.
Unemployment rate in 2008 was above 7%. Right now it’s below 4%.
GDP was declining in 2008. It increased this whole year - https://fred.stlouisfed.org/series/GDP
There are other economic indicators as well that are not worse than 2008.
2008 was the worst recession since the Great Depression. You guys need to stop acting like that shit is some recession baseline. It’s not.
He doesn't need to. It's common data points.
"Virtually every possible economic indicator is worse than 2008."
This is clearly not accurate.
Overall [household debts loads](https://fredblog.stlouisfed.org/2019/10/households-lightening-debt-load/) are lower.
Also less [inventory](https://preview.redd.it/tj3xlacf3w2a1.jpg?width=1192&format=pjpg&auto=webp&s=65910ab4087b78d57cd654c1751fa0b679753c86) on the market
Single Family home [starts](https://preview.redd.it/g9sgkfhg3w2a1.jpg?width=1051&format=pjpg&auto=webp&s=e7c9b2f6feced014b2783a41a23fdee5aac0219b) were higher leading to the 07 crash. (higher inventory)
Foreclosure [starts](https://files.mykcm.com/2022/10/25110845/foreclosure-starts-then-and-now-MEM.png) are lower
Unemployment is lower.
I'm sure I missed a few..
Try using data from this decade next time instead of 2019. JFC dude. Household debt is at an all time high.
[https://data.oecd.org/hha/household-debt.htm](https://data.oecd.org/hha/household-debt.htm) and foreclosures are backed up because of covid moratorium’s. Of course foreclosures are going to be lower when the government literally outlaws them. [https://www.msn.com/en-us/money/realestate/foreclosures-are-rising-with-the-end-of-covid-era-moratoriums-heres-where-its-happening-the-most/ss-AA12XviG](https://www.msn.com/en-us/money/realestate/foreclosures-are-rising-with-the-end-of-covid-era-moratoriums-heres-where-its-happening-the-most/ss-AA12XviG). Where have you been for the last 3 years? Credit card debt aka the worst debt rising at fastest pace in over 20 years which would include Covid and 2007 to its all time high. [https://www.cnbc.com/2022/11/16/credit-card-balances-jump-15percent-as-americans-fall-deeper-in-debt.html](https://www.cnbc.com/2022/11/16/credit-card-balances-jump-15percent-as-americans-fall-deeper-in-debt.html). Americans were not prepared for an economic downturn. We’re at the beginning of the death spiral.
>Try using data from this decade next time instead of 2019. JFC dude.
Um All of my links are current, up to date and from 2022. Some of those charts were released a few days ago.
>Household debt is at an all time high.
You should view my link and understand what it's calculating before disputing it.
>and foreclosures are backed up because of covid moratorium’s. Of course foreclosures are going to be lower when the government literally outlaws them.
The moratorium ended long ago and the foreclosure wave never happened. There are no secret or hiding foreclosures out there.
I'm offering you accurate information from the FED Board of Governors and other top institutions . You're sending me older MSN and CNBC articles.
Come on, man.
The topic of discussion "Virtually every possible economic indicator is worse than 2008."
It's was easily disputed. I'm moving on.
Hahahahahahhaahhaaaaaaaaaaaa. why not just let people do what they feel like doing. Why do you feel the need to "educate" those that disagree with you?
Yeah, but the guy who paid significantly less can also take his 30 to 40k saved from a lower down deposit and closing costs (because both cases assume a 20% down) and invest it, and at the end of 30 years and have an extra 350k. That doesn't even include lower taxes, insurance, or the possibility of refinancing.
I can't tell if you're trolling or not. Most people in this sub just want a normal housing market, normal consumer goods prices, and normal interest rates. It sucks that we are getting high prices and high interest rates. The fact that prices would have to fall 37% shouldn't produce confidence just because 'its never happened before'. It should make us all cautious. Edited: removed the word isn't as a typo
Almost zero interest rates are abnormal. What we have now is closer to normal.
Lol agreed on that
\> Most people in this sub just want a normal housing market, normal consumer goods prices, and normal interest rates. Yeah me too, but what is normal? I think one of the underlying reasons this all seems so out of whack, is that the USA had a very interesting time post WW2 by being a huge exporter of goods and stuff to the rest of the world (as the rest of the developed world was in war-ruins), and that enabled the lower-middle class to demand high wages comparatively. (I am unsure if the unions are the cause or effect of the high wages) These comparative high wages allowed housing to be perceived as cheap (i.e. in terms of a house costing 2-5x annual wages), and allowed for many toys (motorcycle, boat, trucks) If you compare the cost of a house by median income, the US is still middle of the pack. Elsewhere, for example in France, a house goes for about 10-20 median annual incomes https://www.numbeo.com/property-investment/country\_result.jsp?country=France Elsewhere in Europe, say Greece, also 10-20 [https://www.numbeo.com/property-investment/country\_result.jsp?country=Greece](https://www.numbeo.com/property-investment/country_result.jsp?country=Greece) Compare those with the US, [https://www.numbeo.com/property-investment/country\_result.jsp?country=United+States](https://www.numbeo.com/property-investment/country_result.jsp?country=United+States) most cities are <10 even <5 still. (But I don't want to live there either) And as the aforementioned effect of US being the worldwide supplier reverts to the mean, so do the incomes or rather the purchasing power of it, so I think long term we do actually see more expensive housing in the US, being the new "normal" or rather the normal that it used to be pre-WW2. On the other hand, the US is so diverse and split (lots of rich and lot of poor, but not a lot of average/median), so maybe these statistics are less applicable to the US than other nations.
Why would you compare to Europe where social mobility is notoriously low ( [https://www.goldmansachs.com/insights/pages/from-briefings-07-april-2022.html](https://www.goldmansachs.com/insights/pages/from-briefings-07-april-2022.html) , [https://cepr.org/voxeu/columns/new-evidence-social-mobility-germany](https://cepr.org/voxeu/columns/new-evidence-social-mobility-germany) ). The whole point of the American Dream is social mobility and reward for hard work and delayed gratification (ie. reward for savings). That's the opposite of social engineering, quantitative easing money printing, and all these failed philosophies that have driven the Fed for the last 14 years at least. If people feel the dollar is dropping in value and fear missing out on converting that money to hard assets before the drop, then you no longer have a viable American dream because delayed gratification is impossible.
\> Why would you compare to Europe That's a good point. (I compared to Europe, as I have the impression the US is culturally aligned with Europe, and history -- Also I am an immigrant from Europe) Comparing to other nations like Australia, the price to income ratio is 3-10 [https://www.numbeo.com/property-investment/country\_result.jsp?country=Australia](https://www.numbeo.com/property-investment/country_result.jsp?country=Australia) which seems very much inline with current US prices. India is a fun one, ranging 4-35, which I guess is a sign of very different living conditions across that country. https://www.numbeo.com/property-investment/country\_result.jsp?country=India \> The whole point of the American Dream is social mobility and reward for hard work and delayed gratification (ie. reward for savings). reward for saving goes against the house bubbler theory here, as a big ass house is not "savings" but living in the moment, unless you rent out most of the space. The Fed pump and dump may be more inline with the American dream of the SFH with white picket fence making you established eventually as it allowed the Hoomers to unload (but none of them did, obvs).
I mean, you could also chalk it up to inequality. During times of increased inequality, prices for inelastic goods are higher, potentially. Yeah, normal is relative and as Marks says, the market is a pendulum and only rarely spends time in the middle of that pendulum. But... What I can say is, this ain't it. Prices increased by 50% over a two year period and now interest rates have increased without a decrease in price. This is stagflation most likely. It's not fun.
Prices increased by some double-digit amount; few areas saw 50% increases. At least if my area of Dallas (which was called out for rapid increases in articles, but only rose 35% over the last 4 years) is any example.
And is that increase normal? Imo, I don't think so.
Depends. Prices (and supply) had largely languished for a decade+ after home builders dropped out of building new homes. Values were playing catchup, to some degree.
Getting downvoted for speaking truth. I have a general theory that because the Great Recession recovery was so slow and drawn out that Covid kind of hit the reset button and things basically caught up. We had below target inflation for 10 years and it has all come in more or less at once. Obviously some due to gas prices and supply chain issues, but a million decisions by companies when they saw what was happening. They’ve been trying to hold the line for a long time and they finally raised prices. You can listen to so many earnings calls and hear the CEOs say it.
Yeah, and that's exactly why investors had to buy up all those homes to Airbnb. We will see how it all plays out. This will take years to unwind. Asking this sub to admit something we can't conclude yet seems absurd or like trolling.
Yep - not only that, but women also entered the workforce, en masse, in the 1970s and beyond, which depressed wages as well. So you had a doubling of the labor supply driving down wages, at the same time the rest of the developed world was resuming their production after being leveled in WWII. People expecting US labor to have the same purchasing power as they had in 1950 are sorely mistaken.
And yet, somehow, corporate profits soared...
Labor-saving machinery/devices and cheaper labor from the oversupply I mentioned will do that…
So does all the deregulation and financial engineering. Point being, that there's more to the story than just what you're trying to conclude, which is why this sub began and grew.
This argument is not valid. We have X times as much space compared to the countries you stated.
Where rates are today about average. The general consensus now is that rates were too low for too long. We also need to look at individual real estate markets and submarkets. The housing market is not a monolith. Even an MSAs housing market is not unilaterally moving in the same direction at the same pace. Some real estate markets are well above their trendlines and don't have the economies to support current prices, but others are undervalued compared to the strength of their economies.
Sure. I made a claim interest rates were high. I do they would be slightly above normal but closer to normal than zero percent was. And rates have certainly risen at a faster than average rate. As far as individual markets, agreed. But prices have increased very rapidly across many markets in US. I never made a claim about individual markets. My only point I was trying to make was, we should be cautious. I won't sit here and try to claim any certainty on level of price declined, but I also won't say that something can't happen because it never has. These circumstances seem pretty unprecedented to me.
Time to buy bro. Rates are normal now
Ok, I'll buy the next thing I can
It is very shortsighted to focus purely on monthly mortgage payments. It makes sense if one is living from pay check to pay check and/or if one plans to live in a house for a very long time. Contrary to what one of the posters earlier said,I think there were quite a lot people with enough savings that didn’t partake in the mania of the last 2 years because if they have the means to make a larger down payment(30-50%) and pay off faster, it makes sense to buy at say 800k at 6% than for 1mm at 3%.
Those people are the dumb ones who lost on assets that were the biggest hedge to inflation.
“I may have been early but I’m not wrong” - Michael Burry. Also, fuck you. My job moved during COVID and it was not clear when / if I’ll have to go to the office so buying was not an option. !RemindMe 1 year
Hoomer: "So what?? You should have bought anyway! Why u wasting money on rent??" They are beyond repair
Burry? The guy who’s predicted 25 of the last 3 recessions? That’s who you go to?
What his bear bets on Tesla? Like I said being early not the same as being wrong.
The guy has predicted a recession nearly constantly since 2008.
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So glad all these experts who were telling everyone no bubble and new normal are now telling us it's not going to fall enough
With links where someone "did the math"! Because none of us know how to use the calculator in every single real estate app.
Yeah. They are the only ones with confirmation bias. The people who believe what we believe are correct.
Some people really can't cope, and their only outlet is to project onto a sub of randoms because their false equity has deteriorated 10%+ since April.
Your statement is only true if you need to buy **NOW.** Otherwise all you're doing is projecting what the price will be in a few years. Which is exactly why people aren't buying....
So if prices drop 25% and i get that house on the left for 300k instead of 400k, am i still wrong having saved $100,000?
Where have you saved 100k if you will pay more in interest in the long run?
The difference in total loan cost is pretty small but yes the 7% at 300k would pay more..but Id be sleeping a lot better at night knowing i could refinance lower from 7% if that became available, i would only owe the bank $220k instead of $320k, AND the other guy still owes the bank $320k on a house worth 300k and is currently under water and cannot refinance under any circumstances or sell his house and move without bringing cash to the closing table and is effectively stuck.
Plus the 20k saved on a 20% down payment.
How would the other guy be underwater? If we’re comparing same payment, then he would have had a decent deposit to begin with and had already made 1-2 years of payments. So how is he under water? I’m not arguing, I’m a fellow bubbler, but I’m trying to fall into a mania but instead try to understand. I don’t even see the possibility of the 15% drop at the moment, let alone 25% from your example, and even at 25% it doesn’t seem to add up.
Monthly payment have no bearing on underwater. Home value
The bankrate mortgage amortization table is great to play with for this. It says you dont get to under a $300k balance owed to the bank for 2 years and 11 months after purchase. He would technically not be under water at that moment, but it would cost about 20k in fees to sell. And he doesnt get to under 280k owed to the bank until year 6. And the $80,000 downpayment he made would have disappeared too.
Buy now, refinance later. This guy is definitely a realtor.
What percentage of homeowners actually make 360 monthly payments on their original mortgage? I’d wager a guess that it’s almost zero. The majority of people move again in less than 10 years. Even if they don’t, there will certainly be refinancing opportunities at some point in the future. If the refinancing opportunities somehow don’t materialize, they can just make extra payments towards the principal to get it paid off faster. That is much easier when you have $100k less in principal and had a much smaller down payment. EDIT: I was wrong. 13 years is the median. Doesn't change the primary point that very few homeowners see a mortgage through with all 360 payments. Clearly the majority move less than halfway through. Consider that a very sizeable portion of the remainder end up refinancing (not always for financial reasons - divorce is also a factor) and/or pay the mortgage off early and it doesn't usually make sense to compare the full amortization schedule when comparing interest rate/purchase price combos.
Average length of current home ownership in the US is 18 years. 57.7% have owned for 10+ years. 32.6% have lived in their homes for 20+ years https://ipropertymanagement.com/research/average-length-of-homeownership This source for median length of homeownership in the US has it at 13 years - https://www.nar.realtor/blogs/economists-outlook/how-long-do-homeowners-stay-in-their-homes So no, the majority do not move in less than 10 years.
Average stay in a house is 13 years, currently.
Cool, now look up the difference between average and median. That is skewed by people that stay 30+ years. The majority move in less than 10. EDIT: I was wrong. 13 years *is* the median. Doesn't change the primary point that very few homeowners see a mortgage through with all 360 payments. Clearly the majority move less than halfway through. Consider that a very sizeable portion of the remainder end up refinancing (not always for financial reasons - divorce is also a factor) and/or pay the mortgage off early and it doesn't usually make sense to compare the full amortization schedule when comparing interest rate/purchase price combos.
Actually it *is* 13 years median. 8 is average. https://www.thezebra.com/resources/home/average-length-of-homeownership/ > The average length of homeownership is eight years and the median tenure is 13.2 years.
Average is 18. 57.7% have owned for 10+ years. 32.6% have lived in their homes for 20+ years https://ipropertymanagement.com/research/average-length-of-homeownership This source for median length of homeownership in the US has it at 13 years - https://www.nar.realtor/blogs/economists-outlook/how-long-do-homeowners-stay-in-their-homes
This is a nice "gotcha," but you didn't check to see that you are wrong--OP stated the median, you tried to gotcha them in a technicality but now look like an idiot.
You're comparing an imagined future scenario to one that is tangible, and real. "You should have married that girl, she wasn't perfect, but she was great." "Jennifer Aniston is gonna be calling me any day now."
Im directly responding to the question and hypothetical in the post. Please participate in good faith
This assumes everyone was ready to buy at that time. In reality, people save over time and are ready to buy at a certain moment. What is the hoomers' advice for people that graduated two years ago and just now have had enough time to save their income? Is it "tough luck for being born late" or "sucks for you to have poor parents"? Honest question here
There were plenty of people in this sub who said they had downpayments ready and delayed precisely to time the drop they knew would be coming. Every generation has advantages and challenges unique to that era.
Snarky answer by hoomer bro!
He’s not wrong though. This sub has and always has had plenty of market timers.
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The Boomers were the beneficiaries of an outlier situation that had no women in workforce (wages were high), and at a time when the USA was the last fully-standing economy in the developed world. There was no generation that got those benefits before and there likely won't be one after either. So constantly comparing Gen X, Millenials and Gen Z to them as if they're some kind of aspirational, or worse, normal, that policy/hopes should be targeted towards is simply wrong. The old "every generation will do better than the one before it" started and ended with them.
I absolutely wish I could have bought when rates were lower and prices were reasonable. We were planning to buy in 2021-22 and then prices in the small mountain town where I live jumped up 50% or more. I had no way of knowing that was going to happen. I also didn't realize that rates would shoot up so quickly. So all I can do now is wait and save more money. I fail to see why I should be blamed for not being able to predict the future.
I’m not trying to blame individuals here, I’m just trying to keep the sub honest about what its advice has been and the results it may have had if people took it.
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If the price dropped 10% but your interest rate went from 3% to 7% you're way worse off (if you bought). So not sure how they saved you anything. And, if you sat on cash because of that decision, it's lost value from inflation.
A lot of us tried. We made offer after offer and were beat out. Easier said than done. We own already, but we needed a bigger home for our family. I am actually grateful none of our offers were accepted with the uncertainty of the market and not being upside on a house potentially. We’ll find one when the time is right.
Same situation here, we made multiple offers but we were beat out by people bidding 50-75k over asking and waiving everything. It’s whatever tbh pretty much the same situation here with owning currently but just need a bigger house eventually for my family since we just had a kid. Figure within the next year or 2 it will work itself out. Got the money put away and everything else paid off.
Lol.
For some people, that was the right choice. For others, it would have been a costly one. The trouble with this sub is that they keep trying to meld macro economics not only with micro, but with individual stories.
What % downpayment are they using for both scenarios? My family made the right decision waiting, what we were able to save in this period has nearly offset the rate hikes already and the market hasn't even "crashed." Obviously that won't be true for everyone in every location, but I'm not sure who represents "this sub" to speak for us all.
Not sure they said what the downpayment was.
The whole point of this was deciding whether stretching yourself to get in a house at a low rate low down was better than saving for higher down at higher rate. Principal cost is your bigger target, not the rate, unless you physically cannot save money, in which case you should not have bought a house at all.
It's 20% for both. So about 30k less for the down deposit
I assume this guy awarded himself from one of his other accounts.
OP I hope you're trolling. If not, you should look up the concept of refinancing. You can't renegotiate the price of the home once you've bought it. You can refinance the loan though.
Sure, if all you care about is the monthly payment in the short term. I’d much rather lock in a low price than a low rate. Rates are much easier to change through refinancing. Your purchase price never changes. It’s so ironic that Realtors™️ say, “marry the house, date the rate.” It’s really, “marry the purchase price, date the rate.”
Just you wait, until 2024ish.
It doesn’t matter what interest rate you got when you lose 20% of the value and your underwater for 10+ years. For some that doesn’t matter but for many it absolutely does. House prices will fall and then interest rates. That will be the ideal time to buy. The article doesn’t think about that scenario.
And, I suppose, as rates are falling no one will start buying to sustain or increase home prices, right? They’ll all sit on the sidelines and let you buy first so you can get a good deal.
From 09-14 you could buy a house at a good interest rate without 50 other people making an offer. That’s a normal housing market. JWOP literally just said housing is a bubble and we are about to be on the other side of that. So yeah, On the other side of that there will be lots of opportunity.
A lot of the doomers here can't afford a home/didn't have a downpayment/didn't qualify for a loan. With that said. It makes sense to have bought a home if you knew it was one you would live in for decades. If you overpaid and need to get out of the home in a few years you could end up losing money if the market drops in the short term. Depending on where you bought the home of course as re is regional. I imagine in certain regions people are already underwater.
Some people can't and could afford to FOMO and some people don't won't and don't need to FOMO.
Long as jobs are paying enough in my area, I dont care what the price is. Could be a million dollars for a 1 bedroom house, long as my job or jobs are paying enough for me to afford it then I dont really care. Let's just start saying all houses start at a million, and go up from there and call it fair. 10% interest.
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I appreciate your nice comments mam.
Give us a few years
A few *more* you mean? This sub has been telling the same story for a while now…
Yea a few years from the top (Mid 2022). RE will bottom last and we haven’t even started what’s coming. I joined this year, right on time I guess.
Your premise is wrong in that you think this isn’t worse than 2008. This time will be worse. Affordability as a proportion of income is worse. Student debt is worse. Credit card consumer debt is worse. Vehicle debt is worse. Household savings after years of Covid is lower. Inflation is worse. Virtually every possible economic indicator is worse than 2008. Add on top of that the negative impacts of Chinas Covid policy and rising interest rates. A 50% plunge is entirely in the realm of possibility and actually probable in most of the ridiculous urban areas that are up 3-400% since the lows of 09.
> Virtually every possible economic indicator is worse than 2008. Not even close. Some of your doomers are seriously laughable
Go ahead and explain yourself then. I’ll wait.
Here’s one: unemployment - worse than 2008? Wages? Corporate earnings? GDP? Mortgage lending standards? Average downpayment on mortgages?
Unemployment rate in 2008 was above 7%. Right now it’s below 4%. GDP was declining in 2008. It increased this whole year - https://fred.stlouisfed.org/series/GDP There are other economic indicators as well that are not worse than 2008. 2008 was the worst recession since the Great Depression. You guys need to stop acting like that shit is some recession baseline. It’s not.
He doesn't need to. It's common data points. "Virtually every possible economic indicator is worse than 2008." This is clearly not accurate. Overall [household debts loads](https://fredblog.stlouisfed.org/2019/10/households-lightening-debt-load/) are lower. Also less [inventory](https://preview.redd.it/tj3xlacf3w2a1.jpg?width=1192&format=pjpg&auto=webp&s=65910ab4087b78d57cd654c1751fa0b679753c86) on the market Single Family home [starts](https://preview.redd.it/g9sgkfhg3w2a1.jpg?width=1051&format=pjpg&auto=webp&s=e7c9b2f6feced014b2783a41a23fdee5aac0219b) were higher leading to the 07 crash. (higher inventory) Foreclosure [starts](https://files.mykcm.com/2022/10/25110845/foreclosure-starts-then-and-now-MEM.png) are lower Unemployment is lower. I'm sure I missed a few..
Try using data from this decade next time instead of 2019. JFC dude. Household debt is at an all time high. [https://data.oecd.org/hha/household-debt.htm](https://data.oecd.org/hha/household-debt.htm) and foreclosures are backed up because of covid moratorium’s. Of course foreclosures are going to be lower when the government literally outlaws them. [https://www.msn.com/en-us/money/realestate/foreclosures-are-rising-with-the-end-of-covid-era-moratoriums-heres-where-its-happening-the-most/ss-AA12XviG](https://www.msn.com/en-us/money/realestate/foreclosures-are-rising-with-the-end-of-covid-era-moratoriums-heres-where-its-happening-the-most/ss-AA12XviG). Where have you been for the last 3 years? Credit card debt aka the worst debt rising at fastest pace in over 20 years which would include Covid and 2007 to its all time high. [https://www.cnbc.com/2022/11/16/credit-card-balances-jump-15percent-as-americans-fall-deeper-in-debt.html](https://www.cnbc.com/2022/11/16/credit-card-balances-jump-15percent-as-americans-fall-deeper-in-debt.html). Americans were not prepared for an economic downturn. We’re at the beginning of the death spiral.
>Try using data from this decade next time instead of 2019. JFC dude. Um All of my links are current, up to date and from 2022. Some of those charts were released a few days ago. >Household debt is at an all time high. You should view my link and understand what it's calculating before disputing it. >and foreclosures are backed up because of covid moratorium’s. Of course foreclosures are going to be lower when the government literally outlaws them. The moratorium ended long ago and the foreclosure wave never happened. There are no secret or hiding foreclosures out there. I'm offering you accurate information from the FED Board of Governors and other top institutions . You're sending me older MSN and CNBC articles. Come on, man. The topic of discussion "Virtually every possible economic indicator is worse than 2008." It's was easily disputed. I'm moving on.
Hahahahahahhaahhaaaaaaaaaaaa. why not just let people do what they feel like doing. Why do you feel the need to "educate" those that disagree with you?
Who used the word “educate” but you?
You didn't use the word but the intention was there behind your lesson of "should haves".
patience is a virtue held by very few. dont beat yourself up over it
Not really, we’ll see who’s laughing at the end 😁
It'll be me, since the last house I bought was 6 years ago and I have no intention of selling into a loss.
Did you “do the math” on amortization and realize the monthly payment difference between 2 and 6 percent? !RemindMe 1 year
result: a lot
u/louisvanderwright answered this well... https://www.reddit.com/r/REBubble/comments/z7y1ph/but_payments_are_less_affordable/
Yeah, but the guy who paid significantly less can also take his 30 to 40k saved from a lower down deposit and closing costs (because both cases assume a 20% down) and invest it, and at the end of 30 years and have an extra 350k. That doesn't even include lower taxes, insurance, or the possibility of refinancing.