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Will real estate ever be normal again?

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Re: Will real estate ever be normal again?

#381

Post by vultour »

hammock wrote: post #267
kelnos wrote: post #180

Earlier quoted context omitted.

10x isn't terrible, though, is it? Assuming 20% down on a mortgage, if you're frugal, you can save for a down payment in 4 or 5 years or so. Not ideal, of course, but not impossible. In some places in the US folks could save for a decade or more and still not be able to afford a down payment.

The rule of thumb I have heard is 3x. If you buy a house 10x your income and put 20% down, your monthly payments are 40-45% of your income before tax. That's a lot

There literally doesn't exist a 3x property where I'm from in Europe. I make almost triple what the average salary is, and shitty old properties start at 5-6x.

Re: Will real estate ever be normal again?

#382

Post by wastedhours »

alexose wrote: post #281
jshen wrote: post #120

Earlier quoted context omitted.

I don’t think this is good advice financially, though there is more to life than money. First, if by “tech salary” you mean a software engineers salary or a product managers, then you should be able to afford a house in a place like Seattle. It might be tight if you are early in your career, but it is very doable. The main reason this is likely to be bad financially is that your house won’t appreciate like a house in…

Oh, it's not good advice financially. In retrospect, the best thing I could have done with my money would have been to buy the most expensive house in the best neighborhood I could possibly manage. Put it all on the table. But I didn't want to play that game, and neither did my partner (We have bad memories of the 2009 recession and both hate the idea of debt). So I suppose I traded the future riches for present flex…

> the best thing I could have done with my money would have been to buy the most expensive house in the best neighborhood I could possibly manage

Usually the best thing to do is to buy the worst house in the best neighbourhood. That way you are in for less cash, but are anchored to the higher prices around you.

Re: Will real estate ever be normal again?

#383

Post by janeroe »

vlunkr wrote: post #128
jschveibinz wrote: post #2

Clickbait title. Article is about the real estate prices in Austin, TX after Tesla announced the move there. Will real estate ever be normal again? I think that what's happening in real estate is perfectly normal from an economics point of view. Mortgage rates are extremely low, more people are moving because of remote work opportunities, and the younger folks wanting to buy homes now outnumber the baby boomers, all…

On top of the things you mentioned, the pandemic caused supply shortages, meaning new development was slowed at a time when it should have accelerated. Also, I don't have evidence for this, but there seems to be phycological impact where people really want what they can't have, and are willing to bid more, and go into more debt than they would in normal circumstances.

> the pandemic caused supply shortages

Right, it's that Pandemic guy who is ruining everything. He's the one who prints money, closes cities, organizes supply shortages, exacerbates poverty. Someone must arrest him already.

Re: Will real estate ever be normal again?

#384

Post by wastedhours »

digianarchist wrote: post #301
Nition wrote: post #216

Earlier quoted context omitted.

One factor that makes things even worse here in New Zealand is, from what I've heard in the US a home mortgage is usually at a fixed interest rate for the entire term - is that correct? Whereas in New Zealand the rate will usually be fixed for a maximum of five years. So you might have a 30-year mortgage fixed at 3.5%, but if interest rates go up, then in year five you might start paying 5%, and maybe you can't affor…

Correct. 5 year fixed term mortgages are common to UK/Canada/NZ/Australia. Not that interest is as significant in the United States considering it can be deducted from your taxes.

You also tend to pay for the privilege of a 5 year fix (as a first time buyer) - about a 0.4% increase for a 5 year vs a 2 year for us.

Re: Will real estate ever be normal again?

#385

Post by m0zg »

uejfiweun wrote: post #45

The Fed at this point controls the whole economy and they have two options: 1. Raise interest rates and stop printing. Crazy inflation stops, but asset prices crash and we enter a major recession or depression. The end result will likely be unrest and blood in the streets. 2. Do nothing, keep printing. Inflation picks up massively. The economy keeps humming along but young people, including myself, are permanently pr…

That's what I thought when I was 24. By 34 I bought the house I'm writing this from for what I thought was an extravagant amount of money, and by 44 I'd paid it off. It is now 3.5x the price I paid. That price was 2x of what the original owner paid a decade before me. I did have some money when I bought the house (obviously) but it still seemed insane. And I think that's actually sort of by design. It's the largest purchase most people will make in their lives, and there is one million ways to screw it up, so of course it feels insane and uncomfortable. And yet, people manage to scrounge up enough money and courage to buy real estate somehow.

Which is to say, if you're on this site, chances are you'll be able to afford a house, just not at the price you like. Your income will track inflation much better than that of Joe Autoworker or Jim Farmer.

The big downside for you is going to be that most tax brackets aren't revised upward with inflation, so you might find yourself paying nutty effective tax rates that you're voting for right now. :-)

Re: Will real estate ever be normal again?

#386

Post by sokoloff »

thomasedwards wrote: post #372
drdec wrote: post #173

Earlier quoted context omitted.

Inflation can be good for young people. If you really think there will be significant inflation, go buy a house, borrow more than you are comfortable with it necessary. Inflation will make the debt easier to deal with in time.

This is borderline romantic at this point. What bank do you think would ever possibly agree to this? Most people can’t even prove to their banks that they can afford a mortgage that’s less than the rent they’re currently paying.

There’s a lot more expenses as a homeowner than the mortgage (even the PITI (principal, interest, taxes, and insurance)).

I can’t think of a year where I didn’t have $5K of crap that needed fixing/replacement/improvements*, the year with the fence was 6x that, and I’ve got a boiler coming due that will be a $15K project in all likelihood, $25K if I go higher-end and improve the piping configuration for more even heat on the far end of the piping runs.

* not making improvements is a major saving point in favor of renting. Improvements are a money and time pit and most return less than $0.50 per $1.00 spent on them. It means you live without the improvement, but it’s wildly less expensive over time.

Re: Will real estate ever be normal again?

#387

Post by teekert »

uejfiweun wrote: post #45

The Fed at this point controls the whole economy and they have two options: 1. Raise interest rates and stop printing. Crazy inflation stops, but asset prices crash and we enter a major recession or depression. The end result will likely be unrest and blood in the streets. 2. Do nothing, keep printing. Inflation picks up massively. The economy keeps humming along but young people, including myself, are permanently pr…

I agree your generation is pretty f-ed (even here in "socialist" Netherlands) and I hope they will raise taxes on my generation until something good can happen for yours. At least here they are really cracking down on my generation owning multiple homes and renting them to yours for a super high price, among other things.

That said, your generation is digital native, you don't need to live in an expensive city, you can collectively decide to work remote from cheaper (and perhaps more beautiful locations). Our generation will eventually start dying. You need to be creative. I'm sorry. Tell me what to do...

Re: Will real estate ever be normal again?

#388

Post by sokoloff »

mgh2 wrote: post #302
uejfiweun wrote: post #45

The Fed at this point controls the whole economy and they have two options: 1. Raise interest rates and stop printing. Crazy inflation stops, but asset prices crash and we enter a major recession or depression. The end result will likely be unrest and blood in the streets. 2. Do nothing, keep printing. Inflation picks up massively. The economy keeps humming along but young people, including myself, are permanently pr…

There seems to be a possible, overlooked cause & effect in the current landscape: If FIRE followers scale the strategy of investing and renting multiple homes, are they not limiting housing supply for other potential homeowners or exacerbating homelessness? It is not just that houses are not being built, but that a shortage of supply is caused by the FIRE generation: buying houses as investments rather places to live…

People buying houses and renting them to others to live changes ownership stats but does not increase homelessness, at least not in an obvious way. If a housing unit is occupied by N people, that’s N people who aren’t homeless because of that unit.

Buying additional houses and then not renting them out would contribute to homelessness as that unit would be housing 0 people.

Re: Will real estate ever be normal again?

#389

Post by randycupertino »

bradlys wrote: post #363
alexose wrote: post #74

I know this may be sacrilege to some, but: Consider moving to a less desirable place if you can. I got priced out of my hometown of Seattle. So I moved to a small town in rural Oregon and I couldn't be happier. The combination of spending comparatively little on housing + a tech salary is hard to beat. I have my own shop! It feels like freedom, even if it comes at the cost of being near my extended family.

> I got priced out of my hometown of Seattle. So I moved to a small town in rural Oregon and I couldn't be happier. Idk. I grew up in rural Oregon. And I hate Seattle with a passion. But I don’t know if having meth heads for neighbors is really the way I’d go. Going for more rural/less-expensive regions might be beneficial for some but there are some serious downsides and costs for people with children, people who li…

> And I hate Seattle with a passion.

Why do you hate Seattle? I've never been there, but just had a friend move there and she's telling me how great it is.

Re: Will real estate ever be normal again?

#390

Post by randycupertino »

01100011 wrote: post #243
t-writescode wrote: post #170

Earlier quoted context omitted.

I live in Seattle. I have an engineer’s salary. I cannot presently afford a condo, let alone a house. By the time I have enough for the down payment, I will again not be able to afford a home.

You need an engineer's salary combined with another engineer's salary or very productive equity compensation. You're basically competing with folks who have both an engineer's salary(or two) combined with equity from their previous house.

Don't forget the Bank of Mom and Dad!
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