Should you even try to buy a house right now?
December 2, 2022 11:44 PM Subscribe
Something that is always “a little bit scary” is “particularly scary” right now. A confluence of factors, some structural and some cyclical, have aligned to make the current housing market among the most challenging, expensive, and stressful ones in recent years. Many Americans seem to share that sentiment: Half as many home sales occurred this past July as in the same month two years ago.
Welp... I lived in Katie Porter's district (love her), but was forced out by housing prices when buying a house became a priority.
posted by lostburner at 12:53 AM on December 3, 2022 [3 favorites]
posted by lostburner at 12:53 AM on December 3, 2022 [3 favorites]
We just bought one... Because the rate was set at 3.75% as part of a "giving back to the community" deal between the bank and the feds to make up for past redlining. Otherwise ahahahahahahahaha no. Prices are still really high here.
posted by subdee at 12:57 AM on December 3, 2022 [6 favorites]
posted by subdee at 12:57 AM on December 3, 2022 [6 favorites]
I’ll stay a renter as long as mortgage rates are what they are. My last mortgage was about 2.25% and right now I’m paying less in rent than I was for my monthly payment on my condo.
posted by bendy at 1:05 AM on December 3, 2022 [2 favorites]
posted by bendy at 1:05 AM on December 3, 2022 [2 favorites]
Housing is a huge problem the other side of the pond too. Part of that is down to our extremely short term ex-PM Liz Truss, who implemented huge unfunded tax cuts for the wealthiest 'for growth' ; mortgage companies (and everyone else) saw that the BoE would have to crank up interest rates even higher than previously expected to try and reduce the added inflation. So most mortgage providers yanked their products immediately, then brought them back over the following days at 2-3 points higher. And given prices have been vastly outstripping inflation (and pay) for years, buyers going from a 4% mortgage to a 6.5% or 7% mortgage pretty much overnight was a helluva shock.
Most existing borrowers are on a fixed rate deal (around 1.5-2% ish since rates have been so low for so long) so weren't affected immediately, but the most common term is only 2 years and then it switches to a standard variable rate that is a premium over the BoE rate; so growing numbers are getting fed into the re-mortgaging money chipper. And since so much property is buy-to-let, private landlords just pass that on so renters are getting hit just as hard, if not worse.
Truss and her tax cuts have gone - largely because of this exact fuckup - and government bonds have largely returned to normal, but mortgages are still mostly around the 6% range because nobody wants to get swamped with desperate customers by dropping down again too fast, and run the risk they have a bunch of customers who lose their jobs in the recession that's already started, or BoE interest rates unexpectedly spike again. (energy crisis and plummeting consumer confidence will definitely make it a long and tough one - given the current labour shortage, we might avoid mass job losses, but nothing is certain)
Because house prices are so high, and hence loan-to-income percentages are just bananas, I've seen financial experts estimate that a 6% mortgage rate today is as bad as a 15% rate in the '90s in terms of household budget impact.
When we upgraded to a 4 bed house a year ago at 2% (for our kids), after deposit saving for a decade, we left what we thought was decent wiggle room for the inevitable rate rise. We didn't account for 11% inflation, an energy crisis, food crisis AND mortgage rates tripling all happening at the same time! So very fortunate we fixed for 5 years, so we don't have to deal with that hit just yet, but if we hadn't, we'd very likely have to try and sell the house for something much smaller when it's already worth maybe 10% less. We just don't have the extra £700 a month on the mortgage plus the tripling of the energy bill (will be £300+ a month in April) plus the 20% food inflation when our salary increases were 2% and 5% respectively. And we're fairly well paid professionals between us - people on a single average income are getting absolutely hammered, let alone the desperate sods down in minimum-wage land who are getting to the point of food-heat-roof <- pick one.
posted by Absolutely No You-Know-What at 3:25 AM on December 3, 2022 [22 favorites]
Most existing borrowers are on a fixed rate deal (around 1.5-2% ish since rates have been so low for so long) so weren't affected immediately, but the most common term is only 2 years and then it switches to a standard variable rate that is a premium over the BoE rate; so growing numbers are getting fed into the re-mortgaging money chipper. And since so much property is buy-to-let, private landlords just pass that on so renters are getting hit just as hard, if not worse.
Truss and her tax cuts have gone - largely because of this exact fuckup - and government bonds have largely returned to normal, but mortgages are still mostly around the 6% range because nobody wants to get swamped with desperate customers by dropping down again too fast, and run the risk they have a bunch of customers who lose their jobs in the recession that's already started, or BoE interest rates unexpectedly spike again. (energy crisis and plummeting consumer confidence will definitely make it a long and tough one - given the current labour shortage, we might avoid mass job losses, but nothing is certain)
Because house prices are so high, and hence loan-to-income percentages are just bananas, I've seen financial experts estimate that a 6% mortgage rate today is as bad as a 15% rate in the '90s in terms of household budget impact.
When we upgraded to a 4 bed house a year ago at 2% (for our kids), after deposit saving for a decade, we left what we thought was decent wiggle room for the inevitable rate rise. We didn't account for 11% inflation, an energy crisis, food crisis AND mortgage rates tripling all happening at the same time! So very fortunate we fixed for 5 years, so we don't have to deal with that hit just yet, but if we hadn't, we'd very likely have to try and sell the house for something much smaller when it's already worth maybe 10% less. We just don't have the extra £700 a month on the mortgage plus the tripling of the energy bill (will be £300+ a month in April) plus the 20% food inflation when our salary increases were 2% and 5% respectively. And we're fairly well paid professionals between us - people on a single average income are getting absolutely hammered, let alone the desperate sods down in minimum-wage land who are getting to the point of food-heat-roof <- pick one.
posted by Absolutely No You-Know-What at 3:25 AM on December 3, 2022 [22 favorites]
Much as the situation in the UK sucks for anyone with a mortgage right now, particularly a fairly recent one, house prices here are so overinflated that they need to come down pretty significant still to get to a point where buying a house is even remotely affordable for most people.
posted by Dysk at 4:30 AM on December 3, 2022 [1 favorite]
posted by Dysk at 4:30 AM on December 3, 2022 [1 favorite]
If house buying is on your agenda, you might want to read:
The Wall Street Journal. Complete Real-Estate Investing Guidebook
The Wall Street Journal. Complete Home Owner's Guidebook
Make the Most of Your Biggest Asset in Any Market
Owning is not always preferable to owning, housing is not an investment, markets go down as well as up. (That's his take, I do not offer medical or legal or investment advice.)
posted by BWA at 4:47 AM on December 3, 2022 [7 favorites]
The Wall Street Journal. Complete Real-Estate Investing Guidebook
The Wall Street Journal. Complete Home Owner's Guidebook
Make the Most of Your Biggest Asset in Any Market
Owning is not always preferable to owning, housing is not an investment, markets go down as well as up. (That's his take, I do not offer medical or legal or investment advice.)
posted by BWA at 4:47 AM on December 3, 2022 [7 favorites]
I can tell the market has gone south a bit. The constant flood of text/voicemail/snailmail all-cash-offers to buy our home, sight-unseen, for far more than we paid for it a mere six years ago, has dwindled to a trickle. They were all pretty transparently from property-management companies looking to secure more properties to rent.
I’m shocked at what the rental properties in my neighborhood lease for. The house next door, which is identical to my home, rents for well over twice what we pay in mortgage per-month. It’s insane.
I’ve spoken to a few younger folks who really want to buy, and their primary obstacle to doing so is the 20% downpayment lenders require, and not necessarily the monthly mortgage payment.
posted by Thorzdad at 5:07 AM on December 3, 2022 [12 favorites]
I’m shocked at what the rental properties in my neighborhood lease for. The house next door, which is identical to my home, rents for well over twice what we pay in mortgage per-month. It’s insane.
I’ve spoken to a few younger folks who really want to buy, and their primary obstacle to doing so is the 20% downpayment lenders require, and not necessarily the monthly mortgage payment.
posted by Thorzdad at 5:07 AM on December 3, 2022 [12 favorites]
Everything I’ve read lately as I’ve tried to educate myself on the subject in preparation to find a box to die in is 20% hasn’t been the norm for first time home buyers in a long time.
Maybe they should stop listening to their grandparents?
posted by The Monster at the End of this Thread at 5:20 AM on December 3, 2022
Maybe they should stop listening to their grandparents?
posted by The Monster at the End of this Thread at 5:20 AM on December 3, 2022
Well, who is going to give trusted, free financial advice if not grandparents. You re going the trust the internet or WSJ over your grandad?
posted by eustatic at 5:27 AM on December 3, 2022
posted by eustatic at 5:27 AM on December 3, 2022
I’ve spoken to a few younger folks who really want to buy, and their primary obstacle to doing so is the 20% downpayment lenders require, and not necessarily the monthly mortgage payment.
This is 100% the case in the UK (where 15-20% deposits absolutely are the norm for first time buyers). I've spent my entire adult life lining the pockets of buy-to-rent landlords, paying twice their monthly mortgage (or more!) in rent every month. It's a huge tax on not having preexisting wealth.
posted by Dysk at 5:49 AM on December 3, 2022 [10 favorites]
This is 100% the case in the UK (where 15-20% deposits absolutely are the norm for first time buyers). I've spent my entire adult life lining the pockets of buy-to-rent landlords, paying twice their monthly mortgage (or more!) in rent every month. It's a huge tax on not having preexisting wealth.
posted by Dysk at 5:49 AM on December 3, 2022 [10 favorites]
Maybe they should stop listening to their grandparents?
WTF? They’re talking to realtors and lenders. Stuff this ageist bullshit.
posted by Thorzdad at 5:49 AM on December 3, 2022 [16 favorites]
WTF? They’re talking to realtors and lenders. Stuff this ageist bullshit.
posted by Thorzdad at 5:49 AM on December 3, 2022 [16 favorites]
We've had our place since 1989 (one of the previous price bubbles, sigh) and own it clear now (phew). But of course, like many seniors, our house is the majority of our assets.
My own conclusion earlier this year was that there would simply be too much economic uncertainty over the next year or so to make an educated prediction, so I believe that if possible, people should sit back, and then reassess the housing market next summer.
The long run-up in housing costs, and the more recent inflation/crisis hit on food... something's gotta give. It's not survivable for many people, let alone sustainable.
posted by Artful Codger at 6:15 AM on December 3, 2022 [2 favorites]
My own conclusion earlier this year was that there would simply be too much economic uncertainty over the next year or so to make an educated prediction, so I believe that if possible, people should sit back, and then reassess the housing market next summer.
The long run-up in housing costs, and the more recent inflation/crisis hit on food... something's gotta give. It's not survivable for many people, let alone sustainable.
posted by Artful Codger at 6:15 AM on December 3, 2022 [2 favorites]
Hell, we gave up and decided to stay put two years ago!
posted by Naberius at 6:18 AM on December 3, 2022
posted by Naberius at 6:18 AM on December 3, 2022
Much as the situation in the UK sucks for anyone with a mortgage right now, particularly a fairly recent one, house prices here are so overinflated that they need to come down pretty significant still to get to a point where buying a house is even remotely affordable for most people.
I don't think the falls necessary are even close to likely. There's still a huge shortage of property compared to need, so prices have been running hot for a very long time. Even the 20% price cut I've seen forecast over the next couple of years will only wipe out the rise of the last 3-4 years, and the increase in mortgage interest costs more than outweighs that. If/when rates come down again, to 'boost growth', prices will just skyrocket again.
Short term, I can only see more hefty energy subsidies spread more widely and rent controls on private landlords actually doing anything much to help, particularly those that aren't quite poor/pensioner enough to get the benefit boosts, but are still really struggling. Medium to long term, we have to build a helluva lot more decent social housing and actually keep it for actual social rents rather than right-to-buy, and a huge program of energy efficiency upgrades on our ancient draughty housing stock, particularly rentals. Yes, it'll improve a chunk of privately owned property (though a bunch of that is old inefficient housing owned by the less well off, such as old council stock or pensioners), but it's the tenants paying the energy bills.
The land developers promising 30% 'affordable' (which isn't that affordable) housing to get planning permission, then getting to revise it down to 5 or 10% due to 'profitability' is bullshit, and the 'poor door' implementations for that pitiful amount is outrageous.
Paying for all that when the social services ala NHS are already on their knees from massive underfunding is going to be a tall order. Some kind of Land Value Tax, weighted towards high value properties (and probably excluding/discounting farm land), and including all those developers sitting on massive land banks and not building because it's better to constrain supply to push up prices, maybe.
Hell, while we're at it, let's invest heavily in the north so all those houses that are nearly worthless because there are no jobs can come back into play with people wanting to live there, and we're not trying to fit everyone within 50 miles of London.
I can't even imagine any potential government being that bold or taxing back some of the eyewatering gains of the asset-owning wealthiest to pay for it though.
posted by Absolutely No You-Know-What at 6:23 AM on December 3, 2022 [6 favorites]
I don't think the falls necessary are even close to likely. There's still a huge shortage of property compared to need, so prices have been running hot for a very long time. Even the 20% price cut I've seen forecast over the next couple of years will only wipe out the rise of the last 3-4 years, and the increase in mortgage interest costs more than outweighs that. If/when rates come down again, to 'boost growth', prices will just skyrocket again.
Short term, I can only see more hefty energy subsidies spread more widely and rent controls on private landlords actually doing anything much to help, particularly those that aren't quite poor/pensioner enough to get the benefit boosts, but are still really struggling. Medium to long term, we have to build a helluva lot more decent social housing and actually keep it for actual social rents rather than right-to-buy, and a huge program of energy efficiency upgrades on our ancient draughty housing stock, particularly rentals. Yes, it'll improve a chunk of privately owned property (though a bunch of that is old inefficient housing owned by the less well off, such as old council stock or pensioners), but it's the tenants paying the energy bills.
The land developers promising 30% 'affordable' (which isn't that affordable) housing to get planning permission, then getting to revise it down to 5 or 10% due to 'profitability' is bullshit, and the 'poor door' implementations for that pitiful amount is outrageous.
Paying for all that when the social services ala NHS are already on their knees from massive underfunding is going to be a tall order. Some kind of Land Value Tax, weighted towards high value properties (and probably excluding/discounting farm land), and including all those developers sitting on massive land banks and not building because it's better to constrain supply to push up prices, maybe.
Hell, while we're at it, let's invest heavily in the north so all those houses that are nearly worthless because there are no jobs can come back into play with people wanting to live there, and we're not trying to fit everyone within 50 miles of London.
I can't even imagine any potential government being that bold or taxing back some of the eyewatering gains of the asset-owning wealthiest to pay for it though.
posted by Absolutely No You-Know-What at 6:23 AM on December 3, 2022 [6 favorites]
I've owned my own house since I bought a literal shell of a place to fix up in 1999; when we sold that and moved in 2014 we tried renting, but after six months I couldn't handle it. The thing that a lot of rent/own arguments don't account for is power over your own space -- owning a house I can (with the right permits) cut down a tree that's turned the back yard into a shaded sprawl of moss and mud, renovate my own kitchen any way I like, paint, put in shelves, reconfigure non-load-bearing walls, and the beat goes on.
We're contemplating a move in theory right now, and renting -- except if circumstances dictate we rent for six months to a year while we look -- isn't even in the cards for me. Permission-seeking to change my own space, or having to wait until a landlord gets around to it for reasonable updates and fixes, is a hidden cost to renting that I'm willing to pay to avoid. Even a lower-cost house where we think we'd like to be would still mean paying again what our current house cost in 2015, though... but in places where real estate has been unshakeably high for my entire life. We'd be putting in about 50%, which is awesome, but the thought of setting us back seven years in terms of where we were at when we got our current place is daunting.
But the real estate agents I've talked to in the cities we're looking at say that prices are down about 5% vs. same time last year, fewer homes are going on the market, and they're on the market longer. The refrain has been that everything -- other than interest rates -- is in the buyer's favour now more than it has been for 15-20 years. Grain of salt -- these are real estate agents, after all -- but at least one I have an outside-work friendly relationship with and isn't in a place I'm looking at, and I don't think they'd snow me out of a vague fealty to the profession.
This is the first time I've ever seriously wanted to look for a place with an apartment I can rent out in the same building, though. Not just for financial reasons -- I feel almost a moral obligation to rent out something at a reasonable cost to somebody who needs it. I have the skills and tools (and privileged background to acquire these things) that put 99% of what goes wrong with an apartment within my power to fix, and helping even one person with a reasonably-priced place to lay their head is something I can do.
posted by Shepherd at 6:28 AM on December 3, 2022 [10 favorites]
We're contemplating a move in theory right now, and renting -- except if circumstances dictate we rent for six months to a year while we look -- isn't even in the cards for me. Permission-seeking to change my own space, or having to wait until a landlord gets around to it for reasonable updates and fixes, is a hidden cost to renting that I'm willing to pay to avoid. Even a lower-cost house where we think we'd like to be would still mean paying again what our current house cost in 2015, though... but in places where real estate has been unshakeably high for my entire life. We'd be putting in about 50%, which is awesome, but the thought of setting us back seven years in terms of where we were at when we got our current place is daunting.
But the real estate agents I've talked to in the cities we're looking at say that prices are down about 5% vs. same time last year, fewer homes are going on the market, and they're on the market longer. The refrain has been that everything -- other than interest rates -- is in the buyer's favour now more than it has been for 15-20 years. Grain of salt -- these are real estate agents, after all -- but at least one I have an outside-work friendly relationship with and isn't in a place I'm looking at, and I don't think they'd snow me out of a vague fealty to the profession.
This is the first time I've ever seriously wanted to look for a place with an apartment I can rent out in the same building, though. Not just for financial reasons -- I feel almost a moral obligation to rent out something at a reasonable cost to somebody who needs it. I have the skills and tools (and privileged background to acquire these things) that put 99% of what goes wrong with an apartment within my power to fix, and helping even one person with a reasonably-priced place to lay their head is something I can do.
posted by Shepherd at 6:28 AM on December 3, 2022 [10 favorites]
I don't think the falls necessary are even close to likely.
Fully agree. There isn't the political will for it, even aside from everything else.
There's still a huge shortage of property compared to need
I'm not convinced this is entirely true as such - I think the issue is how much of the housing stock is held by private landlords. If you have money, for the longest time, it was (and still is to a certain extent!) one of the best investments you can make. Put down a deposit, and charge twice your monthly mortgage payment in rent. As well as putting rents on an unsustainable escalator, it is a huge part of the demand pressure that has pushed house prices up. Why let a family pay a reasonable price for a property when you can well above that and still come out on top? (Let's ignore the fact that the family are now paying more to rent from you than they would have for their mortgage, fuck those guys for having the temerity to live while not rich).
We should be looking at ways to discourage buy-to-let, not setting up help-to-buy schemes that include them, and in fact end up predominantly being used by people buying second, third, fifth, twentieth properties. We should be looking at making this kind of landlording unattractive and unprofitable.
Which is to say it'll never happen. A small blip, then prices will keep rising, to keep the haves happy, to keep them fucking over the have-nots.
(And like, I'm in the West Midlands, in a smallish town, and prices here have nearly quadrupled in the last two decades. It's way beyond what's affordable for a couple both working full time, earning average wages - unless you happen to have fifty grand lying around - and it's less than half the price of London.)
posted by Dysk at 6:47 AM on December 3, 2022 [7 favorites]
Fully agree. There isn't the political will for it, even aside from everything else.
There's still a huge shortage of property compared to need
I'm not convinced this is entirely true as such - I think the issue is how much of the housing stock is held by private landlords. If you have money, for the longest time, it was (and still is to a certain extent!) one of the best investments you can make. Put down a deposit, and charge twice your monthly mortgage payment in rent. As well as putting rents on an unsustainable escalator, it is a huge part of the demand pressure that has pushed house prices up. Why let a family pay a reasonable price for a property when you can well above that and still come out on top? (Let's ignore the fact that the family are now paying more to rent from you than they would have for their mortgage, fuck those guys for having the temerity to live while not rich).
We should be looking at ways to discourage buy-to-let, not setting up help-to-buy schemes that include them, and in fact end up predominantly being used by people buying second, third, fifth, twentieth properties. We should be looking at making this kind of landlording unattractive and unprofitable.
Which is to say it'll never happen. A small blip, then prices will keep rising, to keep the haves happy, to keep them fucking over the have-nots.
(And like, I'm in the West Midlands, in a smallish town, and prices here have nearly quadrupled in the last two decades. It's way beyond what's affordable for a couple both working full time, earning average wages - unless you happen to have fifty grand lying around - and it's less than half the price of London.)
posted by Dysk at 6:47 AM on December 3, 2022 [7 favorites]
I’ve spoken to a few younger folks who really want to buy, and their primary obstacle to doing so is the 20% downpayment lenders require, and not necessarily the monthly mortgage payment.
While I agree that the downpayment can be a huge barrier to people, it's worth noting that in the US the average downpayment is much smaller (in the ~7% range, per Google). But even that is a huge barrier when house prices are this high, much less the full "traditional" 20%.
I have been keeping a very casual eye on house prices where I am living, and it looks to me like the market is for sure softening. Lots and lots of the houses showing on Zillow have recent price cuts, and some of them have had a series of price cuts. Not all that long ago, none had price cuts and they weren't staying on the market long either. But the cuts look pretty small on average and I don't think sellers are (yet) cutting prices to the point of reversing the last few years of price increases.
So when you add in much higher interest rates, buying looks simply impossible for a huge swath of the population.
posted by Dip Flash at 7:01 AM on December 3, 2022 [2 favorites]
While I agree that the downpayment can be a huge barrier to people, it's worth noting that in the US the average downpayment is much smaller (in the ~7% range, per Google). But even that is a huge barrier when house prices are this high, much less the full "traditional" 20%.
I have been keeping a very casual eye on house prices where I am living, and it looks to me like the market is for sure softening. Lots and lots of the houses showing on Zillow have recent price cuts, and some of them have had a series of price cuts. Not all that long ago, none had price cuts and they weren't staying on the market long either. But the cuts look pretty small on average and I don't think sellers are (yet) cutting prices to the point of reversing the last few years of price increases.
So when you add in much higher interest rates, buying looks simply impossible for a huge swath of the population.
posted by Dip Flash at 7:01 AM on December 3, 2022 [2 favorites]
Having owned 2 properties in my adult life, and now have been a renter since 2009, this really hits home for me. I had to move quickly in February of this year because my landlord (who lives in a gated community in Palm Beach), absolutely HAD to sell the 1 bedroom condo I had been renting for the previous 5 years here in CT. And he HAD to list it 3 months before my lease was up, forcing me to pack, search and move in a space of 4 weeks. He made a fortune on the condo when it sold in 15 days for $20k over asking price.
The 2 family house I am currently in was a lucky find, and more expensive. I have fallen in love with it and hoped to stay here for at least a few years, so I could possibly save up a down payment to buy something once this insane market calms down (lol). 6 months after I moved in here, my landlord informed me that he was selling the property to a couple of investors, who proceeded to kick the upstairs tenant out (he had no lease and had been there for 12 years) and immediately begin gutting the place. Presumably so they could double the rent. Since I do have a lease that ends March 1 of next year, I am assuming that they are not going to be re-signing me, presumably so they can gut my apartment and renovate and double the rent. So now I will have to move again for the second time in a year.
I am beyond pissed because it turns out the landlord had every intention of selling the property, but did not disclose that to me when I signed the lease. Had I known this, I never would have signed on. But, hey, that's business, right? Tough shit, renter. If you want leverage, pull up your bootstraps and buy something so you can quit having to move at the whims of property owners and investors.
Home prices in my town (upper middle class smallish town with a pop of about 29,000) are dipping slightly, and rents are as well. For a while over the past few years, houses did not even make it to market here and were sold by pocket listings. Those that did make it to MLS ended up going for tens of thousands over asking, and bidding wars were common. My bff, who works in the planning and zoning office for the next town over (same demographics as my town, but smaller population) said that she had never seen so much volume - it was an influx of folks moving out of NYC during the pandemic.
Despite the slight dips in home and rent prices, to find a 2 bedroom apartment here is still going to cost a minimum of $2500 - $2700/month plus usually all utilities.
I know this thread is about owning, but I just needed to rant a bit. Sorry for any derail.
posted by sundrop at 7:35 AM on December 3, 2022 [9 favorites]
The 2 family house I am currently in was a lucky find, and more expensive. I have fallen in love with it and hoped to stay here for at least a few years, so I could possibly save up a down payment to buy something once this insane market calms down (lol). 6 months after I moved in here, my landlord informed me that he was selling the property to a couple of investors, who proceeded to kick the upstairs tenant out (he had no lease and had been there for 12 years) and immediately begin gutting the place. Presumably so they could double the rent. Since I do have a lease that ends March 1 of next year, I am assuming that they are not going to be re-signing me, presumably so they can gut my apartment and renovate and double the rent. So now I will have to move again for the second time in a year.
I am beyond pissed because it turns out the landlord had every intention of selling the property, but did not disclose that to me when I signed the lease. Had I known this, I never would have signed on. But, hey, that's business, right? Tough shit, renter. If you want leverage, pull up your bootstraps and buy something so you can quit having to move at the whims of property owners and investors.
Home prices in my town (upper middle class smallish town with a pop of about 29,000) are dipping slightly, and rents are as well. For a while over the past few years, houses did not even make it to market here and were sold by pocket listings. Those that did make it to MLS ended up going for tens of thousands over asking, and bidding wars were common. My bff, who works in the planning and zoning office for the next town over (same demographics as my town, but smaller population) said that she had never seen so much volume - it was an influx of folks moving out of NYC during the pandemic.
Despite the slight dips in home and rent prices, to find a 2 bedroom apartment here is still going to cost a minimum of $2500 - $2700/month plus usually all utilities.
I know this thread is about owning, but I just needed to rant a bit. Sorry for any derail.
posted by sundrop at 7:35 AM on December 3, 2022 [9 favorites]
Everything I’ve read lately as I’ve tried to educate myself on the subject in preparation to find a box to die in is 20% hasn’t been the norm for first time home buyers in a long time.
Maybe they should stop listening to their grandparents?
This really depends on what country you are from and what kind of mortgage you want. If you want to buy with less than 20% down in the U.S. you are going to have to pay mortgage insurance on top of your mortgage. So in addition to paying a lot more interest over the full term of your mortgage due to a higher amount borrowed you are also going to be paying insurance too (at somewhere around 1% of the mortgage per year until you've paid around 20% of the mortgage).
posted by srboisvert at 7:43 AM on December 3, 2022 [9 favorites]
Maybe they should stop listening to their grandparents?
This really depends on what country you are from and what kind of mortgage you want. If you want to buy with less than 20% down in the U.S. you are going to have to pay mortgage insurance on top of your mortgage. So in addition to paying a lot more interest over the full term of your mortgage due to a higher amount borrowed you are also going to be paying insurance too (at somewhere around 1% of the mortgage per year until you've paid around 20% of the mortgage).
posted by srboisvert at 7:43 AM on December 3, 2022 [9 favorites]
The Case-Shiller series has an interesting shape for sure.
posted by soylent00FF00 at 8:27 AM on December 3, 2022 [1 favorite]
posted by soylent00FF00 at 8:27 AM on December 3, 2022 [1 favorite]
Aren't we due for yet another once-in-a-lifetime financial 'correction', anyways?
posted by rmd1023 at 8:34 AM on December 3, 2022
posted by rmd1023 at 8:34 AM on December 3, 2022
I know this thread is about owning, but I just needed to rant a bit. Sorry for any derail.
Disfunction in the property market absolutely hammers renters too, not just owner/occupiers. Because it means kicking out a sitting tenant and selling it off to cash out before it collapses, or rennovating and increasing rent, or just cranking up the rent anyway because you can and there's a dearth of alternatives are all highly profitable, if you had the assets to play that kind of game the last decade or so.
There was an article a little while back with a video of a financial trader who came from a working class background, and he basically laid out badly the whole system is biased towards large asset owners vs people on income, and how basically everyone who earns their income via a job has been utterly stiffed as all the profit has been diverted upwards, because they're all greedy as fuck and simply will never have enough. In that - what do you spend your money on? For most people it goes to the bank for a mortgage, or a landlord for rent. Your food money goes to the supermarkets. Your clothing money goes to big chains. Utilities go to offshore investment firms. And how even the 'low price' shops, i.e. places like Amazon and Walmart, end up enriching the people at the very top the most, ala the Walton family and Bezos. It's a rentier system, from top to bottom.
And now pretty much the last big thing left to suck the value out of and send upwards to the richest is the one asset any proportion of normal people have - their home, which are getting ever harder to get - which is to the wealthiest benefit, because again the asset-owning class are extracting wealth from workers via extortionate rent. Yet as hard as it is, as flawed as it, all he could do was recommend to become an owner, because anyone without it was even more vulnerable to their income getting squeezed ever tighter by the richest.
Wish I'd made a bookmark, it was an enlightening if terrifying watch.
posted by Absolutely No You-Know-What at 8:35 AM on December 3, 2022 [5 favorites]
Disfunction in the property market absolutely hammers renters too, not just owner/occupiers. Because it means kicking out a sitting tenant and selling it off to cash out before it collapses, or rennovating and increasing rent, or just cranking up the rent anyway because you can and there's a dearth of alternatives are all highly profitable, if you had the assets to play that kind of game the last decade or so.
There was an article a little while back with a video of a financial trader who came from a working class background, and he basically laid out badly the whole system is biased towards large asset owners vs people on income, and how basically everyone who earns their income via a job has been utterly stiffed as all the profit has been diverted upwards, because they're all greedy as fuck and simply will never have enough. In that - what do you spend your money on? For most people it goes to the bank for a mortgage, or a landlord for rent. Your food money goes to the supermarkets. Your clothing money goes to big chains. Utilities go to offshore investment firms. And how even the 'low price' shops, i.e. places like Amazon and Walmart, end up enriching the people at the very top the most, ala the Walton family and Bezos. It's a rentier system, from top to bottom.
And now pretty much the last big thing left to suck the value out of and send upwards to the richest is the one asset any proportion of normal people have - their home, which are getting ever harder to get - which is to the wealthiest benefit, because again the asset-owning class are extracting wealth from workers via extortionate rent. Yet as hard as it is, as flawed as it, all he could do was recommend to become an owner, because anyone without it was even more vulnerable to their income getting squeezed ever tighter by the richest.
Wish I'd made a bookmark, it was an enlightening if terrifying watch.
posted by Absolutely No You-Know-What at 8:35 AM on December 3, 2022 [5 favorites]
From today's Washington Post: How millennials got shut out of the pandemic housing market (archive.org link here)
posted by splitpeasoup at 9:13 AM on December 3, 2022 [3 favorites]
posted by splitpeasoup at 9:13 AM on December 3, 2022 [3 favorites]
We bought a house this year for the first time due to a combination of rising rent and trying to shorten my commute. We lived in a duplex that was our landlord's only rental property--she had actually lived on our side for years before having a family and buying a house elsewhere in town. Our rent was always reasonable for the area, but our landlord said she was raising it because the property value had increased so much that she needed more to cover the property taxes.
The mortgage rate increased between our pre-approval and closing. It is not great. Maybe we'll be able to refinance one day. We were incredibly fortunate in many ways with the sale--only one competing bid, they let us have an inspection, the house was overall in good shape. And yet it was a terrible experience in many ways and our house has a lot of issues that in a rational world the seller would have fixed before going on the market (i.e., we have outbuildings full of their junk). We know that they only thing worse than having bought this year and having to deal with this stuff was trying to continue to be a renter in the current world.
The shorter better commute is really nice, though.
posted by hydropsyche at 9:14 AM on December 3, 2022 [3 favorites]
The mortgage rate increased between our pre-approval and closing. It is not great. Maybe we'll be able to refinance one day. We were incredibly fortunate in many ways with the sale--only one competing bid, they let us have an inspection, the house was overall in good shape. And yet it was a terrible experience in many ways and our house has a lot of issues that in a rational world the seller would have fixed before going on the market (i.e., we have outbuildings full of their junk). We know that they only thing worse than having bought this year and having to deal with this stuff was trying to continue to be a renter in the current world.
The shorter better commute is really nice, though.
posted by hydropsyche at 9:14 AM on December 3, 2022 [3 favorites]
As a recent first time buyer after being a long time renter I have this to contribute:
To me there are two parallel problems contributing (not exclusive by any means because the root problem is wages...) -
1. the absence of affordable (available) new small 3/2 housing (sub 1600 sq ft, 3 bed 2 bath) - this is one of the necessary first steps available in home ownership. Most of this market is squeezed to the point of near unavailability.
2nd is a zoning issue - inability in many cities to build higher density rental buildings that are actually affordable. $2K per month for a 2 bedroom is NOT AFFORDABLE. Again putting the squeeze on rentals and driving the prices up.
When I started looking for a house there were 1400 houses on the market, when I bought last year there were under 700. It's 881 as of today.
posted by djseafood at 9:19 AM on December 3, 2022 [3 favorites]
To me there are two parallel problems contributing (not exclusive by any means because the root problem is wages...) -
1. the absence of affordable (available) new small 3/2 housing (sub 1600 sq ft, 3 bed 2 bath) - this is one of the necessary first steps available in home ownership. Most of this market is squeezed to the point of near unavailability.
2nd is a zoning issue - inability in many cities to build higher density rental buildings that are actually affordable. $2K per month for a 2 bedroom is NOT AFFORDABLE. Again putting the squeeze on rentals and driving the prices up.
When I started looking for a house there were 1400 houses on the market, when I bought last year there were under 700. It's 881 as of today.
posted by djseafood at 9:19 AM on December 3, 2022 [3 favorites]
I fear in the states that the window for home ownership for most folks is closing until capitalism is unseated. Or a significant war overseas once again gives American capital more need for "middle-class" henchmen to help "penetrate and capture the market" (aka appropriate/extort/steal)*.
Given the entrance of institutional capital into the landlording market, the "free market" value of property being that which a buyer will pay, and the immutable doctrine of the so called USA that property rights are supreme, I don't see 'physical land and buildings that humans need in order to live' depreciating in extortion value faster than most/all the intellectual property investments** we've attributed abstract value to during boom economies.
No. I fear this is the rubber-meets-road of the so called USA's inceptive founding in neo-feudalism by and for white men with property. The "winners" have made their way around the board enough times that those they paid to help them are no longer required, but payments on rent for the helper's children will certainly still be.
Our personal current plan is to move to a progressive enough area that is temporarily dictating better transaction terms to non-corporations. Temporarily meaning: until the supreme court rules that unconstitutional. Hopefully we'll get a co-op going. We'll see.
-----
*the respective former/dwindling cohort of white white-collar workers from 1960 to 2000 having their "unproductive" years ransomed against them during their "productive" ones (by way of Roth) unfortunately helped charge the fix in.
**Even if tech wasn't sloughing labor off their P&L in this moment (as other investments do at other times) , COLA increases of 3-5%/year were never going to keep pace with a stock market returning 10%. Over the course of 10 years those COLA increases average 34%. The stock market? 159%. Economic value derived from the former will never compete with the latter in a violence-enforced capitalist system.
posted by CPAnarchist at 9:26 AM on December 3, 2022 [3 favorites]
Given the entrance of institutional capital into the landlording market, the "free market" value of property being that which a buyer will pay, and the immutable doctrine of the so called USA that property rights are supreme, I don't see 'physical land and buildings that humans need in order to live' depreciating in extortion value faster than most/all the intellectual property investments** we've attributed abstract value to during boom economies.
No. I fear this is the rubber-meets-road of the so called USA's inceptive founding in neo-feudalism by and for white men with property. The "winners" have made their way around the board enough times that those they paid to help them are no longer required, but payments on rent for the helper's children will certainly still be.
Our personal current plan is to move to a progressive enough area that is temporarily dictating better transaction terms to non-corporations. Temporarily meaning: until the supreme court rules that unconstitutional. Hopefully we'll get a co-op going. We'll see.
-----
*the respective former/dwindling cohort of white white-collar workers from 1960 to 2000 having their "unproductive" years ransomed against them during their "productive" ones (by way of Roth) unfortunately helped charge the fix in.
**Even if tech wasn't sloughing labor off their P&L in this moment (as other investments do at other times) , COLA increases of 3-5%/year were never going to keep pace with a stock market returning 10%. Over the course of 10 years those COLA increases average 34%. The stock market? 159%. Economic value derived from the former will never compete with the latter in a violence-enforced capitalist system.
posted by CPAnarchist at 9:26 AM on December 3, 2022 [3 favorites]
Wish I'd made a bookmark, it was an enlightening if terrifying watch.
I rather suspect that was the Youtube channel GarysEconomics. UK guy, short hair, strong accent?
posted by aramaic at 9:30 AM on December 3, 2022 [2 favorites]
I rather suspect that was the Youtube channel GarysEconomics. UK guy, short hair, strong accent?
posted by aramaic at 9:30 AM on December 3, 2022 [2 favorites]
“JP Morgan Announces It Will Spend $1 Billion to Devour Homes and Rent-Trap People Forever,” Jared A. Brock, Surviving Tomorrow, 29 November 2022
posted by ob1quixote at 9:34 AM on December 3, 2022 [4 favorites]
posted by ob1quixote at 9:34 AM on December 3, 2022 [4 favorites]
I remember reading a piece a while back that included the point that "we" (US specifically, but I think also applying other places) would never solve the homelessness crisis as long as a home was the biggest financial asset most people owned ("owned" alongside the bank, etc.). I think about this every time I see an article about people being shut out of the housing market.
posted by gentlyepigrams at 9:41 AM on December 3, 2022 [3 favorites]
posted by gentlyepigrams at 9:41 AM on December 3, 2022 [3 favorites]
I know this thread is about owning, but I just needed to rant a bit. Sorry for any derail.
It's not a derail at all. A screwed up housing market and a screwed up renting market go hand in hand. If there are reasonable options both for buying and renting, people can make a choice based on their individual situation. But in a lot of places right now, your choice is between terrible renting options that are either unaffordable, unmaintained, or both, and eye-poppingly expensive buying options. That's not a reasonable choice and overall hurts everyone.
Permission-seeking to change my own space, or having to wait until a landlord gets around to it for reasonable updates and fixes, is a hidden cost to renting that I'm willing to pay to avoid.
We spent most of the last decade renting and this part got increasingly tiresome. It's still a tradeoff (since it's not effortless or frictionless to get work done on your own house, either) but I do appreciate not having to push and complain to get routine maintenance done.
posted by Dip Flash at 11:09 AM on December 3, 2022 [1 favorite]
It's not a derail at all. A screwed up housing market and a screwed up renting market go hand in hand. If there are reasonable options both for buying and renting, people can make a choice based on their individual situation. But in a lot of places right now, your choice is between terrible renting options that are either unaffordable, unmaintained, or both, and eye-poppingly expensive buying options. That's not a reasonable choice and overall hurts everyone.
Permission-seeking to change my own space, or having to wait until a landlord gets around to it for reasonable updates and fixes, is a hidden cost to renting that I'm willing to pay to avoid.
We spent most of the last decade renting and this part got increasingly tiresome. It's still a tradeoff (since it's not effortless or frictionless to get work done on your own house, either) but I do appreciate not having to push and complain to get routine maintenance done.
posted by Dip Flash at 11:09 AM on December 3, 2022 [1 favorite]
Yes, 20% down gets you out of mortgage insurance but my impression is that everyone just assumes they’ll be paying that rather than renting several years longer to save up for a 20% down payment that continues to recede toward the horizon.
I haven’t heard anyone take a hard line 20% or bust stance in a long time. I’ll concede I should’ve guessed that mefi would declare my last line ageist and I should have simply said the advice appears to be outdated.
posted by The Monster at the End of this Thread at 6:15 PM on December 3, 2022
I haven’t heard anyone take a hard line 20% or bust stance in a long time. I’ll concede I should’ve guessed that mefi would declare my last line ageist and I should have simply said the advice appears to be outdated.
posted by The Monster at the End of this Thread at 6:15 PM on December 3, 2022
I’ll concede I should’ve guessed that mefi would declare my last line ageist and I should have simply said the advice appears to be outdated.
The advice is bad and outdated, as such people shouldn't listen to their grandparents because you can't have both a wildly inflating market and an expectation that 20% of value is a big deal. Wait 2 years when your home is rising in price at 10% per year, and you will most likely be able to refi away PMI even if you only did like 5% down. Refing is not free and sucks, but it's not that big a deal and you get a ton of equity in your pocket.
Getting to 20% to cut off PMI is a much bigger deal when your home is rising in value at 2% (or possibly declining in value!) per year. Compare that to possibly losing money by buying a house. That's what your grandparents had to deal with, simply because we didn't prevent moderate income people from buying a home in their age and the US at least built way more houses.
posted by The_Vegetables at 8:02 AM on December 5, 2022 [1 favorite]
The advice is bad and outdated, as such people shouldn't listen to their grandparents because you can't have both a wildly inflating market and an expectation that 20% of value is a big deal. Wait 2 years when your home is rising in price at 10% per year, and you will most likely be able to refi away PMI even if you only did like 5% down. Refing is not free and sucks, but it's not that big a deal and you get a ton of equity in your pocket.
Getting to 20% to cut off PMI is a much bigger deal when your home is rising in value at 2% (or possibly declining in value!) per year. Compare that to possibly losing money by buying a house. That's what your grandparents had to deal with, simply because we didn't prevent moderate income people from buying a home in their age and the US at least built way more houses.
posted by The_Vegetables at 8:02 AM on December 5, 2022 [1 favorite]
That's what your grandparents had to deal with, simply because we didn't prevent moderate income people from buying a home in their age and the US at least built way more houses.
Ironically what DipFlash mentioned about a screwed up rental and housing market effected them less to such a degree in their time, more people actually chose to rent [or at least had higher levels of household formation], and the rate of homeownership in the US (again, at least) is on a pretty strong upswing post-covid even as interest rates rise.
posted by The_Vegetables at 8:10 AM on December 5, 2022
Ironically what DipFlash mentioned about a screwed up rental and housing market effected them less to such a degree in their time, more people actually chose to rent [or at least had higher levels of household formation], and the rate of homeownership in the US (again, at least) is on a pretty strong upswing post-covid even as interest rates rise.
posted by The_Vegetables at 8:10 AM on December 5, 2022
« Older Holly Johnson, Basil Switzerland, Nov 11, 2022 | No, that can't be done.... WHAM!!! Newer »
This thread has been archived and is closed to new comments
SB9 was just a chapter in the campaign. There's a lot of talk about housing affordability, vacancy taxes, regulation of institutional investment funds. Not just the usual progressives but moderates too, it's a suburban dems issue.
posted by LeRoienJaune at 12:02 AM on December 3, 2022 [4 favorites]