Housing/real estate

[fan-of-fans]

This might be off topic of the forum so let me know if so, but has anyone bought a home lately and can tell me how it went.

I've been wanting to buy a house over the last 8 years. Back then with the popping of the real estate bubble and all the foreclosures, you could really get a deal on a house. But I did not have enough credit and wasn't in a position to buy.

Fast forward to last year right before Covid-19 got going and I was seriously getting ready to buy after 8 years of financial and credit preparation. It seemed to me that a big idea was that prices were going to crater with the job market and shutdowns. But it seems the opposite has happened, there is less inventory, and here in Florida at least houses are selling very quickly.

I actually at this point don't think anything much is going to change for a long time. Once Covid is past (I'm starting to think this will be much sooner than later) I think more people will be looking to buy but likely not much will change as there still won't be a lot of inventory to meet the demand.

I kind of want to wait to see what happens, but I think if anything the interest rates will go up but due to lack of inventory, prices won't come down that much. And then I will really be in a pickle. Right now I can afford what I'm looking for at these interest rates, it just takes a while for a suitable house to come on the market, but if rates go up, I will likely be priced out of the market.

I prefer to owe less and have a higher interest rate that I can refinance later, than owe more and start with the lower rate. You can't refinance away the debt. But the way things are these days I don't think there's any way around it.

The problem is, when houses were cheap, I was not all that picky. Now that they are a lot more expensive, I've gotten pickier about what I will consider buying and spending money on. I think I'd rather buy a more expensive house that I like rather than spend less but not have what I've been looking for all this time.

What I don't want is to overpay for a house I don't like just to have one. Especially if it doesn't have the features or yard I want. I realize some things can be upgraded later but if I don't like the overall style or features of the house I'm just not going to be as flexible at this point than I was when you could buy a house for $50k.

 

[wayupnorth]

My other next door neighbor is a Real Estate lawyer. He is busy 7 days a week to do closings and he told me about 75% of his closings this year were out of state buyers and alot surprisingly were rural properties bought sight unseen for way over asking price.

 

[petek]

Simplistic answer

In some ways I think it's better to get something, anything, rather than wait. Prices are always going up and so will the value of the not quite what you want house but at least you're on the train and not standing on the platform.

 

[gansky1]

When you are able to afford a house, that's the time to buy one.   Don't spend too much time staring at pics online, you have to see it to believe it.   Find a good Realtor that will spend some time with you and isn't afraid to show you the unexpected.   Best of luck!

 

 

 

[bradfordwhite]

Tim- Maine is basically a suburb of wealthy Mass. It's not a surprise. I can remember just a few years ago seeing listings in Maine that were incredibly affordable. Some of the properties were quite run down but solid. It's probably changed.

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Cole-I share your concerns and position. I haven't been in the market since 2005. A lot has changed hasn't it?
This time last year and about a month or two forward there was all this talk about how the market was going to tumble and banks were stopping lending.....and the bottom feeders were anxiously positioning to take advantage like they did in 2008 and 2009.

That didn't happen like you pointed out and we've seen. Before Covid, the market was already in bubble territory. And it's a bubble because the prices have far exceeded what majority of people can comfortably afford.

We were in a bubble before and now it's even more inflated. This market is the way it is because mortgage rates are low. It shows how artificial things are. If rates went up even 1%, things would no doubt stall.

Mortgage applications have been declining they say. I've predidcted quite a while now what no one wants: Stagnation. No one wants to sell, and with limited inventory few can or want to buy.

Baby boomers want to age in place they say so they aren't adding inventory for people to buy. This is pushing up prices because there is less inventory.

FLA. has some good prices in some areas (not the beach)

It depends what you're looking for.

Unless I find a really good deal, I'm not buying. Not in this market.

There needs to be some structural changes IMO. Whether it's zoning changes that take the hassle out of building homes people ACTUALLY want and sizes and prices that are workable,
or
a change in the tax code so people are less likely to hold properties for tax reasons, and thus open up inventory
or
?

I don't think interest rates are going to go way up.

Just don't find yourself being house horny. You've made it all these years. Continue to position yourself so when an opportunity comes along, you can pounce. Get pre-qualed. Continue to save so that the more money you have , the sweeter the deal you can get. Know the market and where you should be looking and do indeed look regularly.

 

[ea56]

Cole

Home ownership is your ticket to future financial security, provided you can afford to buy and don’t overextend yourself.  I had thought that the rapidly rising prices of real estate would ultimately result in another crash like in 2008, but so far that hasn’t happened.

 

If you can afford to buy now with the extremely low interest rates I would recommend that you do so.  Interview a few realtors until you find one you feel comfortable with and trust.  

 

Get prequalified for a mortgage, then begin your search.  I would suggest that you buy a home with good “bones” in a location that you will want to live in for a long time, maybe forever.  

 

Over look the cosmetic details you may not like, like paint colors, flooring that isn’t your first choice, appliances and counters that “aren’t your style”, these can always be changed and updated overtime.  The important thing is to get you foot in the door.  

 

After you’ve lived in a home for a while often you will have different ideas about the changes you thought you just had to make right away.  By waiting to remodel you will ultimately end up with just what you really want and not waste money.

 

Then, once you do buy, discipline yourself to make 1/12th of your monthly mortgage payment extra each and every month from the very beginning, and have this extra payment applied to the principal of your mortgage.  This way you can pay a 30 year mortgage off in 15 to 22 years and save lots of money on interest.  

 

We’ve been mortgage free as of next month for 11 years, and believe me with both of use being retired this is financial security that can’t be beat.  We paid our home off in 16 years instead of 30. We waited 17 years to replace the carpeting and flooring we didn’t like, pouring all of our extra money into paying off the mortgage, and it was so worth the wait.  Now our only housing costs are property taxes and HOA dues both of which amount to about $600.00 a month.  

 

Comparable homes in our area now cost at least $2500 to $3000 per month, and we just couldn't afford to live here anymore at that price.  And if and when we ever sell its pure profit, less the commission to the realtor.  Rent payments are like flushing the dollars down the toilet, mortgage payments are eventually money in the bank.  Yes, there are expenses in home ownership that don’t occur when you rent, but believe me its worth it.

 

I wish you good luck in your endeavor.  Keep you eye on the prize and you’ll do just fine.

 

Eddie

[this post was last edited: 3/13/2021-18:35]

 

[bradfordwhite]

Is THIS the game you want to play?

"Rent payments are like flushing the dollars down the toilet,"
No, that it isn't. Paying (realistic) rent means paying only for what you use as you go.

If you don't like the neighborhood= no problem just move tomorrow if you want. You're done.

The foundation cracked and needs $40K in repairs and months worth of hassle=no problem just move tomorrow if you want. You're done. It's someone else problem.

HOA is requiring every homeowner spend $10K to upgrade something=no problem You don't own it. It's not your problem. You don't even have to move. If the owner thinks they're going to pass on the cost to you by jacking up the rent. Just move. You're done.

A tree fell on the house while you were at work, a wild fire blew through the area and made a mess, vandals are spray painting the outside at night, green goblins from Mars have landed on the roof and are starting another colony in the attic-
no problem just move tomorrow if you want. You're done. It's not your problem.

----

It's a proven fact that home ownership is a dream scenario most people picture themselves in, including myself. I've def. been there. I should write a book and do videos.
It's also a very expensive one. The full costs of which are not usually discussed because it would dis-way people from wanting to play the game.

Sure, for people like Eddie, he's sitting pretty at the moment. He and hubby have put in a lot of years too. They sacrificed too.
It doesn't always work out that way. And the market does not always go up.

Ask yourself this: If you buy a home now and we continue to stagnate and in five years your home does not go up in value....are you still interested in buying?

What if it declines in value? And I know places where this has happened in a big way.

Is the fantasy of owning worth it?

This is just a normal mcmansion that sold on the market. It wasn't a foreclosure or anything like that. There are thousands like this. And this is a nice neighborhood. This house was built around 2000. It's a nice house too.

Originally sold for $525K in 2004 and sold last year for $385K.
That's $140K LOSS
plus the expensive ($10000+/- a year =$170K for 17 years) property taxes, HOA fees, ANY money spent on improvements or maintenance, insurance, etc.

Loading…

www.zillow.com

 

[ea56]

I have a brother and a sister, both in their late 60’s.  They didn’t plan for their futures and now they are hard pressed to pay rent and be able to afford much of anything else.  Their 40 plus years of rent receipts won’t even  buy them a cup a’ coffee.  Yes they can move anytime they want to.  But they are finding it more difficult every year.  There are lots of homeless people that didn’t plan for the future and now just can’t afford even a room.

 

No situation is perfect. There are risks to just about anything if you want to look at it that way.  But one thing is for sure.  If you’re lucky you’re gonna get old and one day either too worn out to work or you just don’t want to anymore.  Having a paid for roof over your head lets us sleep at night, not worrying about how we’ll make ends meet.

 

Eddie

 

[bradfordwhite]

forgot

You know what was forgot from the illustration above?

Did anyone think of it?

Anyone?

That's right, mortgage interest.

The illustration is as if one would have bought the house for cash.

Now if, like most people you financed it. AL-L-L that interest expense would also get added to the losses.

If you were fortunate and were able to pay off a approx. $450K mortgage on this house in 15 years @ 5% interest you would have paid about $190K in interest according to the mortgage calculator.

To add it up:
140K loss in selling
170K in prop taxes
190K in mortgage interest exp.
17K for home owners insurance @ $1000 year
20K est for repair, improvements, nothing special
------
WOW   $-537,000 LOSS cash out of pocket.  

 

-------

 

And WHAT if you rented for an average of $1200 a month during the last 17 years.  

 

1200 x 12 month in a yr = $14,400 a year  x 17 yrs = $244,800 total 

   add in renters insurance which is quite affordable at about $250 a year = $4,250 + 244,800 = $249,050  That's ALL you'd have had to spend on housing.

 

Which means of the $537,000 that was collectively spent, if you'd paid the 249,000 on rent instead, you'd have $288,000 in cash in your bank, or hopefully it's earning you money in another way.  

 

Ouch.

 

 

 

[mattl]

My cousin's son just bought a house, they bought it prior to being on the market.
they had several people very angry at them because they wanted the property and were willing to pay $100k over listing. They were looking at the higher end, this guy's brother was looking at the low end and getting out bid on every property he was interested in for about a year. The market around here is hot, houses sell in days if not hours often with bidding wars. From what I hear it's similar in many areas of the country.
The purchaser of the high end house was offered a 3% mortgage but hesitated. A few days later he thought better of declining but was only able to lock in at
3.2%, good but not as good, several days later the rates went up again. So area dependent you have to know your budget and move very quickly.

In regards to that old conundrum of rent/own - I can't see any way anyone is better off dumping money into rent for 40 or 50 years. That money is gone with nothing to show for it.Even a modest house will appreciate over 30 years, and at the end you own it. Sell it, live in it, rent it out it's yours.

 

[polkanut]

Property appreciation.

We bought our home in 1998 for $60,000 to settle an estate before it hit the open market.  We've updated the furnace, water heater, electrical service & wiring, and appliances.  New windows, siding, garage door, front and back entrance doors, and roof.  Converted what was the front enclosed porch into a first floor laundry room.  Painted all the rooms, added a shower in the bathroom, and refinished all of the maple flooring.  Our house is now appraised at $100, 000.  Lots of work and $$$ but worth it in the long run.

 

[lorainfurniture]

@ Bradfordwhite

Your numbers are not exactly accurate. Nobody is going to rent a 3500 sq ft “McMansion” for $1200/ month. I rent shoeboxes in Cleveland for that much. At the absolute bare minimum a halfway decent house that size would rent for $2500/ month. Realistically more like $3,000-$3500 depending on neighborhood and school district.

Houses always go up in value long term. There are exceptions of course but they are exceptions. The problem with most home buyers is that they move too often. The first 10 years of a 30 year mortgage is basically all interest. The average person moves every 7 years. This creates a cycle where the owner never builds any meaningful equity. That, or they refinance and reset the clock all over again.

OP: if you move around a lot then renting is the right call. If you’re looking for your forever home then buy what you want that fits in your budget. Your mortgage should never exceed what you make in one week of working.

Housing is an expense. You must live somewhere. The trick is to keep that expense to a minimum. Eventually your house will be paid for and you will only have the taxes/ upkeep etc. I promise you that your landlord will never lower your rent.

Source: I’ve been a landlord/ in real estate for 20 years. I also understand maths.

 

[awooff]

Home prices

In addition to low rates, few foreclosures have entered markets - soon evictions from non paid mortgages will start up again resulting in many good foreclosed homes at good prices - this will effect demand/values on non foreclosed homes.

Banks hold onto foreclosed homes and release them as the market rises, bringing overall prices down, which is where the states are at now - covid stopped a lot of the normal processes here which WILL SOON CHANGE!

Additionally rates have huge effect on home prices / demand. -Typically housing prices have been stabilised by lowering rates, well rates cant go any lower which means home values can no longer be stabilized! I vote for the wait and see game as this all certainly seems to be the heighth of housing.

 

[fan-of-fans]

I keep an eye on the real estate market pretty regularly, mainly just like looking at the pictures.

A few months ago I saw a foreclosure come on the market for $100k that if I was prequalified, I would have certainly made an offer on. It needed some work, roof, flooring, etc. But for the price it was a very nice house.

I've got a good nest egg for a down payment and still have quite a good amount left over. So I'm definitely good to go there.

I just don't want to buy a house at this "peak", if such it is, and then see prices tumble.

Also, I get the buying any house is better than none, even if you don't want to stay there. But the way I see it with today's high prices, if you want to sell and upgrade later you might have a harder time, since a rising tide raises all ships. OTOH it may be a help to at least have a house to start with.

Just at the point where I am now, after 8 years of watching and waiting, I feel like I just want to make a move. If I keep waiting and prices don't come down, or even worse houses get less affordable then I haven't gotten anywhere.

So in that way I feel like I'd be happier to just bite the bullet and get going on this.

 

[fan-of-fans]

Agents

As for busy agents, yes. I have a friend who is a real estate agent, she actually showed me several houses when I thought about buying 5+ years ago. I haven't talked to her in a while but from what I'm hearing she is very busy.

All of these people wanting to buy but fewer houses available makes me wonder if the "bidding wars" are taking place here too. I haven't noticed houses selling for a whole lot over the asking price, but I have seen a few that were a few thousand over. So I would not be surprised if that's happening.

I would not be interested in getting into a bidding war myself. So in that case I may wait.

Another unusual thing I have noticed, is some houses show up in the listings only after they are under contract, and there's only one picture in the listing.

 

[bradfordwhite]

Exactly

"I just don't want to buy a house at this "peak", if such it is, and then see prices tumble."

It is better in the long run to buy a cheap house at an expensive interest rate like 18%
than it is to
buy a bubble priced house with cheap credit, which is what we have now.

If you got a 30 year :

75,000 mortgage at 18% interest the payment would be $1,130 a month

225,000 mortgage at 3% interest the payment would be $949 a month

However, a high interest rate mtg can be refinanced at a later time to a lower rate AND it's a lot easier to pay off a $75,000 balance vs. the 225,000

That 225,000 loan You are stuck with unless there is some unusual forgiveness program.

----
The problem is people have more and more looked at real estate as a growth asset class instead of a place to live. That's one reason homelessness is rising.

Stagnation is where I think we're at. There are too many people wanting to play the greed game and would bitch and complain if interest rates went up even a few points. But on the other side of that there are fewer and fewer people who can buy or want to buy.

Rising interest rates would be best for the majority but with easy terms.

As a country we need to change how properties are valued and held. The system now is so outdated and it's such a hassle.

It's those looking for a simple place to live vs. those looking for an investment.

-----

I would happily sign on to a plan that would guarantee my home would only maintain it's inflation adjusted value as time goes by. It would weed out these idiot Flippers that have screwed over the market and remodeled once nice houses into ugly gray and blue granite and particle board dumps that I would never live in.

 

[bradfordwhite]

Which part of FLA are you looking?

The beach and major metros are certainly different than other areas.

 

[DADoES]

 
I have never considered my house(s) to be an investment.  It's a place to live and (hopefully) be content.

First in 1991 was a 9yo reasonably-nice brick 3br 2ba "starter"-type.  Paid it early in 10y 7m.  Sold in 2005 at an increase of $42K.  The RE agent had a young couple waiting for a house on the street.  It sold the next day after listing ... no actual listing or advertising was involved.

Second was a 9mo new construction.  More than 63% downpayment, no mortgage insurance or tax/insurance escrow required.  Paid-off early in 8.5 yrs.

 

[thomasortega]

Well, prices in Florida are laughable and lovely.

In cities like Orlando and Miami, one of the reasons they go up are Brazilian investors that buy houses for short term rentals. This is HUGE among Brazilians. In Orlando, for example, over 70% of the homes that are used for short term rentals are owned by Brazilians. The closer to Disney World or those huge outlet malls, the merrier.
Also, the bigger, the merrier. I mean, the bigger the house, the cheaper it gets for the person renting it (you can form a group of 20 people and share the 2-week rent). Also, they love that stereotyped "American Dream Megalomania" with open plan kitchens that only the kitchen is bigger than my whole house with two dishwashers and three refrigerators, shower stalls bigger than my bedroom with so many shower heads and sprays that it looks like a car wash, not to mention the "play room" that became super popular in orlando and they wrongly call it "loft" which is a huge area in the upper floor, facing the bedrooms, that usually have a billiard or an air soft table (or both) and of course the "gourmet kitchen" facing a giant swimming pool with a hot tub that can probably fit 20 people.

Oh yes, fill the house with "modern" Ikea cheap furniture (because if it breaks it's not a big deal) and bingo. You have a steady $4000/week income for the rest of your life.

OTOH, when I see a house in Orlando and compare to a house here in Los Angeles, I want to cry.

The same brand new house that is worth between $350k/$500k in some "luxury" areas in Orlando would never be sold for less than $10 million in some areas in great LA.
With $350k/$400k, if you're really lucky to find, you can buy a 100 year-old tiny 2 bd 1 br house, falling apart, full of termites and insulated with asbestos in Compton, the very worst neighborhood in the world.

My advice is.... If you find a house that is perfect for your needs, that you really fall in love with it the moment you see it, don't waste time thinking twice because there is always a Brazilian looking for the best bargains. And considering how profitable they are for Brazilians, invest up to 1 million dollars in a brand new McMansion with a lake on the backyard is nothing. That investment is recovered in under 3 years with the super expensive rentals for tourists.

Tip number 2: Find a Brazilian friend that can negotiate for you. Act as if you were a Brazilian looking to invest. In Florida (all over the state) there are several real state agents that have DIFFERENT PRICES for the same house. For Brazilians, it's cheaper to kinda compensate the exchange rate and the taxes to "export" the money from Brazil. You can reduce, on average, $150k for every $500k.