Fellow home owners, are you ready for the housing market to crash?
I know I’m supposed to want it to keep going up as a wealth generator or whatever.
But like… I wouldn’t be able to afford the monthly payments if I bought my house right now and it’s scary. Also none of my friends are buying homes, none of them are even renting full places. Just like renting rooms.
I hate that we lost sight of what wealth really is and replaced it with the idea of profit. I bought my house to provide myself with financial security, not profit.
My monthly “rent” (mortgage payment) is locked in for the next 25 years and will not go up. At the end of those 25 years when I’m ready to retire, I’ll have housing with only taxes and insurance payments. THAT is wealth. THAT is what home ownership is meant to be. If housing prices fall, it won’t change my life a bit.
That’s why I bought a house instead of renting. One day it will be paid off, and from that on, as long as I keep paying the property tax nobody can kick me out. They can cut my water and electrcity, but the house and the plot remains mine.
Additionally, if overall house prices go up that does mean that your house becomes more valuable.
However, it also means all other houses become more expensive.
So in practice, if you want to move in 10-20 years for whatever reason, it essentially means nothing that your house has gone up in value. All that extra money is going to go to another house which has equally gone up in value.
The value of a house going up means you are technically building wealth, but that wealth is entirely tied up in the house itself. Unless you are intending to become homeless it likely will stay tied up in your house forever.
House prices going up is mostly a good thing for investors. Not so much for people who simply want a place to live.
Except that many people live in their homes until they need assisted living. In which case selling the home nets them more money than they put in to pay for those services. Or consider that home prices raise at different rates in different areas so it’s possible to sell in a hot market and retire to a cheaper area when you no longer benefit from things like proximity great schools as your children are grown.
Meh I don’t care. We bought a couple years ago when rates were super lower but prices were high. Our mortgage is less than rent would be and we’re not going anywhere for a long time. I think of the house as a place to live, not an investment really. Like a car. It serves a purpose and I’ll use it until I can’t anymore.
Doing extra payments when you have a 2% loan is just throwing money away. Savings accounts rates are minimum 4% right now - put your extra payments there if you’re super risk adverse. If you’re less risk adverse, buy mutual funds that match the market.
Saving accounts pay out less then 2% here and we are taxed on the amout that is held in our saving account so it is more beneficial to downplay the mortgage.
Even with the extra payments we are still going to do ETF
You point out the Catch-22 that a lot of people miss on this stuff. They get so fixated on increasing their property values because they want to screw someone over when they finally sell their house…not stopping to think that the same thing is about to happen to them when they go to buy one. Not to mention, higher property values means higher property taxes (in some places, anyway).
Yeah like it’s cool my 200k town home I bought 4 years ago is now selling for 400k (neighbor just sold for that much).
Except that means that the 350k home I was thinking might be a nice upgrade one day, is 700k.
Like I’m way more screwed over now unless I intend to like sell my home then move to the middle of nowhere. All that higher value means is property taxes like you said. But of course renters are the most screwed.
If it makes you feel good, I’d say congrats. I’ve never owned a condo and it has different considerations than a home. I sold my first house in March 2021 after I bought our current house in 2020. Both felt like some of the smartest, best times moves. I actually do wish I would have bought a more expensive house in 2020, but we’re likely buying more land in the next 2-5 years. Not holding some kind of property right now (again, idk about condos), feels like leaving stupid money on the table.
This was actually my thought process when I got divorced. It probably would have been prudent in many ways to downsize to a condo, since it’s just me, however I could afford to buy my ex out of the house and any percent gains will be off a much higher base. I’m hoping that when I do eventually downsize, that my equity will be higher than if I had a paid off condo. In your example, doubling prices gained $200k inequity for the condo owner, vs $350k gain for the house owner (of course it’s more complicated when you factor in the mortgage)
… so yeah, it would suck for the housing market to crash, or stay down
I have like 15 years left on a 30 year fixed rate. I’d like to move closer to where I work, but I don’t want another 30 year loan and a 15 year would currently be a much higher interest rate, so I’m stuck with my house until it’s close to being paid off. Doesn’t really matter what homes are costing when you have to buy another after selling. Expensive houses only help people who own multiple homes and aren’t replacing what they sell.
A bad crash can make you owe more than you can get for the house, which can make it impossible for you to move without losing money. If you lose your job or have to relocate involuntarily, property being cheaper elsewhere isn’t much consolation if you are under water on your existing loan.
I live in Orem, a city you probably have never heard of. Population of under 100k, not a rich city by any means. Median individual income of 26k, median household income of 65k.
There are no single family homes for sale under 400k, and all apartment/condos for sale are 300k.
Just picking a random apartment for sale for a little under 300k and doing an estimate of 10% down with current rates is a mortgage of 2.2 k a month on 30 year fixed. So of course whoever buys and rents these out are going to do so at AT LEAST that number.
With JUST taxes taken out of 65k bringing it down to 45k, the mortgage/rent alone would be well over half the median house hold income for these things. But of course there would be HOA, withdrawals for 401k, withdrawals for medical care, etc. Meaning it would probably be closer to 70% of median household net just to pay mortgage on the cheapest apartment for sale.
And of course we can repeat this exercise for just about any city and get the same result. It’s scary.
Howdy neighbor! Fingers crossed it comes down, I know parts of SLC are becoming a nightmare to rent. So hopefully you have a safe and cheaper place to live.
Fun part about Orem is that all of those houses for 400-600 were built in the 80s and haven’t been updated since then.
So then you start looking at houses in at least Saratoga or Spanish fork. I landed in Springville and I bought 3 years ago before the market got as bad as it did.
House is an investment even if you build it entirely by yourself from materials harvested and processed by you. You invest a chunk of your time and effort to build something you expect to “pay you back” in the future, eg. keep you dry and warm when it’s cold outside.
Non-home owner of Lemmy here. I want you all to know that my fondest wish to see the housing market completely implode is strictly not personal.
My only chance to buy a house slipped away a few years ago. House prices have gone up by 50% or more in some locations, and interest rates have more than doubled. What was previously affordable is now completely outside my means to pay for each month.
My last hope now is for a 2008 repeat so I might be able to snag something up for what it’s actually worth. I certainly can’t count on the state or the government to take the housing crisis seriously enough to have them actually build more affordable housing for people to buy and drive the asking prices lower.
I feel this so much. My dad was a general contractor in California during the 2008 crash; we lost 6 houses that were either ready to sell, or still being built. So I personally know the kind of pain and suffering that a housing market crash can cause for certain people. At this point though I have to look out for me and my family, currently renting part of a way-to-small condo in an area where you’d need 3 incomes to afford a mortgage on a house big enough for all 4 of us.
So yeah, crash and burn market. Give me a chance to get us out of here.
It was a gigantic mistake to ever allow homes to become investments. That economic value growth is only possible by limiting the availability of homes near popular areas, which is by definition exclusionary meaning some people must be priced out of having a home in a place with good opportunities.
It’s not just unfair, it’s also inherently unstable. You’re eventually chasing away many of the workers you’re dependent on, you can’t avoid bubbles and crashes, etc.
i bought my house at the top (two years ago) and no regrets. less about it being an investment and more about having a stable place to call my own that gives me safety and not at the whims of a landlord. i’d quite like it if house prices became more affordable for everyone, the counter intuitive thing to say. 🤷♂️ i was supposed to become a nimby and vote conservative but now i’m more left wing than ever.
Pretty much this. I’m quite content with losing some of my net worth if it means other people don’t have to struggle as much to have their own place to live.
I bought at the peak myself to have stable housing while raising kids.
If house prices just stayed flat until wages caught up and then only increased similar to match wage increases (not inflation) that might be a reasonable compromise between the middle class who have a house and don’t. Those who own will still be paying down a mortgage so increasing your equity that way without being decimated if you have to move. Unfortunately at this point, that could take awhile before wages caught up.
I agree with you. I think property is theft; in an ideal world everyone would have the right to shelter and no one would own land privately. And I also think fear of housing insecurity - including the fear of a landlord extorting or evicting you - is the biggest reason America is obsessed with home ownership and I can’t criticize anybody for pursuing it. The only way to have secure housing in the US today is to own your home, and everyone has a right to secure housing.
The housing market isn’t going to crash. We’re at the highest mortgage rates in 23 years and it’s STILL a sellers’ market. The fact is, inventory being incredibly low + home buying being desirable for many == no reason for a crash. Even the Great Recession only resulted in a temporary price dip.
I know a lot of millennials and zoomers would LIKE for there to be a crash because they think it would let them afford a home. This is a false belief, though: if there were a major crash, it would likely be accompanied by a recession in the labor market too, so there goes your ability to pay for the house.
Also, it’s not black and white. If house prices and interest rates cooled off, it would let me (a homeowner) refinance my mortgage.
Morever, there are benefits to home ownership outside of equity / profiting off a sale:
Tax benefits (I can deduct my mortgage interest and property taxes; can’t do that with a rental)
Do what I want with my house – customize, upgrade, etc.
No landlord to tell me what I can or can’t do, or kick me out
For complicated reasons, there aren’t many detached house rentals in my area, so owning a house means no loud, obnoxious apartment living – this is the BIG one for me
Look at Europe. For many the closest you get to buying a house is a 99 year lease, and for the majority renting is normal. The main difference is that renters have many more rights so there’s less reason to want to own for yourself.
Yes, and it will cost me some money as I’m getting ready to put mine on the market in the coming months.
But I don’t give a shit, the current conditions are unsustainable and I have great empathy for the generations behind me that are excluded from what is a fucking FOUNDATION of getting a stable life going. The shit has to come tumbling down at some point, otherwise our social structure will continue to degrade. The people who will bitch and moan about it are so out of touch they should be ignored anyway. Bring on the crash.
Colorado. I’m not going to really lose money over what I paid because I’ve owned it for almost 20 years. But it will be way down from the market high here and I think that’s peachy. I’d guess I’ll make 20% less than if I had sold 1-2 years ago. If the market really does crash like 2008 then 30% or more. But Housing prices have got to come down still, a lot. Banning corporations from owning single family residences would help a ton.
I care more about houses being affordable for everyone than I do about turning a profit. Greed is a huge sickness in our world. Hell I don’t think houses should be an investment vehicle in the first place. It’s a place to live not a goddamn wealth generator.
I mean things can get way worse. Look at Canada and Australia. No sign of a crash in either yet, prices just keep climbing. Homeless encampments and the like were alien to us up until recently. The median Aussie household income is ~$65,000. Homes start at about $600,000 and at that price a lot of them are teardowns, you’d be spending at least $200,000 in repairs.
Banks want 20% down.
It is scary, definitely.
I rent a nice house, I’m lucky. I’ve also not had a holiday in over a decade…
Non-home owner, currently I could live a hundred lives and never own a home. It must crash, and it must become regulated to prevent this from occurring.
Housing as a wealth generator is a bit of a lie. Prices going up only benefit people or corporations who own multiple homes or those who rent out their homes, and the few people downsizing for retirement by selling their 2500+ sq ft for a small apartment somewhere.
For the regular Joe you always need somewhere to live, so it doesn’t matter if your houses is $100k or $1 million, that money is always going to be tied up in the house and not be spendable.
If anything the prices being high is worse for regular home owners because you’re going to be paying thousands more in interest on the mortgage that goes straight to the banks.
This was my thought, next year my escrow increases by $100 because my property is supposedly 50% more valuable? Nope, it’s a wealth stealer, not a generator.
Let’s also not forget that in a high value market you can’t magically sell a more expensive house and acquire a less expensive house of equal value. You have to downsize and the house of lesser value is still overinflated.
If anything the prices being high is worse for regular home owners because you’re going to be paying thousands more in interest on the mortgage that goes
I always wondered why people never seem to think about this side of the equation.
Your interest rate shouldn’t fluctuate with the housing market, unless you have an Adjustable Rate Mortgage. Most people choose a conventional mortgage where you’re paying interest on the value of the loan you received from the lender, not on the value of the property itself. You can voluntarily refinance the house to get a lower monthly payment if the interest rates go down, but if they go up, you’re insulated from the impact except in the fact that you now likely have less mobility because having to pay a 7% interest rate when you are used to paying your 3.5% rate on a same-value house means you can’t just sell and expect the monthly price you pay to remain the same.
Your taxes and insurance, on the other hand, do quickly balloon out of control if your property suddenly spikes up in value.
I’m not arguing in favor for house prices going up but just wanted to point out how a lot of people use the value of their home. You can pull out money from your house and your interest payments don’t change when the value of your house goes up.
I’ll give the example of my neighbor. They bought their house 10 years ago at about $250k. Interest rates were around 4.5%. We’re in a location that got really hot during the pandemic and the house value jumped to about $700k. At that moment, they had the same payments as 10 years ago. Then interest rates dropped down below 3%. His balance on the original mortgage is probably about $175k and now he refinances the house with a mortgage of $325k, pays off the old loan, and pockets $150k out of the house. But due to the lower interest rates, his payment is the same as it was 10 years ago. He just has $150k in his pocket. Meanwhile, I’m the schmuck who had to buy the identical house at $700k at 5% and pay 3x for the same house.
For the regular Joe you always need somewhere to live, so it doesn’t matter if your houses is $100k or $1 million, that money is always going to be tied up in the house and not be spendable.
I mean, you could take out a loan against your home’s appreciated value, but most people do this to put value back into the house, like remodeling or landscaping. The value isn’t totally tied behind the sale of the house itself, but your point still stands.
Big housing prices only benefit the people owning multiple homes.
Because it doesn’t matter what the housing cost is if you sell your only home, because you will need to buy a new home at the same cost anyway. Since everyone need a house to live.
Not only that, if you have a small starter house you still benefit from a crash. That 400k house will become 250-300k, while your 180k house will just drop to 130-150k.
Your home rising in value doesn’t benefit you, because you still need to live in one if you sold it, and that home has likely also risen in value. Your house doesn’t grow when its value does. It doesn’t sprout an extra bedroom.
If you own multiple homes, then you can view all but one of them as an investment, as you can sell them when the market is good.
If you own one house and have a mortgage on it, then the market going down is bad because you end up with negative equity.
If you own one house with no mortgage, then the market going up is bad because it’s harder to upgrade. I wouldn’t mind my house being only worth £10,000 if it meant that I could buy my dream house for £20,000.
If you own one house with no mortgage, then the market going up is bad because it’s harder to upgrade.
Unless you’re retiring and downgrading. For those with families who grow up and move away, the house can be seen as an investment if they intend to move into a smaller space once they’re just a couple again.
Of course, that’s assuming their kids don’t have to move back home because of astronomical rent prices and a sizeable wealth gap…
I have a ton of equity in my house, but my house was overpriced when I bought it. It’s depressing thinking that I am “fortunate” among my peers to own a home.
I ranted to my mom and some older family members and none of them get my frustrations. Seeing the mobile home from 1974 down the street on the market for half a million is depressing and angering. Seeing million dollar homes were once bought for $250,000 10 years ago is angering and depressing.
I just wanted a nice home in the suburbs and live a boring life. But all I could afford and didn’t get outbid on was a home built shortly after WWII ended and incredibly small. My monthly mortgage is “low” as is my interest rate. But rent is outrageous and not at all fair or reasonable.
The ratio is way off compared to 20 years ago, for income to housing costs.
I want to cash out my equity, but then I’m just going to have to start all over again, compete against “investors” who offer outrageous amounts for homes, and have to have an insane interest rate.
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