Home buying thread

Jysin said:

We already are in a bubble. People are just fucking clueless. No one has a grasp on the value of money anymore (aside from us thrifty gents here in this thread). The problem started with interest rates being floored to stimulate spending during the 2008 recession. With cheaper interest rates, came cheaper mortgages. People don't care that a house costs X dollars. They only care about their monthly payment. So, when rates dropped, instead of remortgaging into a cheaper rate and ultimately lower payments.. people just wanted bigger / more expensive houses. This drove the house prices up into the current bubble we are back in. These houses aren't worth it.. it was cheap mortgage rates that allowed people to afford more expensive houses at the same monthly payments.

These houses didn't magically become worth 10-20% more expensive year over year on their own merit. Get interest rates back to some semblance of "normal" and suddenly the average Joe can't afford prices where they currently are and house prices will correct. Until the interest rates get off the floor, nothing will change.

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Because "average joe" can afford a house right now...?

People need to get more comfortable with the concept of renting. The days of cheap housing are over and are not coming back.

He explained it pretty thoroughly.

If you raise interest rates to 20% housing prices will adjust downward because people shop based on payment.

Picasso3 said:

He explained it pretty thoroughly.

If you raise interest rates to 20% housing prices will adjust downward because people shop based on payment.

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I think that is a gross over-simplification and really just amounts to moving around cups.
The economic landscape of the country has changed drastically in the last 20 years.

Explain it to me

20 years ago there was just a cup, then in 2008 2 girls came along and... well...

Read my post and then read your post and tell me how they connect.

TJT said:

Not the only factor. Bro you are smarmy AF lately. Seems like your counseling sessions aren't making you any happier fam.

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I just don't understand how when i say interest rates and home prices have an inverse relationship that "there's a property tax brick wall though" makes any sense. Maybe i am smarmy but i genuinely don't understand how you think that played in.

Everything is connected to interest rates. Houses and vehicles have all grown in price exponentially, yet wages remain relatively flat for decades. How do people suddenly afford far bigger loans than ever? Low interest rates mixed with far more loose lending practices. (Bad mortgage lending had some new rules applied, but the auto-loan market is still the Wild West in a free for all)

Does this sound familiar?
U.S. Subprime Auto Loan Losses Reach Highest Level Since the Financial Crisis
Another Warning Sign Flashes for Subprime Auto Loans
Why America's Auto Debt Boom Fuels Bubble Talk: QuickTake Q&A

I would agree that renting should be a viable option... except that in many cases renting is just as bad as buying without any gain of equity and no control over your own home.

Look at who is buying 'rental' properties -- increasingly these are foreign investors who then hire bargain-basement management companies to oversee the daily running of the place. Instant 'luxury' slum where renters pay $2600+ for a one bedroom apartment. Sure if the interest rates dropped you might expect the investors in these properties to dry up as well, but there's a feedback loop in play. If the big dollar investors go away then the incentive to build properties also goes away which lowers the overall supply and thus increases demand.

The Greater Boston area is thick with new-ish apartment complexes and towncenter / townhome communities. The places aren't well maintained yet are cursed with bad management and overly draconian rules. I considered renting for awhile to see if the bubble would break, but decided that it just wasn't going to be worth the hassle.

Renting is an option but I think people are over estimating it as this fix to expensive housing. Sure you don't need 20% down to rent a place but chances are the rent is going to be around what a mortgage would cost you on a similar sqft home. If home prices are going up so will rent. But you don't have the luxury of having a fixed monthly payment while renting. I've never once lived in an apartment that the rent went down the next year. At best once it stayed the same but every other year it went up. My rent even went up in 2008.

Also everyone has an opinion on if we're in a bubble. Some are 100% convinced. Others are 100% convinced we are not. It is kind of funny to hear millennials hoping and praying for an economic collapse like in some universe this is nothing but a win. If an economic collapse happens it ripples everywhere. You stand a strong chance of losing your job. It doesn't matter what housing prices look like if you're unemployed and unemployment of the country is at 15%. But for whatever reason the generation just slightly behind me is convinced this will not effect them at all. The only thing that'll happen is they can buy a home.

What kind of rental agreements did you sign where you didn't have a fixed monthly payment? Using that same logic I don't know anyone who has a fixed monthly payment as a homeowner either. Insurance and Taxes go up fairly often and that's part of TJT's point. Rent may go up from lease cycle to lease cycle but you don't need to worry about electricial, plumbing, HVAC and a multitude of other potential money sinks as a renter.

If your rent goes up and you're finding the price hard to swallow you can move to a place that fits your budget. Try doing that with a mortgage.

You live on the west coast now so maybe you hear different things but I don't hear many younger people hoping and praying for an economic collapse. I'd welcome it from a purely selfish standpoint because I have a lot of liquidity I can throw at being greedy during a downturn but it isn't a sentiment many people share with me around where I live. Technically speaking you are a millenial too (I know, they seem to keep changing the age bracket).

I meant per lease cycle which happens usually yearly. Purely anecdotal but it felt like every year they'd try and increase my monthly rent by ~$100. Your argument about taxes is accurate but the way taxes work everywhere is really different. Like now mine is 1% and is mostly fixed. It can only go up a bit. But in Ohio property taxes went up and down depending on how incompetent the school was at handling it's finances.

And you can just go to /r/personalfinance to read up on how your average reddit poster (which in my mind is someone probably 20-30) hopes for a housing crisis so they can afford a home

A lot of the younger people I know are having trouble finding a career job already and have been for some time so a housing crisis probably wouldn't change their employment status or opportunity much anyway. A lot of the recent college graduates around here are underemployed and will probably remain so.

The parenting of that generation is shameful, bordering on disgraceful. Giving their kids little to no real guidance, instead opting to reinforce the stupid notion that they can be whatever they want. Never pushing them to excel or achieve anything other than student debt. "Go to college and follow your dreams" is basically phoning it in as a parent trying to prepare a kid for their future.

I don't want to get into a huge debate over parenting the generation but I do think that a bunch of stuff on the internet says we're in a housing bubble because many people want us to be in a bubble

Again, look at income levels. FLAT.



Housing has climbed steadily upward at a blistering pace. Pre-2007 bad lending practices (subprime mortgages) and post crash due to all-time low interest rates.




Again, people are just dumb and only care what that monthly payment is. Total $ spent is irrelevant.

I've been living in Switzerland for almost 8 years now, I'm originally from Canada. Back in Canada, my family owned our house and 99% of the people I knew growing up, their families also owned their houses. Here in Switzerland it's a different story. I know one person who owns their own place, everyone else rents. I think it's a combination of factors but the biggest one in my opinion is a 20% down payment is required for purchasing a home and the high cost of real estate here. For example, an 1180 square foot apartment in Bern in a decent but not great location was listed at 950,000 CHF which is 1,000,000 USD at current exchange rates. So you need 200k down for that apartment, if you want to start looking at detached houses you're starting at 1.5 mil with a corresponding 300k down payment. 300k is a shitload of money, especially for a fresh university grad just starting out in the working world who are presumably the people who would be buying the "entry" level houses. The city I live in isn't even among the most expensive here, Zürich and Geneva are on a whole other level.

Funny thing is though, no one seems to really care, renting is just normal for people here. It was a bit of a culture shock for me coming from Canada where so many people owned their own homes. My father used to like to say that renting was just paying some other guys mortgage, why not pay your own and build some equity. Perhaps the era of home ownership being so widespread in North America is coming to an end. You're getting to the stupid high prices like over here, and one more housing bubble bursting might just lead to 20% down being required there too. Will be interesting to see hwo things progress over the next few years in that respect.

Debt, is way, way cheaper in America and is heavily marketed. Glamorously in fact.

No other country treats debt the way we do.

How many people in Switzerland even have or use a credit card? Let alone having 10 different ones with different point schemes for different spending habits?