I find it strange that nobody here brings up the option of renting out your house instead of selling when you have to. If the mortgage is fully or even mostly covered by the rent, you can usually do that. In fact it would usually be sufficient if the interest is covered. The only exception would be divorce, unless both parties can agree.
Renting out a house is a huge pain. Local laws can make you accept tenants you wouldn't otherwise, and eviction moratoriums can make a bad tenant very difficult to get rid of. Not only that, but being a landlord isn't a labor-free job, and many of us don't have time for that, while property management companies are very expensive.
I’m pretty sure I bought at the worst possible time (March). Every month that goes by, thousands of dollars of my net worth disappear because of circumstances completely out of my control. It makes me doubt the value of hard work - sure, if you slave away at your desk job you can earn maybe an extra $30k a year, but the guy down the road who just happened to buy a house at the right time earned an extra $300k over th…
Did you buy your house to LIVE in or as a primary investment vehicle? If the latter, I get your frustration (though don't agree with the approach).
So many comments here glazing over an obvious factor.
I’m pretty sure I bought at the worst possible time (March). Every month that goes by, thousands of dollars of my net worth disappear because of circumstances completely out of my control. It makes me doubt the value of hard work - sure, if you slave away at your desk job you can earn maybe an extra $30k a year, but the guy down the road who just happened to buy a house at the right time earned an extra $300k over th…
The primary purpose of buying a house is to live in it. Don't look at month to month price fluctuations. The minimum holding period for a house should be 5-7 years due to transactions costs including realtor commission, mortgage origination fees, moving your stuff, and implicit costs like a zillion trips to the hardware store in the beginning.
Right. Closing costs alone could eat away at 1-2 years of equity. You won't realize gains from a sale until the 5-7 year mark (not withstanding the last few years of fu*kery)
Most of the people I speak to who locked in Current renters will have lower potential to save on a monthly basis, only to get 30-40% off on their first home with a >7% interest rate. If you sum the lost savings from rent plus the additional interest payment, it is uncertain whether that is the best strategy. That is also assuming real estate prices in certain regions wont hold stronger value, which they probably will…
In the US at least, we really should simplify, ease, and mandate 401k loans/withdrawal options for first-time homebuying. Doesn't help if rent eats all your paycheck, but if people are able to save they should be rewarded for doing so, and allowed to use that for a first home purchase. https://www.investopedia.com/ask/answers/081815/can-i-take-m...
I'm not sure I understand. It's quite easy to take money out of your 401k without penalty for a first time home buyer. How could it be easier than just requesting the money?
That's not what happened in 2008. This exact scenario was the primary cause of the financial meltdown at the time. The prevailing wisdom was people would always pay their mortgage, so the securitization of real estate mortgages were viewed as a safe investment - and invest they did! When the housing bubble popped a lot of investment banks who thought they had safe assets suddenly found themselves upside down, further…
> When the housing bubble popped Your comment misses what created the popping of the bubble. The sibling comment talking about sub-prime mortgages talks about them, and I think they're right. I was always under the impression that the crisis began with people that couldn't pay their mortgages because banks were handing them out to people that couldn't afford them. This created downward pressure as foreclosed houses f…
Maybe you and the other commenter were talking about the so-called "jumbo" loans or interest-only loans that had become popular at the time. This was at the height of "flipping" and the idea was you'd make into your house and after five years you'd flip it and make a fortune because home prices were soaring so high. I saw the writing on the wall, but a lot of home buyers apparently didn't realize this was a first-mover opportunity and they may be left holding the bag. As it turned out, that was only the tip of the iceberg and that is what caught everybody by surprise!
> Why wouldn't you? Because it's upside down? You can buy another place and owe less on it?
No, because no matter what, I'll still owe the bank the difference between the value of the house and the mortgage balance. If I was foreclosed on, then my credit is wrecked and I wouldn't be able to get a mortgage on the new house.
I know several people that walked away from homes in 2008 and if they had a good job they bought another home for half the price down the street. Your fears didn't materialize for them. Every one of them bought nicer homes as well.
That's not at all how real estate valuations work in my experience. In times of asset inflation, they lag to cut homeowners a break. So much so that other tax authorities outright reject using municipal valuations on their filings. And municipal valuations never go down, barring someone paying for an independent appraisal and going through the abatement process. If real estate values corrected by 50%, then the people…
The government can also just increase property tax rates if property values go down. Instead of 0.75%, make it 1%, or 2%.
They can’t in California. Not without voter approval. Same is true in many states.
It's also good for buyers with low net worth, but high yearly income. I got into the tech world 5 years ago, fresh out of college. Many of my peers can afford monthly payments of $2-3k... but getting your hands on $100k cash for a 20% down payment takes time, even at decent income levels.
I've been looking at mortgages over the past couple of months, and putting 20% down has near no effect on my potential monthly payments.
Based on what numbers? At a 6.6% loan, putting down 5% rather than 20% will increase your monthly payment by over 25%, on interest alone, ignoring PMI.
> Why wouldn't you? Because it's upside down? You can buy another place and owe less on it?
No, because no matter what, I'll still owe the bank the difference between the value of the house and the mortgage balance. If I was foreclosed on, then my credit is wrecked and I wouldn't be able to get a mortgage on the new house.
people in the comments don't seem to realize if prices drop, you can buy and refinance later when rates come down. so it's really a great time to keep an eye on the market
When do you expect rates to come down? Prices aren't dropping that much - inflation. If you're expecting a 40% price drop anytime soon, well, don't hold your breath.