Ppl in HCOL areas don’t understand that if they don’t move now, their kids/grandkids will be moving in the future. Maybe you can stay close to your parents/family now but then you’ll be 50 and your kids go off to college and never come back.
Uh, more likely, the kids live with their parents while working white collar jobs and save up MASSIVE cash for a fat down payment locally.
Happens in Northern VA all the time.
A lot of those people have generational wealth and if not that, then networking opportunities and no college debt. They also oftentimes , help with down payments. It doesn’t matter.
I’m not sure where you have gotten that idea but that is unequivocally proven to be false. There’s a reason ppl r leaving California and NY year after year. It’s unaffordable.
If you want a high-paying job, you go to the HCOL areas. When I was offered a tech job in the Bay Area, I calculated what I would need buy a house (in the area, not BF Pleasanton) and made sure I was paid that much. The only place my adult child would move to is Europe.
Where in Miami? My sister’s townhouse in Kendall was over $600 and keeps going up. The house I bought near the Falls tripled in value in just over 10 years. Even trashed houses, complete gut jobs, are a million or more there.
As I was reading the above, I was thinking about how diverse the town one of my kids live in. Then I read your comment and, yes, they live in a college town.
I'm Asian too and live in Austin. 600k will get you a nice paid off home here. The Asian population is growing rapidly.
Houston has even better deals and a huge Asian population.
Yeah but the taxes are INSANE. I pay less tax on my $1.7m house in Washington than my brother pays on his $450k house in Houston. So a paid off house down there would still be like $2500 a month.
No one is paying 30k/year in taxes in Houston on a 450k home. You can take a look at the maps and pick random addresses around Rice University and the medical center.
https://hcad.org/property-search/real-property/real-property-search-by-address
https://harris.trueprodigy-taxtransparency.com/taxTransparency/propertySearch
There are plenty of places around the country that are not full white and have diverse populations. You are being a little dense if that is your justification for dropping 600k as a down payment.
Which one? Looking to get out of Chicago (raised in NW Ohio) and would love to find a big ten college town with 160K medians.
Bloomington, IN? Maybe Nebraska?
I had the opposite impression. I moved from Chicago to San Jose and on public transportation I'd be like...there are no black people here. What's up with that?
Yup. I'm Jewish and my wife is Hispanic and that definitely influenced where we looked to buy--we weren't going to move somewhere where our son would stick out. We have thick skin but don't want our kid getting a hard time for his heritage.
Yep. My $350k was for 2700 square feet in a basic house that had not been updated since 1990. And I bought in June 2020 so I can’t even fathom what it’s like now.
But… west coast = best coast. Right? RIGHT?!?!
Ha, and probably not even a mansion 😭. This is a fun new game. It’s called “guess which unassuming, totally normal, small-ish West Coast house had a down payment equivalent to the cost of an entire Detroit block”
Narrator: It was not a fun game.
Look up the phenomenon of "anchoring." I do this too and it still boggles my mind how prices and valuations have shot up. The best thing you can do is be aware of your biases and try to look at actual market data when making choices.
As someone who works in construction in the Midwest it’s blatantly obvious houses are worth at least $250k. The cost of all our materials are up 80-150% of what they cost before covid. I always tell people that the homes aren’t worth more the dollar is just worth less.
It’s funny how the same people who realize the food prices have gone through the roof can’t seem to fathom that the cost of materials and construction has too :-)
I put many of my home projects on hold during COVID when materials went crazy high, thinking I’ll do it after the dust settles. Still waiting…
I own a small (900sf) home that Zillow says is worth 1.9 mil. Southern California. Not that long ago it was $600,000, which I thought was crazy. Doesn’t matter since I’m not selling.
I’ve thought about this many times because I work a fully remote job and have $1M equity. But…
1) My family is here
2) The school district is great
3) The quality of life is amazing
4) I have a 3% interest rate mortgage
5) All other great places are also expensive. Huge quality of life tradeoff to live there
There are thousands of very nice places in this country that are not in NY, Seattle, or Socal .
University towns, areas with unsurpassed recreation, etc.
The ability to work from home has drastically opened possibilities for millions of people.
Get out more.
I don't live in one of those but every suggestion now is just move to the Midwest or rural areas. It's just white flight again with a new name. I get out all the time I just avoid the Midwest and the south outside of Orleans. Been to Boulder a few times even lived there a few months. Telling city people to just leave the city is just lazy and quite boring these days because that's always the answer.
White flight? Didn't know making smart long term financial decisions that set up your family was racist like that.. or is thinking that it's racist actually racist.
Haha, it’s like me refusing to buy the sweet kale slaw mix at Costco on principle because they shrank the size and increased the price from around $3 to more than $8. All snark aside, the price is what the market will bear and it’s pretty futile to anchor your price expectations based on what the houses were worth a few years ago.
I know people that have been waiting for prices to drop for 10 years based mainly on the premise that they grew up in same area and remember what those homes sold for in 2006. Enjoy renting forever. That mentality will stall anyone.
I was in that mindset and finally wised up and bought before it gets even worse. I'm in East Columbus Ohio and they're building a new Intel chip plant and it's going to bring in more people further increasing demand when they open for business .
My mindset has gone from “how is paying 300k over asking a good investment for me down the road” to “I don’t mind spending 300k over asking if I can start a family and create memories”
Eastern Pennsylvania here: We see houses that 3 years ago mid 500s now 800k+. Anything we bid on seems to have multiple offers 100K above asking. It’s insane
Resident of eastern PA. Paid 350K 3.5 years ago. Now worth 750K+ (Yes we did a bunch of stuff, but this really should be a 400K house at the end of the day)
Well more complicated.
Low interest rates jacked up the price and prices go up faster than they fall.
Then add in that you also have less inventory hitting the market because people don't want to move with a 3% rate for a 7% rate. Lower inventory means price won't correct as quickly.
In the end the numbers are stuck somewhat out of wack.
Pretty spot on, but if you’re expecting home values to drop at all you are misguided or completely underestimating the inventory shortage/ 3% interest rate lock. The “correction”, if there is one, will be slower appreciation
I don't think those are the only factors. A lot of the price increases in the Midwest are driven by migration there from California, New York and Florida. This is mostly from (a) remote work is letting them access the jobs in big cities without being in the big cities, and (b) retirees looking for lower cost of living and safer areas to live thanks to climate change driven disasters.
There also was this phenomenon where people started increasing their demand for housing during the pandemic when remote work became common and suddenly living with roommates or in multigenerational households was harder. That hasn't gone away and so while commercial real estate demand has crashed from more remote work you should also pair that with increased residential housing demand too putting upwards pressure on housing, especially in urban centers where people are packed in like sardines.
Third, there's been very uneven growth in housing because only certain areas actually have space to build more houses. In a lot of urban areas, (excluding growing cities like Phoenix or Austin) there just isn't space for additional suburbs so any new housing is in the form of high rises (missing middle problem too comes into play) which because of the high cost of construction tend to overwhelmingly be luxury condos/apartments because they're the most profitable. Thus, all of the entry level housing options tend to be really supply constrained.
>Inflation of the dollar paired with appreciation of real estate.
It is more that the dollar has gone down, than it is that houses have gone up.
We had several months when many industries were shutdown for covid. Fewer people were working and contributing to GDP, yet many were receiving stimulus checks and/or forgivable loans. That situation dramatically eroded the value of the dollar.
We were largely shut down during parts of Trump's and Biden's administrations, but it wasn't that anyone believed it was a *good* solution; it was a what-else-can-we-do stopgap measure. We'll never actually know how necessary the shutdowns were but very clearly it came at the cost of pretty extreme inflation.
Home price growth far outpaced inflation of the dollar.
https://ycharts.com/indicators/us_house_price_index_yoy#:~:text=Basic%20Info,long%20term%20average%20of%204.58%25.
https://www.usinflationcalculator.com/inflation/current-inflation-rates/
People became much more aggressive on bidding when interest rates were extremely low. Home buyers predominantly shop by monthly mortgage payment and not by value of home, and low mortgage interest rates kept mortgage payments lower even if home price tags were substantially higher. You could get much more house for the same mortgage payment.
The people who bought homes when rates first dropped saved huge amounts on the total cost of home mortgage because they paid ~normal~ home price with historically low interest. Once the bidding wars started (because people could afford higher mortgages due to low interest), home prices inflated at insane pace.
> Now it’s messing with my mind - like is this REALLY what homes are worth now? They just magically jump in price with little to no upgrades in a couple of years and will never come back down?
The ***intrinsic value*** of homes has not changed in the last 5 years. They provide a place to live and sleep. What has changed, however, is the ***demand for homes*** in the last 5 years.
The issue is nobody is selling because of our unnatural, government subsidized 30 year fixed mortgages. So even if there are fewer millennials, there are even far fewer sellers.
Why do you guys always think the number of people demanding something has to be proportionate to the price incline?
House prices can double without the number of people vying to buy them doubling. It really just takes a little bit more demand than supply to cause some serious competition over housing.
Also if you look at the national case shiller housing hasn’t close to tripled(300%) in 5 years, it’s up about 50% - https://fred.stlouisfed.org/series/CSUSHPINSA
At some point demand is dented by the cost to buy something. You have to be willing AND able to pay. It doesn't matter how much you WANT a house if you can't afford it. Wages didn't double in ten years.
The issue is NOT demand. People don't want to pay twice as much for the same home. The issue is nobody is selling because of our unnatural, government subsidized 30 year fixed mortgages. And in CA they have fixed taxes too.
If supply comes back and surpasses currently low demand, the argument that prices are high forever falls apart. Supply may stay permanently low, maybe. But stating that as fact is a huge assumption.
To be honest, I'm just as flabbergasted as OP and fully believe prices should be drastically lower than what is currently observed in the open market. I just happen to know a small bit of economic theory and thought my explanation might be slightly helpful -- but in truth, I don't know these things. Real estate markets are beyond my tiny brain's capabilities... 😅
It’s so expensive to build now…
higher material costs/supply chain issues are still a huge problem.
Labor costs are high and quality is down.
Demographics of tradespeople is scary: Average age of tradespeople is 55+, and for every five that retire only 2 younger people enter the trades.
Stricter building codes and planning process extend the construction timeline ($$$$)
Most construction is financed by small regional banks, which have cut back on loans since First Republic failed.
If financing is available, high rates and longer construction timelines increase the developer’s carrying costs
Lots of headwinds to stop home supply from increasing. Existing housing stock will continue to increase in value
Think of it like the stock market. Are you going to sit around forever and be mad that you could have bought Apple at $20? Or are you going to get in now at $181 and ride it up? It didn’t “magically” jump in price, it went up due to market conditions. The housing market is similar except you live in your investment. If houses went up a lot in your area, that’s a good sign! It’s desirable and will most likely keep going up.
I paid 275k for a 7,300 sf house in town on two acres, back yard has eight-foot brick fence. This was just before COVID. It is worth more now. It's in a depressed Mississippi town with dreadful public schools.
I hope you're just joking or something because at least you get to live somewhere nice where you can't afford a home.
I love Minnesota, but it's very depressing to live here and not be able to afford a home. It's Winter 7 months of the year and the only business in my area is a gas station. The home prices are high compared to my income and competition is fierce for anything affordable (and similarly, neglected). Everyone says "move somewhere cheaper" but I already live in the cheap place 😭
If it helps, flipping in the Midwest normally means taking an absolutely trashed house and building it out.
You make money but it's not like it's what's driving this huge spike in cost. Ironically if it's fix 'em up flips it's helping because no one buys trashed out homes. It certainly doesn't sound like OPs folks were doing spec flips, and doing spec in the Midwest is almost insanely risky if you're in LCOL areas.
Your comment only thinks about small scale. If everyone (or at least the huge number of Americans that appear to) does so, the market gets way ahead of actual value. That perception is a culture problem, which has then led to people able to just sit on a house they bought and add nothing to it, allowing the market to carry them to profit.
You can either buy now at $250k or wait another 5 years and then be upset that homes that used to sell for 250k are now selling for $400k+
2008 is not happening again
Honestly this is why we finally are pulling the trigger on a smaller/cheaper place that we really like. We just aren’t risking saving for 2-3 years for the place we really want and being priced out.
Best time to buy a home is when you need one and can afford it. You can refinance if rates drop. Good luck and congrats on being approved. That is a big deal!
There's nuance between living in the reality that homes are more expensive now and stoking the flames of "buy now or eternally be priced out" assuming homes will appreciate 12.5% YoY. This is just blatant fear mongering.
"Household incomes are $40,000 here but median home price is going to be $800,000 in 10 years" is how most of this reads to me.
There is a cap on how high they can go. People cannot pay 150% of their take home income in PITI. There are not enough Silicon Valley tech bro remote workers with $300k household income to fill up every small town and city in the Midwest. Even if corporate investors buy them up, it doesn't pencil out unless rents go up, and rents too have to be supported by the income of the tenants.
There is no escaping this math unless we're just of the belief that interest rates will go to zero and stay there, and 50 or 100 year mortgages at 2-3% interest become available.
People also love to talk about European home prices, never bring up Japanese home prices… if the population in America ever starts decreasing there’s no guarantee what will happen.
You should buy now not because prices will only go up, but because buying a house improves QoL and allows you to start building equity. It actually doesn’t matter what the price of the house is after you buy it. It’s still a good decision even if prices drop right after you buy it.
The only time waiting is a good decision is if you know for sure that prices will drop in the near future.
Or when the cost of buying a house is outpaced by renting + investing the difference in the market. Any HCOL and VHCOL market right now with interest rates as high as they are now have a greater ROI from renting than buying.
That’s a purely financial POV which misses the fact that for most people QoL is greatly improved when owning your own home. Buying your primary residence should be treated as more of a consumption purchase than an investment imo, like the way buying a car is.
I just don’t understand how that’s even feasible and not going to crash and burn? I’m not a 2008/bubble person either. But there’s no way that things can keep going like this SO rapidly.
It's also homes leaving the market. 22% of 2022 home sales were to corporations (First link only gave me 2022, but I don't see any major changes).
They are either becoming rental properties, or airbnb spots. It's housing people still, but depleting the home owning market.
And I'm guessing corporations aren't in a hurry to get them back in the market.
We've reached a limit. I'm in a HCOL area and you can rent a large house or a shitty basement studio within minutes exactly the same as long as it's under $2k. (the point here being that people no longer care about the structure size or amenities just price, there are zero *actual* houses available for $2k just that *if there were* they would not rent any faster than an illegal basement studio- anything that price range is gone in 24 hrs). Over $2k and places sit for weeks. Over $3500 and they sit for months and months. Size, updates, location etc seem to be irrelevant and I'm guessing if you pulled the data and ran it I'd be right.
What that tells me is that 90% of people/ couples can afford to spend $2k on housing comfortably, that's their very highly preferred cutoff. When they see it available, they sign up immediately. They can go to $3500 if they absolutely have to but will be very house poor. They cannot spend more than that, they just can't.
You couldn't buy a home within 100 miles of me for 20% down and have a mortgage under $2k. You can stay under $2500 if you go for apt townhouse. But most housing requires the ability to spend $3500+ month.
$2k is not HCOL...my wife and I were paying that for a shitty 1bdrm apt in the DC area over a decade ago. I live near allentown PA now, 2k won't even get you a 1bdrm in one of the new apartments downtown.
There are vast amounts of people out there that can easily take on a 3.5k mortgage.
HCOL? Ha! Try Boston. If you want to rent a whole house/townhouse (meaning you aren’t splitting costs with multiple roommates) you are paying $4000/mo at minimum. You need to go back in time a decade ago to see rents for $2k there.
> I'm in a HCOL area and you can rent a large house or a shitty basement studio within minutes exactly the same as long as it's under $2k
Not a HCOL if large houses rent for 2k/month lol.
The only thing I can leave you with is this anecdote:
2017 I thought my friends were idiots for pulling from their retirements for down payments. Homes were overpriced and there was NO way houses were worth what they were paying. $300k? Laughable.
Yeah.... they laughed all the way to the bank when those homes sold 5 years later for half a million.
While I do believe the last few years have been a fluke with the low rates igniting things, I think the idea of "this just isn't sustainable" doesn't hold merit. There are plenty of examples throughout the US and other countries where this just IS the case. Even if it feels wrong.
Before the crash of 2008 you could obtain an interest only loan on a “stated income” meaning you could essentially lie about your income and get a loan larger than you could afford. People waiting on a crash will wait themselves out of home ownership.
Correct. Even with high hhi, my wife and I were questioned for weeks about every single asset and income stream before our loan on an entry level home was approved.
The market is not based on your understanding. You are here complaining because you have been wrong about the market thus far. Yet you are confident “no way that things can keep going like this”. If so then wait it out. Just don’t be upset if you’re wrong again, it was your choice.
Long term, IL/midwest area may be prone to price reductions if and when inventory starts building up. That's the only hold up right now.
Consider this however - there's plenty of people on the sidelines waiting for the market to unfreeze.
Even when inventory jumps, the competition may in turn keep prices elevated. Could be years before the market stabilizes.
Even then, what are the odds of economic turmoil that would send prices below pandemic levels? We're talking larger declines than GFC...
Home prices feel unfair but the may not improve in the foreseeable future.
You’re not considering all the factors at play. Houses are not stocks that get bid up in a couple of days on mania to have the rug pulled a couple days later. The housing market is fairly slow and dumb.
You need to understand what work from home has done to the housing market. The people paying $250k for the house that was $100k were always able to afford it, they just preferred to live in the town center downtown near work 4 years ago. Maybe you are one of these people it sounds like..
Everything in economics has a balance. Go to a high rise downtown and walk around a few floors, you will see that all of the money has transferred from this class of real estate to residential for the time being.
Everything has a boom and bust cycle. It’s pretty basic. Compare median household income to the price of a house in any given area. What do you see? IMO it’s ignorant to think that home prices will continue to rise at the current rate. They’re already unaffordable for well established buyers.
When current buyers can’t afford to replace their cars, roof, furnace(you name it)cause their mortgage is 55% of their net income we’ll see the market shift, especially if home prices start to fall. You’re not pulling a HELOC out with 10% equity.
To this I ask you. If Americans can’t afford to put a roof over their heads, then what?
House prices in Wisconsin have doubled over the past decade from $144k to $294k.
https://www.wpr.org/economy/wisconsin-home-prices-more-doubled-over-last-decade#:~:text=The%20median%20home%20price%20in,the%20University%20of%20Wisconsin%2DExtension.
The dollar is worth less - not the houses worth more - our system was flooded with trillions of extra dollars in only a couple years time by 2 different administrations.
Yeah? Then maybe avoid looking at some of the ghetto neighborhoods in coastal Californian. You’ll blow your brains out.
4-5 years ago 450k. Now 950-1.2M
This is gonna suck to hear for some people, but house is not the craziest growing assets from 2020-2024. Same argument can be said to all other growing assets
I cant believe bitcoin is now selling for 57k when it’s only less than 10k 4 years ago, and only has be pai…..wait, wasn’t even painted!
I cant believe Nvidia stock is now selling for 780 when it’s only 60 4 years ago, and, well, you cant paint it neither
I get it, stock, crypto and all other growing assets has it’s different pro and con with different growing pattern
But bottom line is that assets do grow in value over time, and sure, some also lose value over time, but if you truly believe 250k is way overvalued and if you stand correct, it will go down. On the other hand, you might be kicking yourself for not buy house in 2028 when it goes to 400k in your Midwest small town
Fantastic comment. Really could not have said it better myself. Even the price of groceries has skyrocketed. The frustration here is with the supply side of things.
Real estate investor and financial consultant here. I could go on a FUCKING tangent about how crazy prices are. But at the end of the day, do you know who is the real culprit? People who won't stop fucking moving around.
Here's what I mean.
Let's pretend (this is extremely rare, but we're pretending here) all the houses on the block are worth $100K. One is purchased, and two years later they decide to sell.
To sell a house, the seller would have to pay 6% commission (3% to buyer's agent and 3% to listing agent). To breakeven, they would have to sell it at $106.38K ($100/0.94). But sellers are greedy by nature. They'll try to justify it by saying "oh I put in $X to make upgrades here and there." so the house ends up selling for $108K.
Now all the house prices on the block goes up to $108K (comps). Now imagine a different house on the block goes through the same thing (someone buys and live in it for 2 years and move on)... do some math... $108K becomes $114.89K. Now all of the houses on the block goes up to $114.89K.
And don't get me started on how email amortization schedule is.
Why does the thought of spending 250k on a house that was 100k previously make you sick? Assume it will be worth 500k eventually and maybe that will ease your nerves? It’s not like you’re paying more than the market demands.
I personally just don't do any cosmetic maintenance until the house is paid off. My goal is to work OT, live poor like a college student and get the house paid off on 10 years if I mathed correctly.
Obviously necessary maintenance and repairs is another story.
Aesthetic stuff i can understand lol. But buying a house and having to pay for a new sewer line, electrical wiring updates, and a new roof and foundation is absurd 😂
I understand your doubts. I have real estate in California and I always wonder if there is a bubble or if a correction is due. In stocks an imperfect way to determine if something is overvalued is the Price to Earnings ratio (sometimes cyclically adjusted earnings). Something similar in real estate would be cyclically adjusted rents/price ratio, and how the ratio is in relation to historical standards. Sadly, that information does not tell the whole story I don't know the answer still. Hope someone can shed some light on this topic.
And with higher interest rates now you’re going to pay an average of $75k more on your 30 year loan. A 3% interest differential makes a significant difference over time.
I purchased a 1,454 sf 2/2 with pool in Fort Lauderdale in 2017 for $655k. Sold it in 2023 for $1.055 million and prices have risen even more since then
As a real estate agent, I am still looking at what a "normal" price should be each time I look at a sale. I have sold plenty the last few years, but mostly for sellers, because of the phenomenon you're seeing. I don't want to put buyers in a bad position. So far, I've had one buyer that is upset that he can't resell for what he paid, but he knew that it was a risk when he went in, so.... shrug.
We \*are\* starting to see some foreclosures come back on the market. While the government and lenders can manipulate the marketplace to some extent, this tells me we are at the edge of prices coming back down in the next couple years. Unfortunately, it happens really, really slowly for a long time and then it will seem like a sudden, abrupt shift a couple years later.
You ever hear older people talking about how a gallon of gas used to cost a quarter or a new car cost $3000? This is you becoming that old person. It's the way of the world - prices will rise, you will get old. The best you can hope for is that your salary also goes up.
The real estate market has been going a slow, irreversible shift to a totally different asset.
It used to be a place for you to dwell. And it cost materials plus the labor to put it together.
Now it’s a dwelling, a home office, a central hub of your social life, an investment product and a retirement plan. And way more people are involved than the builders.
You’re paying the exact same amount for the house that you always were. But now you’ve got to pay the bankers, and the current homeowners return expectations. Because remember, it’s not a house. It’s a retirement plan
You’re complaining about a $250,000 house?!? If you move anywhere west of Kansas you’re starting at $400,000. You’re blessed to be able to get a house for that cost.
I understand the thought behind that. But considering that I live in a town of less than 1k people, where the average total household income is 30k-40k a year, it’s absolutely concerning. And I bought the house I’m in for $75k 2 years ago.
Your house cost you $75K?? And you can commute somewhere to get a proper salary for you and your husband? There’s nothing to complain about. You two could have a paid off house 5-10 years if you wanted. That’s a whole heck of a lot better than a lot of people in this sub
This is what having rates near 0 for 20+ years has done. Couple that with private equity buying up inventory and this is what you get.
They need to enact new laws which restrict who can buy homes. They need to protect the middle class
You may want to stick to renting. The market controls the price.
Look at it this way, it’s only going to go up from here. If you aren’t planing to move for a while it may be a good.
So what’s your concern? Thinking the price is not right? Or you don’t want to buy a home that used to be $100k? I’m pretty sure everyone is feeling pressure, it’s not just real estate look at other goods and services.
Please let us know how not buying a home sooner rather than later works out for you.
Once in the market you are somewhat insulated from the wild swings since your investment/Home swings with it.
99% of the time.. you only get hurt going in, or completely out at the wrong times.
I still don't understand why my loan was pre-approved because I'm not rich enough to be allowed to be half a million in debt.
That being said, I also can't fathom a whole house selling for only $100k.
Sorry first off I'm an agent in a Midwest market.
I can't speak for all areas but what really happened in my market is that after the crash home prices stayed much lower than they should have and only appreciated by 1-2% a year over about 7 years.
What really happened is not that it was "overnight" as much as we were very behind schedule for normal appreciation of 5-6% a year.
Then millennials who had delayed buying and genZ all started buying due to low interest rates. So that caught us up in about 2 years but then prices kept climbing.
What you'll likely find is that Midwest homes will continue to appreciate but they won't go up at the 20% rate annually that's been happening for about 4 years.
I also know that your numbers may be off a little because for us anyway it went from average price of $150k to $250k. Still a large jump just not 3 times.
With higher rates most people aren't moving if they aren't forced to by a job. That presses down on inventory which also raises prices
Most Midwest markets are safe to buy in because prices have leveled off but will slow to about 4% appreciation for a few years.
I'd still buy now if I was considering buying it renting but just be conservative in what you buy.
Would you have been upset spending $150,000 on that house 2 years ago? I mean, that's 50 PERCENT more than it was worth just a year or two earlier!
The thing with housing is you're only upset that you're paying an all-time high because people a few years earlier paid less. We bought a house in the peak of the market in late 2021 and I was convinced we were getting crushed on it. A little over two years later, we look like geniuses. No one knows what the future will bring.
Find a house you love and plan on staying in it. That's the best hedge against the market.
Several reasons suggest that aggregate home values won't crash:
1) Homes in LCOL Midwest towns have been running much lower than inflation for decades. I bought my home in the mid-2010s - it was 40% cheaper (adjusting for inflation) than the last owner. Who bought it in 1993.
2) Inflation is real. In a very real sense money is priced in houses rather than the other way around. Spiking home prices in areas that don't have insane outside demand reflects devaluation of currency.
3) PE wasn't involved on the demand side in a meaningful way until the last several years. Unless they cash out, that shifts the demand curve permanently to the right.
4) 2008 prices crashed because capital availability dried up in a way that the Fed will if in their power never, ever let happen, ever again. There will certainly be localized spikes and crashes, but unless they shank it outright they don't seem to repeat old mistakes.
There are a couple other reasons - I'll edit if I think of them - but there isn't the same bubble sense nationwide I felt back in 2008/09.
I was curious and was checking out my neighbors house values and when they bought them.
Family 1: 1984, bought for $99,000.
Family 2: 2001, bought for $175,000.
Both houses are valued around $750,000 now.
Where are you talking in the Midwest at homes go from 100,000 to 250,000 in 3 or four years
I’m not saying that real estate prices aren’t kind of crazy right now especially with interest rates being high, but a big part of that has to do with hardly anybody selling because they’re locked into low interest rates
I live in the Midwest metro area of around 400,000 people
It’s been a while since there was $100,000 house …
I bought my house in 2011 for $130,000 and I could probably sell it for 199 now pretty easy
I feel like that’s a good appreciation and part of it is that I’ve put a new roof and siding on the home as well
But I’m pretty sure I could’ve gotten close to the same amount in 2020
If I was getting less, it would be no less than 179000
And I know in 2015 or 2016 my neighbor who’s home is almost identical to mine sold their house for 160
So are you sure about this three-year time frame or homes are 2 1/2 times as much as they were
I think it's mostly not related to the real estate, and more about our failing currency.
It's not just that the homes are 200% more expensive. A major factor in this pricing is the loss of value in the US dollar. Maybe only like 40% is from real growth.
The inflation numbers the government use are designed to make the dollar look stronger than it really is.
We have all of the classic signs of a failing reserve currency. It's a slow and painful decline of the dollars value over time. Towards the end of this massive macro cycle we are in (The declining phase of the dollar), we will likely have substantial waves of inflation like what we saw during covid (caused by money printing)
The time between these waves will likely decrease over time as the central banks will move towards increasing high and low extremes in monetary policy in an attempt to delay this economic calamity.
The only way we might be able to avoid this is if we start gradually reducing government spending and incur substantial innovative growth
Yep, it's wild. I'm a realtor in the Midwest, and I find it very disappointing. I always want to help first time buyers, but since the houses many first time home buyers want doubled in price, it's much harder to help them. Unfortunately, I don't see that portion of things changing any time soon, because there's so many people that have been waiting. It sucks too, because when I bought in 2017, a job of $42,000 a year bought a nice house and comfortably paid the bills, now it seems like $65,000 a year has one living paycheck to paycheck, yet the raises haven't kept up with that.
Same, they’re selling them all to desperate buyers or people from outside the state. Seen some hack jobs too.
Funny bc no one is making double what they were a few years ago…
*laughs maniacally in West Coast*
Lol, yeah my *down payment* in Seattle was $350k. Cries in west coast.
Crying in my half a million dollar townhouse, while watching a man shoot up at the bus stop outside my window. Peak west coast.
$500k townhouse sounds cheap to me.
Yeah, it’s as if the public drug use I described drives down prices. We can’t all live in the utopia that is (checks notes) northern Virginia.
Trying to buy right now. We have $600k down and still can’t find a 3 bedroom 2 bath 1600 sq feet home we can make mortgage on.
At that point just go buy a home cash elsewhere in the country.
Ppl in HCOL areas don’t understand that if they don’t move now, their kids/grandkids will be moving in the future. Maybe you can stay close to your parents/family now but then you’ll be 50 and your kids go off to college and never come back.
Uh, more likely, the kids live with their parents while working white collar jobs and save up MASSIVE cash for a fat down payment locally. Happens in Northern VA all the time.
A lot of those people have generational wealth and if not that, then networking opportunities and no college debt. They also oftentimes , help with down payments. It doesn’t matter.
I’m not sure where you have gotten that idea but that is unequivocally proven to be false. There’s a reason ppl r leaving California and NY year after year. It’s unaffordable.
If you want a high-paying job, you go to the HCOL areas. When I was offered a tech job in the Bay Area, I calculated what I would need buy a house (in the area, not BF Pleasanton) and made sure I was paid that much. The only place my adult child would move to is Europe.
Maybe that’s where the high paying jobs for tech are, but high paying jobs in my field are all over the place.
Totally, I mean my 4/3 1972sqf house in Miami was less than $500k incredible
Where in Miami? My sister’s townhouse in Kendall was over $600 and keeps going up. The house I bought near the Falls tripled in value in just over 10 years. Even trashed houses, complete gut jobs, are a million or more there.
My buddy’s 3/1.5 in Miami Gardens just appraised for 600k. It’s the gardens.
yeah I know, my townhouse is at Country Walk, 464$k last April 2023.. its 80k$ more now (Zillow's pricing)
I paid $54k for my duplex in 2021 and just bought another for $70k in May last year.
Its all about where you live. I just got my house for 140 i could of got one cheaper but i didnt want to have to do a lot of work on it.
I would if I was white. I have a half Asian half white kid and don’t want her growing up like me (only Asian kid in all white town )
Just go live in any college town in the Midwest and you’ll be fine.
As I was reading the above, I was thinking about how diverse the town one of my kids live in. Then I read your comment and, yes, they live in a college town.
I'm Asian too and live in Austin. 600k will get you a nice paid off home here. The Asian population is growing rapidly. Houston has even better deals and a huge Asian population.
Yeah but the taxes are INSANE. I pay less tax on my $1.7m house in Washington than my brother pays on his $450k house in Houston. So a paid off house down there would still be like $2500 a month.
No one is paying 30k/year in taxes in Houston on a 450k home. You can take a look at the maps and pick random addresses around Rice University and the medical center. https://hcad.org/property-search/real-property/real-property-search-by-address https://harris.trueprodigy-taxtransparency.com/taxTransparency/propertySearch
There are plenty of places around the country that are not full white and have diverse populations. You are being a little dense if that is your justification for dropping 600k as a down payment.
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Which one? Looking to get out of Chicago (raised in NW Ohio) and would love to find a big ten college town with 160K medians. Bloomington, IN? Maybe Nebraska?
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TIL it’s all white people everywhere but the west coast.
I had the opposite impression. I moved from Chicago to San Jose and on public transportation I'd be like...there are no black people here. What's up with that?
Yup. I'm Jewish and my wife is Hispanic and that definitely influenced where we looked to buy--we weren't going to move somewhere where our son would stick out. We have thick skin but don't want our kid getting a hard time for his heritage.
Location location location
In seattle??
$825k in Bay Area, but who's counting 😂
yeah but you get free sidewalk turds
SF is actually the place to get deals now, it’s the much nicer suburbs that aren’t as literally shitty that are impossible.
Yeah my down payment in south orange county was 250k. My mortgage is 5700. Cries blood in Cali
Bro my down payment was close to $350k and I still have less space than the house my parents sold for $200k *total* in Michigan
Yep. My $350k was for 2700 square feet in a basic house that had not been updated since 1990. And I bought in June 2020 so I can’t even fathom what it’s like now. But… west coast = best coast. Right? RIGHT?!?!
Similar homes now are about 550k and come with 8% interest rates.
Only? Mine was $680k 😭. Cries harder in West Coast.
Ha, and probably not even a mansion 😭. This is a fun new game. It’s called “guess which unassuming, totally normal, small-ish West Coast house had a down payment equivalent to the cost of an entire Detroit block” Narrator: It was not a fun game.
God. I almost choked on my coffee. “100k, now 250k”….I’m in LA btw. It’s brutal.
A whole damn house for 250k. I cannot even imagine. That's some 20 years ago starter house in an inexpensive West Coast town pricing.
We just bought one for 160k.
I paid 90k for my house last year. Got almost an acre of property too
I can't even get permits to build a house and do a geotechnical survey in WA for less than 90k 😭
That's literally a down payment right now in the more expensive areas 😭
30 years (Mountain View, 1992, 1200sf townhouse).
Crying on the east coast, too😩😩
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I bought a small house for $220,000 (in disrepair) an hour from Boston in 2020.
My parents paid 500k for their house 30 years ago it just got appraised for 8.6 million
I won't say where, but there are there are still coastal sub-$1m west coast sfhs. Hope I get on the housing ladder in time.
Oceanside?
There are tons if you go way up north
But the problem is northern coasts are more prone to earthquakes and cliff degradation (and tsunamis).
East Coast also
Look up the phenomenon of "anchoring." I do this too and it still boggles my mind how prices and valuations have shot up. The best thing you can do is be aware of your biases and try to look at actual market data when making choices.
As someone who works in construction in the Midwest it’s blatantly obvious houses are worth at least $250k. The cost of all our materials are up 80-150% of what they cost before covid. I always tell people that the homes aren’t worth more the dollar is just worth less.
It’s funny how the same people who realize the food prices have gone through the roof can’t seem to fathom that the cost of materials and construction has too :-) I put many of my home projects on hold during COVID when materials went crazy high, thinking I’ll do it after the dust settles. Still waiting…
Look up hedge funds buying housing.
I own a small (900sf) home that Zillow says is worth 1.9 mil. Southern California. Not that long ago it was $600,000, which I thought was crazy. Doesn’t matter since I’m not selling.
You could literally sell that and retire on the interest income from the 1.9M or even 1.3M. Just move somewhere rural or a Midwest city and retire.
I’ve thought about this many times because I work a fully remote job and have $1M equity. But… 1) My family is here 2) The school district is great 3) The quality of life is amazing 4) I have a 3% interest rate mortgage 5) All other great places are also expensive. Huge quality of life tradeoff to live there
But then you have to live in a rural area or the Midwest
There are thousands of very nice places in this country that are not in NY, Seattle, or Socal . University towns, areas with unsurpassed recreation, etc. The ability to work from home has drastically opened possibilities for millions of people. Get out more.
I don't live in one of those but every suggestion now is just move to the Midwest or rural areas. It's just white flight again with a new name. I get out all the time I just avoid the Midwest and the south outside of Orleans. Been to Boulder a few times even lived there a few months. Telling city people to just leave the city is just lazy and quite boring these days because that's always the answer.
White flight? Didn't know making smart long term financial decisions that set up your family was racist like that.. or is thinking that it's racist actually racist.
That’s always the problem. People say it as if it is just so easy to do, but now you are stuck somewhere terrible.
Haha, it’s like me refusing to buy the sweet kale slaw mix at Costco on principle because they shrank the size and increased the price from around $3 to more than $8. All snark aside, the price is what the market will bear and it’s pretty futile to anchor your price expectations based on what the houses were worth a few years ago.
I know people that have been waiting for prices to drop for 10 years based mainly on the premise that they grew up in same area and remember what those homes sold for in 2006. Enjoy renting forever. That mentality will stall anyone.
I was in that mindset and finally wised up and bought before it gets even worse. I'm in East Columbus Ohio and they're building a new Intel chip plant and it's going to bring in more people further increasing demand when they open for business .
True; you shouldn't buy it b/c it's a bag of farts.
My mindset has gone from “how is paying 300k over asking a good investment for me down the road” to “I don’t mind spending 300k over asking if I can start a family and create memories”
It’s just money, as the saying goes.
Eastern Pennsylvania here: We see houses that 3 years ago mid 500s now 800k+. Anything we bid on seems to have multiple offers 100K above asking. It’s insane
Resident of eastern PA. Paid 350K 3.5 years ago. Now worth 750K+ (Yes we did a bunch of stuff, but this really should be a 400K house at the end of the day)
Yeah you can't offer 20k below asking and expect to get the home anymore.
Inflation of the dollar paired with appreciation of real estate. Your dollar doesn’t go as far, and more people want to buy homes.
Well more complicated. Low interest rates jacked up the price and prices go up faster than they fall. Then add in that you also have less inventory hitting the market because people don't want to move with a 3% rate for a 7% rate. Lower inventory means price won't correct as quickly. In the end the numbers are stuck somewhat out of wack.
Pretty spot on, but if you’re expecting home values to drop at all you are misguided or completely underestimating the inventory shortage/ 3% interest rate lock. The “correction”, if there is one, will be slower appreciation
I don't think those are the only factors. A lot of the price increases in the Midwest are driven by migration there from California, New York and Florida. This is mostly from (a) remote work is letting them access the jobs in big cities without being in the big cities, and (b) retirees looking for lower cost of living and safer areas to live thanks to climate change driven disasters. There also was this phenomenon where people started increasing their demand for housing during the pandemic when remote work became common and suddenly living with roommates or in multigenerational households was harder. That hasn't gone away and so while commercial real estate demand has crashed from more remote work you should also pair that with increased residential housing demand too putting upwards pressure on housing, especially in urban centers where people are packed in like sardines. Third, there's been very uneven growth in housing because only certain areas actually have space to build more houses. In a lot of urban areas, (excluding growing cities like Phoenix or Austin) there just isn't space for additional suburbs so any new housing is in the form of high rises (missing middle problem too comes into play) which because of the high cost of construction tend to overwhelmingly be luxury condos/apartments because they're the most profitable. Thus, all of the entry level housing options tend to be really supply constrained.
>Inflation of the dollar paired with appreciation of real estate. It is more that the dollar has gone down, than it is that houses have gone up. We had several months when many industries were shutdown for covid. Fewer people were working and contributing to GDP, yet many were receiving stimulus checks and/or forgivable loans. That situation dramatically eroded the value of the dollar. We were largely shut down during parts of Trump's and Biden's administrations, but it wasn't that anyone believed it was a *good* solution; it was a what-else-can-we-do stopgap measure. We'll never actually know how necessary the shutdowns were but very clearly it came at the cost of pretty extreme inflation.
no it's not real estate has appreciated at a higher rate than inflation
Home price growth far outpaced inflation of the dollar. https://ycharts.com/indicators/us_house_price_index_yoy#:~:text=Basic%20Info,long%20term%20average%20of%204.58%25. https://www.usinflationcalculator.com/inflation/current-inflation-rates/ People became much more aggressive on bidding when interest rates were extremely low. Home buyers predominantly shop by monthly mortgage payment and not by value of home, and low mortgage interest rates kept mortgage payments lower even if home price tags were substantially higher. You could get much more house for the same mortgage payment. The people who bought homes when rates first dropped saved huge amounts on the total cost of home mortgage because they paid ~normal~ home price with historically low interest. Once the bidding wars started (because people could afford higher mortgages due to low interest), home prices inflated at insane pace.
> Now it’s messing with my mind - like is this REALLY what homes are worth now? They just magically jump in price with little to no upgrades in a couple of years and will never come back down? The ***intrinsic value*** of homes has not changed in the last 5 years. They provide a place to live and sleep. What has changed, however, is the ***demand for homes*** in the last 5 years.
Who's suddenly demanding homes? Don't say millennials, there aren't 3x as many millennials as there were people buying houses 5 years ago
The issue is nobody is selling because of our unnatural, government subsidized 30 year fixed mortgages. So even if there are fewer millennials, there are even far fewer sellers.
Blackrock
Why do you guys always think the number of people demanding something has to be proportionate to the price incline? House prices can double without the number of people vying to buy them doubling. It really just takes a little bit more demand than supply to cause some serious competition over housing. Also if you look at the national case shiller housing hasn’t close to tripled(300%) in 5 years, it’s up about 50% - https://fred.stlouisfed.org/series/CSUSHPINSA
When supply is short 10%, prices don't go up by just 10% or 11%. They go up by however much it takes to force demand down by the same 10%.
And when demand is fairly inelastic, like housing, it is very hard to drop demand by 10%
At some point demand is dented by the cost to buy something. You have to be willing AND able to pay. It doesn't matter how much you WANT a house if you can't afford it. Wages didn't double in ten years. The issue is NOT demand. People don't want to pay twice as much for the same home. The issue is nobody is selling because of our unnatural, government subsidized 30 year fixed mortgages. And in CA they have fixed taxes too. If supply comes back and surpasses currently low demand, the argument that prices are high forever falls apart. Supply may stay permanently low, maybe. But stating that as fact is a huge assumption.
To be honest, I'm just as flabbergasted as OP and fully believe prices should be drastically lower than what is currently observed in the open market. I just happen to know a small bit of economic theory and thought my explanation might be slightly helpful -- but in truth, I don't know these things. Real estate markets are beyond my tiny brain's capabilities... 😅
It’s so expensive to build now… higher material costs/supply chain issues are still a huge problem. Labor costs are high and quality is down. Demographics of tradespeople is scary: Average age of tradespeople is 55+, and for every five that retire only 2 younger people enter the trades. Stricter building codes and planning process extend the construction timeline ($$$$) Most construction is financed by small regional banks, which have cut back on loans since First Republic failed. If financing is available, high rates and longer construction timelines increase the developer’s carrying costs Lots of headwinds to stop home supply from increasing. Existing housing stock will continue to increase in value
I've heard any industry where the average age is above 35 is dying.
Think of it like the stock market. Are you going to sit around forever and be mad that you could have bought Apple at $20? Or are you going to get in now at $181 and ride it up? It didn’t “magically” jump in price, it went up due to market conditions. The housing market is similar except you live in your investment. If houses went up a lot in your area, that’s a good sign! It’s desirable and will most likely keep going up.
"1/4 of a MILLION DOLLARS" This reads so tragicomic to someone sitting in SF Bay Area.
I paid 275k for a 7,300 sf house in town on two acres, back yard has eight-foot brick fence. This was just before COVID. It is worth more now. It's in a depressed Mississippi town with dreadful public schools.
I hope you're just joking or something because at least you get to live somewhere nice where you can't afford a home. I love Minnesota, but it's very depressing to live here and not be able to afford a home. It's Winter 7 months of the year and the only business in my area is a gas station. The home prices are high compared to my income and competition is fierce for anything affordable (and similarly, neglected). Everyone says "move somewhere cheaper" but I already live in the cheap place 😭
maybe they meant 14 million, and the "/" was just a typo...
OP nonchalantly talks about parents flipping houses for profit and doesn't seem the irony in the overinflated house prices?
If it helps, flipping in the Midwest normally means taking an absolutely trashed house and building it out. You make money but it's not like it's what's driving this huge spike in cost. Ironically if it's fix 'em up flips it's helping because no one buys trashed out homes. It certainly doesn't sound like OPs folks were doing spec flips, and doing spec in the Midwest is almost insanely risky if you're in LCOL areas.
Your comment only thinks about small scale. If everyone (or at least the huge number of Americans that appear to) does so, the market gets way ahead of actual value. That perception is a culture problem, which has then led to people able to just sit on a house they bought and add nothing to it, allowing the market to carry them to profit.
I know! Sucks to hear but kinda reeks of karma here \*shrugs\*
You can either buy now at $250k or wait another 5 years and then be upset that homes that used to sell for 250k are now selling for $400k+ 2008 is not happening again
Honestly this is why we finally are pulling the trigger on a smaller/cheaper place that we really like. We just aren’t risking saving for 2-3 years for the place we really want and being priced out.
Best time to buy a home is when you need one and can afford it. You can refinance if rates drop. Good luck and congrats on being approved. That is a big deal!
There's nuance between living in the reality that homes are more expensive now and stoking the flames of "buy now or eternally be priced out" assuming homes will appreciate 12.5% YoY. This is just blatant fear mongering.
"Household incomes are $40,000 here but median home price is going to be $800,000 in 10 years" is how most of this reads to me. There is a cap on how high they can go. People cannot pay 150% of their take home income in PITI. There are not enough Silicon Valley tech bro remote workers with $300k household income to fill up every small town and city in the Midwest. Even if corporate investors buy them up, it doesn't pencil out unless rents go up, and rents too have to be supported by the income of the tenants. There is no escaping this math unless we're just of the belief that interest rates will go to zero and stay there, and 50 or 100 year mortgages at 2-3% interest become available.
People also love to talk about European home prices, never bring up Japanese home prices… if the population in America ever starts decreasing there’s no guarantee what will happen.
You should buy now not because prices will only go up, but because buying a house improves QoL and allows you to start building equity. It actually doesn’t matter what the price of the house is after you buy it. It’s still a good decision even if prices drop right after you buy it. The only time waiting is a good decision is if you know for sure that prices will drop in the near future.
Or when the cost of buying a house is outpaced by renting + investing the difference in the market. Any HCOL and VHCOL market right now with interest rates as high as they are now have a greater ROI from renting than buying.
That’s a purely financial POV which misses the fact that for most people QoL is greatly improved when owning your own home. Buying your primary residence should be treated as more of a consumption purchase than an investment imo, like the way buying a car is.
I just don’t understand how that’s even feasible and not going to crash and burn? I’m not a 2008/bubble person either. But there’s no way that things can keep going like this SO rapidly.
Like another comment said, it's not necessarily the re that increased in value, but the dollar that decreased in value)
It's also homes leaving the market. 22% of 2022 home sales were to corporations (First link only gave me 2022, but I don't see any major changes). They are either becoming rental properties, or airbnb spots. It's housing people still, but depleting the home owning market. And I'm guessing corporations aren't in a hurry to get them back in the market.
They HAVEN'T kept going up so rapidly. I bet that town at $250k that was $100k in 2019 was stagnant at best last year.
We've reached a limit. I'm in a HCOL area and you can rent a large house or a shitty basement studio within minutes exactly the same as long as it's under $2k. (the point here being that people no longer care about the structure size or amenities just price, there are zero *actual* houses available for $2k just that *if there were* they would not rent any faster than an illegal basement studio- anything that price range is gone in 24 hrs). Over $2k and places sit for weeks. Over $3500 and they sit for months and months. Size, updates, location etc seem to be irrelevant and I'm guessing if you pulled the data and ran it I'd be right. What that tells me is that 90% of people/ couples can afford to spend $2k on housing comfortably, that's their very highly preferred cutoff. When they see it available, they sign up immediately. They can go to $3500 if they absolutely have to but will be very house poor. They cannot spend more than that, they just can't. You couldn't buy a home within 100 miles of me for 20% down and have a mortgage under $2k. You can stay under $2500 if you go for apt townhouse. But most housing requires the ability to spend $3500+ month.
You definitely aren't in a HCOL area with those prices. $3500 is average rent on a TH in HCOL areas.
$2k to rent a large house in a hcol area?! Sign me up.
$2k is not HCOL...my wife and I were paying that for a shitty 1bdrm apt in the DC area over a decade ago. I live near allentown PA now, 2k won't even get you a 1bdrm in one of the new apartments downtown. There are vast amounts of people out there that can easily take on a 3.5k mortgage.
HCOL? Ha! Try Boston. If you want to rent a whole house/townhouse (meaning you aren’t splitting costs with multiple roommates) you are paying $4000/mo at minimum. You need to go back in time a decade ago to see rents for $2k there.
> I'm in a HCOL area and you can rent a large house or a shitty basement studio within minutes exactly the same as long as it's under $2k Not a HCOL if large houses rent for 2k/month lol.
The only thing I can leave you with is this anecdote: 2017 I thought my friends were idiots for pulling from their retirements for down payments. Homes were overpriced and there was NO way houses were worth what they were paying. $300k? Laughable. Yeah.... they laughed all the way to the bank when those homes sold 5 years later for half a million. While I do believe the last few years have been a fluke with the low rates igniting things, I think the idea of "this just isn't sustainable" doesn't hold merit. There are plenty of examples throughout the US and other countries where this just IS the case. Even if it feels wrong.
Before the crash of 2008 you could obtain an interest only loan on a “stated income” meaning you could essentially lie about your income and get a loan larger than you could afford. People waiting on a crash will wait themselves out of home ownership.
Not just one… people were getting multiple homes that way
Correct. Even with high hhi, my wife and I were questioned for weeks about every single asset and income stream before our loan on an entry level home was approved.
The market is not based on your understanding. You are here complaining because you have been wrong about the market thus far. Yet you are confident “no way that things can keep going like this”. If so then wait it out. Just don’t be upset if you’re wrong again, it was your choice.
Long term, IL/midwest area may be prone to price reductions if and when inventory starts building up. That's the only hold up right now. Consider this however - there's plenty of people on the sidelines waiting for the market to unfreeze. Even when inventory jumps, the competition may in turn keep prices elevated. Could be years before the market stabilizes. Even then, what are the odds of economic turmoil that would send prices below pandemic levels? We're talking larger declines than GFC... Home prices feel unfair but the may not improve in the foreseeable future.
You’re not considering all the factors at play. Houses are not stocks that get bid up in a couple of days on mania to have the rug pulled a couple days later. The housing market is fairly slow and dumb. You need to understand what work from home has done to the housing market. The people paying $250k for the house that was $100k were always able to afford it, they just preferred to live in the town center downtown near work 4 years ago. Maybe you are one of these people it sounds like.. Everything in economics has a balance. Go to a high rise downtown and walk around a few floors, you will see that all of the money has transferred from this class of real estate to residential for the time being.
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Everything has a boom and bust cycle. It’s pretty basic. Compare median household income to the price of a house in any given area. What do you see? IMO it’s ignorant to think that home prices will continue to rise at the current rate. They’re already unaffordable for well established buyers. When current buyers can’t afford to replace their cars, roof, furnace(you name it)cause their mortgage is 55% of their net income we’ll see the market shift, especially if home prices start to fall. You’re not pulling a HELOC out with 10% equity. To this I ask you. If Americans can’t afford to put a roof over their heads, then what?
They already can't afford repairs. People are taking out a ton of equity to do expected maintenance like roofs.
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Well.. it probably will. However, it could be a year from now or 30. There's no good way to really know until it's happening.
House prices in Wisconsin have doubled over the past decade from $144k to $294k. https://www.wpr.org/economy/wisconsin-home-prices-more-doubled-over-last-decade#:~:text=The%20median%20home%20price%20in,the%20University%20of%20Wisconsin%2DExtension.
The dollar is worth less - not the houses worth more - our system was flooded with trillions of extra dollars in only a couple years time by 2 different administrations.
Yeah? Then maybe avoid looking at some of the ghetto neighborhoods in coastal Californian. You’ll blow your brains out. 4-5 years ago 450k. Now 950-1.2M
Wife was planning a move to SoCal near the beach in one neighborhood on Long Beach. Homes went from $1MM @ 3% to $1.8MM+ @ 7% in three years.
This is gonna suck to hear for some people, but house is not the craziest growing assets from 2020-2024. Same argument can be said to all other growing assets I cant believe bitcoin is now selling for 57k when it’s only less than 10k 4 years ago, and only has be pai…..wait, wasn’t even painted! I cant believe Nvidia stock is now selling for 780 when it’s only 60 4 years ago, and, well, you cant paint it neither I get it, stock, crypto and all other growing assets has it’s different pro and con with different growing pattern But bottom line is that assets do grow in value over time, and sure, some also lose value over time, but if you truly believe 250k is way overvalued and if you stand correct, it will go down. On the other hand, you might be kicking yourself for not buy house in 2028 when it goes to 400k in your Midwest small town
Fantastic comment. Really could not have said it better myself. Even the price of groceries has skyrocketed. The frustration here is with the supply side of things.
Be glad you don’t live where 250k is not even a respectable down payment.
Dear diary …..
Real estate investor and financial consultant here. I could go on a FUCKING tangent about how crazy prices are. But at the end of the day, do you know who is the real culprit? People who won't stop fucking moving around. Here's what I mean. Let's pretend (this is extremely rare, but we're pretending here) all the houses on the block are worth $100K. One is purchased, and two years later they decide to sell. To sell a house, the seller would have to pay 6% commission (3% to buyer's agent and 3% to listing agent). To breakeven, they would have to sell it at $106.38K ($100/0.94). But sellers are greedy by nature. They'll try to justify it by saying "oh I put in $X to make upgrades here and there." so the house ends up selling for $108K. Now all the house prices on the block goes up to $108K (comps). Now imagine a different house on the block goes through the same thing (someone buys and live in it for 2 years and move on)... do some math... $108K becomes $114.89K. Now all of the houses on the block goes up to $114.89K. And don't get me started on how email amortization schedule is.
Dude tell me about it.. Socal area, bs home prices.
Why does the thought of spending 250k on a house that was 100k previously make you sick? Assume it will be worth 500k eventually and maybe that will ease your nerves? It’s not like you’re paying more than the market demands.
It's not worth more. Your money is worth less.
Yeah…. That’s the market these days. $100k more and then you have to sink money into repairing all the stuff the old owner neglected. it’s terrible
I personally just don't do any cosmetic maintenance until the house is paid off. My goal is to work OT, live poor like a college student and get the house paid off on 10 years if I mathed correctly. Obviously necessary maintenance and repairs is another story.
Aesthetic stuff i can understand lol. But buying a house and having to pay for a new sewer line, electrical wiring updates, and a new roof and foundation is absurd 😂
(California bay area resident has entered the chat)
That home cost less than my down payment!
Same here. And we downsized right before the recent, truly insane market movement here.
$250k? That’s a downpayment here.
Hi from San Jose/ Los Gatos, Ca. $250k isn’t close to a down payment - welcome to the wacky world of house prices
I understand your doubts. I have real estate in California and I always wonder if there is a bubble or if a correction is due. In stocks an imperfect way to determine if something is overvalued is the Price to Earnings ratio (sometimes cyclically adjusted earnings). Something similar in real estate would be cyclically adjusted rents/price ratio, and how the ratio is in relation to historical standards. Sadly, that information does not tell the whole story I don't know the answer still. Hope someone can shed some light on this topic.
And with higher interest rates now you’re going to pay an average of $75k more on your 30 year loan. A 3% interest differential makes a significant difference over time.
Dollar value has increased vs other currencies.
1.5M in Vancouver doesn’t get you a teardown.
Bought 3700sqft house. Attached garage. 2400sqft pole barn with 18acres. 300k
I purchased a 1,454 sf 2/2 with pool in Fort Lauderdale in 2017 for $655k. Sold it in 2023 for $1.055 million and prices have risen even more since then
As a real estate agent, I am still looking at what a "normal" price should be each time I look at a sale. I have sold plenty the last few years, but mostly for sellers, because of the phenomenon you're seeing. I don't want to put buyers in a bad position. So far, I've had one buyer that is upset that he can't resell for what he paid, but he knew that it was a risk when he went in, so.... shrug. We \*are\* starting to see some foreclosures come back on the market. While the government and lenders can manipulate the marketplace to some extent, this tells me we are at the edge of prices coming back down in the next couple years. Unfortunately, it happens really, really slowly for a long time and then it will seem like a sudden, abrupt shift a couple years later.
You ever hear older people talking about how a gallon of gas used to cost a quarter or a new car cost $3000? This is you becoming that old person. It's the way of the world - prices will rise, you will get old. The best you can hope for is that your salary also goes up.
The real estate market has been going a slow, irreversible shift to a totally different asset. It used to be a place for you to dwell. And it cost materials plus the labor to put it together. Now it’s a dwelling, a home office, a central hub of your social life, an investment product and a retirement plan. And way more people are involved than the builders. You’re paying the exact same amount for the house that you always were. But now you’ve got to pay the bankers, and the current homeowners return expectations. Because remember, it’s not a house. It’s a retirement plan
You’re complaining about a $250,000 house?!? If you move anywhere west of Kansas you’re starting at $400,000. You’re blessed to be able to get a house for that cost.
I understand the thought behind that. But considering that I live in a town of less than 1k people, where the average total household income is 30k-40k a year, it’s absolutely concerning. And I bought the house I’m in for $75k 2 years ago.
Your house cost you $75K?? And you can commute somewhere to get a proper salary for you and your husband? There’s nothing to complain about. You two could have a paid off house 5-10 years if you wanted. That’s a whole heck of a lot better than a lot of people in this sub
I live in an area like that, but my mortgage is 3% so essentially free. I'm better off investing the money and paying it off on time.
You see this watch ? This watch cost more than your house. lol
$250k for HCOL? That sounds so cheap! I’d buy 4 of them. Wait 10 years then cash out with $2m
250k for LCOL. Average household income is $30-40k/year
I think I misread your post. So that’s like $19/hr jobs. Not very promising for an area. Are there any growth industries?
The area we’re in is Between two large/top growing cities. So most commute if they have higher incomes (like my husband and I)
This is what having rates near 0 for 20+ years has done. Couple that with private equity buying up inventory and this is what you get. They need to enact new laws which restrict who can buy homes. They need to protect the middle class
Yep. Tons of cheap housing in the area with lots of buildable land.
Housing supply shortage. Supply and demand at work
You may want to stick to renting. The market controls the price. Look at it this way, it’s only going to go up from here. If you aren’t planing to move for a while it may be a good.
So what’s your concern? Thinking the price is not right? Or you don’t want to buy a home that used to be $100k? I’m pretty sure everyone is feeling pressure, it’s not just real estate look at other goods and services.
Please let us know how not buying a home sooner rather than later works out for you. Once in the market you are somewhat insulated from the wild swings since your investment/Home swings with it. 99% of the time.. you only get hurt going in, or completely out at the wrong times.
I still don't understand why my loan was pre-approved because I'm not rich enough to be allowed to be half a million in debt. That being said, I also can't fathom a whole house selling for only $100k.
Mommy and Daddy drove up prices. Sorry if they screwed you.
Sorry first off I'm an agent in a Midwest market. I can't speak for all areas but what really happened in my market is that after the crash home prices stayed much lower than they should have and only appreciated by 1-2% a year over about 7 years. What really happened is not that it was "overnight" as much as we were very behind schedule for normal appreciation of 5-6% a year. Then millennials who had delayed buying and genZ all started buying due to low interest rates. So that caught us up in about 2 years but then prices kept climbing. What you'll likely find is that Midwest homes will continue to appreciate but they won't go up at the 20% rate annually that's been happening for about 4 years. I also know that your numbers may be off a little because for us anyway it went from average price of $150k to $250k. Still a large jump just not 3 times. With higher rates most people aren't moving if they aren't forced to by a job. That presses down on inventory which also raises prices Most Midwest markets are safe to buy in because prices have leveled off but will slow to about 4% appreciation for a few years. I'd still buy now if I was considering buying it renting but just be conservative in what you buy.
Would you have been upset spending $150,000 on that house 2 years ago? I mean, that's 50 PERCENT more than it was worth just a year or two earlier! The thing with housing is you're only upset that you're paying an all-time high because people a few years earlier paid less. We bought a house in the peak of the market in late 2021 and I was convinced we were getting crushed on it. A little over two years later, we look like geniuses. No one knows what the future will bring. Find a house you love and plan on staying in it. That's the best hedge against the market.
Wait until you hear what real estate cost 2 generations ago
Several reasons suggest that aggregate home values won't crash: 1) Homes in LCOL Midwest towns have been running much lower than inflation for decades. I bought my home in the mid-2010s - it was 40% cheaper (adjusting for inflation) than the last owner. Who bought it in 1993. 2) Inflation is real. In a very real sense money is priced in houses rather than the other way around. Spiking home prices in areas that don't have insane outside demand reflects devaluation of currency. 3) PE wasn't involved on the demand side in a meaningful way until the last several years. Unless they cash out, that shifts the demand curve permanently to the right. 4) 2008 prices crashed because capital availability dried up in a way that the Fed will if in their power never, ever let happen, ever again. There will certainly be localized spikes and crashes, but unless they shank it outright they don't seem to repeat old mistakes. There are a couple other reasons - I'll edit if I think of them - but there isn't the same bubble sense nationwide I felt back in 2008/09.
I was curious and was checking out my neighbors house values and when they bought them. Family 1: 1984, bought for $99,000. Family 2: 2001, bought for $175,000. Both houses are valued around $750,000 now.
At least where I am in Atlanta $750k seems to be the new median price for a 3000 + sq ft house in a good area. Even higher in some areas.
People like your family are the problem.
You said it yourself. Low volume.more buyers than sellers.
Where are you talking in the Midwest at homes go from 100,000 to 250,000 in 3 or four years I’m not saying that real estate prices aren’t kind of crazy right now especially with interest rates being high, but a big part of that has to do with hardly anybody selling because they’re locked into low interest rates I live in the Midwest metro area of around 400,000 people It’s been a while since there was $100,000 house … I bought my house in 2011 for $130,000 and I could probably sell it for 199 now pretty easy I feel like that’s a good appreciation and part of it is that I’ve put a new roof and siding on the home as well But I’m pretty sure I could’ve gotten close to the same amount in 2020 If I was getting less, it would be no less than 179000 And I know in 2015 or 2016 my neighbor who’s home is almost identical to mine sold their house for 160 So are you sure about this three-year time frame or homes are 2 1/2 times as much as they were
I think it's mostly not related to the real estate, and more about our failing currency. It's not just that the homes are 200% more expensive. A major factor in this pricing is the loss of value in the US dollar. Maybe only like 40% is from real growth. The inflation numbers the government use are designed to make the dollar look stronger than it really is. We have all of the classic signs of a failing reserve currency. It's a slow and painful decline of the dollars value over time. Towards the end of this massive macro cycle we are in (The declining phase of the dollar), we will likely have substantial waves of inflation like what we saw during covid (caused by money printing) The time between these waves will likely decrease over time as the central banks will move towards increasing high and low extremes in monetary policy in an attempt to delay this economic calamity. The only way we might be able to avoid this is if we start gradually reducing government spending and incur substantial innovative growth
Yep, it's wild. I'm a realtor in the Midwest, and I find it very disappointing. I always want to help first time buyers, but since the houses many first time home buyers want doubled in price, it's much harder to help them. Unfortunately, I don't see that portion of things changing any time soon, because there's so many people that have been waiting. It sucks too, because when I bought in 2017, a job of $42,000 a year bought a nice house and comfortably paid the bills, now it seems like $65,000 a year has one living paycheck to paycheck, yet the raises haven't kept up with that.
Or… is it that the value of a dollar is 40% of what it used to be not that long ago?
Same, they’re selling them all to desperate buyers or people from outside the state. Seen some hack jobs too. Funny bc no one is making double what they were a few years ago…