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I mean home prices for homes went up by $100 to $200 thousand over the market value where we are. I mean good time to sell bad time to buy. Only reason can see rents up is demand. Everywhere around the city living in NC has waiting list. Rental homes are $1500 plus.
That's not how it works. The bolded is an oxymoron.
If "everything went up $100k" that means that IS the new market value.
It is a SHOCK and unprecedented rise to be sure. But the very basic economics of supply vs demand and the current conditions affecting both sides of that equation.....do not show any signs of upward pressure on prices slowing down anytime soon. Let alone anything close to a decrease in prices.
To be clear; I am NOT happy about this as many people would assume those of us in the RE business are..it is heartbreaking honestly. But it is the reality.
Last edited by TarHeelNick; 02-03-2022 at 08:28 AM..
That's not how it works. The bolded is an oxymoron.
If "everything went up $100k" that means that IS the new market value.
It is a SHOCK and unprecedented rise to be sure. But the very basic economics of supply vs demand and the current conditions affecting both sides of that equation.....do not show any signs of upward pressure on prices slowing down anytime soon. Let alone anything close to a decrease in prices.
To be clear; I am NOT happy about this as many people would assume those of us in the RE business are..it is heartbreaking honestly. But it is the reality.
I think it’s also impossible to disregard the unprecedented market manipulation by the fed not just in terms of quantitative easing but also ridiculous amounts of stimulus funny money. Not sure if this is a Jimmy Carter 2.0 situation but if the end game means ratcheting up interest rates to fix their mess it’s hard to see exactly where and how current demand is going to be sustainable in such an environment (which as I’m sure you know will have ramifications far beyond the housing market), and how far the fed is willing to go.
I think it’s also impossible to disregard the unprecedented market manipulation by the fed not just in terms of quantitative easing but also ridiculous amounts of stimulus funny money. Not sure if this is a Jimmy Carter 2.0 situation but if the end game means ratcheting up interest rates to fix their mess it’s hard to see exactly where and how current demand is going to be sustainable in such an environment (which as I’m sure you know will have ramifications far beyond the housing market), and how far the fed is willing to go.
And I will add that it’s a global issue.
The biggest difference , at least with regards to housing (both for purchase and for rent) is EXTREME lack of supply. Much more difficult/longer process to really increase the supply. Even if the demand side of the curve starts to decrease; it's still offset by the ramifications of timid building for the past decade that have led to a huge shortage of supply. And unfortunately the only real "decrease in demand" is by people literally getting priced out.
If you rented a place for $2200 (that magically never increased in 15 years) you’d have spent the same amount. With zero profits to walk away with at the end. That’s a swing of nearly $500,000.
The fact is that a $65,000 profit on your house in 15 years is the rental equivalent of someone paying you $300/month to live in their place. Your ability to rent now was likely affected by your not renting the two decades previously.
The $65,000 I walked away with, was after putting in a $20K down payment and $20K in cash along the way for improvements. So really, my net "winnings" were more like $25,000. So that $300/m is more like $140/m.
I don't understand your $500K swing comment. You pay cash either way - there is no swing.
You do make a good point about rent increases. Rents increase faster than mortgage taxes.
And before the tax reform happened in 2017, I'd argue it is far better to own than rent. You used to be able to deduct mortgage interest and taxes, which was awesome. But with that advantage gone, the calculus is completely different.
The $65,000 I walked away with, was after putting in a $20K down payment and $20K in cash along the way for improvements. So really, my net "winnings" were more like $25,000. So that $300/m is more like $140/m.
I don't understand your $500K swing comment. You pay cash either way - there is no swing.
You do make a good point about rent increases. Rents increase faster than mortgage taxes.
And before the tax reform happened in 2017, I'd argue it is far better to own than rent. You used to be able to deduct mortgage interest and taxes, which was awesome. But with that advantage gone, the calculus is completely different.
You walked away with $65,000. Or $25,000, or [insert random positive number here]. If you had paid $2200/month in rent for those same 15 years, you would have walked away with -$400,000. Buying was a great investment for you. It saved you $400,000+ you could have spent in rent.
Spending over 1/3 of your income on rent is too much. Accounting for state and local payroll taxes should be considered but many Americans are stretched and will never get off of the treadmill in many cities.
Solution is raising personal income. Plan how to get rent to a manageable % of income, settle for cramped cheaper units until you can afford a unit you truly want.
$3k for rent? eff-that. I don't live in SoCal but I do have 7 figures in the market. Bought my first house for $71k and my second and last house for $132k. Paid that off and been plowing it into the market for 30 years.
Rent? LOL You want to be on the other side of that transaction ASAP.
In 20 years, I imagine the wealth gap between those who owned a house pre-pandemic and those who did not will be studied in great detail.
Agreed. There are a few metros left where one can own a home at a reasonably price. Of the largest metros, Houston, Atlanta, and maybe DFW offer the best value if you want a large metro, but the latter two are creeping up fast. It's getting pretty pricey out there.
You walked away with $65,000. Or $25,000, or [insert random positive number here]. If you had paid $2200/month in rent for those same 15 years, you would have walked away with -$400,000. Buying was a great investment for you. It saved you $400,000+ you could have spent in rent.
This makes absolutely no sense.
Scenario 1: I pay $2,200/m in cash for my mortage/taxes/etc for 15 years
Scenario 2: I pay $2,200/m in cash for rent
Same cash out of my pocket.
Scenario 1: I made, essentially, a $25,000 win on my investment (65K profit, less down payment, less extra cash for improvements)
Scenario 2: $0
So Scenario 1, in this simple example, is $25,000 better over a 15 year period. Not a lot of money, but better than zero.
Agreed. There are a few metros left where one can own a home at a reasonably price. Of the largest metros, Houston, Atlanta, and maybe DFW offer the best value if you want a large metro, but the latter two are creeping up fast. It's getting pretty pricey out there.
Yep. Houston is still the undiscovered gem.
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