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.
My condo is paid off, actually. But I still want to to crash, because the price gap between my little place and a larger home is way too big. I basically can’t upgrade unless prices fall.
I’m trying to fix up a few things then get it re-appraised so I can get PMI taken off my mortgage. After that I don’t really care, I plan to live here for awhile so if the value goes down in the short term I’m not too bothered.
In the US, at least, the last housing market crash was because people couldn’t afford their homes. Since most homeowners are now on fixed rates and most people’s incomes are significantly up since they purchased, there probably won’t be a housing market crash like last one. Even with losing a job, a lot of these people could get a significantly less paying job and still be relatively okay compared to their Great Recession compatriots. With investors, most aren’t in real estate for the short term. A lot sit on housing they don’t rent or lease, even in a seller/landlords market. So you’re left with poor investors and the short term housing investors, who can probably cause a collapse by themselves, but in an increasingly wealthy domestic and international market base, those will most likely be bought up before a significant dent in the housing market happens.
However, the federal government needs to increase housing supply and public transportation infrastructure by an obscene amount very soon, unless it wants a major economic and societal collapse in the coming decades that it may not be able to pull itself out of. A housing market collapse like 2008 should be the least of their worries.
Home owner, I started buying back in 2007. Been through one crash, and if another crash makes it so I can move again, fuck it. Let the whole thing just burn.
I never counted on equity, and the system was fucked from the start. At least this way I wouldn’t feel trapped.
I was lucky to be in a position to buy shortly after the 2008 crash, so another crash would erase a good chunk of equity (but I see most of it as fantasy equity anyway) but otherwise I’ll be fine. I was in DevOps/SysOps for a real estate tech company at that time (and until recently) so I got to see the weird market moves in real time.
Nationwide we’ve already seen about a 4% drop from the end of the 2022 sales season (Memorial Day - Labor Day) to the end of the 2023 season. That decrease is actually as bad the height of the 2008 crisis but the drops were most felt in the most overpriced markets. This allowed the rest of the nation buffer against it so it’s not having a big effect on main economy metrics (like the consumer confidence index).
Basically the bubble deflated considerably without popping, which is overall a guard against a (really bad) crash. Of course 1/3rd of China’s economy is their housing market and it’s on the verge of collapse… I don’t know what that will do to the US but it won’t be good.
The cascade of failures is a few steps further along. We had a total of about a 12% market decline in 2008 before enough dept bundles turned toxic for Bear Stearns and ANB to become insolvent. Those potential chickens are still in their eggs.
The only way this benefits a home owner is if they can live somewhere else for cheap or free. If you can’t do that selling is pointless.
Once things come down then I could potentially afford a second home on my income. Additionally people less financially fortunate can afford the first house (or at least see their ridiculous rent prices drop).
It will be unfortunate for people who bought at an inflated rate so naturally those people won’t be so crash happy but that’s just the nature of it. If you are someone in such a situation then selling now and paying high rent elsewhere may be a wise decision. Not that prediciting a crash is a simple task.
I’m not planning on moving so it doesn’t really matter what my house is worth. It was relatively cheap to begin with; 105k€. My monthly payment for the mortage is 520€ while the rent my friends are paying is usually 700€/month or more. That would cover my water and electricity bill aswell and I’d still have money left over.
Yes, owning a house shouldn’t had ever been the end goal for 90% of the population. We should’ve solved housing for all people on earth a hundred years ago FFS! But we were too busy industrializing war and sending kids to die.
I’m really surprised to see all these bitter comments. Downvote me all you want, but I think people hate the housing market because of a lack of knowledge.
I did my homework, worked my ass off and in a few months I will be buying two houses. One to live in and the other as an investment. And the best part is that the first one will be paid off in 5 years (thanks to publicly available banking tools). The investment property will not be paid off until the end of the mortgage. Why? Because it will give me huge tax deductions (again - great banking tools). After a few years I will be able to buy another investment property which will give me even more tax deductions. And so on and so forth.
You are probably in a different tax bracket than us.
The median house hold income is 60kish in the US. Meaning half of all households make less than that.
2k for rent or 3k mortgages just isn’t doable. But that is the only thing availabe for most of us. The math can’t work with taxes, insurance, and utilities. Children right now is a poverty sentence for 50% of Americans.
And “make more money” can’t work for everyone. The median is 60k per household, meaning 10s of millions of people would need to find much higher paying jobs to be able to deal with this. But that’s not possible, there are not 10s of millions of 80k+ jobs just sitting around.
As I said before - lack of knowledge. You are assuming that the monthly repayment will be $3k. There are tools available for everyone to make it way less.
Let’s start with offset account. Having it setup with your mortgage will decrease the interest part of the repayments as long as you will keep adding money to that account. More money, smaller interests.
Second tool - interest only loan. For first few years you will pay only interests. In my case it will cut the monthly repayments almost by half. Combine it with the offset account and each month you save some money on offset account the interests rate will be lower allowing to save more.
And finally - interest in advance (pay the whole year of interests upfront). I don’t know US tax laws but where I live this gives me tax deductions starting from day one. This will work only for investment property.
Also there is a thing called refinancing a loan. When the interest only and in advance things are coming to an end refinance a loan and start over.
On top of that is the mindset. People need to realise that in order to make things better some sacrifices have to be made. So when buying a house get the investment property first and work your ass toff to pay it off as soon as possible. After few years the value of the property will go up and you will be able to get a bigger loan. Buy another investment property in a better neighbourhood to get a bigger return.
To summarize, talk to someone who knows that stuff (not a banker, a real money guy), check bank offers, read articles about investments, learn about taxes. It’s easy to complain and do nothing.
When people can’t even afford 2K rent, there are no games to play. Median house hold income is 60k After taxes that’s closer to 40k. When rent alone is 24K, there are no games to play, no moves to be made. The math doesn’t work. 2K isn’t me over exaggerating, it’s median.
Then you’re supposed to put 6% into your 401k, then how ever how much for medical insurance , then cost for car insurance ,gas… where is money for food? Where is the 20% for investing for retirement? The basic of budget is 50,30,20. You’re not supposed to spend more than 50% of your income on “needs”, yet the median rent is more than 50% of the median after tax household income.
All those tricks are just putting the debt ahead into the future. That only works if you think you’ll be making more in the future, but wages have been super stagnant.
You can’t play games when rent requires more than half your income.
I own my home, life is fine, I’m fine. But try to do the math, try to make it work. For 60k gross pay and 24k yearly rent, explain how to make it work, how to save up the 10% down for a house and save for retirement.
I was starting with aroud $45k usd before taxes. I live in Australia, one of the most expensive countries. But instead of complaining and saying that math doesn’t work I made it work. For years I was saving on everything, putting away every penny on managed fund. It didn’t give me huge interest but at least I didn’t lose on inflation. Fast forward 7 years and I’m about to buy two houses.
It’s all about mindset, dedication and knowledge. And no, this isn’t moving debt to the future. It’s working around the debt, it’s making the debt to work for you. Again, talk to a real money guy and he/she will explain you how it works.
It was somewhere around 1500 USD per month. On top of that I had to pay for overpriced health insurance (required by my visa - additional few hundred dollars per month) and I had a huge loan I took to move to Australia (visa costs, moving my stuff across the world, car, etc.). In total I was paying around 2300 USD per month, and I still had to pay for utilities and food.
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