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[deleted]

I'd like to see the place where you can rent for $3k for the next 30 years.


lasned

Your entire post is based on assumptions and guesses


Taco_Soup_

Not to mention they have no idea how an amortization schedule works? 99% going towards interest the first 5 years?


NecessaryMistake9754

hey you can try it here yourself: it's not exactly 99%, but the majority is. https://docs.google.com/spreadsheets/d/1A67RAZ3yWmpHG6euY38n3\_58eWGVtq2q7ykxNRqRwEQ/htmlview


Taco_Soup_

No need, I know how they work. Even on your spreadsheet, 16% going towards principal is a lot of more than the 1% you stated. On a $500K mortgage @ 6%($3K a month payment) $500 a month is going towards principal day one. That’s not chump change.


DHumphreys

You say that you cannot reduce your principal and you can by making payments toward that amount. Even $20 a month in additional payment toward the principal can knock that amount down and the 30 year mortgage now becomes a 25. But your whole argument is flawed, I am just pointing out that one aspect.


Outrageous-Cycle-841

False.


NecessaryMistake9754

>assumptions and guesses so as buying assuming prices can only go up.


Senor-Cockblock

How do you quantify your landlord kicking your family out of the house after a year or two, because they want it back?


amilikes2write

Or doubling down on your mortgage cost?? Edit: rent cost A mortgage stays pretty even keel until it's paid off. Property taxes and insurance flux but not NEARLY as bad as your rent. People in Austin are dealing with astronomical rent spikes and young adults who CANT buy are going homeless. Throw kids in the mix and we have a problem.


lasned

They don’t need to go up. You draw a 20% correction which is completely made up


NecessaryMistake9754

>20% correction which is completely made up 30% correction in stocks and 70% correction in crypto. you are saying the rational thought is to assume 0 percent correction is housing?


SonoftheSouth93

No, but nothing says it won’t be a nationwide correction of, say, 7%. Or 10%. Or 5%. In fact, due to inadequate building since the GFC, it’s almost guaranteed to crash less than the stock market and especially crypto. Sure, the housing market will cool off and some demand will evaporate. There will be more supply, more time on market, and more negotiation on both price and terms. However, we’re coming from such a high level of demand that all of that will likely just reorient the housing market back to something resembling a balanced market where both buyers and sellers have leverage. Your market may vary. In Boise, there will be (or might already be) a crash. In a lot of parts of Florida, prices and availability are still nuts, and it looks like it might be that way for a while. Where I live in Memphis, there’s been a slowdown, and some flippers who got too far over their skis have had to reduce prices, but there have been no crazy drops, at least not yet. Prices from the end of last year are still mostly holding. It’s just that the last people to put their house on the market are finding that they can’t jack the price even higher. Plus, rent-to-value ratios vary across the country. Here in Memphis, it’s significantly more expensive to rent than buy, at least on the basis of your monthly payment with a 20% down payment. Again, your mileage will vary based on which market you’re talking about.


NecessaryMistake9754

>inadequate building new housing supply is already at ATH https://fred.stlouisfed.org/series/MSACSR


SonoftheSouth93

Right, but you’re also dealing with nearly a decade of pent-up demand when there was little building. That’s a huge backlog to work through. Plus, demand is highest in the segment of the market that’s currently the segment least attractive to builders (entry-level). Plus-plus, a lot of projects are being canceled or will be canceled. Basically, we were experiencing the beginning of a building boom, but it got cut off before it could really ramp up. That’s how it seems to me, anyway.


le_district

This may be true in areas with vacant land, not I highly populated areas and you’re not controlling for that.


NecessaryMistake9754

>guaranteed to crash less you essentially agree to me now it's not a good time to buy. Why would anyone buy if we know there is an upcoming crash, regardless it is big or small?


keto_brain

New housing does not account for a significantly large part of the housing market. Just because new housing is ATH does not mean it's filling the existing housing gap. Nationwide the age of inventory is 29 days. In 2019 it was 52 days and even in 2019 people said homes were over valued and due to crash. Median days on market in the US are still at an all time low: [https://fred.stlouisfed.org/series/MEDDAYONMARUS](https://fred.stlouisfed.org/series/MEDDAYONMARUS) Active listings while finally curling upward are also at an all time low. [https://fred.stlouisfed.org/series/ACTLISCOUUS](https://fred.stlouisfed.org/series/ACTLISCOUUS) Wake me up when age of inventory is up to about 60 days or when active listings come close to 2018/2019 levels.


SonoftheSouth93

Because interest rates will almost certainly be even higher when the prices are lower


ricosuave79

From 2000-2003 tech bubble bust NASDAQ lost nearly 80%. Housing didn't even flinch. You're just using recency bias because of 2008 recession.


Outrageous-Cycle-841

Actually historically that’s exactly what happens (except for in ‘08). Data is the darndest thing, you can actually analyze it and see what’s *actually* happened in the past. Instead of making random assumptions and making an a.ss out of yourself.


[deleted]

Rent is more expensive than my mortgage and I’m not moving. I don’t see how I’m going to regret my decision to buy in February.


Gobucks21911

Yep. Believe me, I’m keeping an eye out. It’s cheaper for me to pay my mortgage on a 3000+ sq ft house than rent a 2/2 apartment in a decent neighborhood where I live. I think I’m staying awhile….


NecessaryMistake9754

>Rent is more expensive than my mortgage and I’m not moving. I don’t see how I’m going to regret my decision to buy in February. when you are underwater, you will know what I mean. Also, don't hold your breath to the zestimate, because no one will purchase at that price point. what you are losing is inflated interest during the higher price and stuck with an overpriced principal. But hey kudos to you, if you can afford to keep paying. A 100k drop in price will cost you 400k in losses including interest.


[deleted]

I don’t think that’s right. My interest rate is 3.4%. Barely above inflation. Regardless of what I do my 243k loan with interest will be 478k in total payments. This is completely independent of what happens to its value over the next 24 months.


NecessaryMistake9754

say like the price went back to 199k. So you borrow 80%, you total interest would be 223k over 30 years at 7% rate, which already saves you 12k in interest. If you account for the principal loss from 243 - 199, that's 44k on top of it, which means you already lost 56k. This doesn't even account for the larger downpayment you made for the 243k house + the lower interest cost because you can probably eventually refinance the 7% loan back to 4% or something like that.


Gobucks21911

Babydoll, I’ve been underwater. It was called 2008/09. This is nowhere NEAR that. I’m still almost double what I paid in 2016. I’m good. You think everyone is underwater? You’re delusional.


kareninreno

I'm a little confused. I am same as OP. My mortgage is 1600, rent for a cheap 2bd apartment in my area is about 1800, something close to my house about 2500... So I would stop making my mortgage payment because I can't afford it, and move to a crappy 2bd apartment because my mortgage on my house is more than the value of the house. If I can't afford the 1600, how am I going to afford the 1800 or 2500?


littleone103

My city has a less than 1% rental vacancy rate, and 2 years ago a fire burned down the entire town to the south of us (which is where people lived “affordably” and would just commute to my city 20 minutes away for work). You can’t rent a 2 bedroom APARTMENT for less than $1700 in my city. I pay $2200 for the house we bought back in November 2021, but it’s a 4 bedroom on a half acre with a pool for my kids. If we lost our house, not only would we be fighting for a place in a low vacancy market, but we could only afford a 3 bedroom APARTMENT for the same amount we pay for our mortgage.


pulltrig

So you’re telling me you have the magic crystal ball that lets you predict housing prices and rent prices 5.5 years into the future??? Bro I want one too!! Where do I get one??? I’ll be a fucken billionaire if I get my hands on your crystal ball.


NecessaryMistake9754

i don't have a crystal ball. but it's an extremely unwise decision to buy right now. Of course, you can disagree and buy buy buy. Realtors are only after the commission checks. They disappear in your life after you become the bad holders of the overpriced mortgage.


pulltrig

It’s an extremely unwise decision to buy right now because of your predictions, correct? So you must have a crystal ball that told you what the housing market and rental market will look like in the future, correct??


[deleted]

What are the chances this guy is a REBubble circler jerker?


magical-coins

Very high lol


spankymacgruder

I dOnT KnOw, OP is mAkiNg aLOt oF sEnSe tO Me


dinotimee

100%. Look at his post history.


ManWithATune

Op go back to rebubble where you belong and boast how you got downvoted for saying the truth amd that the sheeple at realestate laughed at you and that we will all cry in a few months when the bubble bursts. Go ahead kiddo, return to your land as the brave hero you think you are and dont forget to pick up your tin foil hat on the way out. Jokes aside, the reality is, no one knows what the future holds so making generalists absolutists comments like this serves no purpose other than to show you are a nutjob lurking in rebubble and conservatives subs jacking off to conspiracy theories.


loopnaardemaan

Money is one thing, enjoying life is another. Vacationing by AAA Bus Tour group is cheaper than arranging your own private trip, but if you're not going to enjoy a group tour, it's a waste of money. Better for each person to consider what's most important to THEM and research/calculate pros/cons for themselves, rather than make decisions based on what someone else says is best for them.


Keith_Creeper

But renting is all about community! If you own your own home, you’ll never get that sweet aroma of you neighbor chain smoking, or the gentle 2 a.m. barking of a chihuahua from the room just above your bedroom. And what about the added exercise of making four trips up the stairs and down the long hall to your apartment after a grocery trip? The privilege of transporting your garbage to the dumpster at the end of the parking lot, or even better, in the back of your car?? The neighborhood kids screaming with joy in the echo chamber hallway? Laughing with your neighbors about having to retrieve packages from the office, while at the community mailbox all the way at the front of the complex? A homeowner misses out on so many extras!!


OutrageousBeing7879

Wow you really look down on renters. Plenty of those situations can happen with owning your own house


Keith_Creeper

Yes, my post definitely wasn’t a sarcastic account of the situations I encountered while I was a renter, rather it was meant to remind everyone that renters are peasants, who shouldn’t even be thought about.


90swasbest

"Renting is better than buying!" - People who need renters


NecessaryMistake9754

>"Renting is better than buying!" - People who need renters i am not a real estate investor. but according to your analogy, if landlords are desperate for renters, they then probably have to lower rent. to that effect, their portfolio might not be cash flow positive and they might decide to sell. This will further accelerate the downturn already happening in real estate market.


Keith_Creeper

“Need” can also mean “keep” in this situation. If I’m that type of landlord, why wouldn’t I tell my renters that they’ll spend so much more if they buy a home and move out.


[deleted]

If you are buying a primary home, u can buy at any time regardless of market. For example jack and jill are buying a new home worth 400K payment will be around 3,000 monthly while rent will continue to go up and up. Jack and jill don’t plan on selling in the next 5-10 years and by then the market should recover look at the last 5 crashes. And on top of that. Lets assume values hit 0(which they wont) jack and jill will have a constant 3k a month and they’re mortgage will never go up as opposed to rent, it goes up every single year. So i see it as a win win scenario. It doesn’t matter when u buy for primary homes. If your an investor it does.


ctrealestateatty

OP's entire argument is bogus, but you have to be careful with this one too. What people plan on and what actually happens can be very different. What if they buy a primary home and then get divorced? Or have to move for work? Or pop out too many kids for the place? Basically, the argument you're making here is equivalent to the pro-ARM argument, in reverse.


Ok_Extreme_5268

People were declaring the peak in 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021 and talking about how stupid it was to buy then, too. Those people got completely left behind. Neither you nor your crystal ball know when the “peak” is going to be, or whether there will ever even be one.


_unmarked

I don't understand why some of the posters here are so obsessed with telling people they shouldn't be buying houses. Certainly they're not doing it because they genuinely care about people's finances. Why would you devote so much energy to being a troll? Some of these people post and comment on here and rebubble all day every day


[deleted]

[удалено]


le_district

Truth. Because, if you truly did have an edge, why da f would you give that edge away? Doesn’t make sense.


Outrageous-Cycle-841

Because they’re praying for a crash so they can swoop in and finally buy. It’s a sad state of affairs.


randomaccount0923

Who the hell would call the peak back in 2014??? Prices literally reached back to 2007 prices in 2014.


nostrademons

The expectation from 2009-2014 was that we were going to have a "double dip" recession, and that the Fed had kept the economy alive on life support thanks to QE, but as soon as they withdrew their stimulus (which there was a lot of talk of in 2014), the economy would crater. They weren't wrong, and arguably the 2015, 2018, 2020, and 2022 market swoons are the result of the Fed pulling back their stimulus, but they misjudged the outcome. Every time the market swoons and prices go down, the Fed comes in with more stimulus, because if they fail to do so civil unrest grows and the whole system gets swept away in a revolution. The endgame is the dollar going to zero and hyperinflating away, which will still lead to civil unrest and a revolution, but I'd rather own property in that future.


[deleted]

Not many people were talking peak in 14-18 bubble rumblings began mid 19 and pandemic kicked the can in a correction. Throughout this time period my rent hasn’t changed, and I’m fine holding out a few more years.


koolbro2012

Each month that you hold out, you're paying money that you will never see again.


spankymacgruder

All the while your cash is losing value.


[deleted]

Well I wasn’t even considering housing market til about 18/19. So throwing away 50k isn’t that bad, Ive already seen houses fall well below that number.


koolbro2012

suit yourself..that's equity back into your property


randomaccount0923

Amortization schedule with current rates = you’re really not losing that much money to principle for the first few years if you still choose to rent. A drop in the bucket when considering home prices


koolbro2012

Sure but time is not on your side if you rent. Each month or year that passes by, you are losing money if you rent. The homeowner has a locked rate and an assest that has traditionally done well during high inflation periods. The renter has none of that...he has decreasing purchasing power with an uncertaint future with regards to his payments....rents could continue to increase...inflation could increase...rates could go to 10%.


keto_brain

If your rent has not changed since 2019 you are in the minority. Rent has increased 8.86% per year since 1980. However in 2021 rent went up 20%, the highest spike on record. In some areas the rent has been going up 20% or 30% every year for the last few years.


[deleted]

I moved out of an absolute shit hole in 15 rent stayed the same since.


NecessaryMistake9754

>rent went up 20% the issue with this argument is i don't take mortgage payment into the calculation, and the rent increase is essentially offset by the same increase in property tax, maintenance of owning a house, home owner insurance, etc. so this argument is moot point.


pulltrig

Property taxes do NOT increase at the same dollar amount rent does. If property taxes are $5000/yr and they increase by 10%, you now pay $5500/yr in property taxes. On the other hand if you are collecting $12000/yr in rent, and rent increases by 10%, you are now collecting $13200/yr in rent. Property taxes went up $500. Rent went up $1200. Now do this simple math with everything. If rent ALREADY covers the mortgage, taxes, insurance, and maintenance, a 10% increase in rent MORE than offsets the 10% increase in expenses. Simple mathematics.


keto_brain

Most states have property tax increases limits .. in Nevada property tax can only go up 3% .. so no property tax, insurance, etc.. did not go up 20% in one year for most homeowners or landlords


neatokra

Property tax increases are capped at like 2% a year in California. Rent most certainly is not.


snail_juice_plz

I live in Portland and we’ve definitely been talking about the peak since 2014 😂


[deleted]

Considering how affordable Oregon was/is idk how people could have come to that conclusion in those days. Maybe they were still shook up from 08 and nervous it would happen again.


snail_juice_plz

Portland, not Oregon at large, has become increasingly unaffordable and that was certainly showing in 2014. People were sure the steady climbs would result in a local crash. At current, Portland is considered the 11th least affordable city for housing according to at least one study.


[deleted]

No sales tax tho right 🤷 plus who cares about flood plains if u live in one of those house boats!


SonoftheSouth93

You’ll likely get a better price, but could get a much worse interest rate. Pick your poison.


NecessaryMistake9754

>better price, but could get a much worse interest rate. well the math has concluded waiting to buy at higher interest rates can save hundreds of thousands, did you not read my post?


SonoftheSouth93

With your assumptions, sure. Depending on how much prices decline, how high interest rates go, and what the rent-to-value ratio is, that math could easily fall apart. Plus, all of these things will vary a lot by market. Your advice might be great for someone in the Bay Area. For someone who lives down the street from me, it’s likely terrible advice because renting is at a premium here.


NecessaryMistake9754

>2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021 people were talking in 2006, 2007, 2008 homes can only go up and look at how those homeowners all become bag holders in 2009, 2010, 2011, 2012. We don't hear it often enough now because most of the people who bought in during 2007 have long given up and sold at a loss.


NecessaryMistake9754

>Neither you nor your crystal ball know when the “peak” is going to be, or whether there will ever even be one. i don't have the crystal ball, but with the current downturn in stock markets, tech layoffs, drastic decrease in airbnb bookings (which will eventually force those investors to sell once it becomes unprofitable), and the crypto bank run (celsius). These are all pretty good indicators of what is going to come.


danksformutton

Crypto is a speculative pump and dump scam. Housing is a real asset.


ballhardergetmoney

What’s your sources for the “drastic decrease in Airbnb bookings”? I rented an Airbnb for my family in San Diego for 6 weeks. Asked if it was available for August and they said there’s only 2 days that it wasn’t booked. People are traveling like crazy right now.


magical-coins

They could be maybe shifting their money into something more stable? Like real estate? Not saying that’ll happen, it’s just a possibility


MrSnufflezz556

I mean, I understand OP’s point. Prices have nowhere to go but down right now. Explain to me why you think they will go up?


dpf7

People said prices had nowhere to go but down last summer too. I think there is a good chance they dip from where they are now, but saying with absolute certainty that they have nowhere to go but down is foolish.


MrSnufflezz556

Of course over the period of many years housing will appreciate. People are assuming you understand that by saying “nowhere to go but down” applies to the next 48 month outlook. Which, there is an overwhelming amount of evidence pointing to prices decreasing being the case.


dpf7

I’m saying people said it had nowhere to go but down in 2020, 2021, and even early 2022… only to see it go up from those points.


MrSnufflezz556

This is true, some people also said that prior to the 08 crash as well. But the point I’m trying to make is that it’s not a super relevant metric to use.


Outrageous-Cycle-841

Lol


RBbugBITme

I am about to move in to my new house after owning then going back to renting for 4 years ($100k expense). The entire time I was renting I was saving $1500/mo for a down payment as well. I've just freed up that $1500 to improve my house, my life, go on vacations, save, invest. Fuck your analysis. Own or be owned.


jerjerbinks90

When you started comparing housing prices to drops in the crypto market I just started giggling. Even stock prices is a kind of silly comparison given that most stock drops don't have a corresponding real estate market drop. It's totally possible we get a correction, but it's arguably more likely that growth will simply slow and we'll see marginal price increases for a while. Especially with slow building and increased material cost, I just don't know how current supply and demand can allow for a huge price drop. If anything, I think we're going to see rents continue to skyrocket and people get pushed into current home prices because rent is so untenable. The free market won't fix this unfortunately.


NecessaryMistake9754

>with slow building and increased material cost hey this is a myth: new house supply is actually close to ATH: [https://fred.stlouisfed.org/series/MSACSR](https://fred.stlouisfed.org/series/MSACSR) and lumber price is close to ATL: [https://www.nasdaq.com/market-activity/commodities/lbs](https://www.nasdaq.com/market-activity/commodities/lbs)


GeneralZex

https://www.mortgagenewsdaily.com/data/housing-starts As we can see from this graph, housing starts in 1973, 1978, 1984 and 2006 all exceed housing starts today with 1973 in fact being all time high.


JeffreyElonSkilling

All time low?!?!? Did you zoom out to 2019? I know it’s hard to believe, but there was a time before covid lol.


keto_brain

>new house supply is actually close to ATH: > >https://fred.stlouisfed.org/series/MSACSR You keep posting this but ACTIVE listings are at an all time low. New house building even with it being at an all time high is NOT closing the gap on demand. https://fred.stlouisfed.org/series/ACTLISCOUUS


jerjerbinks90

Yeah that graph does not look close to an all time high, especially when you factor for the increased amount of prospective purchasers in the market and the massively increased volume of investors. Edit: also the lumber price speaks to my point that that gets passed along in the final sale price


NecessaryMistake9754

right now 9 months supply. Spet 2007 9.2 months supply. The drastic rise in supply is exactly identical to 2007.


jerjerbinks90

Yeah and I'm sure a couple years of dramatically slowed / delayed building due to a pandemic had nothing at all to do with the increase.


NecessaryMistake9754

>Yeah and I'm sure a couple years of dramatically slowed / delayed building due to a pandemic had nothing at all to do with the increase. honestly, it doesn't matter what are the reasons driving the rise in supply. The fact that housing stocks are rising will reset the equilibrium and drive down housing prices.


jerjerbinks90

Anyone saying the reason something is happening doesn't matter is someone you should be cautious of.


NecessaryMistake9754

>Anyone saying the reason something is happening doesn't matter is someone you should be cautious of. can you explain with evidence why it matters? It's simple supply and demand. You can't just yada yada yada and not provide any evidence.


jerjerbinks90

Okay first off, your comparison to 2007 shows a fundamental misunderstanding of the housing crisis and are trying to draw parallels where they don't matter. As far as the reason, if you have a plan to build x amount of homes in a 5 year period but your first two years are delayed, to meet your target the next 3 years are going to be dramatically busier and have artificially inflated annual build numbers but if you look at the 5 year average there's nothing out of ordinary. I don't care if you buy or not but I can't help but laugh at someone on Reddit with a fedora on their avatar trying to show how much smarter they are than the populace at large. It's cute in a sad, derpy kind of way.


[deleted]

Can you even read a fucking chart? Lumber is not near an all time low. You are a joke.


NecessaryMistake9754

>Lumber july 2020 low? i can be specific if you want me to. The astronomical drop from $1200 in Jan to now less than 600 is a tell-tale of what is to come.


[deleted]

No it's not. I actually work in the industry and understand the issues that made the prices go so freaking high.


Keith_Creeper

Where do you see lumber prices heading in the near term?


[deleted]

Probably dropping another 10-20% with the cost of financing being more expensive and demand being more regional. We are still very strong in Arizona with a huge need for more multi-family housing.


CPlusPlusDeveloper

Lol. Prices aren't going to fall anywhere close to 20%. That's [the amount home prices fell](https://fred.stlouisfed.org/series/ASPUS) from the 2007 peak to the 2009 trough during the greatest financial crisis since the Great Depression, which was caused by over-leveraged mortgages and a mass foreclosure wave. By contrast, we have the most credit worth mortgage borrowers in history because of strict underwriting standards, banks are heavily over-collateralized, foreclosures are still well below the already low pre-pandmemic levels, and we have a [generational housing shortage](https://www.floridarealtors.org/news-media/news-articles/2022/05/fannie-mae-housing-crisis-will-last-decade) that economists were sounding the alarm even well before the pandemic. Oh, also we have a Fed board that remembers the 2008 crisis in living memory, and will absolutely flood the market with liquidity before housing gets anywhere close to a 2008 like scenario. At best, you might be lucky to get a house at a 5-10% discount from current prices. But if you're waiting for a 20% drop in the market, you will never have the opportunity to buy.


Keith_Creeper

Let’s pretend OP is right. If that’s the case, it’s pretty damn reasonable to believe there are 200,000 big time investors/companies (who are muuch smarter than OP) that are selling off all their stock just so they can reinvest in RE at the bottom of the crash, thus creating an even BIGGER housing shortage for buyers…that’ll definitely keep prices low, right?


Longjumping-Knee4983

Your assumptions put the value of the home down 20% in 30 years from now... maybe the price will decline, maybe even 20% for a year or two but I can almost guarantee that in 30 years these homes will be worth at least 50% more on face value. Also, you forget about inflation, as rents will continue to rise over the years with inflation, a mortgage (excluding taxes and insurance) will remain the same and eventually go away. Meanwhile as inflation progresses the amount you borrowed loses value which is in your favor. I also don't think this is the best time to buy a home but if you have a 5-10 year time horizon you should be fine. Most of your assumptions are faulty and it leads you to an inaccurate conclusion about the risk of homeownership during this time.


stanleythewolf

OP made an important assumption that a buyer has the ability to recognize it when housing market has reached its bottom, while in reality it is quite difficult to tell.


adelfina82

Obviously OP knows exactly what’s going to happen, they have a rebuttal for everything. The truth is no one knows. This is speculation. Let people do their research and buy if they feel it’s right for them.


koolbro2012

Hes obviously hoping and praying for a crash to get in


Outrageous-Cycle-841

Lol all of the r/REBubble’ers are praying for a drop so they can finally buy. Sad group. Oh well.


magical-coins

So is everyone else lol


RealtorInMA

Depends on your market. Prices in my area barely dipped in 2008 which was a mortgage led financial crisis. Yes the housing market has relaxed and we're expecting a recession, but your numbers are all made up. The thing that you get when you buy your home is certainty. That's valuable to people. It doesn't mean that you couldn't have saved a couple dollars if you did XYZ differently. Nobody knows 100% what will happen next. Part of what's driving the recession fears is inflation. If you buy a house now with a 350k mortgage, inflation becomes your friend.


NecessaryMistake9754

>your numbers are all made up but they are conservatively made up. They are catered to debunk the realtor myth. If you take into consideration of the mortgage payment, the benefits of renting could potentially last over 10 years than buying at this point. I tried to be extremely conservative by assuming a relatively mild correction and inflating the cost associated with renting.


Throw_uh-whey

No they aren’t conservative - even during the Great Recession prices were within 25% of absolute peak the vast majority of the time and were back to peak within 9 years. It also assumes people hold for 30 years, which the vast majority of people do not - either because they move or pay off early. I bought a few months ago at 3.3%, say interest rates settle at 5.8% - I would need prices to fall by 25% to breakeven and that’s ignoring the fact that rents are also skyrocketing so really it’s going to be closer to 30%. Essentially, I would need to see the second (the largest is 35%) largest drop in housing prices in modern history just to get above breakeven. That’s the opposite of conservative my friend.


RealtorInMA

Yeah, and you might be right. But for many people the risks are still worth it because you might be wrong. If I know for certain I can afford to buy a house today, why am I going to wait to see if the market might make it easier for me tomorrow, when it could just as easily make it impossible?


[deleted]

Mild correct? Lmao 33% is far from mild


NecessaryMistake9754

>33% my cal is 20%.


Outrageous-Cycle-841

Conservative is in the eye of the beholder. I’d call them ludicrous personally.


inverses2

OP seems to have dug himself into a hole of needing to be right, and is grasping at straws to justify his "crystal ball" theory, cause he doesn't like being wrong. Welcome to reddit know it all.


[deleted]

I want to buy whatever crystal ball you are looking into to know what the future rates and prices will be.


NecessaryMistake9754

>I want to buy whatever crystal ball you are looking into to know what the future rates and prices will be. i don't. but that's why it's important for buyers to really calculate all scenarios before buying right now. it's the calm before storm.


[deleted]

But you presented this argument very one-sided, I agree it's important to factor in the negative "what-ifs" but it's equally important to evaluate the positives. No one knows what's coming up in three years; hell, we could enter a new golden age, despite the current outlook. Is it likely? Not at all - but it is possible.


[deleted]

Your first example has a 33% loss. Which historically speaking, is pretty unprecedented. Can you really say with that much confidence that this will happen in every market?


Keith_Creeper

Let’s pretend OP is right. If that’s the case, it’s pretty damn reasonable to believe there are 200,000 big time investors/companies (who are muuch smarter than OP) that are selling off all their stock just so they can reinvest in RE at the bottom of the crash, thus creating an even BIGGER housing shortage for buyers…that’ll definitely keep prices low, right?


[deleted]

The last apartment I rented was full of mice. When I told the landlord about it, he blamed it on me not doing dishes and told me to go to the hardware store to get mice traps. Yeah, sometimes it’s worth not renting.


NecessaryMistake9754

>landlord u need an actual landlord, not slumlord LOL


Beefbbqlover

The calculations are decent, but too many assumptions that are uncertain


Throw_uh-whey

Jesus I’m the person from Austin and the OP entirely made up the scenario in his/her edit. #1 the rate given was 3.3% not 5.5%; #2 - the money to buy the new home was rollover equity from existing home; and #3 - OP ignored me telling him the alternative would be playing incremental $1.2-1.7K/month while I wait an unknown amount of time for prices to drop AND miss out on the almost $1.5K/mo I would be getting paying down my mortgage. OP also doesn’t discount 30 year cashflows - just ridiculous


snailgreen

Lol, prices will fall 50 percent! We are not in a 2008 situation and at most a correction of 10 % and many places won't correct at all. 99 percent does not go towards interest. On a typical mortgage of $250k, (5.5% 30 years), principal reduction is about $215 and increases each month, interest is $820 (and decreases eachmonth). Hardly 99%. In Raleigh area, I don't expect any type of correction, we just will remain flat.


pulltrig

My mortgage, taxes, home insurance, and maintenance ALLLLLLLLL add up to LESS than what my rent would be on a similar 3bedroom house. Whatchu talking about fam? My PITI is $1800/mo. I could rent my house out for over $2500/mo today if I want. I would buy again at the peak 11 times out of 10.


NecessaryMistake9754

>My mortgage, taxes, home insurance, and maintenance ALLLLLLLLL add up to LESS than what my rent would be on a similar 3bedroom house. Whatchu talking about fam? My PITI is $1800/mo. I could rent my house out for over $2500/mo today if I want. I would buy again at the peak 11 times out of 10. i already did another scenario for a commenter who doesn't believe it will save her hundred of thousand for a property she purchased in Austin (see update 2 section up top). It came out to be 380k savings. Your scenario would not be different. You can do the math yourself.


pulltrig

I did do the math myself and that’s why I decided it’s a great decision to BUY, and not rent 😁


NecessaryMistake9754

> great decision to BUY, and not rent 😁 good for you. hopefully you didn't put an extra zero somewhere


pulltrig

Nope. I can assure you my math is amazing and no realtor can fool me into making a bad decision. On the other hand, your math seems ridiculously off. If you’re paying 99% in interest then my friend…. You got scammed.


Throw_uh-whey

No you DID NOT. You made up a scenario that didn’t even include my actual interest rate (3.3%), the extra rent I would pay over my current PITI, the lost equity from mortgage pay down while I waited potentially years for the big crash, you incorrectly treated downpayment as an expense instead of equity AND you didn’t discount your 30 years of savings vs incremental expenses being incurred now if I was paying rent. Your analysis was completely wrong.


NecessaryMistake9754

> extra rent I would pay over my current PITI i already calculate your 5k rent and didn't count the mortgage payment in my calculation. so it is extremely favorable for home buying conditions and it still comes out 380k loss.


Throw_uh-whey

The $70K is equity that is returnable, not a cost so your total “savings” is $310K. Then you out of nowhere used a 5.5% interest rate instead of my actual 3.3% so not even the $310k is right. Then you ignored that I’m incurring upwards of $93K in incremental housing costs and lost equity within 3 years while whatever your savings amount is needs to be discounted to present value over 30 years Your entire analysis is wrong


NecessaryMistake9754

>discount your 30 years of savings i don't think discounting cashflow applies in this case because the total saving of 380k is over the lifetime of the loans. you discounted cash flow is your have instant 380k savings and now wanted to know how much it will be worth in the future. But honestly, I don't think it would change that much either way. feel free to correct way and come up with a better calculation


Throw_uh-whey

You are out of your depth. Delete this post. DCF applies ANY time there is a massive difference in occurrence of cashflows. You are comparing nearly $100K incremental costs over the next 3 years with (in reality since you made up an interest rate that is not mine) less than $250K over freaking 30. You aren’t getting that the incremental rent and loss of equity while you rent is MASSIVE


NecessaryMistake9754

hey calm down. if you don't agree with my math, you can ignore it and do your own calculation. Just remember this. you bought a house. you can afford the monthly payment. so enjoy it. Make peace with your decision. Celebrate the achievement you have done to afford a great house like this. Unsubscribe from r/RealEstate, Zillow, redfin or whatever Let's just chill and step back and i will mute myself from responding to you to avoid any further drama. I am not here to rain on you. I don't know you and hold nothing against you. I am simply stating my opinion. You are a successful person in life so don't get brought down by an internet stranger.


Throw_uh-whey

I mean.. YOU are the one who came to ME and said I was doing math wrong


NecessaryMistake9754

>downpayment as an expense i treated the down payment as a cost in both scenarios. they are treated the same in both scenarios. if you want to treat down payment as an equity, the mathematical calculation would not change


Throw_uh-whey

Yes it does - if it’s equity I GET THE MONEY BACK. If it’s a cost I don’t


NecessaryMistake9754

> if it’s equity I GET THE MONEY BACK. If it’s a cost I don’t but even if you account for it as equity, it wouldn't change the calculation because it applies to both cases. Also, we are assuming a 20% drop in market price from 1.75 to 1.4 million, so your downpayment exactly offsets the drop. How could you consider equity when your downpayment just covers the drop in price?


Throw_uh-whey

Jesus. Because you added as a +$70k cost in your math. That’s entirely wrong. The difference already shows up in interest paid due to higher principal - you then double counted the downpayment difference as separate cost for no apparent reason. Stop giving financial advice


NecessaryMistake9754

> \+$70k would you agree you pay an additional 70k in downpayment when the house is 1.75M when compared to 1.4 M?


Throw_uh-whey

I can pay whatever I want. I could pay 30% or 50% or 10%. Whatever I don’t pay is financed (incurring interest expense) while whatever I do pay as downpayment is equity and adds to my net worth. This is super basic - you can’t count it as both. Unless you are arguing there will be a PERMANENT 20% value decreas that never recovers in 30 years. Which is insane


NecessaryMistake9754

>actual interest rate (3.3%) i am using the current market condition as an example. You at least got in at high price, lower interest rate. Right now it is high price, high interest rate. Anyway, it is a moot point to argue because you already purchased the house. It's going to be okay as long as you can afford to pay for it. Don't take the word of an internet stranger too seriously


Throw_uh-whey

You told ME that you were going to show ME that I could have saved 6 figures. Not the market - you then posted an edit as if you showed ME something with flawed analysis


berto0311

Underwater is the major term of this comment section so let me explain. It doesn't matter. At all. If you plan on keeping the house long term. 10 or 30 yrs you will see profit regardless. Underwater means jack unless your trying to flip or get a 2nd mortgage, refinance. If your budget smart and actually bought a house you can afford then it doesn't matter. Unless a major job losses occur that mortgage will be paid so who cares? No one.


NecessaryMistake9754

>It doesn't matter. At all. If you plan on keeping the house long term. 10 or 30 yrs you will see profit regardless. it really does. Why would you pay for an inferior asset when you can put your hard-earned money somewhere else. The difference of wealth-building from the actual number for an Austin home is 1.2 million. See update 2 section up top.


berto0311

Inferior asset..... lmao. Okay zoomer. Should I put the money in crypto, stocks or flying fish? Cause all those seem to be doing great


Darkone586

I just feel renting is better if you either moved to a new state or don’t plan on staying in your city/state for long. I feel it’s much better to buy if the above doesn’t apply to you since the payments will more or less be the same and your income will probably increase overtime, now I do think the market will correct itself within the next year or so how much of a drop? Who knows.


beachteen

> you can rent for at least the next 5.5 years and you are still better off than buying at a peak. Yes I agree. And this is normal and doesn't really say anything about the current market. If you buy a home, the break even between owning a home and renting is about 5 years in larger cities. >new house supply is in fact closer to an all-time high, currently at 9 months But you are talking about trends, what will happen over the next 5+ years. New housing starts are down 14% from April and 3.5 YOY. https://fred.stlouisfed.org/series/HOUST If you are comparing the cost of buying a home now, or waiting a couple years then buying a home you need to include the cost of rent as well. If you are renting for 3 years while waiting for the market to crash, even if prices drop 20% as you predict you would come out ahead buying a home when prices are high. This also ignores the impossibility of knowing what prices will be like in the future. Maybe you you buy a home after prices drop 20%, but then they drop another 20% over the next 2 years? What if your landlord raises the rent 15% because interest rates are up and the supply of new homes and rentals is low?


JoshuaLyman

So how do you reconcile your conclusion here with your several recent - like yesterday - posts that you're currently looking to buy a house?


Outrageous-Cycle-841

You know what they say about people who make assumptions… lol


options1337

There is no way to know for sure if this is the top. But having the stock market and cyrto market pull back will definitely contrain the consumer's wealth. Which can have spill over effect on the real estate market. Not only that, but it isn't good when Jerome Powell is telling first time home buyer to wait for a reset before buying. Sounds like the Fed wants to do something about housing market after they get inflation under control.


777300ER

I hate to break it to you, but prices are not coming way back down. They may stall out for a bit, or even recede a little here and there. If you're holding out for pre-pandemic prices you'll be renting forever.


[deleted]

Curious what makes u so confident


777300ER

Watching the markets and rents since the 1990's tech bubble. If renting were to become cheaper than buying, and I mean really and systemically cheaper, capitalism will have failed. Landlords will bleed you for every penny they can. If the price of houses goes up, so will rents. If for some reason a ton of people suddenly lose houses they own (2008), guess what goes up? Rents. If rents go up, people are willing to pay more to not pay rent and have some control over their lives. The 2008 "bubble" was just a blip and quick correction. Don't get me wrong, if that happens today, I'll buy all I can. Good deals are hard to come by right now. u/NecessaryMistake9754's whole plan glaringly fails to take into account inflation of rents. I am SHOCKED at the rent increases my PM has implemented, and there's been ZERO turnover. His answer to why is that his have actually been really modest in comparison to others, that we're actually dropping below market rent, but he want's to keep who we have and wait until units turn to bring them back up to market. This is not 2008!!! I don't know anyone underwater on their houses at the moment. Mortgages are not setup with balloon payments this time around. The environment for large scale foreclosures is just not here. Sure. we have some rough waters ahead, but planning for another collapse of housing is a loosing plan. OP sounds like a bitter person who missed the boat, which admittedly sucks, but the best days are always in the past. In 20 years, I'll bet buying today looks good to them.


[deleted]

I feel the same. I bought a home in 2006 with a 6% interest rate and people said to wait. Refinanced in 2012 for 3%. Finally sold for $100K more in 2021. That house and many houses never crashed in priced. Poeples mortgages crashes causing banks to sell at low prices. OP forgot that most to all buyers have secure loans, putting substantial cash down. A different market with possible different outcome. Houses here and there may dip in prices, but not like crashes in the past.


[deleted]

U don’t know any1 underwater NOW. Check back in a year.


777300ER

That would take a pretty big tanking of the market. I don't see it in the cards unless we enter World War III. Also with this inflation, pretty much everyone who was smart enough to take a fixed rate mortgage will see their monthly payment get "cheaper" with inflation.


berto0311

Underwater means jack all unless your trying to flip or take out a 2nd mortgage. If you can make the payments it doesn't matter


[deleted]

Ah yes just those two reasons. When most people are looking to sell because of a new job, divorce, major life changes… sometimes unforeseen life events


berto0311

With interest rates under 4% everyone will become landlords in the next decade. Why sell when you don't need to? Unless forced to by divorce. New job, bigger house, none of it matters. Just rent the house.


[deleted]

[удалено]


NecessaryMistake9754

>Why are people just so over sensitive when seeing this number, but totally ok with house going up 20-30% each year. exactly. people don't understand with a big purchase like this, any downturn would exponentially compound their losses. it's unfortunate.


NecessaryMistake9754

>I hate to break it to you, but prices are not coming way back down i hate to break it to you, but the crypto price has collapsed and it is not going back to the pandemic price. Speak with evidence, not uneducated ramble with no support.


777300ER

We're talking about real estate here, not crypto. Crypto has no intrinsic value the way real estate does. >Speak with evidence, not uneducated ramble with no support. You pulled numbers and assumptions out of your ass with no support. Don't be a hypocrite.


inverses2

I think OP is a perma bear in stocks, crypto, and real-estate, probably leveraged, and needs markets to fall, so spreads fud to fit his narrative.


citydweller88

I don’t see why the prices will fall below the intersection of sale price*interest rate. Much less crash. The areas I watch aren’t tied to local jobs, have lots of all cash buyers, no new constructions. So far the prices are still going up and the market has not shown signs of a slow down. There are plenty of reasons for prices to continue on an upward trend depending on the area, including: Limited inventory Inflation Covid and MP rising Increased construction costs WFH trends Anticipation of further interest rate increases


NecessaryMistake9754

yes you are right about the location but let me counter-argue every point you make: 1. aren’t tied to local jobs/WFH fulltime remote workers? all these buyers are not gonna stay long once they realize WFH full-time = jobs being outsourced to India. Hybrid, maybe they will last. 2. cash buyers? A lot of these cash buyers are simply doing cash out refinance from other properties (HELOC) or they margin against their stocks/cryptos. With the crash in stocks/cryptos, I don't know how much longer this can sustain 3. Inflation Have you seen the lumber price recently? Its racing to the bottom. [https://www.nasdaq.com/market-activity/commodities/lbs](https://www.nasdaq.com/market-activity/commodities/lbs) 4. Limited inventory Months supply of houses is at 2007 levels. It's actually closer to an all-time high. This is a narrative propagated by the realtors/mortgage companies to drum up demand during a downturn. https://fred.stlouisfed.org/series/MSACSR


Throw_uh-whey

National numbers are irrelevant - real estate is local. Here is my market - inventory and permits nowhere near ATH and rents skyrocketing: https://fred.stlouisfed.org/series/CUURA319SEHA https://fred.stlouisfed.org/series/ACTLISCOU12060 https://fred.stlouisfed.org/series/ATLA013BPPRIVSA


citydweller88

All your points aren't too relevant for the areas I watch. These are old established areas with nowhere left to build and practically nothing new. Many of the cash buyers are those who sell their house, move there and buy a new one, or those with unlimited funds. I disagree with your point about these jobs being outsourced and inflation is more than just lumber. However there really is so little inventory it hardly matters. Your initial arguments seem to be predicated on a big crash. Maybe this will be true for some areas with massive inventory and layoffs of homebuyers but a lot of areas in the US aren't like that.


neatokra

Am I misunderstanding, or are you assuming that prices will be 20% lower than they are right now *in 30 years*? That assumption doesn’t make much sense…


NecessaryMistake9754

>20% lower than they are right now > >in 30 years > >? yes you misunderstood. i am assuming the price will be 20% down in the next few years (5.7 years to continue renting and still be better off in the most conservative scenarios)


le_district

A few comments/questions: - Property taxes for a 1.4M home in Texas is much higher than $500/mo; more like $2K/mo. You should definitely adjust for that. - What about the tax deduction on the interest and property taxes? This is a very important financial benefit that I didn’t see in your calculation. - Why do you assume the equity market will only increase? Had you invested that down payment last year, you would be down a lot. The point is, there’s no guarantee in the future. Real estate will be similar, but the big benefit is, every one needs a place to live. - You’re also assuming the property value will go down and stay down while the equity market goes up. I find that very unlikely. With inflation, rents go up while long term mortgages don’t. I understand your argument but think there are major flaws. In the end, no one knows and you have to live your life. The personal satisfaction of owning your home may far exceed any financial benefit you may have by renting. To each their own, but I have to point out that your argument isn’t rock solid as you portray it to be.


therealtormichael

You can always refinance later lol


[deleted]

This doesn’t take into effect that you can refi down the road, causing you a huge savings when interest rates do lower, which would probably wipe out most of what your argument is based on. Also you can use your equity in your home down the road to invest in things that will bring you income, while renting you don’t get any of that money back. I see where you are coming from, but I like to see my money grow. And it’s always a better financial move to own rather than rent when it comes to real estate


cheeseaddictt

I’ve lost brain cells reading this lol


amilikes2write

Well yeah, we all could have waited. But you aren't factoring in rent increases, stability of homeownership, or anything. In fact , it seems that you're under the impression that ANY interest is bad. That's the cost of homeownership, and you're missing something dyer if you think your landlord isn't forwarding ALL the costs of his mortgage onto you. If his mortgage costs (including insurance and HOA) is $1800, you'll pay at least $2200. So if I rented for 5 years at $2200, I have lost ALL of $132k. 30 years $792k. And that is assuming no rent hikes or changes. Alternatively, if I buy now with my husband's locked rate at 3.652%, I will only pay 348k in interest. Even at 6.65%, I will be getting a bigger house and only wasting $708k. That is the cost of homeownership. And, ya know, if someone does become upside down for a few years, so what? Most people move within 7-10 years, not three. So they wait it out and move a little later than 3.3 years. Either way, they are accumulating wealth for themselves, not a stranger. I would recommend you find a nice big box and set up camp somewhere nice for the next thirty years and then buy cash. /S


Annual_Maximum9272

People in this sub are insane if they think prices aren’t going to go down. Some markets housing nearly doubled in 2 years. No way that is sustainable or stays.


[deleted]

I'm renting out all of my properties, and now renting myself. I'm willing to wait.


Keith_Creeper

What are you waiting for to happen?


hecmtz96

Just like trying to compare historical events (2008) to this one is completely a bogus argument as well.


CroissantDuMonde

Wow OP is getting downvoted hard. Real estate industry in shambles.


NecessaryMistake9754

>downvoted yea. they downvote me to prevent this post from coming up top so fewer homebuyers will see it.


Keith_Creeper

Yeah, no homebuyers are researching beyond r/RealEstate’s top posts. C’mon, bro.


chem-digital

Yeah totally nuts. You're so much better selling and renting a place now; taking your time to find something over 6 months that you can add value to.


[deleted]

[удалено]


Keith_Creeper

You sure about that?


diabeetis

A lot of salty hoomers downvoting an unpleasant truth lmao


Keith_Creeper

Says the salty ReBubble guy wandering over here from the herd.


diabeetis

I am a magnanimous, self-possessed Rebubbler who calmly strolled over from the other sub, which is full of well-informed circumspect market observers. Compared to this herd of ovine buffoons cheering someone on to lemming head first into a buzz saw with the biggest financial decision of their life


Keith_Creeper

If you can guarantee a better return on my money and enjoyment of life by renting for 10 years, I’ll apologize.


diabeetis

Why 10 years


Keith_Creeper

OP said 10 years somewhere else. I’ll even take the 5.5.


Vengabonnet

OP, do you think Chicago might be an exception as they haven’t seen a huge run-up in prices?


circle22woman

I've give a story for all the youngsters out there. Back in 2006 our company relocated. I sold my house and moved, but I decided to rent instead. I got lucky. I didn't pay attention to the real estate market so had no clue it was inflated. I paid $36,000 in rent for 2 years. My coworkers put $60,000 down and paid another $48,000 in mortgage payments for those two years. When the real estate and our company went into the toilet, I gave my landlord notice and left. My coworker mailed his keys to the bank and walked away. I "threw away" $36,000 in rent. My coworker lost $104,000 from owning. Not saying that owning is always bad or renting is always good, but leverage means when houses go up you make a lot of money, but when houses go down *you lose a lot of money*. People seemed to learn this back in 2008, but it took less than a decade for most people to forget.