There's Never Been a Worse Time to Buy Instead of Rent
wsj.com
wsj.com
In which case this kind of article really isn't for you. You're looking for real estate investment news, not housing.
Or dollars are devalued since there's ~40% more M3 than pre-pandemic: https://fred.stlouisfed.org/series/MABMM301USM189S
Only time will tell which is the case
https://www.redfin.com/news/housing-market-update-home-selle...
Not quite yet. Lots of sad sellers holding out hope for a macro long gone. Supply is constrained, but mortgage rates + risk free rate means house prices will come back to mortgage payment/wage governed prices. Folks who can will stick it out, folks who can't (relo, death, divorce, etc) will set the comparables/comps in their market.
People are buying smaller houses because that's all they can afford. Prices are not coming down per square foot (yet): https://fred.stlouisfed.org/series/MEDLISPRIPERSQUFEEUS
Prices have stopped sky-rocketing upward. Considering housing is ~40% of the inflation bucket - this trend (if it continues) should slow down inflation soon.
Or a delta that's maybe 2x standard deviation.
(Not to mention the not fully internalized effects of interest rates on other buyers' and sellers' behaviors-- prices have not nearly moved as much as one would predict from interest rate changes).
At least in our area, if I had the cash then I'd let houses sit for six more months, let reality hit a few folks in the face, wait for those prices to drop.
Yes, but you're still getting a discount on an inflated price. You'll get that same discount six months from now, only on a much lower price when 8% interest rates start to really cut down on the buyer pool.
From my POV, what you suggest is going to buy a car 12 months ago, convincing the dealer to take off that "market adjustment surcharge, then bragging about how much of a deal you got by only paying MSRP. Versus the person 12 months later that started negotiations at MSRP, and not an artificial price.
(Disclaimer: I'm just a guy on the internet talking out his ass. The number of houses I've purchased can be counted on one hand.)
I have lost count of the number of people who were convinced that the housing bubble had peaked in 2018-2019, and were waiting for the crash despite having enough money to buy. None of them can afford to enter the market now.
I don't think house prices will drop until there's a pressure on home owners to sell.
The two biggest reasons I can think are:
- People with ARMs unable to make payments - People losing jobs
I remember well that, despite the many foreclosures in 2008, people that had no explicit reason to sell would hold on their homes for years until they were above water again. I distinctly remember houses going on sale, then going off market, over and over again until the owners could walk away at least without a loss.
As long as unemployment is low and not too many people got an ARM, I don't forsee this market undergoing a rapid correction.
The houses that sit are either: extremely expensive, or need updates. Anything of good value is gone in 1-2 days.
Redmond is out of my price range.
Right now new construction can run better deals by paying down mortgage rates. But new construction has downsides too as the location may be less desirable or the lot size smaller etc…
There's new construction in the area I'm looking at, but it's well out of my price range unfortunately. There are empty plots of land that cost more than my current house..
It's the kind of thing a real estate agent says. Not that I think the original poster is one. The truth is that owning real estate, like owning most things and investments in particular is very situational. People make the decision too much based on what people around them are doing. It's much better-- good market or bad-- to be thinking things like: is this a good price? how long will I want this property? how much financial risk am I taking. etc. If that is your framework you don't really need to worry about the "good time / bad time" news cycle.
Good time to buy a house is basically when you are ready to deal with it. Good time. Bad time. If you are ready, you are ready.
( Yes, I know it is much harder now, but that is a separate conversation. )
edit: I just had this weird flashback to pre-2008 where a guy was trying to sell me condo after I just came to US. He knew I could not possibly afford $160k for a condo, but it did not matter. There was just soo much money floating in real estate and so many people speculating, I probably could have had a condo now that I purchased with zero chance ( at the time ) to pay it off. Wild times.
We are obviously not revisiting that scenario now.
Maybe? In the 1970s in the UK we had double-digit inflation. It turns out that was the best time to borrow because (wage) inflation eroded the cost of mortgages within just a few years, making a large mortgage in 1970, a very small one by 1980.
Whether inflation, right now, is coming back under control in Western economies is a matter of debate.
Right now, we have both - high prices and high rates.
In the ~2012-2018 era, we had low-medium rates and average prices
In the Covid 2020-early 2022 era we had super-low rates and high prices.
Because the asset prices have not adjusted to the new rates yet, now is a [temporary] worst time to buy, regardless of whether you are borrowing or not.
1) i've been screwed over by too many landlords and have become so exhausted with renting (i was forced out of my last apartment for complaining about not having hot water. i know this is illegal, unfortunately there is nothing you can do about it.) 2) the apartment i found was _perfect_ for me. it had everything i wanted...quite rare 3) i was not thrilled about the idea of waiting for mortgage rates to drop, home prices to go up and then ensuing bidding wars bringing you far over asking, like what happened in the early covid days. 4) rates will drop eventually and i'll refinance
maybe it doesn't make all the financial sense in the world, but it worked out for me.
The best time to buy is as soon as you can. High, low, whatever, it makes no difference in the long run. In that long run, you've bought a house you chose, are not throwing away money, and will eventually make back any money you lost buying high.
I have a feeling all the people giving advice to not buy in climate X at any given time are only saying so to feel better that they currently can't.
Since we have been renting our accounts have gone parabolic. We are able to save my wife's entire check, every month. There is no money burning a hole in her pocket to redo the kitchen, or bathroom, or backyard. There is no money going toward a new garbage disposal or A/C unit. We have more money despite two teenagers that have gone parabolic fees for club sports, driving, clothes, and FOOD.
We could absolutely buy right now, but I have my foot firmly down as a HARD NO. I would rather buy her a new car to assuage the urge to buy a home. If I could wave a magic wand and remove the desire completely, I would in a heartbeat. A home, from a 100% economic POV, is a waste of time and money. It is only complicated because of emotions and "what everyone else" is doing. There is zero logic in a mortgage and what is worse is that you never truly own the dirt your home is sitting on, at least in the USA.
Edit: I feel like the people that encourage others to buy a mortgage are doing so out of ignorance and have never actually thought it through to the end of days. I see old people living in nursing homes every day. None of them tell me about the homes they lived in while we wait for transport to the ER. They all talk about experiences, places they have traveled, their families, and the parts of their working lives they loved and hated. Never had a person talk about their "mortgage", I mean "home" on their deathbed.
When I bought, all that went away. We bought a nice house that didn't need immediate work done. My mortgage was below rental rates.
So my point is that it takes a little insight when buying a house, but if rents are expected to go up (which are expected almost always), then it's a wise decision long term. Yes, house maintenance needs to be factored in, but those costs are amortized over long-term.
Have you factored in a terrible neighbor? A halfway house or care home next door?
Rent may be going up or down or sideways... you have the option to move if you don't like it. I could realistically move in less than a week and I have a full blown wood shop in my rental garage, two teenagers, wife and a dog. It would be messy, but we could do it with basically zero consequences.
If you care about your credit score, you are not going to just walk away from your mortgage. We can jam out of here if the wind blows a direction we don't care for.
With all three cars paid off, I truly have zero debt. A few of my friends tell me they have "zero debt except for the mortgage"... I am like that is a giant ball and chain around your neck broham... Nothing about that says "debt free" or "freedom."
Mortgage debt is not a concern, houses can be sold on a market. If you feel that having no mortgage empowers you, then that's great for you! I don't think this "fear" applies to everyone. Debt can be used very strategically.
All this leads me to believe the situation is very different in America. I'm not even sure what any of that means. Here in Europe you buy a house, pay interest on the mortgage, and that's about it.
I'm happy you're doing better renting, and I agree that experiences are far more important than "stuff", but I don't count a home as stuff. Unless you're doing something cool like nomading it, I see buying a house as just having one of your basics covered and out of the way, like buying shoes.
I'm paying a little under 3/4 of what I'd be (was) paying in rent, and whilst there's the interest to take into account, the maths easy: If the interest is less than what rent would be, then having interest is better than paying rent, since 100% of rent is up in smoke, whereas only the interest is up in smoke for a mortgage.
I wish it weren't such a default assumption that everyone has to buy a place given the massive friction this puts on relocation.
I bought a house in a city about a year before I knew I was likely to leave for another country. When I was sure, and told people I was leaving, they presumed I meant some long term plan. They thought I was delusional when I said I meant in a couple of months. Everybody said it couldn't be done; what about this, what about that, it's not as easy as just packing up and going!
Yes, yes it is. I did as much prep as I needed to, packed my bags, and left. I rented the house out _whilst_ was in the other country, and eventually sold it for a nice profit when I'd had enough of that. It was incredibly easy, and I haven't even gone into the parts that should have been difficult given a particular situation I was in.
If you can buy, then buy. You won't regret it.
My point is that housing prices have historically kept going up. I'm not referring to YoY trends, but median long-term. I think prices will continue to rise over decades, give or take a market correction, because demand is still strong.
cost:
https://fred.stlouisfed.org/series/MSPUS
demand:
Having sold a home (foreclosure we bought in 2009) in 2021, I am super happy to be renting again. Owning a home is pain in the ass and I say this a person that can remodel a bathroom, install flooring, and fix my own A/C if needed. Constantly on the hook for every problem that invariably crops up is giant time, energy and money drain.
My wife on the other hand, hates renting. She wants to paint the walls and decorate... and nest? We end up spending a crap ton of our time and money on the house. It's 100% emotional for her. I understand, but I don't share those emotions. We have had lots of time to talk about it and it will be different when we buy again. She will have a budget for house stuff and I will not be on the hook for every little thing. In short, she is going to step up for maintenance if she wants to buy a house again.
The only thing that's going to cause prices to drop are: rising interest rates + declining rental rates causing rental units to become unprofitable and go back on the market, or a wave of foreclosures, which seems unlikely given how many homes have very low rate mortgages right now. I don't think either of those are going to lead to a precipitous decline.
If they "need" to move they will. Lose the ability to pay property taxes, baby boomer's departing earth, AirBnBust, raising insurance rates, job loss, and many other reasons...
The market is frozen right now. Mainstream media is lying to us, Realtors are manipulating the listings, Homebuilders are playing games with listings, accounting and land. The charade will not hold up for much longer.
If rates break, this problem will come back up again in the near future exactly as it is now or even worse. Inflation and everything else in the economy would create more uncertainty which causes even more problems for housing prices.
It'll probably be neither. Prices will likely stay flat, rates will do whatever they want. What will change is people's expectations of how long it takes for a house to sell. It's not uncommon in non-big coastal urban areas for homes to sit for months, and until recently that wasn't uncommon. The anomaly has been the recent trend of "put on market, receive 5 offers before the end of the day".
Even if you assume 4% real return (beating inflation), you'd need to have at least 600k worth of index funds, and you won't be growing it. Even for HN users, that's a lot of money.
This strategy will never work for more than 1-2% of the population.
Except the markets with heavy homeownership also have high rents. If you’re in Manhattan, sure, it might make sense to sell and lease back. But in a lot of the country, I don’t think the math works.
We're comparing renting to buying. Renting doesn't require a mortgage.
Try working out how much you need to save over 30 years (while renting) to buy a home. Don't forget to account for inflation in any assumed investment return.
Using this timeline for equity comparison makes 0 sense. This is more of a reply to the GP, than your post.
i paid 5% down on my house and my PMI is only 4% of my all in monthly payment (mortgage, PMI, prop tax, insurance). if i had to wait until i had saved 20% i'd probably still be saving & renting. instead i've already paid down another 5% of my mortgage plus getting the interest tax breaks each year.
Why does everything always have to about investments and speculation and all that crap? What about, you know, actually living your life? If you do everything "right", according to the financial experts, the richest you'll ever be is at the moment before you die.
The reason to own a house is you want to own a house. You want it to be yours. You want to do whatever you want to it. You want to accept the responsibility of its maintenance because the advantages of ownership outweigh the responsibilities.
If that's what you want to do then do it. Or you could get depressed listening to these bozos who live their life like it's a game that you're somehow losing despite living in a developed country, no needs unmet and sleeping peacefully every night.
Previously landlords could rent at £1000 pcm, pay their buy-to-let mortgage at £900, and get taxed on the profit of £100, at 40%, that would be £40.
Now they get taxed on £1000 = £400, and get a tiny amount of tax relief on the mortgage cost.
So many landlords were paying much, much, more tax. So quite a lot of them exited the market.
Fewer properties, same number of people chasing places, has increased rents. On top of a stupidly hot property market in London, and it's the perfect storm really.
Slow applause for the UK government on this one. They were told this would happen when they made the change several years ago.
I am seeing rental yields still under 3.5% (zones 1-2, Victorian terraces converted to 1-2 beds).
So who are the buyers?
Mortgage rates were too low for too long because the Fed was buying them up. Home prices went way up because payments were low and supply was somewhat constrained. Now, the Fed has pulled the rug out and is no longer buying mortgages. People with low rates are sitting still and you'll only see people selling who have to. So, supply is heavily restricted keeping prices higher even with the higher rates.
Only a large tick up in unemployment will create more forced selling and a maybe some downtrend in pricing.
The alternative (but much less likely scenario) is Congress eliminating some of the very generous tax incentives that exist for owning residential real estate as an investment. I wouldn't hold my breath waiting for this one.
>According to Merkley’s office, last year we saw the fastest increase in hedge fund home purchases in the last 16 years.
As examples of the impact, Merkley said data shows large hedge fund investors bought 42.8 percent of homes for sale in the Atlanta metro area and 38.8 percent of homes in the Phoenix area in 2021.
https://www.kiro7.com/news/trending/new-senate-bill-aims-sto...