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’m torn, I really want to move but don’t want to play the current interest rates. I bought high but have that great interest rate. I’m also looking to move again since my job is not fully remote and my girlfriend hates my house.
My condo is paid in full. I want the market to sink like a stone.
This current housing market has everyone trapped. I cannot sell and upgrade because I’m not going to pay 7% interest on the part I don’t have in my bank account.
The house I live in is paid off and it’s supposed to be our forever home, so market value doesn’t matter much. For my two apartments I rent out it is more relevant. On those I have a fixed interest for another 5+ years still ahead of me. After that I‘m hoping that I’ll still be able to afford the higher interest rates on the by then lower balance.
Can’t wait. If it could happen in isolation and not involve a lot of people losing their jobs, I would love to see prices come down. No downside for homeowners really, the house is the same house independent of market value but taxes will decrease so monthly cost will decrease.
I’m old and know prices don’t go up forever. As soon as those “we will buy your house” signs and phone calls start, it’s near the end.
but taxes will decrease so monthly cost will decrease.
Doubt. Your local government isn’t going to cut spending just because revenue went down. And why should they? It isn’t like the workload changed. When housing collapses it isn’t like there will be less crime and less homeless and less school age students. All that stuff is going to continue to happen independently. You will either see raised rates or suddenly a lot of homes will be marked as worth more.
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.
I play around with mortgage calculators every so often and look at houses in my area. One of them at current rates would have someone paying well over $10k per month at 20% down, not including utilities, food, water, gas, etc. (it is a 1.4 million home). My wife and I were speculating on the type of person who could even afford that, if you follow the rule of don’t spend more than 50% of your monthly on rent.
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.
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.
I have no issues with that. I’m not living here to make a fortune on speculation. I am living here because it is my home, and I leave selling this to our kids once we are dead, hopefully many decades in the future.
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.
Hey, newer homeowner here. If the housing market crashes, does that actually affect me at all? Or is it just like, I can’t profit if I wanted to sell my house or some shit
good, fuck em. Seeing houses as an equity Builder was retarded in the first place. It’s literally not sustainable, if it’s supposed to constantly appreciate value no matter what it means that there is an ultimate threshold where it becomes unaffordable for everyone.
A house is a place to live, not a fucking financial asset to make money with.
Everything can be an asset to make money with. Before money it was bartering and you can bet your ass the home was an asset back then too. Humans value the creation of things. Assets of created thing will always exist.
This is very region dependent. But here in Canada we have 25-30 year mortgages broken up into 5 year terms, every 5 years we renegotiate our interest rate and have the option to switch lenders.
If your house value were to drop 75%, it might make it harder to switch lenders (does a bank want to lend you more than what the house is now worth).
I think there is an escape hatch here where if you stay with the same lender they will still accept you, but I honestly don’t know much about the specifics.
Things would need to get pretty bad for this to actually matter (and I suspect the government might step in if it became widespread)
It can. The housing market doesn’t impact all properties across the board, and some neighborhoods get away unscathed while others are devastated.
In the worst case scenario, having a downturn can cause a “buyer’s market”, where there are more people trying to sell their house than there are prospective buyers, so they have the power to negotiate much better deals. If you purchased your house 10 years ago for 200k, and in that time it appreciated to 400k, and then there was a sudden market downturn and it lost 50% of it’s value, your house would be worth about what you paid for it, but all your equity is gone, so you don’t profit but you are also not totally screwed.
If you bought your house for 400k right before the market downturn, you will be “underwater”, and own a property that is worth less than what you paid for it, meaning that if you tried to sell you wouldn’t get enough to cover the mortgage you owe to the lender. Forget about profit at that point.
If you plan to live in the house you are in now until you die, then none of that matters at all, really. In fact, having market downturns benefits you in that scenario because if your property is worth less money (relative to all the properties around you) you pay less in taxes and insurance. But most people don’t plan on living in the same house forever. They might want to move to a nicer house, or one in a better location, or downsize when their kids move out, etc. so it’s usually seen as a bad thing when the market crashes because you have to spend years building equity and loan amortization means that for the initial few years of your mortgage payment, you are basically paying off the interest only and barely denting the principal.
I think it’s still gonna be tough. The prices will go down because of the high interest rates, but they’ll stop at the point where people are able to make the payments again. People who buy at that time will pay about the same as they would have, just less on the principal. If the interest rates go down they will do very well after refinancing.
In my area I’ve definitely seen it slowing. When I bought my house a few years ago, right after lockdowns, a place would be on the market for a day or two and they’d have tons of crazy offers. It took a while to find a place because of this. Now two houses on my street have been on the market for over a month.
You are a middleman who provides no value. The difference between the people paying you and yourself is one earns their daily bread while you rest on the work of the past. It is enough that you are getting money, don’t expect us to like you just because you can legally do your “work” slightly worse.
The value I provide is taking over the risks and responsibilities of owning the apartment. Not everybody is willing or able to take out a loan of that size. The tenant maintains their flexibility of moving wherever they want or need to at relatively short notice. If there’s problems with the apartment I must figure it out, not them. It’s not my job by the way. The rent my tenants pay covers the bills I get for owning the apartment. I‘m employed somewhere else. What is your idea of doing it differently? Must housing be just free for everyone? Or everybody must just buy? I’m generally curious!
Why do you think that is? All this raw anger directed at a member of our economic class? Maybe, just possibly it is because everyone has had at least one shit landlord and they know that said landlord got away with it and is still out there ruining another person. Nah crazy talk. It must be totally random.
Wow, neat logic. Hey, now that you mention it, I’ve met a shitty person or two in my day. Guess I should call for the death of all people, hmm?
Wait, this couldn’t possibly be the same exact logic most racists use to justify why they hate X race, could it? Naw, I guess this landlord is just “one of the good ones,” huh?
OR maybe all X aren’t Y just because some X are Y.
As exciting as this sarcasm battle seems, you have made up your mind that all X are in fact Y and nothing I say will be able to change that, so I’m going to have to decline, sorry.
Well, first off your reading comprehension needs work, I’m not the landlord so “0.”
Secondly, with him only owning two apartments and people typically signing a year lease, theres about a 2/365 chance on any given day, and that’s assuming 100% “keep” rate of security deposits, no renewals, etc.
Or did you think “two apartments” and “two apartment buildings” is the same thing?
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.
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