How are people affording these crazy home prices?

[Baddog]

I don’t see how the government can ever raise interest rates back up much. It’ll set off a crisis and they’ll promptly lower them back

 

[Jacobo2012]

It’s gotta be really bad for first time homebuyers. We’re doing what the majority of ppl are doing
Bought in 2016 for 165 sold for 255 paid of a little debt and upsized on house and land
We’re relocating to a small town in Id of about 5000 population. After looking around we found it was about the same price to build rather than buy.
Bought a 1.8 acre piece of land and had a builder come in and develop it and build us a home.
We got in contract at a perfect time early this year before the huge lumber increase! I think there’s been 2 or 3 lumber jumps since we signed our contract
Should be done at the end of the year we’re super excited


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[TheGDog]

Breathe dude, you are way down the rabbit hole. Yes the govt is corrupt but they are living so rent free in your head they are going to drive you insane.

Little late for that warning!

 

[2531usmc]

I don’t see how the government can ever raise interest rates back up much. It’ll set off a crisis and they’ll promptly lower them back

But keeping interest rates this low for this long is setting off waves of inflation. That’s why housing prices are jumping up in the first place.

 

[TheGDog]

Dang.. checked just now and my place has gone up 54% percent in price! Dayum!

Wow... man now it seems like in order to be a first time buyer, and not be already in some lucrative career.. people are going to need to more and more start lowering their standards and increasing their commutes. And I'm sure the information age has influenced this. With all the players involved having more reporting/trending data, they can now have more resolve to hold out for better pricing for maximum earnings on the sale of that property.

Hrmm.... I wonder if Covid and lotsa of the rest of the non-techie population now learning that a lot of job functions can be down directly from home... I wonder how much this ability to now work remotely for many... is affecting this wild pricing going on as well. Since now many people in tech careers can contemplate WHERE in the country they'd like to live as well now since they may not necessarily *have* to live where the main company is located.

Hrmm... and then I suppose just like when cities have blackouts and then 9months later buncha babies are born... this Covid downtime probably resulted in a lot more babies being made too, no doubt. So then BOOP! Uh-oh.. we need a house now! Wonder how much that is influencing this current trend re: prices?

 

[oldman]

I’m that guy that was an idiot and sold my house in 2019 when the market was at an all time high where I live in Southern Utah and had decided that it was a good time to sell. We had a 4900sq/ft custom built home and our 2 oldest had just moved out so it left us with 1 kid at home. I talked my wife into selling because it seemed like we were due for a correction in my mind since it had been over 10 years since the last dip and we never planned on retiring in this home. Also with only 1 son at hike we didn’t need a hike the size of what we were living in. We had planned on buying property after we rented for a year or so and building our next home that would take us into retirement and live in until we die. So we ended up selling for $570k which at that time seemed like a ton since we had bought it 9 years earlier for $350k. Used some of the equity to pay off all our debt so we were debt free and kept a nice chunk of money in the bank. Now we have literally priced ourselves out of the market where we live and this is we’re we want to retire. Our house would have easily sold for a million right now. That’s over $400k that we have lost by selling. I’m so sick about how this has all worked out and not even sure what to think or do anymore. I make a great 6 figure salary but can’t imagine what people do to afford these $700k + mortgages. Are people in serious debt or is the rest of the country just making more money than I can even imagine. Talking to the realtors around here they are saying that many of the people buying the homes where we live in St. George are buying them as second homes and many paying cash. That’s just crazy. Also they say these are well qualified loans and have income to pay the mortgages unlike the 2008 housing crisis where they gave anyone a loan even without income verification.

What’s the end game here. Are these high prices here to stay (new normal) or is something catastrophic gonna happen or will there just be a small dip in real estate? I don’t know what or who to believe anymore. All I know is I’m always second guessing myself for selling but on the other hand happy I’m 100% debt free. My biggest concern is I had planned on retiring in 5 years. (Age 55). Now not owning a home I know that’s most likely a pipe dream and not gonna happen. I can’t go into retirement with a $3k a month mortgage. What are your thoughts. Should I buy now or wait it out at this point? My next home will be my forever home more than likely.


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This is avery common problem in the West. Buy now as it looks like inflation is going to soar really soon...even higher than the last 6 months.

Creste Butte Colorado average home is $900,00 and the workers cannot find housing. This is not even one of the premier ski areas. High end homes in Denver are are going for more than listed prices.

I have come to the conclusion that those that can afford these homes are all " drug dealers" HA!

 

[Marble]

That's typical for CA, which I believe he lives in So California.

Don't forget comp time. A cop I know comp'd 25 years worth of ot, holiday, etc, and cashed out at retirement. It was a 260k check that he used to buy a cabin on the Rogue in Oregon.
Public employee pensions are killing cities in California.

That's not a pension issue. It's not even related to it.

It's an issue of whatever agency he worked for allowing him to go over his cap on his banks, the banks being too high to start with, the amount of overall time off he gets monthly being too high and the ability to receive cash for most of them upon separation.

The benefits have been increased slowly during hard times with the economy for a give away instead of a contractually obligated raise. When public servants don't get their raises, they are usually realized in another way. A way that greatly benefits the employee in the long run.

The only saving grace about this system is with people in my situation who stay near their caps, whent hey have a signnificant iillness (cancer for the second time) I have the ability to burn time while I get treatment without worry.

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[SummitsCalling]

But keeping interest rates this low for this long is setting off waves of inflation. That’s why housing prices are jumping up in the first place.

The government printing money causes inflation. The lower interest rates simply keeps the housing market inline with inflation. You can buy more house with a 2.5% interest rate than a 4.5%. Tack on the fact the government is the primary buyer of mortgage securities, and you get a situation where it's been signaled the fed will not allow 2008 to happen again. One of the reasons I've been a buyer in this market for rentals.

 

[Phoenix3585]

Dude, house prices are never going “back down”. Housing and the stock market are highly, highly correlated to one another now. Most of these people buying homes that are so out of line with local incomes have seen their investments up 100% from 2019. They have a lot of disposable income, and because housing is the “chosen asset” in America, people spend far more on it than they should, to the detriment of everything else.

If the stock market and/or housing ever goes down again, expect massive intervention from the Fed and Treasury to pump prices back up. This country (and most individuals in it) are so heavily indebted, they can’t tolerate deflation - and no country ever has “paid down their debts” via austerity - every country grows and prints their way to lower debt. Complain and whine about this all you want, or profit from it. My advice: hold assets not cash.

 

[thinhorn_AK]

Paid ~ 330k for my place a few months ago. Just today, a neighbor (guy with money) came and offered me 500k. I’d do it but there isn’t many other houses to buy here.

 

[PredatorSlayer]

OnlyFans is your answer.

 

[Geewhiz]

Paid ~ 330k for my place a few months ago. Just today, a neighbor (guy with money) came and offered me 500k. I’d do it but there isn’t many other houses to buy here.

Man I would seriously consider building a hut out of sticks to live in for a 170k profit in a few months. Looks like you made a wise investment.

 

[freddyG]

The problem here is that overall, people don’t learn from history. They act like it will be different this time. It doesn’t work that way.

 

[Deadfall]

Hold on to your money. Sit tight. This crash gonba be worse then the 80s.

 

[TheGDog]

I'm kinda kicking around a theory that maybe they are purposefully trying to create higher inflation right now... possibly on purpose in order to create the "perception" of "equity" in order to entice the less prudent borrowers into potentially taking out loans on their equity in their homes since when they do it generates business and spreads the money around a bit, and... sometimes the homes then need to be re-assessed if they'd done an addition or something... so BOOM... higher property tax brackets too.

So ya got a certain win-win of sorts. Cause whenever money changes hands... cha-ching the govt wins. Cause they get there's on both sides of every deal. The localities benefit from the artificially boosted property value numbers which in some folks inspire them to sell to cash-out, this then equates to new higher purchase price and subsequent property tax bills. All because it now takes more of those same "clams" to buy that same thing. The properties value, as a property and what it can give to you as the owner, has not changed, it's merely a change to the number "beans" used to count that value.

 

[Phoenix3585]

You’re giving the government way too much credit, they’re not that smart. They see one step ahead and that’s it. No long term planning here - this is not China…

Next step as I see it is inflation forces the Fed to end QE and then start to raise interest rates in late 22. They won’t get far. A couple of raises and the stock market will buckle. Once it’s down 20-30%, the Fed panics and reverses course yet again. Problem is, now inflation is still running hot and they’re unwilling to fight it. Now we are really off to the races with inflation - stocks, gold and houses go way up. A few years after some ham-handed attempts at government price controls, the economy is in recession, gas is $20/gallon and week’s groceries is $1k. Wages probably don’t move much.

The upside is government debt to GDP ends up far, far smaller than it is today as inflation eats the debt. US still has world’s largest gold reserve and can re-back the dollar with gold anytime - makes perfect sense after the debt inflation devaluation is complete.

The one outcome that’s totally politically intolerable is allowing housing to slump 20%+ with interest rates rising. There would be so many underwater, unemployed home ”owners” out there mad as hell and desperate for a bailout. That’s why deflation cannot happen. We’re running out of runway and there’s no good options for dealing with this. Historically, every government eventually ends up turning to the printing press though…

 

[2531usmc]

The problem is that the Fed cant raise rates to combat 7 or 8 % inflation. As pointed out earlier, it would crater the stock market.

For the market to return to historical valuations, it would have to drop 50% and then another 25% on top of that. A market collapse of this size would break most people’s retirement accounts and would certainly bankrupt most state retirement accounts.

so there are only really bad scenarios going forward. Coupled with a citizenry that is conditioned for “more benefits for me” I don’t see how this could end well

 

[Mosby]

My son is moving to DC in January and getting married in July. Rent for a small two bedroom is around $3000 a month, not counting parking. Housing is either unaffordable, a huge commute or in a bad area. Those that can afford it, send their kids to private school. Not a lot of good options for young people in most major cities.

 

[NDGuy]

Paid ~ 330k for my place a few months ago. Just today, a neighbor (guy with money) came and offered me 500k. I’d do it but there isn’t many other houses to buy here.

I would bet my home I purchased 2 months ago already went up in value as well. It wasn’t cleaned/kept up well but it was a big upgrade on space and neighborhood and the school district is gold. Little tcl I’m guessing it would appraise for 5-10% more already.

 

[Broomd]

Man I would seriously consider building a hut out of sticks to live in for a 170k profit in a few months. Looks like you made a wise investment.

A lot of capital gains there to consider though. In 20 months or so that profit would be a tax-free reality, but not right now.