Housing hyperinflation... (sales, credit card, loan)

[Zippyman]

Originally Posted by MN-Born-n-Raised

My statement was accurate. In MN for instance (which has a VERY healthy economy), YOY home appreciation was 11% https://www.noradarealestate.com/blo...estate-market/ . i.e. about 1/3 of the PHX metro. Now say you want to live 20 minutes from work in DT MPLS (which in 2021, I would not personally do), then look in Blaine, MN. Something like this for $250K https://www.realtor.com/realestatean...4-82853#photo0 or this for $250K https://www.realtor.com/realestatean...5-26848#photo8

My MIL sold her home for $240K in Blaine MN and it was brutally competitive. With 80 weekend showings. the winner was a 26 year-old, college degreed, state of MN worker bought her place with 20% down. And she is single. We picked her as a buyer because we wanted to reward her ability to save and personal drive to become a home owner. Her payments cannot be over $1400 a month. I understand she is going to take in a couple of roommates because she is smart with her money.

I can point you to several thousand other spots like this one in various states. All in healthy economies. You just aren't going to be living in a tier 1 suburb.



You just lost me when you said $50K downpayment and 5% interest rates. You can put close to zero down and get a 3.25% loan. So why round it up to $50K down and 5% interest rate?? That's not the case. The cheap money is a key reason why home prices have skyrocketed. But as I pointed out, not everywhere. Appreciate has really taken off on the left side of the coast. Not so much in middle America.

Middle America is all peachy now, huh?

The bottom line is that every dollar spent on housing by the “middle” and “lower” economic classes is one less dollar spent at whatever business you own or work at - whether you care to admit it or not.

In 2012, I purchased the (crappy) house across the street from this one :

https://www.zillow.com/homedetails/1.../7995824_zpid/

And, fully rehabbed & spiffy, I was able to rent it above market price at $1,000 a month.. dumps like that one were pulling ~$800-ish.

While I was writing this response, the rent literally bumped from $1900 to $1980 per month. That’s less than ten years - and over double the rent. Rent there went up $80 this morning. Zillow history shows it last rented in 2018 @ $1295..

A regular joe renting that house paying a grand a month, at the same income might have room in their budget to buy or lease a shiny new pickup or perhaps a mustang gt or something.. today - those funds are covering the rent, and not allowing for things like whatever services or products your company provides.

I got mine already! I’m “rich”, socially secure, financially free..

But I’m terrified because the guys who keep the water and sewer flowing in Phoenix make something like $35-$45k per year, and there aren’t enough trailer parks, or momma’s basements for them to live in. Without them, Phoenix is literally going to dry up and blow away. I’d rather that didn’t happen. Plus, they can’t actually “stimulate” the economy.. That means bad things for the future.. we’re all in this together.. or at least we used to be. “Let them drive further” isn’t helping.

[john3232]

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[MN-Born-n-Raised]

Originally Posted by Zippyman

Middle America is all peachy now, huh?

As a reminder, I repped you and mentioned that it is a big problem. I had a couple of posts where was clarifying a few things. 1st, there are many markets where housing costs have not skyrocketed up 30%. And I also proved my point that there are hundreds of areas around the country that are not in dire straights. As in, affordable housing and higher-paying jobs. As for "peachy" now? I never said that. Nor are interest rates 5% and you don't need to sell a kidney. I was just keeping it real.

Originally Posted by Zippyman

The bottom line is that every dollar spent on housing by the “middle” and “lower” economic classes is one less dollar spent at whatever business you own or work at - whether you care to admit it or not.

That goes without saying. To be balanced, people really need to learn how to manage their money. And yes, 1% of the population holding 30% of this countries wealth is a massive problem considering the lower 50% of the Americans have a "whopping" 2% of the countries wealth. For those who find this statement impossible, google it.

[Zippyman]

I currently live in one of those “cheap housing” areas - “I can see Flint from my porch!” - housing prices (and rents) have easily doubled in the past couple years, just like Phoenix, with the additional burden of a much older housing stock. Old houses use a ton more energy, so when natural gas and propane double in cost, we’re going to literally feel it - and they’re turning the screws on energy costs as we speak.

My water bill in rural Michigan is higher than my water bill was in Phoenix, and it doesn’t include trash. I’m fortunate to be living in one of the newest, most efficient homes in my city and my overall energy costs are about the same as they were in Phoenix..(my neighbors are paying a lot more than myself)... car insurance is about twice as expensive as it was in Phoenix, license plates cost twice as much here vs there.. my nursing license cost more than it did in Phoenix, and it expires every 2 years, vs 3 years there. the point being, there’s no “free lunch”, and there aren’t really any cheap seats in the game of life.

If the labor “participation rate” is 61%, then 39% of the adult population either is living off savings, the charity of others, a pension, social security, disability, etc - none of which is going to be sufficient to survive in an environment when a crappy house in a “meh” area is $1,900 a month there, or maybe $1200-ish here. That’s a lot of tents, even if 90% of them find a way to crash for free with family and friends

As for 5% mortgages being unrealistic, I’ll be glad to bet you six of the finest beers you can find that we’re back at 5% within 12 months.. the fed already said they’re planning on jacking rates, and the banker bro’s are not a bit bashful about turning a 1/4 or 1/2 point rate increase by the fed into a full percent for themselves.. even with an 800 Fico, and current fed rates at effectively zero percent, I still get lots of credit card offers at 10-15%.. They’re pretty shameless in their greed, and it’s worked out well for them, even after destroying our economy multiple times in the past few decades..

[MN-Born-n-Raised]

Originally Posted by Zippyman

I currently live in one of those “cheap housing” areas - “I can see Flint from my porch!” - housing prices (and rents) have easily doubled in the past couple years, just like Phoenix, with the additional burden of a much older housing stock. Old houses use a ton more energy, so when natural gas and propane double in cost, we’re going to literally feel it - and they’re turning the screws on energy costs as we speak.

I don't doubt that prices have doubled in your area. After all, you live there. My point is that other areas (take MN) went up 11% on average. And we all know that "affordable" areas often go up the most. So, with cheap money and in "reasonable" areas, it's "affordable" for many while others are being left behind.

And yes, fuel costs are going up too. There was a day when the USA consumed 25% of the world's energy with 4% of the population. In 2018, we were at 17%. I could not find what that percentage is today, but it's dropping as the world is using a ton more energy. Let's just say that a lot of things are going up in price as other countries gain wealth.

Part of what is going on is we are competing on the world market for jobs and supplies. To think that a bunch of coasters (>>50% of the people rolling through K-12) is going to keep their standard of living, long term isn't going to happen. As I said, USA wealth distribution is a massive problem. But when are people going to look in the mirror and figure out why we haven't "got theirs". We raised our kids to kick butt. Others assumed that all they needed to do is (barely) finish K-12 and they can have the same standard of living as their parents. Nope! So keeping it real, a lot of people really need to see why they are where they are. And while society certainly has a lot to say about inequities, their lazy rear-ends with poor financial management is their own damn fault. It's called personal responsibility.

re; the 5% interest rate. I suppose so. But that's not what is happening today. Personally, I don't see it at 5% in a year. Because it will CRUSH housing prices. And the government (who is backing a lot of the loans) now has a vested interest in keeping money cheap!

[Ponderosa]

Originally Posted by MN-Born-n-Raised

I don't doubt that prices have doubled in your area. After all, you live there. My point is that other areas (take MN) went up 11% on average. And we all know that "affordable" areas often go up the most. So, with cheap money and in "reasonable" areas, it's "affordable" for many while others are being left behind.

And yes, fuel costs are going up too. There was a day when the USA consumed 25% of the world's energy with 4% of the population. In 2018, we were at 17%. I could not find what that percentage is today, but it's dropping as the world is using a ton more energy. Let's just say that a lot of things are going up in price as other countries gain wealth.

Part of what is going on is we are competing on the world market for jobs and supplies. To think that a bunch of coasters (>>50% of the people rolling through K-12) is going to keep their standard of living, long term isn't going to happen. As I said, USA wealth distribution is a massive problem. But when are people going to look in the mirror and figure out why we haven't "got theirs". We raised our kids to kick butt. Others assumed that all they needed to do is (barely) finish K-12 and they can have the same standard of living as their parents. Nope! So keeping it real, a lot of people really need to see why they are where they are. And while society certainly has a lot to say about inequities, their lazy rear-ends with poor financial management is their own damn fault. It's called personal responsibility.

re; the 5% interest rate. I suppose so. But that's not what is happening today. Personally, I don't see it at 5% in a year. Because it will CRUSH housing prices. And the government (who is backing a lot of the loans) now has a vested interest in keeping money cheap!

5% in a year is certainly possible if not likely. Maybe not the advertised rates but the practice now is to lard it up with fees and points, so APR could easily be 5%. Mid-4's is a given.

[KurtAZ]

Had a BBQ with some friends yesterday...some of whom are in the Real Estate and Mortgage industry...the consensus is that this will be the norm for at least the next 2-5 years. Especially in the South Chandler area with the Intel Expansion, Samsung coming to the area and the push for more businesses along the Tech Corridor and Lucid Motors in CG. You can sell but where are you moving to?

[Ponderosa]

Originally Posted by KurtAZ

Had a BBQ with some friends yesterday...some of whom are in the Real Estate and Mortgage industry...the consensus is that this will be the norm for at least the next 2-5 years. Especially in the South Chandler area with the Intel Expansion, Samsung coming to the area and the push for more businesses along the Tech Corridor and Lucid Motors in CG. You can sell but where are you moving to?

LOL. I've never heard a of a real estate person who said the market is going to slow down. I worked with a lot of developers back in the day and they are the most optimistic, gonna-get-rich, people I have ever met.

[hikernut]

Originally Posted by Ponderosa

LOL. I've never heard a of a real estate person who said the market is going to slow down. I worked with a lot of developers back in the day and they are the most optimistic, gonna-get-rich, people I have ever met.

+1

Yes, it's always a good time to buy... that is the message if one's income depends on commissions.

[Sno0909]

Originally Posted by Ponderosa

LOL. I've never heard a of a real estate person who said the market is going to slow down. I worked with a lot of developers back in the day and they are the most optimistic, gonna-get-rich, people I have ever met.

As someone who does RE as a hobby, I can tell you that many agents have actually been hurting the past year and a half. Some are doing quite well, if you can get listings. But if you're a buyer's agent, good luck. The competition is stiff. And the limited inventory means less agents are getting a slice of the pie.

So...I would agree that I see this continuing for a few years. Not being greedy or overly optimistic, because I don't really plan on playing this game much longer. I'll probably just help friends and family going forward.