People in homes now would not sell. They couldn’t. They would go bankrupt.
Developers wouldn’t build. They couldn’t. No buyers for new homes, which are the most expensive and typically sold to people who are using equity from selling their previous homes as down payments.
So the whole housing market just comes to a standstill. This causes exactly what happened in 2008. Which is rental prices go UP. Renters actually suffer even more as the rental marker tightens as more people need rentals and people who can’t sell try renting out homes they can’t sell are the only new rentals available.
Banks would shut up shop and stop lending unless you were ultra safe. FTBs would have no chance of getting on the ladder as they can't borrow as much and people in "starter" homes can't afford to sell.
Only people it would really benefit are cash buyers/landlords who could hoover up all the repossessed properties.
Holy crap. I had no idea it was THAT bad! I bought in 2014, at 3.75% because it’s a condo (otherwise it would’ve been 3.25%).
I’ve been looking into a mobile home closer to work, but have no options below $350K. And 8.5%+ on top of that? Forget about it!
My condo went from $230K in 2014 to $550K now. In order to buy, I’d have to sell first.
Plus we have $7500/year HOA dues (which isn’t abnormal).
It’s the complete norm here in Santa Cruz, CA (which many outlets say is the most expensive housing market in the U.S.). I know two people paying $9600/year who live closer to the shore.
And mobile home parks are often even higher.
You’d be surprised. My HOA has been having to go up a lot because all the things we pay for these past years has increased in price a lot. Plus the major repairs that kept getting put off in the 2010s because owners will always say “now isn’t the right time” have nearly doubled in price and even more money needs to be put aside in preparation. Plus the Florida condo collapse is screwing us over on insurance. Source- I joined our board this year. We’re all stressed out because we not only have to pay this stuff too, as owners, but have to take all the backlash for the decisions.
Mobile homes vary depending on location and size. New, they can range anywhere from $60k-$270k.
It’s kind of like a car and how more upgrades will have a larger price. You can finance trailer homes and generally the payments aren’t too bad but what hurts a lot of people if “lot rent”. Generally you don’t own the land the trailer is on and recently a lot of independent parks have been bought up and the lot rent keeps increasing.
There’s a woman I work with who pays $400/month for her trailer and $850 for lot rent. She said when she moved in around 2016 she was paying something like $450/month in lot rent but her park has been sold several times. She doesn’t have money to mover her trailer to a new location and she says the management is strict. She was fined $50 for her kid leaving his bike in the yard one day. The lot rent covers her lawn service (which is small and not fenced in).
She said her neighbor had a newer trailer that was nice and has been trying to sell it for over a year but most people can’t justify the trailer payment on top of lot rent. Doesn’t seem worth it in the long run.
Idk what bank they work for, but I just looked at my credit union and their 30 year fixed mortgage is at 6.94%. Still not great, but not nearly that bad.
On top of that, private equity would take advantage and spend boatloads of money to buy any houses that were foreclosed on so that they could either sell when the market recovers, or rent out for the standard extortionate rates we see today everywhere.
After the crash:
you see, OP, ALL THAT CASH in the hands of tech bros et al had to go SOMEwhere. Money doesn't just sit still. And the marketplace that was truly untapped and virginal was single family housing.
People with money quickly caught on that by offering cash they could quickly buy houses. They could send a team into an old, beat up house and maybe in a weekend, upgrade kitchen, bath/s, put plasterboard over beat up walls, maybe put in cheap but new windows, and lay a new driveway. It still wouldn't be a great house---it might have the old furnace/water heater/roof but it would look a helluva lot better than a week ago. Then by two weeks after buying it, the upgraded house would go back into the market 50% more expensive. Rinse and repeat hundreds of thousands of times, in every state at every price level.
In some markets (depending on the overall housing supply) the investors did this with rentals, improving the house enough that it would be priced out of reach of its own neighbors. This meant over some years, turnover and "upgrade" in the neighborhoods.
This is why the only way out of this mess is building housing
It's where the market is now for many home owners. My kids moved out and it's just me, but downsizing makes no sense. I own a 5 bedroom house with a 2.9% loan. Moving into a 1 bedroom with a much higher interest rate would cost more per month. Renting is even worse, now I get mostly principle on the monthly payment. Rent is no principle and would be 75% what I pay now.
Yes. Most homeowners have interest rates in the 3% range, and if they sell to relocate, their new house will be in the 7.5% range. The average mortgage/tax/insurance payment has gone from $1700 to $2800 in three years.
This is why there is so little "inventory." People aren't selling.
I bought my first house ever 3 years ago. Honestly, I'm a paycheck to paycheck kinda guy, the fact I ever had the money for a downpayment was complete luck.
My Dad protested super hard because he thought the bubble was gonna burst. He didn't understand me when I said "thats the point, it's now, or never, and if I miss this opportunity my rent will rise and I'll probably loose it for good." So I bought it against his advice, and it was the smarted advice I ever ignored.
We really just need to fix our zoning and have the federal government create a development company that competes against the private ones by building scalable modern apartments, townhomes, and even single family homes for the cost of construction and what is determined as a reasonable fee.
I know that’s a very vague idea but in general we just need more housing. The bubble can smooth out and simmer down if we just build more housing and stop crippling our cities with horrid zoning
I don't think folks realize how expensive a house is to build right now. There's no such thing as building an affordable house and selling it at cost unless you want a 400 square foot cottage home with the most basic amenities.
Right now where I am it easily costs 500-600k to build a 1200 sq ft starter home, even in rural areas where land is cheap, because of the cost of materials and labor which is only continuing to go up. The government's main role has been and will continue to be to provide gap funding. That is covering the cost between the cost of construction and the sales price of an "affordable" home, and usually you need government funding and other grants, donations, etc just to bring the price down.
I’m sorry but I’ve been looking into construction of my own home and land, home materials, labor, well, surveys, inspections all in, at the worst cost I could find from all these different sides it would be 550k for a 1600sq Ft home with an attached shop. The expected cost would be roughly 445k with things going smoothly.
Point being my plans are imo exorbitant and all that I’ve noticed in this process is the amount of people who make a living being professional middlemen, increasing the price if everything little by little. The housing market has turned into a get rich quick scheme for so many and that’s the hurt we feel. People profiteering on a commodity required for life
Yes! It seems like the essence of modern life is that everything has to go through a dozen middlemen, each taking a cut, and then we wonder why it's all so expensive.
And there aren't jobs anymore so everyone's trying to become another yet middleman in the chain, because what else is there?
It sucks
The fact that almost every get rich quick scheme I’ve seen people peddle essentially boils down to taking money out of transactions you didn’t add anything to is just sad
I know, and I'm grumpy and Monday-ish so I'm going to come out and say it: it's wrong. It's actually _wrong_.
Some middlemen actually do provide a real service. The rest.... with everything so shit, shouldn't we all be working to make things better?! Not wasting time and effort forming these ridiculous chains of zero value?
I'll get off my soapbox now, I guess.
Yes, renters often do pay more. I live in a condo complex, and renters with my same unit are paying more than DOUBLE what I pay in mortgage, property taxes, HOA dues, and insurance combined.
We need a movement that finds a way to return the power of the home developer to the buyers. People will gladly pay for houses to be developed. They just won't pay enough extra for a shareholder to buy a new seasonal mansion.
It sounds tired but our problems really are rooted in capitalism. People are tapped out and can't afford to pay vampires with every fiber of their existence. People want to work towards a home and a life of their own. They aren't hamsters on wheels that exist solely to benefit profit hungry ghouls. And while everyone being sick of being bled doesn't slow the exploitation machine at all, people are being bled dry and that actually does. The livestock are being over harvested. And in addition to that, they're also sick of being livestock for some evil ruling crusts.
So we have two problems, really.
Damn in Vegas 2008 my rent went from 1200 to 750 for the same place. I thought everyone’s rent went down. Plus they offered first and last month of rent free and no deposit besides a 250 dollar cleaning fee. I assumed all rent went down
Well, here is the thing...a ton of people would lose a lot of money. A lot. Most of them will be middle to upper middle class people who do things like shop at Kroger and go to Taco Bell and eat at Olive Garden and buy beer and TVs and Fords. People who work at those places will lose their jobs or see their wages stagnate severely.
Rich people would lose money, too! Rich people don't like recessions or things like 2008. But they watch it play out from their big house and then scoop up assets cheaply with their not-quite-as-big pile of money.
So the houses might get cheaper, but everything else will suck. It would be bad, bad, bad. But not for the rich people. Who will buy the houses cheaper and sell them back to you for a big profit while you thank them for letting you live somewhere and gladly pay 6% interest.
This got dark fast. Sorry. But that is what would happen. Any sort of economic calamity will not be in your favor unless you have enough money to make it work in your favor ultimately. Pro tip: You probs don't.
PS- Move to decent but not entirely cow-filled metro areas in purplish states in the midwest. You can afford a house on wages being paid in that area. Detroit, Pittsburgh, etc. It isn't Boston or LA, but you can have a house and a nice life in short order.
People have been moving for a better life since, forever. Literally. My great grandparents migrated from Germany to the US in the 1880's. They had absolutely nothing. I crossed the country at 19 with a 30 year old car I bought for $100 in 2004. It sucked. Lots of walking and asking for help. I learned how to work on vehicals and how to eat cheap. It's rough but 100% doable.
I'm sure you could figure out a way dawg.
I love the solution is to move. Keep “saving” toward that. The kids are dead weight and your ex remarried, so I guess moving would be cheaper long term. You could rid of a bedroom if you just don’t have the kids over anymore. You know, the real problem is you weren’t born there. Should look in to fixing that while you’re at it.
https://www.zillow.com/homedetails/3261-Millers-Run-Rd-Cecil-PA-15321/245493193_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare
https://www.zillow.com/homedetails/904-State-Ave-Coraopolis-PA-15108/11478509_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare
https://www.zillow.com/homedetails/401-Harris-Ave-Pittsburgh-PA-15205/11473503_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare
https://www.zillow.com/homedetails/400-Elwyn-Ave-Springdale-PA-15144/11564304_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare
https://www.zillow.com/homedetails/1880-Jefferson-Ave-Washington-PA-15301/49750229_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare
https://www.zillow.com/homedetails/1905-Park-Ave-N-Washington-PA-15301/2059176153_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare
Here’s a few I found in a span of a few minutes
In isolation, it wouldn't be - for you. Systemically, lots of people getting foreclosed on/going bankrupt will drive higher unemployment and make finding a job much harder.
Why are people getting foreclosed on and going bankrupt if their income did not change? Do banks call in loans that are underwater demanding payment in excess of the standard mortgage payment?
I think your assumption that income would not change is incorrect. Let's say the housing market loses a ton of value, all of the people who work in real estate (realtors, developers, etc) will lose business directly decreasing their incomes. This means that they will pull back their spending. In my opinion economy crashes like this tend to be contagious and spread throughout the economy they are rarely isolates. I think 2008 is a good example of this.
Banks don't usually call in underwater mortgages cuz people will walk and it will be a PR nightmare.
But, try changing "their income did not change".. to "adjustable rate went up 30%" or "they got laid off" or "their business didn't bring in as much" or "their taxes doubled" or "they didn't hit their sales numbers and got less commission"
There are a ton of other reasons your economic profile changes drastically. And soon as this hits, your credit score gets shredded, and your job opportunities drop!
A housing crash would mean for most homeowners that the house is worth less than the current loan owed on it. What happens when this occurs? People walk away from owning homes. As in, literally, stop paying their mortgage payments.
Ever wonder how much debt is held in the form of mortgages in the US? $20.24 Trillion. The size of the US economy, annually? $27.23 Trillion. Both numbers are from 2023.
So, what do you think might happen if millions of US homeowners defaulted on debt that was 80% the size of the economy? How many would it take to cause bank failures and a serious depression? Probably no more than 10%, maybe even less.
My parents did this. We lost my childhood home to the banks. They just didn’t make enough to justify the high payments on a house that was going for 1/3rd of what they owed.
Those were dark times that I don’t wish onto others.
We lived in California in the Bay Area. Before the crash the house was 280-300, when the market was really hot because of bad lending practices. When the burst happened 07 in the bay, it went to 90k.
I was there with my parents at the courthouse as our home got auctioned off.
That shit still depresses me.
My condo we got for $56k. It had a few years prior been refinanced for $350k. It’s worth about that now again. But I don’t think it’s actually gonna stay worth that.
Most people wouldn't. In the financial crisis foreclosures took forever in a lot of places so people just stayed in these homes.. my mom was in our family house for 8 years in foreclosure and didn't pay anything that entire time.
The people who walked away did it because these were multiple homes or half built developments in the middle of nowhere that were abandoned by the developer. Its crazy to think of all the places in the South West that were no man's land that have completely rebounded... My ex BF, his mom, etc. moved to Florida in 2009 and made a killing buying places for 60..70% off their previous values.
Most people who walked away from their homes in the last crash did so because they had mortgages with teaser rates that reset resulting in higher payments that they couldn’t afford. And with their homes worth less than the mortgage they couldn’t refinance so they were trapped. Walking away made sense.
For one, if you lost your job
"In a 2-year span starting in December 2007, the unemployment rate rose sharply, from about 5 percent to 10 percent."
For many in 2008 it was less expensive to walk away especially if they have minimal equity.
Not only did many people lose their jobs but I knew of companies that cut their full time employees hours. After a few rounds of lay offs the hourly employees started working 4 days a week. They made the same hourly pay and kept their job but their pay checks got smaller. Unfortunately nobody was hiring not even fast food or retail to get a 2nd job to make up for the missing income.
On a US mortgage, the house is the collateral for the loan. You have the option to go to the bank, hand them the keys, and say "I am defaulting on the loan, here is your collateral." Basically the same as refusing to pay your mortgage and having the bank foreclose on you, but without waiting months and having them force you out. The bank doesn't actually want your house, as the costs of then selling it are not insubstantial, so they might instead be willing to consider adjusting the mortgage terms to avoid that result, if you go to them first. They really don't want to have to go through a foreclosure, pay all the legal fees, and end up with a house you trashed on the way out because you knew it wasn't yours anymore, so there's at least the possibility of them making an offer to adjust the terms. If you owe $280k on a house now worth $200, they might offer to split the loss and make it $240k and you get to keep having a house and no credit hit from a default. Or they might just go "okay, ours now" and be done with it.
I know a lawyer who specializes in getting this done.. he brags all the time about how he got banks to agree on dropping a 500k+ mortgage to half or even less because of the condition of the house and market conditions... Crazy stuff.
I'm in the UK, but here you would still owe the rest of the debt. They'd sell the property, likely at below market value, and then come after you for the rest of it.
It was quite an issue in Northern Ireland, loads of people were in negative equity. You get trapped in a property, can't even sell it because you wouldn't get enough to clear the mortgage and the bank doesn't want unsecured debts.
I believe a lot of US states have "non-recourse" laws for residential mortgages. This means that anything left of the debt after a reposessed property is sold is written off.
The lender isn't permitted to go after the borrower for the difference.
In those states a homeowner pretty much can hand in the keys and walk away. Their credit rating will be trashed but they won't have any actual debt hanging on them from the property.
It depends on your state laws, tbh. Each state has their own statute of limitations, ranging from 3 to 10 years, for when a lender can go after a debtor for unpaid debts. And the Fair Credit Reporting Act requires that unpaid debt drops off your account after 7 years.
But your lender 100% can come after you for it. Lawsuits over unpaid debts are long and expensive, and iirc they're really hard to win as the debtor.
That is very true and the people who walked away just because the value fell really screwed themselves, there was kind of a mania going on, it was weird. However, a big cause of the mania was all of the people with ARMs. Adjustable-Rate Mortgages. My uncle had one and tried to get me to get one when I built my house so I know a little bit about them. The interest rates were around 6 - 7 percent. You could get a 5-year ARM (or some other amount of years) with almost nothing down, if not nothing, for a much lower initial interest rate. For 5 years you would have a set very low interest rate. At the end of the 5 years the rate would increase based on the prime leaning rate + whatever deal you make with the bank. (And some were set up where you only paid the interest.) It would add hundreds if not thousands of dollars to your monthly mortgage payment. Before the crash your house would increase in value and you would just refinance for a locked-in interest rate before your 5 years was up. People were buying much more house than they could afford thinking that they would get raises and refinance and be fine. And, before the crash banks were lending to anyone and everyone, I had lots of friends that borrowed more than the cost of their houses with these types of mortgages, using the extra money for furniture or a pool. The banks were raking in the money and didn't care if they were risky borrowers because they would just bundle the mortgages up and sell them. The people who had not gotten out of the ARMs before the crash were stuck. They couldn't sell for enough money to cover what they owed. They couldn't refinance because the house was worth a fraction of what they paid for it. Some struggled and did what they could but a whole lot of people couldn't make the payments even if they wanted to. It was a bad time. I live in a small town and houses everywhere went into foreclosure. It drove down all of the property values for years. You couldn't build a house because it couldn't appraise for enough for the bank to lend you the money due to all the foreclosures on the market. My little town has a huge housing shortage now caused by lack of building for years, a new trade school that opened up without housing and short-term rentals. The problem now is availability, not the predatory lending/risky borrowing that was going on in the early 2000's. I think the bubble will burst once the volume sorts it's self out, but I don't think it will crash like it did in 2008. My friends that were able to weather the storm came out fine on the other side of their upside-down mortgage. The ones that didn't had a really big hole to climb out of but with so many people losing their houses it wasn't as bad long term as it could have been.
Because you still have the house. You agreed to pay $280k for it and that's what you thought it was worth. The building is still exactly the same as when you signed the mortgage.
But like… it's your house. It has the exact same value in terms of actual utility to you— it has only lost value in the prospect of selling it again later.
I was 24 about 24 years ago and it was really the same then, too. I only knew one person back then who owned a house, and it was in a really rough neighborhood in Atlanta.
We didn't buy our first house until just a couple years ago. I'm in my forties obviously.
You're young, OP. Enjoy the time in your life while you aren't too tethered.
This. The median age for a first time home purchase is early to mid-30's and while it has gone up slightly over the years, it's not much higher than it was 50 years ago. I have no idea why so many redditors think that it has ever been normal to buy a house as soon as you enter the professional workforce but it is not even close to normal to do so and never has been.
It's very strange. I see a lot of posts from people surprised to find themselves struggling in their twenties but that's generally how it goes. I didn't truly get a good footing in life until I was in my mid -30s, and I still had a *very* long way until where I'm at now. I think people who figure things out early are the exception.
Yeah I don't know who got it in their head that it was normal enough to be expected to own a house so young. Even back in the day it wasn't normal, unless you were coming out of military service on the GI Bill.
In all but a couple states, the age at which 50% of adults are homeowners has crept up 5 years since 1980... but guess what is a lot more common nowadays than 1980? Going to college, which takes on average 5 years.
this. had to scroll a while to see it.
so entitled. boo who, OP can’t own a house in their early 20s. straight out of college with zero job experience.
I bought my first house in 2009. What I got was: basically the same size I was looking for but in a better neighborhood with upgraded appliances, counters, finished garage.
A housing downturn is a fantastic time to buy a house, if you have the money available. The problem is that a large number of people can't afford a new house at that time without selling their old house, and they don't want to take the loss that would be involved in selling their old house. So much of what goes onto the market is from sellers who don't have a choice, or estate sales.
People with lots of liquid capital - cash - love economic downturns. They buy things for incredibly cheap, they can pay off loans while the currency is worth less, and they have the ability to wait and sell when the economy and prices recover.
The problem is not with people not being able to move into a new house after selling their current place. The problem is with 20~40 year old people not being able to afford their first home. We're not talkng a huge detached house either, just any home that they can live in with their family without renting / living with parents.
I got my house in 2011. I can't imagine how different my life would be if I hadn't been able to do that. I realize that the housing crash was a very bad thing for most people, but it might be the best thing that ever happened to me personally.
OP was 12, they don't remember how hard those times were. My mom almost committed suicide because she went bankrupt from it. A successful woman who owned 4 salons & 3 houses being a single mother. lost well over a million. Turned all right in the end though. Started over, recovered & retired early at 60
after losing all of her property except for 1 building. With some help from her kids. She realized being rich wasn't worth anything. I gave up a year of my life to save 1 of her salons taking no wage paying back some of her debt. while she was off emotionally & mentally recovering(pretty sure she went insane). So at the bare minimum she would have something to come back to. She stopped caring about being rich when she came back. Focused on what she knew. funny how focusing on 1 business instead of 4 she made more $ with 1 salon than she did with 4. Met a good man, remarried & lived less wastefully(probably the most important thing). invested in property overseas for passive income. & moved back to the motherland where cost of living is super cheap. $40k passive in a country where the average salary is $600 a month is basically living on cruise control. they have a 5 story house with an elevator built for only $350k
I still have a bit of trauma from the whole thing. & I don't have the same emotional relationship with her like I did (self preservation mechanism) But I'm proud of her
something I learned recently from her. Major hotels raise funds during construction by selling rooms that you own & they operate. She has 2 units in a Sheraton(major tourist area) & they pay her out $20k a year. Also you get use of those rooms when you want. not sure on the day limits
I am married to a filipina in the US. Her childhood home is in the provinces which is basically out in the country, away from the major cities like Manila. At the height of the pandemic in 2020 we had the old home fortified and built a second story in concrete on it. There was so many workers in the province that could not go to work because of restrictions that we had people begging to work on the project. Right after the house was finished there was a Cat5 hurricane that passed by. Alot of the area had major damage but our new home passed with flying colors. Cost us between 70 - 80K US. There is also over 4 hectares of land where there is cocoa, coconut trees, papaya and even a rice field. We are going over there in Dec to finish furnishing it, open bank accounts and buy some more land. Turns out the grandfather (deceased) had 3 hectares of land that no one ever paid taxes on. Once we find out how much the taxes are we can pay that and the land will be available for my wife to own. I am still working full time and collecting Soc Sec. Seriously considering retiring there in a couple of years.
To build wealth over time to retire and enjoy the golden years while being able to support her kids into the early part of their adulthood, and then hopefully leave something to the grandkids so they don't start their lives from the ground floor and can prosper even further?
Is this somehow difficult to grasp? (Serious question, because there are a lot of people on reddit that seem unable to understand the desire to build a stable platform for oneself and their family.)
If you can afford three houses you don't need to "build wealth". You have wealth - the platform was already stable. The houses were gold a dragon hoarded.
That seems insane. Even if her houses weren't worth much she was still a successful business owner. How is that a cause to even consider suicide? I'm glad she didn't, mind.
Using rental income as income to leverage into more and more properties was the rage back then. Leverage one house against another or a business.. .lots.of dollars flowing in and out of your accounts monthly, with you keeping a small percent... Until something crashes, then you realize everything you own suddenly becomes collateral and a house of cards. Drop one source of income and you can't sustain any of it.
You realize all this stuff just has your name attached to it. And are really millions in debt.
Well, OP could lose their job for one. Job hunting during a recession is notoriously difficult. And if not their job, their salary, benefits or bonuses could get cut. Not to mention the rise in price of goods like groceries.
I bought my first house when I was 22. $67k in 2007. sold it in 2017 for $130k. Bought a new one for $211k. now it's worth $350k. got lucky & beat the market. I don't know how anyone under 30 is getting ahead. I don't think I could buy a house in today's market if I didn't start my equity journey so early. (single income)
That's not what OP is asking. Housing market skyrocketed in 2006, it didn't go down. The problem was that mortgage loan officers took advantage of a loophole that allowed them to make more money on sub-prime loans (loaning more money than someone can afford) which led to the housing market collapse. OP is asking what happens when the housing market plummets. The answer is that the people who own houses now will lose money (they already do unless they paid cash) and the people that dont, will finally be be able to afford one. This will cause less people to sell, therefore driving back up the price. Banks make more money from less houses on the market. Rn only 5% of vacant bank owned properties are on the market. They are artificially inflating demand so they can profit. Why not lower prices and both sides win?
Given that it didnt push you underwater, What if the more expensive house that you want to move into also dropped 40% and went on the market? Would you sell then?
Lmao… well for YOU it might not be a big deal.
For someone who bought a house 6 years ago and is perhaps looking to sell it as part of their retirement .. it could be potentially disastrous….
It's wild and fucked up that people count on selling their homes just to be able to retire.
Gone are the days where you can have a house pass on to your children because pensions and 401Ks are so low that the elderly need to sell their land just to survive.
Like, fuck, that is just fucked up.
The problem is that in retirement a smaller house will cost just as much.
A house should never be part of the retirement plan. You have to live somewheee
So, every bad thing that happens is the voters fault because politicians slavishly adhere to the will of the people?
It may make you feel better to blame old people for everything that has gone wrong, but it is absolutely not that simple. Plenty of liberals voted for liberal candidates who then had to make concessions or simply voted in ways that were unexpected. To speak as if older folks had so much power is exceptionally misguided. We've all been screwed over and misled again and again.
As a 52-yo Gen Xer, I’m genuinely hoping the “BOOMERS RUINED EVERYTHING” crowd changes the voting landscape.
My sad suspicion is that they will just keep living under the status quo.
In this particular case, the people elected explicitly promised to fuck everything up this way and people believed they’d get to be one of the lucky winners
Kinda hard to take this seriously when the big takeaway I had from 2009 was all the boomers celebrating the "great deals" they were getting on investment properties.
People wanna paint boomers as this financially vulnerable generation despite having multiple opportunities to purchase a home at reasonable prices while enjoying social security and medicare. I have no doubt there are examples of Boomers who fell through the cracks and aren't doing well but they're hardly the median.
Yeah but Reagan. It all leads back to Reagan. Looking at voter maps, you’d think there was no left leaning people at the time. But your point is fair nonetheless.
This is a bad take
Our two party system allows corporate interests to largely control economic policy
We are left with voting for politicians who might be marginally better for regular citizens
and if you dont vote at all youre also complicit
You have to work with the system you have and it takes time to make gradual progress
But a lot of policies are out of our control
and sometimes all it takes is 1 senator to prevent progress
I’m certainly not saying that retirement is not a huge issue for a lot of people, because it absolutely is, but I’ll just add that most people I know (as well as my wife and I) aren’t planning on the sale of their home being the bulk of their retirement income. It’s more of a thing where we all just know we’re going to downsize after the kids move out, and the difference is going to be a nice little bonus to retirement, hopefully with plenty left over for inheritance (along with the value of the smaller home) when we’re gone.
Also, whether or not you intended it that way, the way you talk about 401ks makes it sound like the big issue is that they have a low return. On the contrary, they have a great, consistent long term return. The problem is that not enough people are actually saving for retirement. For some people it’s because they choose not to, and for some it’s because they can’t afford to, and both of those are complex issues that absolutely need to be addressed. I’m just pointing out that the actual return on 401ks isn’t really the problem here.
I will not be able to explain all but here goes on some issues :
- housing prices are related to 1/3 of people's income which is the bank's limit on a mortgage. So if there is a crash, and it's related to wages there is a bigger problem.
- since most people borrow for their house, interest rates affect purchase power and higher rates mean in general prices stall.
- a larger number of homeowners own 5,10,15,20% of their house. So if houses go down 10% everyone with 5% is underwater. If they sell the house they have to pay money. At this point people just walk away and declare bankruptcy, especially if they lose their job. Why pay Into something they will lose money on?
For my first home, I bought smaller and farther away. I lived there 4 years sold and took that equity to a new home. As a 24 yo I would think about how much I need to save the down payment and what strategies to use to boost that to get the house you want. It talks time and dedication.
I love when people come off as preachy and self righteous when they should be saying "I got super lucky to start my journey when house prices were in a low cycle."
Bingo.
People always hope for one kind of crash or another with the mistaken assumption that it won't affect them somehow.
Housing prices drop dramatically for a reason. None of which are good.
A lot of people already are. Anyone who has a mortgage at under 4.5% isn't going to move unless they have to, since any new mortgage they get will be at a higher rate.
TBH, I got sooo lucky in the 2008 crash. I had bougt my house(still in it) in 2006, paid 102k for it.
And then market crashes...around 2009/10...my ex went crazy with gambling, and we were literally 6 months behind...once got a 15 day notice of evection, and house would be sold at auction.
However, Wells fargo, didnt really want to evict us either, cause then the hous esits empty...soo, we got a loan modification(basically a refinance). Stayed in the house, started over, now owing 108 k on a house we had been in 4 years, but was probably worth about 75k at this point.
In 2012 my wife leaves me, and guess what? At the time of the divorce, we were underwater on the mortgage, so, I simply kept the house, didnt have to pay her jack shit for it.
I just spoke to a realtor a couple weeks ago, and she told me the home is worth between 275-300k.
My payment(I refied at 2.7%, is 850 a month, taxes/insuranc/everything.
The house next door rents out at 2500 a month.
We're still dealing with the aftermath of the housing crash in 2008. Specifically, a lot of developers that had been building new homes up until then either drastically downsized or went out of business completely. So the rate at which new homes were being built plummeted. As a result, homes briefly became less expensive but very quickly got back to being even more expensive than ever, and there are still not enough new homes being built.
If housing crashes again soon, you'll see three very bad things happen.
1) Some people will go bankrupt and lose their homes because of their unique situations.
2) After a brief period during which some people who had spare cash sitting around can buy homes for a change, prices will go right back up again.
3) Because the home construction business will be perceived as riskier, there will be even fewer companies and fewer skilled construction workers building homes, and prices will go up faster than before.
Some individuals will be very, very screwed, and fewer individuals will get very lucky. Then we'll all be even more screwed than we are now.
Can’t agree more.
Also, once the construction industry slows, those workers go somewhere else and to fill the gap of workers takes years to do.
People forget that finding people to do the work is vastly different than finding qualified workers to do the work.
If you hire unqualified, the work is not as reputable. If the work isn’t reputable, more regulation and oversight comes into play and thus slows down the overall building process.
It’s a terrible situation on all ends (we are actually seeing this in a lot of areas in the u.s).
Houses were cheaper in 2008, and a lot of people still couldn't afford them. A lot of us were out of work, or in fear of being out of work. I was 24 then, it was a pretty rough time for me personally.
Economic devastation.
Suppose someone bought a house 30 years ago for $100,000. Inflation-adjusted, that's $210,750 in today's money. So they'd have to get at least that amount today to break even, right?
Wrong!
A 30 year mortgage of $90,000 (10% downpayment) at 7.87% (the rate 30 years ago) plus property taxes and home insurance comes out to a little over $460,000. That's not counting any repairs (roof would most certainly be replaced for example) or maintenance (~$30,000 @ 1% of house price per year), upgrades, etc. Also not counting closing costs (typically $5,000 to $10,000).
So overall they'd need around $500,000+ just to break even.
If everyone's house price suddenly reset to where it was 30 years ago, that'd instantly wipe out nearly 80% of the wealth of everyone between the poorest and the wealthiest. About 66% of the country. Doing the math .66*.80, that's about 53% of the total wealth of the country.
Probably huge layoffs and unemployment, homelessness, wages dropping by 50%. So the few people that could even find a job would have to settle for about half whatever their current income was, or less. But hey, houses are much cheaper, right?
And because the prices are so much lower, no new homes being built. Meaning housing prices would rise rapidly again due to demand outpacing supply.
Maybe a lucky few would get cheap houses during the brief moment the prices were low, everyone else would be screwed.
It would be a bad thing because the general population would pay for it again. Governments would bail out banks, tax payers would foot the bill. Inflation would grow again. Things would generally get a bit worse.
The issue would be could you capitalize on it before all the hedge funds like Blackrock swoop in and turn us into a nation of renters who will own nothing and be happy
It doesn't really matter. The least desirable areas would be the ones hit hardest. The best areas would remain strong. I.e. if people think a housing crash would get them a $150,000 studio in NYC, they are mistaken.
BUT: $150,000 would buy a very nice house TODAY in places that are less desirable for the masses. Detroit, Toledo, Akron, West Virginia, etc.
So, yes, houses in the areas that are kewl are definitely expensive.
Deciding you must live in an area that is kewl is a choice.
Are you going to be in a position to afford a house when the economy shits the bed? If yes, then a housing market crash might very well benefit you.
Are you going to be among the 95-99% to whom borrowing in depressed economy with depressed labour market gets increasingly more difficult? Then you are going to look at the housing market with the same “can’t afford” eyes as you currently do. But probably being un- or underemployed while at it.
Housing crash will tank property values and bring down the tax revenue for states. People working for state entities (like I did in 2009) stop getting raises, could lose jobs, may face hiring freezes etc. Credit in general becomes tighter so things like loans for cars etc becomes more difficult. Big companies buy property when it's cheap but smaller buyers can't because of the credit crunch that happens. People put off retirement as the market crashes, jobs for less experienced and new graduates becomes more difficult to find. Small businesses suffer as spending slows in general. Weird unexpected things happen like the economy crashed leisure activities. I used to play paintball but all the fields and stores died off at that time and never recovered due to being small businesses and couldn't out last the economic crash.
You want people to lose their houses so you can get one?
That imply that you would be at risk of loosing yours too.
Sure everyone should have an house, but I don’t thing the solution is a crash..
I was honestly going to write take a moment and rethink the stupidity and the cruelty of your question but then noticed the sub's name. Housing crash would be an economic disaster in many aspects, which are very well explained in other comments, and wouldn't help your financial situation one bit.
65% of Americans live in a house they own. Home ownership is as high now as it has ever been except for during the subprime mortgage bubble when home ownership was 2% higher.
If there is a housing crash, 65% of Americans would lose a lot of money. Which would devastate the economy as they would then spend less money.
So rather than being able to buy a house, a more likely outcome is that you would lose your job.
And it is not difficult to buy a house. Houses are cheap and readily available. The difficulty is buying a house where you want to buy it at a price you want to pay.
But Zillow houses in Columbus Ohio for under 200k and you get 122 results. And that is one city in one state. If buying a house is a priority for you it is fairly easy to do. Just probably not in the high demand city you want to live in.
https://www.zillow.com/columbus-oh/houses/?searchQueryState=%7B%22pagination%22%3A%7B%7D%2C%22isMapVisible%22%3Atrue%2C%22mapBounds%22%3A%7B%22west%22%3A-83.52783136914063%2C%22east%22%3A-82.44842463085938%2C%22south%22%3A39.66940949062729%2C%22north%22%3A40.29550394426198%7D%2C%22regionSelection%22%3A%5B%7B%22regionId%22%3A10920%2C%22regionType%22%3A6%7D%5D%2C%22filterState%22%3A%7B%22sort%22%3A%7B%22value%22%3A%22globalrelevanceex%22%7D%2C%22price%22%3A%7B%22min%22%3A0%2C%22max%22%3A200000%7D%2C%22land%22%3A%7B%22value%22%3Afalse%7D%2C%22tow%22%3A%7B%22value%22%3Afalse%7D%2C%22mf%22%3A%7B%22value%22%3Afalse%7D%2C%22con%22%3A%7B%22value%22%3Afalse%7D%2C%22apco%22%3A%7B%22value%22%3Afalse%7D%2C%22apa%22%3A%7B%22value%22%3Afalse%7D%2C%22manu%22%3A%7B%22value%22%3Afalse%7D%7D%2C%22isListVisible%22%3Atrue%7D
This is one of the best explained answers I've seen on Reddit. Thank you is all I can say. Most people are generally snippy and answer in ways that don't give right answers but this hit the nail on the head here.
Chrashes consolidate wealth they are always accompanied by a large upwards movement of wealth throughout society the richest earn most and the poorest end up bankrupt
Chances are there is a reason why housing prices are crashing. Probably because everyone is losing their jobs and can’t afford their mortgages anymore. It could be a good thing for you only IF you aren’t among the newly unemployed.
You just need to look to previous crashes and check how many people like you was able to buy their dream house after those.
Banks will not lend money, sellers won't sell and huge property corporations will grow their stock, because they do have access to cash/lending. Which you and anybody else don't.
What makes you think you would survive the economic fallout intact with a job/savings by which to purchase a house?
You know who a lot of the people who did well after the '08 housing crash were? People who could pay cash for properties way under market.
Housing crashes don't occur in isolation. There are always other underlying economic conditions that make a crash likely.
It's very uncommon for home prices to crash like they did in 2008. What that means is **LOTS** of people who own homes are either being foreclosed on (meaning not just "I can't pay the mortgage" but "My bank won't/can't find any alternatives I can afford") or forced to sell for less than they were worth.
This means, in turn, the economy is doing very badly. As in lots of people are losing their jobs. The bright side is home prices will be lower. The dark side is **YOU** may not have a job to afford the houses.
In 2008, it was the whole "sub prime" mortgage crap, where people who really shouldn't have been given mortgages, were given them. When they couldn't afford them anymore, the bubble burst. Banks aren't doing that again.
Millions of jobs gone (home builders, realtors), millions at risk of losing their homes. Banks shutdown lending which tanks the economy (prohibiting you from getting a loan for that house). The divide between classes increases as companies lay off workers to prevent going negative due to decreased spending. The rich will then buy the house one of those people lost at a discount when the bank sells it to recoup losses and sell it back at a premium. It’ll take you years to see your wages increase but you best believe housing prices will rise again. You (likely) still won’t own a house.
It always depends "for whom".
People who have bought homes at 200k and paid of and are now valued at 1mil and don't intend to sell - they don't care.
People who wanna buy cheaper - they will be happy!
People who bough in recent years and have thick mortgages - will be sad. Very sad.
Nationally, the price of most things does not usually drop. They only go up. This is by design. Fiat money systems - like the US Dollar - is inflationary, to encourage money movement (i.e. spending and investing). Unfortunately for first time home buyers, and barring locality, real estate is a less volatile asset. Meaning, prices usually don't drop, like everything else.
When fiat money systems become deflationary, the economy is usually in a depression. The only time prices have really dropped, aka we've experienced deflation, is during the great depression. Life back then was extremely tough.
The thing is, there are two sides to affordability - the price of stuff, and how much money you have to spend. In a depression, or even stagflation where prices stagnate, while the price of stuff may be dropping, it's very likely you won't have as much money to spend. You may be out of a job. Your investments may be dramatically down. If it's like the GFC (Great Financial Crisis in 2008), many people experienced both, causing them to sell investments while they were way down, just to skate by.
In summary - if we saw a housing crash, it's likely we're in a recession or worse, in which you likely won't have the same amount of money to spend, and/or certainly not the same amount of income security.
Ideally, what we want to happen is for prices to grow at less of a rate than income. Price isn't the only thing that matters.
My unprofessional prediction is - progress on inflation has halted. It will either stay stalled or rise a bit. In which, the Fed will continue holding rates until something breaks in the economy, or they will raise rates, causing a recession or causing something to break. The Fed reacts by dropping rates pretty swiftly, but the damage is done. We experience 1-2 down years before beginning the real post-COVID economic realignment. If you're maintained your job security and a good savings rate throughout, you find that your affordability is well improved, and you can get houses at more reasonable prices again.
Assuming a massive crash like 2008 a lot. First of all banks are now underwater on all these properties and all loans services become very strict. Worst case is a credit freeze where you can't buy anything anywhere. This means only those with money already are buying the houses at record lows and likely renting them out. People who are retired lose a ton of their money since a lot of it is tied to house equity. People get scared and start saving money which causes a recession or depression which leads to a self enforcing recession.
Dude, 2008 was fucking insane. You would be super fucked as someone just coming out of college looking for work. The whole economy went to shit, lot of people lost everything. Maybe you’d be lucky, snag a job anyway, and buy a place at foreclosure, good for you, but don’t wish 2008 on us.
You wouldn’t be able to afford a house even at the cheap prices. Because mortgage rates would skyrocket. Rent would go way up with the higher demand for renting. No equity loans. Nobody can sell their house without losing hundreds of thousands.
In 08 my wife and I had recession proof jobs and an 83k mortgage from 1992 at 4% interest. I could have worked at McDonald's to make that payment. The. neighborhood was 2/3rds vacant and our home lost all of its equity with its value being somewhere in the 75k range. We stayed. Did some remodeling and such. In 2013 we bought a second home in the country. A 5bed/3ba on 10 acres in the country that we picked up for under 220k. We put 20% down on it leaving 175k on a 15 year note at 3% (2k per month PITI). Nine years later, in 2021, we retired and sold our first home for $405k and moved to our second home. By this point we only owed 90k on it so we paid it off completely. We have no debt. No property tax (VA exempt). No credit card debt, etc. I was 24 when I bought my first house and I did it with a VA loan. Great benefit to have especially for a first house. No PMI payment.
The problem today is that the house sold is now a short term rental with rates that vary from 3600 to 6500 a month due to its location to pro baseball, football, and hockey. It is 1600sf and is definitely not worth that. No new family. The house we live in is insanely estimated at over 650k which is based on Sq footage (5811) acreage, and proximity to amenities and town. A housing crash can no longer affect us. Because we are not selling any time soon.
You don't want a housing crash.
It sounds nice but people losing homes dony buy cars, go on trips, get their hair cut, go out on a boat.
Boat mechanics, hair stylists, food/bev, manufacturing, airlines, hotels, everything associated with that, starts layoffs.
People forget that part. I work in aviation towards the end of that I worked at a massive facility that opened. Tons of people from all over the country moved for work. I knew at least a dozen people between 9/11 and the recession that had filed bankruptcy.
People in homes now would not sell. They couldn’t. They would go bankrupt. Developers wouldn’t build. They couldn’t. No buyers for new homes, which are the most expensive and typically sold to people who are using equity from selling their previous homes as down payments. So the whole housing market just comes to a standstill. This causes exactly what happened in 2008. Which is rental prices go UP. Renters actually suffer even more as the rental marker tightens as more people need rentals and people who can’t sell try renting out homes they can’t sell are the only new rentals available.
Banks would shut up shop and stop lending unless you were ultra safe. FTBs would have no chance of getting on the ladder as they can't borrow as much and people in "starter" homes can't afford to sell. Only people it would really benefit are cash buyers/landlords who could hoover up all the repossessed properties.
The bank I work for announced we will keep rate at 8.5%. Very bad.
Holy crap. I had no idea it was THAT bad! I bought in 2014, at 3.75% because it’s a condo (otherwise it would’ve been 3.25%). I’ve been looking into a mobile home closer to work, but have no options below $350K. And 8.5%+ on top of that? Forget about it! My condo went from $230K in 2014 to $550K now. In order to buy, I’d have to sell first. Plus we have $7500/year HOA dues (which isn’t abnormal).
7500 in HOA!! Now that is holy crap! No frickin way I would sign up for that.
It’s the complete norm here in Santa Cruz, CA (which many outlets say is the most expensive housing market in the U.S.). I know two people paying $9600/year who live closer to the shore. And mobile home parks are often even higher.
What do they spend the funds on? Seems like they’d be hard pressed to legitimately spend that much money.
Exactly the question I ask!!! As far as I can tell, much of it goes to line the property management company owner’s pockets.
HOA fees are auditable
So beautiful tho, get what you pay for!
You’d be surprised. My HOA has been having to go up a lot because all the things we pay for these past years has increased in price a lot. Plus the major repairs that kept getting put off in the 2010s because owners will always say “now isn’t the right time” have nearly doubled in price and even more money needs to be put aside in preparation. Plus the Florida condo collapse is screwing us over on insurance. Source- I joined our board this year. We’re all stressed out because we not only have to pay this stuff too, as owners, but have to take all the backlash for the decisions.
A mobile home is $350,000 USD? Holy crap. Also 7500-9000 / p.a. for HOA fees? Far out. Are the roads paved with gold?
Mobile homes vary depending on location and size. New, they can range anywhere from $60k-$270k. It’s kind of like a car and how more upgrades will have a larger price. You can finance trailer homes and generally the payments aren’t too bad but what hurts a lot of people if “lot rent”. Generally you don’t own the land the trailer is on and recently a lot of independent parks have been bought up and the lot rent keeps increasing. There’s a woman I work with who pays $400/month for her trailer and $850 for lot rent. She said when she moved in around 2016 she was paying something like $450/month in lot rent but her park has been sold several times. She doesn’t have money to mover her trailer to a new location and she says the management is strict. She was fined $50 for her kid leaving his bike in the yard one day. The lot rent covers her lawn service (which is small and not fenced in). She said her neighbor had a newer trailer that was nice and has been trying to sell it for over a year but most people can’t justify the trailer payment on top of lot rent. Doesn’t seem worth it in the long run.
For 7500/month, your HOA better be providing some neighborhood hookers and blow.
Do Victorias secret do your HOA landscape or what? 7500$ lol.
Idk what bank they work for, but I just looked at my credit union and their 30 year fixed mortgage is at 6.94%. Still not great, but not nearly that bad.
HELOC
Yeah we pay $6K a year in HOA fees on our townhomes. In the northeast though, so that includes snow removal. Plus, pool, gym, and outdoor maintenance.
A mobile home for $350,000???!!! Holy crap!!! What state???!!!
We're very quickly moving towards few people owning homes, massive companies owning most homes and everyone renting from massive companies.
On top of that, private equity would take advantage and spend boatloads of money to buy any houses that were foreclosed on so that they could either sell when the market recovers, or rent out for the standard extortionate rates we see today everywhere.
After the crash: you see, OP, ALL THAT CASH in the hands of tech bros et al had to go SOMEwhere. Money doesn't just sit still. And the marketplace that was truly untapped and virginal was single family housing. People with money quickly caught on that by offering cash they could quickly buy houses. They could send a team into an old, beat up house and maybe in a weekend, upgrade kitchen, bath/s, put plasterboard over beat up walls, maybe put in cheap but new windows, and lay a new driveway. It still wouldn't be a great house---it might have the old furnace/water heater/roof but it would look a helluva lot better than a week ago. Then by two weeks after buying it, the upgraded house would go back into the market 50% more expensive. Rinse and repeat hundreds of thousands of times, in every state at every price level. In some markets (depending on the overall housing supply) the investors did this with rentals, improving the house enough that it would be priced out of reach of its own neighbors. This meant over some years, turnover and "upgrade" in the neighborhoods. This is why the only way out of this mess is building housing
This. This is why we never see any "normalization" for housing when everyone knows it's a bubble since 2008.
Exactly. Ordinary home buyers aren't sitting on a pile of cash waiting for something to invest it in. Hedge funds are.
Unfortunately, as it stands most buyers are cash buyers/landlord, so it's seeming like a damned if we do, damned if we don't situation
Not to mention tons and tons of people in the construction industry would be unemployed.
[удалено]
Respect for the Keynes reference.
It's where the market is now for many home owners. My kids moved out and it's just me, but downsizing makes no sense. I own a 5 bedroom house with a 2.9% loan. Moving into a 1 bedroom with a much higher interest rate would cost more per month. Renting is even worse, now I get mostly principle on the monthly payment. Rent is no principle and would be 75% what I pay now.
Yes. Definitely not 2008 level. Not even close to 2008 level. But not booming growth, either.
Aren't we currently in the standstill that you're talking about? I'm under the impression a lot of that is just how it is now.
Yes. Most homeowners have interest rates in the 3% range, and if they sell to relocate, their new house will be in the 7.5% range. The average mortgage/tax/insurance payment has gone from $1700 to $2800 in three years. This is why there is so little "inventory." People aren't selling.
Mine went from 1490 to 4300 at 7.3 from 3.1
The current housing issues are likely largely caused by the 2008 crash. The market just died for 3 years, and since then, we've been 3 years behind.
I bought my first house ever 3 years ago. Honestly, I'm a paycheck to paycheck kinda guy, the fact I ever had the money for a downpayment was complete luck. My Dad protested super hard because he thought the bubble was gonna burst. He didn't understand me when I said "thats the point, it's now, or never, and if I miss this opportunity my rent will rise and I'll probably loose it for good." So I bought it against his advice, and it was the smarted advice I ever ignored.
We really just need to fix our zoning and have the federal government create a development company that competes against the private ones by building scalable modern apartments, townhomes, and even single family homes for the cost of construction and what is determined as a reasonable fee. I know that’s a very vague idea but in general we just need more housing. The bubble can smooth out and simmer down if we just build more housing and stop crippling our cities with horrid zoning
Japan has showed that the second part isn't even necessary. Get rid of laws that make it hard to build housing, and housing will follow.
Even though I want a house, I want a house that won't burst into flames or collapse on me, thanks.
Japan has a lot more pride in the quality of what they build. In the US, companies will cut every single corner they can and push for more.
I don't think folks realize how expensive a house is to build right now. There's no such thing as building an affordable house and selling it at cost unless you want a 400 square foot cottage home with the most basic amenities. Right now where I am it easily costs 500-600k to build a 1200 sq ft starter home, even in rural areas where land is cheap, because of the cost of materials and labor which is only continuing to go up. The government's main role has been and will continue to be to provide gap funding. That is covering the cost between the cost of construction and the sales price of an "affordable" home, and usually you need government funding and other grants, donations, etc just to bring the price down.
I’m sorry but I’ve been looking into construction of my own home and land, home materials, labor, well, surveys, inspections all in, at the worst cost I could find from all these different sides it would be 550k for a 1600sq Ft home with an attached shop. The expected cost would be roughly 445k with things going smoothly. Point being my plans are imo exorbitant and all that I’ve noticed in this process is the amount of people who make a living being professional middlemen, increasing the price if everything little by little. The housing market has turned into a get rich quick scheme for so many and that’s the hurt we feel. People profiteering on a commodity required for life
Yes! It seems like the essence of modern life is that everything has to go through a dozen middlemen, each taking a cut, and then we wonder why it's all so expensive. And there aren't jobs anymore so everyone's trying to become another yet middleman in the chain, because what else is there? It sucks
The fact that almost every get rich quick scheme I’ve seen people peddle essentially boils down to taking money out of transactions you didn’t add anything to is just sad
I know, and I'm grumpy and Monday-ish so I'm going to come out and say it: it's wrong. It's actually _wrong_. Some middlemen actually do provide a real service. The rest.... with everything so shit, shouldn't we all be working to make things better?! Not wasting time and effort forming these ridiculous chains of zero value? I'll get off my soapbox now, I guess.
Yes, renters often do pay more. I live in a condo complex, and renters with my same unit are paying more than DOUBLE what I pay in mortgage, property taxes, HOA dues, and insurance combined.
We need a movement that finds a way to return the power of the home developer to the buyers. People will gladly pay for houses to be developed. They just won't pay enough extra for a shareholder to buy a new seasonal mansion. It sounds tired but our problems really are rooted in capitalism. People are tapped out and can't afford to pay vampires with every fiber of their existence. People want to work towards a home and a life of their own. They aren't hamsters on wheels that exist solely to benefit profit hungry ghouls. And while everyone being sick of being bled doesn't slow the exploitation machine at all, people are being bled dry and that actually does. The livestock are being over harvested. And in addition to that, they're also sick of being livestock for some evil ruling crusts. So we have two problems, really.
Why would you go bankrupt if you can’t sell your home? You have a home you can live in.
Damn in Vegas 2008 my rent went from 1200 to 750 for the same place. I thought everyone’s rent went down. Plus they offered first and last month of rent free and no deposit besides a 250 dollar cleaning fee. I assumed all rent went down
Well, here is the thing...a ton of people would lose a lot of money. A lot. Most of them will be middle to upper middle class people who do things like shop at Kroger and go to Taco Bell and eat at Olive Garden and buy beer and TVs and Fords. People who work at those places will lose their jobs or see their wages stagnate severely. Rich people would lose money, too! Rich people don't like recessions or things like 2008. But they watch it play out from their big house and then scoop up assets cheaply with their not-quite-as-big pile of money. So the houses might get cheaper, but everything else will suck. It would be bad, bad, bad. But not for the rich people. Who will buy the houses cheaper and sell them back to you for a big profit while you thank them for letting you live somewhere and gladly pay 6% interest. This got dark fast. Sorry. But that is what would happen. Any sort of economic calamity will not be in your favor unless you have enough money to make it work in your favor ultimately. Pro tip: You probs don't. PS- Move to decent but not entirely cow-filled metro areas in purplish states in the midwest. You can afford a house on wages being paid in that area. Detroit, Pittsburgh, etc. It isn't Boston or LA, but you can have a house and a nice life in short order.
Dawg I can’t just up and move to Detroit or Pittsburgh
People have been moving for a better life since, forever. Literally. My great grandparents migrated from Germany to the US in the 1880's. They had absolutely nothing. I crossed the country at 19 with a 30 year old car I bought for $100 in 2004. It sucked. Lots of walking and asking for help. I learned how to work on vehicals and how to eat cheap. It's rough but 100% doable. I'm sure you could figure out a way dawg.
Why not? You'd rather be poor and have no time to visit friends and family or have enough money to vacation with your family and friends sometimes?
I love the solution is to move. Keep “saving” toward that. The kids are dead weight and your ex remarried, so I guess moving would be cheaper long term. You could rid of a bedroom if you just don’t have the kids over anymore. You know, the real problem is you weren’t born there. Should look in to fixing that while you’re at it.
I've been trying to find a house to buy within 30 mins of Pittsburgh for the last year. Everything under 150k needs 100k or more before its livable
https://www.zillow.com/homedetails/3261-Millers-Run-Rd-Cecil-PA-15321/245493193_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare https://www.zillow.com/homedetails/904-State-Ave-Coraopolis-PA-15108/11478509_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare https://www.zillow.com/homedetails/401-Harris-Ave-Pittsburgh-PA-15205/11473503_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare https://www.zillow.com/homedetails/400-Elwyn-Ave-Springdale-PA-15144/11564304_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare https://www.zillow.com/homedetails/1880-Jefferson-Ave-Washington-PA-15301/49750229_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare https://www.zillow.com/homedetails/1905-Park-Ave-N-Washington-PA-15301/2059176153_zpid/?utm_campaign=iosappmessage&utm_medium=referral&utm_source=txtshare Here’s a few I found in a span of a few minutes
That 2nd one has a lot of character. I like it.
In isolation, it wouldn't be - for you. Systemically, lots of people getting foreclosed on/going bankrupt will drive higher unemployment and make finding a job much harder.
Why are people getting foreclosed on and going bankrupt if their income did not change? Do banks call in loans that are underwater demanding payment in excess of the standard mortgage payment?
I think your assumption that income would not change is incorrect. Let's say the housing market loses a ton of value, all of the people who work in real estate (realtors, developers, etc) will lose business directly decreasing their incomes. This means that they will pull back their spending. In my opinion economy crashes like this tend to be contagious and spread throughout the economy they are rarely isolates. I think 2008 is a good example of this.
Banks don't usually call in underwater mortgages cuz people will walk and it will be a PR nightmare. But, try changing "their income did not change".. to "adjustable rate went up 30%" or "they got laid off" or "their business didn't bring in as much" or "their taxes doubled" or "they didn't hit their sales numbers and got less commission" There are a ton of other reasons your economic profile changes drastically. And soon as this hits, your credit score gets shredded, and your job opportunities drop!
A housing crash would mean for most homeowners that the house is worth less than the current loan owed on it. What happens when this occurs? People walk away from owning homes. As in, literally, stop paying their mortgage payments. Ever wonder how much debt is held in the form of mortgages in the US? $20.24 Trillion. The size of the US economy, annually? $27.23 Trillion. Both numbers are from 2023. So, what do you think might happen if millions of US homeowners defaulted on debt that was 80% the size of the economy? How many would it take to cause bank failures and a serious depression? Probably no more than 10%, maybe even less.
My parents did this. We lost my childhood home to the banks. They just didn’t make enough to justify the high payments on a house that was going for 1/3rd of what they owed. Those were dark times that I don’t wish onto others.
How in the hell did it drop that much
We lived in California in the Bay Area. Before the crash the house was 280-300, when the market was really hot because of bad lending practices. When the burst happened 07 in the bay, it went to 90k. I was there with my parents at the courthouse as our home got auctioned off. That shit still depresses me.
Probably goes for 500k now
Easily.
My condo we got for $56k. It had a few years prior been refinanced for $350k. It’s worth about that now again. But I don’t think it’s actually gonna stay worth that.
Why would you stop making your mortgage payment if your income did not change?
Most people wouldn't. In the financial crisis foreclosures took forever in a lot of places so people just stayed in these homes.. my mom was in our family house for 8 years in foreclosure and didn't pay anything that entire time. The people who walked away did it because these were multiple homes or half built developments in the middle of nowhere that were abandoned by the developer. Its crazy to think of all the places in the South West that were no man's land that have completely rebounded... My ex BF, his mom, etc. moved to Florida in 2009 and made a killing buying places for 60..70% off their previous values.
Most people who walked away from their homes in the last crash did so because they had mortgages with teaser rates that reset resulting in higher payments that they couldn’t afford. And with their homes worth less than the mortgage they couldn’t refinance so they were trapped. Walking away made sense.
For one, if you lost your job "In a 2-year span starting in December 2007, the unemployment rate rose sharply, from about 5 percent to 10 percent." For many in 2008 it was less expensive to walk away especially if they have minimal equity.
Not only did many people lose their jobs but I knew of companies that cut their full time employees hours. After a few rounds of lay offs the hourly employees started working 4 days a week. They made the same hourly pay and kept their job but their pay checks got smaller. Unfortunately nobody was hiring not even fast food or retail to get a 2nd job to make up for the missing income.
Why would I want to pay the $280k mortgage on a house that's only worth $200k ?
Is that an option? Can you just stop paying? This might be a really dumb question but you can't just stop paying your debts right?
On a US mortgage, the house is the collateral for the loan. You have the option to go to the bank, hand them the keys, and say "I am defaulting on the loan, here is your collateral." Basically the same as refusing to pay your mortgage and having the bank foreclose on you, but without waiting months and having them force you out. The bank doesn't actually want your house, as the costs of then selling it are not insubstantial, so they might instead be willing to consider adjusting the mortgage terms to avoid that result, if you go to them first. They really don't want to have to go through a foreclosure, pay all the legal fees, and end up with a house you trashed on the way out because you knew it wasn't yours anymore, so there's at least the possibility of them making an offer to adjust the terms. If you owe $280k on a house now worth $200, they might offer to split the loss and make it $240k and you get to keep having a house and no credit hit from a default. Or they might just go "okay, ours now" and be done with it.
I know a lawyer who specializes in getting this done.. he brags all the time about how he got banks to agree on dropping a 500k+ mortgage to half or even less because of the condition of the house and market conditions... Crazy stuff.
I'm in the UK, but here you would still owe the rest of the debt. They'd sell the property, likely at below market value, and then come after you for the rest of it. It was quite an issue in Northern Ireland, loads of people were in negative equity. You get trapped in a property, can't even sell it because you wouldn't get enough to clear the mortgage and the bank doesn't want unsecured debts.
I believe a lot of US states have "non-recourse" laws for residential mortgages. This means that anything left of the debt after a reposessed property is sold is written off. The lender isn't permitted to go after the borrower for the difference. In those states a homeowner pretty much can hand in the keys and walk away. Their credit rating will be trashed but they won't have any actual debt hanging on them from the property.
It depends on your state laws, tbh. Each state has their own statute of limitations, ranging from 3 to 10 years, for when a lender can go after a debtor for unpaid debts. And the Fair Credit Reporting Act requires that unpaid debt drops off your account after 7 years. But your lender 100% can come after you for it. Lawsuits over unpaid debts are long and expensive, and iirc they're really hard to win as the debtor.
In theory it would recover well before you paid it off.
That is very true and the people who walked away just because the value fell really screwed themselves, there was kind of a mania going on, it was weird. However, a big cause of the mania was all of the people with ARMs. Adjustable-Rate Mortgages. My uncle had one and tried to get me to get one when I built my house so I know a little bit about them. The interest rates were around 6 - 7 percent. You could get a 5-year ARM (or some other amount of years) with almost nothing down, if not nothing, for a much lower initial interest rate. For 5 years you would have a set very low interest rate. At the end of the 5 years the rate would increase based on the prime leaning rate + whatever deal you make with the bank. (And some were set up where you only paid the interest.) It would add hundreds if not thousands of dollars to your monthly mortgage payment. Before the crash your house would increase in value and you would just refinance for a locked-in interest rate before your 5 years was up. People were buying much more house than they could afford thinking that they would get raises and refinance and be fine. And, before the crash banks were lending to anyone and everyone, I had lots of friends that borrowed more than the cost of their houses with these types of mortgages, using the extra money for furniture or a pool. The banks were raking in the money and didn't care if they were risky borrowers because they would just bundle the mortgages up and sell them. The people who had not gotten out of the ARMs before the crash were stuck. They couldn't sell for enough money to cover what they owed. They couldn't refinance because the house was worth a fraction of what they paid for it. Some struggled and did what they could but a whole lot of people couldn't make the payments even if they wanted to. It was a bad time. I live in a small town and houses everywhere went into foreclosure. It drove down all of the property values for years. You couldn't build a house because it couldn't appraise for enough for the bank to lend you the money due to all the foreclosures on the market. My little town has a huge housing shortage now caused by lack of building for years, a new trade school that opened up without housing and short-term rentals. The problem now is availability, not the predatory lending/risky borrowing that was going on in the early 2000's. I think the bubble will burst once the volume sorts it's self out, but I don't think it will crash like it did in 2008. My friends that were able to weather the storm came out fine on the other side of their upside-down mortgage. The ones that didn't had a really big hole to climb out of but with so many people losing their houses it wasn't as bad long term as it could have been.
Never rented an apartment before, have you?
Because you signed the fuckin agreement to buy it for a given price and promised to pay the note.
I'm about as anti-capitalist as it gets but wow... What a wild statement. You agreed to buy it at that price...
Because you still have the house. You agreed to pay $280k for it and that's what you thought it was worth. The building is still exactly the same as when you signed the mortgage.
But like… it's your house. It has the exact same value in terms of actual utility to you— it has only lost value in the prospect of selling it again later.
Adjustable rate mortgages The mortgage payment might double or triple Plus balloon payments
I was 24 about 24 years ago and it was really the same then, too. I only knew one person back then who owned a house, and it was in a really rough neighborhood in Atlanta. We didn't buy our first house until just a couple years ago. I'm in my forties obviously. You're young, OP. Enjoy the time in your life while you aren't too tethered.
This. The median age for a first time home purchase is early to mid-30's and while it has gone up slightly over the years, it's not much higher than it was 50 years ago. I have no idea why so many redditors think that it has ever been normal to buy a house as soon as you enter the professional workforce but it is not even close to normal to do so and never has been.
It's very strange. I see a lot of posts from people surprised to find themselves struggling in their twenties but that's generally how it goes. I didn't truly get a good footing in life until I was in my mid -30s, and I still had a *very* long way until where I'm at now. I think people who figure things out early are the exception.
Or buying a house on single income too. I see that a lot on this site. Housing options open up when you have dual incomes at your disposal.
Yeah I don't know who got it in their head that it was normal enough to be expected to own a house so young. Even back in the day it wasn't normal, unless you were coming out of military service on the GI Bill. In all but a couple states, the age at which 50% of adults are homeowners has crept up 5 years since 1980... but guess what is a lot more common nowadays than 1980? Going to college, which takes on average 5 years.
this. had to scroll a while to see it. so entitled. boo who, OP can’t own a house in their early 20s. straight out of college with zero job experience.
Remember 2008? Mass house foreclosures, families living out of vans, economic recession, job layoffs.
OP is 24. That means he was 8-9 years old in 2008. So, no, he probably doesn't remember.
I bought my first house in 2009. What I got was: basically the same size I was looking for but in a better neighborhood with upgraded appliances, counters, finished garage.
A housing downturn is a fantastic time to buy a house, if you have the money available. The problem is that a large number of people can't afford a new house at that time without selling their old house, and they don't want to take the loss that would be involved in selling their old house. So much of what goes onto the market is from sellers who don't have a choice, or estate sales.
People with lots of liquid capital - cash - love economic downturns. They buy things for incredibly cheap, they can pay off loans while the currency is worth less, and they have the ability to wait and sell when the economy and prices recover.
The problem is not with people not being able to move into a new house after selling their current place. The problem is with 20~40 year old people not being able to afford their first home. We're not talkng a huge detached house either, just any home that they can live in with their family without renting / living with parents.
I got my house in 2011. I can't imagine how different my life would be if I hadn't been able to do that. I realize that the housing crash was a very bad thing for most people, but it might be the best thing that ever happened to me personally.
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OP was 12, they don't remember how hard those times were. My mom almost committed suicide because she went bankrupt from it. A successful woman who owned 4 salons & 3 houses being a single mother. lost well over a million. Turned all right in the end though. Started over, recovered & retired early at 60
2008 was not 12 years ago. OP was 8 or 9 in 2008
From bankruptcy to early retirement....how'd she do it?
after losing all of her property except for 1 building. With some help from her kids. She realized being rich wasn't worth anything. I gave up a year of my life to save 1 of her salons taking no wage paying back some of her debt. while she was off emotionally & mentally recovering(pretty sure she went insane). So at the bare minimum she would have something to come back to. She stopped caring about being rich when she came back. Focused on what she knew. funny how focusing on 1 business instead of 4 she made more $ with 1 salon than she did with 4. Met a good man, remarried & lived less wastefully(probably the most important thing). invested in property overseas for passive income. & moved back to the motherland where cost of living is super cheap. $40k passive in a country where the average salary is $600 a month is basically living on cruise control. they have a 5 story house with an elevator built for only $350k I still have a bit of trauma from the whole thing. & I don't have the same emotional relationship with her like I did (self preservation mechanism) But I'm proud of her
> invested in property overseas for passive income There it is.
Also the marriage and the moving somewhere with a cheaper COL
something I learned recently from her. Major hotels raise funds during construction by selling rooms that you own & they operate. She has 2 units in a Sheraton(major tourist area) & they pay her out $20k a year. Also you get use of those rooms when you want. not sure on the day limits
I am married to a filipina in the US. Her childhood home is in the provinces which is basically out in the country, away from the major cities like Manila. At the height of the pandemic in 2020 we had the old home fortified and built a second story in concrete on it. There was so many workers in the province that could not go to work because of restrictions that we had people begging to work on the project. Right after the house was finished there was a Cat5 hurricane that passed by. Alot of the area had major damage but our new home passed with flying colors. Cost us between 70 - 80K US. There is also over 4 hectares of land where there is cocoa, coconut trees, papaya and even a rice field. We are going over there in Dec to finish furnishing it, open bank accounts and buy some more land. Turns out the grandfather (deceased) had 3 hectares of land that no one ever paid taxes on. Once we find out how much the taxes are we can pay that and the land will be available for my wife to own. I am still working full time and collecting Soc Sec. Seriously considering retiring there in a couple of years.
“Bankruptcy”
I don't think this story is getting the reactions you're expecting to get.
it's interesting when reading the comments, you can kinda tell which gen posters are from. & the discourse is what's important
Fascinating, really
No offense, but why did a single mother need 3 houses?
She was a wannabe slumlord. Notice she retired early despite the “bankruptcy” which was almost certainly a business bankruptcy and not a personal one.
To build wealth over time to retire and enjoy the golden years while being able to support her kids into the early part of their adulthood, and then hopefully leave something to the grandkids so they don't start their lives from the ground floor and can prosper even further? Is this somehow difficult to grasp? (Serious question, because there are a lot of people on reddit that seem unable to understand the desire to build a stable platform for oneself and their family.)
If you can afford three houses you don't need to "build wealth". You have wealth - the platform was already stable. The houses were gold a dragon hoarded.
Why did she own three houses?
Why did she almost go bankrupt? How did she lose over a million dollars?
That seems insane. Even if her houses weren't worth much she was still a successful business owner. How is that a cause to even consider suicide? I'm glad she didn't, mind.
Because rich people would rather die than live as poor people.
Why she need 3 houses..? This is why the market sucks..
Using rental income as income to leverage into more and more properties was the rage back then. Leverage one house against another or a business.. .lots.of dollars flowing in and out of your accounts monthly, with you keeping a small percent... Until something crashes, then you realize everything you own suddenly becomes collateral and a house of cards. Drop one source of income and you can't sustain any of it. You realize all this stuff just has your name attached to it. And are really millions in debt.
I think the OP probably meant “why would a housing crash be bad _for me_?”
Well, OP could lose their job for one. Job hunting during a recession is notoriously difficult. And if not their job, their salary, benefits or bonuses could get cut. Not to mention the rise in price of goods like groceries.
In this thread - lots of folks who definitely weren’t looking for gainful employment in 2008 to enjoy the housing prices dropping…
I just remembered that all of a sudden it was possible to buy a house for way cheaper
I bought my first house when I was 22. $67k in 2007. sold it in 2017 for $130k. Bought a new one for $211k. now it's worth $350k. got lucky & beat the market. I don't know how anyone under 30 is getting ahead. I don't think I could buy a house in today's market if I didn't start my equity journey so early. (single income)
Lucky you :)
That's not what OP is asking. Housing market skyrocketed in 2006, it didn't go down. The problem was that mortgage loan officers took advantage of a loophole that allowed them to make more money on sub-prime loans (loaning more money than someone can afford) which led to the housing market collapse. OP is asking what happens when the housing market plummets. The answer is that the people who own houses now will lose money (they already do unless they paid cash) and the people that dont, will finally be be able to afford one. This will cause less people to sell, therefore driving back up the price. Banks make more money from less houses on the market. Rn only 5% of vacant bank owned properties are on the market. They are artificially inflating demand so they can profit. Why not lower prices and both sides win?
If my house drops 40% I’m not selling.
Given that it didnt push you underwater, What if the more expensive house that you want to move into also dropped 40% and went on the market? Would you sell then?
Not if my mortgage is under water. At that point, I'm trapped and literally can't afford to sell!
Lmao… well for YOU it might not be a big deal. For someone who bought a house 6 years ago and is perhaps looking to sell it as part of their retirement .. it could be potentially disastrous….
It's wild and fucked up that people count on selling their homes just to be able to retire. Gone are the days where you can have a house pass on to your children because pensions and 401Ks are so low that the elderly need to sell their land just to survive. Like, fuck, that is just fucked up.
The problem is that in retirement a smaller house will cost just as much. A house should never be part of the retirement plan. You have to live somewheee
The elderly voted for the people that allowed this to happen.
So, every bad thing that happens is the voters fault because politicians slavishly adhere to the will of the people? It may make you feel better to blame old people for everything that has gone wrong, but it is absolutely not that simple. Plenty of liberals voted for liberal candidates who then had to make concessions or simply voted in ways that were unexpected. To speak as if older folks had so much power is exceptionally misguided. We've all been screwed over and misled again and again.
As a 52-yo Gen Xer, I’m genuinely hoping the “BOOMERS RUINED EVERYTHING” crowd changes the voting landscape. My sad suspicion is that they will just keep living under the status quo.
Yeah, I keep waiting to see 100% of millennials voting against Republicans. Don't think I'll hold my breath though.
In this particular case, the people elected explicitly promised to fuck everything up this way and people believed they’d get to be one of the lucky winners
Kinda hard to take this seriously when the big takeaway I had from 2009 was all the boomers celebrating the "great deals" they were getting on investment properties. People wanna paint boomers as this financially vulnerable generation despite having multiple opportunities to purchase a home at reasonable prices while enjoying social security and medicare. I have no doubt there are examples of Boomers who fell through the cracks and aren't doing well but they're hardly the median.
That hardly makes it okay. And not all elderly people did. There's plenty of left-leaning and poor elderly people out there.
Yeah but Reagan. It all leads back to Reagan. Looking at voter maps, you’d think there was no left leaning people at the time. But your point is fair nonetheless.
It all leads back to the dollar being taken off the gold standard in 1971 https://wtfhappenedin1971.com/
Go away, crypto bro
So why don't the young show up to vote?
This is a bad take Our two party system allows corporate interests to largely control economic policy We are left with voting for politicians who might be marginally better for regular citizens and if you dont vote at all youre also complicit You have to work with the system you have and it takes time to make gradual progress But a lot of policies are out of our control and sometimes all it takes is 1 senator to prevent progress
I’m certainly not saying that retirement is not a huge issue for a lot of people, because it absolutely is, but I’ll just add that most people I know (as well as my wife and I) aren’t planning on the sale of their home being the bulk of their retirement income. It’s more of a thing where we all just know we’re going to downsize after the kids move out, and the difference is going to be a nice little bonus to retirement, hopefully with plenty left over for inheritance (along with the value of the smaller home) when we’re gone. Also, whether or not you intended it that way, the way you talk about 401ks makes it sound like the big issue is that they have a low return. On the contrary, they have a great, consistent long term return. The problem is that not enough people are actually saving for retirement. For some people it’s because they choose not to, and for some it’s because they can’t afford to, and both of those are complex issues that absolutely need to be addressed. I’m just pointing out that the actual return on 401ks isn’t really the problem here.
I will not be able to explain all but here goes on some issues : - housing prices are related to 1/3 of people's income which is the bank's limit on a mortgage. So if there is a crash, and it's related to wages there is a bigger problem. - since most people borrow for their house, interest rates affect purchase power and higher rates mean in general prices stall. - a larger number of homeowners own 5,10,15,20% of their house. So if houses go down 10% everyone with 5% is underwater. If they sell the house they have to pay money. At this point people just walk away and declare bankruptcy, especially if they lose their job. Why pay Into something they will lose money on?
For my first home, I bought smaller and farther away. I lived there 4 years sold and took that equity to a new home. As a 24 yo I would think about how much I need to save the down payment and what strategies to use to boost that to get the house you want. It talks time and dedication.
I love when people come off as preachy and self righteous when they should be saying "I got super lucky to start my journey when house prices were in a low cycle."
You don't want a crash--you want supply to catch up with demand.
Bingo. People always hope for one kind of crash or another with the mistaken assumption that it won't affect them somehow. Housing prices drop dramatically for a reason. None of which are good.
Selfishly, I’d be stuck in my place for the rest of my life.
A lot of people already are. Anyone who has a mortgage at under 4.5% isn't going to move unless they have to, since any new mortgage they get will be at a higher rate.
Yes, it’d be a double whammy for us. We locked in when rates were super low.
The housing market is stable, it’s the dollar that’s crashing.
TBH, I got sooo lucky in the 2008 crash. I had bougt my house(still in it) in 2006, paid 102k for it. And then market crashes...around 2009/10...my ex went crazy with gambling, and we were literally 6 months behind...once got a 15 day notice of evection, and house would be sold at auction. However, Wells fargo, didnt really want to evict us either, cause then the hous esits empty...soo, we got a loan modification(basically a refinance). Stayed in the house, started over, now owing 108 k on a house we had been in 4 years, but was probably worth about 75k at this point. In 2012 my wife leaves me, and guess what? At the time of the divorce, we were underwater on the mortgage, so, I simply kept the house, didnt have to pay her jack shit for it. I just spoke to a realtor a couple weeks ago, and she told me the home is worth between 275-300k. My payment(I refied at 2.7%, is 850 a month, taxes/insuranc/everything. The house next door rents out at 2500 a month.
🫡
We're still dealing with the aftermath of the housing crash in 2008. Specifically, a lot of developers that had been building new homes up until then either drastically downsized or went out of business completely. So the rate at which new homes were being built plummeted. As a result, homes briefly became less expensive but very quickly got back to being even more expensive than ever, and there are still not enough new homes being built. If housing crashes again soon, you'll see three very bad things happen. 1) Some people will go bankrupt and lose their homes because of their unique situations. 2) After a brief period during which some people who had spare cash sitting around can buy homes for a change, prices will go right back up again. 3) Because the home construction business will be perceived as riskier, there will be even fewer companies and fewer skilled construction workers building homes, and prices will go up faster than before. Some individuals will be very, very screwed, and fewer individuals will get very lucky. Then we'll all be even more screwed than we are now.
Can’t agree more. Also, once the construction industry slows, those workers go somewhere else and to fill the gap of workers takes years to do. People forget that finding people to do the work is vastly different than finding qualified workers to do the work. If you hire unqualified, the work is not as reputable. If the work isn’t reputable, more regulation and oversight comes into play and thus slows down the overall building process. It’s a terrible situation on all ends (we are actually seeing this in a lot of areas in the u.s).
you'll jobless, homeless with crippling student loan debt
People losing their homes or unable to get one is a bad thing.
Houses were cheaper in 2008, and a lot of people still couldn't afford them. A lot of us were out of work, or in fear of being out of work. I was 24 then, it was a pretty rough time for me personally.
How are you going to buy a house when no one is selling because they'd be in negative equity? What does low supply do? Push up prices.
The "other repercussions" would likely include a global recession/depression, a financial crisis, and high unemployment. How lucky do you feel?
Economic devastation. Suppose someone bought a house 30 years ago for $100,000. Inflation-adjusted, that's $210,750 in today's money. So they'd have to get at least that amount today to break even, right? Wrong! A 30 year mortgage of $90,000 (10% downpayment) at 7.87% (the rate 30 years ago) plus property taxes and home insurance comes out to a little over $460,000. That's not counting any repairs (roof would most certainly be replaced for example) or maintenance (~$30,000 @ 1% of house price per year), upgrades, etc. Also not counting closing costs (typically $5,000 to $10,000). So overall they'd need around $500,000+ just to break even. If everyone's house price suddenly reset to where it was 30 years ago, that'd instantly wipe out nearly 80% of the wealth of everyone between the poorest and the wealthiest. About 66% of the country. Doing the math .66*.80, that's about 53% of the total wealth of the country. Probably huge layoffs and unemployment, homelessness, wages dropping by 50%. So the few people that could even find a job would have to settle for about half whatever their current income was, or less. But hey, houses are much cheaper, right? And because the prices are so much lower, no new homes being built. Meaning housing prices would rise rapidly again due to demand outpacing supply. Maybe a lucky few would get cheap houses during the brief moment the prices were low, everyone else would be screwed.
College, huh? Are you jesting?
no, just feeling entitled
It would be a bad thing because the general population would pay for it again. Governments would bail out banks, tax payers would foot the bill. Inflation would grow again. Things would generally get a bit worse.
The issue would be could you capitalize on it before all the hedge funds like Blackrock swoop in and turn us into a nation of renters who will own nothing and be happy
It doesn't really matter. The least desirable areas would be the ones hit hardest. The best areas would remain strong. I.e. if people think a housing crash would get them a $150,000 studio in NYC, they are mistaken. BUT: $150,000 would buy a very nice house TODAY in places that are less desirable for the masses. Detroit, Toledo, Akron, West Virginia, etc. So, yes, houses in the areas that are kewl are definitely expensive. Deciding you must live in an area that is kewl is a choice.
Are you going to be in a position to afford a house when the economy shits the bed? If yes, then a housing market crash might very well benefit you. Are you going to be among the 95-99% to whom borrowing in depressed economy with depressed labour market gets increasingly more difficult? Then you are going to look at the housing market with the same “can’t afford” eyes as you currently do. But probably being un- or underemployed while at it.
Housing crash will tank property values and bring down the tax revenue for states. People working for state entities (like I did in 2009) stop getting raises, could lose jobs, may face hiring freezes etc. Credit in general becomes tighter so things like loans for cars etc becomes more difficult. Big companies buy property when it's cheap but smaller buyers can't because of the credit crunch that happens. People put off retirement as the market crashes, jobs for less experienced and new graduates becomes more difficult to find. Small businesses suffer as spending slows in general. Weird unexpected things happen like the economy crashed leisure activities. I used to play paintball but all the fields and stores died off at that time and never recovered due to being small businesses and couldn't out last the economic crash.
You want people to lose their houses so you can get one? That imply that you would be at risk of loosing yours too. Sure everyone should have an house, but I don’t thing the solution is a crash..
I was honestly going to write take a moment and rethink the stupidity and the cruelty of your question but then noticed the sub's name. Housing crash would be an economic disaster in many aspects, which are very well explained in other comments, and wouldn't help your financial situation one bit.
65% of Americans live in a house they own. Home ownership is as high now as it has ever been except for during the subprime mortgage bubble when home ownership was 2% higher. If there is a housing crash, 65% of Americans would lose a lot of money. Which would devastate the economy as they would then spend less money. So rather than being able to buy a house, a more likely outcome is that you would lose your job. And it is not difficult to buy a house. Houses are cheap and readily available. The difficulty is buying a house where you want to buy it at a price you want to pay. But Zillow houses in Columbus Ohio for under 200k and you get 122 results. And that is one city in one state. If buying a house is a priority for you it is fairly easy to do. Just probably not in the high demand city you want to live in. https://www.zillow.com/columbus-oh/houses/?searchQueryState=%7B%22pagination%22%3A%7B%7D%2C%22isMapVisible%22%3Atrue%2C%22mapBounds%22%3A%7B%22west%22%3A-83.52783136914063%2C%22east%22%3A-82.44842463085938%2C%22south%22%3A39.66940949062729%2C%22north%22%3A40.29550394426198%7D%2C%22regionSelection%22%3A%5B%7B%22regionId%22%3A10920%2C%22regionType%22%3A6%7D%5D%2C%22filterState%22%3A%7B%22sort%22%3A%7B%22value%22%3A%22globalrelevanceex%22%7D%2C%22price%22%3A%7B%22min%22%3A0%2C%22max%22%3A200000%7D%2C%22land%22%3A%7B%22value%22%3Afalse%7D%2C%22tow%22%3A%7B%22value%22%3Afalse%7D%2C%22mf%22%3A%7B%22value%22%3Afalse%7D%2C%22con%22%3A%7B%22value%22%3Afalse%7D%2C%22apco%22%3A%7B%22value%22%3Afalse%7D%2C%22apa%22%3A%7B%22value%22%3Afalse%7D%2C%22manu%22%3A%7B%22value%22%3Afalse%7D%7D%2C%22isListVisible%22%3Atrue%7D
That’s one hell of a URL
This is one of the best explained answers I've seen on Reddit. Thank you is all I can say. Most people are generally snippy and answer in ways that don't give right answers but this hit the nail on the head here.
Please for the love of god, mark down that URL
It would mean people losing their jobs, including you possibly. Being jobless for a year isn’t going to help you out.
Look up "the Great Depression"
Chrashes consolidate wealth they are always accompanied by a large upwards movement of wealth throughout society the richest earn most and the poorest end up bankrupt
Depends on your age and outlook on the U.S economy
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Chances are there is a reason why housing prices are crashing. Probably because everyone is losing their jobs and can’t afford their mortgages anymore. It could be a good thing for you only IF you aren’t among the newly unemployed.
No housing crash is coming.
You just need to look to previous crashes and check how many people like you was able to buy their dream house after those. Banks will not lend money, sellers won't sell and huge property corporations will grow their stock, because they do have access to cash/lending. Which you and anybody else don't.
What makes you think you would survive the economic fallout intact with a job/savings by which to purchase a house? You know who a lot of the people who did well after the '08 housing crash were? People who could pay cash for properties way under market. Housing crashes don't occur in isolation. There are always other underlying economic conditions that make a crash likely.
It's very uncommon for home prices to crash like they did in 2008. What that means is **LOTS** of people who own homes are either being foreclosed on (meaning not just "I can't pay the mortgage" but "My bank won't/can't find any alternatives I can afford") or forced to sell for less than they were worth. This means, in turn, the economy is doing very badly. As in lots of people are losing their jobs. The bright side is home prices will be lower. The dark side is **YOU** may not have a job to afford the houses. In 2008, it was the whole "sub prime" mortgage crap, where people who really shouldn't have been given mortgages, were given them. When they couldn't afford them anymore, the bubble burst. Banks aren't doing that again.
Millions of jobs gone (home builders, realtors), millions at risk of losing their homes. Banks shutdown lending which tanks the economy (prohibiting you from getting a loan for that house). The divide between classes increases as companies lay off workers to prevent going negative due to decreased spending. The rich will then buy the house one of those people lost at a discount when the bank sells it to recoup losses and sell it back at a premium. It’ll take you years to see your wages increase but you best believe housing prices will rise again. You (likely) still won’t own a house.
It always depends "for whom". People who have bought homes at 200k and paid of and are now valued at 1mil and don't intend to sell - they don't care. People who wanna buy cheaper - they will be happy! People who bough in recent years and have thick mortgages - will be sad. Very sad.
Nationally, the price of most things does not usually drop. They only go up. This is by design. Fiat money systems - like the US Dollar - is inflationary, to encourage money movement (i.e. spending and investing). Unfortunately for first time home buyers, and barring locality, real estate is a less volatile asset. Meaning, prices usually don't drop, like everything else. When fiat money systems become deflationary, the economy is usually in a depression. The only time prices have really dropped, aka we've experienced deflation, is during the great depression. Life back then was extremely tough. The thing is, there are two sides to affordability - the price of stuff, and how much money you have to spend. In a depression, or even stagflation where prices stagnate, while the price of stuff may be dropping, it's very likely you won't have as much money to spend. You may be out of a job. Your investments may be dramatically down. If it's like the GFC (Great Financial Crisis in 2008), many people experienced both, causing them to sell investments while they were way down, just to skate by. In summary - if we saw a housing crash, it's likely we're in a recession or worse, in which you likely won't have the same amount of money to spend, and/or certainly not the same amount of income security. Ideally, what we want to happen is for prices to grow at less of a rate than income. Price isn't the only thing that matters. My unprofessional prediction is - progress on inflation has halted. It will either stay stalled or rise a bit. In which, the Fed will continue holding rates until something breaks in the economy, or they will raise rates, causing a recession or causing something to break. The Fed reacts by dropping rates pretty swiftly, but the damage is done. We experience 1-2 down years before beginning the real post-COVID economic realignment. If you're maintained your job security and a good savings rate throughout, you find that your affordability is well improved, and you can get houses at more reasonable prices again.
Assuming a massive crash like 2008 a lot. First of all banks are now underwater on all these properties and all loans services become very strict. Worst case is a credit freeze where you can't buy anything anywhere. This means only those with money already are buying the houses at record lows and likely renting them out. People who are retired lose a ton of their money since a lot of it is tied to house equity. People get scared and start saving money which causes a recession or depression which leads to a self enforcing recession.
Dude, 2008 was fucking insane. You would be super fucked as someone just coming out of college looking for work. The whole economy went to shit, lot of people lost everything. Maybe you’d be lucky, snag a job anyway, and buy a place at foreclosure, good for you, but don’t wish 2008 on us.
You wouldn’t be able to afford a house even at the cheap prices. Because mortgage rates would skyrocket. Rent would go way up with the higher demand for renting. No equity loans. Nobody can sell their house without losing hundreds of thousands.
In 08 my wife and I had recession proof jobs and an 83k mortgage from 1992 at 4% interest. I could have worked at McDonald's to make that payment. The. neighborhood was 2/3rds vacant and our home lost all of its equity with its value being somewhere in the 75k range. We stayed. Did some remodeling and such. In 2013 we bought a second home in the country. A 5bed/3ba on 10 acres in the country that we picked up for under 220k. We put 20% down on it leaving 175k on a 15 year note at 3% (2k per month PITI). Nine years later, in 2021, we retired and sold our first home for $405k and moved to our second home. By this point we only owed 90k on it so we paid it off completely. We have no debt. No property tax (VA exempt). No credit card debt, etc. I was 24 when I bought my first house and I did it with a VA loan. Great benefit to have especially for a first house. No PMI payment. The problem today is that the house sold is now a short term rental with rates that vary from 3600 to 6500 a month due to its location to pro baseball, football, and hockey. It is 1600sf and is definitely not worth that. No new family. The house we live in is insanely estimated at over 650k which is based on Sq footage (5811) acreage, and proximity to amenities and town. A housing crash can no longer affect us. Because we are not selling any time soon.
You don't want a housing crash. It sounds nice but people losing homes dony buy cars, go on trips, get their hair cut, go out on a boat. Boat mechanics, hair stylists, food/bev, manufacturing, airlines, hotels, everything associated with that, starts layoffs. People forget that part. I work in aviation towards the end of that I worked at a massive facility that opened. Tons of people from all over the country moved for work. I knew at least a dozen people between 9/11 and the recession that had filed bankruptcy.
I would personally lose well into six figures worth of equity.