patrick.net

A friend bought a home in 2009 for 280k and recently sold it at 550k. Relocated to Dallas from Columbus. Buying that home for 550k makes no sense to me but selling does. I have a couple of dollars saved up but this economy and the future worries me and I guess that's their goal. It seems to me that a lot of folks are in distress, it doesn't have to be this way but this is what they want. I will do what I can, live below my means..

gabbar says

I have a couple of dollars saved up but this economy and the future worries me and I guess that's their goal. It seems to me that a lot of folks are in distress, it doesn't have to be this way but this is what they want. I will do what I can, live below my means..

Live frugally even if you do have wealth. You sleep, bath and cook in your house. That's literally what it is. If you have kids you're never there once they're out of school. Basically you're not at your house. Even though my current home is nice, I don't want to be in it. Always looking for somewhere else to go or something to do.

I think everyone should own, but not 4k Sq. Ft. houses or bigger with a family of 4. We need to get back to the 60-70's style. 1,200-1,800 sq ft ranches. Larger lots. I hate the generational arguments, but Boomers 1,000% fucked up housing on so many level it's scary. I hope when a new wave of construction starts in mass it's 2,000 sf or less ranches. 3/2.1, maybe sneak some stuff in a basement if that's protocol for your area. We don't need huge houses.

WookieMan says

We don't need huge houses.

Correct. What we do need is a building boom like happened in the 60s. I forget the name of it but, there were a few programs(?) that allowed very quick built homes in very large numbers. I think it was the start of the VA loan program for returning soldiers or something. No, what we have now is no bueno. What I see is condos and tear downs to put up McMansions and new neighborhoods with McMansions. That's all that's being built around here.

GNL says

What we do need is a building boom like happened in the 60s. I forget the name of it but, there were a few programs(?) that allowed very quick built homes in very large numbers. I think it was the start of the VA loan program for returning soldiers or something.

You may be referring to the GI Bill that caused a building boom in the 1950s. WWII vets found they could buy instead of rent. A documentary by PBS referred to how Levittown went from a planned community of rentals to selling the homes to GIs instead. Most were 2 bedroom.

Yes, I think that's it...Levittown. Does anyone doubt 2/1 homes on zero lots could be sold like hotcakes?

It was also the start of the 15 year mortgage. Before that people bought their houses outright, or a lot quicker than 15 years. But with more aid, prices go up, wages stay the same, and everyone becomes a debt slave...

NuttBoxer says

It was also the start of the 15 year mortgage. Before that people bought their houses outright, or a lot quicker than 15 years. But with more aid, prices go up, wages stay the same, and everyone becomes a debt slave...

Interesting tidbit.

gabbar says

A friend bought a home in 2009 for 280k and recently sold it at 550k. Relocated to Dallas from Columbus. Buying that home for 550k makes no sense to me but selling does. I have a couple of dollars saved up but this economy and the future worries me and I guess that's their goal. It seems to me that a lot of folks are in distress, it doesn't have to be this way but this is what they want. I will do what I can, live below my means..

So you can see Bay Area appreciation for comparison purposes. Bought this house in 2009 for $215k. It’s now worth $930k.

This house bought in 2013 for $440k. It’s now worth $1.4M. I wanted to sell them in 2018 to buy more apartments, but my wife wouldn’t let me.

WookieMan says

We don't need huge houses.

Small homes are not profitable or less profitable to the home builder, this is the reason why larger and taller square footage on small lots is built, so that the builder can make more money, is this correct?

In Portland, Maine this program is voluntary. In Portland, Oregon --- well we will see.

https://www.msn.com/en-us/money/realestate/portland-launches-home-share-program-for-asylum-seekers-amid-looming-expo-shelter-deadline/ar-AA1e2vEB?ocid=hpmsn&cvid=63ef403b075d49168221f9e1fda6e46c&ei=213

Misc says

In Portland, Maine this program is voluntary. In Portland, Oregon --- well we will see.

https://www.msn.com/en-us/money/realestate/portland-launches-home-share-program-for-asylum-seekers-amid-looming-expo-shelter-deadline/ar-AA1e2vEB?ocid=hpmsn&cvid=63ef403b075d49168221f9e1fda6e46c&ei=213

Isn't NYC also trying a similar approach? That is, the city will pay homeowners to lease out spare rooms to illegals.

HeadSet says

Isn't NYC also trying a similar approach? That is, the city will pay homeowners to lease out spare rooms to illegals.

yeah, the good ole boarding house route ... i know AirBnB allows to rent out part of your home ...

i lived in a boarding house back in Manassas, VA around 2011...paid $700 (included utilities and cable) for my own bedroom and bathroom...

cheaper to do that than to rent my own $1200 a month apartment... saved about $650 a month which I put into buying index funds...

.

gabbar says

WookieMan says

We don't need huge houses.

Small homes are not profitable or less profitable to the home builder, this is the reason why larger and taller square footage on small lots is built, so that the builder can make more money, is this correct?

gabbar says

WookieMan says

We don't need huge houses.

Small homes are not profitable or less profitable to the home builder, this is the reason why larger and taller square footage on small lots is built, so that the builder can make more money, is this correct?

The other is with construction cost escalation due to building codes incrementally doing away with simple construction. In CA specifically, there has been about $50,000 to $75,000 added to the base cost of building a home no matter the square footage. It’s to the point of making “affordable” homes of yesteryear an impossibility to construct under a building permit. All of the Title 24 energy code stuff, fire sprinklers, municipal building permit costs. The builders make the homes large enough to burry the costs and dilute them on a /sf basis to make the home appear to have enough value to buy.

ForcedTQ says

In CA specifically, there has been about $50,000 to $75,000 added to the base cost of building a home no matter the square footage

Yeah, not just the international building code changes like arc fault circuit interrupters but I suspect also California-code related such as in regards to green or eco friendly building, etc.

.

ad says

ForcedTQ says

In CA specifically, there has been about $50,000 to $75,000 added to the base cost of building a home no matter the square footage

Yeah, not just the international building code changes like arc fault circuit interrupters but I suspect also California-code related such as in regards to green or eco friendly building, etc.

.

That $50-75k is just for the permits. Other stuff like :

When did sprinkler systems become mandatory in California?
2011
Since the California law was instituted in 2011, builders have installed fire sprinklers in more than 70,000 homes. Many municipalities and states – including Orange County and California – now have ordinances and laws for fire sprinklers in place.

Add to the expense.

Rubicon says

No distressed (forced selling) = low inventory remains = no price crash.

In my hood several houses sold at top dollars. It’s all about location. You sell a house in a great location someone will buy your overpriced house. It’s that simple and just a matter of time.

Agreed. Unless we have a massive recession with epic job losses, prices will not crash in desirable areas. There are too many rich people and house-hungry buyers who will pay cash or sell their souls to own. Additionally, so many more people with money (i.e., information workers) can work remotely, so they're less likely to be forced to sell and move if they lose their job.

Rubicon says

DTI for recent buyers is obviously pretty high. If that trend continues and the job market turns a significant number of recent home owners are in trouble.

Simply amazing the DTI of borrowers in 2021 is equivalent to 2011.

The DTI was 34% at the bottom of the last housing downturn vs. 36% during the pandemic? This explains why the housing market was so hot. A combination of low inventory and cheap debt made it affordable so buyers drove housing prices to the stratosphere.

I believe something has to give. I just don’t know which one will give first.

Rubicon says

Point is, new construction- historically speaking- has always had a premium. Not in todays market.

I have noticed that builders seem more reluctant to build spec houses. I guess they do not want a house they have to discount to sell.

This is why I don't gamble. Markets and wishful thinking, seldom the twain shall meet. That's why the criminal rich's Prime Directive is: "First, control the market."

Builders have decreased the size of the houses they build, have less upgrades than existing homes and are generally further away from attractions.

For the '08ers who think nothing every goes down:

NuttBoxer says

For the '08ers who think nothing every goes down:

Look at the chart. Being a renter sucks. Rent goes up practically every year except 2008 and 2009, where it went down at most 2-6% while it went up as high as 6-14% in the remaining 16 years, and the rate of rent increase compounds each year.

Misc says

Builders have decreased the size of the houses they build, have less upgrades than existing homes and are generally further away from attractions.

My biggest issue with new houses is the lot size and they go for the minimum space requirements between houses.

RC2006 says

Misc says

Builders have decreased the size of the houses they build, have less upgrades than existing homes and are generally further away from attractions.

My biggest issue with new houses is the lot size and they go for the minimum space requirements between houses.

That is the new normal. Only old homes/tear downs will have yards. Or new construction for the truly wealthy.

RC2006 says

Misc says

Builders have decreased the size of the houses they build, have less upgrades than existing homes and are generally further away from attractions.

My biggest issue with new houses is the lot size and they go for the minimum space requirements between houses.

I agree. It’s the location, and the value is in the land. Land value in Palo Alto goes for $600/sqft.

Eman says

RC2006 says

Misc says

Builders have decreased the size of the houses they build, have less upgrades than existing homes and are generally further away from attractions.

My biggest issue with new houses is the lot size and they go for the minimum space requirements between houses.

I agree. It’s the location, and the value is in the land. Land value in Palo Alto goes for $600/sqft.

I definitely don't like being close enough to piss on the neighbors house out of my master bedroom window. We'll have 3/4's of an acre and our one neighbor bought another lot and won't build. It will feel like we have about in acre in a small town with sewer and water. We might buy the last corner lot and basically our friend/neighbor and us will own the South side of the block. It will be expensive for IL standards where I'm at, but not for CA peeps. $600-800k. Forever house. We'll probably never get rid of it. It's just a bitch of a process, building custom.

Eman says

Look at the chart. Being a renter sucks. Rent goes up practically every year except 2008 and 2009, where it went down at most 2-6% while it went up as high as 6-14% in the remaining 16 years, and the rate of rent increase compounds each year.

Riddle me this, what's your maintenance costs over the same period? My friend in the Bay Area tells me his costs have gone up 50%. I don't see a 50% rise on that chart.

Further if you look at the increase just before the last crash(housing, economic, don't care what you want to call the crash), and the subsequent plunge(but rents NEVER go down!!), it's about a third greater than the rise. So looks like we should expect a 24% decline in rents sometime soon.

Beyond that during that period I've paid as little as $1,350 for a 3/1 house with a yard in SoCal. I've paid as little as $1,550 for a 3/2 house with a pool in Phoenix. I've only had the rent raised on me three times, and two of those were at the current place. I've had multiple roof leaks fixed, electrical work, two water heaters replaced, and had countless other small repairs made without lifting a finger, spending one minute of my own time, or one dime of my own money. My wife has never had to work, we've sent our daughter to private school, always lived in good family neighborhoods, taken many trips and vacations. And have had no interest bearing debt for at least half of those years, no debt at all for five.

I might be an exception, but only because more people don't take the path less traveled when it comes to debt and investing.

NuttBoxer,

Would you please share how you derived 24% decline in rents from the chart you shared above? I would love to learn how to read it correctly.

This year isn’t over so I don’t have the numbers to compare to last year to know the maintenance costs. I doubt it’s anywhere close to 50%, but I don’t have to numbers to share at the moment.

Do what works for you and your family. Your chart suggests being a renter sucks, but I might have interpreted it wrong. Hopefully, you can share how to interpret it correctly.

I don’t share the same sentiment about private schools. We send our daughter to public schools. Do what works for you and your family. That’s all there is to it.

Eman says

I don’t share the same sentiment about private schools. We send our daughter to public schools.

Good on you (and her).

For decades in the trenches of tech I heard too many parents (colleagues) say too much awful stuff about the public K-12 without ever setting foot in one to observe, volunteer or whatever. Phase II of that snobbish behavior was for moms to have a pecking order based on how they perceived which private K-12 were superior to which other. Money from RSU's or whatever that could have been used for college pissed away on private K-12 tuition while paying extremely high property taxes to fund the public schools.

Silly valley techies.

Rubicon says

Over 50% of houses sell above asking

CA isn't even representative nationally. There's no crash coming. Stagnation maybe with minor drops in hipster cities. Small towns will gain for sure. Neighbor sold his house in 3 days in a bidding war. There's like 2 homes for sale out of 800 with water meters. My market is under 1 month. There are no rentals.

I don't look at East coast, but flyover country is a joke inventory wise. I see no for sale signs. Everyone is buying $20k UTV's and golf carts. And their main car is a $50k Tahoe. No one around me is hurting for money. We're losing population here in IL, but warehouses are showing up like weeds. The market doesn't make sense, but housing seems to be fine. People are buying shit a lot. My wife's work is booming. I like being cautious of markets, but I'm not seeing anything negative. I'm not overly positive either. This is an Obama economy. Not good, not awful for 80% of people. I wouldn't want 4 more years of it though.

Rubicon says

Yeah, this economy isn’t that bad for people with assets. Terrible for renters who are trying to buy though. But what else is new.

What industry is your wife in?

Sales for infrastructure. Government contracts basically at a municipal and county level in IL and WI.

We've gotten $1.7M federally for the board I'm on which is insane. The money is flowing big time. Good or bad, take advantage of it if you're in the position. The $1.7 is for a community project that is worth it in my opinion and I dislike government. Minds can be changed I suppose. I make $0 off it outside of my town looking less shitty. Even though I love it as shitty looking as it is. We frankly need a few people to die that own properties downtown. And yes they're old, but it's still at 10+ year window. Small towns are weird.

Hope not to offend Boomers, but most give no shit about any of the younger generations. Never have. They're too lazy to rent out a basic store front (where I'm at) for $600/mo. They're idiots. I don't mind religion, but the biggest issue in my area is a cultish type church that fucking brainwashes the people that financially are set. They're fucked up. Us 30-50 year olds are trying to break their shit up though. It's what I like and hate about small towns. We can make change and we are.

https://finance.yahoo.com/news/loan-officer-m-seeing-middle-000641114.html

Loan officer: I’m seeing middle class homebuyers take on $7,000 mortgages thinking they can ‘always refinance when rates come down in the future’

Patrick says

https://finance.yahoo.com/news/loan-officer-m-seeing-middle-000641114.html

Loan officer: I’m seeing middle class homebuyers take on $7,000 mortgages thinking they can ‘always refinance when rates come down in the future’

$270k income is considered middle class? 😅

Eman says

Would you please share how you derived 24% decline in rents from the chart you shared above? I would love to learn how to read it correctly.

This year isn’t over so I don’t have the numbers to compare to last year to know the maintenance costs. I doubt it’s anywhere close to 50%, but I don’t have to numbers to share at the moment.

I believe I stated it pretty clearly. Look at the peak and decline percentage ratio in '08 and adjust for that monstrous peak we just passed to forecast likely bottom. I would say that's the highest the bottom could be, likely will go lower. As to the why of that, please familiarize yourself with Rothbard.

My friend has the numbers, I think specifically because the 10% rule is preventing him from raising to what he'd like in order to keep his profit margin. He's historically been well under market.

Eman says

I don’t share the same sentiment about private schools. We send our daughter to public schools.

B.A.C.A.H. says

I heard too many parents (colleagues) say too much awful stuff about the public K-12 without ever setting foot in one to observe, volunteer or whatever.

Not sure where you guys live, but if your schools have met expectation, they are the exception. Let me share some reality for the rest of us. My oldest and middle daughter were not taught math in PUBLIC Elementary school. Specifically the oldest was taught some finger trick for addition/multiplication over memorizing. The middle one was sent home with a "solve for x" problem in Kindergarten. Since I took an education class, I know before Junior High, children are incapable of abstract thought. At one point we tested the middle one for transfer to a Catholic, she was two grade levels behind. She only caught up because she attended a public school in the small town we live in with a 1/5 student teacher ratio, and because we put her in tutoring the year before when her public school teacher refused to help her in any way.

Further, oldest daughter got an 1100 on her SAT despite having a 4.0 GPA, so no scholarships(we don't quality for income based stuff). And because the people who ill educated her pushed the UC track so hard, she still hasn't finished college(refused the shot).

I had the contact the head of the lunch program for the district my daughter attends to get them to stop giving her lunch at school, then charging us, because they have some rule about having to feed kids. I explained very clearly we are responsible for her nutrition not the school. To the guys credit, he was onboard with me, but this kind of over-reach has been a constant problem at every public school they've attended. I refuse to disclose reason for absence, because it's none of their fucking business what we do as a family when not at school. I've had to explicitly put in writing that they not allowed to give my kids any medication or shots. I've told a teacher that I've taught my daughter to fight back, and if there's an issue, I won't blame her, I will blame them. I've had to insist they allow them to call us if they aren't feeling well, or need anything, that the teacher is not allowed to decide what action to take. My wife says the offices are scared of me, apparently just because I assert my rights as a parent.

You guys are way out of touch with reality when it comes to our(almost everyone else's) experience.

NuttBoxer says

You guys are way out of touch with reality when it comes to our(almost everyone else's) experience.

We live in Silicon Valley, not Flyover Country.

What I recounted is all SoCal, but last time I checked, California has one of the worst public school systems, so "flyover" is probably kicking your ass. In fact, I went to school in Indiana and Michigan, and my education and quality of instructors was vastly superior to what I've seen on the coast.

Are you aware California mandated curriculum change in 2013 to push perverted authors, and expend sex-ed to include un-natural acts? That currently they are attempting to usurp school boards and control all curriculum decisions from Sacramento(likely to due to pushback over same perverted, and hatred spewing indoctrination attempts). That a Riverside county school board expelled a high ranking state rep when he went over his time fighting to prevent parents from being informed when their kids express a desire to perform self-mutilation via evil plastic surgeons?

Your good public school is a unicorn, and one that will soon be shot if the state gets their way.