Been trying to buy a house because my rent is going up(and it will continue to do so) and a mortgage would be around the same as what my rent will become in a few years anyway so I figure I might as well build equity and have a house for my family.
Thing is the current housing market is nuts. Houses are put on sale with strict deadlines of “accepting all offers due 12pm 5 days from now” creating a false sense of urgency and to top is off the process is super opaque. You dont know what other people are offering so unlike an actual auction you cant start low and hopefully get a good value. Nope it’s a black box and the asking price isnt of any help because that was just an advertising tactic to get more people to look at the house.
So you have to do research based on past history of other homes sold in the area of the same type recently and then place a competitive bid based on that. Of course everyone else is also doing that so you have to make your bid “competitive” and give a little more. How much more is hard to say and you only really get the one bid. So 12 pm comes along and the anticipation in your stomach is insane because this could be it you could be a homeowner and you did put in a competitive bid, and then sometime between immediately and just before bed you get a message saying they went with another offer.
ITS SO DAMN FRUSTRATING! Houses that I bid $30,000 over asking price and someone still swooped in and bid even more. And of course since the process is a black box you dont get told what bid beat you out or what the other bids were(dont want the 2nd place bid to decrease their bid in the event the 1st place falls through). You’ll find out eventual final sale price a few months from now when everything finishes closing. I imagine the issue is other people got frustrated with the game over the last few months and now if they see a house thats ok they go all in with their max offer instead of a smart offer.
Oh and the market is limited, but somehow out of sheer coincidence after one round of sales is done the realtors manage to find another round of homes to put on the market. I’m convinced the realtors are limiting the supply on purpose and letting homes trickle in because the ACT NOW PUT IN THE BEST OFFER OVER ASKING tactic probably doesnt work as well if there are more than a handful of homes for sale at a time.
Its so frustrating I just want a house to live in and raise my soon to be born child, and Im willing to pay you what you’re asking for it! The worst part is the housing market in my area shot up a lot over the years. So these people playing bid wars are making 100k profit AT LEAST for a house they bought just 5 years ago! And then theres the old people who bought the house for pretty much nothing 30+ years ago
Sorry for my long wall of text rant
You must log in or register to comment.
Until the US passes laws designed to make the main purpose of homes to be housing, and not just profit for the already rich, millennials, Gen Z, and anyone else not already house-rich, will forever be locked out and forced to pay their hard earned wages to the rich just for the luxury of not being homeless.
Eh, it’s not about people trying to get rich…
There just literally, is a huge shortage of housing right now. Pre-covid, I could easily find 100-200 houses for sale, near my small town.
Now? There are hardly 20 houses for sale at a given time.
Everyone is looking to rent/buy, but, there is hardly anything for sale/rent.
When COVID hit, builders basically stopped building houses. But- people didn’t stop reproducing.
Interest rates probably plays a role with people having locked up mortgages at 2-3% and then seeing that if they sell and looked for a new home it’d be at like 6%.
When COVID hit, builders basically stopped building houses. But- people didn’t stop reproducing.
That’s basically a drop in the bucket, as they started building up again pretty quickly.
The real problem goes back further than that. Builders really slowed down in 2008 and never really picked it back up. Meanwhile, construction costs have soared (both labor and materials), so a lot of construction starts have gotten delayed as the lag between housing starts versus housing completions started to stretch much longer than the historical average. We’ve got basically 14 years of backlog against the expected household formation (kids becoming adults and moving out), while also shifting economic activity even more urban, with regional migration trends towards the Sun Belt. That has led to some areas deepening their economic malaise (certain rural and small town areas, especially in the Midwest and Appalachia), while white-hot housing markets elsewhere completely wreck prices for new buyers.
Meanwhile, policy has a huge role to play, too. The difficulty building in some cities/states prevents some homes from ever coming on the market, while a growing population competes for a fixed number of homes. Other more subtle policy decisions around property tax rates (especially those favoring incumbent homeowners getting grandfathered into old rates) prevent those homes from going on the market even when the home no longer fits that homeowner’s needs (empty nesters, etc.).
Plus macroeconomic policy of trying to juice the economy since the 2008 recession led to a sustained period of low interest rates, and now incumbent homeowners have locked in interest rates that make it irrational to sell, so those homes stay off the market, too.
We’re in a weird place right now, where there are a lot of homes in existence, but not a lot that are actually being listed for sale.
I thought the housing market was crazy in 2020, so waited till 2021. I understood what crazy really meant in 2021 but ended up buying a house at the peak of the crazy market in 2021. Or so I thought. It was crazy in 2022, and it’s still crazy in 2023. What the fuck is going on?! At least I managed to buy before the crazy interest rates came by (2.875). I’m making calculations, and at the current mortgage rates, even if I buy a house for 100k less, I would still be paying more per month.
spoiler
asdfasdfsadfasfasdf
Wait. With the interest rates as high as they are if you can give it a year or so the market will cool rapidly. All those people bidding way over the value are taking on way more debt than they can afford and once job losses start increasing we are going to see another 2008ish crash.
My expectation is that high(-ish) interest rates will not lower prices; it will lock more people into their houses - chaining them with 2-3% mortgage rates so that they can’t move up (since going from 2%-7% is something like a 40-50% increase in monthly payment). That will lower supply or, in hot areas, keep supply artificially low. Even for people who have to move, it becomes enticing (if financially feasibly) to keep the property as a rental as the mortgage with a low rate is almost certainly less than what you can command on the rental market. Even if you pay 10% to an agency and put aside another 10-20% for maintenance and replacement reserve, you can still break even on the mortgage, essentially having someone else pay off your loan while you keep the asset.
There won’t be a bust like there was in '09 when everyone was forced to sell or be foreclosed. Ridiculously hot areas will fall back a small amount, but for the most part we’ll see a flattening of value increase over the next 7-10 years, with tight supply propping up values more than other inflationary pressures. By then we’ll be ready for another bubble. Younger Millennials and pretty much all of all of Gen Z are fuckd.
I was planning on doing this and waiting to see what next year brings, but with my rent increasing and then increasing again it felt like a good time to get out. If Im going to be paying this much I’d rather it go to my own mortgage. Plus those higher interest rates would impact me too, and since my area was historically undervalued the places I want to live are only going to go up in price, even if it is less competitive.
The idea that prices only go up is exactly what creates bubbles. I would be careful with that assumption. I do believe that governments will go to great lengths to prop up the value of homes as it has done in the past, but birthrates are declining in the developed world.
Also, when you get a mortgage, it takes years of paying interest before you start to make a dent in the principal and build equity. You’re paying mostly interest until about 13 years into a 30 year loan. The bank always gets paid first.
Unfortunately it’s no bubble. My area popped 60 years ago and it’s only just recently started very slowly turning around. Climate change combined with good old bones are making the area a lot more appealing over time and for the first time in a long time we’ve started gaining population again. I can see the market slowing and the bidding wars stopping if the economy slows up, but it would take an absolute catastrophe to get prices to go down again.
it would take an absolute catastrophe to get prices to go down again
I fear you are correct. While I believe the market is overvalued, I don’t see a correction coming without extreme fallout. People are struggling and for many their home is their life savings.
I’m not sure if this is something that’s helpful, but I do want to give the advice that real estate really isn’t the best way to build wealth If you are very disciplined. Renting can be an even better way of building wealth.
If you treat housing a service you pay for, buying a house has a higher overall cost if you include mortgage, taxes, insurance, repairs, and etc. Remember, mortgage is the least you’ll pay, while rent is the most you’ll pay.
Imagine if your mortgage was 2k/mo, taxes, insurance, and home maintenance is another 500/mo, you can almost certainly find a house to rent for under that cost (let’s say 2k/mo for example) unless you live in one of the exceptionally cheap places in the US where the price-to-rent ratio is low <15.
Now also consider how you most likely needed a 20% down, and most of your payment goes towards interest initially for a mortgage.
The tricky part is having the financial discipline to put away that extra 500/mo into investments. Mortgage FORCES you to save into an appreciating asset, most people will just blow that extra 500/mo onto other items. It sounds like you already are by maxing out your 401k, and I would also looking into maxing Roth IRA if you can. Home ownership isn’t the only path towards wealth, though it is a means by which many people (conscious or not) force themselves into “saving”.
From a practical financial perspective, you are correct. However, owning a property provides long term security. It also insulated you from rising rent prices for 30 years. There is a certain peace of mind that comes with knowing you have complete control over your own shelter. While there are risks associated with that, you can mitigate that pretty effectively provided that
-
you make a smart purchase to begin with. Identify major issues and make a conscious decision whether you want to own those problems, or walk away.
-
Conduct regular, proper preventative maintenance to head off problems before they get bad.
-
Have decent insurance
While someone that rents indefinitely does avoid a lot of the risk of ownership, they also tied the cost of their shelter to something outside of their control. Sure, it’s cheaper than owning right now, but how will rent prices in 10-15 years compare to the cost of ownership of a property purchased today?
-
For a whole new level of frustration, try to research any HOA before you buy a house. Their rules aren’t typically disclosed until after you
buy the houseput in your offer and enter escrow.The seller is required to provide a package with all HOA bylaws within 5 days of accepting an offer, at least in my state. If you disagree with anything in the HOA rules (or any other reason as long as the HOA is cited as the reason), you can back out of the sale with no earnest money forfeited.
Yeah I miss remembered my experience. I still think an offer and escrow is too far in the process before the rules are disclosed.
deleted by creator
The investment firms are a big part of the problem, coupled with the fact that anyone who locked in a 30 year mortgage at rates between 2.5-3.0% really, really don’t want to sell and give up that rate.
In a seller’s market, you need to work backwards… Instead of spending a lot of time finding and falling in love with the house you want, you put in offers, sight-unseen, on any and all homes that meet your general criteria. Include a 10-day inspection contingency and a financing contingency.
Only when a seller accepts your initial offer do you actually view (“inspect”) the property. If you don’t love it after your “inspection”, you exercise your contingency and walk away.
spoiler
asdfasdfsadfasfasdf
NEVER DO. Everyone will try to convince you to waive it, DO NOT. Even my realtor told me I should waive it on my current house and I told her there’s no way I’m buying a house without one an inspection. She was like “Well, I guess we could have one done, but it’d have to be early tomorrow at like 7am…” and I was like “Great, I’ll be there!”
spoiler
asdfasdfsadfasfasdf
