Just for clarity, I'm not arguing that there's going to be a housing crash but rising rate simply must alter affordability. I expect that will be realized as longer time on market and slower price growth for a while.
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Home buying thread
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Just for clarity, I'm not arguing that there's going to be a housing crash but rising rate simply must alter affordability. I expect that will be realized as longer time on market and slower price growth for a while.
TJT
Mr. Poopybutthole
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Well clearly people are wanting to and buying houses thus creating a lot of pressure on the market. But the person who could afford a $400k house is going to struggle paying for that same house when it costs $800k.
My income increased dramatically with the Corona, but not astronomically.
My income increased dramatically with the Corona, but not astronomically.
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Blazin
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Look at this from this perspective, new home construction is the carrot that leads existing home costs. Historically new homes cost about 15% more than existing. The rapid inflation we have seen has pulled that new home cost up significantly which in many parts of the country left a gap much larger than normal between new and existing. In my area it grew to almost 40-50% more for new than existing. As long as that condition exists, existing home prices are going to climb and climb to fill that gap.
The cost of new being so high is stopping many Gen Xers from upgrading and freeing up their home to millennials to buy as a first home. The amount of home sales is quite low, with inventory in many places not even being 30 days.
The country needs about 2 million new units every year just to keep pace with depreciated stock and pop growth. We under built for a VERY long time, and we are trapped now by inflationary costs that are going hamper the ability to build out and meet that demand. So what does this mean? It means prices stay high and probably going a bit higher while the number of transactions stays frustratingly low to get you out of the problem.
The cost of new being so high is stopping many Gen Xers from upgrading and freeing up their home to millennials to buy as a first home. The amount of home sales is quite low, with inventory in many places not even being 30 days.
The country needs about 2 million new units every year just to keep pace with depreciated stock and pop growth. We under built for a VERY long time, and we are trapped now by inflationary costs that are going hamper the ability to build out and meet that demand. So what does this mean? It means prices stay high and probably going a bit higher while the number of transactions stays frustratingly low to get you out of the problem.
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Blazin
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You are correct affordability index has already dropped from mid 140s into 130s and could drop further yet if things continue, I'm just explaining we are not "yet" at a historically challenged level. And as above post explains we are unlikely to escape this issue anytime soon. I think this problem persists for the better part of the next decade. Not to get too thick into the weeds but the early 2030s is where things will get interesting. I'm a big believer in super cycles driven largely by demographics, a lost decade of great horribleness is coming, but IMO not yet.
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Jysin
Ahn'Qiraj Raider
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Relevant to the recent price / inflation talk:
15:30 (US) Fed's Waller (hawk, voter): Inflation data was high and we knew it would be; Data supports 50 basis point hike in May,and maybe more in June and July; Believe we are at peak inflation - CNBC
- I am forecasting we are pretty much at the peak of inflation and March core CPI reading suggested that
- We need to get above neutral by later this year
- Do expect higher mortgage rates to have bite on how much people can pay push prices lower in coming months
- We have no control of supply, can only affect demand
- We can pull back demand for labor and not have a big impact on jobs
15:30 (US) Fed's Waller (hawk, voter): Inflation data was high and we knew it would be; Data supports 50 basis point hike in May,and maybe more in June and July; Believe we are at peak inflation - CNBC
- I am forecasting we are pretty much at the peak of inflation and March core CPI reading suggested that
- We need to get above neutral by later this year
- Do expect higher mortgage rates to have bite on how much people can pay push prices lower in coming months
- We have no control of supply, can only affect demand
- We can pull back demand for labor and not have a big impact on jobs
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Lanx
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i paid 15% over bid for mine less than a year ago and now almost all the inventory is gone
now
you either pay 1m for a house w/ a 1 car garage or this type of style
where your house has a front door and a garage backyard/door, my realtor said no one likes these types of houses and i agree
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Sanrith Descartes
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Higher rates pushing prices lower than they would have been otherwise is true but different than actually pushing prices lower in $ terms.
Tmac
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I mean... So, what do people like me do?
Mid 30's. Just married. Want to have kids soon. We probably pull in $140k combined, but rent is $2k - $2.5k for something decent. And to get what we can grow into, in a decent area, we'd have to spend $500k-600k on a mortgage.
Both options seem like really big limits to us saving/investing.
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Kiroy
Marine Biologist
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man mid 30s is pretty late to be figuring out how you're going to get into your first starter house.
live below your means (by a lot), save and move to whatever location is the best income/cost of living ratio - this is what you should have started in your early to mid 20's.
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Tmac
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Technically I can "afford" a $500k house, but it kills my ability to save aggressively. Starter houses have gone up $100k and will probably be that way for the next decade. Did you even read Blazin's post?
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Sanrith Descartes
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Now is not the time to buy a house unless you have to. Rent sucks, but the housing market is irrational right now. Wait and save. If you havent, run your front and back end DTIs and keep an eye on them while you wait for the markets to normalize. If you plan on staying in whatever town/city you are in for the future then focus more on land than house. Look for the right property even if it has the less than perfect house. A house can always be modified/wrecked down the road. If you want to have kids you will be paying the premium for good school districts unless you opt to private school/home school. If so you can save money buy focusing on good neighborhoods with mediocre schools. Honestly though, the good school district houses will appreciate over time better than the mediocre school districts.
tldr: be patient, save money, cut debt and wait for housing to cool off. You may need to wait out the mortgage rises this year.
ps.. I cant stress enough to make sure you like the local governments/school boards/state governments where you want to own. Nothing worse than owning a great house but living with shitty government policies.
OU Ariakas
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Maybe all of this will have people rethinking that they need 4000 square feet for a family of 3.
A 'starter house' should be 2 or 3 bed and 2 baths at the most but there are none of those being built anymore.
The current idea of a starter house being 4 bed 3 bath and an extra room (media/game) is beyond insanity.
A 'starter house' should be 2 or 3 bed and 2 baths at the most but there are none of those being built anymore.
The current idea of a starter house being 4 bed 3 bath and an extra room (media/game) is beyond insanity.
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what im doing. cleared all debt, saving cash maintaining my current rental with moderate increases with landlord.
Sanrith Descartes
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In normal times I am very anti-rent. These aren't normal times though. Just be nimble enough to be able to pounce on something if a good deal falls through the cracks.
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Lanx
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yea man, school districting is basically the difference between a house that stays stagnant or a neighborhood that grows.
i still get house updates from ks, and since i know the area, i might as well just keep on looking at it for trends, recently this house came up
typical older house, i wouldn't even say this is a "starter home" it's fucking 4bd and it's also not just 1450sq/ft it's actually more like 2500sq/ft b/c some homes do here do not include the sq/ft of the basement b/c it's not fully furnished (or up to code like an egress, etc) but this place has stayed in this range for years
i lived 1minute over the next hood and a more modern home goes for 240ish and was sold at 180 a few years ago
my house was literally sold over zoom, the agent came in, zoomed w/ the buyer and plot down 20% over in cash. my agent said take the deal and i did b/c it was an out of state offer, ppl in state wanted the house but not for the price (cuz they were going up from a starter home) but wanted to move in the area while this guy really wanted to just get in the district, the school district sold my house basically.
Sanrith Descartes
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School district is the #1 factor that will drive house price year over year. Its like investing in AAPL.yea man, school districting is basically the difference between a house that stays stagnant or a neighborhood that grows.
i still get house updates from ks, and since i know the area, i might as well just keep on looking at it for trends, recently this house came up
typical older house, i wouldn't even say this is a "starter home" it's fucking 4bd and it's also not just 1450sq/ft it's actually more like 2500sq/ft b/c some homes do here do not include the sq/ft of the basement b/c it's not fully furnished (or up to code like an egress, etc) but this place has stayed in this range for years
i lived 1minute over the next hood and a more modern home goes for 240ish and was sold at 180 a few years ago
my house was literally sold over zoom, the agent came in, zoomed w/ the buyer and plot down 20% over in cash. my agent said take the deal and i did b/c it was an out of state offer, ppl in state wanted the house but not for the price (cuz they were going up from a starter home) but wanted to move in the area while this guy really wanted to just get in the district, the school district sold my house basically.
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