Is my impression of Indianapolis accurate? (Fishers, Carmel: rent, HOA, buyers)

[Durpie22]

Originally Posted by ischyros

As a Fishers resident, most of Fishers is overpriced as well. It's just not a good time to be trying to buy a house anywhere. People making cash offers over asking are getting outbid. It's ridiculous out there right now.

You can get a lot more per square foot in Fishers than Carmel. At least when I was looking a few years ago.

[Durpie22]

Originally Posted by Don_Draper

Probably our only shot because I refuse to get into a bidding war and end up with much less equity, and then watch the housing market crash like in 2007-2009.

Then what's your plan if it doesn't crash like 2007-2009? Rent forever? You can easily google the causes of the 2007 crash and none of those causes exist today. You might be waiting forever or only get a 5% "crash". Then what?

As far as bidding wars. I found a sellers agent to be my buyers agent and thats how I got my house before it was listed. She represented both the seller and me and got to give the sellers a discount on her fee.

[sheerbliss]

Originally Posted by indy_317

So the question becomes, does one rent for three years at $1,500/month, $54,000 total, or take the chance on a home now and if it drops in price $54,000 in a year or so, was there ever really a financial loss in the grand scheme of things?

Yes.

If you take out a mortgage for $270,000 ($300k house with a $30k down payment) at 5.1%, and the value drops by $54,000:

• Over three years, you'll have paid $67,025 in principal, interest, insurance, PMI and property taxes, and
• Your balance on the loan will be $253,082 on a house that's worth $246,000. If you have to sell at that point, you'll have to bring $7,000 to the table, plus thousands for the realtor's commission.
• Renting would have been cheaper by $20,025--assuming you couldn't get a lower rent after a housing price collapse.

Source: https://www.mortgagecalculator.org

[Kluch]

Originally Posted by sheerbliss

Yes.

If you take out a mortgage for $270,000 ($300k house with a $30k down payment) at 5.1%, and the value drops by $54,000:

• Over three years, you'll have paid $67,025 in principal, interest, insurance, PMI and property taxes, and
• Your balance on the loan will be $253,082 on a house that's worth $246,000. If you have to sell at that point, you'll have to bring $7,000 to the table, plus thousands for the realtor's commission.
• Renting would have been cheaper by $20,025--assuming you couldn't get a lower rent after a housing price collapse.

Source: https://www.mortgagecalculator.org

The question is how will you find a rental in this market for $1500? We have a 4 bdrm 1800sqft house (near Franklin) that we rented 2 years ago for $1500. We just got our renewal and it's for $1720. And if you're looking in Fishers then I feel that price point is non-existent.

[sheerbliss]

Oops--forgot to include the $30,000 down payment.

So:
$30,000 down payment
$67,025 house payments
$7,000 (if you have to sell while underwater)

=$104,025 spent to own a house for three years with nothing to show for it at the end if the market drops by (in this case) 18%.

Renting in this scenario would have been cheaper by $50,000--again, assuming you can't get a reduction in rent in a down housing market.

[sheerbliss]

Originally Posted by Kluch

The question is how will you find a rental in this market for $1500? We have a 4 bdrm 1800sqft house (near Franklin) that we rented 2 years ago for $1500. We just got our renewal and it's for $1720. And if you're looking in Fishers then I feel that price point is non-existent.

I'm just going by what someone else quoted. I'll leave it to others to crunch whatever numbers they think are realistic.

I have no idea where house prices will be in three years. On the one hand, I'd have been permanently priced out of the Denver market if I hadn't gotten in when I did. On the other hand, there have been many real estate bubbles besides the 2008 one, and before each one people probably said, "this time it's different." I would question how much higher buying vs. renting can get, rising prices in the face of rising interest rates, and rising prices as supply chain issues get sorted out. Everyone seems to have forgotten the "too few goods" part of inflation.

[indy_317]

Originally Posted by sheerbliss

Yes.

If you take out a mortgage for $270,000 ($300k house with a $30k down payment) at 5.1%, and the value drops by $54,000:

• Over three years, you'll have paid $67,025 in principal, interest, insurance, PMI and property taxes, and
• Your balance on the loan will be $253,082 on a house that's worth $246,000. If you have to sell at that point, you'll have to bring $7,000 to the table, plus thousands for the realtor's commission.
• Renting would have been cheaper by $20,025--assuming you couldn't get a lower rent after a housing price collapse.

Source: https://www.mortgagecalculator.org

Great point, but:

-One should likely never buy a home if there is even the remote chance that they would have to sell in three years. Now if a job offer that comes with a serious pay boost presents itself, I get it. But when I'm talking serious pay boost, I'm thinking something like at least a $30K+/year increase or more as it relates to the cost-of-living from the current area to the new area. I get it is still a loss, but in the grand scheme of things, sometimes one has to spend money to make money. In this case one is spending money taking a loss, but they are likely gaining by not spending as much for a new home in the new location and they are seeing a significant gain in income year after year.

-The example above comes with a 10% down payment. I guess 20% down is a thing of the past with the current high prices?

-The current example also comes with a 30 year mortgage, which I feel is part of the problem with people looking at RE as an investment. By pushing the investment line of thinking, people have no problem being debt slaves for three decades. "Housing will always go up!" mindset. I know I'm very more debt adverse than most folks, but wanting a debt to be hanging around my neck for that long would seem tiring after the first ten years. Of course if one believes the market will always provide a 10-12% return "over the long haul," then I can see not paying down mortgage debt and putting more into investment accounts. With mortgages at 5%+, owners should seriously consider paying down mortgage debt to some extent as soon as the loan starts.

[Toxic Toast]

I'm just throwing this out there.

10+ years ago I bought a cheap house in a part of the city just about no one on this forum would have ever recommended. The absurd low mortgage and solid stock on the block was too hard to pass up. Fast forward 10 years, the house is worth almost 4 times what I paid. We have re-financed a couple of times and started college funds for our kids with some of the money. The above would never have been possible if I listened to what most people tell you to do, which is rent rent rent or buy out in Fishers until you're house poor.

[sweetana3]

Toxic Toast: We have never bought anything at the height of what we could have afforded. As a result, we have a healthy portfolio, no debt and freedom. Love the modern expensive homes downtown but not the real estate taxes.

But then I was raised in a 900 sq foot house and a family of 5. No garage, no family room, one tv when we finally had a channel, etc.

[sheerbliss]

Originally Posted by indy_317

Great point, but:

-One should likely never buy a home if there is even the remote chance that they would have to sell in three years. Now if a job offer that comes with a serious pay boost presents itself, I get it. But when I'm talking serious pay boost, I'm thinking something like at least a $30K+/year increase or more as it relates to the cost-of-living from the current area to the new area. I get it is still a loss, but in the grand scheme of things, sometimes one has to spend money to make money. In this case one is spending money taking a loss, but they are likely gaining by not spending as much for a new home in the new location and they are seeing a significant gain in income year after year.

Another scenario: you lose your job and nothing else within commuting distance is available. People in such scenarios declare bankruptcy, become landlords or suffer a major, permanent loss of capital.

Originally Posted by indy_317

-The example above comes with a 10% down payment. I guess 20% down is a thing of the past with the current high prices?

My SIL in Denver told me years ago there were people cashing out their 401(k) to buy houses there. But even with 20% down in the example above, it would still be a huge loss and I'd hazard a guess it would have been cheaper to rent. Again, I'll let others crunch whatever numbers they think are realistic.

Originally Posted by indy_317

-The current example also comes with a 30 year mortgage, which I feel is part of the problem with people looking at RE as an investment. By pushing the investment line of thinking, people have no problem being debt slaves for three decades. "Housing will always go up!" mindset. I know I'm very more debt adverse than most folks, but wanting a debt to be hanging around my neck for that long would seem tiring after the first ten years. Of course if one believes the market will always provide a 10-12% return "over the long haul," then I can see not paying down mortgage debt and putting more into investment accounts. With mortgages at 5%+, owners should seriously consider paying down mortgage debt to some extent as soon as the loan starts.

I think this is picking around the edges. The major issue is people spending way, way beyond their means on housing. I get that people want a safe neighborhood and good schools, but who really needs a gigantic house with granite countertops, a three-car garage and other middle-class bling or a half-million dollar starter home in a trendy city?

Like Toxic Toast, I saw a screaming bargain on the Near Eastside several years ago and yet most people thought I was nuts to ditch Denver for Indianapolis. So I suppose you're right: most people would rather be debt slaves than live in more modest surroundings--or at least cheaper surroundings. My house here is nicer and larger than the one I came from.