Ethics of Real Estate Investment, NIMYism and the Housing Crisis

z31maniac said:

I just don't understand who can afford these prices? Are the vast majority of Americans just OK being house poor? Even with that I still don't get it. 

I deleted this post yesterday, maybe  I'll keep it today.  Here goes:

I was pre-qualified for a $350k loan in 2013.  We bought our dream house in Tacoma, WA for $260k and I put $60k down and financed the rest.  With both me and Mrs. Hungary working (I was an upper level aircraft technician with a rather large company in the area) and Mrs. Hungary working in-home assisted care, we found ourselves in debt to the tune of about $13,000 after 3-years of living stateside.  Our only debt at the time was a $230 payment for Mrs. Hungary's associates degree.  No other car payments, no fancy phones, no vacations (save for the occasional camping trip to a campground with no fees), no avacodo toast, nothing...

Sold the house in 2016 for $350k.  I thought that was the correct price for it, honestly.  Plus we had done a bunch of MUCH needed refinishing to all the wood work, and repainted the insides (all sweat equity).

That house just sold for $750k and I can not FATHOM how someone in TACOMA had that much money to spend on THAT house.  It's SO UGLY now.  The owner after us ripped up all our beautiful landscaping, painted the place a god-awful ugly blue....  and it's tripled what I paid for it 10-years ago.

So I looked at my grandparents old place.  My grandfather bought it when he worked as a machinist for the same company I work for.  No education, single family income, three kids...  The man paid for it, sent two kids to college, and retired with two Cadillacs and an RV.  His place my Grandma sold around 2015 for about $190k.  It's now $400k.

Even though I've continually advanced my career (I'm now a mid/upper level engineer in the same company) I can't afford my old house.  Simply put, my salary grew by about 50%, while my house grew by 300%.  Worse yet, I don't think I can even afford my Grandfathers old place even though I'm miles ahead of him in my career path (still no student loans, car payments, etc).

TLDR:  I don' know man.  But my spidey senses have been tingling for YEARS now and it's still continuing seemingly unchecked...

Anyhoo, here's the house.  I wish I had some pictures of the way it was on this computer.  It was so amazing, I sometimes wish we had never moved.

z31maniac said:

bobzilla said:

The one south of us was a little slower, 9k to 28k.

These are just such small towns I find it fascinating. 

I can't imagine living somewhere so small. 

Where I grew up, the town that was my mailing address had maybe 200 people in it, and it was a 10 minute drive from my house.

In reply to Hungary Bill (Forum Supporter) :

Even though your income has grown 50% and the house has grown 300%, everything else is more expensive too. So we have less of our income to use on a house now. 

Where I live, $400k is your lot buy in lol

It's the same in suburban Atlanta. I used to look forward to selling our suburban ATL ranch and moving to a small college town and downsizing.. now I'm not so sure that plan works anymore. 

Duke said:

z31maniac said:

bobzilla said:

The one south of us was a little slower, 9k to 28k.

These are just such small towns I find it fascinating. 

I can't imagine living somewhere so small. 

Where I grew up, the town that was my mailing address had maybe 200 people in it, and it was a 10 minute drive from my house.

 

Well all of these are donut towns around Indianapolis. So while these towns are "small", they're attached to the 800k people in indianapolis, or more appropriately 1 million in marion county. add in those donut counties and we have 1.8M people in a 60 mile by 60 mile square. Sure, that's not at lot compared to many large metropolitan areas but for a rural Indiana boy it is.

In reply to Scotty Con Queso :

both. We have a HUGE influx of east coast people. Better schools, better CoL, lower taxes and comparable income levels. If you don't mind the ever present urban sprawl, weird weather and odd accents its a great place to grow a family.

yupididit said:

In reply to Hungary Bill (Forum Supporter) :

Even though your income has grown 50% and the house has grown 300%, everything else is more expensive too. So we have less of our income to use on a house now. 

Where I live, $400k is your lot buy in lol

Well at least the quality of the stuff we're buying is lower... 

In reply to bobzilla :

One of the things that is surprising to me is just how long the urban sprawl took. Indy is, or at least was until Columbus recently overtook it, the 3rd biggest city in the entire Midwest. Yet I can remember my dad talking to my cousin who was working in Indy at the time that the nice part about Indianapolis is that it's only a 15 minute drive before you're in Indiana. My cousin still bought a place 120 miles away because he was afraid of the urban sprawl and wanted at least 100 acres to insulate himself from it. It probably took 20 years, but that 15 minutes to Indiana is now... what, 30, 45 to be safe?

mtn said:

On the mortgages and home prices - we were approved for $385 or $400. Maybe $415?

I worked out that we could afford $350. That would make us just shy of house poor. We bought the best neighborhood we could, which was difficult because any home in our price range was immediately bought by a contractor and torn down. That was 2016. 
 

7 years later and homes bigger, nicer, and in better condition than ours are being torn down. One down the street was sold for $540. There is a fence around it now and a small backhoe. Looks like the going rate for a lot is $540k. 
 

It is, quite simply, unsustainable insanity. 
 

I predict in a year that prices will have dropped because of the interest rates, but I doubt they'll drop to a reasonable amount. I am just thankful we aren't buying today. 
 

 

I dont disagree about the unsustainable part, but I saw something yesterday about the interest on the debt has surpassed military spending. Now military spending is just an arbitrary number that people will use as the measuring stick to tell us the sky is falling, but it does illustrate our interest payments are growing rapidly, largely because of the higher rates. In general, I dont think you see as much coverage on inflation anymore, so Im willing to bet we start seeing some downward pressure on the rates, and we light this thing on fire again, or at least I think its more likely than a large correction in the housing market.

This is a product of inflation and way more tax revenue being needed to pay interest on debt.  It isn't going to improve unless the overall economic understanding in the country improves significantly.  This is a great way to concentrate wealth at the pointy end and trap the poor in eternal poverty.  One used to be able to work their way into a decent life and great future for their kids.  That is now getting significantly more difficult.  
 

I find it ironic that people will complain about home prices without seeing how world events, unlimited spending and the desire for absolute control contributed to it all.  

mtn said:

In reply to bobzilla :

One of the things that is surprising to me is just how long the urban sprawl took. Indy is, or at least was until Columbus recently overtook it, the 3rd biggest city in the entire Midwest. Yet I can remember my dad talking to my cousin who was working in Indy at the time that the nice part about Indianapolis is that it's only a 15 minute drive before you're in Indiana. My cousin still bought a place 120 miles away because he was afraid of the urban sprawl and wanted at least 100 acres to insulate himself from it. It probably took 20 years, but that 15 minutes to Indiana is now... what, 30, 45 to be safe?

I heard a stat recently, and now you're hearing it from me on the internets, so take it with a grain of salt.  Columbus, OH is set for 20 years of development in 10 years or less.  So there is going to be a huge increase in housing costs in that area very soon, similar to Raleigh.

I think the one thing that we can agree on is your metro area is going to rapidly expand very soon and you can't stop it by complaining.  If you don't like how crowded it is now, you're really going to hate it in 10 years so move now.  That is one good thing about Pittsburgh - the topography has stunted growth and sprawl for years.  The city and its surrounding neighborhoods are built out and there's no room for additional infrastructure.  So if you want to live in a neighborhood that won't grow, and you really like E36 M3 weather, move to Pittsburgh.    

In reply to mtn :

It has taken turns on each side. The Northeast side (Fishers, Carmel, Lawrence, Geist) has been exploding for 20 years. The NW side took off 10 years ago. South side has been a slow creep for the last 30 years (greenwood, southport, Camby). East side is starting now (Greenfield). Growing up and living on the west side, I can tell you that its not the same place I remember 20 years ago. From 465 west to Danville is one long urban expansion. Avon filled in and exploded. Plainfield as well. 

In reply to Scotty Con Queso :

I don't want to live in ANY neighborhood. IT's why we bought and built where we did. 

yupididit said:

GIRTHQUAKE said:

Just checked Zillow to see what my current home price is- I paid $125K in 2021, and I've uploaded no images of the interior or told anyone in realty about the improvements I've made like new doors and windows, interior, LVT flooring, or anything. Zillow says by streetview it's now worth $210K. Ha ha, wow and people still think it's not an absurd market that's pricing people out of homes today.

 

Is a $125k house typical price in 2021 Omaha?

It used to be for ~1500 square feet on average lots, but it's a little hard for me to explain without revealing the ZIP codes and addresses of past living areas of mine and where my friends and family live, so I'm gonna try to give a rough overview. Basically my besties, family and myself all used to live in one of the fastest accruing ZIP codes in the nation- value in 2018 was still in that $125K range for fixers, but the market increased so massively over the past 5 years that some of my friends were priced out of homes they were actively trying to buy. One of my bestie's homes increased in price so sharply between 2018-2021 that they were basically paid $30K a year to live there, and they turned around and promptly upgraded to bigger- another friend who's now in Cali bought his originally for $115K and sold for ~$275K with the original single pane windows still in place. My home is a bit of an outlier (I'm also technically not in Omaha) but frankly it's because it looked TERRIBLE in photos and needed a tear out.

That's why I have to disagree with Boost- like yeah, someone is buying these homes, but I know of a handful owned by VRBO, know too much about investment banking and I have too many friends and acquaintances that had to go back to actively saving to make a future attempt. And this is just Nebraska, I have friends in Florida that were priced out of 750 Square foot apartments and are now having to raise their families in trailer parks because cost of owning/renting has increased so sharply. Here in Nebraska, you can't really even make $16/hr and call it a "living wage" anymore even, and that's what I made as a paramedic in 2017.

I don't think it's about interest rates. Rates were at about 7% 30 years ago when I bought my house, but houses weren't stupid expensive back then. It's about supply and demand. People with money are piling in from China and India. People with no money are piling up on the border trying to find a way in. Investors looking for safe places for money are buying up single family homes to rent. People with money also piling in from the coasts where they don't have enough money to live any more. We also have a shortage of people who can build houses and materials cost more. 

And isn't going to change anytime soon.

bobzilla said:

In reply to Scotty Con Queso :

I don't want to live in ANY neighborhood. IT's why we bought and built where we did. 

I hear ya man.  And I'm sorry about the situation that unfolded for your forever home.  Hope you can find another place in the not so distance future. 

Hungary Bill (Forum Supporter) said:

z31maniac said:

I just don't understand who can afford these prices? Are the vast majority of Americans just OK being house poor? Even with that I still don't get it. 

I deleted this post yesterday, maybe  I'll keep it today.  Here goes:

I was pre-qualified for a $350k loan in 2013.  We bought our dream house in Tacoma, WA for $260k and I put $60k down and financed the rest.  With both me and Mrs. Hungary working (I was an upper level aircraft technician with a rather large company in the area) and Mrs. Hungary working in-home assisted care, we found ourselves in debt to the tune of about $13,000 after 3-years of living stateside.  Our only debt at the time was a $230 payment for Mrs. Hungary's associates degree.  No other car payments, no fancy phones, no vacations (save for the occasional camping trip to a campground with no fees), no avacodo toast, nothing...

Sold the house in 2016 for $350k.  I thought that was the correct price for it, honestly.  Plus we had done a bunch of MUCH needed refinishing to all the wood work, and repainted the insides (all sweat equity).

That house just sold for $750k and I can not FATHOM how someone in TACOMA had that much money to spend on THAT house.  It's SO UGLY now.  The owner after us ripped up all our beautiful landscaping, painted the place a god-awful ugly blue....  and it's tripled what I paid for it 10-years ago.

So I looked at my grandparents old place.  My grandfather bought it when he worked as a machinist for the same company I work for.  No education, single family income, three kids...  The man paid for it, sent two kids to college, and retired with two Cadillacs and an RV.  His place my Grandma sold around 2015 for about $190k.  It's now $400k.

Even though I've continually advanced my career (I'm now a mid/upper level engineer in the same company) I can't afford my old house.  Simply put, my salary grew by about 50%, while my house grew by 300%.  Worse yet, I don't think I can even afford my Grandfathers old place even though I'm miles ahead of him in my career path (still no student loans, car payments, etc).

TLDR:  I don' know man.  But my spidey senses have been tingling for YEARS now and it's still continuing seemingly unchecked...

Anyhoo, here's the house.  I wish I had some pictures of the way it was on this computer.  It was so amazing, I sometimes wish we had never moved.

I honestly don't understand the housing costs here in Tacoma. You have houses that up until a few years ago were 100k, selling for close to 300k. For no reason. With all the deferred maintenance. It's insane! It'd be one thing if it was a really nice area like University Place but we're talking blocks away from huge homeless encampments that throw trash everywhere and treat the city like a toilet.

Until supply exceeds demand, home prices are going to continue to rise.  I thought that the stock market was over inflated for the last several years and was waiting for a crash.  Which has never happened and doesn't look like it's going to anytime soon. 

We bought our house in 2008, almost at the bottom.  We should've waited another 3-4 months, but even with that it's basically tripled in value since then.  Like many others here, we couldn't afford to buy it now...

In reply to docwyte :

Fun fact, our latest assessment has us at $350k, we could sell likely at $400k. We paid $218k in 2004, inflation shows that to be $352k, so pretty close actually to just keeping up with inflation.

docwyte said:

Until supply exceeds demand, home prices are going to continue to rise.  I thought that the stock market was over inflated for the last several years and was waiting for a crash.  Which has never happened and doesn't look like it's going to anytime soon. 

We bought our house in 2008, almost at the bottom.  We should've waited another 3-4 months, but even with that it's basically tripled in value since then.  Like many others here, we couldn't afford to buy it now...

Yeah, it feels like everything is way inflated.......I'm also waiting for the crash. The fiance finally got a new job after 5+ months, but it's in ad/marketing......and that's the first place budgets get cut when things go to E36 M3. I'm starting to stockpile cash just in case.

OK unemployment insurance is BS, it basically works out to $13/hr. I haven't made that little since I was an ER clerk at QuikTrip in college. And that was 2001. 

Seconded to Snowdoggie- intrest rates right now are only 7.15% on a fixed 30 year, they've been FAR worse in the past. But aside from people trying to enter the nation, you also have banks and investment firms who are using homes as investments and capital, while small homes have always been a bad investment for builders because larger ones have much better returns.

bobzilla said:

In reply to docwyte :

Fun fact, our latest assessment has us at $350k, we could sell likely at $400k. We paid $218k in 2004, inflation shows that to be $352k, so pretty close actually to just keeping up with inflation.

And I know #1stworldproblems......we'd like to sell our house and move, but things have gone so crazy, plus our current mortgage is below 3%, it just doesn't make sense to make a move. Unless I all of a sudden double my salary, which I don't think is going to happen.

GIRTHQUAKE said:

Seconded to Snowdoggie- intrest rates right now are only 7.15% on a fixed 30 year, they've been FAR worse in the past. But aside from people trying to enter the nation, you also have banks and investment firms who are using homes as investments and capital, while small homes have always been a bad investment for builders because larger ones have much better returns.

Money was "expensive" and houses were cheap. Now we have expensive money and expensive houses. I understand we used to pay higher rates but we werent paying this type of money for homes. I dont think anyone would care about 8% loans if housing prices dropped like crazy.

My entire family is in the construction/building industry, and I wouldnt say historically small homes are a bad investment. They have slimmer margins, because most people are buying a smaller home for budget reasons, so largely you are being shopped on price, which means you want to be inexpensive. The benefit is you build the same house over and over with few options so you develop a relatively standardized process and can do a bunch of them quickly with little headache, plus you can keep a steady stream of work for your trades so you can actually get the out there. Custom homes and larger homes have better margins but they are generally a massive headache, stuff gets changed in the middle or someone doesnt like the tile so you rip it back out. My uncle has said repeatedly he'd rather a bunch of small homes instead of dealing with a single custom home. Problem is with rising lot and material costs, the first time home buyer either has to move upmarket or look at used homes. The traditional first time home buyer new build industry doesnt exist around here anymore.

bobzilla said:

In reply to docwyte :

Fun fact, our latest assessment has us at $350k, we could sell likely at $400k. We paid $218k in 2004, inflation shows that to be $352k, so pretty close actually to just keeping up with inflation.

For another perspective - and I'm not picking on you, Bob, just using your numbers as an example - will edit with some others from this thread later - when we do the math, we get the reminder that time will smooth everything out. 
 

I'm seeing that as a 2.5% to 3.2% YOY increase depending on which number you are using. According to the CPI data, we have seen 2.6% YOY since 2004. So your home value seems to be very reasonable. 
 

We bought ours in 2016 for $345 (I may have said $350 earlier, I think I was wrong). Today, I believe we could sell for $420 and possibly up to $540 based on recent sales, but that I'm not convinced. That would be a 2.85% (reasonable) to 6.6% (not reasonable) YOY increase. CPI data showing 3.47% - high but not too crazy. 
 

I think that the missing part of the picture here is wage stagnation. 
 

EDIT: Hungary's Tacoma house had

• 16% from 2013 to 2015 against 1% CPI
• 10% from 2015 to 2023 against 3.2% CPI
• 11% from 2013 to 2023, against 2.7% CPI

Translation? Tacoma has been going nuts but is actually slowing down. Not to a reasonable level though. 

z31maniac said:

bobzilla said:

In reply to docwyte :

Fun fact, our latest assessment has us at $350k, we could sell likely at $400k. We paid $218k in 2004, inflation shows that to be $352k, so pretty close actually to just keeping up with inflation.

And I know #1stworldproblems......we'd like to sell our house and move, but things have gone so crazy, plus our current mortgage is below 3%, it just doesn't make sense to make a move. Unless I all of a sudden double my salary, which I don't think is going to happen.

We'd actually have to take out a mortgage again if we wanted to move/build what we have. We are working a different plan that may have us moving to a dry heat in 8 years.