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Comment by doctoboggan | Hacker News Reader

My wife and I are currently shopping for a home in Chicago. Is it a stupid idea to buy a house in the next few weeks?

It is probably the worst time to buy a house in US history:

https://www.longtermtrends.net/home-price-median-annual-inco...

That really makes the point starkly. It also makes me wonder how much of the current housing valuations are tied to investors being in the market. I wonder what would push those investors to sell their holdings, too. (I imagine the routine maintenance is probably handled well in the short term, but maybe becomes determinative in the long term?)

Investors, presumably, would slowly and strategically sell off assets in their portfolio to minimize their losses.

I had a front row seat to this in 2010, during my stint as a creditor's rights attorney.

It was this odd tango of homeowners who would strategically default, and creditors dragging their feet throughout the foreclosure process.

It was implied that as long as the property was sufficiently maintained, the creditors would waive the deficiency judgement when they decided to foreclose. They would try to limit the number of foreclosures in a neighborhood or zip code to prevent saturating a given areas market.

Kind of a brilliant win win. No cost living for up to 3 years for being a good caretaker. That's the only bright side to it. It was savage and emotionally taxing, I'm glad to be a debt now.

The question is answered in specific, not in general. Is the rate you are offered good enough to offset the potential decline in equity? Remember that if the house loses 10% of its value, your downpayment does not somehow appreciate - essentially every month you pay some portion of each payment for equity that only the bank has / you cannot recover.

That said, if the rate is attractive and you have a long time horizon which you can predict reliably, then you might still find the rate attractive. if you plan to sell over the next 5 years though, it may be better to rent and negotiate lower rents if housing prices fall.

Alternatively, if you have a specific use for a house that requires you to own, consider whether that use is worth a premium of homeownership. (e.g. you have a woodworking business and need space that is hard to rent, or you have kids that need to go to a specific school district)

Timing the market is a bad idea, having contingencies for the eventuality that your timing was wrong is a good idea. so, build the cost of the contingencies into your model.

Finally, don't get into a false dichotomy of rent vs buy. it is better to think about the total sum on the table for either option and how you'd like to allocate it. e.g. you could just buy a smaller house, or rent a bigger one. Or, rent as cheaply as possible and buy gold, or bootstrap a small business. remember to enumerate all possible capital allocations before getting trapped in the choice between just rent vs buy.

Nobody knows. The future could bring anything. Maybe rates will go up for 10 years, maybe this is a blip and next year they will be down. Maybe housing prices will go up, maybe they will go down, maybe they will stay the same.

You asked about Chicago - the city as a whole doesn't have the outrageous prices of California, and so might do something different from the national average. Within the cities some areas have better prices than others. Different areas of the city will see different results. This applies in California as well - location matters.

You have to live someplace. What will rent cost if you don't buy now. I lost money on my first house (moved at the bottom of the 2008 downturn), but after accounting for all the rent I would have had to pay instead of the house I was still better off financially.

Make your best guess based on the above. You will be wrong in at least minor details, but hopefully close enough. In the worst case you just have to accept you made the best decision you could at the time, and there was no way to know it would turn out bad.

Well rates are only going to increase from here it seems, which increases the cost of borrowing. You could be waiting a year or more for rates to come back down. If you're in a solid financial position and you see something you really want, why not?

I guess it seems like the fed is actively trying to pop the housing bubble and drop prices. If that's the case then buying now seems like a bad idea and we should rent for a year first. But honestly we are moving to a new city and I told myself I was done renting and ready to buy. We are in a solid financial position to put a substantial amount down.

If you just moved to a new city would you benefit from waiting anyways? Do you know the neighborhoods you'd want to live in?

What if this is not a bubble?

You can't really time the market. So buy something you want at a price your comfortable with.

You’re a good example of how humans are not simple logical and rational decision makers. And also that houses are more than hedonic compositions of goods to be traded solely for investment.

Yeah, I worked with a realtor once that kept referring to houses as "the product" as though it was some profound philosophical insight. I wanted to punch him in the face.

I don't think Powell's words mean he is trying to pop a bubble, just to slow down price increases for a while to bring prices in line with historical norms.

"to bring prices in line with historical norms."

How can you determine if that is the correct/desired course of action?

They publicly state their desired course of action each year. They've historically held an economic policy of maintaining perpetual ~2% inflation over long periods of time. Inflation is higher than that now, so they're trying to bring it back down. For more details see:

https://www.federalreserve.gov/monetarypolicy/monetary-polic...

https://www.federalreserve.gov/newsevents/pressreleases/mone...

Ask any financial professional and they'll tell you if you're trying to buy a house you really want, they'd say not to wait. It's hard enough to find a home you really want and you can't predict future conditions. You might not "get a good deal" but you'll have your dream home. If you were just flipping houses then waiting is the right move.

It's very hard to time any market, and particularly with a primary residence, most folks plan to stay in them for at least 3 years. It's entirely possible that you overpay today but if you make a smart purchase that you like, there's a pretty good chance your home value recovers in the long run.

I think the bubble talk is slightly overstated due to the increase in remote workers. That demand isn't going anywhere soon, which means prices aren't likely to come down much. The Fed is really trying to price out AirBnb and institutional investors, which only account for a small percentage of the market anyway.

Home prices are likely to go down over the course of the summer in the US, driven by the increasing costs of financing. But macro factors (demographics driving up demand for a limited and slow to expand housing supply) are still present so the price relief could be short lived. Or we could enter a recession that drives home prices down to historic lows, nobody knows.

Mortgage rates are likely to stay elevated for a year minimum, so that’s just reality if you need a place to live in the meantime. Paying the extra monthly cost until rates drop and you can refinance probably still beats renting for that time.

If you are planning to own it for a long time then you’ll be fine. It’s only stupid if you buy and then sell it when the price went down, but the price will generally trend up year over year and you’ll come out ahead (though some say you never come out ahead owning a house).

I want to say yes, but I've always been warned against trying to time the market.

I don't think anyone can answer this for you considering you have to live somewhere.

Don't forget though that real estate is an inflation hedge so even if the market cools it is hard to see it falling off a cliff.

If you can afford the house you are buying and like the house then it's worth it. If rates drop in 6 months you can always refinance, if prices fall you still have a house.

Yes

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