Why would anybody buy a house now?! (way, way overpriced) (property tax, value)

[mathjak107]

We have had an amazing time frame for having growth of ones money in equities help us accumulate the resources needed to buy a house .since 2008 markets have had amazing compounding helping .

When I started out we were coming off a stock market that went no where for 20 years and high inflation .

It was very difficult to grow money or even save money .

So while prices are higher in comparison to incomes , the ability to use powerful compounding to help raise the funds is way way better in more recent times.

it isnt just ones wages that helps them have the resources to buy but the compounding of those bits we do manage to save too in the case of many of us

[JONOV]

Originally Posted by otterhere

This discussion seems to be exclusively about SFHs... What about condos? Will high assessments be more common and maintenance fees rise along with everything else, including the price of the condos themselves? Which will be the smarter investment?

High assessments will continue to largely be the result of poor long term financial planning on behalf of the condo.

Maintenance fees will rise since the cost of the guy that mows the lawn and cleans the pool will rise. But really, that's regardless of whether or not you own a condo, rent, etc...unless you're 100% self sufficient.

[Sand&Salt]

Originally Posted by mathjak107

Neither us or our kids could buy a single family home out of the box .

As far back as the late 1970s we had to buy a coop first as that is all we could afford .

Same with our kids when they graduated and started working , so I can’t say home ownership was ever an option until years later after we developed the resources

Really? In the late 70s we bought our first house and I was a 22 year old waitress, lol. $72,000 in Mission Viejo, CA with payments of $650. There wasn't much to it back then. Partner worked as a supervisor in a printing plant so no one was raking it in. I laugh now thinking how I sold my horse and he sold his used Cessna to get the downpayment which I think was around $5,000.

[Sand&Salt]

Originally Posted by beach43ofus

I've owned 2 condo's, and both were difficult to unload when I wanted to, and the HOA fees did nothing but increase. If a condo is ocean front, that is a different deal, but otherwise, I'd only buy a single-family home. Also, there's nothing like having an attached garage.

Have to agree that being oceanfront is the main compensation for being in a condo. And being older and done with yard work. We have an enclosed garage attached to other garages and that's fine. HOA fees have not gone up at all in 6 years. No one wants that.

Re prices going up and down, I was shocked when I sold my Corpus Christi, TX condo and discovered it had sold in 2006 for $20,000 MORE than current pricing (2016). That was even oceanfront too, so hard to believe.

[mathjak107]

Not here in nyc ……

We did manage to squeak out buying a coop apartment as an insider when our rental building went coop back in the early 1980s ..homes were more than 2x what a coop cost

[leastprime]

Originally Posted by Serenity2019

I don't understand why anybody wants to buy a house now! Prices are way , way high for houses. People are even in bidding wars where I live and bid on the same house to try to buy it. Ridiculous, live in an apartment, a nice apartment, until the housing goes down or crashes like in 2008. I feel sorry for anybody buying a home right now, they should wait!

Because they can.
Because their family needs requires a larger place.

in our area, SFH are in scarce supply. Primarily because of the area's trained labor pool. Land is constrained by geography and then by commute times, finally by amenities (Schools, shopping, location to transit, highways) .
YHMV

[otterhere]

I think most people have a REASON for buying a house; they aren't just moving for the heck of it. And those reasons exist regardless of the market.

[CarnivalGal]

Originally Posted by chicagoliz

Yet Texas is always discussed as some kind of low tax Shangri-la. Doesn't Texas have some kind of senior citizen's homestead tax exemption? Cook County, IL -- which includes Chicago has that. To avoid the elderly getting screwed in that situation.

So much of this is market-specific. I live in the Boston area now and housing prices are not going to go down. We have a friend who would like to buy a house but prices are insane. She keeps saying she wants to wait until prices go down and we keep telling her that isn't going to happen.

When I moved to Boston a few years ago, the average days on market was very low. It's even lower now. In our previous home in a far-suburban area in Pennsylvania, the average days on market was much higher -- in excess of 30 days. I was actually pretty worried about selling that house. But now, I keep tabs on that market and know people who live there still, the houses are selling extremely quickly and for higher than I previously would have guessed.

As they say in real estate -- they aren't making any more of it. And the population just keeps increasing. People gotta live somewhere.

I'm sure there will be a few pockets where prices could decrease, but I think a lot of places will be flat at best. I feel terrible for people who are newly jumping into the market for the first time -- I don't know how anyone does it because the prices are so insane.

Texas has a homestead exemption for properties that are your primary residence, which provides a discount, but that just means that instead of my taxes being $14,000, they are $13,500. Our county tax assessor actually gives the tax amount with and without exemptions, so you can see what the difference or "savings" is. School taxes get frozen at age 65. But that's just school taxes, not city tax, county tax, etc. Our school taxes are currently 1.337%. So that means on an $800K house (like the one used in my example), the school taxes alone are close to $11K. So, yeah, it will freeze at that amount if you are 65 or older, but it's still $11K, and all your other taxes (like the city, county, etc) will still keep going up every year.

I don't think the bottom will drop out of the real estate market here, but I do think prices may go down slightly, especially as interest rates increase. How much just depends on how high interest rates go.

[Hemlock140]

If anything the high prices is encouraging buyers to jump in before they go even higher. Here the Amazon and Microsoft tech workers making $200k+ while living in a small apartment or in Mom's basement have saved up the cash to outbid others on a million dollar fixer, then bring in a contractor to renovate. Meanwhile many original owners are reaching the empty nest downsize age, and selling to take advantage of the equity and pay cash for something smaller in a less expensive area. No one seems concerned about the higher interest rate.

[moguldreamer]

Originally Posted by NC211

Massive housing shortage these days due to the crash of 08’ and builders (and financial industry that supports them) barely returned, and none went back to building speculative neighborhoods all at once.

In addition to the factors you point out, I'd add two more:

1. New, post-2008 federal, state and municipal regulations can add $250,000 to $400,000 per house to manufacturing costs
2. Many communities do not want more housing, period. They want to raise the drawbridge.

Originally Posted by NC211

No doubt there is a bubble now.

I disagree twice. First I disagree on "no doubt." Second, I disagree on "bubble."

The prices of residential real estate observed at any time are based on correct evaluation of all information available at that time, including general national economic conditions, the condition of the local economy in general, housing specific items, demographics, rational expectations of future economic conditions, etc etc etc. The academic research tests this, and so far, real estate markets appear to be efficient.

Moreover, countless academic hours & computing hours have gone into attempting to forecast, in advance, the emergence & subsequent pop of a bubble, and specifically what conditions lead to its emergence and what conditions lead to its pop. So far, no one has found a mathematical, economic, or econometric model to identify, ahead of time, the emergence of a bubble or the conditions that reliably lead to it. That is, no one can beat a blindfolded person just throwing a dart at a dart board.

Real estate prices, just as all asset prices, can be out of line for periods of time, but they self correct. These out-of-line instances in asset prices will generate some winners and some losers. But you cannot reliably predict (with a testable model based on sound academic assumptions) ahead of time which is which.

In order for a bubble to exist, you have to tell me when they are going to burst. The definition of a bubble must be something that has a predictable ending. If it’s just something you use to describe an up and a down, well, that's pretty useless. Those things happen in random series.

It isn't clear 2008 was a housing bubble. Non-economists refer to it as a bubble because the prices went up and they came down. But now they’re up higher than they were at the previous peak, so what’s the 2008 bubble? Is it the up and then the down? Or is it the down and then the up?

In an economy, Savings ≡ Investment, and Investment ≡ Savings. Mortgage originators use invested money to lend to mortgage borrowers. To say say housing sales prices are too high implies that mortgage originators are lending too much money, which in turn says savers are saving too much money.

Really? Does anyone truly believe savers are saving too much money?

Any individual real estate purchaser can be irrational at any given point in time, paying too much. They are balanced by the real estate purchaser who irrationally passes & doesn't purchase. Overall, over time, the markets self-correct.