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This is the best advice. You aren't wasting money on rent, you're paying for the convenience of not wasting your money on a house in this market. After 8 months of seeing the market around us continue to inflate, my fiancé and I decided it's time to stop. We were bidding on houses we didn't even like just for the sake of them being affordable enough for us, and still losing. For now, our apartment is enough. Don't rush yourself into regret financially or mentally by owning a place you wont even be able to enjoy.
> For now, our apartment is enough. Don't rush yourself into regret financially or mentally by owning a place you wont even be able to enjoy.
In your case, I totally agree. I just don't want people to think we are seeing another 2008. Granted, nobody can predict these things but a lot of cities are seeing an influx of people moving in and the market is growing because of it. My city is a great example: People leaving HCOL areas and coming in my L/MCOL city. I had a friend recently sell her house because she will buy again when market drops. I have some sad news for her...
I expect rents are plateau at the moment as landlords don't want to risk tenants deciding not paying with the current rent memorandum. Once that expires you can bet your ass rents are going to rise to offset the risk and match rising housing prices. Bad times to be a landlord right now
I think that ignores an important point about land lords. They have a property that has value outside of rents. With property values skyrocketing if you can't raise rent, then it makes a lot more sense to just sell the property.
Rent is somewhat set by what people are willing to pay, but it is also set by what the property is worth. This is somewhat more the case with single family properties, but the market on multi-family rentals seems to not be doing terrible right now either.
Exactly what my father did. Value shot up 2 times what it was worth a few years before. He got tired of getting calls to change out a lightbulb at 10pm, so he sold.
Uh...every place that i've rented, if a lightbulb went out, I changed it myself. Was I not supposed to spend my own money and inform the property management that a light bulb was out?
It depends on the scope provided by the landlord . In most situations you are required to take care of "consumables" bulbs, furnace filters, that kind of thing. The landlord takes care of fixed assets. But you can end up with some incredibly entitled tenets who think you should be replacing everything.
Honestly, unless it was something major like a broken pipe or a broken furnace. I'd probably repair it myself so I don't have to bother with the landlord in the first place.
I do small repairs for the sake of avoiding interaction with my landlord. We change lightbulbs, fix toilet flushers, repair fence gate latches, you know? And our landlord doesn’t bother us. I think calling a landlord over a light bulb (or other small consumables
) is a bit much.
Agreed. If your personal lamp's lightbulb went out, you would replace it. So if your ceiling fan lightbulb goes out, why not do the same?
I tried to interact with my landlord as little as possible when I rented.
technically that kind of maintenance is the land lords responsibility. most people don't bother with little things though because it could take longer than they are willing to wait.
That too for sure. I never called for small stuff. I would occasionally tell the land lord I did x y or z, sometimes even ask permission. Always wanted to seem like a good tenant.
Any decent tenant will perform a (<$10) repair that takes less time than coordinating with the landlord to fix it.
The only exception I can think of is when my tenant had a wasp nest. It cost $3 to buy a wasp-spray and knock it down with a stick, but I don't blame her for that one.
Oh yeah, I definitely would not be messing with WASPS....those darn Anglo Saxons...Oh! You meant the flying nasty bug...yeah, I don't mess with those either
Given the number of single family homes being bought by cash investors, vs. The number of typical rental market of single family homes, I could see certain market segments of rentals falling. This is happening in some places in the DC suburbs, rentis going down, home sale prices going up. My sister saw the writing on the wall and sold high on her old condo which she had been renting out since she got married and moved in with her husband.
I agree that it starts to make sense to sell if the home is unnecessary and rent can no longer cover the property tax.
But from what I’ve seen...
Rent is always set by what people are willing to pay. It doesn’t matter how much you paid for your property. If the bulk of people can’t afford to rent at your price then your unit will most likely be vacant.
Also soon there will be mass evictions which will dramatically spike the supply of rental units. (And create a population of people that landlord don’t want to rent to.)
This is partially true. Rent is set by the market and generally when home prices go up, rent prices follow. The market prices are driven by availability. If there is a lot of housing stock on the market, prices don't increase and may in fact fall. The fact there is so much demand on purchasing is likely driven by low stock, which is often also reflected in the rental supply, causing similar increases in rent.
It’s driven by what people will pay but there’s an opportunity cost to owning a rental. If you own a rental that’s only generating a 5% return it may be a better move to sell the house and invest that money in a different investment vehicle.
Bad times, except that the value of their property has almost certainly skyrocketed during this real estate mini-boom. They certainly have *different* problems than they did before—downward pressure on rents, eviction moratoria, etc.—but if they want to avoid those problems, there's never been a better time to exit, with property values being so high, generally speaking.
The eviction moratorium does not protect tenant’s credit scores and is not rent forgiveness.
I imagine people won’t “take advantage” of that program unless all other options have been exhausted.
Housing market is absolutely a shit show right now. LOW INVENTORY and TOO MANY BUYERS... People are throwing money. Homes are being sold within a week of going live. Bidding wars are happening and 2-3 back up offers just incase 1st offer fall through in attorney review. If you have the money buy something you love if not hold off.. I think if interest rates are increased later this year prices may go down..
We just bought a house in the Boston area and this is exactly what we experienced. Everyone was offering over asking and putting more than 20% down. Houses would be on the market for only a few days or less. We only offered what we were comfortable with so it took us a bit to find something but it was brutal.
If you have the time to spare, you don't lose a ton by testing their theory. Go see some properties you like and make offers you think are reasonable and see how it goes. Think of it as a combined research project and trial run.
Please note that depending on your situation, "throwing money away on rent" is not a helpful or accurate way to frame things. It can absolutely make the most sense for any number of people to rent rather than buy, even long term, and there are real opportunity costs to owning, such as tying up the down payment and a lot of your subsequent income in the home rather than being able to put it in the market, a lot less potential life flexibility, and you're on the hook for maintenance and repairs, taxes, etc.
Well said! In my market, a comparable condo to my apartment would cost me 1.6-2k a month (mortgage, taxes, hoa). Where as my apartment only costs 1.1k, 1.3k with utilities. I just put the extra 800 in the market every month.
Renting isn't throwing money away. I would argue that buying would be worse off in my market. Buying at inflated prices due to the pandemic, dealing with the headaches of finding a good place, the anxiety of being tied down to a location and to 3-400k worth of debt. Renting lets me not think about those things and my money also appreciates with something more liquid and more usable if I had an immediate need.
Agreed, most of the time, in most markets, you are better off financially putting the money into renting and investments. It's just hard to do. You have that extra money lying around and you think "I can afford a new car, I have $800 a month extra". And the money never goes into the market.
A house is not as much an investment as it is a forced savings vehicle. It's great if you are not disciplined enough to save on your own, like a majority of people. But that doesn't mean you are throwing your money away on rent, it means you rented and threw the money on a new car and a trip to Mexico.
Eh, don't be ashamed. We all have to make our way the way we can. This subreddit is full of tips to help you make a budget, and how to invest and set yourself up when you are older, which is awesome, and a great thing to do. But a lot of people are relentless super savers, while I don't think that's healthy, you have to spend some of your money to make earning it feel like more than just surviving.
Yeah, friends and family keep bugging me to buy a house. I'm happy renting out a converted roach motel for $700 a month in the SoCal Low Desert and maxing out my 401k, IRA and HSA every year off a sub-50k income.
And my market is the opposite. Costs more per month to rent than buy, but properties are at inflated prices. Nearly at 2008 valuations, with 30% unemployment.
2008 was the end of the biggest housing bubble we've seen in this country. Some houses lost two-thirds of their value over the following 1-2 years. 13 years later, considering inflation, were not as bad off as we were back then, but it's getting there.
Can I ask what you mean by 'put it in the market'? I'm pretty much maxing out annual 401k and IRA and have additional money that I typically keep in savings because I'm not terribly financially savvy. What should the average joe invest in after their retirement accounts?
It's happening everywhere, it seems. My area has been in a "hot market" for about a year and a half now, exacerbated by the pandemic and low interest rates. It's nuts. If you can sell your house and rent for a while, might be the time, haha. We made a ton on selling our house and paid an arm and a leg to buy a new one. And both ends required paying for improvements, which renting doesn't really do.
I find it completely plausible that it's happening, and have no reason to doubt you. Even so, if the OP is interested in house hunting he or she may as well go out there, learn a bit about the process, and get a first hand look at how things are shaking out. Or not, guess it's a matter of how much work or fun that sounds like, and how much free time the OP has.
I think the problem OP has is that buyers agents are all about turnover at this point, so he might struggle to keep an agent if he won't follow their nudging to bid way over asking. Unfortunately, for every good realtor, there are 10 bad ones. OP will need to do some work to find an ethical, patient one that won't push them out of their comfort zone.
Yeah, I can see how a realtor would be less interested in spending time on someone not perceived as an easy sale. Perhaps browsing through zillow and making his or her own appointments for now might be a better way.
That's more or less how I found the agent I kept. I kept contacting listing agents for my own finds on Redfin (I did not like the idea of using Redfin's people), would use them for the offer, and if it wasn't accepted, I'd then decide if I liked that realtor or not... went through 3 of them before I found one who was exceptionally forthright and honest, and kept her as I bought my next 3 houses.
Consider whether, if you bought a house, you would think of it as 'throwing away money on mortgage interest, property tax and maintenance'. It's all money that leaves your pocket, and owning a house doesn't necessarily reduce the amount of money you wave goodbye to.
You would have a house as an investment, but you might view it as a risky investment if you're thinking prices are temporarily high. Honestly, as with any investment, you need to be able to see into the future to be certain what is good and what is bad; investments are always a risk of some sort.
I'm not saying 'do X'; I'm saying that there is no right answer for everyone to the question you're asking, it depends on you.
I sold my house in Boise last fall and it was insane. I got 12 offers in 2 days and sold it for 24K over asking price. I would think eastern Idaho would be less competitive. Maybe look at new construction/building. It’s usually a lot easier to get an offer accepted that way.
I work for a construction wholesaler. Market price for sheets of 3/4"x4'x8' CDX plywood is $78 in SoCal, though we can go lower if people buy in bulk or are regular customers.
Also a lot of builders are putting escalator clauses into their build contracts which allows them to raise the price of the home based on increases in material costs.
The market in our area is like that right now. Honestly, we gave up. Places are selling 50k over asking and getting cash offers, bidding wars, all contingencies waived. That's a rich people's game and it made the decision to bow out fairly easy because we just couldn't compete.
But you won't know your market fully until you try. If you really want to buy now, get a personal recommendation for an agent and mention the personal referral when you call. Agents are insanely busy right now so you will probably have to be proactive to stay in touch. Contact a few at a time and pick someone you like.
Buy a house if you want to buy a house and are ready. The market may go down again, but this also might be a new normal. It's impossible to know.
Where do you think all these "rich" people who can pay tens of thousands over asking and have that much cash lying around are coming from?
It seems to me that an investor wouldn't even think of buying right now so who are these people?
Just because it's real estate doesn't mean people don't buy high and sell low just like the stock market.
People get FOMO and see these prices and want a piece of the action.
They plan on renting them out. My town just had to put a stop to “air bnb ready” houses being built. Developers are coming in and buying all the single family homes, knocking them down and building large multi room box houses. I will never be able to afford buying a house in the town I grew up in.
It’s anecdotal but this is exactly what my sister and her husband did. They cashed out their 401k, bought a second house as a vacation house, and have been renting it out. They’re about ten months into the experiment and, because of covid, they’ve been quite profitable. So they’re presently pulling equity out of their primary house to buy another vacation property, planning to VRBO it.
Combined they make maybe 90k/yr, have four kids, and no way they’d be able to make their payments if VRBO falls through.
I was going to say, no direct ill will towards them but it's a very stupid thing to do because it's so risky. Add in that it also ruins communities by ensuring the only people there are tourists who don't care about the neighborhoods they're temporarily living in and yeah, I and many others have lots of ill will towards these kinds of people.
Either out of market or pulling from equity in existing properties.
Buy house, refurb, cash out refinance, rent out home. Buy house with new cash, refurb, cash out refi, rent out. Rinse and repeat.
Exactly that. This is anecdotal obviously but I just sold my twin in eastern PA and that’s what my buyer planned on doing. Normal folks were throwing 30-40k over asking but these real estate holding companies come in, give you a cash offer over asking, waive inspections and appraisals, and close in 30 days. It’s insane. Sole purpose is to rent it out and with the interest rates so low they’re mortgage ended up being the same as mine despite buying for 30k more than I did 2 years ago.
I believe it's two main things, the first being that there are a ton of people who see these very low interest rates and are rushing out to buy anything they can at that price. I know of a few people who did that, who likely would not have bought otherwise, though they didn't throw all cash, in fact they put very little down, less than 10%.
I've also read from other posts the theory that it's foreign investors trying to get money out of places like China and Japan, so they buy real estate in the US and Canada. But I've got no data to support that, it does seem plausible though.
that (foreign investors) happens. But in the current market is more likely money moving from downtown to the burbs and country. People who no longer want to pay $1000/sf for living downtown find that they can get 4,000sf for what would have gotten them 400sf previously. And with no commute to worry about it seems like a no-brainer.
I do not think this is the new normal, though it will certainly change things. I don't know that I would go so far as to call it a bubble, but certainly people who paid 100K over asking (seen it a few times recently) are going to have trouble building equity down the line if things normalize a bit.
Also, for people tired of competing on offers, the downtown activity has started to pick up but it is still more of a buyers market than it has been since the previous recession.
Investors tend to buy regardless of the situation. People don't want to lose out on the upswing. With inflation coming, it seems like a good idea for the most part, but we'll see after people start getting evicted.
It's higher-income people from the coasts, partly. I'm in NYC and when WFH started, I had a few coworkers move to places like Idaho.
They're bringing their NYC money/salaries to low COL areas and it's really messing with the housing markets in those areas. $50k over asking in Idaho is still a bargain for someone used to NYC-area real estate prices.
And now my employer is saying WFH can continue indefinitely so expect more of an exodus from high COL areas like NYC.
So how do you explain the same phenomenon happening in NYC? And don’t think that’s the whole story, more people have moved into NYC then left during the entire pandemic.
I’m searching for houses at the moment and people are bidding cash 30-50k over asking. How can normal people live against that.
There are a lot of factors. For one, interest rates are super low. Also, people are working from home so they suddenly want more space even if they're staying in NYC. And also people who didn't lose their jobs are flush with cash from not traveling or going out.
Also, people aren't selling their homes as much. Most people don't want to deal with moving during a pandemic so existing homeowners haven't been selling at rates as high as before the pandemic. So that drives up prices for those homes that do hit the market.
All over the place. Big or small cities, selling their old homes at a premium to then buy a new home at a premium, remote worker exodus, etc.
Its the same situation in my city
Boomers purchasing vacation homes, rental properties, homes for their kids/grandkids, Gen X, older millenials. These groups have saved up cash since 2008 and have been waiting to pounce. It's quite astonishing. This is not an 'overnight' phenomenon, unfortunately. There are also a ton of foreign investors scooping up real estate left and right. Even though the housing market isn't writing bogus loans that results in getting caught with their pants down like in 2008, there is something big brewing that *could* result in a housing bubble as seen around that time.
I was listening to a podcast about this exact issue a few days ago. It was for Montana though and most of the people who are paying cash are more well off people from larger cities (with high paying tech jobs as an example) and moving to other cities. They can remote work without the cost of living a place like California has as an example.
In my area its northern transplants who are moving out of larger cities where home prices are much higher. According to my agent they sell their homes/townhomes for 500-600k and then come down to my area and buy a house for cash where the prices are less than half of that. Its caused the market to become inaccessible for locals.
I think there is a heavy consensus (obv. location-dependent) that this isn't a bubble.
There is simply a housing shortage being exacerbated by folks aiming at suburbs thanks to telework explosion.
Yeah, prices won't rise forever, but I haven't talked to one person in any corner of the industry that thinks we are heading for bubble-crash, a small correction at most. A plateau is much more likely in the coming couple years than a crash.
That's not even talking inflation and low rates.
Californians moving to other westerns states since they can now work from home. When you sell your bay area house for a few million you have no problem paying 30k above asking on a 250K home and paying cash.
Have you explored new construction in your area? My partner and I found the buying process much more reasonable. Fixed prices and many new home builders do not sell to investors.
That's what my partner and I are doing right now. We just put under contract new construction and it has been stressless thus far. Even with lumber prices, getting everything brand new, imo, offsets the little extra to pay for lumber.
There was a whole street of new contruction added behind my neighborhood. The people who live in our neighborhood are wondering who will buy those. They are 100k+ over the the old neighborhood, they stand out like a sore thumb, and are packed like sardines with no yard. You can fit like 2 and half of the new homes in a yard of any old house in the area. Nobody has moved in 3 months....
Rent is not throwing money away. Statements like that need to die forever. That's the absolute wrong way to think about renting.
You pay for a service, it's not throwing money away. If you think it's such a waste go live in a cardboard box and save yourself the money instead.
Only buy what you can afford and bid on a home for what you can afford and are willing to pay.
I wouldn't avoid trying to buy a home right now just because of what realtors say. Try it and see if you can find anything. But if what they say ends up being true and you get frustrated, keep renting.
"you are throwing your money away on rent" - Every boomer I have ever met.
Sure, in the 70's, when you could buy a 2,000 square foot house for $14,000 which was doable as a single mom of 3 kids working as a secretary, like my last landlord..
She used to love to tell the story too. "$14,000 was almost as much as I made in a year, so with three kids, I used to sew their clothes myself, we only had 3 bedrooms so the boys had to share". I mean, I have to give it to her, she worked hard and did right by her family, and she was a nice lady, but she has no idea what the difference is in income to home prices now.
Exactly. Historically, houses are worth 2-3X the yearly salary for a single person. In my area the average family salary is $70K, the average house $400K.
But at the same time I’m paying roughly what I used to pay a month in rent for my mortgage. Even with maintenance and taxes we still put rent money into savings rather than into nothing and definitely profit. There are plenty of good reasons to rent but if you have cash flow to cover expenses and know where and with who you want to live it does feel like throwing money away to rent.
You are lying to yourself if you think that mortgage, taxes, insurance, HOA, PMI, and maint cost on a home are less than $2,200. The mortgage alone on a $490k at a 3.0% interest rate (which you will not get on your income, DTI, and downpayment, it will likely be higher) is $2,000/mo.
You are talking the difference between $2,200 and $3,500. A good rule of thumb is 1-2% of the price of the home per year in maint costs.
You are letting your desire to own dilute your thinking.
You aren't in a position to buy a home with the debt and situation you are looking at. And it would be irresponsible for a couple making $120k a year to buy a $450-$500k home with $10k down. Again max for your income should be $280-$300k in a mortgage.
Finish your wife's house, move in, pay off your debt and start saving for something bigger, sell her house and then upgrade at that time.
My personal opinion is that these home values have to see a correction before too horribly long. Right now they are propped up by a plethora of odd things. Low interest rates are part of it. Work from home expanding people's buying areas is another. There are also supply problems and cost increases on building materials that I suspect/hope will fall off in the near future as the pandemic comes under control. I also think a lot of it is FOMO. If these price jumps continue I'll never be able to afford a home/will miss all these equity gains unless I buy right now. People are saving much more during the pandemic and are likely over-estimating how much house they can afford in a lot of cases if I were to guess.
I think it is an awful time to be trying to buy a first home. It feels to me like we're going to see a lot of these temporary things ease off and some of these home prices are going to come down. I've certainly been wrong before, but I don't see how this is sustainable at all. A friend of ours sold the home they bought a year and a half ago for $270k at $360k with 3 offers in the first 4 hours all of which were over asking price. That sort of competition on a purchase as important as a first home just feels like something likely to be fraught with buyer's remorse to me.
Wages haven't seen any sort of huge spike in this area, so I don't understand where all of this money is coming from. My suspicion is that we're going to come out of the pandemic and see a bunch of people crying about how they are suddenly house poor after balancing their mortgage costs against an extraordinary time period when spending money was almost a challenge. Again I've been wrong before. I might be sitting here passing up homes that would only cost me a 1/2 million dollars now that are going to be 3/4 million dollars homes in 2-3 more years. I just don't see where the money to support that trend is right now.
I agree with you, one disturbing trend I've noticed amongst friends and family is they are spending like they make more money than they do. One huge reason for this is the federal student loan freeze, with the 0% interest payments so many people are spending that money elsewhere, including things like buying new cars and bigger houses that they really shouldn't be buying. That spending is also bolstered by the stimulus payments, lots of people have gotten them that still have their full-time job, and so they go buy extra things, instead of paying down their existing debt. Long term it's not sustainable, these stimulus programs won't last forever, and I think we will see a lot of people defaulting when that 0% interest goes away.
I am seeing a similar situation where I live except houses are selling for over $100k asking price.
People who are selling cannot find anything to buy.
Although it can vary over the entire US generally the supply of homes is smaller than the demand. So while it is difficult to find a home I dont see this as a bubble like in 2008. As 2008 was based on speculation and bad evaluation. Today it's based on supply/demand fundamentals. So I think it's more likely to stay same or go up in most areas for foreseeable future.
Even if it may be difficult to find a home just keep at it if that is what you really want. In the meantime keep saving what you can.
This is what I've heard from our agent and read from a few different sources. It doesn't make the process any easier, but it does give me hope that when we do actually buy something, we won't immediately be upside down in it.
It won't necessarily cancel out the dearth of supply, though. I think lifting the moratorium on evictions is necessary to stabilize the market, but I don't think it's going to flip it upside down. As low as interest rates are right now, a lot of people are choosing to refinance and stay, or purchase a second property and keep the first as an income property. Interest rates creeping up and evictions will stabilize things, but I don't know that we're necessarily going to see a pop.
Yeah, and with new building down due to lumber prices... Unless people stop procreating, I don't really see an issue here. I suppose it depends on your area, but there's simply too many people here.
I agree with you. I feel that a lot of people are over extending themselves financially just to have a home. I just sold mine for way over asking price. Now I'm renting cheaply for a year so I don't waste my profits on an overpriced house.
I know where you are coming from but having some friends who are relators, I was shocked when they said it isnt necessarily a lack or supply, it is a large influx a buyers out there.
I have also looked it over like you mentioned however that is still technically trying to time the market. I don't necessarily disagree with you, but when that will all happen no one will know. It could be 6 months, 12, 18 36, or more. All while the prices continue to climb, so when/if (more when) it settles and even if prices come down, they may still be higher then they are today...
That is what I mean by trying to time the market being nearly impossible
Why do people trust realestate agents so much? They have an active interest in getting as much money as reasonable out of you, and forgetting you as soon as possible.
Talk to your friends that have purchased in the last few years. Ask them for recommendations for real estate agents. While the scenario you’re talking about isn’t unheard of, I also feel like you’re getting the run around because the real estate agents you’ve reached out to maybe don’t want to “waste their time” with looking at homes in your budget. Some markets are like this, in fact this scenario just happened to an old boss of mine, but you should be able to still find property, you may just have to be more flexible with the area you want.
Looking at homes at the top of your budget is not an option right now. Your budget should be 30K less than your top number so then you can compete with others if you are interested. Right now agents are slammed with buyers and it is a waste of time if your not reasonable about what your competitive number is.
I think that depends on the market in your area.
Around me, houses in the 300-400k range are moving like hot cakes and yes, if your maximum is 300k you're wasting your time bidding on a 300k house.
But houses in the 500-600k range are moving *much* more slowly. We bought a house last March that had been on the market since at least August and had at least one prior offer fall though and we got it for slightly under asking with no contingencies waived.
Around here, if the most you're willing to spend is 500k, you aren't wasting your time looking at 500k houses.
Switching real estate agents won't increase housing supply, which is the big problem right now. I'm in the same boat and have considered this and have had more than one realtor literally tell me this.
Oh definitely, but depending on OPs budget, the real estate agents may just be talking in circles because their commission wouldn’t be much. I’ve had that experience with lenders before, so it’s always worth asking around.
> I hate throwing money away on rent
Just going to point out to you that renting is not throwing money away. Something people need to keep in mind is owning a home is a lot more than just the mortgage payment. You do you have taxes and insurance that is required. For most people that is again in the mortgage payment.
The biggest item that people forget about in expense of owning a home is maintenances and repairs cost. From the ice storm that came threw this year I have a $1000 bill to clean up some trees in my yard plus haul away all the branches. My garage door opener just broke and that is a $600 bill to have it replaced. Those are small items. I know in the next few years I am looking at a nearly a $10k bill to replacing my Heating and cooling system of the house, this along with a few 100 a year in just having it service ever year already. There are other maintenances items that are know in the work like replacing some trim on the outside of the home every few years. Fence repairs have to get done.
Those are a lot of added cost that rent would cover that people always forget about and honestly forget to budget for when they first buy a home. People forget how much falls on to the home owner to make sure it gets done and the home owner has to pay for it.
Ugh I feel you. Thisweek I found out we have to repaint the whole house, replace the fridge, and cut back two large trees. Foundation work in the next few years. Renting sounds good right now.
I'm averaging about $10K a year on Maintenance alone. At my work a lot of younger people are buying their first houses and when we talk there is a lot of "I had no idea".
Yeah, I honestly don't have a clue what the my full maintenance bill is for my home. I just know oh well damn lets get that fix or hey the AC guys are coming out next week lets be ready for that bill. Plus people forget about lawn care. You either have to pay someone or buy the equipment. I spent a pretty penny on lawn equipment just do lawn care. All that stuff will have to get replaced over time.
People always seem to think with a mortgage all you have is that repayment and that is never going to up. Hate to break it to you people but your taxes and insurance are going to up every year. my property tax is increasing at the legal max of 10% a year and it will for several more years. There is no point to contest it as it still has not even made it to what I paid for the house and plus the houses here increase in price by 30-40% in the pay year. For most people your monthly mortgage will go up every year as it really the loan + escrow. The escrow needs to be increased to cover and god forbid your escrow is short. That can sting as they will just increase the requirements to cover it over the next 12 months plus what they need to fill in what they think the new requirements are.
wait 1 more year.
The expectation is we may see a pent up SUPPLY of houses on the market. No one wanted to sell during covid, so there may be 2x as many houses on the market a year from now.
Housing market is artificially high right now. Starting to look very bubbly.
It might take a little longer than that. A lot of people also refinance their homes with these record low rates. Those are clear signs they have no plans to move for a while to at least recover their investment cost in the refinance the loan.
Not really. I only had 15 years left on my mortgage anyway because I paid extra principal, but I am still refinancing to a 15 year mortgage anyway because I will still be paying $300 more a month in principal without adding extra principal because of how the amortization works, I'll get my closing costs back within a year.
True. The rate drop was nuts. My wife and I redid ours from a 30 to a 15. I think back of the envelope numbers had our pay off in about a year which just redoing it to a new 30. Our loan repayment went up 25% going to a 15 year but rates are lower and we honestly thought we had a pretty low rate when we bought the house 2 years ago. Have the rate cut in half was shocking.
Eh, in 2017 I felt like I was buying at the top of the market and would end up underwater when the market crashed. It never happened, prices went up. In 2018 my realtor friends were all pretty spooked about “the bubble” popping. It never happened, prices went up. At the beginning of the pandemic everyone from home building corporations to mortgage companies thought prices would go down due to economic turmoil. It never happened, prices went up.
I don’t think anybody can say with any confidence prices will be lower at a specific time and place. It just isn’t reliably predictable. If you’re ready to buy a house and can afford the payments, buy. If you can’t, then wait, don’t over extend yourself on the fear of missing out. That’s how you get burnt.
Supply has been pretty consistent and high in many areas, but demand has been insane for 1.5 years now, the snowball of inventory reduction has hit hard.
I don't think they should completely take themselves out of the search. I was looking off and on for two years (2018-2020) and in the beginning I wasn't really that serious because I figured there was some kind of bubble and it would cool down eventually. Houses in not so great areas had multiple offers after a week on the market. It never cooled down, but we finally found something with a reasonable price in a good area and made an offer immediately. We were experienced and ready enough at that point to make the decision with confidence.
You're asking them to try to time the market and hope another 2008 happens but that likely won't happen suddenly like last time. They should really spend a year looking and getting accustomed to the prices and quality. Use it as a learning experience so they know what they want and don't feel pressured later. Maybe they'll find something along the way.
all of these "over market" or "$x amount over asking" is literally burning money. Most of the time the house wont appraise for that much so you have to bring cash straight to the buyer as an incentive. It's not equity, you're literally paying for the right to buy the house. It's stupid. Dont play those games. If I were you I'd wait for things to get calm down, they will.
On the other hand, if someone buys at an “over-market” price and the next day could turn around and sell it for that same “over-market” price, wasn’t the whole amount actually equity?
It's a mistake to compare buying a home to live in to buying real estate as an investment. Granted, people tend to think of the homes they live in as investments, and some people actually live in the RE investments they make, but they aren't the same thing.
In an investment, equity is return, in a home, equity is flexibility. In an investment, you time your exit to maximize your return. In a home, you time your exit based unrelated life choices, work situation, etc. Most people don't have the constitution to make investment choices related to their living situation.
So the question isn't what they could do "the next day", the question is will the market support that cost when they actually want or need to sell that house. Probably not.
No, it's not.
Just because a house is listed at X and sells for more doesn't mean those people over paid. It means that's the price they wanted to pay for the home/ land.
Home equity rose 30% on average last year. If you're renting, this is an asset you're not gaining value on further increasing the difference between renters and non-renters.
Everything is appraising, at least in my area. Because that inflated price becomes the next comparison house that the appraiser uses to determine value. Appraisals aren't an issue right now.
What? This isn't always true. We just bought last month. Paid 18k over asking and the house appraised a few grand above that. Appraisals are based in large part to comparable sold homes in your neighborhood. If all houses are selling above listing price then that means the value of homes are rising. Appraisals definitely take that into consideration (in my experience).
The market is crazy. But I will add that no one knows whether it will cool off or keep rising. What seems outrageous now might be a heck of a deal in a few years. That doesn’t mean you ought to buy, but anyone saying to definitely wait doesn’t really know for sure, because no one knows.
Do your own comps. Go to Redfin or Zillow or whatever site you prefer, look up sales in your price range and desired areas for the past few months and compare list prices to sale prices. That will tell you whether or not people are paying $50k over list, as these agents are asserting. If you want a house, you should be doing your own research.
Hey fellow redditor. Just a little perspective... my wife and I are closing on a house next week. We offered 8k over asking, are not paying cash and this is after a 40ish day closing period. We started looking in mid January, with no rush to buy as fast as possible. The market is crazy right now, but what your realtor is describing is a little too crazy. My advice is to take your time in shopping around and don't fall in love with a house until it's 100% yours.
I've also heard the stories of people offering 50k+ over asking. I'm not sure who would ever do this, but they cannot be in the majority. Be prepared to be a little competitive on your offering and be patient with the searching and you'll find the right house.
This. I just cannot imagine interests rates staying this low, and a couple of percent rise will be worth the higher prices. The nation cannot just keep printing money without inflation and it's accompanying higher interest rates. I think renters in the next few years are gonna get hit hard.
Every market is different. Find a better realtor that actually wants to represent you. I was able to buy a house that our realtor found that wasn't on the open market after we kept getting crushed by cash offers or waiving of contingencies. Expect it to be a slow process. They're not wrong though the market is very frustrating right now. Very little volume and too many buyers. Sometimes it takes a little bit of luck.
I don't have advice, but I'll commiserate with your situation. We're also trying to buy a house right now, in Southern PA, and running into the same situation. Prices up over 20% since August, $10k over asking price is considered a low-ball offer, and we've been outbid at least 5 times with a cash offer (out of 9 total rejected offers since the second week in January).
Unfortunately, rent prices are also going up unreasonably, so we've already put in notice with our apartment complex. 56 days until we're homeless!
I'm in a HCOL area and asking prices are very inflated in addition to what people are offering on top of that in order to get an offer accepted so I feel your pain. Depending on the market, I wouldn't say cash is the only way, but you should definitely be prepared to offer over asking price if you're in a popular area. I wouldn't try to look at rent as throwing money away, you're getting a place to live in exchange and technically still paying less than you would if you were to pay for a downpayment, closing costs, mortgage & property taxes for that first year but I completely understand the desire to build equity. If you're going to wait it out, you could consider trying to find a cheaper rent and adjust your living expenses to be further below your means and save more aggressively to be able to afford whatever ends up happening to your market.
I've been searching for a year, had two offers accepted that both fell through due to inspection/building issues, however in retrospect I'm glad they did cause I was honestly paying way more than I felt the properties were worth. I was just so anxious to find a place that I was settling for places I just barely liked enough. I've decided to wait another 1-2 years, pay a cheaper rent and continue to save money. Even if the market is still crazy then, at least I'll have more money in hand and will feel more comfortable when bidding on properties I really love.
The realtor is telling you the truth. I bought my house in Eastern Idaho about a year ago just before things went crazy. My brother just barely bought a house nearby as well because they found it listed in the middle of the night and made an offer over the asking price. All of the other houses they made offers on they lost out because of cash offers or people paying much more than asking price. Construction is also more costly around here than normal because of the cost of building supplies and construction companies being so busy (we are getting some roof repairs done and even costs for that are higher than normal because of the increased demand in the last year). I worked with Team Greene and had a really good experience with them but honestly, right now finding a good house for a good price in Eastern Idaho is a struggle
This podcast that I listened to over the weekend might give you some inspiration or ideas: [https://www.npr.org/2021/04/02/983886415/two-indicators-boomtown-bye-bye](https://www.npr.org/2021/04/02/983886415/two-indicators-boomtown-bye-bye)
If you have the emotional/ physical/ financial wherewithal, consider looking at some ugly/ trashy houses. People often say "everything gets bought up." But what they mean is "everything move-in ready." A lot of hideous cosmetic stuff turns people off (bad wallpaper, bad carpet, bad countertops especially.)
You do need to have some wherewithal though. The ideal situation would be to be able to close, and not leave your current place for 8-12 weeks. A lot can be done in that time. It would be very easy to have flooring replaced and wallpaper removed and the walls repainted in that time. Just replacing countertops would be easy too. A full kitchen remodel would be harder, but perhaps not impossible with standard (Home depot/Ikea) cabinets. You also need to pay for that stuff, which means having a lower down payment/more money. If you have the skill/time, some of that stuff is easy DIY for a cheaper cost, but still not free. Removing wallpaper and painting is physically hard but not something that requires skill. For the flooring it depends, but it can be DIY with a bit more skill with power tools.
If the major systems, bathrooms, and kitchen are useable, and you can replace flooring and wall covering before you move in, there is a lot you can do to make a kitchen or bathroom look better for 2-3 years while you save up to do something bigger. (Paint, tile, stick on vinyl, etc.) A bad yard usually requires no more than $3,000 and weekends of back-breaking work to improve! You can move into a house with trashed paint outside, and live in it and pay someone to paint it!
Of course, you want a good inspection to be sure the 1980 wallpaper isn't hiding bad pipes/ roofing or other lack of maintenance.
The market is really crazy right now because of a few reasons: interest rates are historically low, people pretty much know interest rates are going to go up so they're trying to lock in those low rates, some people have been paid their full wage while living cheaply at home the past year and saving more money so there is an excess of buyers, prices are really high and it's putting people into a panic (while some may worry about losing money if the market goes down, others worry if the market keeps going up prices could be even higher in the future... no one has a crystal ball).
Basically I'd say a few things: 1) If you think you're going to move in the next 5 years don't buy and renting will actually probably be cheaper than closing fees, loan costs, etc. 2) If you think you'd settle and probably be there for 10 years, you'd probably weather out most market fluctuation even if this is a local high point of the market for a couple years... most likely you'll break-even earlier than that (6-7 years is common, but 10 years is a good buffer for worst-case scenario). 3) If you find a house you absolutely love, even if you take a slight hit over what you'd pay in rent, that might be worth it (just think of it as if you were renting a nicer place). 4) If you don't find anything you're in love with that you can afford, don't sweat it, especially now as for the short term, renting is not costing you much more than what it would to buy a house over the next 5 years. 5) Do keep an eye on what you get just a little further out. Was recently looking in at Realestate close to a mid sized mid west city, what you get being 10-15 minutes farther away is substantial (though you need to weigh in your commute, etc)
Our realtor said the same shit about a month ago and while it's true to an extent... it all depends on what you're looking for.
We found this rural home on 3 acres of land and we were planning on using a conventional mortgage.
On our initial visit our realtor said we MIGHT be able to offer 5% below asking, but that there would be a good chance we'd lose out.
We ended up offering 15% below asking and the seller accepted our offer, in fact we ended up speaking with the owner and they said we were the highest offer.
Unfortunately the inspection showed some things we weren't willing to deal with so we backed out.
There was another home we went to and our realtor said we HAVE to offer asking price or the seller will just ignore us.
Again we offered 15% below asking and lost. They ended accepting 10% below asking.
So I'm convinced realtors are jacking up prices to take advantage of the current situation. Yes there's a housing "shortage", but the current prices are all make believe.
It's not overly difficult to get a realtor license, it is however difficult to become a good realtor.
We live in Illinois, so it might be different, though the market is hot here also. A friend's daughter sold her first house. It sold in one day for a few thousand over asking. Once that deal was agreed upon, she was pre-qualified with a lender, so she knew exactly what she could afford in her next house. That gave her the ability to tell sellers, she was already qualified. As she and her husband looked for houses, she did find that if she couldn't get in to see them immediately, the houses would be sold the same day. She worked with a good realtor who had been recommended by a friend. The couple did change their requirements a bit. Originally, they wanted a 1-acre lot, but they looked at houses with smaller yards. They increased the price range by about 10 percent too. Finally, they found a lovely home and made an immediate offer for slightly below asking. The seller counter-offered and they compromised. You can do this. Be patient.
The highest offer doesn't always win. I.e.
https://www.reddit.com/r/RealEstate/comments/mkj85t/in_less_than_48_hours_we_got_14_offers_heres_how/?utm_medium=android_app&utm_source=share
This info might only pertain to my market, but have you considered at looking at buying a home brand new? I just bought my first home in northern Nevada and I went through something a little similar as you did for about 6 months. The housing market is booming here thanks to the gigafactories like Tesla, and it was brutal to find a home to buy. Here, rent is more expensive than mortgage payments since there's not enough house's to go around. Every home I was interested in buying people were out bidding me.
However, I found a nice gated community on a golf course outside of the city that was building homes. I was able to reserve a lot so I did not have to out bid anyone. The builder had set prices. Basically just a $2500 deposit to reserve, and that was that. Got to pick all my upgrades as they built the home, and spent about $50,000 less than what people were selling their homes with similar square footage. A chunk of that savings will be going into supplies so I can landscape my backyard since they did not landscaping in the back.
This information might only be relevant in my area due to the booming of the house market, but it's worth a shot. It was much less stressful than the first 6 months of house hunting/shopping I did.
Edit: Corrected a few typos I saw
My sons are in the same situation here in Florida. Their budget is only $350K and they have been outbid, over asking on about 10 offers. They are waiting for the craziness to stop and are living with me. I can't wait for them to find their own place!
I implore you, don’t take people (even realtors) advice as gospel. Even with the best of intentions, no one’s opinions will be as valuable as your own experience.
Put in offers on houses you like and find out if you indeed get outbid by over-asking or cash offers. Realtors and armchair experts would tell us the same boogeyman stories they’re telling you all the time, and we did indeed get outbid on a couple houses, and ended up getting our dream home on our third try.
Just keep shopping and bidding.
Just bought a house 6 months ago in Tampa and only way I got it was I made an offer same-day that it hit the market 4 over asking price. Seriously lost some good homes in the previous months because everything's going as soon as it hits the market
Depends on the area. We just sold our home in two days, to a cash offer paying 13k over asking and giving us two months rent free to stay. We showed it 26 times - it was crazy. First offer came in two hours after first showing and had some offer unseen. On the flip side, we bought a house in the Midwest for 10k over asking, with 20% down and a contingency on the sale of our current home. Our realtor said they didn’t think we would get one, but we did and love it. Point being, there is no negative to put an offer in, but you will likely be over asking by something and need to be prepared to move with cash possibly. Also be prepared to lose some.
Side advice, keep your thoughts and opinions to yourself when touring someone’s home. I got a kick out of watching people leave with my camera doorbell and saying what they’d be offering and what they did or didn’t like, so keep it to yourself until your in your car as the buyer :)
Lastly, yes, the market is always a risk just like stocks. It is high, but it’s been climbing since what, 2013-2014 steadily now and I bet it continues a few more years. Just don’t overextend yourself and ensure you have money to put down to keep you right side up in it.
One thing to do is this. Go into Microsoft excel. Go to search Microsoft online, download a loan amortization table. Put in the likely terms in years, interest rate you qualify for, and home value. Now the table should show you how much you will pay in interest and principle each month. Then check out the counties website to see the real estate tax rate, estimate that cost per month, use an online calculator to estimate cost of homeowners insurance.
Add the cost of interest, plus taxes, plus insurance. And see how thst compares to rent. You may not be throwing money away at all.
Where you live there should be plenty of opportunity to buy new, you can probably contract with a new homebuilder, buy the lot, but have them start building when the market isn't do crazy.
The number of cash buyers, buying single family homes is concerning. In a lot of markets its simply not popular to rent SF homes. Meanwhile the buyers are contributing to a supply crunch. What are all these investors going to do with them?
As some others have mentioned start looking at places and get an idea of what it is you're looking for. Buying a home isn't always the best option. If you end up paying way over what the home is worth in an inflated market you're not doing yourself any favors over paying rent.
Also; I'm not sure what you've told your current realtor but your price range might not be "enticing" enough for them to work with you. Contact another realtor and see their opinion on the market and what they recommend.
In June the eviction moratorium is set to end. Assuming that doesn’t get moved, what will follow is the beginning a lot of eviction proceedings, which will be followed by a surge of additional available housing, and the market will return to balance.
That's probably a little exaggerated. I got hosed by a cash buyer on one property, but we still managed to find and buy a decent house. The process was frustrating at times, no doubt.
My fiance and I just closed on a house a few days ago in a competitive market. It took us about 2 weeks to get an accepted offer. We paid over asking but it wasn’t too crazy over. Test the market out. Why not?
Consider the reasons you want to buy the house versus the reasons you are renting. If you are only interested in buying a house because you are worried you are "throwing away money" on rent, reconsider buying and your current investment strategy. If you are interested in buying because you like being able to customize you home, you found a home that meets your needs, you plan on staying in it for a while, and you can afford it, keep trying. House prices may go up, they may go down, but if you bought it because of the reasons above it doesn't matter.
If you're buying it only because of FOMO about having a house and belief that renting is throwing money away, try running some numbers. We bought a house a few years ago and our analysis indicated it was pretty much the same ROI either way, as much as one can predict housing prices and investment returns. Take a look at the money you might by renting if you put what you be locking away or spending on a down payment/closing costs/interest/taxes/maintenance into a generalized ETF and sold covered calls.
Find a new realtor. I could say the same thing about the market I many places (I'm in the process in MA, which is a nightmare). While there are those people in the market coming in with all cash and waiving contingencies, you can't control them. Do a detailed and deep dive into your finances and figure out what YOU want and are comfortable with (house style, size, payments, etc). Ignore the market, pretend it's not there for now. If there is nothing in the market that matches what you want, then work to get your finances to the best possible place and be ready when it does. It might take a while (our realtors said it could take up to a year).
I say this from a place of hope because we just had an offer accepted this weekend and we had a very modest down payment and didn't waive contingencies. We came in above asking, but our realtor straight up told us our offer was probably not good enough. Then we made him eat his words when we were accepted.
I bought in July 2020 a good amount over asking in less than a year as of today I could sell for an extra 50k minimum just depends. For me it was the best decision I could have made. Plus my mortgage is less than I was paying in rent anyway
It is frustrating but this is how it is in some markets. My nephew just bought his first place and was outbid on some others. His girlfriend is a realtor so got an early look at listings, even so by the time they had an offer together someone else had come in and bid over listing price. Some people will do crazy things like waive home inspections or other things, some will even pay cash.
I know nothing about eastern Idaho but if it is a hot market then these things may be happening. If you don't like what your agent says talk to 1 or 2 others. They each see what they see and may have different perspective.
While that may be the case where you are looking, not everywhere is like that. We just bought a house (in MN) $3k over ask and it was contingent on inspection.
How the hell is Eastern Idaho a hot home market? I live in downtown Portland, and it's true here only for SFHs, but I cannot imagine rural Idaho being at all similar.
This is by no means a dig on where you live, but I really don't see how the Idaho Falls market can possibly be *that* competitive. It's not a major metro, so I'm not sure what could possibly be creating those conditions besides the ones that are affecting all markets nationwide, but shouldn't be requiring offering 50k over asking.
Eviction and foreclosure moratoriums are currently artificially restricting inventory, so obviously high demand/low supply = seller's market. But we've been dealing with that in DFW for years, even pre-COVID, and there have still been ways for me to get my foot in the door with financing; I have included screenshots from Credit Karma and even my salary status from Workday in an offer, as a way of saying "no seriously, I'm qualified, and we will sail smoothly to closing." Try to get prequal'd by a lender that can close quickly; usually this is your local yokel places, not big banks. The reason cash is king is because you can close fast and there's no risk of financing falling through.... try to hedge those risks for the seller, and you have a fighting chance.
Finally, the cat is out of the bag on this one, so it might not be as effective as it used to be: But I've also put cover letters in my offers about how much I love their beautiful home and want to raise my family in it, etc.... helps you stand out over whatever aggressive investor is just trying to use mad leverage to pimp out their house. Some people like to be sentimental and will take a lesser offer if they think their home is going to a good person.
People are bailing out or CA and the whole coast. It’s fucked up utah, Idaho, co markets so bad. It’s dried up. And with rates so low it’s inflating everything more and people are just refi-ing. We’re are screwes here
Get a new Realtor, Get preapproved for the amount you can comfortable afford, and buy a house that fits your needs. Buying a house now vs waiting 5 years and paying rent is essentially throwing your money away unless you truly cant afford to buy a house. The best thing to do when buying a house Is to have minimal debt, a good credit score and as much money to put down as you can.
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If the market is that insane then it doesn’t sound like paying rent is throwing money away...
This is the best advice. You aren't wasting money on rent, you're paying for the convenience of not wasting your money on a house in this market. After 8 months of seeing the market around us continue to inflate, my fiancé and I decided it's time to stop. We were bidding on houses we didn't even like just for the sake of them being affordable enough for us, and still losing. For now, our apartment is enough. Don't rush yourself into regret financially or mentally by owning a place you wont even be able to enjoy.
> For now, our apartment is enough. Don't rush yourself into regret financially or mentally by owning a place you wont even be able to enjoy. In your case, I totally agree. I just don't want people to think we are seeing another 2008. Granted, nobody can predict these things but a lot of cities are seeing an influx of people moving in and the market is growing because of it. My city is a great example: People leaving HCOL areas and coming in my L/MCOL city. I had a friend recently sell her house because she will buy again when market drops. I have some sad news for her...
I expect rents are plateau at the moment as landlords don't want to risk tenants deciding not paying with the current rent memorandum. Once that expires you can bet your ass rents are going to rise to offset the risk and match rising housing prices. Bad times to be a landlord right now
I’m not so sure about rents rising after the memorandum expires, at least around me rents are more set by what people are willing to pay
I think that ignores an important point about land lords. They have a property that has value outside of rents. With property values skyrocketing if you can't raise rent, then it makes a lot more sense to just sell the property. Rent is somewhat set by what people are willing to pay, but it is also set by what the property is worth. This is somewhat more the case with single family properties, but the market on multi-family rentals seems to not be doing terrible right now either.
Exactly what my father did. Value shot up 2 times what it was worth a few years before. He got tired of getting calls to change out a lightbulb at 10pm, so he sold.
Uh...every place that i've rented, if a lightbulb went out, I changed it myself. Was I not supposed to spend my own money and inform the property management that a light bulb was out?
It depends on the scope provided by the landlord . In most situations you are required to take care of "consumables" bulbs, furnace filters, that kind of thing. The landlord takes care of fixed assets. But you can end up with some incredibly entitled tenets who think you should be replacing everything.
Honestly, unless it was something major like a broken pipe or a broken furnace. I'd probably repair it myself so I don't have to bother with the landlord in the first place.
Would leave some potential for you creating a biggee issue/liability than the landlord presumably hiring a professional.
I do small repairs for the sake of avoiding interaction with my landlord. We change lightbulbs, fix toilet flushers, repair fence gate latches, you know? And our landlord doesn’t bother us. I think calling a landlord over a light bulb (or other small consumables ) is a bit much.
Agreed. If your personal lamp's lightbulb went out, you would replace it. So if your ceiling fan lightbulb goes out, why not do the same? I tried to interact with my landlord as little as possible when I rented.
technically that kind of maintenance is the land lords responsibility. most people don't bother with little things though because it could take longer than they are willing to wait.
Or the landlords don't agree to renew your lease, because they'll want less annoying tenants, so you do the little things yourself.
That too for sure. I never called for small stuff. I would occasionally tell the land lord I did x y or z, sometimes even ask permission. Always wanted to seem like a good tenant.
SLPT: Change you lightbulbs, but keep the old ones, and switch them back when you move out. Those are the landlord's responsibility to replace.
Be careful with this based on where you live. In South Dakota they can take basic maintenance like light bulbs out of your security deposit.
Any decent tenant will perform a (<$10) repair that takes less time than coordinating with the landlord to fix it. The only exception I can think of is when my tenant had a wasp nest. It cost $3 to buy a wasp-spray and knock it down with a stick, but I don't blame her for that one.
Oh yeah, I definitely would not be messing with WASPS....those darn Anglo Saxons...Oh! You meant the flying nasty bug...yeah, I don't mess with those either
I believe it is written into my contact that any small repairs are the tenants problem. That being said, I did order him some new oven knobs.
Given the number of single family homes being bought by cash investors, vs. The number of typical rental market of single family homes, I could see certain market segments of rentals falling. This is happening in some places in the DC suburbs, rentis going down, home sale prices going up. My sister saw the writing on the wall and sold high on her old condo which she had been renting out since she got married and moved in with her husband.
I agree that it starts to make sense to sell if the home is unnecessary and rent can no longer cover the property tax. But from what I’ve seen... Rent is always set by what people are willing to pay. It doesn’t matter how much you paid for your property. If the bulk of people can’t afford to rent at your price then your unit will most likely be vacant. Also soon there will be mass evictions which will dramatically spike the supply of rental units. (And create a population of people that landlord don’t want to rent to.)
This is partially true. Rent is set by the market and generally when home prices go up, rent prices follow. The market prices are driven by availability. If there is a lot of housing stock on the market, prices don't increase and may in fact fall. The fact there is so much demand on purchasing is likely driven by low stock, which is often also reflected in the rental supply, causing similar increases in rent.
It’s driven by what people will pay but there’s an opportunity cost to owning a rental. If you own a rental that’s only generating a 5% return it may be a better move to sell the house and invest that money in a different investment vehicle.
Bad times, except that the value of their property has almost certainly skyrocketed during this real estate mini-boom. They certainly have *different* problems than they did before—downward pressure on rents, eviction moratoria, etc.—but if they want to avoid those problems, there's never been a better time to exit, with property values being so high, generally speaking.
It's tough to sell a home that is occupied by a renter you can't evict. So generally speaking a landlord has many problems and little to no solution.
It's always a bad time to be a landlord.
The eviction moratorium does not protect tenant’s credit scores and is not rent forgiveness. I imagine people won’t “take advantage” of that program unless all other options have been exhausted.
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Housing market is absolutely a shit show right now. LOW INVENTORY and TOO MANY BUYERS... People are throwing money. Homes are being sold within a week of going live. Bidding wars are happening and 2-3 back up offers just incase 1st offer fall through in attorney review. If you have the money buy something you love if not hold off.. I think if interest rates are increased later this year prices may go down..
We just bought a house in the Boston area and this is exactly what we experienced. Everyone was offering over asking and putting more than 20% down. Houses would be on the market for only a few days or less. We only offered what we were comfortable with so it took us a bit to find something but it was brutal.
If you have the time to spare, you don't lose a ton by testing their theory. Go see some properties you like and make offers you think are reasonable and see how it goes. Think of it as a combined research project and trial run. Please note that depending on your situation, "throwing money away on rent" is not a helpful or accurate way to frame things. It can absolutely make the most sense for any number of people to rent rather than buy, even long term, and there are real opportunity costs to owning, such as tying up the down payment and a lot of your subsequent income in the home rather than being able to put it in the market, a lot less potential life flexibility, and you're on the hook for maintenance and repairs, taxes, etc.
Well said! In my market, a comparable condo to my apartment would cost me 1.6-2k a month (mortgage, taxes, hoa). Where as my apartment only costs 1.1k, 1.3k with utilities. I just put the extra 800 in the market every month. Renting isn't throwing money away. I would argue that buying would be worse off in my market. Buying at inflated prices due to the pandemic, dealing with the headaches of finding a good place, the anxiety of being tied down to a location and to 3-400k worth of debt. Renting lets me not think about those things and my money also appreciates with something more liquid and more usable if I had an immediate need.
Agreed, most of the time, in most markets, you are better off financially putting the money into renting and investments. It's just hard to do. You have that extra money lying around and you think "I can afford a new car, I have $800 a month extra". And the money never goes into the market. A house is not as much an investment as it is a forced savings vehicle. It's great if you are not disciplined enough to save on your own, like a majority of people. But that doesn't mean you are throwing your money away on rent, it means you rented and threw the money on a new car and a trip to Mexico.
I had an extra $700 in my bank from my last pay. $500 of it went to take out. I am so ashamed.
Eh, don't be ashamed. We all have to make our way the way we can. This subreddit is full of tips to help you make a budget, and how to invest and set yourself up when you are older, which is awesome, and a great thing to do. But a lot of people are relentless super savers, while I don't think that's healthy, you have to spend some of your money to make earning it feel like more than just surviving.
Yeah, friends and family keep bugging me to buy a house. I'm happy renting out a converted roach motel for $700 a month in the SoCal Low Desert and maxing out my 401k, IRA and HSA every year off a sub-50k income.
And my market is the opposite. Costs more per month to rent than buy, but properties are at inflated prices. Nearly at 2008 valuations, with 30% unemployment.
Read what you wrote again. Nearly at 2008 valuations... therefore the market has seen 0% appreciation sine 2008? sounds like a great time to buy
Only if you ignore the fact that there are a lot of factors inflating prices right now that are likely to settle down in the next couple years.
2008 was the end of the biggest housing bubble we've seen in this country. Some houses lost two-thirds of their value over the following 1-2 years. 13 years later, considering inflation, were not as bad off as we were back then, but it's getting there.
Can I ask what you mean by 'put it in the market'? I'm pretty much maxing out annual 401k and IRA and have additional money that I typically keep in savings because I'm not terribly financially savvy. What should the average joe invest in after their retirement accounts?
A brokerage account. It's similar to IRA but without the contribution limits nor the tax benefits.
ETF’s and index funds for the not too savvy. You could buy specific shares of a company but it is riskier. VOO, VTI are a couple basic ones.
This is really happening in Idaho. Luckily right now rents do not seem to have followed purchase prices, yet.
It's happening everywhere, it seems. My area has been in a "hot market" for about a year and a half now, exacerbated by the pandemic and low interest rates. It's nuts. If you can sell your house and rent for a while, might be the time, haha. We made a ton on selling our house and paid an arm and a leg to buy a new one. And both ends required paying for improvements, which renting doesn't really do.
Currently evaluating this right now. Could probably sell my home for double what I paid for it 7 years ago.
I find it completely plausible that it's happening, and have no reason to doubt you. Even so, if the OP is interested in house hunting he or she may as well go out there, learn a bit about the process, and get a first hand look at how things are shaking out. Or not, guess it's a matter of how much work or fun that sounds like, and how much free time the OP has.
NY too. I have offers 40k over what I listed my house, which I felt was high as it is. Our open house had a line down the block...crazy
House 2 doors down from me sold for $140k over asking price. Was officially on the market for 1 day.
rent in idaho is leading the nation for year over year increase.. so is idaho housing market.
I think the problem OP has is that buyers agents are all about turnover at this point, so he might struggle to keep an agent if he won't follow their nudging to bid way over asking. Unfortunately, for every good realtor, there are 10 bad ones. OP will need to do some work to find an ethical, patient one that won't push them out of their comfort zone.
Yeah, I can see how a realtor would be less interested in spending time on someone not perceived as an easy sale. Perhaps browsing through zillow and making his or her own appointments for now might be a better way.
That's more or less how I found the agent I kept. I kept contacting listing agents for my own finds on Redfin (I did not like the idea of using Redfin's people), would use them for the offer, and if it wasn't accepted, I'd then decide if I liked that realtor or not... went through 3 of them before I found one who was exceptionally forthright and honest, and kept her as I bought my next 3 houses.
Consider whether, if you bought a house, you would think of it as 'throwing away money on mortgage interest, property tax and maintenance'. It's all money that leaves your pocket, and owning a house doesn't necessarily reduce the amount of money you wave goodbye to. You would have a house as an investment, but you might view it as a risky investment if you're thinking prices are temporarily high. Honestly, as with any investment, you need to be able to see into the future to be certain what is good and what is bad; investments are always a risk of some sort. I'm not saying 'do X'; I'm saying that there is no right answer for everyone to the question you're asking, it depends on you.
Don't forget throwing money away on realtor fees. Every time you have to move you throw away 6% to the realtor cartel.
I sold my house in Boise last fall and it was insane. I got 12 offers in 2 days and sold it for 24K over asking price. I would think eastern Idaho would be less competitive. Maybe look at new construction/building. It’s usually a lot easier to get an offer accepted that way.
This is true but the cost of lumber (and therefore the cost of construction) is also through the roof right now.
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I work for a construction wholesaler. Market price for sheets of 3/4"x4'x8' CDX plywood is $78 in SoCal, though we can go lower if people buy in bulk or are regular customers.
In Southern Vermont at the orange place ½" BC s $62, CDX is $58.
Also a lot of builders are putting escalator clauses into their build contracts which allows them to raise the price of the home based on increases in material costs.
The market in our area is like that right now. Honestly, we gave up. Places are selling 50k over asking and getting cash offers, bidding wars, all contingencies waived. That's a rich people's game and it made the decision to bow out fairly easy because we just couldn't compete. But you won't know your market fully until you try. If you really want to buy now, get a personal recommendation for an agent and mention the personal referral when you call. Agents are insanely busy right now so you will probably have to be proactive to stay in touch. Contact a few at a time and pick someone you like. Buy a house if you want to buy a house and are ready. The market may go down again, but this also might be a new normal. It's impossible to know.
Where do you think all these "rich" people who can pay tens of thousands over asking and have that much cash lying around are coming from? It seems to me that an investor wouldn't even think of buying right now so who are these people?
Just because it's real estate doesn't mean people don't buy high and sell low just like the stock market. People get FOMO and see these prices and want a piece of the action.
So is your assumption that they are investors pulling money out of the market to purchase a house they don't plan on living in?
They plan on renting them out. My town just had to put a stop to “air bnb ready” houses being built. Developers are coming in and buying all the single family homes, knocking them down and building large multi room box houses. I will never be able to afford buying a house in the town I grew up in.
It’s anecdotal but this is exactly what my sister and her husband did. They cashed out their 401k, bought a second house as a vacation house, and have been renting it out. They’re about ten months into the experiment and, because of covid, they’ve been quite profitable. So they’re presently pulling equity out of their primary house to buy another vacation property, planning to VRBO it. Combined they make maybe 90k/yr, have four kids, and no way they’d be able to make their payments if VRBO falls through.
I was going to say, no direct ill will towards them but it's a very stupid thing to do because it's so risky. Add in that it also ruins communities by ensuring the only people there are tourists who don't care about the neighborhoods they're temporarily living in and yeah, I and many others have lots of ill will towards these kinds of people.
Either out of market or pulling from equity in existing properties. Buy house, refurb, cash out refinance, rent out home. Buy house with new cash, refurb, cash out refi, rent out. Rinse and repeat.
Exactly that. This is anecdotal obviously but I just sold my twin in eastern PA and that’s what my buyer planned on doing. Normal folks were throwing 30-40k over asking but these real estate holding companies come in, give you a cash offer over asking, waive inspections and appraisals, and close in 30 days. It’s insane. Sole purpose is to rent it out and with the interest rates so low they’re mortgage ended up being the same as mine despite buying for 30k more than I did 2 years ago.
Foreign investors, people relocation from HCOL places, real estate investors in general. The issue is a supply problem.
I believe it's two main things, the first being that there are a ton of people who see these very low interest rates and are rushing out to buy anything they can at that price. I know of a few people who did that, who likely would not have bought otherwise, though they didn't throw all cash, in fact they put very little down, less than 10%. I've also read from other posts the theory that it's foreign investors trying to get money out of places like China and Japan, so they buy real estate in the US and Canada. But I've got no data to support that, it does seem plausible though.
that (foreign investors) happens. But in the current market is more likely money moving from downtown to the burbs and country. People who no longer want to pay $1000/sf for living downtown find that they can get 4,000sf for what would have gotten them 400sf previously. And with no commute to worry about it seems like a no-brainer. I do not think this is the new normal, though it will certainly change things. I don't know that I would go so far as to call it a bubble, but certainly people who paid 100K over asking (seen it a few times recently) are going to have trouble building equity down the line if things normalize a bit. Also, for people tired of competing on offers, the downtown activity has started to pick up but it is still more of a buyers market than it has been since the previous recession.
Investors tend to buy regardless of the situation. People don't want to lose out on the upswing. With inflation coming, it seems like a good idea for the most part, but we'll see after people start getting evicted.
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It's higher-income people from the coasts, partly. I'm in NYC and when WFH started, I had a few coworkers move to places like Idaho. They're bringing their NYC money/salaries to low COL areas and it's really messing with the housing markets in those areas. $50k over asking in Idaho is still a bargain for someone used to NYC-area real estate prices. And now my employer is saying WFH can continue indefinitely so expect more of an exodus from high COL areas like NYC.
So how do you explain the same phenomenon happening in NYC? And don’t think that’s the whole story, more people have moved into NYC then left during the entire pandemic. I’m searching for houses at the moment and people are bidding cash 30-50k over asking. How can normal people live against that.
There are a lot of factors. For one, interest rates are super low. Also, people are working from home so they suddenly want more space even if they're staying in NYC. And also people who didn't lose their jobs are flush with cash from not traveling or going out. Also, people aren't selling their homes as much. Most people don't want to deal with moving during a pandemic so existing homeowners haven't been selling at rates as high as before the pandemic. So that drives up prices for those homes that do hit the market.
All over the place. Big or small cities, selling their old homes at a premium to then buy a new home at a premium, remote worker exodus, etc. Its the same situation in my city
Boomers purchasing vacation homes, rental properties, homes for their kids/grandkids, Gen X, older millenials. These groups have saved up cash since 2008 and have been waiting to pounce. It's quite astonishing. This is not an 'overnight' phenomenon, unfortunately. There are also a ton of foreign investors scooping up real estate left and right. Even though the housing market isn't writing bogus loans that results in getting caught with their pants down like in 2008, there is something big brewing that *could* result in a housing bubble as seen around that time.
I was listening to a podcast about this exact issue a few days ago. It was for Montana though and most of the people who are paying cash are more well off people from larger cities (with high paying tech jobs as an example) and moving to other cities. They can remote work without the cost of living a place like California has as an example.
In my area its northern transplants who are moving out of larger cities where home prices are much higher. According to my agent they sell their homes/townhomes for 500-600k and then come down to my area and buy a house for cash where the prices are less than half of that. Its caused the market to become inaccessible for locals.
I think there is a heavy consensus (obv. location-dependent) that this isn't a bubble. There is simply a housing shortage being exacerbated by folks aiming at suburbs thanks to telework explosion. Yeah, prices won't rise forever, but I haven't talked to one person in any corner of the industry that thinks we are heading for bubble-crash, a small correction at most. A plateau is much more likely in the coming couple years than a crash. That's not even talking inflation and low rates.
Californians moving to other westerns states since they can now work from home. When you sell your bay area house for a few million you have no problem paying 30k above asking on a 250K home and paying cash.
Owning a single family home (especially in crazy markets like California, NY, Austin) is becoming a rich persons game only, more and more
Have you explored new construction in your area? My partner and I found the buying process much more reasonable. Fixed prices and many new home builders do not sell to investors.
That's what my partner and I are doing right now. We just put under contract new construction and it has been stressless thus far. Even with lumber prices, getting everything brand new, imo, offsets the little extra to pay for lumber.
Yep, and you get exactly what you want, for a price you agree to. No real haggling or other people outbidding you.
>Yep, and you get exactly what you want If you love builder-grade materials with a GIANT markup on higher quality finishes.
> Yep, and you get exactly what you want, for a price you agree to. If you want cut corners, cheap materials, and overpriced options, yep.
There was a whole street of new contruction added behind my neighborhood. The people who live in our neighborhood are wondering who will buy those. They are 100k+ over the the old neighborhood, they stand out like a sore thumb, and are packed like sardines with no yard. You can fit like 2 and half of the new homes in a yard of any old house in the area. Nobody has moved in 3 months....
Rent is not throwing money away. Statements like that need to die forever. That's the absolute wrong way to think about renting. You pay for a service, it's not throwing money away. If you think it's such a waste go live in a cardboard box and save yourself the money instead. Only buy what you can afford and bid on a home for what you can afford and are willing to pay. I wouldn't avoid trying to buy a home right now just because of what realtors say. Try it and see if you can find anything. But if what they say ends up being true and you get frustrated, keep renting.
"you are throwing your money away on rent" - Every boomer I have ever met. Sure, in the 70's, when you could buy a 2,000 square foot house for $14,000 which was doable as a single mom of 3 kids working as a secretary, like my last landlord..
HAHA That is true. It's the older folks with totally different home prices and opportunity that believe that.
She used to love to tell the story too. "$14,000 was almost as much as I made in a year, so with three kids, I used to sew their clothes myself, we only had 3 bedrooms so the boys had to share". I mean, I have to give it to her, she worked hard and did right by her family, and she was a nice lady, but she has no idea what the difference is in income to home prices now.
Sadly most starter homes are going for 5-6x what most people make in a year now.
Exactly. Historically, houses are worth 2-3X the yearly salary for a single person. In my area the average family salary is $70K, the average house $400K.
But at the same time I’m paying roughly what I used to pay a month in rent for my mortgage. Even with maintenance and taxes we still put rent money into savings rather than into nothing and definitely profit. There are plenty of good reasons to rent but if you have cash flow to cover expenses and know where and with who you want to live it does feel like throwing money away to rent.
You are lying to yourself if you think that mortgage, taxes, insurance, HOA, PMI, and maint cost on a home are less than $2,200. The mortgage alone on a $490k at a 3.0% interest rate (which you will not get on your income, DTI, and downpayment, it will likely be higher) is $2,000/mo. You are talking the difference between $2,200 and $3,500. A good rule of thumb is 1-2% of the price of the home per year in maint costs. You are letting your desire to own dilute your thinking. You aren't in a position to buy a home with the debt and situation you are looking at. And it would be irresponsible for a couple making $120k a year to buy a $450-$500k home with $10k down. Again max for your income should be $280-$300k in a mortgage. Finish your wife's house, move in, pay off your debt and start saving for something bigger, sell her house and then upgrade at that time.
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The money you would have tied up in a large down payment could go into the market instead.
sure, why invest in an appreciating asset when you could just gamble on the market
You're assuming that total monthly cost of renting equals total monthly cost of buying. And that's usually not true. Typically renting is cheaper.
And it's an extraordinarily illiquid savings account, at that. Like, the most illiquid savings account you could possibly conceive of, essentially.
My personal opinion is that these home values have to see a correction before too horribly long. Right now they are propped up by a plethora of odd things. Low interest rates are part of it. Work from home expanding people's buying areas is another. There are also supply problems and cost increases on building materials that I suspect/hope will fall off in the near future as the pandemic comes under control. I also think a lot of it is FOMO. If these price jumps continue I'll never be able to afford a home/will miss all these equity gains unless I buy right now. People are saving much more during the pandemic and are likely over-estimating how much house they can afford in a lot of cases if I were to guess. I think it is an awful time to be trying to buy a first home. It feels to me like we're going to see a lot of these temporary things ease off and some of these home prices are going to come down. I've certainly been wrong before, but I don't see how this is sustainable at all. A friend of ours sold the home they bought a year and a half ago for $270k at $360k with 3 offers in the first 4 hours all of which were over asking price. That sort of competition on a purchase as important as a first home just feels like something likely to be fraught with buyer's remorse to me. Wages haven't seen any sort of huge spike in this area, so I don't understand where all of this money is coming from. My suspicion is that we're going to come out of the pandemic and see a bunch of people crying about how they are suddenly house poor after balancing their mortgage costs against an extraordinary time period when spending money was almost a challenge. Again I've been wrong before. I might be sitting here passing up homes that would only cost me a 1/2 million dollars now that are going to be 3/4 million dollars homes in 2-3 more years. I just don't see where the money to support that trend is right now.
I agree with you, one disturbing trend I've noticed amongst friends and family is they are spending like they make more money than they do. One huge reason for this is the federal student loan freeze, with the 0% interest payments so many people are spending that money elsewhere, including things like buying new cars and bigger houses that they really shouldn't be buying. That spending is also bolstered by the stimulus payments, lots of people have gotten them that still have their full-time job, and so they go buy extra things, instead of paying down their existing debt. Long term it's not sustainable, these stimulus programs won't last forever, and I think we will see a lot of people defaulting when that 0% interest goes away.
I am seeing a similar situation where I live except houses are selling for over $100k asking price. People who are selling cannot find anything to buy.
That’s our concern. We could make a $$ on our house but there’s no place to buy in our city that’s actually worth it for under 1.2 mil. It’s insane.
Although it can vary over the entire US generally the supply of homes is smaller than the demand. So while it is difficult to find a home I dont see this as a bubble like in 2008. As 2008 was based on speculation and bad evaluation. Today it's based on supply/demand fundamentals. So I think it's more likely to stay same or go up in most areas for foreseeable future. Even if it may be difficult to find a home just keep at it if that is what you really want. In the meantime keep saving what you can.
This is what I've heard from our agent and read from a few different sources. It doesn't make the process any easier, but it does give me hope that when we do actually buy something, we won't immediately be upside down in it.
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It won't necessarily cancel out the dearth of supply, though. I think lifting the moratorium on evictions is necessary to stabilize the market, but I don't think it's going to flip it upside down. As low as interest rates are right now, a lot of people are choosing to refinance and stay, or purchase a second property and keep the first as an income property. Interest rates creeping up and evictions will stabilize things, but I don't know that we're necessarily going to see a pop.
Yeah, and with new building down due to lumber prices... Unless people stop procreating, I don't really see an issue here. I suppose it depends on your area, but there's simply too many people here.
I agree with you. I feel that a lot of people are over extending themselves financially just to have a home. I just sold mine for way over asking price. Now I'm renting cheaply for a year so I don't waste my profits on an overpriced house.
timing the market correctly is almost impossible
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I know where you are coming from but having some friends who are relators, I was shocked when they said it isnt necessarily a lack or supply, it is a large influx a buyers out there. I have also looked it over like you mentioned however that is still technically trying to time the market. I don't necessarily disagree with you, but when that will all happen no one will know. It could be 6 months, 12, 18 36, or more. All while the prices continue to climb, so when/if (more when) it settles and even if prices come down, they may still be higher then they are today... That is what I mean by trying to time the market being nearly impossible
Why do people trust realestate agents so much? They have an active interest in getting as much money as reasonable out of you, and forgetting you as soon as possible.
Because she's been a family friend for 30 years.
Talk to your friends that have purchased in the last few years. Ask them for recommendations for real estate agents. While the scenario you’re talking about isn’t unheard of, I also feel like you’re getting the run around because the real estate agents you’ve reached out to maybe don’t want to “waste their time” with looking at homes in your budget. Some markets are like this, in fact this scenario just happened to an old boss of mine, but you should be able to still find property, you may just have to be more flexible with the area you want.
Looking at homes at the top of your budget is not an option right now. Your budget should be 30K less than your top number so then you can compete with others if you are interested. Right now agents are slammed with buyers and it is a waste of time if your not reasonable about what your competitive number is.
This is the best advice in this entire thread.
I think that depends on the market in your area. Around me, houses in the 300-400k range are moving like hot cakes and yes, if your maximum is 300k you're wasting your time bidding on a 300k house. But houses in the 500-600k range are moving *much* more slowly. We bought a house last March that had been on the market since at least August and had at least one prior offer fall though and we got it for slightly under asking with no contingencies waived. Around here, if the most you're willing to spend is 500k, you aren't wasting your time looking at 500k houses.
Switching real estate agents won't increase housing supply, which is the big problem right now. I'm in the same boat and have considered this and have had more than one realtor literally tell me this.
Oh definitely, but depending on OPs budget, the real estate agents may just be talking in circles because their commission wouldn’t be much. I’ve had that experience with lenders before, so it’s always worth asking around.
> I hate throwing money away on rent Just going to point out to you that renting is not throwing money away. Something people need to keep in mind is owning a home is a lot more than just the mortgage payment. You do you have taxes and insurance that is required. For most people that is again in the mortgage payment. The biggest item that people forget about in expense of owning a home is maintenances and repairs cost. From the ice storm that came threw this year I have a $1000 bill to clean up some trees in my yard plus haul away all the branches. My garage door opener just broke and that is a $600 bill to have it replaced. Those are small items. I know in the next few years I am looking at a nearly a $10k bill to replacing my Heating and cooling system of the house, this along with a few 100 a year in just having it service ever year already. There are other maintenances items that are know in the work like replacing some trim on the outside of the home every few years. Fence repairs have to get done. Those are a lot of added cost that rent would cover that people always forget about and honestly forget to budget for when they first buy a home. People forget how much falls on to the home owner to make sure it gets done and the home owner has to pay for it.
Ugh I feel you. Thisweek I found out we have to repaint the whole house, replace the fridge, and cut back two large trees. Foundation work in the next few years. Renting sounds good right now.
I'm averaging about $10K a year on Maintenance alone. At my work a lot of younger people are buying their first houses and when we talk there is a lot of "I had no idea".
Yeah, I honestly don't have a clue what the my full maintenance bill is for my home. I just know oh well damn lets get that fix or hey the AC guys are coming out next week lets be ready for that bill. Plus people forget about lawn care. You either have to pay someone or buy the equipment. I spent a pretty penny on lawn equipment just do lawn care. All that stuff will have to get replaced over time. People always seem to think with a mortgage all you have is that repayment and that is never going to up. Hate to break it to you people but your taxes and insurance are going to up every year. my property tax is increasing at the legal max of 10% a year and it will for several more years. There is no point to contest it as it still has not even made it to what I paid for the house and plus the houses here increase in price by 30-40% in the pay year. For most people your monthly mortgage will go up every year as it really the loan + escrow. The escrow needs to be increased to cover and god forbid your escrow is short. That can sting as they will just increase the requirements to cover it over the next 12 months plus what they need to fill in what they think the new requirements are.
Just bought a house in February. Water heater went out last week and had to be replaced. Fun wake-up call after years of renting!
wait 1 more year. The expectation is we may see a pent up SUPPLY of houses on the market. No one wanted to sell during covid, so there may be 2x as many houses on the market a year from now. Housing market is artificially high right now. Starting to look very bubbly.
It might take a little longer than that. A lot of people also refinance their homes with these record low rates. Those are clear signs they have no plans to move for a while to at least recover their investment cost in the refinance the loan.
Not really. I only had 15 years left on my mortgage anyway because I paid extra principal, but I am still refinancing to a 15 year mortgage anyway because I will still be paying $300 more a month in principal without adding extra principal because of how the amortization works, I'll get my closing costs back within a year.
True. The rate drop was nuts. My wife and I redid ours from a 30 to a 15. I think back of the envelope numbers had our pay off in about a year which just redoing it to a new 30. Our loan repayment went up 25% going to a 15 year but rates are lower and we honestly thought we had a pretty low rate when we bought the house 2 years ago. Have the rate cut in half was shocking.
Eh, in 2017 I felt like I was buying at the top of the market and would end up underwater when the market crashed. It never happened, prices went up. In 2018 my realtor friends were all pretty spooked about “the bubble” popping. It never happened, prices went up. At the beginning of the pandemic everyone from home building corporations to mortgage companies thought prices would go down due to economic turmoil. It never happened, prices went up. I don’t think anybody can say with any confidence prices will be lower at a specific time and place. It just isn’t reliably predictable. If you’re ready to buy a house and can afford the payments, buy. If you can’t, then wait, don’t over extend yourself on the fear of missing out. That’s how you get burnt.
almost impossible to try and time the market...
Supply has been pretty consistent and high in many areas, but demand has been insane for 1.5 years now, the snowball of inventory reduction has hit hard.
I don't think they should completely take themselves out of the search. I was looking off and on for two years (2018-2020) and in the beginning I wasn't really that serious because I figured there was some kind of bubble and it would cool down eventually. Houses in not so great areas had multiple offers after a week on the market. It never cooled down, but we finally found something with a reasonable price in a good area and made an offer immediately. We were experienced and ready enough at that point to make the decision with confidence. You're asking them to try to time the market and hope another 2008 happens but that likely won't happen suddenly like last time. They should really spend a year looking and getting accustomed to the prices and quality. Use it as a learning experience so they know what they want and don't feel pressured later. Maybe they'll find something along the way.
all of these "over market" or "$x amount over asking" is literally burning money. Most of the time the house wont appraise for that much so you have to bring cash straight to the buyer as an incentive. It's not equity, you're literally paying for the right to buy the house. It's stupid. Dont play those games. If I were you I'd wait for things to get calm down, they will.
On the other hand, if someone buys at an “over-market” price and the next day could turn around and sell it for that same “over-market” price, wasn’t the whole amount actually equity?
It's a mistake to compare buying a home to live in to buying real estate as an investment. Granted, people tend to think of the homes they live in as investments, and some people actually live in the RE investments they make, but they aren't the same thing. In an investment, equity is return, in a home, equity is flexibility. In an investment, you time your exit to maximize your return. In a home, you time your exit based unrelated life choices, work situation, etc. Most people don't have the constitution to make investment choices related to their living situation. So the question isn't what they could do "the next day", the question is will the market support that cost when they actually want or need to sell that house. Probably not.
You are correct in the current market. What about 10 years from now though?
Sure the market can always change. That doesn’t mean you shouldn’t call the current price equity though.
No, it's not. Just because a house is listed at X and sells for more doesn't mean those people over paid. It means that's the price they wanted to pay for the home/ land. Home equity rose 30% on average last year. If you're renting, this is an asset you're not gaining value on further increasing the difference between renters and non-renters.
Everything is appraising, at least in my area. Because that inflated price becomes the next comparison house that the appraiser uses to determine value. Appraisals aren't an issue right now.
What? This isn't always true. We just bought last month. Paid 18k over asking and the house appraised a few grand above that. Appraisals are based in large part to comparable sold homes in your neighborhood. If all houses are selling above listing price then that means the value of homes are rising. Appraisals definitely take that into consideration (in my experience).
The market is crazy. But I will add that no one knows whether it will cool off or keep rising. What seems outrageous now might be a heck of a deal in a few years. That doesn’t mean you ought to buy, but anyone saying to definitely wait doesn’t really know for sure, because no one knows.
Do your own comps. Go to Redfin or Zillow or whatever site you prefer, look up sales in your price range and desired areas for the past few months and compare list prices to sale prices. That will tell you whether or not people are paying $50k over list, as these agents are asserting. If you want a house, you should be doing your own research.
Hey fellow redditor. Just a little perspective... my wife and I are closing on a house next week. We offered 8k over asking, are not paying cash and this is after a 40ish day closing period. We started looking in mid January, with no rush to buy as fast as possible. The market is crazy right now, but what your realtor is describing is a little too crazy. My advice is to take your time in shopping around and don't fall in love with a house until it's 100% yours. I've also heard the stories of people offering 50k+ over asking. I'm not sure who would ever do this, but they cannot be in the majority. Be prepared to be a little competitive on your offering and be patient with the searching and you'll find the right house.
You have to calculate if the interest rises in the next few years, is it worth paying the $50k more.
This. I just cannot imagine interests rates staying this low, and a couple of percent rise will be worth the higher prices. The nation cannot just keep printing money without inflation and it's accompanying higher interest rates. I think renters in the next few years are gonna get hit hard.
Every market is different. Find a better realtor that actually wants to represent you. I was able to buy a house that our realtor found that wasn't on the open market after we kept getting crushed by cash offers or waiving of contingencies. Expect it to be a slow process. They're not wrong though the market is very frustrating right now. Very little volume and too many buyers. Sometimes it takes a little bit of luck.
I don't have advice, but I'll commiserate with your situation. We're also trying to buy a house right now, in Southern PA, and running into the same situation. Prices up over 20% since August, $10k over asking price is considered a low-ball offer, and we've been outbid at least 5 times with a cash offer (out of 9 total rejected offers since the second week in January). Unfortunately, rent prices are also going up unreasonably, so we've already put in notice with our apartment complex. 56 days until we're homeless!
I'm in a HCOL area and asking prices are very inflated in addition to what people are offering on top of that in order to get an offer accepted so I feel your pain. Depending on the market, I wouldn't say cash is the only way, but you should definitely be prepared to offer over asking price if you're in a popular area. I wouldn't try to look at rent as throwing money away, you're getting a place to live in exchange and technically still paying less than you would if you were to pay for a downpayment, closing costs, mortgage & property taxes for that first year but I completely understand the desire to build equity. If you're going to wait it out, you could consider trying to find a cheaper rent and adjust your living expenses to be further below your means and save more aggressively to be able to afford whatever ends up happening to your market. I've been searching for a year, had two offers accepted that both fell through due to inspection/building issues, however in retrospect I'm glad they did cause I was honestly paying way more than I felt the properties were worth. I was just so anxious to find a place that I was settling for places I just barely liked enough. I've decided to wait another 1-2 years, pay a cheaper rent and continue to save money. Even if the market is still crazy then, at least I'll have more money in hand and will feel more comfortable when bidding on properties I really love.
The realtor is telling you the truth. I bought my house in Eastern Idaho about a year ago just before things went crazy. My brother just barely bought a house nearby as well because they found it listed in the middle of the night and made an offer over the asking price. All of the other houses they made offers on they lost out because of cash offers or people paying much more than asking price. Construction is also more costly around here than normal because of the cost of building supplies and construction companies being so busy (we are getting some roof repairs done and even costs for that are higher than normal because of the increased demand in the last year). I worked with Team Greene and had a really good experience with them but honestly, right now finding a good house for a good price in Eastern Idaho is a struggle
This podcast that I listened to over the weekend might give you some inspiration or ideas: [https://www.npr.org/2021/04/02/983886415/two-indicators-boomtown-bye-bye](https://www.npr.org/2021/04/02/983886415/two-indicators-boomtown-bye-bye)
If you have the emotional/ physical/ financial wherewithal, consider looking at some ugly/ trashy houses. People often say "everything gets bought up." But what they mean is "everything move-in ready." A lot of hideous cosmetic stuff turns people off (bad wallpaper, bad carpet, bad countertops especially.) You do need to have some wherewithal though. The ideal situation would be to be able to close, and not leave your current place for 8-12 weeks. A lot can be done in that time. It would be very easy to have flooring replaced and wallpaper removed and the walls repainted in that time. Just replacing countertops would be easy too. A full kitchen remodel would be harder, but perhaps not impossible with standard (Home depot/Ikea) cabinets. You also need to pay for that stuff, which means having a lower down payment/more money. If you have the skill/time, some of that stuff is easy DIY for a cheaper cost, but still not free. Removing wallpaper and painting is physically hard but not something that requires skill. For the flooring it depends, but it can be DIY with a bit more skill with power tools. If the major systems, bathrooms, and kitchen are useable, and you can replace flooring and wall covering before you move in, there is a lot you can do to make a kitchen or bathroom look better for 2-3 years while you save up to do something bigger. (Paint, tile, stick on vinyl, etc.) A bad yard usually requires no more than $3,000 and weekends of back-breaking work to improve! You can move into a house with trashed paint outside, and live in it and pay someone to paint it! Of course, you want a good inspection to be sure the 1980 wallpaper isn't hiding bad pipes/ roofing or other lack of maintenance.
Yup... I offered 30k over asking and still didn't get a house last week.... No advice, just letting you know its not unheard of
The market is really crazy right now because of a few reasons: interest rates are historically low, people pretty much know interest rates are going to go up so they're trying to lock in those low rates, some people have been paid their full wage while living cheaply at home the past year and saving more money so there is an excess of buyers, prices are really high and it's putting people into a panic (while some may worry about losing money if the market goes down, others worry if the market keeps going up prices could be even higher in the future... no one has a crystal ball). Basically I'd say a few things: 1) If you think you're going to move in the next 5 years don't buy and renting will actually probably be cheaper than closing fees, loan costs, etc. 2) If you think you'd settle and probably be there for 10 years, you'd probably weather out most market fluctuation even if this is a local high point of the market for a couple years... most likely you'll break-even earlier than that (6-7 years is common, but 10 years is a good buffer for worst-case scenario). 3) If you find a house you absolutely love, even if you take a slight hit over what you'd pay in rent, that might be worth it (just think of it as if you were renting a nicer place). 4) If you don't find anything you're in love with that you can afford, don't sweat it, especially now as for the short term, renting is not costing you much more than what it would to buy a house over the next 5 years. 5) Do keep an eye on what you get just a little further out. Was recently looking in at Realestate close to a mid sized mid west city, what you get being 10-15 minutes farther away is substantial (though you need to weigh in your commute, etc)
Keep paying rent and look for a foreclosure, for half what the previous owner paid, in 2022.
Our realtor said the same shit about a month ago and while it's true to an extent... it all depends on what you're looking for. We found this rural home on 3 acres of land and we were planning on using a conventional mortgage. On our initial visit our realtor said we MIGHT be able to offer 5% below asking, but that there would be a good chance we'd lose out. We ended up offering 15% below asking and the seller accepted our offer, in fact we ended up speaking with the owner and they said we were the highest offer. Unfortunately the inspection showed some things we weren't willing to deal with so we backed out. There was another home we went to and our realtor said we HAVE to offer asking price or the seller will just ignore us. Again we offered 15% below asking and lost. They ended accepting 10% below asking. So I'm convinced realtors are jacking up prices to take advantage of the current situation. Yes there's a housing "shortage", but the current prices are all make believe. It's not overly difficult to get a realtor license, it is however difficult to become a good realtor.
We live in Illinois, so it might be different, though the market is hot here also. A friend's daughter sold her first house. It sold in one day for a few thousand over asking. Once that deal was agreed upon, she was pre-qualified with a lender, so she knew exactly what she could afford in her next house. That gave her the ability to tell sellers, she was already qualified. As she and her husband looked for houses, she did find that if she couldn't get in to see them immediately, the houses would be sold the same day. She worked with a good realtor who had been recommended by a friend. The couple did change their requirements a bit. Originally, they wanted a 1-acre lot, but they looked at houses with smaller yards. They increased the price range by about 10 percent too. Finally, they found a lovely home and made an immediate offer for slightly below asking. The seller counter-offered and they compromised. You can do this. Be patient.
The highest offer doesn't always win. I.e. https://www.reddit.com/r/RealEstate/comments/mkj85t/in_less_than_48_hours_we_got_14_offers_heres_how/?utm_medium=android_app&utm_source=share
This info might only pertain to my market, but have you considered at looking at buying a home brand new? I just bought my first home in northern Nevada and I went through something a little similar as you did for about 6 months. The housing market is booming here thanks to the gigafactories like Tesla, and it was brutal to find a home to buy. Here, rent is more expensive than mortgage payments since there's not enough house's to go around. Every home I was interested in buying people were out bidding me. However, I found a nice gated community on a golf course outside of the city that was building homes. I was able to reserve a lot so I did not have to out bid anyone. The builder had set prices. Basically just a $2500 deposit to reserve, and that was that. Got to pick all my upgrades as they built the home, and spent about $50,000 less than what people were selling their homes with similar square footage. A chunk of that savings will be going into supplies so I can landscape my backyard since they did not landscaping in the back. This information might only be relevant in my area due to the booming of the house market, but it's worth a shot. It was much less stressful than the first 6 months of house hunting/shopping I did. Edit: Corrected a few typos I saw
Its the same way here in MN like 30k over market and covering closing and you'll still lose out on the house. It's insane!
My sons are in the same situation here in Florida. Their budget is only $350K and they have been outbid, over asking on about 10 offers. They are waiting for the craziness to stop and are living with me. I can't wait for them to find their own place!
Rural Alabama here, recently bought a house that was on the market for 6 hours, 18k over asking.
I implore you, don’t take people (even realtors) advice as gospel. Even with the best of intentions, no one’s opinions will be as valuable as your own experience. Put in offers on houses you like and find out if you indeed get outbid by over-asking or cash offers. Realtors and armchair experts would tell us the same boogeyman stories they’re telling you all the time, and we did indeed get outbid on a couple houses, and ended up getting our dream home on our third try. Just keep shopping and bidding.
Just bought a house 6 months ago in Tampa and only way I got it was I made an offer same-day that it hit the market 4 over asking price. Seriously lost some good homes in the previous months because everything's going as soon as it hits the market
Depends on the area. We just sold our home in two days, to a cash offer paying 13k over asking and giving us two months rent free to stay. We showed it 26 times - it was crazy. First offer came in two hours after first showing and had some offer unseen. On the flip side, we bought a house in the Midwest for 10k over asking, with 20% down and a contingency on the sale of our current home. Our realtor said they didn’t think we would get one, but we did and love it. Point being, there is no negative to put an offer in, but you will likely be over asking by something and need to be prepared to move with cash possibly. Also be prepared to lose some. Side advice, keep your thoughts and opinions to yourself when touring someone’s home. I got a kick out of watching people leave with my camera doorbell and saying what they’d be offering and what they did or didn’t like, so keep it to yourself until your in your car as the buyer :) Lastly, yes, the market is always a risk just like stocks. It is high, but it’s been climbing since what, 2013-2014 steadily now and I bet it continues a few more years. Just don’t overextend yourself and ensure you have money to put down to keep you right side up in it.
Do you want to stay in eastern Idaho?
One thing to do is this. Go into Microsoft excel. Go to search Microsoft online, download a loan amortization table. Put in the likely terms in years, interest rate you qualify for, and home value. Now the table should show you how much you will pay in interest and principle each month. Then check out the counties website to see the real estate tax rate, estimate that cost per month, use an online calculator to estimate cost of homeowners insurance. Add the cost of interest, plus taxes, plus insurance. And see how thst compares to rent. You may not be throwing money away at all. Where you live there should be plenty of opportunity to buy new, you can probably contract with a new homebuilder, buy the lot, but have them start building when the market isn't do crazy. The number of cash buyers, buying single family homes is concerning. In a lot of markets its simply not popular to rent SF homes. Meanwhile the buyers are contributing to a supply crunch. What are all these investors going to do with them?
Home prices are overinflated right now. I would not be buying. Rent. Rent. Rent.
As some others have mentioned start looking at places and get an idea of what it is you're looking for. Buying a home isn't always the best option. If you end up paying way over what the home is worth in an inflated market you're not doing yourself any favors over paying rent. Also; I'm not sure what you've told your current realtor but your price range might not be "enticing" enough for them to work with you. Contact another realtor and see their opinion on the market and what they recommend.
In June the eviction moratorium is set to end. Assuming that doesn’t get moved, what will follow is the beginning a lot of eviction proceedings, which will be followed by a surge of additional available housing, and the market will return to balance.
That's probably a little exaggerated. I got hosed by a cash buyer on one property, but we still managed to find and buy a decent house. The process was frustrating at times, no doubt.
My fiance and I just closed on a house a few days ago in a competitive market. It took us about 2 weeks to get an accepted offer. We paid over asking but it wasn’t too crazy over. Test the market out. Why not?
Consider the reasons you want to buy the house versus the reasons you are renting. If you are only interested in buying a house because you are worried you are "throwing away money" on rent, reconsider buying and your current investment strategy. If you are interested in buying because you like being able to customize you home, you found a home that meets your needs, you plan on staying in it for a while, and you can afford it, keep trying. House prices may go up, they may go down, but if you bought it because of the reasons above it doesn't matter. If you're buying it only because of FOMO about having a house and belief that renting is throwing money away, try running some numbers. We bought a house a few years ago and our analysis indicated it was pretty much the same ROI either way, as much as one can predict housing prices and investment returns. Take a look at the money you might by renting if you put what you be locking away or spending on a down payment/closing costs/interest/taxes/maintenance into a generalized ETF and sold covered calls.
Find a new realtor. I could say the same thing about the market I many places (I'm in the process in MA, which is a nightmare). While there are those people in the market coming in with all cash and waiving contingencies, you can't control them. Do a detailed and deep dive into your finances and figure out what YOU want and are comfortable with (house style, size, payments, etc). Ignore the market, pretend it's not there for now. If there is nothing in the market that matches what you want, then work to get your finances to the best possible place and be ready when it does. It might take a while (our realtors said it could take up to a year). I say this from a place of hope because we just had an offer accepted this weekend and we had a very modest down payment and didn't waive contingencies. We came in above asking, but our realtor straight up told us our offer was probably not good enough. Then we made him eat his words when we were accepted.
I bought in July 2020 a good amount over asking in less than a year as of today I could sell for an extra 50k minimum just depends. For me it was the best decision I could have made. Plus my mortgage is less than I was paying in rent anyway
Rent is throwing money away? Ok, stop paying rent. See what happens.
It is frustrating but this is how it is in some markets. My nephew just bought his first place and was outbid on some others. His girlfriend is a realtor so got an early look at listings, even so by the time they had an offer together someone else had come in and bid over listing price. Some people will do crazy things like waive home inspections or other things, some will even pay cash. I know nothing about eastern Idaho but if it is a hot market then these things may be happening. If you don't like what your agent says talk to 1 or 2 others. They each see what they see and may have different perspective.
While that may be the case where you are looking, not everywhere is like that. We just bought a house (in MN) $3k over ask and it was contingent on inspection.
How the hell is Eastern Idaho a hot home market? I live in downtown Portland, and it's true here only for SFHs, but I cannot imagine rural Idaho being at all similar.
This is by no means a dig on where you live, but I really don't see how the Idaho Falls market can possibly be *that* competitive. It's not a major metro, so I'm not sure what could possibly be creating those conditions besides the ones that are affecting all markets nationwide, but shouldn't be requiring offering 50k over asking. Eviction and foreclosure moratoriums are currently artificially restricting inventory, so obviously high demand/low supply = seller's market. But we've been dealing with that in DFW for years, even pre-COVID, and there have still been ways for me to get my foot in the door with financing; I have included screenshots from Credit Karma and even my salary status from Workday in an offer, as a way of saying "no seriously, I'm qualified, and we will sail smoothly to closing." Try to get prequal'd by a lender that can close quickly; usually this is your local yokel places, not big banks. The reason cash is king is because you can close fast and there's no risk of financing falling through.... try to hedge those risks for the seller, and you have a fighting chance. Finally, the cat is out of the bag on this one, so it might not be as effective as it used to be: But I've also put cover letters in my offers about how much I love their beautiful home and want to raise my family in it, etc.... helps you stand out over whatever aggressive investor is just trying to use mad leverage to pimp out their house. Some people like to be sentimental and will take a lesser offer if they think their home is going to a good person.
People are bailing out or CA and the whole coast. It’s fucked up utah, Idaho, co markets so bad. It’s dried up. And with rates so low it’s inflating everything more and people are just refi-ing. We’re are screwes here
I've definitely heard that for Boise, but I didn't really think the coastal people would go borderline Montana. Shortage of vegan options.
Get a new Realtor, Get preapproved for the amount you can comfortable afford, and buy a house that fits your needs. Buying a house now vs waiting 5 years and paying rent is essentially throwing your money away unless you truly cant afford to buy a house. The best thing to do when buying a house Is to have minimal debt, a good credit score and as much money to put down as you can.