Housing market theories

[u2slow]

Do all those people always have the newest and best shit, car note paying for streaming and tons of other bs.

...

If not what are you going to do when shit hits the fan with the house payment?

There’s tons of houses available that are cheaper but people don’t want to live in them because they are outdated and in not great locations either subpar neighborhoods or far commute.

Nope. Wages have not doubled/ tripled in the last 15 years like housing has.

The banks forcibly refinance you, or foreclose. They prefer the former, obviously.

There is really no cheaper housing available (southwest Canada). Lot/land values are wild... any sub-par housing is quickly bulldozed to make way for $1M+ castles.

Edit: I'm fully aware how shrewd I needed to be to secure and improve the place I have. Had I waited 5 more years, the housing market would have pulled away and left me in the dust.

 

[rockota]

Nope. Wages have not doubled/ tripled in the last 15 years like housing has.

The banks forcibly refinance you, or foreclose. They prefer the former, obviously.

There is really no cheaper housing available (southwest Canada). Lot/land values are wild... any sub-par housing is quickly bulldozed to make way for $1M+ castles.

IIRC, mortgages in CA are much different than in the US... but can you elaborate on the highlighted?

 

[east_beast]

Having money requires saving, planning and self control. A lot of people aren’t capable of saving 100k for a down payment because the lack one of those things. If you can’t save for a down payment but are approved for xyz number you need to have a close look at your finances.

Even if you are renting for 2k a month and swap it for a mortgage with no money down you still have more outlay per month via insurance, property taxes, maintenance/property upkeep without changing a single thing. 99.99% of the time you won’t be able to buy a house for cheaper than you can rent one on a yearly basis. So if you can’t save money you can’t buy a house, it’s that simple.

So let's say after taxes, insurance, and maintenance that $2000 per month becomes $2500. It'll take you 16 years to save up that $100k at that $500 difference. At which point it would probably need to be $200k.

Average cost of housing vs. average wages is wildly out of step with historical norms.

 

[u2slow]

IIRC, mortgages in CA are much different than in the US... but can you elaborate on the highlighted?

They (banks) shift the interest/principal ratio, raise the payment, and/or add on more years. There is a leverage threshold where your mortgage is no longer portable/transferrable.

We also have to renew our mortgages regularly (1-10 years but most often 5). When you renew you get to pick from the rates offered at the time.

 

[east_beast]

They (banks) shift the interest/principal ratio, raise the payment, and/or add on more years. There is a leverage threshold where your mortgage is no longer portable/transferrable.

We also have to renew our mortgages regularly (1-10 years but most often 5). When you renew you get to pick from the rates offered at the time.

Ugh. Fuck that.

 

[rockota]

They (banks) shift the interest/principal ratio, raise the payment, and/or add on more years. There is a leverage threshold where your mortgage is no longer portable/transferrable.

We also have to renew our mortgages regularly (1-10 years but most often 5). When you renew you get to pick from the rates offered at the time.

So y’all are kind of in a perpetual adjustable rate mortgage?

 

[u2slow]

Ugh. Fuck that.

Is what it is.

So y’all are kind of in a perpetual adjustable rate mortgage?

Basically yes. You could take a fixed rate for 10 years, but its probably going to cost you several points above prime. Other extreme is full variable, with options to lock in.

 

[Tin Roof]

Having money requires saving, planning and self control. A lot of people aren’t capable of saving 100k for a down payment because the lack one of those things. If you can’t save for a down payment but are approved for xyz number you need to have a close look at your finances.

Even if you are renting for 2k a month and swap it for a mortgage with no money down you still have more outlay per month via insurance, property taxes, maintenance/property upkeep without changing a single thing. 99.99% of the time you won’t be able to buy a house for cheaper than you can rent one on a yearly basis. So if you can’t save money you can’t buy a house, it’s that simple.

It requires saving, planning, self control, and a decent income.
Not many people are saving $100k for a down payment because even if they are not spending extravagantly just the basics are eating up their take home pay.
The median household income in Iowa is $70k. Those people are not putting more than $10k/yr in savings after paying just the basics for the household. Now factor in any major auto repairs or health bills, and they are at net zero at the end of the year.

 

[mobil1syn]

Ugh. Fuck that.

yea that.

u2slow what are the taxes like if you own your house outright or is the whole mortgage scheme intended to prevent that"?

 

[u2slow]

u2slow what are the taxes like if you own your house outright or is the whole mortgage scheme intended to prevent that"?

Prop tax composition varies because some areas bill sewer/water/garbage separate. Rates are the same wether you have a mortgage or are paid off. $5-6k total annual is not uncommon. Some have it broken down monthly and paid with their mortgage.

 

[rockota]

Is what it is.



Basically yes. You could take a fixed rate for 10 years, but its probably going to cost you several points above prime. Other extreme is full variable, with options to lock in.

yuck... So do people ever actually pay off their mortgage or just stuck in a circular refinance situation?

 

[landscraper]

I work primarily for developer/builders and investors on new residential construction.

For the past 15 years, I've had a couple of projects in the pipeline every year consisting of detached single family homes. They're "starter homes" with 6' between houses, 6-12 houses per acre, and between 10 and 60 homes on each project. Purchase prices have escalated from ~$280k to $400k+ over the years. We're finishing one up this fall that I bid in 2022.

Now is the first time in 15 years I don't have one of those in the pipeline. The builders doing them have either quit or are pivoting to 100+ unit apartment complexes. We've done a 9 and 20 unit townhouse projects this summer, and it turns out they're all Air BnB's.

The investors are the other side of the coin. 10 years ago they were excited to bring a spec to market for $699k "because there's nothing under $700k." Now the specs we're working on start at $2m. We're starting a $6m spec next week.

Long story short, the barrier into property ownership is only getting higher in our market.

 

[u2slow]

yuck... So do people ever actually pay off their mortgage or just stuck in a circular refinance situation?

Didn't used to be a problem. The last 10 years, new buyers are stuck in the circle.

 

[east_beast]

I work primarily for developer/builders and investors on new residential construction.

For the past 15 years, I've had a couple of projects in the pipeline every year consisting of detached single family homes. They're "starter homes" with 6' between houses, 6-12 houses per acre, and between 10 and 60 homes on each project. Purchase prices have escalated from ~$280k to $400k+ over the years. We're finishing one up this fall that I bid in 2022.

Now is the first time in 15 years I don't have one of those in the pipeline. The builders doing them have either quit or are pivoting to 100+ unit apartment complexes. We've done a 9 and 20 unit townhouse projects this summer, and it turns out they're all Air BnB's.

The investors are the other side of the coin. 10 years ago they were excited to bring a spec to market for $699k "because there's nothing under $700k." Now the specs we're working on start at $2m. We're starting a $6m spec next week.

Long story short, the barrier into property ownership is only getting higher in our market.

Yep. Definitely seeing much more of a shift toward multi-unit rentals vs. single unit for sale.

It's just crazy how fast things have gotten to the point of being untenable. I bought my 3000 square foot house on 12 acres less than four years ago. They built a brand new luxury apartment complex a couple miles away. My mortgage with taxes and insurance included is less than the rent for a one bedroom 900 square foot apartment.

 

[Swayzeexpress]

I think things are gonna take off again next year. The management companies that I am close with for work are all doing the same thing. Everyone is putting as little $ into their buildings as possible. We have 2 great, multi-year contracts that are taking this year off and doubling up next year...

the way it was explained to me is that with rates and taxes here how they are, they need to show how profitable the buildings are to keep their financing level. One guy called it an cash inflow year. They are doing this knowing full well it will cost more long term. Once everyone gets a solid 12 months of nice positive cash flow, they are gonna borrow the max and snatch up more buildings and get back on track fixing the ones they have.

I'm hoping they are right, we are running about 60% compared to the last 8/9 years yes that is directly proportionate to my take home. BRB, gonna go cry in the bathroom real quick

For individuals, everyone is just locked in. Can't imagine jumping into something new and giving up sub 3% on my place anytime soon.

 

[mobil1syn]

Now is the first time in 15 years I don't have one of those in the pipeline. The builders doing them have either quit or are pivoting to 100+ unit apartment complexes. We've done a 9 and 20 unit townhouse projects this summer, and it turns out they're all Air BnB's.

selling a long term revenue stream makes more money than selling a handful of houses.

 

[Pocahontas]

Pocahontas I understand what you’re saying.

however you’re talking black and white. It’s like comparing Fl-Krawler and waterhead Florida men.

I was referring to first time homebuyers, in their 20’s-30’s with some savings. A “grey” area.

That’s what an fha loan is for. Can be zero down and a few points to a few percent off market rates depending upon person and property.

 

[Tin Roof]

There's been grants available for multi-family housing which has been fueling the switch to building those. We have seen developers make the same change to that market.

 

[Slander]

Yep. Definitely seeing much more of a shift toward multi-unit rentals vs. single unit for sale.

It's just crazy how fast things have gotten to the point of being untenable. I bought my 3000 square foot house on 12 acres less than four years ago. They built a brand new luxury apartment complex a couple miles away. My mortgage with taxes and insurance included is less than the rent for a one bedroom 900 square foot apartment.

Right? I bought a 1200 sq ft suburban starter house in 2010, with 2% down (Pocahontas) and then got lucky buying here 4yrs ago. Now we put close to 100k down on this place, but there was no way in fuck I could have done that for our starter house. Thank God for that place as we were able to build up equity and got lucky we sold in clown world market in one area, and just got in early on clown world pricing here. My current mortgage is around $1200. In 2009 I was renting a 1bedroom 850sq ft apartment for $1100 in a cheap Chicago suburb.

Housing is insane now, no idea how people can afford to buy in now. Thanks indefinite QE since 2008 and the fed printing trillions during COVID.

Prices are coming down here, house across the street just sold this week for $149,000 lower than what it was put on the market for in April.

 

[u2slow]

For individuals, everyone is just locked in. Can't imagine jumping into something new and giving up sub 3% on my place anytime soon.

Those early-covid low-rate 5yr terms are ending here pretty quick.

 

[landscraper]

selling a long term revenue stream makes more money than selling a handful of houses.

Nashville cracked down on Air BnB's a couple of years ago limiting where they can be built. The townhomes are permitted for it, which would likely double their sales price. But, none of the 20 unit is for sale, and only a couple of the 9 unit are. Neighboring buildings are grossing ~$90k annually per unit.

 

[Swayzeexpress]

Those early-covid low-rate 5yr terms are ending here pretty quick.

What was the covid balloon deal? We closed Feb 2020, was awesome not have fam come to "see the new house" for like 4 months

 

[bad zuki]

Those early-covid low-rate 5yr terms are ending here pretty quick.

Hmmm. That whole system sucks, but thats gonna hit hard.

 

[Pocahontas]

Nope. Wages have not doubled/ tripled in the last 15 years like housing has.

The banks forcibly refinance you, or foreclose. They prefer the former, obviously.

There is really no cheaper housing available (southwest Canada). Lot/land values are wild... any sub-par housing is quickly bulldozed to make way for $1M+ castles.

Edit: I'm fully aware how shrewd I needed to be to secure and improve the place I have. Had I waited 5 more years, the housing market would have pulled away and left me in the dust.

Not sure on the Canada market but sounds like it’s a tourist destination, we have a town like that where it used to be 1-2k per acre pre covid now it’s 10k unless you get into 100 acres tracts.

However you go 10 miles away and prices on land drop back to sub 5k per acre fast.

So let's say after taxes, insurance, and maintenance that $2000 per month becomes $2500. It'll take you 16 years to save up that $100k at that $500 difference. At which point it would probably need to be $200k.

Average cost of housing vs. average wages is wildly out of step with historical norms.

Then something needs to change there’s programs to help first time home buyers, if your making 100k with a take home of 70 and can’t figure out how to save that’s on the person.

It requires saving, planning, self control, and a decent income.
Not many people are saving $100k for a down payment because even if they are not spending extravagantly just the basics are eating up their take home pay.
The median household income in Iowa is $70k. Those people are not putting more than $10k/yr in savings after paying just the basics for the household. Now factor in any major auto repairs or health bills, and they are at net zero at the end of the year.

I’m not disagreeing I see it here as well but those people are usually not being diligent with their finances, going out to eat often entertainment bars ect. Not dollars to cents but before the wife and kids I was living on less than 500 a month for phone, food, housing and transportation. Was it fun no but 3 years of eating once a day and thinking about every outflow allowed me to get where I could buy my first rental property with cash.


This was sent to me today, it’s about 20k overpriced but I get 100 or more of these every day. The house is small but in a city of 30k and away from the major 1million person city by 45 minutes or so. There’s plenty of properties out there but they aren’t what being pushed on hgtv, instagram and ticktock.

 

[YZRider]

Not sure on the Canada market but sounds like it’s a tourist destination, we have a town like that where it used to be 1-2k per acre pre covid now it’s 10k unless you get into 100 acres tracts.

However you go 10 miles away and prices on land drop back to sub 5k per acre fast.



Then something needs to change there’s programs to help first time home buyers, if your making 100k with a take home of 70 and can’t figure out how to save that’s on the person.



I’m not disagreeing I see it here as well but those people are usually not being diligent with their finances, going out to eat often entertainment bars ect. Not dollars to cents but before the wife and kids I was living on less than 500 a month for phone, food, housing and transportation. Was it fun no but 3 years of eating once a day and thinking about every outflow allowed me to get where I could buy my first rental property with cash.


This was sent to me today, it’s about 20k overpriced but I get 100 or more of these every day. The house is small but in a city of 30k and away from the major 1million person city by 45 minutes or so. There’s plenty of properties out there but they aren’t what being pushed on hgtv, instagram and ticktock.

Post the link.

 

[Tin Roof]

I’m not disagreeing I see it here as well but those people are usually not being diligent with their finances, going out to eat often entertainment bars ect. Not dollars to cents but before the wife and kids I was living on less than 500 a month for phone, food, housing and transportation. Was it fun no but 3 years of eating once a day and thinking about every outflow allowed me to get where I could buy my first rental property with cash.

I understand where you are coming from, but it's also a completely different cost of living now as well. Inflation is eating up income regardless of wasteful spending.

This was sent to me today, it’s about 20k overpriced but I get 100 or more of these every day. The house is small but in a city of 30k and away from the major 1million person city by 45 minutes or so. There’s plenty of properties out there but they aren’t what being pushed on hgtv, instagram and ticktock.

There's affordable starter homes around here as well. I saw a 3/1 that has new windows, siding, bathroom remodel, and electrical service upgrade listed this week for $60k. Just needs the walls finished in the rest of the house (tape and mud then paint). In another town close by there's a 3/1 with two stall detached garage for $80k.

 

[mobil1syn]

There's affordable starter homes around here as well. I saw a 3/1 that has new windows, siding, bathroom remodel, and electrical service upgrade listed this week for $60k. Just needs the walls finished in the rest of the house (tape and mud then paint). In another town close by there's a 3/1 with two stall detached garage for $80k.

what are the local wages like?

 

[Tin Roof]

what are the local wages like?

Hotel towns. Most are driving an hour away to make $25-30/hr in a factory or a trade job at $70-80k/yr or more.

 

[u2slow]

Pocahontas

Your suggestion of "tourist destination" can then be applied to every population center in BC. the sheep aren't making $100k... more like $60-70k... and paying hand-over-fist for every car and home repair/service. (Since they're never had any surplus funds to equip themselves to perform or learn any DIY.)

What was the covid balloon deal?

1.74% fixed 5yr term for me.

One buddy thought he was smarter, so he only signed a 3yr. Last year he had to renew at just under 6% and tack more total years on.

 

[bad zuki]

This was sent to me today, it’s about 20k overpriced but I get 100 or more of these every day. The house is small but in a city of 30k and away from the major 1million person city by 45 minutes or so. There’s plenty of properties out there but they aren’t what being pushed on hgtv, instagram and ticktock.

Thats $350k+ here depending on location. Edit for clarification. These homes don't come up for sale. It should sell for $250k based on sf.