Since the election I’ve kinda buried my head in the sand to try and stay sane, so I’m not sure what projections are looking like for the real estate market. Unfortunately I need to move pretty ASAP and I’m having the worst luck with rentals.
So, anyone have any advice or an idea of the outlook in the next few months?
Feel free to crosspost to !AskUSA@discuss.online
I made the decision to buy at a bad time, and it turns out the mortgage rates went much higher than what I bought at. I have no idea if that will happen again, but my mental health absolutely benefited from owning my house over the stress of renting and waiting to find out if I need to move every year again.
Same, mortgage rates were near record high when I purchased but the circumstances were otherwise right. Mortgage ended up being a little over half the cost of renting and won’t go up every damn year, and homes aren’t getting cheaper. Plus there’s the option to refinance in the future if rates drop enough.
I’m honestly really surprised that your mortgage is about half the cost of renting. That has not been my experience in recent years at all. That’s how things used to be, but in post 2020 times, monthly mortgage payments often seem to surpass rent payments in my area, making the whole thing kind of a hard pill to swallow. Idk. Maybe I was looking at things wrong. I’m not a real estate expert. I just know that buying my place increased my monthly bills a bit instead of decreasing them like that. It seemed that would have happened with any property I looked at.
The caveat is that “circumstances were right” meant a sizable down payment among other things. Without the down payment, a mortgage would have approximated rent at the time. I was at the end of a lease though, and the jump to renew in a craphole apartment was enough to tip the scales. Bills are approximately the same, thankfully. I did take a hit on convenience in location, but the house was a tremendous deal.
Mortgage was always higher than rent where I live, in the past, because people were renting houses they bought a long time ago so even with the profit in there it just worked out that way. Then rents exploded here, and buying was cheaper but then prices of houses exploded and now renting is cheaper again.
Imo, yeah, probably. Home prices are fucking divorced from reality, but anyone telling you that we’re in a housing bubble is selling you a bridge. We basically stopped building housing in 2008- that’s almost twenty years now you ancient millennial* fucks- and what housing has been built has been small batches of single family homes where they don’t build more until that small batch sells. On top of that, you’ve got housing having been transformed into an investment (read that in a tone of disgust, please) with vacation rentals, REITs, and the landlord hustle further restricting supply. All that to say that the big fundamental difference between 2008 and now is that we’re massively short on supply. For there to be a price crash, we’d either need people to just stop needing a place to live on a massive scale or we’d need to start plunking down a commie block in every small or larger city a week for years (spoiler alert, not gonna happen)
I’m working with Strong Towns and some other groups trying to push the city to build a lot more housing and make our city more affordable to live in by breaking car dependency. With any luck, we’ll be able to unwind the absurd price of housing over years. I’d plunk down commie blocks of I could, but I can’t, so slowly deflating home prices over decades is the most realistic thing I can probably hope for. In other words, if you do buy, you’re unlikely to end up underwater by much.
* Am a millennial, am old fuck
No one knows.
But, if rates suddenly drop you can always refinance.
The Trump administration had a few ideas on how to fix the market, which boiled down to removing regulations. The Harris administration had a more complete plan that addressed housing costs at different angles including regs but we no ont be getting that plan anytime soon.
Don’t forget refinancing is not free, often $10000 usd+ to refinance with application, origination, title, and other fees
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Oh yes yes yes. I am absolutely going to do that
An interesting perspective I heard about is “affordability”. To describe that with my own words: if your income is stable or will grow compared to your housing costs, and housing costs are not burdensome to you, housing is affordable to you. Owning a house rather than having a lease should make your housing costs vary less, so if housing costs will go up in the future it might be useful to buy a house (but if housing costs will go down in the future it might not be useful to buy a house). I found some graphs for “Affordability”: https://dqydj.com/historical-home-affordability/ https://fred.stlouisfed.org/series/FIXHAI
I have also heard that it’s hard to find people to do repair work in some places, and that people there charge a lot of money for their services. If you have trouble finding someone who you can pay just to produce a quote for a roof repair, the actual cost of housing will probably be higher than in other places.
I had a thought after looking at this post: I expect that it’s better to own land in places that are more likely for people to want to move to or work near.
Not answering your question. But if you do buy, don’t listen to the realtor or loan officer about how big a loan you can afford. Both are incentivized to sell you the biggest house/loan. Neither will care when you’re struggling to pay for it.
You’re monthly payment plus insurance plus taxes should be something you could safely pay for six months while unemployed. If that’s impossible, get a small house. The worst possible situation is being house poor.
I went with buying raw land out of the city, for me it’s a 30 minute drive and no traffic, my “rent” is under $200 for the year of property taxes. I own the land for less than 1 year of rent.
I can live in an RV, and I can build a house or convert a shed to live in so it’s super affordable, plus I have room for a garden to feed my family.
For anyone considering this, check your zoning laws. Years ago, to save money, I wanted to buy some land and put a trailer on it so I could save up to build something more permanent.
The laws did not permit that. Nor living in an RV. Or living in your car. We had to fight to get tiny houses here IIRC, but the cost savings for those isn’t as big as I would have hoped. (And being disabled, being able to do a lot of the work to save money wasn’t an available option.)
Yes the county rules are very important, there’s only a few counties that allow this. I moved to a state that allows us to live in an RV and to build our own house out of almost any materials.
I’m not trying to step on your comment, but I read this as unrealistic? It sounds like you bought land, but don’t actually live on it currently. Like, you CAN live in an RV, but what are you actually doing with it now? Again, not trying to be a dick. I actually considered the exact same, but once we started crunching numbers on what we wanted, just buying the land and building on it was out of our budget.
It really really depends on the county and it’s rules, there are a few counties near here that have permits to live in an RV, the county I am in is a bit more restrictive and requires a building permit to have an RV.
Right now we are camping in the car as we wait for the septic, since it’s holidays things are a bit slow now.
There’s a saying that goes along the lines of: “The best time to buy a house was 10 years ago. The second best time is now”. Rates are bad but you can refinance down the road. I was also on the fence because I wasn’t 100% sure yet if we’ll still be in our city in 5 years, but our lease was ending and I was getting tired of moving with ever increasing rent. Back in my home country, you typically buy a house and live there forever, so it was also a culture shock for me to learn that the average homebuyer in the US lives in their house for only 7 years before moving on. So I had to change my mindset, and we bought a house earlier this year.
Maybe, but in another, more civilized country than the US.
Great advice in the other comments, so I’ll only add this - with this being your first house, if you can afford it, do a multifamily unit or a property that can be used as multifamily. Nearly everywhere is in a housing shortage, so you’ll be able to get a good win win with some renters that can help pay your mortgage faster while they have an affordable place to live. Best if the units can be fully separated so less drama.
I’m neutral on the housing market right now. People buying houses are generally living in them (or renting them), there’s very little house flipping like in 2005-06. There’s also no interest-only mortgages, so people actually have the cash flow to stay. Rates are probably not going up, but they might come down a little. If they do drop, I think prices will go up proportionately such that the monthly payment is the same either way. New housing is being built, but not fast enough to make a major impact on demand in the near term.
Altogether, I think housing in the US is “fairly” valued on a supply/demand basis at the moment. If we get a recession, prices might dip, but I would be very surprised to see another crash like 2007-09. However, I also don’t expect to see prices go up quickly from here other than in response to lower interest rates. So, if I were making a new purchase decision today, I’d be thinking about the following:
- Do I plan to stay 5+ years (the longer, the better)
- Can I comfortably afford to pay the mortgage (or is it at least comparable to rent)?
- Can I afford a major repair bill? Especially if any of the big ticket items will hit their typical end of life in the next 5 years.
Here are some of my major home maintenance expenses from the last 10 years:
- Water supply line to the house failed (polybutylene): $2.5k
- Tankless hot water unit failed: $3.5k
- Wildlife exclusion due to rats in the attic and crawlspace: $2k
- Electrical repairs due to rats in the crawlspace chewing on wiring: $3.4k
- Totally gut and rebuild kitchen & bathroom due to plumbing failure: $2k deductible, plus my homeowner’s insurance increased every year since
- Replaced failed mini-split HVAC system: $3.5k
- Dig up and repair sewage line that was clogged with roots: $3.5k
- New sod to repair the lawn after the plumbers dug it up: $1.5k
Those are the big items I recall that I had little choice in. I also replaced my way past end of life 2 zone HVAC system for about $30k. I could have kept the old one running longer and I could have gotten a cheaper replacement (maybe $22k), but the old system was struggling and couldn’t keep the house comfortable anymore. I seem to recall hearing a good rule of thumb is to set aside 1-2% of your home’s value every year for major maintenance and that seems about right from my experience.
Since 2008 the best time to buy has been when you have the money and find something appropriate. It’s no different now. Millennials have been hoping for a housing crash they could take advantage of for 16 years and it hasn’t materialized. Prices just keep going up and historical evidence suggests that will continue until another crash at an indeterminate point in the future. Trying to time that point is only going to leave you as a permanent renter.
It’s always a good time to buy if you are confident that you will live there for 3-5 years. Even pre 2008 crash, homes recovered in about 5 years.
The important part is avoiding becoming house poor. The payment you can qualify for and the payment you can afford are very different. There’s plenty of online calculators that can show you what a payment would look like. In many states taxes can increase dramatically after the first year, so be prepared to pay more in the future. For a down payment, 20% is ideal but often unrealistic for a first time buyer. More is better, but don’t clean out your entire account. You can put as little as 3% down, but that’s a good sign you can’t afford it if anything goes wrong
You can test drive a payment level while watching the market. Pick the price bracket that you think might be your max and calculate the payment. Then set up an automatic recurring transfer from your checking to a savings account for the amount of the theoretical house payement with escrow - current rent. This will help you see if you can manage a higher payment or if you will feel too house poor. Those savings transfers can be earmarked for the downpayment too.
When figuring out how much of a downpayment you can afford, don’t forget to reserve money for closing costs which can be thousands of dollars. You will also need to reserve some emergency funds, and expect to buy a significant number of tools in the first few years. Yard care tools, ladders, etc. really add up.
If you look at places that need a little work, do your best to arrange to have all that work done before you move in. For example I wish we had our floors refinished before we moved in. To do that now would be a lot like moving twice.
The best time to buy is when you need to, it’s hard to time the market and if you are going to stay there for a long time all that matters is can you afford it. Where I live they sure seem overvalued, but when we bought our house I was sure it was overpriced and the theoretical value now is 2x that amount not even 5 years later, WTF? So my guess is we will see a downturn, especially with the new government, but really the best time to buy doesn’t always align with the best price.
Remember that maintenance on a house is expensive too, build that into your affordability calculation.
