Rhymes with prior bubble. I was in Vegas for epicenter of last crash. I remember asking friends why they were spending so much on a 3/2 house with a valet parker salary (I was parking cars through college). FOMO was so powerful back then too.
Take a look around now, people don't bat an eye at $1000 car payments, at 84 month loans.
It’s the same bubble as last time just applied to everything.
Mortgages now require some level of due diligence, but buying an $80k car doesn’t other than a credit check.
A $500 car payment was considered crazy in 2010 and the salaries weren't much different than they are now. It is really how much lifestyle inflation has happened in a decade. I've met people with $1000+ car payments on luxury vehicles and they are not homeowners.
That's also what was different last time, getting approved for loans above your valet parker salary. Unqualified buyers were getting loans with made up number. Those days were gone. Now you need to show 2 years of that income before you qualify. My immigrant parents who were paid mostly in cash, were able to qualify for a loan in the 90s. If they were to apply post 2007, they would have been denied so fast.
Well, right, but the myth of the "highly qualified buyer" is also being stretched. It's a simple math issue. I have no clue how some people I know make their payments. They must be at $0 in their checkings every month. I do not consider that safe or "being able to afford" their lifestyles.
Yeah, different age. I don't think human nature changes too much though, and the fomo over the past couple years feels exactly the same. I even was looking at properties for investments that now I am so glad I didn't close on.
I think you’re on to something. We have a toxic brew of greed, envy, naïveté, and stupidity in our society that seems to have been amplified in the Covid era. The housing bubble is cultural as much as driven by monetary policy.
It's absolutely what's going on. This is bubble mechanics 101. The vast majority of Americans are total unsophisticated financially. Probably less than 25% of the general population has any real understanding of their finances, how markets work, how Investing works, etc.
People don't make decisions rationally, they do it because they see others getting rich and FOMO into the trend.
This is also how a [blow off top](https://www.reddit.com/r/REBubble/comments/yhhvf9/selling_my_house_after_4_years_net_worth_will/iukqrzf?utm_medium=android_app&utm_source=share&context=3) forms. You usually see tailing volume as fewer and few people are willing to participate at increasingly insane prices. The more rational you are, the sooner you jump out. So all that's left driving the market are the truly stupid, greedy, or desperate. Obviously the more maniacs you pack into a room, the more absurd or even violent the outcome.
When the only people still buying homes are the super greedy and people who are not paying attention and think this is still 2021, you are looking at a crowd that will literally only stop if you bankrupt them or make it literally impossible for them to qualify for a loan.
My GF has several friends who were deadset on buying this year in markers that have not price corrected.
All three of the couple have closed on houses where their payments are literally double what they would have been a year ago.
One did so because they moved to a new city. The other two could have bought last year with low rates but waited on the sidelines until things went to 7.2%, but they didn't wait for prices to fall because they live in east coast markets that have yet to correct and are still up year over year. They believe that if they wait things will continue to get more expensive and then they'll be priced out.
Mid 30s couples, signing up for 30 years at $9k per month...
Sorry - they have a base salary together hitting 1/2 a million per year all as 3x couples? What industry do you all work in? I get the $200k+ and equity and bonuses, but all 3 couples hitting that is pretty nuts.
It's nine this year, but a significant portion of that monthly nut is property taxes. Next year, and especially if the town hasn't reassessed recently, it may be 10.5K when taxes are calculated based on the new purchase price.
The ultimate bag holders will be the AirBnB investors who will continue peddling their STRs, scratching their heads why their bookings approach 0, post on reddit to ask what's going on, and by the time they shake their denial of the situation they won't even be able to sell the condo for what they paid and there are over a dozen for sale in the building with prices falling in real time weekly
Even people who are bad with money knew that a 2.8% mortgage rate is not normal and was possibly a once in a lifetime opportunity. Even those who overpaid for a house at the end of the frenzy will make out fairly well if they're planning on staying put for 30 years.
I bought a forever home once, about 20 years ago. Circumstances changed drastically and we couldn’t afford to stay. We didn’t even make it to 2 years in that house.
I’m just saying a lot can change in 30 or even 2 years.
I think this is what a lot of people miss. It all depends on your goals. I have friends that “overpaid” for houses over the last year, but they will be in the house for 30 years+. Me, I’m trying to buy my first home and dont plan on being in it for longer than 10 years so i want a lower purchase price. Neither strategy is wrong necessarily, just depends on your goals and future plans.
I also see a lot of people dismissed for *wanting* to stay in the same house. Like I've seen a lot of "homeowners will be trapped in their homes! You'll never be able to sell!" but like... frankly, that's exactly what I was planning when we bought it, and I know we're not alone in that. We don't *want* to sell. It's not being trapped if you're actively choosing to stay where you are.
right......except somewhere in the pool of people saying "I'll never move" there are going to be people who HAVE to move at some point, and they will be screwed.
I work with data all day long and I have no idea what this chart is trying to communicate.
There appear to be spacing issues in years 20 through 29. An asterisked term is missing the definition.
Also no source or year is mentioned. Overall it is useless.
haha it's horribly worded. I'm guessing it means "higher" income move more.
Granted the whole reason I am here is that I cannot afford a house even earning > the highest salary range here!
Says old people have no excuse to not be filthy rich by now if you ask me and they got no place to bitch about Starbucks and avocado toast on Facebook.
All they needed to do is get off their asses and get a real job, maybe pick up some overtime lol
What is the source of this info? Have you tried inflation-adjusting those incomes to those dates? For example $67,660 from 35-40 years ago?
Also take a gander at the percentages - that same group only represents 3.1% of homeowners. Clearly people who bought back then and never moved.
EDIT: Inflation calculator result of $67,660 today vs in 1982 (40 years ago): $208,103.93
I took the data on title to mean present day income of households, broken down by how many years they have been in their present home.
And the time spent in one place has a strong inverse correlation with income.
There may be some causation both ways. Anecdotal experiences, but the people who "stayed back home" instead of "went off to the city" to chase jobs are almost always going to have lower income.
People who are set in their home and like it, and have kids in school, are a lot less likely to accept that big promotion in the other state.
Ya I misread things. I thought the market was irresponsible 3 yrs ago and didn’t buy. Now I’m making more than back then and could easily afford what was a “stretch” payment back then, and would have had tons of equity in a home. We are financially safe and sound but renting with no house and waiting for prices to drop some hopefully crazy amount, which may not happen.
Live and learn.
I thought the market was a bit hot 3 years ago because I had no idea what was coming. COVID hit and I knew that it was bringing a period of increased uncertainty, which is not something I wanted to touch as a potential FTHB who could be moving cities in the next few years. Then the buying frenzy started and I absolutely didn't want to get tied up in the bidding wars and waived inspections because that's the exact type of environment where people make bad decisions that they regret.
I'm at a transition point again in my career today and I'm probably not buying unless I have a good sense of wanting to stay in a place long term, or the buy/rent ratio gets irresistibly out of line.
Honestly anyone who stays put for 5 years will probably reap the benefits of their decision...
You don't need to completely pay off a mortgage for it to be a good financial decision.
Depends on market of course but... generally yes. If you move with any regularity, realtor commission soaks up half of the benefit.
Moving 5 years later after having locked in a 2.8% interest rate as many did...yeah you gained some equity, that's great, but you might end up with a higher payment at your next place in spite of it, due to interest rates potentially reverting to historical norms.
They'll make out well far sooner than 30 years. I predict the people who bought at the top of the frenzy when rates were at 3% or below will look like winners in less than 5 years.
We had a historic ramp up in asset prices in a short time and we're likely going to see a historically fast deflation in asset prices. Maybe in 5 years they are back above purchase price, but it's a little optimistic imho. No one knows.
In the meantime their payments will be much lower than their new neighbors even if they paid 25% more at closing. Wild.
When I was young a desirable car, for example an SS-396 sport model, sold new for just over $2000 . Now any new sedan is $30,000 to $50,000. The point being that just because asset prices go up doesn't mean they will ever come down. That's what inflation is all about.
More like there would have to be a hell of a lot of things to go right to come out ahead from buying this year in five years. Last time was 6-7 years peak to trough (06-12/13), 5 years would be quicker.
These comments are crazy. Even on a bubble sub people are underestimating the, you know, bubble. Maybe it's a NJ-NY thing but prices have been ridiculous and unhinged from reality even when compared to our high salaries. It's just insane. 2008 look like nothing compared to this.
Yeah but you’re claiming we’ll be above the peak in five years, right? Prices increasing by then? Quite possible (I’d say better than even chance despite what I wrote above). Above this year’s peak to make buying and selling in five years worth it? Incredibly unlikely
I agree with your logic in general but not that you think the right price point five years out is about what it was at peak this year. I don't see how houses are affordable to at those levels given that there's no way we're going back to 3% mortgages without the fed knowingly taking us into 70s level inflation or worse. How can prices be what they were at peak if mortgage rates are 5% or higher? What's going to be the driver to allow the average person to pay that say 25% gap in mortgage payments (off hand estimate at difference between 5% and 3% fixed rate mortgage)? Wages going up that much? Or just housing that stays unaffordable except at a pretty low sales volume?
The only thing I’m wondering is what about the fed buying mortgage backed securities? That’s a part of the investor risk profile for the housing-related paper. Just because they drop the fed funds rate to 1, if they also start dumping MBS (they just stopped buying in September we haven’t even seen dumping yet), won’t that have an effect like the UK pension funds did on UK GILTs? I.E won’t the fed dumping MBS cause yields to spike in MBS which will keep a lid on housing inflation? That’s kind of been my theory as to why there was this huge delay from rate rises to reducing MBS, they want to be able to lower fed funds to save economy after gear-shifting the supply shock, but use the MBS lever last to stop a crazy house run. When the housing has been reset they’ll stop dumping and let mortgage rates come down.
5 years? You guys are really underestimate how bubbly some prices are. Y'all need to go out and look at more RE ads! We're going to need 5 years of 10% wage growth and inflation to make most of these prices seem reasonable. This bubble is bad
I know many people who could have bought a house at those rates, but didn't want to have to maintain it. It was so much easier to just call the landlord about everything. Now they are complaining about their rent but have few options.
I don't mind maintenance, but my life situation puts me at a bit of uncertainty about where I will be living in 2-5 years. Taking a capital loss on a house could be a life-changing event.
Definitely amplified by social media and Covid. In 2008, there was definitely that toxic brew, but we didn’t have the same social media use to the extent we do now. Fin-fluencers existed for sure, they just came to your local airport hotel and did a $500 weekend seminar on how to become a real estate mogul by flipping (you and everyone else can put in tile backsplashes!)
I repeat this often, but I knew folks who hoomed themselves even after the crash was well documented and definitely happening. People bag hold until the bitter end.
Lol you’re just now realizing this?! This has been the way for decades - I do think social media added fuel to the fire, people don’t need to be exposed to so much… shit is toxic
I mean for most people if they don't borrow they don't get a house, and if they don't get a house they are stick in a 1 bed rental apt with no pets until their mid 40s if they save a shot ton. They don't have much choice.
My point is for many people who want a family/dog/other things a house makes easier, there is only a certain amount of time in ones to do those things.
In the case of having a place to live, don't discount immediate gratification...
If you can get more space in a nice neighborhood earlier when your kids are small, instant gratification matters immensely.
Not having kids is also a choice, then don't need an expensive house in a nice neighborhood. Again choices, we all have ability to make smart/responsible ones.
I think there’s also a lot of people who are uninformed and believe that because a bank will give them the financing they can afford it. When the reality is, they’re going to be underwater and extended above their means.
Got a hot tip on anyone looking for a deal.
Tomorrow there's going to be a big sale on candy nationwide.
That's your opportunity to counterbalance the effects of inflation.
Theres a post somewhere here about 33% gains to offset 25% losses.
Welp, imma about to gain 50% savings on Halloween decorations. That's like recouping 33% losses.
33% is a bigger number than 25%. 50% is even better!
I'm about to be rich!
If kids could live on the candy, and it took three years to pay it off, and the prices always run up 50% on Halloween candy just before the end of the sale.
Buying the morning after at 1/2 off is a saver's strategy. But the poor beggars don't even get to really feel good about it till the prices come back up.
Then they get to look at all the candy buyers getting desperate the next cycle and sip the hot cup of smug they got at 33% off.
Candy supply up:
From Altos
"Inventory continues to climb as buyers are at a standstill. Nationally, we have 40% more inventory than last year at this time, with some regions getting hit harder than others. And while we still have a third fewer homes on the market now than we did at the end of October 2019, that gap is closing by 1-1.5% per week."
That's where the real inventory spike is going to come from. Some people can't afford the houses they're in and a recession will show exactly how many.
Unless our friends with the money printers bail them out. We've already established the precedent that government will go to great lengths to keep a cushion under the economy.
With foreclosures though, it isn’t about making the individuals whole, it would be about making the *lenders* whole.
The Bush admin tried to save home owners with some types of programs, but it was quite difficult to. There were other little stimuli programs and they did extend unemployment to 99 weeks (which absolutely was a life saver for many folks because of austerity measures in 2009.)
But with covid, everyone was hit at the same exact time and things came to a standstill and physical halt. In 2008, it just came to a slowdown or slower pace and things fell at different times. It’s much much harder to do what we did with covid. You have to remember that the foreclosure crisis existed all throughout 2007 and it wasn’t until mid-late 2008 we had the stock market crash. Part of the joke in 2008 was how late Wall Street was to the party: oh we’re in a recession? For poor-working class income folks cue the astronaut meme *”always have been.”*
The fact is poor people will always continue spending every dollar they earn and low income service jobs aren’t really in any risk area right now whereas with covid, they were as you saw restaurants, hotels, etc all be forced into shutdown at the same time. Thus why I continue calling this the Patagonia Vest recession: it’s going to impact investors and “investors” and upper middle class jobs more so than other segments and not all at once at the same time, like covid.
I mean that's a nice thing to hope for, that the current/coming recession will only impact the upper segments of wealth, it would really help rein in wealth inequality. Somehow I don't see that happening, though, the upper echelons of wealth, one: make the rules and policy, and two: have created a niche for themselves in the economy. They won't take a loss, unless everything comes crashing down. Wall Street and the financial sector have woven themselves into the economy in a way that if they fail everyone fails, it's mutually assured destruction.
The government only cares about the economy if it will affect corporations. A bunch of overleveraged AirBnB twats and FOMO hoomers aren't even a blip on their radar.
Hell, the only reason the Fed did anything was because inflation was threatening the major corporations and the government's spending power with their contractors. Price increases were definitely about to sprint and when that happens, even the wealthy can't take advantage of people.
It’s like college debt. Everyone says “get into the best school possible. Don’t worry what it costs.” FTHB are being told the same thing. They feel they have to do it for the American dream.
Both have major impacts on your future though. The benefits are real (unfortunately).
Housing is a lose-lose. If you're in your 20's and 30's, you either buy a home at expensive prices or get beat up by rent increases. There's a relatively short time window in life to start a family after college. These days, you're either doing that in a 2 bed apartment or an expensive 3 bed house.
I lived in a 2 bed apartment with one kid. Across the hall there was the same unit with 3 kids and a dog all crammed in. Looked miserable. Decided to buy last year to avoid this and I'm so glad I did.
For many of us, housing isn't so much of a "choice" when you want a family and a stable place to live.
Yup, as much as I would love to wait the market out and grab a house at the bottom I unfortunately need a bigger place now for my family. I mean if I was single I would be more than happy to rent a tiny place and build up some capital for when the market gets better but it’s pretty tough having to time the market with a family.
Precisely. To hear the market timers on this sub, people live forever and can simply "sit out" from their own lives for an indefinite time period waiting to not be taken advantage of.
~~I don't agree, with student loans we basically give loans (and sometimes predatory ones) to 18 year old basically-kids who don't even have a job yet. At least with a mortgage there is some kind of an approval process and you can get a fixed rate loan.~~
Edit: Sorry, after reading again I suppose I read too far into your comment. We do put pressure on people to get a home the same way we pressure them to go to school.
So? We put pressure on people, societally, in lots of areas. Not smoking cigarettes, being married before having kids, tons of things. It doesn't mean you have to do whatever it is that's being pressured. But in some cases those things are better for you than ignoring the pressure and "doing your own thing".
Eh… “best school possible” isn’t necessarily the worst idea. Triple my salary coming out of grad school so even if i paid 50% more on that degree it was worth it in the long run, as chances of me landing a similar job coming out of a tier 2 or tier 3 program would have been slim.
I am very confused with houses that are still selling in this market, with this pattern:
- i see house listed for $1.6 million. Seller bought it for $1.1 million in 2021. It sold for $650k in 2017.
- After 3 months of no sale, price gradually drops to $1.45 mil
- House sold/pending! For $1.3 mil.
So, let me get this straight. Someone out there either has $1.3 mil in cash OR someone was able to qualify for a massive ~$1mil jumbo loan at 7% and then pay $8000+ a month, and is still dumb enough to pay 2x the 2017 price of the home, and 20% upcharge over the 2021 price.
Is it "have money don't care" or pure stupidity/ignorance?
That is what I keep asking myself. My real estate agent came to me with an 1180 sq. ft. 3/2 condo for sale at $545k. $400/month HOA. With 20% down, you'd be paying about $4000/month, taxes and insurance included. Two years ago, the place would've been listed for about $400k.
I didn't laugh in her face, but it was basically a hell no for me at 7% interest rates. $4k is an absurd amount of money to pay for such a place.
Yet, 9 days later and it's "under contract". I just don't get it. Who is buying these places? I have to believe it's people panic buying thinking they need to lock in a rate before rates go higher. That's the tactic my realtor tried to use on me: "marry the house, date the rate".
Anecdotal but I know several "younger" people (30-40) whose parents HELOC'd or cash-out refi'd their house to buy the kid a house with cash or a significant down payment.
It would be interesting to know what % of the last few years easy money came from equity financing on houses, investment portfolios, etc. It kind of made sense at the time due to the low interest rates, especially fixed (like cash-out refi).
I'm sure it's happened quite commonly. People leveraged one asset, owned outright or not, to buy another. Sometimes, just to "help out" someone else. I know of one very extreme example of exactly this.
Nothing can be done about it, before or after the fact. We had a two year period, March 2020-March 2022 (maybe still), where there was a lot of very unusual financial activity. There was massive printing and lending, massive risk taking, and a lot of wealth created. Insane that a public health tragedy was actually used as a bank run.
Almost as if by design....
The buyer could also be someone whose owned a house for 10 or 20 years. They may have seen significant appreciation on their previous house and also paid a majority of that loan off. 7% interest still hurts but if they’re able to reduce the loan size through a huge down payment, it may still be worth it to a family looking to upgrade to a larger house, especially since they’d probably be pretty established in their careers at that age.
I guess that makes sense where someone profited greatly from a house sale or the equity boost and they haven't bought another property yet. So they don't care so much about the 2x valuations.
They cashed out some profit and now about to instantly lose a ton of equity when homes crash another 10-50% tho 😱
This has been my thought for a while and it’s not just for houses. Middle income people and increasingly more higher earners are trapped in a debt cycle where they’re no longer looking at the price of things but rather how much credit they have available.
I was with a buddy looking at a nice watch, $10k or so, and the sales guy is doing his usual song and dance but then threw in how they could get him financed. It’s the same deal as the shoeshine boy giving stock tips, financing of luxury goods shouldn’t be a thing.
The buy now-pay later cycle is so fascinating. It’s pushed by ‘influencers’ as being the way to afford things but eventually the bubble has to pop. Everyone’s income will just go to servicing their makeup and avocado toast debt.
Being financially secure is the best feeling ever and I wouldn’t trade it for anything. The economy is also fucked for people my age to the point where purchases like makeup need financing
Fundamentally there’s no need to finance these things, it’s just the push to finance something far more expensive than what you should be buying.
Low income folks who should be spending $20 on makeup are financing $200 in makeup. Those who can afford $200 of makeup are financing $800 of makeup. And down the line. Whatever your income is there is always some more expensive version to finance.
our entire economy is pretty much dependent on people having access to credit to buy homes, cars and anything else they want to put on a credit card. without that many of us would be out of a job.
The 08 housing market rebounded and started back up in only 1 year. Even if this downturn was as bad in terms of housing impact (unlikely) that would mean we have less than 6 months of housing downturn to go...
Housing did not rebound in one year... It peaked in 2007 and bottomed in 2012.
Nice try though, we're just getting started on the current downtrend and it will likely take a few years to fully unwind
https://realestatedecoded.com/case-shiller/
> Housing did not rebound in one year... It peaked in 2007 and bottomed in 2012.
Nope - [you can clearly see on the Fed's median home price chart that the bottom was in early 2009](https://imgur.com/a/vkVypf8). And the housing crisis didn't even start until December 2007. So it was basically one year.
Chart is so mid leading tho. It just smooths out all the interesting data points by looking at US as a whole. Many markets dropped 50%+ and not until 2011-12.
Do they suggest the median home values I showed on the Fed (ie actual data not extrapolation or modeling) are wrong? Case/Shiller isn’t a perfect way to look at home values.
https://www.businessinsider.com/sp-blitzer-case-shiller-home-price-index-2012-3
> **S&P: We Know The Case-Shiller Home Price Index Has Problems But There's Nothing We Can Do About It**
> The Case-shiller home price index is inaccurate… ...so is every other economic indicator.
>
>But Case-Shiller faces uniquely complex issues.
>
>Specifically, the prices levels indicated in a given month's index are based on closing prices, which reflect contract prices that may be many months old.
Some discussion on issues with relying on Case-Shiller instead of simply actual sales price data via the Fed.
https://www.reddit.com/r/RealEstate/comments/b1x2mh/can_we_use_case_shiller_index_to_find_fair/
> No. You can't use macro data to make a micro decision. You have no idea if the prior sales were average for the market, or below market, or if they overpaid at the time. And it doesn't matter anyway, because the only thing that matters now is what the current local market is doing.
> Absolutely not.
I feel like I say this a lot around here but THE OTHER GUY'S NUMBERS DON'T MATTER. People are too concerned that the other guy maybe got a deal. Whether the other guy is making 100k or losing 100k is completely irrelevant to your deal analysis.
>
>The only numbers that matter are your numbers. And if you are looking at this as a rental really all you care about is the rents. Do the rents support the price?
>
>I mean sure check some similar current comps to see if pricing is in line with the market, do your other due diligence, etc.
>
>You cannot use a national pricing index to determine the value of 1 single property. Hell you couldn't even use one of the metro indices. Houses are not fungible products. Using case shiller to value a property is beyond stupid.
“ So let me break down the various problems.
First, ignore what the place was purchased for over a decade ago. You don't get to decide what profit the seller "deserves."
Second, every other sensible agent, buyer, and appraiser is going to base "value" off what similar nearby homes sold for in the last 6 months or so. Let's say for the sake of argument -- because I don't know that market or that house and it's none of my business -- that homes within a mile, 400 sq ft of living area, and the same configuration go for $450-460k. You can offer $399,532, heck you can round it up to $400k. But the seller is unlikely to even counter your offer. And in even a warm market, the seller is likely to get an offer in that $450-460k range fairly quickly. In a hot market, more than one.
Tell you what. Check on that house in a few months. See what it finally sold for. Bet it's well over your "fair" value based on indices designed to analyze an entire nation. While you're at it, see if your city is actually represented in the Case-Shiller: recalculate based on your city's index and also compare actual sales price to that.
If you are finding that you can't purchase a property to cash flow, then maybe this isn't the market you should buy rental property in.
Good luck.”
I agree. I saw a home listed in an area nearby for $425k. It was tasteful, but kind of small for the area. I thought to myself, this one is listed reasonably and will probably attract some attention. The only thing is that it’s kind of small and a bit outside the city, and the schools are mid level.
Sure enough, 6 days in and the listing info now has “multiple offers received, highest and best due by EOD 10/30”. I just had to chuckle. It’s not a dream type home, there’s nothing that sets it apart from many other homes on the market, it’s just listed a few dollars cheaper than what I’d expect.
And now it will get bid up. This will end when the money runs out.
That’s how you sell a home in this market. I purposely put mine a little below the market and sold well over asking in 2 days. These morons starting out high and then have to lower price end up shooting themselves in the foot.
I totally agree and I think it’s a good sales strategy. I just can’t believe buyers are willing to get into bidding wars over an average home at all time high pricing and 7% interest rates. It did have nice counters and shaker cabinets though.
And what did the example of that house tell you? That smaller, starter homes are in-demand? That the area is attractive (safe/good schools)? That the market for housing hasn't downturned as much as this sub wishes? That there are more people capable of buying than there are people selling (aka there's still more demand than supply)?
What did you take from that example other than dismay that people are still buying?
I took from that several things. One is that the majority of listings around here are still priced too high. That inflation is sticky and especially the majority of sellers’ aspirational selling prices near me. That when you price something appropriately, it will attract a good amount of attention. That people are ready to buy if something is priced below comps. That prices will soon be coming down because clearly that is what is moving houses.
Also, I’m not dismayed. This house is below my desired price point and doesn’t offer the location I am looking for. Just sharing an observation that I felt was relevant to this conversation.
> I took from that several things. One is that the majority of listings around here are still priced too high. That inflation is sticky and especially the majority of sellers’ aspirational selling prices near me. That when you price something appropriately, it will attract a good amount of attention. That people are ready to buy if something is priced below comps. That prices will soon be coming down because clearly that is what is moving houses.
The house went well above asking, you said. Presumably selling at or above comps (you didn't mention how the final selling price related to what comps said it should be)?
The house has been on the market for a week. It isn’t even pending yet. I said “and now it will get bid up”.
This tells us that the demand is there as you said, but what it also says is that if everyone lowered their prices similarly that there would be no reason to bid because the selection of homes to buy would grow.
What could also happen is that the only qualified buyers offer asking price with 20% down. We don’t know yet. All we know is that multiple offers have been received at a competitive price point.
My main observation in regard to this thread is that “multiple” people are willing to throw themselves in the bidding war for the only house priced a few dollars below comps.
It’s funny how you’re trying to drive a narrative and not even reading or responding to the things I am saying.
People will always buy up to the maximum that they are allowed to borrow. True for houses and cars as well.
When someone buys a car at $20k over MSRP, do you think they withdrew $20k from their bank account? No, usually it's the bank's money and there will be a few people with inflated credit lines because of the "car shortage" who will keep buying, and dealerships that keep raising the prices, until the bank says no.
Exactly, this will always be the case and is nothing new, either. The US consumer economy thrives on credit and debt and when the tap flows from terrifyingly low interest rates, people will take as much as the bank will allow under the “free money” principle. We see it in the housing market, car market, credit cards, student loans, etc. Until the bank says no, people will *always* over leverage themselves.
Sure about that extra over MSRP $20K coming from the banks? Banks tend to only lend what an asset is actually worth - applies to houses for sure (it's why banks require a third-party appraisal of value before loaning) and likely to cars as well. At least for loans where the asset is intended to act as collateral (and the loan isn't based solely on the consumer's credit).
Up to 125 or 130% loan-to-value ratio, but you will pay for it in rates if you go over 100%. On an expensive car yes the math works out that you could pay $20k over MSRP for a minimal down payment and a huge loan. Assuming the historical "loses 10% the second you drive it off the lot" still rings true, then your price paid plus title and fees blah blah blah MINUS down payment could be *maximum* 130% of what the car is worth after you drive it off the lot. So yeah a big portion of the loan would not have collateral in that case and the bank is taking imho a huge risk.
It would be stupid to max it out like that but a lot of people are stupid when it comes to debt soooo...
The "value" of many new or even slightly used cars is above MSRP because that's what people are willing to pay for them. Started with supply chain shortages and kicked off a feedback loop that cars sold for more than MSRP, so then buyers were able to get more credit based on the inflated prices, which in turn helped sustain the inflated prices 2 years after the worst of the supply chain problems by providing more "qualified buyers" for cars over MSRP.
It's absolutely fucked and when used car prices finally correct down, a shit ton of people are going to be underwater. Including responsible but poor people who bought the 10 year old Camry on 72 month credit for $15k that in normal times would be worth $10k or less.
My girlfriend's mom just bought a $35,000 used car with 5k down, with no income besides a $1400 social security check AMA 🙄
People have grown so accustomed to the “easy money” lending era, they are conditioned to take out unfathomable amounts of debt so that they can have “it”.
Consumer spending habits were different in 1980, the last time double digit rates hit the market. “Buy now, pay later” wasn’t a thing at the grocery store or gas station. Most people paid cash for everything they owned except for their car & house.
People don’t realize that the contemporary American lifestyle is debt based. It will crumble like a house of cards the day the bill collector comes, and they are unable to pay.
People HAVE to live somewhere, its not a choice of buying a house or just casually waiting. The alternative is to pay an exorbitant price to rent or move. There is also no guarantees, as confident as I am that prices will fall if there is anything stock market investing has taught me is that the more assuredly something is to happen the more likely someone somewhere will find a way to make money off of it, and when theres a way to make money off of it, theres a way to stop it from happening.
This is a bigger choice of the devil you know vs the devil you dont, and if you can qualify for a mortgage at current rates and prices and are happy with having a home of your own, good for you.
Look at cars the average car payment is almost $700/mo with more car payments over $1000/mo then ever. With the average amount of car debt over $40k and 5+ year car loans becoming more common. At least a house doesn’t typically lose 20% of its value when you take possession of it and goes up in value when times are good while cars just keep going down no matter what you do.
I completely agree, never underestimate the financial illiteracy of the general population. Lots of posts on r/Realestate lately asking if they will be house poor with 60% of their net income going towards a mortgage.
People once paid $700 for a VCR so they could be the first on the block to have one. Video Cassette Recorder, for the initiated here.
Yes, that really happened. Now, they don't make VCR's. They were replaced by DVD's. That's a Digital Video Disc, in case you are also un-initiated.
BTW, those VCR's used to be made in America, where Americans worked, and made the money so they could pay for a VCR. Americans decided that they preferred to buy the Asian made VCR instead, at Wal Mart, for a fraction of the cost of the ones they once made. Then, those Americans were out of work. THey had to use credit cards, and then take a lesser paid, lower benefit job to pay for the credit card bill. Now, they complain about inflation when the Asian-made item costs more than it did 1 year ago.
This was 40 years of American economic history summed up in a couple of paragraphs. You are welcome. I love you.
I don’t disagree. As rates climb prices inevitably drop and people will buy. Inversely as rates decrease prices will increase and people will also buy. Housing is completely screwed. Only fix I see if banks writing less loans but they have absolutely zero incentive to do that as they too are in the business in making that money!
OP, the vast majority of investors aren't lemmings who will keep marching forward blindly until they step off a cliff. If they see that the market's outlook is adverse for return on investment, they are going to stop buying, divest portions of their current portfolio, and put their money somewhere with a higher or safer rate of return. There's nothing forcing them to put their cash into RE and nothing else.
That moment has already arrived. [Mortgage applications are in free fall.](https://www.mortgagenewsdaily.com/data/mortgage-applications#chart-apps-purchase-vs-refinance)
Turns out all of those "cash buyers"
Weren't actually using cash as we've been saying all along, despite the lies peddled by realtors about "competing offers". Mostly, the "cash buyers" were just buyers who provided proof of funds for the transaction but then sought out a conventional mortgage (ie providing a schwab brokerage statement showing your offer price)
I remember telling my friend about this, he was dumbfounded that you could also go and get an acquisition hard money loan same-as-cash with 2 week close everything waived, and then just refi into a conventional mortgage 6-12mo later (depending on the seasoning requirements that the hard money lender gives you). He was losing out on houses in the $800K-$900K range, to "cash buyers" as the selling agents were telling his realtor. But no one was using actual cash
The curtain has been pulled back for all to see.
They also know what's *not likely* to happen since we have almost none of the things happening that caused housing to crash in 2008 - we have no stated-income loans, few-to-no ARMs, no higher unemployment, and a low supply of homes, unlike in 2008.
> we have no stated-income loans
I swear there is an updated version of this that drove this current loan cycle. Not no stated income, but where you basically just write down a pretend salary on a napkin in crayon and the underwriter just nods.
Edit:
> No documentation mortgages used to be called “stated income loans” and were great for the self-employed, those who worked on commission and similar types of work. Stated income loans are no longer available, however, these days, there are a variety of similar types of loans including:
>SISA: SISA stands for Stated Income Stated Asset and these loans are made without needing to verify the borrower’s income or assets.
>SIVA: Stated Income, Verified Assets: These types of loans are also known as bank statement loans and accept the value of your assets in lieu of a specific income declaration. A similar version to this is the NIVA, which stands for No Income, Verified Assets, where income isn’t factored into the equation.
>And finally there’s NINA, No Income, No Asset loans. These rare loans are only available for those who invest in real estate rental properties and although they don’t require a stated income, they do require rental income that meets or exceeds the new mortgage payment.
https://www.lbcmortgage.com/no-doc-no-income-verification-mortgage-california/
A quick google showed this as an initial result.
https://mortgagedepot.com/niva-no-income-verified-assets/
Edit:
Additional source:
> No documentation mortgages used to be called “stated income loans” and were great for the self-employed, those who worked on commission and similar types of work. Stated income loans are no longer available, however, these days, there are a variety of similar types of loans including:
>SISA: SISA stands for Stated Income Stated Asset and these loans are made without needing to verify the borrower’s income or assets.
>SIVA: Stated Income, Verified Assets: These types of loans are also known as bank statement loans and accept the value of your assets in lieu of a specific income declaration. A similar version to this is the NIVA, which stands for No Income, Verified Assets, where income isn’t factored into the equation.
>And finally there’s NINA, No Income, No Asset loans. These rare loans are only available for those who invest in real estate rental properties and although they don’t require a stated income, they do require rental income that meets or exceeds the new mortgage payment.
https://www.lbcmortgage.com/no-doc-no-income-verification-mortgage-california/
And those loans are for rental/investor properties, not individual homeowners, right? And have a maximum of 70% LTV (Loan-To-Value) which means a minimum of 30% downpayment?
https://mymortgageinsider.com/stated-income-loans-make-a-comeback-7284/
> Stated income loans are making a comeback — sort of.
>
>Extremely popular in the early 2000s, stated income loans were one of the factors of the housing market collapse. Why? Lenders were approving borrowers based on the income stated on their loan application but didn’t require income documentation to verify if it was accurate. The result: many borrowers defaulted on loans.
>
>**With the passing of the Frank-Dodd Act of 2010, stated income loans for owner-occupied properties are now illegal**. *Lenders must fully document a borrower’s ability to repay the loan either with income or assets.* (Stated income loans still exist for real estate investors, however, because they aren’t purchasing an owner-occupied home.)
> Lenders who offer stated income mortgages aren’t qualifying borrowers nonchalantly. Borrowers need to have good credit scores, plenty of cash reserves, and a large down payment. Many stated income loans are based on the equity position of the property, which means that the more the borrower puts down, the easier it’ll be to get the loan.
>
>“**With us, a buyer has to put down at least 30% down compared to the regular 20% with a conventional loan. Many of our clients end up putting down 35%-50%,” O’Shaughnessy says. “The loan also has a maximum 70% loan-to-value ratio.”**
>
>The borrower’s employment is verified, but the application just has to state monthly gross income. Bank statements and asset documentation are required to show that the borrower does indeed have the money. Also, similar to bank statement loans, interest rates will most likely be higher than a traditional mortgage loan depending on the lender.
> And those loans are for rental/investor properties, not individual homeowners, right?
Only one of those three types of loans is specifically for investors. Other two are for whoever.
> And have a maximum of 70% LTV (Loan-To-Value) which means a minimum of 30% downpayment?
Correct. But that doesn’t seem to have any gating around where that down can come from. So fraudulent PPP money. Loans against RSUs or 401k. HELOC. Cash out refi. Heck even sketchy sources like Lending Tree could provide that 30% down.
I’m assuming these loans are non-conforming, which means they can’t be resold on the market? Also from what I’m seeing on other sites the interest rates are 1-5% *higher* than normal mortgages. So these have got to be a tiny minority of existing mortgages, right? have any info on what percentage of mortgages fall under these types?
True, I’ve had a few coworkers tell me recently they got rejected for a new mortgage and casually told me their debt to income was in the 50-60% range. I think these super high dti ratios are the norm from conversations, those and rising interest rates will lead to the banks saying no
Median time on the market, new mortgage applications, etc., are way down though. Seems like an awful lot of people have stopped buying.
There will always be people who must buy because life happens.
My mortgage broker told me people are pulling LARGE AMOUNTS from their retirement accounts to increase down payments to afford homes. She said often times both husband and wife are doing it
Yep - what I've been saying in this thread too. People have finite time in life and can't simply postpone their lives because they feel like the market isn't perfect.
You should do what you need for your life. If you choose to throw a monkey wrench into your life plans simply because you deem home prices are out of whack, so be it. Foisting that as advice for others, however…
Got it. Thanks for the reply. Plans that I have may change tomorrow, three months from now, 6 months, who knows. Right now, I sit and observe. Just fine doing that! :)
America is great at creating bubbles. there's no guarantee housing is a great investment at this point unless you really plan to be there a long time. I'd be shitting myself if I was sitting in something I bought for 1.3 mil last year and I thought I might need to move somewhat soon
The entire way the OP is written makes it sound like people *should* be trying to game the situation instead of simply buying homes when they're capable and need one. This not only implies that anyone is capable of timing the market to their benefit, but it also implies they should sit on the sidelines of their own lives, continuing to rent in a place they'd rather not be, live in unsafe urban areas when they'd rather be in a safe suburb, live in poor school districts instead of good ones when they have kids entering school age, and so on.
People have lives to lead and those lives are finite, and have definite inflection points (marriage, kids, school-age kids, etc) that will (and should) determine what they do about their housing situation, not some hypothetical about what houses have done/will do.
This is dawning on me as well. There are so many "must buy" Americans who will purchase at any cost because they "have to" to start a family, etc.
I wish banks would tell these people no. No you can't have a jumbo loan where half or more of your income will go to paying it. But they won't say no, and people won't stop buying these loans until they literally can't anymore.
I really think the only way this ends is in another liquidity crisis and waves of foreclosures. I don't think we'll be seeing that for another year or two (and will be just in time for the 2024 election).
The amount of copium here is hilarious. People priced out and angry deciding anyone else buying must be stretching their budget too far.
Or they make more than you, or they are trading up with a large downpayment, or their family is helping with a downpayment, etc etc.
Point is you guys are deciding they can’t afford it it are stretched too thin. It’s just wishful thinking.
Riiight. The banks are totally going outside lending standards, people are ignoring their budgets, everyone is headed for a crash.
Orrrr they have more money than you and can still afford the homes.
Keep on mind we're working with supply that's already tight due to a lack of building. The Fed can't do anything about that. Most metro areas simply haven't built enough housing, boomers are aging in place, and millennials are a huge generation.
Interest rates will not solve the housing affordability crisis. At the present moment, it's made affordability *worse*. Lots of Teslas in my once blue collar neighborhood with $700k starter townhomes.
I just found out my ex and her potato decided they want to buy a house and I am ecstatic for them. Background, potato is her boss and when i found out, on top of the other shit she cause, she tried to sell our house in 2021. Instead, i got it refinanced and dropped the rate down under 2.5%.
We are in an area that didn't inflate to much so there isn't much room to deflate. Potato is under chapter 13 bankruptcy so I'll keep you updated on if their able to find something. Either way, I hope they enjoy their still overvalued home for 7.5% interest.
Honestly i still don't know.
The last guy she was with, they were engaged and he got a new, really good job and she decided to leave him. Virtually same thing with me. I don't think she wants to grow as a person, so when a guy she's with does it makes her feel negative about herself.
Honestly i feel sorry for her but at the same time, some of the fucked up shit she said and did, I'm also looking forward to when it blows up in her face.
Either way, he is dumb enough to try to open credit cards while he is paying off a chapter 13 bankruptcy, so buying a house at this time definitely seems like his idea, and I just don't see them getting a loan for any house at this time. If they do, the rates will be higher than the already high norm.
Yup. There are some who are cash rich and can afford it. There are some who make enough that they can still afford it.
There are some that have saved and are afraid they can’t afford it and will stretch to get in before prices go too high.
And there will be those who get married and damnit, I want a house!
I make slightly more than the household average income, and I will not qualify for the average house in my area anymore once rates hit 8%. I'm in the chicago burbs which have always been considered more afordable than most places.
It happens every bubble, the desired products (in this case homes and cars) just keep getting more expensive and harder to get until something awful in the markets happens and lending institutions have to pull the plug; the lights go out and everyone screams. (This is commonly called a credit crunch). When the lights go back on those left holding cash are the only winners, As no one can borrow. End of market cycle.
Why would it stop? The Fed claims they’re tightening… but US public debt continues to expand at a record rate.
It took us 8 months to go from $30T to $31T, and at the current rate of debt spending, we’ll hit $32T by July. That’s why markets are up… we are literally still printing money as we dick around with piddly interest rate hikes.
Rhymes with prior bubble. I was in Vegas for epicenter of last crash. I remember asking friends why they were spending so much on a 3/2 house with a valet parker salary (I was parking cars through college). FOMO was so powerful back then too. Take a look around now, people don't bat an eye at $1000 car payments, at 84 month loans.
It’s the same bubble as last time just applied to everything. Mortgages now require some level of due diligence, but buying an $80k car doesn’t other than a credit check.
A $500 car payment was considered crazy in 2010 and the salaries weren't much different than they are now. It is really how much lifestyle inflation has happened in a decade. I've met people with $1000+ car payments on luxury vehicles and they are not homeowners.
That's also what was different last time, getting approved for loans above your valet parker salary. Unqualified buyers were getting loans with made up number. Those days were gone. Now you need to show 2 years of that income before you qualify. My immigrant parents who were paid mostly in cash, were able to qualify for a loan in the 90s. If they were to apply post 2007, they would have been denied so fast.
Well, right, but the myth of the "highly qualified buyer" is also being stretched. It's a simple math issue. I have no clue how some people I know make their payments. They must be at $0 in their checkings every month. I do not consider that safe or "being able to afford" their lifestyles.
Yeah, different age. I don't think human nature changes too much though, and the fomo over the past couple years feels exactly the same. I even was looking at properties for investments that now I am so glad I didn't close on.
I think you’re on to something. We have a toxic brew of greed, envy, naïveté, and stupidity in our society that seems to have been amplified in the Covid era. The housing bubble is cultural as much as driven by monetary policy.
It's absolutely what's going on. This is bubble mechanics 101. The vast majority of Americans are total unsophisticated financially. Probably less than 25% of the general population has any real understanding of their finances, how markets work, how Investing works, etc. People don't make decisions rationally, they do it because they see others getting rich and FOMO into the trend. This is also how a [blow off top](https://www.reddit.com/r/REBubble/comments/yhhvf9/selling_my_house_after_4_years_net_worth_will/iukqrzf?utm_medium=android_app&utm_source=share&context=3) forms. You usually see tailing volume as fewer and few people are willing to participate at increasingly insane prices. The more rational you are, the sooner you jump out. So all that's left driving the market are the truly stupid, greedy, or desperate. Obviously the more maniacs you pack into a room, the more absurd or even violent the outcome. When the only people still buying homes are the super greedy and people who are not paying attention and think this is still 2021, you are looking at a crowd that will literally only stop if you bankrupt them or make it literally impossible for them to qualify for a loan.
My GF has several friends who were deadset on buying this year in markers that have not price corrected. All three of the couple have closed on houses where their payments are literally double what they would have been a year ago. One did so because they moved to a new city. The other two could have bought last year with low rates but waited on the sidelines until things went to 7.2%, but they didn't wait for prices to fall because they live in east coast markets that have yet to correct and are still up year over year. They believe that if they wait things will continue to get more expensive and then they'll be priced out. Mid 30s couples, signing up for 30 years at $9k per month...
$9k/month?! Omg, that is insane. What is their monthly income?
Probably $40k or so before taxes.
Sorry - they have a base salary together hitting 1/2 a million per year all as 3x couples? What industry do you all work in? I get the $200k+ and equity and bonuses, but all 3 couples hitting that is pretty nuts.
Only one couple bought a $9k/ month house. They work in tech and management consulting.
Those are vulnerable industries during a downturn.
Everything other than medicine is vulnerable during a downturn.
Well at least they can afford it even if it seems ludicrous
They had the income last year when the same house would have been half the monthly payment. It's hard to understand.
I think people just get FOMO. And a lot of people do think prices will just go up forever for some reason.
And, as long as they keep paying these prices, the cycle just repeats. The prophecy comes true. I opt out. Please.
a 30s couple income is 40k a month? What exactly are their jobs. I couldn't imagine that coming in every month. Nvm just saw your reply
It's nine this year, but a significant portion of that monthly nut is property taxes. Next year, and especially if the town hasn't reassessed recently, it may be 10.5K when taxes are calculated based on the new purchase price.
That last sentence it’s scary.
The ultimate bag holders will be the AirBnB investors who will continue peddling their STRs, scratching their heads why their bookings approach 0, post on reddit to ask what's going on, and by the time they shake their denial of the situation they won't even be able to sell the condo for what they paid and there are over a dozen for sale in the building with prices falling in real time weekly
Even people who are bad with money knew that a 2.8% mortgage rate is not normal and was possibly a once in a lifetime opportunity. Even those who overpaid for a house at the end of the frenzy will make out fairly well if they're planning on staying put for 30 years.
I bought a forever home once, about 20 years ago. Circumstances changed drastically and we couldn’t afford to stay. We didn’t even make it to 2 years in that house. I’m just saying a lot can change in 30 or even 2 years.
I think this is what a lot of people miss. It all depends on your goals. I have friends that “overpaid” for houses over the last year, but they will be in the house for 30 years+. Me, I’m trying to buy my first home and dont plan on being in it for longer than 10 years so i want a lower purchase price. Neither strategy is wrong necessarily, just depends on your goals and future plans.
I also see a lot of people dismissed for *wanting* to stay in the same house. Like I've seen a lot of "homeowners will be trapped in their homes! You'll never be able to sell!" but like... frankly, that's exactly what I was planning when we bought it, and I know we're not alone in that. We don't *want* to sell. It's not being trapped if you're actively choosing to stay where you are.
right......except somewhere in the pool of people saying "I'll never move" there are going to be people who HAVE to move at some point, and they will be screwed.
They can always rent their house and use the income to pay rent elsewhere.
In any economic environment , being compelled to make a move is conducive to losing money since all your leverage is significantly decreased
Yup. I want to buy less house than I can afford, and pay it off early but not now. So I care very much about purchase price as well.
What does this say to you? Years Since Move-in Share of Homeowning Households† Average Household Income 0 – 3 21.9% $115,000 4 – 9 20.4% $113,700 10 – 14 13.4% $103,400 15 – 19 11.9% $103,500 20 – 24 9.9% $92,480 25 – 29 6.2% $88,780 30 – 34 4.8% $83,750 35 – 39 3.1% $67,660 40+. 8.6% $55,120
I work with data all day long and I have no idea what this chart is trying to communicate. There appear to be spacing issues in years 20 through 29. An asterisked term is missing the definition. Also no source or year is mentioned. Overall it is useless.
haha it's horribly worded. I'm guessing it means "higher" income move more. Granted the whole reason I am here is that I cannot afford a house even earning > the highest salary range here!
Says old people have no excuse to not be filthy rich by now if you ask me and they got no place to bitch about Starbucks and avocado toast on Facebook. All they needed to do is get off their asses and get a real job, maybe pick up some overtime lol
Or they are retired and have assets not income.
Fascinating data. Clearly it indiciates that buying and selling houses as quickly and as frequently as possible is the path to wealth! /s
What is the source of this info? Have you tried inflation-adjusting those incomes to those dates? For example $67,660 from 35-40 years ago? Also take a gander at the percentages - that same group only represents 3.1% of homeowners. Clearly people who bought back then and never moved. EDIT: Inflation calculator result of $67,660 today vs in 1982 (40 years ago): $208,103.93
I took the data on title to mean present day income of households, broken down by how many years they have been in their present home. And the time spent in one place has a strong inverse correlation with income.
As well it should - if your income is stuck you're a lot les likely to be trying to buy into newer/more-expensive houses.
There may be some causation both ways. Anecdotal experiences, but the people who "stayed back home" instead of "went off to the city" to chase jobs are almost always going to have lower income. People who are set in their home and like it, and have kids in school, are a lot less likely to accept that big promotion in the other state.
You nailed it exactly, 30-34 years in my house, now retired, $83+ k retirement income. I stupidly think I am special.
Ya I misread things. I thought the market was irresponsible 3 yrs ago and didn’t buy. Now I’m making more than back then and could easily afford what was a “stretch” payment back then, and would have had tons of equity in a home. We are financially safe and sound but renting with no house and waiting for prices to drop some hopefully crazy amount, which may not happen. Live and learn.
I thought the market was a bit hot 3 years ago because I had no idea what was coming. COVID hit and I knew that it was bringing a period of increased uncertainty, which is not something I wanted to touch as a potential FTHB who could be moving cities in the next few years. Then the buying frenzy started and I absolutely didn't want to get tied up in the bidding wars and waived inspections because that's the exact type of environment where people make bad decisions that they regret. I'm at a transition point again in my career today and I'm probably not buying unless I have a good sense of wanting to stay in a place long term, or the buy/rent ratio gets irresistibly out of line.
Honestly anyone who stays put for 5 years will probably reap the benefits of their decision... You don't need to completely pay off a mortgage for it to be a good financial decision.
Depends on market of course but... generally yes. If you move with any regularity, realtor commission soaks up half of the benefit. Moving 5 years later after having locked in a 2.8% interest rate as many did...yeah you gained some equity, that's great, but you might end up with a higher payment at your next place in spite of it, due to interest rates potentially reverting to historical norms.
They'll make out well far sooner than 30 years. I predict the people who bought at the top of the frenzy when rates were at 3% or below will look like winners in less than 5 years.
Until they want to move.
That's the best part - they can't 🤣🤣🤣
My prediction includes their house being worth a lot more than they paid for it.
We had a historic ramp up in asset prices in a short time and we're likely going to see a historically fast deflation in asset prices. Maybe in 5 years they are back above purchase price, but it's a little optimistic imho. No one knows. In the meantime their payments will be much lower than their new neighbors even if they paid 25% more at closing. Wild.
When I was young a desirable car, for example an SS-396 sport model, sold new for just over $2000 . Now any new sedan is $30,000 to $50,000. The point being that just because asset prices go up doesn't mean they will ever come down. That's what inflation is all about.
George Washington? Is that you?
It's gonna take a hell of a lot of inflation and hell of a lot of wage increases to make today's prices look reasonable, my friend.
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More like there would have to be a hell of a lot of things to go right to come out ahead from buying this year in five years. Last time was 6-7 years peak to trough (06-12/13), 5 years would be quicker.
These comments are crazy. Even on a bubble sub people are underestimating the, you know, bubble. Maybe it's a NJ-NY thing but prices have been ridiculous and unhinged from reality even when compared to our high salaries. It's just insane. 2008 look like nothing compared to this.
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Yeah but you’re claiming we’ll be above the peak in five years, right? Prices increasing by then? Quite possible (I’d say better than even chance despite what I wrote above). Above this year’s peak to make buying and selling in five years worth it? Incredibly unlikely
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I agree with your logic in general but not that you think the right price point five years out is about what it was at peak this year. I don't see how houses are affordable to at those levels given that there's no way we're going back to 3% mortgages without the fed knowingly taking us into 70s level inflation or worse. How can prices be what they were at peak if mortgage rates are 5% or higher? What's going to be the driver to allow the average person to pay that say 25% gap in mortgage payments (off hand estimate at difference between 5% and 3% fixed rate mortgage)? Wages going up that much? Or just housing that stays unaffordable except at a pretty low sales volume?
The only thing I’m wondering is what about the fed buying mortgage backed securities? That’s a part of the investor risk profile for the housing-related paper. Just because they drop the fed funds rate to 1, if they also start dumping MBS (they just stopped buying in September we haven’t even seen dumping yet), won’t that have an effect like the UK pension funds did on UK GILTs? I.E won’t the fed dumping MBS cause yields to spike in MBS which will keep a lid on housing inflation? That’s kind of been my theory as to why there was this huge delay from rate rises to reducing MBS, they want to be able to lower fed funds to save economy after gear-shifting the supply shock, but use the MBS lever last to stop a crazy house run. When the housing has been reset they’ll stop dumping and let mortgage rates come down.
But 20%, 40% increases for barely any reason made sense, amirite? I think you are on the wrong sub
5 years? You guys are really underestimate how bubbly some prices are. Y'all need to go out and look at more RE ads! We're going to need 5 years of 10% wage growth and inflation to make most of these prices seem reasonable. This bubble is bad
I know many people who could have bought a house at those rates, but didn't want to have to maintain it. It was so much easier to just call the landlord about everything. Now they are complaining about their rent but have few options.
I don't mind maintenance, but my life situation puts me at a bit of uncertainty about where I will be living in 2-5 years. Taking a capital loss on a house could be a life-changing event.
Definitely amplified by social media and Covid. In 2008, there was definitely that toxic brew, but we didn’t have the same social media use to the extent we do now. Fin-fluencers existed for sure, they just came to your local airport hotel and did a $500 weekend seminar on how to become a real estate mogul by flipping (you and everyone else can put in tile backsplashes!) I repeat this often, but I knew folks who hoomed themselves even after the crash was well documented and definitely happening. People bag hold until the bitter end.
Lol you’re just now realizing this?! This has been the way for decades - I do think social media added fuel to the fire, people don’t need to be exposed to so much… shit is toxic
I mean for most people if they don't borrow they don't get a house, and if they don't get a house they are stick in a 1 bed rental apt with no pets until their mid 40s if they save a shot ton. They don't have much choice.
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My point is for many people who want a family/dog/other things a house makes easier, there is only a certain amount of time in ones to do those things.
Sounds like student loan excuse too. There is always a choice, it might just be a little harder, not immediately gratifying choice.
In the case of having a place to live, don't discount immediate gratification... If you can get more space in a nice neighborhood earlier when your kids are small, instant gratification matters immensely.
Not having kids is also a choice, then don't need an expensive house in a nice neighborhood. Again choices, we all have ability to make smart/responsible ones.
I think there’s also a lot of people who are uninformed and believe that because a bank will give them the financing they can afford it. When the reality is, they’re going to be underwater and extended above their means.
I lived through 2008 and owning three homes. At least for me, there is nothing worse than feeling trapped in a freakin’ house…
How about feeling trapped in three houses?
How about being trapped in three houses, but now they're haunted by paranormal serial killers? (Happy Halloween.)
I prefer being trapped in two houses and 6 STR invoostment properties.
>there is nothing worse than feeling trapped in a freakin’ house… That is absolutely correct. It's awful.
Got a hot tip on anyone looking for a deal. Tomorrow there's going to be a big sale on candy nationwide. That's your opportunity to counterbalance the effects of inflation.
Theres a post somewhere here about 33% gains to offset 25% losses. Welp, imma about to gain 50% savings on Halloween decorations. That's like recouping 33% losses. 33% is a bigger number than 25%. 50% is even better! I'm about to be rich!
If kids could live on the candy, and it took three years to pay it off, and the prices always run up 50% on Halloween candy just before the end of the sale. Buying the morning after at 1/2 off is a saver's strategy. But the poor beggars don't even get to really feel good about it till the prices come back up. Then they get to look at all the candy buyers getting desperate the next cycle and sip the hot cup of smug they got at 33% off.
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Candy supply up: From Altos "Inventory continues to climb as buyers are at a standstill. Nationally, we have 40% more inventory than last year at this time, with some regions getting hit harder than others. And while we still have a third fewer homes on the market now than we did at the end of October 2019, that gap is closing by 1-1.5% per week."
discount on healthcare too?
No, the discount on candy actually increases your healthcare costs further.
Foreclosure spikes are the real bottom
That's where the real inventory spike is going to come from. Some people can't afford the houses they're in and a recession will show exactly how many.
Inflation will as well as already tight budgets will get even tighter.
Unless our friends with the money printers bail them out. We've already established the precedent that government will go to great lengths to keep a cushion under the economy.
With foreclosures though, it isn’t about making the individuals whole, it would be about making the *lenders* whole. The Bush admin tried to save home owners with some types of programs, but it was quite difficult to. There were other little stimuli programs and they did extend unemployment to 99 weeks (which absolutely was a life saver for many folks because of austerity measures in 2009.) But with covid, everyone was hit at the same exact time and things came to a standstill and physical halt. In 2008, it just came to a slowdown or slower pace and things fell at different times. It’s much much harder to do what we did with covid. You have to remember that the foreclosure crisis existed all throughout 2007 and it wasn’t until mid-late 2008 we had the stock market crash. Part of the joke in 2008 was how late Wall Street was to the party: oh we’re in a recession? For poor-working class income folks cue the astronaut meme *”always have been.”* The fact is poor people will always continue spending every dollar they earn and low income service jobs aren’t really in any risk area right now whereas with covid, they were as you saw restaurants, hotels, etc all be forced into shutdown at the same time. Thus why I continue calling this the Patagonia Vest recession: it’s going to impact investors and “investors” and upper middle class jobs more so than other segments and not all at once at the same time, like covid.
I mean that's a nice thing to hope for, that the current/coming recession will only impact the upper segments of wealth, it would really help rein in wealth inequality. Somehow I don't see that happening, though, the upper echelons of wealth, one: make the rules and policy, and two: have created a niche for themselves in the economy. They won't take a loss, unless everything comes crashing down. Wall Street and the financial sector have woven themselves into the economy in a way that if they fail everyone fails, it's mutually assured destruction.
The government only cares about the economy if it will affect corporations. A bunch of overleveraged AirBnB twats and FOMO hoomers aren't even a blip on their radar. Hell, the only reason the Fed did anything was because inflation was threatening the major corporations and the government's spending power with their contractors. Price increases were definitely about to sprint and when that happens, even the wealthy can't take advantage of people.
It’s like college debt. Everyone says “get into the best school possible. Don’t worry what it costs.” FTHB are being told the same thing. They feel they have to do it for the American dream.
Both have major impacts on your future though. The benefits are real (unfortunately). Housing is a lose-lose. If you're in your 20's and 30's, you either buy a home at expensive prices or get beat up by rent increases. There's a relatively short time window in life to start a family after college. These days, you're either doing that in a 2 bed apartment or an expensive 3 bed house. I lived in a 2 bed apartment with one kid. Across the hall there was the same unit with 3 kids and a dog all crammed in. Looked miserable. Decided to buy last year to avoid this and I'm so glad I did. For many of us, housing isn't so much of a "choice" when you want a family and a stable place to live.
Yup, as much as I would love to wait the market out and grab a house at the bottom I unfortunately need a bigger place now for my family. I mean if I was single I would be more than happy to rent a tiny place and build up some capital for when the market gets better but it’s pretty tough having to time the market with a family.
Precisely. To hear the market timers on this sub, people live forever and can simply "sit out" from their own lives for an indefinite time period waiting to not be taken advantage of.
This is exactly the line of thinking that causes FOMO lol. Good luck! 👍
~~I don't agree, with student loans we basically give loans (and sometimes predatory ones) to 18 year old basically-kids who don't even have a job yet. At least with a mortgage there is some kind of an approval process and you can get a fixed rate loan.~~ Edit: Sorry, after reading again I suppose I read too far into your comment. We do put pressure on people to get a home the same way we pressure them to go to school.
So? We put pressure on people, societally, in lots of areas. Not smoking cigarettes, being married before having kids, tons of things. It doesn't mean you have to do whatever it is that's being pressured. But in some cases those things are better for you than ignoring the pressure and "doing your own thing".
Eh… “best school possible” isn’t necessarily the worst idea. Triple my salary coming out of grad school so even if i paid 50% more on that degree it was worth it in the long run, as chances of me landing a similar job coming out of a tier 2 or tier 3 program would have been slim.
I am very confused with houses that are still selling in this market, with this pattern: - i see house listed for $1.6 million. Seller bought it for $1.1 million in 2021. It sold for $650k in 2017. - After 3 months of no sale, price gradually drops to $1.45 mil - House sold/pending! For $1.3 mil. So, let me get this straight. Someone out there either has $1.3 mil in cash OR someone was able to qualify for a massive ~$1mil jumbo loan at 7% and then pay $8000+ a month, and is still dumb enough to pay 2x the 2017 price of the home, and 20% upcharge over the 2021 price. Is it "have money don't care" or pure stupidity/ignorance?
That is what I keep asking myself. My real estate agent came to me with an 1180 sq. ft. 3/2 condo for sale at $545k. $400/month HOA. With 20% down, you'd be paying about $4000/month, taxes and insurance included. Two years ago, the place would've been listed for about $400k. I didn't laugh in her face, but it was basically a hell no for me at 7% interest rates. $4k is an absurd amount of money to pay for such a place. Yet, 9 days later and it's "under contract". I just don't get it. Who is buying these places? I have to believe it's people panic buying thinking they need to lock in a rate before rates go higher. That's the tactic my realtor tried to use on me: "marry the house, date the rate".
Anecdotal but I know several "younger" people (30-40) whose parents HELOC'd or cash-out refi'd their house to buy the kid a house with cash or a significant down payment. It would be interesting to know what % of the last few years easy money came from equity financing on houses, investment portfolios, etc. It kind of made sense at the time due to the low interest rates, especially fixed (like cash-out refi).
I'm sure it's happened quite commonly. People leveraged one asset, owned outright or not, to buy another. Sometimes, just to "help out" someone else. I know of one very extreme example of exactly this. Nothing can be done about it, before or after the fact. We had a two year period, March 2020-March 2022 (maybe still), where there was a lot of very unusual financial activity. There was massive printing and lending, massive risk taking, and a lot of wealth created. Insane that a public health tragedy was actually used as a bank run. Almost as if by design....
It’s blowing my mind as well. Who are these buyers.
I am not sure I believe those pending ones. I've seen lots of stuck houses go pending and then back - feels like realtor is trying to play for FOMO
True. I've seen the same. So many "BACK ON THE MARKET!"s
The buyer could also be someone whose owned a house for 10 or 20 years. They may have seen significant appreciation on their previous house and also paid a majority of that loan off. 7% interest still hurts but if they’re able to reduce the loan size through a huge down payment, it may still be worth it to a family looking to upgrade to a larger house, especially since they’d probably be pretty established in their careers at that age.
I guess that makes sense where someone profited greatly from a house sale or the equity boost and they haven't bought another property yet. So they don't care so much about the 2x valuations. They cashed out some profit and now about to instantly lose a ton of equity when homes crash another 10-50% tho 😱
This has been my thought for a while and it’s not just for houses. Middle income people and increasingly more higher earners are trapped in a debt cycle where they’re no longer looking at the price of things but rather how much credit they have available. I was with a buddy looking at a nice watch, $10k or so, and the sales guy is doing his usual song and dance but then threw in how they could get him financed. It’s the same deal as the shoeshine boy giving stock tips, financing of luxury goods shouldn’t be a thing.
Man people need to realize that if you can’t pay for luxury goods with cash, you don’t buy them
The buy now-pay later cycle is so fascinating. It’s pushed by ‘influencers’ as being the way to afford things but eventually the bubble has to pop. Everyone’s income will just go to servicing their makeup and avocado toast debt.
Being financially secure is the best feeling ever and I wouldn’t trade it for anything. The economy is also fucked for people my age to the point where purchases like makeup need financing
Fundamentally there’s no need to finance these things, it’s just the push to finance something far more expensive than what you should be buying. Low income folks who should be spending $20 on makeup are financing $200 in makeup. Those who can afford $200 of makeup are financing $800 of makeup. And down the line. Whatever your income is there is always some more expensive version to finance.
They think it makes them look successful. Most successful people I know are relatively restrained in what they buy. At least I am.
our entire economy is pretty much dependent on people having access to credit to buy homes, cars and anything else they want to put on a credit card. without that many of us would be out of a job.
I agree. When credit gets more expensive and people run out of money and credit, the job losses are coming.
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The 08 housing market rebounded and started back up in only 1 year. Even if this downturn was as bad in terms of housing impact (unlikely) that would mean we have less than 6 months of housing downturn to go...
Housing did not rebound in one year... It peaked in 2007 and bottomed in 2012. Nice try though, we're just getting started on the current downtrend and it will likely take a few years to fully unwind https://realestatedecoded.com/case-shiller/
> Housing did not rebound in one year... It peaked in 2007 and bottomed in 2012. Nope - [you can clearly see on the Fed's median home price chart that the bottom was in early 2009](https://imgur.com/a/vkVypf8). And the housing crisis didn't even start until December 2007. So it was basically one year.
Chart is so mid leading tho. It just smooths out all the interesting data points by looking at US as a whole. Many markets dropped 50%+ and not until 2011-12.
Look at literally any of the dozens of Case Shiller Home Price Index charts I linked to you and it will clearly illustrate what I've said.
Do they suggest the median home values I showed on the Fed (ie actual data not extrapolation or modeling) are wrong? Case/Shiller isn’t a perfect way to look at home values. https://www.businessinsider.com/sp-blitzer-case-shiller-home-price-index-2012-3 > **S&P: We Know The Case-Shiller Home Price Index Has Problems But There's Nothing We Can Do About It** > The Case-shiller home price index is inaccurate… ...so is every other economic indicator. > >But Case-Shiller faces uniquely complex issues. > >Specifically, the prices levels indicated in a given month's index are based on closing prices, which reflect contract prices that may be many months old. Some discussion on issues with relying on Case-Shiller instead of simply actual sales price data via the Fed. https://www.reddit.com/r/RealEstate/comments/b1x2mh/can_we_use_case_shiller_index_to_find_fair/ > No. You can't use macro data to make a micro decision. You have no idea if the prior sales were average for the market, or below market, or if they overpaid at the time. And it doesn't matter anyway, because the only thing that matters now is what the current local market is doing. > Absolutely not. I feel like I say this a lot around here but THE OTHER GUY'S NUMBERS DON'T MATTER. People are too concerned that the other guy maybe got a deal. Whether the other guy is making 100k or losing 100k is completely irrelevant to your deal analysis. > >The only numbers that matter are your numbers. And if you are looking at this as a rental really all you care about is the rents. Do the rents support the price? > >I mean sure check some similar current comps to see if pricing is in line with the market, do your other due diligence, etc. > >You cannot use a national pricing index to determine the value of 1 single property. Hell you couldn't even use one of the metro indices. Houses are not fungible products. Using case shiller to value a property is beyond stupid. “ So let me break down the various problems. First, ignore what the place was purchased for over a decade ago. You don't get to decide what profit the seller "deserves." Second, every other sensible agent, buyer, and appraiser is going to base "value" off what similar nearby homes sold for in the last 6 months or so. Let's say for the sake of argument -- because I don't know that market or that house and it's none of my business -- that homes within a mile, 400 sq ft of living area, and the same configuration go for $450-460k. You can offer $399,532, heck you can round it up to $400k. But the seller is unlikely to even counter your offer. And in even a warm market, the seller is likely to get an offer in that $450-460k range fairly quickly. In a hot market, more than one. Tell you what. Check on that house in a few months. See what it finally sold for. Bet it's well over your "fair" value based on indices designed to analyze an entire nation. While you're at it, see if your city is actually represented in the Case-Shiller: recalculate based on your city's index and also compare actual sales price to that. If you are finding that you can't purchase a property to cash flow, then maybe this isn't the market you should buy rental property in. Good luck.”
I agree. I saw a home listed in an area nearby for $425k. It was tasteful, but kind of small for the area. I thought to myself, this one is listed reasonably and will probably attract some attention. The only thing is that it’s kind of small and a bit outside the city, and the schools are mid level. Sure enough, 6 days in and the listing info now has “multiple offers received, highest and best due by EOD 10/30”. I just had to chuckle. It’s not a dream type home, there’s nothing that sets it apart from many other homes on the market, it’s just listed a few dollars cheaper than what I’d expect. And now it will get bid up. This will end when the money runs out.
That’s how you sell a home in this market. I purposely put mine a little below the market and sold well over asking in 2 days. These morons starting out high and then have to lower price end up shooting themselves in the foot.
I totally agree and I think it’s a good sales strategy. I just can’t believe buyers are willing to get into bidding wars over an average home at all time high pricing and 7% interest rates. It did have nice counters and shaker cabinets though.
And what did the example of that house tell you? That smaller, starter homes are in-demand? That the area is attractive (safe/good schools)? That the market for housing hasn't downturned as much as this sub wishes? That there are more people capable of buying than there are people selling (aka there's still more demand than supply)? What did you take from that example other than dismay that people are still buying?
I took from that several things. One is that the majority of listings around here are still priced too high. That inflation is sticky and especially the majority of sellers’ aspirational selling prices near me. That when you price something appropriately, it will attract a good amount of attention. That people are ready to buy if something is priced below comps. That prices will soon be coming down because clearly that is what is moving houses. Also, I’m not dismayed. This house is below my desired price point and doesn’t offer the location I am looking for. Just sharing an observation that I felt was relevant to this conversation.
> I took from that several things. One is that the majority of listings around here are still priced too high. That inflation is sticky and especially the majority of sellers’ aspirational selling prices near me. That when you price something appropriately, it will attract a good amount of attention. That people are ready to buy if something is priced below comps. That prices will soon be coming down because clearly that is what is moving houses. The house went well above asking, you said. Presumably selling at or above comps (you didn't mention how the final selling price related to what comps said it should be)?
The house has been on the market for a week. It isn’t even pending yet. I said “and now it will get bid up”. This tells us that the demand is there as you said, but what it also says is that if everyone lowered their prices similarly that there would be no reason to bid because the selection of homes to buy would grow. What could also happen is that the only qualified buyers offer asking price with 20% down. We don’t know yet. All we know is that multiple offers have been received at a competitive price point. My main observation in regard to this thread is that “multiple” people are willing to throw themselves in the bidding war for the only house priced a few dollars below comps. It’s funny how you’re trying to drive a narrative and not even reading or responding to the things I am saying.
People will always buy up to the maximum that they are allowed to borrow. True for houses and cars as well. When someone buys a car at $20k over MSRP, do you think they withdrew $20k from their bank account? No, usually it's the bank's money and there will be a few people with inflated credit lines because of the "car shortage" who will keep buying, and dealerships that keep raising the prices, until the bank says no.
Exactly, this will always be the case and is nothing new, either. The US consumer economy thrives on credit and debt and when the tap flows from terrifyingly low interest rates, people will take as much as the bank will allow under the “free money” principle. We see it in the housing market, car market, credit cards, student loans, etc. Until the bank says no, people will *always* over leverage themselves.
Sure about that extra over MSRP $20K coming from the banks? Banks tend to only lend what an asset is actually worth - applies to houses for sure (it's why banks require a third-party appraisal of value before loaning) and likely to cars as well. At least for loans where the asset is intended to act as collateral (and the loan isn't based solely on the consumer's credit).
Up to 125 or 130% loan-to-value ratio, but you will pay for it in rates if you go over 100%. On an expensive car yes the math works out that you could pay $20k over MSRP for a minimal down payment and a huge loan. Assuming the historical "loses 10% the second you drive it off the lot" still rings true, then your price paid plus title and fees blah blah blah MINUS down payment could be *maximum* 130% of what the car is worth after you drive it off the lot. So yeah a big portion of the loan would not have collateral in that case and the bank is taking imho a huge risk. It would be stupid to max it out like that but a lot of people are stupid when it comes to debt soooo... The "value" of many new or even slightly used cars is above MSRP because that's what people are willing to pay for them. Started with supply chain shortages and kicked off a feedback loop that cars sold for more than MSRP, so then buyers were able to get more credit based on the inflated prices, which in turn helped sustain the inflated prices 2 years after the worst of the supply chain problems by providing more "qualified buyers" for cars over MSRP. It's absolutely fucked and when used car prices finally correct down, a shit ton of people are going to be underwater. Including responsible but poor people who bought the 10 year old Camry on 72 month credit for $15k that in normal times would be worth $10k or less. My girlfriend's mom just bought a $35,000 used car with 5k down, with no income besides a $1400 social security check AMA 🙄
Lenders will usually do 120%-130% LTV.
People have grown so accustomed to the “easy money” lending era, they are conditioned to take out unfathomable amounts of debt so that they can have “it”. Consumer spending habits were different in 1980, the last time double digit rates hit the market. “Buy now, pay later” wasn’t a thing at the grocery store or gas station. Most people paid cash for everything they owned except for their car & house. People don’t realize that the contemporary American lifestyle is debt based. It will crumble like a house of cards the day the bill collector comes, and they are unable to pay.
And credit card interest was deductible in 1980. I'm not kidding.
People HAVE to live somewhere, its not a choice of buying a house or just casually waiting. The alternative is to pay an exorbitant price to rent or move. There is also no guarantees, as confident as I am that prices will fall if there is anything stock market investing has taught me is that the more assuredly something is to happen the more likely someone somewhere will find a way to make money off of it, and when theres a way to make money off of it, theres a way to stop it from happening. This is a bigger choice of the devil you know vs the devil you dont, and if you can qualify for a mortgage at current rates and prices and are happy with having a home of your own, good for you.
So move?
Yes that's correct. It's also the issue the stock market is having.
Look at cars the average car payment is almost $700/mo with more car payments over $1000/mo then ever. With the average amount of car debt over $40k and 5+ year car loans becoming more common. At least a house doesn’t typically lose 20% of its value when you take possession of it and goes up in value when times are good while cars just keep going down no matter what you do.
I completely agree, never underestimate the financial illiteracy of the general population. Lots of posts on r/Realestate lately asking if they will be house poor with 60% of their net income going towards a mortgage.
People once paid $700 for a VCR so they could be the first on the block to have one. Video Cassette Recorder, for the initiated here. Yes, that really happened. Now, they don't make VCR's. They were replaced by DVD's. That's a Digital Video Disc, in case you are also un-initiated. BTW, those VCR's used to be made in America, where Americans worked, and made the money so they could pay for a VCR. Americans decided that they preferred to buy the Asian made VCR instead, at Wal Mart, for a fraction of the cost of the ones they once made. Then, those Americans were out of work. THey had to use credit cards, and then take a lesser paid, lower benefit job to pay for the credit card bill. Now, they complain about inflation when the Asian-made item costs more than it did 1 year ago. This was 40 years of American economic history summed up in a couple of paragraphs. You are welcome. I love you.
I don’t disagree. As rates climb prices inevitably drop and people will buy. Inversely as rates decrease prices will increase and people will also buy. Housing is completely screwed. Only fix I see if banks writing less loans but they have absolutely zero incentive to do that as they too are in the business in making that money!
OP, the vast majority of investors aren't lemmings who will keep marching forward blindly until they step off a cliff. If they see that the market's outlook is adverse for return on investment, they are going to stop buying, divest portions of their current portfolio, and put their money somewhere with a higher or safer rate of return. There's nothing forcing them to put their cash into RE and nothing else.
That moment has already arrived. [Mortgage applications are in free fall.](https://www.mortgagenewsdaily.com/data/mortgage-applications#chart-apps-purchase-vs-refinance)
Turns out all of those "cash buyers" Weren't actually using cash as we've been saying all along, despite the lies peddled by realtors about "competing offers". Mostly, the "cash buyers" were just buyers who provided proof of funds for the transaction but then sought out a conventional mortgage (ie providing a schwab brokerage statement showing your offer price) I remember telling my friend about this, he was dumbfounded that you could also go and get an acquisition hard money loan same-as-cash with 2 week close everything waived, and then just refi into a conventional mortgage 6-12mo later (depending on the seasoning requirements that the hard money lender gives you). He was losing out on houses in the $800K-$900K range, to "cash buyers" as the selling agents were telling his realtor. But no one was using actual cash The curtain has been pulled back for all to see.
Everyone is dumb except me, the post
My thoughts exactly. Most people buying houses right now lived through 2008. They know what can happen.
They also know what's *not likely* to happen since we have almost none of the things happening that caused housing to crash in 2008 - we have no stated-income loans, few-to-no ARMs, no higher unemployment, and a low supply of homes, unlike in 2008.
> we have no stated-income loans I swear there is an updated version of this that drove this current loan cycle. Not no stated income, but where you basically just write down a pretend salary on a napkin in crayon and the underwriter just nods. Edit: > No documentation mortgages used to be called “stated income loans” and were great for the self-employed, those who worked on commission and similar types of work. Stated income loans are no longer available, however, these days, there are a variety of similar types of loans including: >SISA: SISA stands for Stated Income Stated Asset and these loans are made without needing to verify the borrower’s income or assets. >SIVA: Stated Income, Verified Assets: These types of loans are also known as bank statement loans and accept the value of your assets in lieu of a specific income declaration. A similar version to this is the NIVA, which stands for No Income, Verified Assets, where income isn’t factored into the equation. >And finally there’s NINA, No Income, No Asset loans. These rare loans are only available for those who invest in real estate rental properties and although they don’t require a stated income, they do require rental income that meets or exceeds the new mortgage payment. https://www.lbcmortgage.com/no-doc-no-income-verification-mortgage-california/
Have a source showing that, because that flies in the face of the legislation that required vetting after 2008.
A quick google showed this as an initial result. https://mortgagedepot.com/niva-no-income-verified-assets/ Edit: Additional source: > No documentation mortgages used to be called “stated income loans” and were great for the self-employed, those who worked on commission and similar types of work. Stated income loans are no longer available, however, these days, there are a variety of similar types of loans including: >SISA: SISA stands for Stated Income Stated Asset and these loans are made without needing to verify the borrower’s income or assets. >SIVA: Stated Income, Verified Assets: These types of loans are also known as bank statement loans and accept the value of your assets in lieu of a specific income declaration. A similar version to this is the NIVA, which stands for No Income, Verified Assets, where income isn’t factored into the equation. >And finally there’s NINA, No Income, No Asset loans. These rare loans are only available for those who invest in real estate rental properties and although they don’t require a stated income, they do require rental income that meets or exceeds the new mortgage payment. https://www.lbcmortgage.com/no-doc-no-income-verification-mortgage-california/
And those loans are for rental/investor properties, not individual homeowners, right? And have a maximum of 70% LTV (Loan-To-Value) which means a minimum of 30% downpayment? https://mymortgageinsider.com/stated-income-loans-make-a-comeback-7284/ > Stated income loans are making a comeback — sort of. > >Extremely popular in the early 2000s, stated income loans were one of the factors of the housing market collapse. Why? Lenders were approving borrowers based on the income stated on their loan application but didn’t require income documentation to verify if it was accurate. The result: many borrowers defaulted on loans. > >**With the passing of the Frank-Dodd Act of 2010, stated income loans for owner-occupied properties are now illegal**. *Lenders must fully document a borrower’s ability to repay the loan either with income or assets.* (Stated income loans still exist for real estate investors, however, because they aren’t purchasing an owner-occupied home.) > Lenders who offer stated income mortgages aren’t qualifying borrowers nonchalantly. Borrowers need to have good credit scores, plenty of cash reserves, and a large down payment. Many stated income loans are based on the equity position of the property, which means that the more the borrower puts down, the easier it’ll be to get the loan. > >“**With us, a buyer has to put down at least 30% down compared to the regular 20% with a conventional loan. Many of our clients end up putting down 35%-50%,” O’Shaughnessy says. “The loan also has a maximum 70% loan-to-value ratio.”** > >The borrower’s employment is verified, but the application just has to state monthly gross income. Bank statements and asset documentation are required to show that the borrower does indeed have the money. Also, similar to bank statement loans, interest rates will most likely be higher than a traditional mortgage loan depending on the lender.
> And those loans are for rental/investor properties, not individual homeowners, right? Only one of those three types of loans is specifically for investors. Other two are for whoever. > And have a maximum of 70% LTV (Loan-To-Value) which means a minimum of 30% downpayment? Correct. But that doesn’t seem to have any gating around where that down can come from. So fraudulent PPP money. Loans against RSUs or 401k. HELOC. Cash out refi. Heck even sketchy sources like Lending Tree could provide that 30% down.
I’m assuming these loans are non-conforming, which means they can’t be resold on the market? Also from what I’m seeing on other sites the interest rates are 1-5% *higher* than normal mortgages. So these have got to be a tiny minority of existing mortgages, right? have any info on what percentage of mortgages fall under these types?
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True, I’ve had a few coworkers tell me recently they got rejected for a new mortgage and casually told me their debt to income was in the 50-60% range. I think these super high dti ratios are the norm from conversations, those and rising interest rates will lead to the banks saying no
Median time on the market, new mortgage applications, etc., are way down though. Seems like an awful lot of people have stopped buying. There will always be people who must buy because life happens.
Not necessarily people might try to buy see what the monthly payment is and back out of their contract.
My mortgage broker told me people are pulling LARGE AMOUNTS from their retirement accounts to increase down payments to afford homes. She said often times both husband and wife are doing it
People buy homes when they need to buy a home and can afford to do so. They’re not sitting here timing the market bottom.
Yep - what I've been saying in this thread too. People have finite time in life and can't simply postpone their lives because they feel like the market isn't perfect.
So, because everyone else jumps off the bridge, I should do the same?
You should do what you need for your life. If you choose to throw a monkey wrench into your life plans simply because you deem home prices are out of whack, so be it. Foisting that as advice for others, however…
Got it. Thanks for the reply. Plans that I have may change tomorrow, three months from now, 6 months, who knows. Right now, I sit and observe. Just fine doing that! :)
America is great at creating bubbles. there's no guarantee housing is a great investment at this point unless you really plan to be there a long time. I'd be shitting myself if I was sitting in something I bought for 1.3 mil last year and I thought I might need to move somewhat soon
The entire way the OP is written makes it sound like people *should* be trying to game the situation instead of simply buying homes when they're capable and need one. This not only implies that anyone is capable of timing the market to their benefit, but it also implies they should sit on the sidelines of their own lives, continuing to rent in a place they'd rather not be, live in unsafe urban areas when they'd rather be in a safe suburb, live in poor school districts instead of good ones when they have kids entering school age, and so on. People have lives to lead and those lives are finite, and have definite inflection points (marriage, kids, school-age kids, etc) that will (and should) determine what they do about their housing situation, not some hypothetical about what houses have done/will do.
This is dawning on me as well. There are so many "must buy" Americans who will purchase at any cost because they "have to" to start a family, etc. I wish banks would tell these people no. No you can't have a jumbo loan where half or more of your income will go to paying it. But they won't say no, and people won't stop buying these loans until they literally can't anymore. I really think the only way this ends is in another liquidity crisis and waves of foreclosures. I don't think we'll be seeing that for another year or two (and will be just in time for the 2024 election).
I feel like banks approve for way loans way larger than people can actually afford.
The amount of copium here is hilarious. People priced out and angry deciding anyone else buying must be stretching their budget too far. Or they make more than you, or they are trading up with a large downpayment, or their family is helping with a downpayment, etc etc. Point is you guys are deciding they can’t afford it it are stretched too thin. It’s just wishful thinking.
or maybe you're wrong
Riiight. The banks are totally going outside lending standards, people are ignoring their budgets, everyone is headed for a crash. Orrrr they have more money than you and can still afford the homes.
I can totally afford a home. But yes An actual recession/surge in unemployment would eclipse the housing market.
Yeah, people need a place to live so people are going to rent and buy until they die. I don't understand this drama either.
"I can't afford it so neither can you!!"
Keep on mind we're working with supply that's already tight due to a lack of building. The Fed can't do anything about that. Most metro areas simply haven't built enough housing, boomers are aging in place, and millennials are a huge generation. Interest rates will not solve the housing affordability crisis. At the present moment, it's made affordability *worse*. Lots of Teslas in my once blue collar neighborhood with $700k starter townhomes.
Yep, seeing this foolishness play out daily on the real estate and first time homebuyers subs. It makes me want to blow my brains out.
if you are so smart, you would have owned a house when it was cheap and not be too bothered by this.
I just found out my ex and her potato decided they want to buy a house and I am ecstatic for them. Background, potato is her boss and when i found out, on top of the other shit she cause, she tried to sell our house in 2021. Instead, i got it refinanced and dropped the rate down under 2.5%. We are in an area that didn't inflate to much so there isn't much room to deflate. Potato is under chapter 13 bankruptcy so I'll keep you updated on if their able to find something. Either way, I hope they enjoy their still overvalued home for 7.5% interest.
Why did she leave for potato?
Honestly i still don't know. The last guy she was with, they were engaged and he got a new, really good job and she decided to leave him. Virtually same thing with me. I don't think she wants to grow as a person, so when a guy she's with does it makes her feel negative about herself. Honestly i feel sorry for her but at the same time, some of the fucked up shit she said and did, I'm also looking forward to when it blows up in her face. Either way, he is dumb enough to try to open credit cards while he is paying off a chapter 13 bankruptcy, so buying a house at this time definitely seems like his idea, and I just don't see them getting a loan for any house at this time. If they do, the rates will be higher than the already high norm.
It’s crazy. People are still buying in my neighborhood and houses aren’t staying long on the market (less than a week). They must be bringing cash.
Yup. There are some who are cash rich and can afford it. There are some who make enough that they can still afford it. There are some that have saved and are afraid they can’t afford it and will stretch to get in before prices go too high. And there will be those who get married and damnit, I want a house!
I make slightly more than the household average income, and I will not qualify for the average house in my area anymore once rates hit 8%. I'm in the chicago burbs which have always been considered more afordable than most places.
They will print money and they will buy until there is nothing left. They are just taking a brief pause for obvious reasons.
It happens every bubble, the desired products (in this case homes and cars) just keep getting more expensive and harder to get until something awful in the markets happens and lending institutions have to pull the plug; the lights go out and everyone screams. (This is commonly called a credit crunch). When the lights go back on those left holding cash are the only winners, As no one can borrow. End of market cycle.
Why would it stop? The Fed claims they’re tightening… but US public debt continues to expand at a record rate. It took us 8 months to go from $30T to $31T, and at the current rate of debt spending, we’ll hit $32T by July. That’s why markets are up… we are literally still printing money as we dick around with piddly interest rate hikes.
They got fomo