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Ten Reasons It's A Terrible Time To Buy An Expensive House


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2015 Jul 11, 12:58pm   925,532 views  448 comments

by Patrick   ➕follow (55)   💰tip   ignore  



  1. Because house prices in expensive areas still dangerously high compared to incomes and rents. Banks say a safe mortgage is a maximum of 3 times the buyer's annual income with a 20% downpayment. Landlords say a safe price is set by the rental market; annual rent should be at least 9% of the purchase price, or else the price is just too high. Yet in affluent areas, both those safety rules are still being violated. Buyers are still borrowing 6 times their income with tiny downpayments, and gross rents are still only 3% of purchase price. Renting is a cash business that proves what people can really pay based on their salary, not how much they can borrow. Salaries and rents prove that affluent neighborhoods are still in a huge housing bubble, and that bubble seems to be getting more dangerous by the day.


    2. On the other hand, in some poor neighborhoods, prices are now so low that gross rents may exceed 10% of price. Housing is a bargain for buyers there. Prices there could still fall yet more if unemployment rises or interest rates go up, but those neighborhoods have no bubble anymore.

  2. Because it's usually still much cheaper to rent than to own the same size and quality house, in the same school district. In rich neighborhoods, annual rents are typically only 3% of purchase price while mortgage rates are 4% with fees, so it costs more to borrow the money as it does to borrow the house. Renters win and owners lose! Worse, total owner costs including taxes, maintenance, and insurance come to about 8% of purchase price, which is more than twice the cost of renting and wipes out any income tax benefit.

    The only true sign of a bottom is a price low enough so that you could rent out the house and make a profit. Then you'll know it's pretty safe to buy for yourself because then rent could cover the mortgage and ownership expenses if necessary, eliminating most of your risk. The basic buying safety rule is to divide annual rent by the purchase price for the house:

    annual rent / purchase price = 3% means do not buy, prices are too high

    annual rent / purchase price = 6% means borderline

    annual rent / purchase price = 9% means ok to buy, prices are reasonable

    So for example, it's borderline to pay $200,000 for a house that would cost you $1,000 per month to rent. That's $12,000 per year in rent. If you buy it with a 6% mortgage, that's $12,000 per year in interest instead, so it works out about the same. Owners can pay interest with pre-tax money, but that benefit gets wiped out by the eternal debts of repairs and property tax, equalizing things. It is foolish to pay $400,000 for that same house, because renting it would cost only half as much per year, and renters are completely safe from falling housing prices. Subtract HOA from rent before doing the calculation for condos.

    Although there is no way to be sure that rents won't fall, comparing the local employment rate (demand) to the current local supply of available homes for rent or sale (supply) should help you figure out whether a big fall in rents could happen. Checking these factors minimizizes your risk.


  3. Because it's a terrible time to buy when interest rates are low, like now. House prices rose as interest rates fell, and house prices will fall if interest rates rise without a strong increase in jobs, because a fixed monthly payment covers a smaller mortgage at a higher interest rate. Since interest rates have nowhere to go but up, prices have nowhere to go but down. When housing falls, you lose your equity, but not your debt.

    The way to win the game is to have cash on hand to buy outright at a low price when others cannot borrow very much because of high interest rates. Then you get a low price, and you get capital appreciation caused by future interest rate declines. To buy an expensive house at a time of low interest rates and high prices like now is a mistake.

    It is far better to pay a low price with a high interest rate than a high price with a low interest rate, even if the mortgage payment is the same either way.



    • A low price lets you pay it all off instead of being a debt-slave for the rest of your life.


    • As interest rates fall, real estate prices generally rise.


    • Your property taxes will be lower with a low purchase price.


    • Paying a high price now may trap you "under water", meaning you'll have a mortgage debt larger than the value of the house. Then you will not be able to refinance because then you'll have no equity, and will not be able to sell without a loss. Even if you get a long-term fixed rate mortgage, when rates inevitably go up the value of your property will go down. Paying a low price minimizes your damage.


    • You can refinance when you buy at a higher interest rate and rates fall, but current buyers will never be able to refinance for a lower interest rate in the future. Rates are already as low as they can go.






  4. Because buyers already borrowed too much money and cannot pay it back. They spent it on houses that are now worth less than the loans. This means most banks are still actually bankrupt. But since the banks have friends in Washington, they get special treatment that you do not. The Federal Reserve prints up bales of new money to buy worthless mortgages from irresponsible banks, slowing down the buyer-friendly deflation in housing prices and socializing bank losses.

    The Fed exists to protect big banks from the free market, at your expense. Banks get to keep any profits they make, but bank losses just get passed on to you as extra cost added on to the price of a house, when the Fed prints up money and buys their bad mortgages. If the Fed did not prevent the free market from working, you would be able to buy a house much more cheaply.

    As if that were not enough corruption, Congress authorized vast amounts of TARP bailout cash taken from taxpayers to be loaned directly to the worst-run banks, those that already gambled on mortgages and lost. The Fed and Congress are letting the banks "extend and pretend" that their mortgage loans will get

    paid back.

    And of course the banks can simply sell millions of bad loans to Fannie and Freddie at full price, putting taxpayers on the hook for the banks' gambling losses. Heads they win, tails you lose.

    It is necessary that YOU be forced deeply into debt, and therefore forced into slavery, for the banks to make a profit. If you pay a low price for a house and manage to avoid debt, the banks lose control over you. Unacceptable to them. It's all a filthy battle for control over your labor.

    This is why you will never hear the president or anyone else in power say that we need lower house prices. They always talk about "affordability" but what they always mean is debt-slavery.


  5. Because buyers used too much leverage. Leverage means using debt to amplify gain. Most people forget that debt amplifies losses as well. If a buyer puts 10% down and the house goes down 10%, he has lost 100% of his money on paper. If he has to sell due to job loss or a mortgage rate adjustment, he lost 100% in the real world.

    The simple fact is that the renter - if willing and able to save his money - can buy a house outright in half the time that a conventional buyer can pay off a mortgage. Interest generally accounts for more than half of the cost of a house. The saver/renter not only pays no interest, he also gets interest on his savings, even if just a little. Leveraged housing appreciation, usually presented as the "secret" to wealth, cannot be counted on, and can just as easily work against the buyer. In fact, that leverage is the danger that got current buyers into trouble.

    The higher-end housing market is now set up for a huge crash in prices, since there is no more fake paper equity from the sale of a previously overvalued property and because the market for securitized jumbo loans is dead. Without that fake equity, most people don't have the money needed for a down payment on an expensive house. It takes a very long time indeed to save up for a 20% downpayment when you're still making mortgage payments on an underwater house.

    It's worse than that. House prices do not even have to fall to cause big losses. The cost of selling a house is kept unfairly high because of the Realtor® lobby's corruption of US legislators. On a $300,000 house, 6% is $18,000 lost even if housing prices just stay flat. So a 4% decline in housing prices bankrupts all those with 10% equity or less.


  6. Because the housing bubble was not driven by supply and demand. There is huge supply because of overbuilding, and there is less demand now that the baby boomers are retiring and selling. Prices in the housing market, even now, are entirely a function of how much the banks are willing and able to lend. Most people will borrow as much as they possibly can, amounts that are completely disconnected from their salaries or from the rental value of the property. Banks have been willing to accomodate crazy borrowers because banker control of the US government means that banks do not yet have to acknowledge their losses, or can push losses onto taxpayers through government housing agencies like the FHA.


  7. Because there is still a massive backlog of latent foreclosures. Millions of owners stopped paying their mortgages, and the banks are still not forclosing on all of them, letting the owner live in the house for free. If a bank forecloses and takes possession of a house, that means the bank is responsible for property taxes and maintenance. Banks don't like those costs. If a bank then sells the foreclosure at current prices, the bank has to admit a loss on the loan. Banks like that cost even less. So there is a tsunami of foreclosures on the way that the banks are ignoring, for now. To prevent a justified foreclosure is also to prevent a deserving family from buying that house at a low price. Right now, those foreclosures will wash over the landscape, decimating prices, and benefitting millions of families which will be able to buy a house without a suicidal level of debt, and maybe without any debt at all!


  8. Because first-time buyers have all been ruthlessly exploited and the supply of new victims is very low.

    From The Herald:

    "We were all corrupted by the housing boom, to some extent. People talked endlessly about how their houses were earning more than they did, never asking where all this free money was coming from. Well the truth is that it was being stolen from the next generation. Houses price increases don't produce wealth, they merely transfer it from the young to the old - from the coming generation of families who have to burden themselves with colossal debts if they want to own, to the baby boomers who are about to retire and live on the cash they make when they downsize."

    House price inflation has been very unfair to new families, especially those with children. It is foolish for them to buy at current high prices, yet government leaders never talk about how lower house prices are good for American families, instead preferring to sacrifice the young and poor to benefit the old and rich, and to make sure bankers have plenty of debt to earn interest on. Your debt is their wealth. Every "affordability" program drives prices higher by pushing buyers deeper into debt. Increased debt is not affordability, it's just pushing the reckoning into the future. To really help Americans, Fannie Mae and Freddie Mac and the FHA should be completely eliminated. Even more important is eliminating the mortgage-interest deduction, which costs the government $400 billion per year in tax revenue. The mortgage interest deduction directly harms all buyers by keeping prices higher than they would otherwise be, costing buyers more in extra purchase cost than they save on taxes. The $8,000 buyer tax credit cost each buyer in Massachusetts an extra $39,000 in purchase price. Subsidies just make the subsidized item more expensive. Buyers should be rioting in the streets, demanding an end to all mortgage subsidies. Canada and Australia have no mortgage-interest deduction for owner-occupied housing. It can be done.

    The government pretends to be interested in affordable housing, but now that housing is becoming truly affordable via falling prices, they want to stop it? Their actions speak louder than their words.



  9. Because boomers are retiring. There are 70 million Americans born between 1945-1960. One-third have zero retirement savings. The oldest are 66. The only money they have is equity in a house, so they must sell. This will add yet another flood of houses to the market, driving prices down even more.


  10. Because there is a huge glut of empty new houses. Builders are being forced to drop prices even faster than owners, because builders must sell to keep their business going. They need the money now. Builders have huge excess inventory that they cannot sell at current prices, and more houses are completed each day, making the housing slump worse.




Next Page: Eight groups who lie about the housing market »



The Housing Trap

You're being set up to spend your life paying off a debt you don't need to take on, for a house that costs far more than it should. The conspirators are all around you, smiling to lure you in, carefully choosing their words and watching your reactions as they push your buttons, anxiously waiting for the moment when you sign the papers that will trap you and guarantee their payoff. Don't be just another victim of the housing market. Use this book to defend your freedom and defeat their schemes. You can win the game, but first you have to learn how to play it.

115 pages, $12.50Kindle version available

« First        Comments 409 - 448 of 448        Search these comments

409   zzyzzx   2022 Dec 27, 8:47am  

https://www.reddit.com/r/RealEstate/comments/zvgi53/should_i_sell_my_home_in_ca/

we bought our first house back in Dec 2020, we pretty much live paycheck to paycheck and all our money is tied to this house. We can’t even properly maintain the house because we don’t have the money (examples; ductwork, electrical panel, etc) and we’re feeling unhappy with our situation and feel stuck. We are back and forth whether it would be a good idea to sell, pay off debt, get our credit up, be more stable, save the rest of the money and try to buy again in a year or two. Of course we’d have to rent in the meantime and we have the rate 2.5 Apr on this house which is great but is it worth staying? We’d maybe walk away with 100k-130k
412   CBOEtrader   2022 Dec 27, 11:30am  

zzyzzx says






lets see him try to sell that house with rates at 7.5%
413   RWSGFY   2022 Dec 27, 12:00pm  

zzyzzx says







$1K rent doesn't jive with $2M house: in the areas where rents are $1K houses are not $2M and vice versa. Unless the guy was renting from some slumlord in a ghetto shithole which would be weird for someone making the money he said he makes. I also don't see how he could be approved for a loan that big - he certainly doesn't make enough for that.
414   HeadSet   2022 Dec 27, 1:58pm  

RWSGFY says

$1K rent doesn't jive with $2M house:

True, that is the rent for a small 1-2 bedroom apartment even in coastal Virginia.
415   Onvacation   2022 Dec 30, 2:47pm  

HeadSet says


RWSGFY says


$1K rent doesn't jive with $2M house:

True, that is the rent for a small 1-2 bedroom apartment even in coastal Virginia.


Could be renting a room in someone's house. I think he (assuming gender) made stated income PLUS 15K/month in some lucrative gig.

Outlier anecdote illustrating high cost of mortgage and possibility of job loss. There are a lot of SF Bay area mortgagees that are going to be hurting if they lose their job.
416   zzyzzx   2023 Jan 3, 12:23pm  

https://www.marketwatch.com/picks/my-wife-and-i-live-an-average-life-in-the-bay-area-making-320k-last-year-we-bought-a-house-for-200k-over-asking-now-we-dont-want-to-live-in-it-should-we-get-professional-help-01672699874

My wife and I live ‘an average life’ in the Bay Area making $320K. Last year, we bought a house for $200K over asking — now we don’t want to live in it. Should we get professional help?
417   Ceffer   2023 Jan 3, 12:38pm  

zzyzzx says

Should we get professional help?

LOL! They can still afford professional help? How Caligulan of them.
418   clambo   2023 Jan 3, 1:02pm  

It's getting expensive everywhere.
I'm seeing nice but small 2 bed/2 bath condos in La Paz for $170,000-$200,000 (900 -1000 square feet).
And, foreigners have to pay cash! You can't get a mortgage in the USA to "buy" in Mexico as far as I am aware.
419   stereotomy   2023 Jan 3, 3:14pm  

zzyzzx says


Should we get professional help?

Left coast / first world problems.

LOL
420   zzyzzx   2023 Jan 17, 12:05pm  

https://www.businessinsider.com/buyers-remorse-buying-a-home-regrets-2023-1

A 34-year-old first-time homebuyer with a 6.99% interest rate said she regrets the house she just purchased. Do you have buyer's remorse?

In December, a first-time homebuyer paid $585,000 — $35,000 over asking — for a three-bedroom house in Richmond, Virginia, with a mortgage interest rate of 6.99%.

The 34-year-old buyer, who asked to remain anonymous for privacy reasons (because they don't want to be outed as a moron) , hasn't even moved in yet, and already wishes she could take back the decision.

"I did the dumbest thing possible in buying the peak of the market and the peak of interest rates," she told Insider. "It just doesn't make any sense."

I didn't know that you could even pay that much for a house in Richmond, VA...
421   kmail   2023 Jan 17, 12:11pm  

zzyzzx says

https://www.businessinsider.com/buyers-remorse-buying-a-home-regrets-2023-1

A 34-year-old first-time homebuyer with a 6.99% interest rate said she regrets the house she just purchased. Do you have buyer's remorse?

In December, a first-time homebuyer paid $585,000 — $35,000 over asking — for a three-bedroom house in Richmond, Virginia, with a mortgage interest rate of 6.99%.

The 34-year-old buyer, who asked to remain anonymous for privacy reasons (because they don't want to be outed as a moron) , hasn't even moved in yet, and already wishes she could take back the decision.

"I did the dumbest thing possible in buying the peak of the market and the peak of interest rates," she told Insider. "It just doesn't make any sense."

I didn't know that you could even pay that much for a house in Richmond, VA...

really? why not? https://www.redfin.com/city/17149/VA/Richmond/filter/sort=hi-price
i'm not familiar w/that area tho... 600k would be nice in socal tho! :)
423   Eman   2023 Feb 19, 9:32pm  

ad says


S&P 500 average annual return is only about 6.5% since January 2000. Accounting for inflation, it is only about 3.5%. So much for the S&P 500 returning 11% a year over the long term. Has housing done better since January 2000 ?
.



.

The answer is likely yes for Bay Area real estate assuming the typical buyer put 20% down and 25% for investors.

Since 2000, Bay Area real estate has gone up probably around 200%…..some more, some less. At 200% times 4 to 5x leverage with the down payment, that’s about 8-10x return.

For investment properties, rents have likely doubled since. The reason real estate has gone up more due to lower mortgage rates. It was around 8% in 2000 and 3% early last year. Rents haven’t budged much in Bay Area with the exception of San Francisco?
424   Eman   2023 Feb 19, 9:38pm  

Booger says





In general, it doesn’t make sense to buy expensive real estate in most cases when we do a rent vs. buy analysis. It’s more of a lifestyle choice.

People buy real estate for different reasons. Maybe they have too much money and want to lock in the low property tax basis for their kids in the future as good locations are always in high demand? Average buyers are being replaced with more qualified buyers as the area becomes more and more desirable overtime as “they don’t make anymore land” due to NIMBYism in the Bay Area?
425   AD   2023 Feb 19, 10:05pm  

Eman says

Since 2000, Bay Area real estate has gone up probably around 200%


Yep
.



.
426   Eman   2023 Feb 19, 11:49pm  

ad says

Eman says


Since 2000, Bay Area real estate has gone up probably around 200%


Yep
.



.

It’s not a black and white comparison between real estate and the stock market as some makes it out to be.

One thing I’ve learned is that low to no appreciation markets tend to have higher cash flow to start while higher appreciation markets tend to have no to negative cash flow at the onset. However, the rent growth in higher appreciation markets would catch up in the next few years. Then it’s all gravy after that. Higher rent growth = higher appreciation. Higher appreciation = higher passive income, which is the “true” passive income.

The low mortgage rates after the pandemic really distorted housing prices. It’ll probably take a decade to unwind it, but who knows. Some likes to think they know. In all honesty, I’m not smart enough to know. I just know that I’m a buyer and seller for the right price regardless where we are in the cycle of the housing market.
427   Patrick   2023 Feb 20, 9:30pm  

ad says

S&P 500 average annual return is only about 6.5% since January 2000.


Why compare to the tech bubble peak?


428   Misc   2023 Feb 20, 10:13pm  

I dunno, why don't we inflation adjust the returns?

It makes that last little drop much better represented.
429   AD   2023 Feb 21, 12:27am  

Misc says

I dunno, why don't we inflation adjust the returns?

It makes that last little drop much better represented.


Right now the S&P 500 is at 4079 and about 15.5% below its all time high set in December 2021. The 52 week high for 2020 was 3380 set in February, right before the pandemic started.

Estimate about 17% inflation from February 2020 to present day. So the S&P 500 currently has had a real return of no more than 4% since February 2020.

When it bottomed around 3577 in October 2022, it was in negative return territory, so the pandemic gains were wiped out.

.
430   AD   2023 Feb 21, 12:37am  

Eman says

the rent growth in higher appreciation markets would catch up in the next few years.


Yes, and what do you expect rent growth to be ? average of 5% annual increase ?

Yes, I agree, I know some that took advantage of the housing crisis of 2008; for example, one white liberal acquaintance bought a 3 bedrm/2.5 bath/2 car garage/2 miles to beach townhome for $115,000 in 2010. Same townhome sold for $270,000 about 4 years prior. He is renting that townhome for $2100 a month and his monthly expenses are about $900 a month. He was renting it for $1500 back in 2017. His ROI is growing steadily. He only put in about $5000 to get it ready for leasing.

Same type of white liberal class pushed for unqualified buyers to get mortgages, and then exploited it.

.
431   AD   2023 Feb 21, 12:42am  

Patrick says

Why compare to the tech bubble peak?


S&P 500 has NASDAQ stocks so its more of a comprehensive index for me and benchmark of the economy.

.
432   AD   2023 Feb 21, 12:49am  

Eman says

The low mortgage rates after the pandemic really distorted housing prices. It’ll probably take a decade to unwind it, but who knows.


Eman, It already unwound, with San Fran Bay Housing down 35% from peak and at 2019 levels. Check out Wolf Street website which has shown the charts and data for this.

It may take 10 to 15 years to recover like it did with the 2008 housing crash. I recall my Alexandria, VA townhome's 2007 value was peak value around $435,000 and it took about 12 years later to reach that value (based on what I saw of sales records). That townhome sold for $300,000 in late 2008, and was purchased for $200,000 in 2000.

....
433   WookieMan   2023 Feb 21, 6:00am  

ad says

Eman, It already unwound, with San Fran Bay Housing down 35% from peak and at 2019 levels. Check out Wolf Street website which has shown the charts and data for this.

I don't search CA real estate. Likely true. Problem is predictions that the entire market is collapsing are false. Over inflated coastal areas depicting a not realistic median number nationally. Most of the US land mass is totally fine, though some bigger cities are gonna get burned. Again, that brings down the national median and people think we're all gonna die or something.

A ridiculously low percentage of houses have been bought at the current rates. No one wants to sell because the next house will be more expensive. So there's NO INVENTORY in most of the country. Interest rates matter, but not more than supply and demand. People will always want housing and will pay high interest. CA's problem in my estimation is an out migration to other states. I dealt with it a decade ago in IL. Been there done that. Chicago proper will have issues, but the state outside of Chicago is totally fine if not appreciating outside of cities. That's what CA is experiencing, but also a loss of foreign capital because countries like China are fucked.

The only people that are fucked in CA are those that bought 2 years ago and NEED to move. That might increase distressed inventory (REO or short sales) but the floor is high on any housing bust with inflation. This isn't and really can't be 2007(ish).
434   GNL   2023 Feb 21, 7:02am  

Eman says


I just know that I’m a buyer and seller for the right price regardless where we are in the cycle of the housing market.

I would imagine this is the key. I would also say that buying a negative cash flow property is gambling. How many people do you think are going to lose in that scenario now that rates have and are rising?
435   GNL   2023 Feb 21, 7:03am  

No one ever seems to talk about the losers in real estate investing. Not only that but EVERYONE is a genius when interest rates are falling and have real estate.
436   Eric Holder   2023 Feb 21, 10:55am  

GNL says

No one ever seems to talk about the losers in real estate investing. Not only that but EVERYONE is a genius when interest rates are falling and have real estate.


We still remember Casey Sirin.
437   AD   2023 Feb 21, 10:57am  

WookieMan says


I don't search CA real estate. Likely true. Problem is predictions that the entire market is collapsing are false. Over inflated coastal areas depicting a not realistic median number nationally. Most of the US land mass is totally fine, though some bigger cities are gonna get burned. Again, that brings down the national median and people think we're all gonna die or something.


I understand. I have observed Californians selling their inflated homes and then moving to mountain towns in Idaho and Colorado, as well as Phoenix, Las Vegas, etc. That drove some of the price increases there. So California skews the sales data.

Right now Phoenix is down about 8.5% ( source: https://fred.stlouisfed.org/series/PHXRNSA )

My question is how many foreign buyers (i.e., far east Asia, India, etc.) bought in California during the run up in prices ?

.
438   Eman   2023 Feb 21, 1:30pm  

GNL says

Eman says



I just know that I’m a buyer and seller for the right price regardless where we are in the cycle of the housing market.

I would imagine this is the key. I would also say that buying a negative cash flow property is gambling. How many people do you think are going to lose in that scenario now that rates have and are rising?

In my line of biz, buying negative cash flow to reposition is where the big money/equity can be earned. If not holding long term for cash flow and wealth building, it can be sold to 1031 exchange buyers who are willing to pay top dollars for turnkey assets at market/retail prices

I’ve seen retailers buying negative cash flow properties in my market where the numbers just don’t pencil out. They’re either very savvy, or not. However, these tend to happen more often in the residential space, 1-4 units, rather than commercial, 5+ units as the lender is actually underwriting the deals and be sure the assets have positive cash flow, or the borrowers have a ton of money/reserve and put a big down payment so the assets would perform/cash flow.
439   Eman   2023 Feb 21, 2:28pm  

GNL says

No one ever seems to talk about the losers in real estate investing. Not only that but EVERYONE is a genius when interest rates are falling and have real estate.

Like any biz, there are always winners and losers. As long as people have more winners than losers, they should be okay. Risk mitigation can be taken to a certain extent, but that’s about it. Just like no one saw how aggressive the Fed hiking rates in 2022.

I think the issue is that the general public perceives speculators as investors. Speculators are riding the housing waves while hoping the market will continue to carry them. They tend to not having a back up plan like how would they exit a $3M SFH flip if the housing stalled? OTOH, investors take calculated risks on every purchase. When SHTF, speculators go BK and investors get a bad rep from it.

Talking to JPM recently, they’ve been doing “cash-in” refinance on their commercial loans where the loan terms adjusted during this high interest rate environment. So far, no red flags as borrowers have been able to bring in the cash difference to refinance. They’re being very selective on which assets to lend, and they’re avoiding the office space as much as possible. All in all, what the Fed doing is working. JPM is also laying off a bunch of employees in their mortgage division as loan volume is down, which is to be expected.
440   GreaterNYCDude   2023 Feb 21, 8:41pm  

My hose sold in 2003 for $460,000.
Foreclosed on as part of the 2008 crisis.

Bought it for $300,000 in 2012.
(Foreclosures take YEARS in NY)

It's FMV today (according to the county) for tax purposes?
$440,000.

I could get more than that... but 1) where would I go and 2) if I stay in this area a bigger house means more in taxes /maintance / upkeep. Why bother?

Live within your means and the rest will work out. It's a place to live... not an investment.
441   Eman   2023 Feb 22, 7:59am  

GreaterNYCDude says

My hose sold in 2003 for $460,000.
Foreclosed on as part of the 2008 crisis.

Bought it for $300,000 in 2012.
(Foreclosures take YEARS in NY)

It's FMV today (according to the county) for tax purposes?
$440,000.

I could get more than that... but 1) where would I go and 2) if I stay in this area a bigger house means more in taxes /maintance / upkeep. Why bother?

Live within your means and the rest will work out. It's a place to live... not an investment.

Good to hear from you ECBB. Real estate is local. Based on the same 20 years time frame, real estate has gone up about 200% for our area while yours seems to be flat. I’m sure there are markets where real estate have even gone down in value. It’s just the way it is. It’s location. Then supply and demand.

The best time to buy real estate for our market was the mid 1990’s. This was the bottom of the Savings & Loans crises followed by the housing bubble, early 2010’s. If anyone could timed these, that person would be well off. The average SFH, bought in the mid 1990’s, has gone up about $1M.
442   GreaterNYCDude   2023 Feb 22, 9:40am  

Real estate is local.

@eman. Agreed. All markets are local. Here it went up after 9/11 as everyone left NYC, went asymtotic during the 1st housing bubble (as did everywhere), bottomed out after the crash, started going up again slowly thereafter, and just picked up speed with the recent trend to remote work. My local market topped rhis past summer. Now that offices want people back, the market has flattened out or dropped a bit.

For new homebuyers that are getting priced out either prices need to drop or wages need to go up. The one thing I did not expect was how much rent had gone up in the past 10 years. If I were 15 years younger I'd probably be priced out of this area.

I have no idea how you all make it work on the West Coast. For as bad as it is here, out there seems even worse when it comes to the cost of putting a roof over your head.
444   GNL   2023 Apr 12, 8:46am  

zzyzzx says





Why do people think the future is always supposed to be bright? Never understanding that life can turn on a dime. They have a years cushion. That's better than 95% of Americans. If you're so worried, sell your place. Downsize your mortgage.
445   NDrLoR   2023 Apr 12, 8:57am  

GNL says

They have a years cushion.
They also have an $8K/month mortgage, that would make anyone quail.
446   AD   2023 Apr 30, 10:54pm  

Bitcoiner says

we all know it won’t spike up in a meaningful way.


How do we do know house supply won't spike in a meaningful way ? There may be some panic selling and fire sales. Look at how the big tech companies have announced new layoff plans which will effect some of the San Fran Bay area .

How many tech workers are returning to San Fran Bay area ? 200,000 ?
.
447   WookieMan   2023 Apr 30, 10:56pm  

GNL says

Why do people think the future is always supposed to be bright? Never understanding that life can turn on a dime. They have a years cushion. That's better than 95% of Americans. If you're so worried, sell your place. Downsize your mortgage.

You don't have to sell or pay it. This was my career from 2006 to 2012. You don't have to pay your mortgage for 24 months roughly before the bank takes it back. The bank will pay the taxes. You cut the $8k/mo out and save it in cash since it's under $10k. Get a nice safe. After about 12 months not paying you try to short sell it and hopefully sell it in the following 12 months. In 4 years that banked cash is a hefty down payment when you can get a loan again. Or borrow privately and refi when eligible.

Always keep receipts for EVERYTHING you buy for your primary home specifically for this case. The amount short is considered income. Also even primary resident people don't keep shit not realizing the married cap gains tax can be written down too. You have a $600k gain, but put $100k into the house, you pay no taxes as a couple. It's not just investment properties. It's not a loophole it's just something most accountants (sad) and owners don't know. Keep everything from the day you buy. Everything.

Same with a short sale or foreclosure. If it goes for $100k less than what you owed that's considered taxable income. If you had $50k in receipts only $50k is taxable depending on your situation. Always have binder is the way we do it. Every receipt goes into it. Be religious about it. So many clients of ours got burned at tax time. We warned them, but we're not accountants and have to tread lightly with advice.
448   WookieMan   2023 May 1, 12:02am  

ad says

How many tech workers are returning to San Fran Bay area ? 200,000 ?

Bay area is a unique situation nationally. They don't NEED to be at the office. They just built multi-million dollar complexes (maybe billion) and have to justify them to shareholders. To pay the taxes and loans they have to lay people off. Many are talented and could move to Austin, Atlanta, Nashville, etc. and get a similar paying job with a lower cost of living.

It's not glorious but the post office is hiring people at $30/hr with potential lifetime pension. Zero skill required outside of not being a criminal. If you don't take much time off you can be making $60k individually. That's basically the median household income. That's a $220k home in fly over country which is easily findable. And not in a ghetto. Have a spouse working and you're hitting $350's if you're into buying a house.

There's no reason outside of laziness to not be making $120k+ if you're married. No one wants to work right now. Wish kids could start younger because my kids could have jobs they'd be making $15-20/HR at 13.

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