Buying a house is so disheartening
Buying a house is so disheartening
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
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.
Thankfully no HOAs where I'm looking . Just good old fashioned taxes to the local government.
I get everyone hates HOAs, but this is flat wrong. HOA rules are material facts about the property, they must be disclosed before buying. They will be disclosed in escrow, if not earlier. When they are disclosed, read them over and bail if you don't like them or ask for a price reduction.
You are correct. What I don't like is you have to put in an offer on a house and get that far before you see the rules.
Stick to a firm budget, and don't go over it. We had a firm ceiling of $400k, looked at around 40 houses, and put in 7 offers before ours was accepted. It was listed for $375k, made an offer for $385k with a 24 hour expiration. Appraisal came back at $412k. We closed about 6 months ago, and it took us 7 months of looking at multiple houses every week to get to it. We were also using a VA loan, which turned some sellers off due to the added time for the VA appraisal and potential to either force them to fix things that aren't an issue for most people, or back out of the contract.
My wife was pregnant at the time (and miscarried two months later), so I get the added pressure of trying to find something NOW. Don't dig yourself into a hole that you can't climb out of for thirty years because of that pressure.
We got lucky with this one because the previous owners were going through a nasty divorce. I get the frustration, and it was disheartening as fuck constantly being outbid, especially after you like a house enough to tie yourself to it for decades. Our realtor was great, and knew most of the agents in the area, so he was able to get us some inside info on a few of the houses we looked at. If your agent isn't being transparent with you, find a different one.
Treat the search as a business transaction. You have a list of criteria, you're reviewing options within your budget that meet the highest number of your needs. If it doesn't meet your nonnegotiable criteria, don't bid. The most important one of those criteria should be that you like the house. Have a checklist to run down in your walkthrough (roof, crawlspace, foundation, visible water damage, age of HVAC and major appliances that will convey, etc), and try to weed out as many major issues as you can before paying for an inspection.
It's tedious, extremely frustrating, and disheartening. Eventually, you'll find one. You may have to compromise on some things, and it's ok to gradually improve the house after you buy it. Just make sure the basics are solid. Also, allocate way more time for painting than you think it'll take, especially if you're doing it without help. Everything will take longer than you think, be patient with yourself.
Be stubborn as fuck during this process, and be willing to walk away. I get that you want to get out of a lease (I rented for years, and it sucks compared to owning), but once most sellers are motivated to get shit done once they're under contact just as much as you are. They don't want to start the process over again either, especially because if a major issue is uncovered during an inspection, they are legally required to disclose it (my realtor threatened their agent with this fact over some mold in our crawlspace when the seller wanted to walk away instead of fixing it. He told them that he has access to their system and would personally make sure the next offer received a copy of the inspection report and would report the agent if they didn't disclose it).
This was great advice. Re:
Have a checklist to run down in your walkthrough (roof, crawlspace, foundation, visible water damage, age of HVAC and major appliances that will convey, etc), and try to weed out as many major issues as you can before paying for an inspection.
I'd add to check out all of the mechanicals and find out when they were installed and last serviced. Usually mechanicals have an 8-12 year lifespan. Also find out when the roof was installed. These are pricey items to replace when you move in, so you really don't want to have to do that right away.
Also, check out a flood map for the areas you are planning to buy in and locate the houses you are interested in on the map. (This was one of the deciding factors for buying our house). Also, see if the land surrounding the house slopes towards or away from the house (obviously, sloping away is preferable).
Absolutely, great points. If possible, go check the house out when it's raining. Our first visit was during a massive storm, and we were able to verify that there was proper drainage/no water intrusion (crawlspace mold was from some mulch covering a crawlspace vent and some subsequent seeping).
Our roof was original, 20ish years old, and had some minor damage. No leaks or evidence of previous leaks, but we had it replaced a few months after moving in before it became a problem. We knew about it ahead of time and could budget accordingly, and could take the time to shop around for a decent price from a reputable company.
Side note: GO IN THE CRAWLSPACE OF EVERY HOUSE YOU LOOK AT. We waved off of at least a dozen houses because there were massive issues that I found in the crawlspaces (standing water, major cracks, infestations, temporary jacks holding up the house, you name it). Everything else can be perfect, but if the foundation is fucked, so is the house. Don't waste money on an inspection if you see major issues. If you can see it with an untrained eye, it's already expensive.
Thanks for the kind words and advice! My wife is pregnant as well which was part of why we started later in the season. Our old apartment rent used to be super favorable, but a change in policy caused our landlords to start upping rent to make yet more monies.
We have been setting a firm ceiling for ourselves based on budget as well and going through things. We've got an expected hopeful ceiling of 230ish(give or take depending on home) for what we hope to spend and a cap of $250k if the house is super updated(in a tasteful welldone way) and we can expect few repairs in the near future. I can only hope that as august pushes on that we weed out the people desperate to throw too much money down before school starts and that as the season slows sellers will be more willing to give to sell quickly.
Unfortunately the way things are I suspect people are more likely to just wait until next year unless they really gotta move.
Good luck man, hope you find something soon! Inventory will probably drop next month, but like you said, most people aren't going to move right after school starts, so competition should be lower.
VA loans are so fucking clutch.
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.
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.
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%.
You can put in escalating offers when you place your bid. Say you want to pay 400k, but you are willing to go up 500k to get the house. Your realtor writes up the offer with the escalation listed. "Our offer is 400k, but we will escalate past any bid you can verify by 10k, up to 500k."
We did this to buy our house. We got close to, but not up to, our limit.
Yes, it's called an escalation clause. I have been in the same heart-wrenching process for the last year. I closed on my home a week ago, and we had an escalation clause.
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.
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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!"
I get where you're coming from, but sight unseen in a sellers market is a terrible idea. I commented above about the details of my experience, but there are so many shitty houses with major problems that are evident the second you walk into them. This approach ties up earnest money and can potentially prevent you from being able to jump on a good house.
Yep. We ran into this issue and we didn't even do it sight unseen, we were just moving so fast that we got sloppy. It's hard to continue to be diligent after 30+ failed bids. Ended up with a bid for a house that needed significant and immediate repairs that we couldn't afford. Ended up walking away and losing our earnest money instead of keeping the house, but we're much happier for it.
Our budget also continually increased throughout our search. The same houses we were bidding on at the start increased by 50k just in the couple of months spent searching. We only found inventory once we broke into not a starter home budget category. This has resulted in us being pretty house poor to start, but ultimately we plan to stay here for 20+ years so it hasn't mattered after those lean first few years.
Earnest money is customary, not mandatory. You can tell the seller's agent you're open to the inclusion of earnest money in their counter offer. Alternatively, you can specify that the earnest money be held by the buyer's agent rather than the seller or escrow agent.
Your earnest money also binds the seller. They can't accept a better offer coming in later while they are under contract with you. I have seen sellers double the buyer's earnest money so they can accept a significantly higher offer coming in later from another buyer.
In a seller's market, the buyer needs to get into the negotiation phase as soon as possible. Use inspection contingencies for a cooling-off period.
It probably depends on your area, but where I'm at there are no sale conditions. If you put conditional on home inspection, you just got rejected.
Then you're paying an extremely high premium to buy in that area. You're almost certainly trying to buy at the peak of the market in that area.
I would divide the average cost of the house I want by my annual pay, and use that number to go shopping for a job in another area. Even taking a fairly steep pay cut, you'll have a higher lifestyle elsewhere.
Look at a state whose population has declined, or lagged behind the national average. Generally speaking, those states will likely be in the trough of their housing cycles, and will likely peak when you're ready to sell.
, you put in offers, sight-unseen, on any and all homes that meet your general criteria
yeah this is absolutely a nogo for me. They all have deadlines anyway and I live around here so it's not like it costs me anything to schedule an appointment to see the place or pop over during an open house. Also offers are all accepted at the same time so they'll just pass if theres a 10 day spiff on it, and in my state you have to sign some formal paperwork to make a deal. This implies a covenant of good faith, so I dont really know the legality of singing and sending out a bunch at once but I suspect it's dubious(which sucks because they get the option to choose from multiples)
Housing stock in my area is old for the US and these 100 year old homes can range from exactly what you see in the pictures to dangerously obsolete or just bad. The charming woodwork and hardwood floors photograph well and then IRL they areslanted, broken, there's mysterious smells, and the basement is a disaster zone.
Theres also just the issue of, I'm not trying to fall in love with "the perfect house". I will make it a home and update, and paint, and replace cabinets and plant gardens, I know I can make it my own. But I also plan on living here and raising a family for the next few years and there dealbreakers. It's a lot like taking a car for a test drive before buying it. You dont really know how it feels to drive or how enjoyable it is or how comfortable it is, or how the plastics on the dash feel until you actually get inside of it.
But yeah otherwise I will never waive inspection.
Also offers are all accepted at the same time
That is rarely the case, and the only real reason to wait in a seller's market.
and in my state you have to sign some formal paperwork to make a deal. This implies a covenant of good faith, so I dont really know the legality of singing and sending out a bunch at once
The "legality" of doing it is explicitly defined in the offer. The offer you made to the seller explicitly includes the right to withdraw from the deal if it doesn't meet your expectations. That is the express purpose for the contingencies.
There is potentially an ethical issue, if this negotiation strategy is so far out of the norm that it is completely unexpected, unreasonable, and causes some sort of harm to the seller.
But, I would argue that this practice benefits the seller, in that they can actually consider your higher offer, rather than accepting a lower, earlier offer while you're still waiting for your viewing appointment.
Even if you decide not to move forward, it is typical in a seller's market to receive numerous "backup" offers; they can proceed with another offer as soon as you back out.
In a seller's market, and assuming you aren't introducing unnecessary delays, I wouldn't call this unethical. It's simply negotiation.
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Its not even firms where Im from. A good chunk of the homes Im looking at were individual owned or occupied, I just think the realtors in the area have a nonaggression treaty to make as much money as possible. Obviously the supply cant be that big to start with if theyre doing this but the way these houses come and go is definitely convenient.
And the percentage of homes for sale is quite small compared to the total number of homes. So if investors are buying even a few percent of the homes, that can still be most of the homes that are for sale.
Realtors get paid when they sell a house, but it's only 2.5%-3.0% of the sale price. Getting someone to pay an extra 10% on a house nets them an additional 0.25%-0.3%, it's chump change to them. Selling a one million dollar home for $1.1 million nets them $27,500. Selling 2 one million dollar homes for $900k nets them $45,000.
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.
For another level of frustration, you are also competing with international buyers who may find your local market cheap investments. There are legit overseas organizations that advertises to rich people to buy real estate, they work with equally legit local real estate agents to gain access to these “easy” clients.
You the local resident is disadvantaged as are the local real estate agents. But it’s great for these overseas client. But the end result is what you see, rising housing prices that doesn’t make sense to local residents
Thankfully my rusty area isnt on their radar just yet. There are a lot of investment companies and of course absentee wannabee landlords from NYC/long island who buy up properties around here though.
This is one of the main issues with all new builds in London.
There's plenty of places going up but they're all being sold to overseas investors as buy to let and do it keeps making rents exorbitant for locals.
Yeah I bought a house 5 years ago and Zillow says it’s worth $100k more now. If I was looking for a home right now I couldn’t afford the one I’m living in. In the last 5 years I make $35k more than I did then but it still wouldn’t be enough to buy this house.
Back when I bought my house is was considered aggressive to offer their full asking price, which is what I did.
The whole system is beyond broken at this point.
Yeah, it's fucking depressing. At least you guys still have reasonably priced houses. House values have tripled here in the last decade. Some areas have doubled just in the last 2 years. Owners are sitting on $700,000.00+ in equity. Rental owners are making an entire average income just because they happened to buy a house before we entered the bizarro timeline. My landlord owns 3 houses, 2 that she's renting. She's getting about $70,000 per year in equity from renters. Her mortgages are under $12,000 per year on each house. It must be nice to be just a few years older, or have become stable in your career just a few years earlier, and get rewarded with two million fucking dollars in make-believe house money. What's even more frustrating is knowing this is an unsustainable bubble that will eventually come crashing down. We've been taking it easy for a few years hoping some sanity would return to the market, but it just keeps going up. So that's a constant fear while looking, that it'll all come crashing down right after we finally buy something, and we'll be left holding the bag while the wealthy go find some other market to plunder.
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.
People have been saying this for decades though
Houses that I bid $30,000 over asking price and someone still swooped in and bid even more.
Asking price is such a lie. But also keep in mind that it's not just about price, it's also about contingencies. Hyperbole but if I have 2 offers, one is $450k all cash no inspection, and the other is $550k contingent on their cat liking it, I know which I'm going with. That being said DO NOT waive the inspection. Unless you're a contractor who can handle anything that goes wrong, you don't want to risk it. You could get a great house, or you could buy a money pit.
It's crazy, I got my offer accepted because their realtor liked my realtor better than the others. They talked to my realtor on the side, said they had another offer for 4% more than ours but didn't like the other realtor and if we met it they'd accept with no counter.
Only contingency I offer is inspection and I'd rather spend an eternity looking than risk not having an inspection done. I'm handier than average, but there are some construction/contractor level things that I am just not capable of handling. Thankfully the number of people waiving inspections has dropped quite a bit, but theyre still out there ruining it for the rest of us.
I just went through this over the 3 years of the pandemic. Saw maybe 250 houses. Put bids on at least 8. It’s absolutely insane and I can’t see how it can continue.
Unfortunately covid taught the real estate industry in my historically undervalued area how to game the system. Its hard to complain because even "overpaying" these houses are less than some other regions in the sate, but they definitely know how to make it a frantic process that takes away all power from the people buying.
Im certain theyre drip feeding the supply too in order to make the supply even more limited.
In a seller's market, you have to reverse the process. Instead of viewing a dozen houses then bidding on the one you fell in love with, you want to put in a dozen offers, then view only those homes where the seller accepts or counters.
Your offers should include a 10-day inspection contingency. This is where you actually view the home. If you don't fall in love with it in that 10-day period, you exercise your contingency and either renegotiate a counter offer or walk away.
I’m not sure what market you’re in or what your budget is, but the pains that you’re talking about (other than the actual price of the houses) can be mitigated by working with a competent realtor. You want someone who both knows that particular market and also knows how to identify comparable sales. That means knowing the neighborhoods you’re looking at as well as prices and trends.
I’m not a realtor, but I did buy a house fairly recently in an extremely hot market. People here will bid $300k over asking and waive all contingencies. That’s just the nature of the market right now - at least in some areas.
Basically, look at the asking price but use something like redfin or zillow to get their estimation of what the selling price of the house will be. The sites will also (try) to show you comparable houses. The sites tend to err on the high side with estimated values, but if you’re not in a market that’s open to bargain hunters it will be close.
It’s a big step - probably bigger than it should be. I believe that the majority of American families have the majority of their net worth invested in their house.
Closed bidding is how it’s always worked, though. Generally, the people selling the house will pick the top two or three offers and make a counter-offer or otherwise solicit additional offers. When a market is hot, they can additionally push for a quick closing. As a rule of thumb, you’ll probably spend less for houses that have been on the market for a while, but you can likely expect the same kind of issue when it comes time to sell it. If you buy in a desirable market where houses sell within a few weeks, you’ll again probably see that kind of thing when you sell. Bargain hunting in real estate - waiting for the chance to get a smart offer approved - can lead to you being frozen out - or worse, getting taken for a ride that more informed buyers are staying away from. It can be like buying stocks in that way, except with hundreds of thousands to millions on the line with a single investment.
Anyway, find a realtor you can trust - possibly through a referral. Ask around at work or something if none of your friends has someone. It makes the process a lot smoother. This depends on the state, but the seller may pay the realtor’s commission, and in any case should be considered part of the cost of buying a house.
Ya know....
Around a decade ago, I picked up my house for around 110k USD. Nothing fancy, a nice little house, with a decent amount of room inside and outside.
These days, the exact same house is worth over double that. Supposedly, its worth 200k.
Now, that sounds absolutely fantastic, except for- the process to build my dream house, went from costing 200k, to nearly 500k now.
Guess, i'll be stuck in my now tiny house (kids. lots of kids).... until the damn housing market returns to somewhat normal.
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.
Lol, interest is 4% now
Nah it’s 7% now.
https://www.mortgagenewsdaily.com/mortgage-rates
Absolutely bonkers. I refinanced at 2.5%, but the rate now would nearly double my monthly payment.
Didn’t realize it came down so much. Last I saw it was close to 7
I don't know where you are looking but this does not represent the majority housing market in the US right now. Demand and prices are cooling off.
Meanwhile, Biden brags about how great the economy is doing, and his upcoming election opponent is even worse. When the hell is America going to elect someone competent to sit in that chair?
Been there. Lived in So Cal and knew a guy who bought a house for 200k turn around 6 months later and his neighbor sold (nearly identical house) for $500k. He got lucky and bought in a neighborhood that got "popular".
My wife and I were DINKs and realized that we would still never afford a house there, so I let them keep their houses, changed careers, and bought a house in a quieter place on the other side of the country (well, moved, rented for a couple years, and then bought). Took a 40% reduction in salary to do it. Still worth it.
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I hear you, it is a nightmare. I bought my first home earlier this year and ended up moving an hour outside of the city. Paid less than half what I would have paid, don't have to worry about crime, and everyone is generally more chilled out.
Half of what you describe was the same even before the pandemic, this real estate bubble just made everything worst !
It's true but my area was historically undervalued and behind when it came to pricing. The most frustrating thing in the world is looking at houses in a desirable neighborhood that would have been my first choice to live in that I know went for like $150k in 2016 going for $300+ today.
Same. What a time to be alive. Not to mention what the next generation is going to have to put up with.
Shit’s crazy. My house is worth >50% more than I bought it for in 2016, when I overbid by $100K.
Try florida where the mandatory insurance costs as much as the mortgage, plus you still have to replace the roof or they won’t pay anything
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
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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.
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Conduct regular, proper preventative maintenance to head off problems before they get bad.
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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?
I do think it is an effective hedge against increased cost of living in your particular area, and swapping that out for other risks such as natural disaster, long term climate and political disaster, and increases in interest or insurance costs, but I don’t think most people see it that way from a financial perspective.
From a market average perspective, your earnings in the market will far outweigh normal increases in rental cost in the long term. Property tax, insurance, and cost of home maintenance are also going to increase as cost of living increases.
I do 100% agree there is a psychological benefit to home ownership that might even extend to the foundation of American middle-class democratic values.
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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.
You realize that renters also pay for those things via rent, right? Landlords are not charities.
Not sure how that changes my argument.
If you look at the rental market in the United States, it’s cheaper to rent than it is to own if you take into consideration the opportunity cost of money when it is not invested in the higher growth equities market from a purely financial perspective.
Farming isn’t a charity either but it’s usually more efficient for people to not work as farmers tilling their own land.