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The OP is quite right. Many housing markets are suffering severe over-valuation. And valuation is at the epicenter of what is wrong with so much to do with housing—and other asset classes. There seems to be a blindness, or ossification when it comes to excessively high valuations. Investors become unable to act for all sorts of reasons that behavioural scientists put down to biases like regret and the fear of losing out, short term focus, loss bias, the belief that recent trends are likely to continue, media reports, and the list goes on. The problem of over-valuations is largely one of behavior. Being better informed avoids these behavioral pitfalls.
Buying into an over-bought market is not a strategy for building wealth. It can, in fact, lead to lingering financial complications for the unwary. Competing with institutional investors is the worst thing a buyer can do. Wall Street doesn’t care what it pays, because in all likelihood it is re-packaging those investments and selling on the risk, only this time it’s not mortgages, but bricks and mortar.
A sensible strategy is to sit on the fence, resist temptation, and educate yourself. Look for signs of distress and other dynamics in the market; increasing sales, increasing inventory, increasing number of price reductions, widening list-to-sales spread, increasing DOMs (days on market), median and repeat sales home price indices, increasing non-performing loans, defaults, foreclosures, mortgage rates, inflation, affordability index and so on. RE cycles move slowly, so be patient.
Look for signs of distress and other dynamics in the market; increasing sales, increasing inventory, increasing number of price reductions, widening list-to-sales spread, increasing DOMs (days on market), median and repeat sales home price indices, increasing non-performing loans, defaults, foreclosures, mortgage rates, inflation, affordability index and so on. RE cycles move slowly, so be patient.
Rent is also increasing, right?
Money paid for rent could never be recovered.
Unfortunately prices are high across the board and while someone is being patient while living in rental, he/she is risking to loose value in money (cash) he/she keeps now due to insane inflation rate. And waste more money paying rent.
Rent is also increasing, right?
Money paid for rent could never be recovered.
Unfortunately prices are high across the board and while someone is being patient while living in rental, he/she is risking to loose value in money (cash) he/she keeps now due to insane inflation rate. And waste more money paying rent.
Sometimes it is better to rent than buy for the avg. person. That's the math in numerous cities in California's big cities, Seattle, Denver, and other places.
Another reason is:
MORTGAGE RATES
$400,000 loan
Mortgage payment:
in Dec. 2021 - $1,968 at 4.25%
in May 2022 - $2,318 at 5.75%
$500,000 loan
Mortgage payment
in Dec. 2021 - $2,460
in May 2022 - $2,902
$500,000 loan (no tax return loan and self-employed)
Mortgage payment
in Dec. 2021 - $2,460 at 4.20%
in May 2022 - $3,160 at 6.50%
Money paid for property taxes is never recovered either.
Rising homeowner insurance rates
Search "why are homeowner insurance rates going up" and pick a few.
Good luck on insurance claims and when the claim is approved it could take a year or much longer to get it fixed. Many insured who had damage from Hurricane Irma are still waiting 4+ years. search "still waiting on hurricane irma funds" or "fire insurance not enough to rebuild home" to those in California and Boulder.
The key to good renting is to lock in a 2-3 year lease or take a lease with a maximum rise of 3% per year. I've heard many stories of tenants moving out due to new landlord increasing rent by $700/month on a $2,100 3 bedroom to $2,800. There needs to be a maximum cap. It is tough all around and price stability is basically out of control in this country. You have to blame this on lawmakers.
Price gouging is rampant across industries and it's up to the Pres. and state's Governors to stop it and stop pointing to Russia or supply chain. They need to stop their blame game and fix it now. Of course they get everything free and don't feel it. Instead of being a govt. for the people they seem like a govt. for the govt.
The key to good renting is to lock in a 2-3 year lease or take a lease with a maximum rise of 3% per year. I've heard many stories of tenants moving out due to new landlord increasing rent by $700/month on a $2,100 3 bedroom to $2,800. There needs to be a maximum cap. It is tough all around and price stability is basically out of control in this country. You have to blame this on lawmakers.
Price gouging is rampant across industries and it's up to the Pres. and state's Governors to stop it and stop pointing to Russia or supply chain. They need to stop their blame game and fix it now. Of course they get everything free and don't feel it. Instead of being a govt. for the people they seem like a govt. for the govt.
Locked rent agreement with cap for increase is impossible in our area. I know people who were willing to pay for 2-3 years upfront in exchange for rent price to stay the same or be subject to minimal increase. Due to this crazy market when average price increased by 30% compare to last year prices for rents, no landlords, including investors, are willing to sign such agreements.
I don't believe gov. will get involved and will control pricing. Not in this County of freedom...
Locked rent agreement with cap for increase is impossible in our area. I know people who were willing to pay for 2-3 years upfront in exchange for rent price to stay the same or be subject to minimal increase. Due to this crazy market when average price increased by 30% compare to last year prices for rents, no landlords, including investors, are willing to sign such agreements.
I don't believe gov. will get involved and will control pricing. Not in this County of freedom...
Yea, it is very different all of a sudden. About 4 years ago is when I found out people were locking in a 2-3 year lease.
You'll probably find that small mom & pop investors who won't be selling anytime soon will be more interested in doing a 24 month lease with a good stable tenant than large companies (apt building communities).
Really; how many refugees can Florida absorb from New York and Texas, from California? There will be a saturation point. And/or they'll ruin those places, too.
Rent is also increasing, right?
Money paid for rent could never be recovered.
Unfortunately prices are high across the board and while someone is being patient while living in rental, he/she is risking to loose value in money (cash) he/she keeps now due to insane inflation rate. And waste more money paying rent.
I understand this perspective. And as a homeowner I tend to agree with that. But I also see it as a justification of why we purchased. I also included the every time I got a raise the landlord held his hand out for it.
But the fact of the matter is, you need a roof over your head. And costs always rise. So even when you get a mortgage and that stays stable because you chose a fixed rate mortgage, your taxes are going to go up, maintenance costs are going to go up, that’s just a fact of life.
I don’t like how this subject becomes homeowners versus renters. We’re all in the same boat. And each choice that someone makes is a valid choice for them. Homeowning works for me. I had friends who were renters and that worked for them.
There is a case to made for renting. No repairs or updates and if your a very shrewd investor you may do just as well or better than a home owner.
But, I honestly do not see housing prices going down and by down I mean 20%. Will we see a 5 or10 % drop? Probably but it will go back up again. With the price of building materials and wages all up and everything else why would housing be one of the only things to drop.
There is a case to made for renting. No repairs or updates and if your a very shrewd investor you may do just as well or better than a home owner.
But, I honestly do not see housing prices going down and by down I mean 20%. Will we see a 5 or10 % drop? Probably but it will go back up again. With the price of building materials and wages all up and everything else why would housing be one of the only things to drop.
Right - I have rarely seen prices actually drop on anything other than gasoline.
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Solly says — Be nice!
