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I always here these commercials on the radio from mortgage brokers. Same message for 3 or 4 years. Rates are low but they are going up soon. Now they really are going up. But if they go way up home prices might really tumble. So you got a great rate but your house is way underwater. Whatever down payment you put on it evaporated. Sure one day prices will come back to more than what you paid. But people now are being near the top. Could be a long wait.
Very true.
We were lucky to buy one of those underwater houses during the last recession. The previous owners lost 200K on the house.
It has taken 12 years for it to go back up to the price they paid for it and more.
Are people nuts? seriously A home that brings rental income sold for $315K 3 years ago now just sold for $540K.
Another gigantic soprano house sold for $500K two years ago. Now many of them are up for sale for $600K.
How the hell can anyone afford that kind of mortgage?
The people buying these houses are A) Cash rich buyers from other states OR B) Making well over 100k a year to buy it OR C) Sold their home and using equity to bring that big payment down.
Our friends ended up getting a house after all. Started at 1.1million and they bid 1.2 million. They got outbid by 50k. However the owners wanted a local family to have it and not the out of state people so they went with the 1.2 offer. So our friend has his house on the market for 800k with a 300k mtg balance. He'll roll the equity into the new house. His payment will be $4800 per month. He works with my bf and is doing well over 200k a year.
Once you get to higher priced homes, the calculus is different. At higher price levels, it is about asset allocation, not merely monthly paychecks. By asset allocation, I mean the percentage of your net worth invested in equities (stock ETFs or mutual funds or individual stocks), percentage in bonds, percentage in gold, percentage in cryptocurrency, percentage in other things, and percentage in real estate.
Let's say my net worth is $8 Million, with 80% of that in equity ETFs, 15% in bond ETFs, and 5% in alternatives including REITs and commodities and cryptocurrency and a 1960s era Mustang I've been restoring.
My current asset allocation is very heavy equities and very light real estate.
When I look at buying a house, I consider my current asset allocation - the "pie chart" - which is imbalanced, because I have too much in equities and too little in real estate.
So when I buy your hypothetical $600,000 house, I might do an asset transfer of $300,000 from equities, and add to that say $100,000 of profit from selling my existing house, which means I only need a mortgage of $200,000.
The day after buying your hypothetical $600,000 house, my net worth hasn't changed a penny - but my asset allocation has improved. My percentage in equity has declined (that's a good thing) while my percentage in real estate has increased (that's a good thing).
I've ignored taxes in the above to make the illustration simpler. In the real world, you need to take taxes into account.
Thank you I didn't consider this is how they can afford such a high priced real estate property.
I must be old fashioned, I went for the loan and used my saved up money in my bank for down payments. I sold some things that we can just say were commodity that went up in value over the years.
my old property I sold to a nice couple and they turned around 4 years later and made a killing on it for the $540.
The other one I made a typo it was brand new on the lot and sold for $700K not $600K '
that wasn't mine but it sold in a nearby area.
The people buying these houses are A) Cash rich buyers from other states OR B) Making well over 100k a year to buy it OR C) Sold their home and using equity to bring that big payment down.
Our friends ended up getting a house after all. Started at 1.1million and they bid 1.2 million. They got outbid by 50k. However the owners wanted a local family to have it and not the out of state people so they went with the 1.2 offer. So our friend has his house on the market for 800k with a 300k mtg balance. He'll roll the equity into the new house. His payment will be $4800 per month. He works with my bf and is doing well over 200k a year.
That's what I did for my last home. I sold it for $315K and used it to pay off the home I am living in now. Now I live ok with a very low income but no mortgage. I didn't care about keeping a mortgage to use the interest as a tax deduction since the tax deduction wouldn't give me much of a refund. That interest was to high to even entertain the though of keeping the mortgage.
I had to be careful about bidding wars. A seller lost both perspective buyers from a bidding war that was so competitive the both walked away and it didn't get sold for months later.
So the Realtors who pushed people who couldn't afford to buy a home back in I think it was 2008 didn't learn their lesson. Realtors never factored in all other expenses when they told their clients what the taxes would be and the loan amount would be. Not one considered people have to factor in all expenses when buying a home. The banks didn't either and everything came crashing down. Also I brought this up with a government treasurer that many of the people who never should have gotten a loan in the first place also took out a home equity line of credit and purchased RV's, new furniture, took vacations instead of for home emergencies. When they foreclosed they didn't have to pay that money back either. Every tax payer paid for that catastrophe when the banks bailed them out, at least I think they did.
We are going to watch the same mistake happen again. Realtors don't care because they get their commission upon the closing when the buyers get the loan they can't afford. Here we go again
It was really Wall Street, not realtors who drove the 2008 crash. Banks gave loans to people they knew couldn’t afford them, because Wall Street firms were willing to buy up all the bad debt to resell. Peoples mortgage companies got changed so often some couldn’t even find out who they were supposed to pay the mortgage to anymore. It’s not a realtors job to make sure a client can afford a house anymore than it’s a car salesman’s job to make sure you can afford the car you came in to buy. Thats the lenders domain.
Someone mentioned realtors sending letters, not in my area. I get one from who will be my agent, she always sends a postcard when she sells or lists a house in my development. If she has a buyer with no house, she will post in our facebook group to see if anyone wants to sell. She is never pushy. No one has sent anything saying it's a great time to sell and make money.
Quote:
Originally Posted by Arktikos
If owners want to do someone else a favor and are comfortable with the low price, why not discuss with friends and see if they know of any prospective first time home owners to recommend? In other words, the owner is sort of choosing the buyer rather than initiating a feeding frenzy.
It's disheartening to see young people priced out of owning their a home by these bidding wars.
The sellers want the most money for the house, not the closest to asking. They did it for a bidding war to drive the price up. They aren't going to give their house away when they can make money.
Quote:
Originally Posted by staystill
So the Realtors who pushed people who couldn't afford to buy a home back in I think it was 2008 didn't learn their lesson. Realtors never factored in all other expenses when they told their clients what the taxes would be and the loan amount would be. Not one considered people have to factor in all expenses when buying a home. The banks didn't either and everything came crashing down. Also I brought this up with a government treasurer that many of the people who never should have gotten a loan in the first place also took out a home equity line of credit and purchased RV's, new furniture, took vacations instead of for home emergencies. When they foreclosed they didn't have to pay that money back either. Every tax payer paid for that catastrophe when the banks bailed them out, at least I think they did.
We are going to watch the same mistake happen again. Realtors don't care because they get their commission upon the closing when the buyers get the loan they can't afford. Here we go again
When they foreclose on a house, the owner owes the bank whatever money they lost, it doesn't get eaten. They're on the hook for it. I'm not sure for how long.
It's always better to do a short sale to settle with the lender than to get foreclosed on.
Quote:
Originally Posted by Oklazona Bound
I always here these commercials on the radio from mortgage brokers. Same message for 3 or 4 years. Rates are low but they are going up soon. Now they really are going up. But if they go way up home prices might really tumble. So you got a great rate but your house is way underwater. Whatever down payment you put on it evaporated. Sure one day prices will come back to more than what you paid. But people now are being near the top. Could be a long wait.
That's what was going to happen to us, we were going to lose money, won't now that the market came back up.
I laughed when recently an out of state RE investor offered me $140,000 for my 25 open acres of raw land on the outskirts of Austin.
Two years ago the neighboring landowner sold his similar property for nine (9) times that amount and is building a 500,000 sq/ft distribution facility.... and another on the other side of that one just sold for $7,800,000 to an apartment complex developer.
I’m in the Boston area and it’s crazy here. There’s not much on the market now in my town which is about 30 min from Boston. I’ve certainly been shocked by what houses list and sell for. A house around the corner from us was last sold in 1975 for 85k. It hadn’t been updated since that time by the looks of it. It went on for 925k and sold for 890k. I think they could have gotten more of they had waited until spring. I will be curious to see what happens in the spring. I’m sure I’ll see more listings on March 1.
It's not the same. Lenders have changed the requirements for loans. It's not so easy like in 2008. The taxes are stated in the listing.
Yes you are right. But they never tell their client they have to write down or have their bank help them with a budget that includes every single expense they have. People just don't think groceries, gas, car repair, just everyday and monthly expenses must be deducted from their salary to know if they can afford the mortgage and taxes. Realtors didn't care because they wanted their commission and pushed people to buy what they knew full well their client couldn't afford. Then the banks failed to make sure they could afford the loans and made it worse by giving them a line of credit so they could go on vacations, buy RV's, new cars. The lived it up but people like myself and many others who were and are responsible adults. Had to pay for it. I never want to go through that again.
Happens here, too. Most houses go under contract within a few days of listing.
Houses here go under contract in hours. We are seeing so many cash buyers beating out those with financing.
Example: Last Saturday 02/19/2022 - Single Family Home $839,000 - (estimate I ran was $661,000) - our buyer offered over $900K with 30% down. No HOA. Renovated. Cash buyer took it "for well over $900K" per the listing agent. We were #2 in the running.
People seem to have so much cash.
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I didn't consider this is how they can afford such a high priced real estate property. 
South Florida here
