Buying a House - Venting/Freaking Out

That's a LOT of red!

(I do think the price comparison to pre-recession prices may vary by region. My home is still 21% under what it was appraised for pre-recession)

The national numbers show the average house price has passed the pre-recession pricing, but real estate pricing is very Local in nature.

We're up a lot! Other places not so much. A few places still are below normal. Average them together and you get a National Average that is above what the national average was before.

But hold on to your hat because the economy is liking the idea of Trump. If it likes the actuality of Trump then your prices will climb too.

Here's an excerpt from something I just put on my company Facebook page:

IT'S OFFICIAL, THE FEDS RAISED THEIR RATE TODAY

That doesn't mean mortgage rates are instantly going to rise by 1/4% - 1/2%, but it does mean the secondary effects of that raise will begin affecting mortgage rates soon. (and rates have already risen some this afternoon)

But the Feds rates won't be the biggest effect on mortgage rates. The reason for the Feds increase is that the economy is beginning to wake up. Trump's election and the promise of the removal of some restrictive legislation that has held the economy down as well as a pro-the people type of government instead of a pro-the government type of government we've been living with ensures inflation.

Inflation is good as long as we don't get too much too fast. It means things are growing and times will be easier for you. You'll have money to spend and you won't be looking over your shoulder wondering what else is going to go wrong.

So the bottom line is that any of you on the fence about buying a home need to do it sooner rather than later. Rates & prices have begin their rise.

In reply to carguy123:

Ok, I appreciate the info and all, but what was with the "Liberal" dig? Nice attempt at a flounder? Is it even right? The hardest hit were nevada and Florida, neither known as particularly blue states. They're purple at best.

In reply to carguy123:

I will stop short of calling that a political flounder, but it is dangerously close, and has pretty much nothing too do with pHeller's new house.

---speaking, of course, as a guy who has crossed that line a few too many times.

carguy123 wrote: Owning your own home is good for both you & your kids. Plus it is the #1 way for regular people to get ahead! Here are 9 reasons study after study show home ownership benefits you over & above just the satisfaction of owning your own home and not having a party wall with the neighbors. #9 is probably the most important.

I agree with a lot of what you posted, but in the interest of presenting the same argument in reverse:

Why your house is a terrible investment

It's important to remember the plural of anecdote is not data. I have owned 3 homes (now age 32), and completely understand the value both ways. It is great to have a home that I own to come home to, where I don't have a management company making the rules to how I live. If something important breaks, I fix it RIGHT THEN. If something trivial breaks, I can set my own schedule to fix things. I really, really, value being left alone to do my own thing. On the other hand, I have rented out bedrooms in my home pretty much since the beginning, and my roommates get a pretty sweet deal too. For the price of $500-700/month including utilties, they write one check per month, don't ever have to deal with utility providers, and have a bedroom (and sometimes bathroom) of their own. The lack of responsibilities is very appealing when you watch them going out to have fun while you are stuck renovating your second home top to bottom.

I could sell my 2 current homes, liquidate the fleet of cars, rent a swanky apartment with a 1 car garage, and drive a V12 Vantage as my only car, owing nothing to anybody. There are days that has enormous appeal.

I'm 29 years old and unmarried, and I bought an apartment for my family, my parents and I. There I also make some excellent neighbored and friends and enjoy my time a lot. My parents are also happy to have it.

Duke said:

In retrospect, had I known what a non-event it was going to be, I'd have added $30k-$40k to the budget and bought a similar house but in a slightly nicer neighborhood, but I have no regrets.

Same here.  My first house payment in 1977 was $352.55 a month for a modest neighborhood.  For $400 a month, I could have moved to a much nicer neighborhood 1/4 mile down the road.  I was knocking down $15,228/year at the time and wife was making much less teaching.  

I understand you so much. My husband and I had a long story of buying a new [canoe].  [It was awesome, and then some mod went a deleted it!?]

scared canoe?

Alex lives in a canoe

I bought my first house a month or so after getting fired from my first dealership job in 2010. (The only time I've ever been fired). It was a foreclosure. Abandoned for a few years. I basically squatted there until I got another job, made the place nice enough to rent out some rooms. The house was $30k-ish. I put maybe 15k into roof, deck, porch, tree removal and general maintenance. I sold it to my old boss who just moved the area. It was a great fixer upper for him. Still needed a ton of work but selling it to him for 100k off anything else in the area let me buy something much better fitting for me (read; big shop with a lift) and let him and his new wife have a ball making the place their own. I overpaid for my current house because the owner was a tool but I wanted it and a shop/lift doesn't add value to a house but I knew how much it would be to build myself. However I bought at the end of 2018 right before the market went berserk. Now it's worth more than I paid!

I bought my first real estate when I was a senior in high school in 1975. It was an investment with others. I never lived in it. I've 1031 exchanged my share of that property probably a dozen times since even trading one for two.

I also thought the first property was expensive when I invested but over time it's been one of the best investments I've ever made. And you can't freak out over corrections. The values will come back.

najamsoc said:

Wow! Even back then, in 2016, the market seemed “inflated.” What would you say about the market today? It’s terrible! The prices are insane, and I don’t even know if I will be able to afford a house in the following 10-15 years.

It is getting out of hand here still in SC. Way too many investors/flippers still buying and trying to cash in a $200k payday. Another builder has abandoned building it's new neighborhood opting to sell to an investor that is turning neighborhood into rental homes. (These are expensive rental houses). They are renting them out for 2x-4x what a normal mortgage payment would be. Crazy and scary as heck. 

ProDarwin said:

Keith Tanner wrote: For all those who don't believe it's worth owning - you're obviously doing the exact opposite math from your landlord

Many landlords are really bad at math

Last I heard real estate has made the most millionaires and its not even close. Im not saying that was all done by leasing, just saying historically real estate has been a great investment.

I have a thing for saving old houses (while almost the entirety of my family is in the business of tearing them down and building new ones), which has led to also being a landlord. Being a landlord kind of sucks, its a pain in the ass, and people tear up the original 1912 heart pine floors you spent months working on. My friends that rent laugh and say after repairs and the work, being a landlord is costing me money.

When I do the math I see that a couple months I lose money, for the month, and lots of months I profit less than expected because of something small, but I get some pretty good tax advantages, I get some extra money in my pocket, and I have someone else paying for my investment. I didnt pay what my bank paid for the house, and even in a super weird market its worth multiples of what the bank paid for it and if I decide to cash out today and I do a very liberal accounting on ever dime ive spent on the house including taxes and utilities Id probably be 4x my money.

Im not saying im even good at real estate, im just saying I dont think landlords are bad at math. There is a reason you have some of the largest pools of money being poured into real estate. Historically if you pick a good area and buy right, you generally do pretty good, and have plenty of time to get out, if the area starts to turn.

In reply to najamsoc :

Housing prices went crazy the last couple years when money was essentially free, and now that rates are higher (probably where they need to be, but thats a whole different discussion), im surprised to see that prices arent dropping all that much. Im in a pretty hot area, so it may be different in other parts of the country, and it has definitely cooled, but people are still essentially paying 3% rate prices at 7% rates. Now you are seeing some focus on the transferable loans, and while everyone might have taken a 5-10% hit from the 50-100% they where already up, those houses with 2 or 3% transferable mortgage are seeing a premium because of the cheap money for the new buyer. So its a compounding effect, the cheap money led to price increases, then money went up and prices didnt equalize, so there is another increase for the people that can offer the cheap mortgages.

We still dont know how bad this economic downturn will be and how it will effect housing prices, but based on what Im seeing now, I doubt we will see housing go back to "normal," and I legitametly worry about my friends who didnt get in before the last craziness.

SWMBO and I were talking last night, and decided we will probably not be doing a college fund for our child. Instead we will be putting money aside for a house fund for our child. Id rather hand my kid a large sum of money when they turn 18 to be used to buy a house or a down payment on a house so hopefully they can be in a good position, but it might just be so they can even enter the market at all. If they choose a path that requires a college education and we can help them pay for it when they decide we obviously will, but i think nowadays owning a home puts most people in a better situation than money for college. We are both college graduates.

najamsoc said:

Wow! Even back then, in 2016, the market seemed “inflated.” What would you say about the market today? 

He'd say, "Not a big deal. I bought before the explosion, so I am now part of the bourgeois capitalist class, and I no longer have to worry about things like that" 

If my wife and I hadn't bought in 2016, i think we would have been in trouble.  Our house, according to Zillow, is worth 165% of what we paid for it. No way we could buy it now if we had the job/grade levels we had when we bought. Even with adjusting wage for inflation. 

As far as college debt vs house down payment...  I think mortgage rates are possibly still better than (non federal) college loan rates, but I could be wrong. The big sticking would be down payment and having it be enough to avoid mortgage insurance I guess. 

Opti said:

In reply to najamsoc :

Housing prices went crazy the last couple years when money was essentially free, and now that rates are higher (probably where they need to be, but thats a whole different discussion), im surprised to see that prices arent dropping all that much. Im in a pretty hot area, so it may be different in other parts of the country, and it has definitely cooled, but people are still essentially paying 3% rate prices at 7% rates. Now you are seeing some focus on the transferable loans, and while everyone might have taken a 5-10% hit from the 50-100% they where already up, those houses with 2 or 3% transferable mortgage are seeing a premium because of the cheap money for the new buyer. So its a compounding effect, the cheap money led to price increases, then money went up and prices didnt equalize, so there is another increase for the people that can offer the cheap mortgages.

I think the prices will decrease from interest rate increase like you expected, but it will take time. I imagine most sellers still want to get the earlier price for their homes, because who wouldn't, but eventually the market will drive them down. 

But that's just me guessing. My wife and I plan to stay in our current home and we have a low fixed rate from a few years ago so I don't have as much skin in the game as a lot of people. 

Apexcarver said:

If my wife and I hadn't bought in 2016, i think we would have been in trouble.  Our house, according to Zillow, is worth 165% of what we paid for it. No way we could buy it now if we had the job/grade levels we had when we bought. Even with adjusting wage for inflation. 

 

As far as college debt vs house down payment...  I think mortgage rates are possibly still better than (non federal) college loan rates, but I could be wrong. The big sticking would be down payment and having it be enough to avoid mortgage insurance I guess. 

I not a fan of college debt, me and the wife both worked through college to pay for it, but I understand it's unavoidable sometimes. I wasn't talking necessarily about the rates of college debt vs mortgage rates but the disparity in net worth between home owners and non home owners.

In the US home ownership it is the single biggest indicator of wealth. I think owning a home sets someone up much better than a college education and our concern is without some big changes or corrections it is going to be much harder for the future generation to get in 

In reply to gearheadmb :

Some of the analysts are concerned about the massive amounts of people that bought or refinanced when rates were low and have no intention of selling because of their rate. They think this will contribute to low inventory levels and keep prices high.

I'm not sure if it's true, but me and the wife say the same thing. We've got a low rate and because of that have no intention of selling anytime soon

In reply to Opti :

Same here. I have no intention of selling. (Unless some fool offered me double my home's value.)

Unless you have to move, why would you?  The next step for us is quite a bit more than what our house is worth.  Then add in the fact that the mortgage rate is three times what we currently have and that really locks us into this house.  I imagine it's much the same for other people as well, the fact that the higher mortgage rate makes the next step basically unaffordable, so they're not going to move.

That means lower inventory and the prices will be more stable.  In 2008 the mortgages were funny money, they weren't supported by income etc.  That's not the case now...

najamsoc said:

Wow! Even back then, in 2016, the market seemed “inflated.” What would you say about the market today? It’s terrible! The prices are insane, and I don’t even know if I will be able to afford a house in the following 10-15 years.

Here's an idea to be able to afford a houseboat.

Step 1: Join a forum.

Step 2: Make 1 comment on an off topic thread that hasn't been posted on in over a year.

Step 3: Wait a couple days and then edit your post or make a second post containing a link to some scam website.

Step 4: Get banned.

Step 5: Profit?

In reply to pheller :

My advice is always buy the worst house in the best possible neighborhood. 
  Just like a car, the building always depreciates, while the land appreciates at least at the rate of inflation. Typically higher than the rate of inflation if the neighborhood is worthy. 
      That rate of property appreciation is never even or steady.  Population growth is the prime determining factor. Steady or lower inflation increases demand.  
      The building itself is what most people get excited about.  Stone or Brick exterior tends to be the lowest maintenance.  ( no need to paint except wood trim)  slate or clay tile roof demand the least frequent replacement. With asphalt shingles the highest replacement. 
   You can spend a fortune keeping current with interior trends. Magazines and shows have the latest trends  while the classics tend to remain constant.   
  budget at least 1&1/2% of the price of the house for annual taxes 2% is towards the high side  more than 2% is cause to look at local political activity to judge if you are receiving a fair return on your costs.  Remarkably the highest priced neighborhoods tend to have the lowest tax rate, rate! Not dollar cost. 
    Avoid frequent moving.  Selling a house and buying another,  costs about 10% of the value of the property. Between moving costs,  realtors fees, closing costs on the new place, and adjusting furniture and trim to the new location.   That's if you've  choose  wisely. 
    I've moved 2 times in nearly 50 years  my first house cost me $27,800  and sold 9 years later for $99,000 this place cost an additional $8000 and today it's value is approaching  2 mil. 
    Of that,  less than $400,000 of it is the house. Yet that house took 31,000 hours of my own personal labor. At least that in material costs.