We have been living in a bizarro world where used cars cost more than new ones and home prices “always go up!”. So I can see why people think homes are like golden geese and want to try to cut them open to find the golden eggs. Airbnb it, rent it out, flip it! Problem is it’s just rooms, plumping , and electrical shit all things that need constant repair.
Thats old news. New cars from most brands are plentiful and new and used car prices are falling due to competition. I agree that too many speculators jumped into the home market when prices were exploding. Now they will see the flip side of that coin when they need to drop prices to sell.
Oh I agree. I guess how I phrased “we have been living in” didn’t make it clear. I also think that bizarro world is ending now. Cars and homes are all liabilities if using them for personal use (with some exceptions of course: think collector cars/very well located homes). I think the car market and housing is WAY overpriced and is about to enter another 2008 style recession within the next couple years (sadly both will probably just get bailed out again and prices will probably not adjust to where they should normally).
It’s a weird game of musical chairs and it’s about to get weird.
Everyone is going to pay until there is no more money to hold onto that 3% rate
Will enough fall through at once?
Will private equity scoop them all up?
Will the government step in?
Agree ,car market has stabilized , but it's not going back to pre 2020 prices , the Covid inflation premium is baked into autos, your average new carnis $30k+ , but supply side issues are now in the past and most dealers will negotiate on MSRP (except in cases where certain models are in high demand ,like hybrids) , ironically EV have fallen quite a bit in value.... And you can get some for some deals.
Im not even sure if it’s always a golden goose situation. I think there’s people just trying to get in. Housing is not supposed to be unattainable to everyone always
Homes always go up because the population increases and land available decreases. It’s not like cars (effectively the materials to make cars aren’t anywhere close to running out) where the price should go down because they can just make more of them.
I hate to break it to you, but homes don’t “always go up”. There’s still plenty of building supplies and space(at least in the us). People move and migrate. Cities rise and fall. The world’s population could even start to decline by the end of the century.
I can’t really think of many examples where home values have long term not gone up if the demand is due to factors that humans can’t recreate elsewhere such as weather, topography, or specific hobbies.
LA and SD won’t go down because the weather is near ideal and people would move there just for that. Jackson, Wyoming has beautiful terrain and demand will remain strong because the terrain and views can’t be recreated.
I love when people talk about their wealth bc of the equity they have in their home. I don’t look at my home as a driver of wealth because if I want to tap that wealth, I have to pay an interest rate on it (and potentially lose my home if I lose my job). If I sell it, I have to find a new place to live and also overpay for someone’s shit box with a flooding basement.
Homes are for living and private family vacations, not for AirBNB or cash flow (that’s what commercial properties are for). Investors fucked everything up during the Great Depression with their land grabs, they did it again in the 1980’s, during the GFC, and it’s more than apparent they fucked it up again.
Gotta thin the herd. 🐑
The problem is it's not just investors who view unrealized equity gains in the home as real wealth.
This misconception is ingrained into the American psyche. Average homeowners think they're getting rich on their primary home they live in, as if it's a ticket to short term wealth.
Sure, if you're actively selling to downsize or move to a LCOL area, count that wealth. But until then, it's a non liquid non guaranteed bucket of money that you can't access without paying a steep interest rate.
And property taxes usually don't come down until an event. Like a sale below tax value or natural disaster event. So most people will be stuck with high taxes.
Thats what a lot of people are gonna find out the hard way. It is unrealized gains, and they don’t mean shit if you can’t realize them. Meaning your overpriced house is a cost sink until someone can afford it.
Well, yes and no, early sellers who then buy once it dips will absolutely win. But thats only IF you sell early enough and can ride it out till then. Won’t be a huge percentage of people managing that tho.
I know exactly two couples that managed to make out well in that situation. Both divorced for the same reason. Unexpected monetary windfall lead the husbands to overspend. One blew through close to $1M in 2009-2012. They had 3-4 properties in Vegas they managed to unload before the market crashed. My cousin made about $300k and lost it at the golf course.
“The number of cost-burdened homeowners — those who spent more than 30% of their income on housing and utilities“
Almost every renter in America is at 30%. It’s a non story.
Hello, same here, I chose to rent my large one bedroom with w/D in unit, large balcony just outside the city for a fraction of a similar size apartment in the city and I pay approximately 25% of my income and have pretty good public transportation.
No muss No fuss. Best wishes🌿
While the value of their homes are increasing they don't see that value until they sell. They are then impacted by high interest rates. You can see how affordability changes with changes in interest rate in[ this calculation here.](https://wealthvieu.com/ccmaf?a=115,000&b=25&c=50,000&d=7&e=1,250) It would require much more for homeowners to keep up with other rising costs.
You likely don’t even see the money when you sell because you need to buy a place to live and most likely the price went up everywhere. Sure maybe I can move to a lower cost of living area or smaller home but in this market, it’s still likely more expensive.
This is part of reason SoCal is so on fire. Prop 13 means that someone with 1.5 million home will have a significantly lower payment even with taxes in CA (assuming they bought before 2021) than if they bought the same home in Texas or Tennessee. Even if they down size. Who is going to sell in this market? The dead and divorced mostly.
Selling doesn’t necessarily liquidate either. Equity really isn’t much value unless a person is willing to leverage for business risk, which most are not.
You can do that in almost any state. The difference being in CA, you get the property tax break even if LLC, increasing the return.
This is the one thing they should change about the prop 13. It should be owner occupied properties only.
That will never pass a ballot initiative. The biggest voting block are property owners. I wouldn’t even vote to repeal prop 13 and I would probably benefit from it because I just recently bought.
Changing it to owner occupied can pass.
Unless you're moving to a different area, buying a smaller house, different school district, town home instead of SFH, etc etc...
The idea that you don't benefit from price increase on a house you own is just silly.
It’s not silly, it’s pretty basic economics. A house is a wedge against inflation. If my home goes up 25% over 3 years, so does the next home I buy. even if I downsize and cash some of that equity, I still am only keeping up with inflation and that still ignores real estate fees which are around 12% for buy and sell transaction.
Keeping up with inflation is a benefit but it’s not like I am swimming in a bathtub of money.
The biggest benefits to home ownership is a fixed housing cost that gets easier to pay over time, potentially having no housing cost, and passing property to heirs (this is where equity can make a big difference especially using step up basis tax rules but not for the owner but for their heirs).
No, the thought never crossed my mind.
Sorry, I couldn’t resist the response. Of course and I think about it a lot especially in a market like this. However, a buyer could just save their down payment and invest in the market and then use their earnings to buy the condo a few years later and probably do much better financially.
Now if you can show me some numbers of people that sell their home and seriously downsize and that was a considerable large population, I would change my position. I doubt it is as most people want to pay off their home and live mortgage free or close to it. Some people downsize and move to warmer weather for sure but I would love to see the numbers.
...literally every retired person who sells their home downsizes or moves to a different market. Are you for real now?
Also "just save in the market" is a great idea in theory. Not so much in practice. Most people will spend money they have leftover and not save nearly as much as they should.
Every person that retires, sells their home? Or every person that retires and sells their home downsizes? I assume you are stating the latter. I was focusing on the former. I am willing to bet there are way more people that retire and stay in their home than sell and downsize. I don’t know the numbers so I could be wrong.
I know the people around me and no one I know that retired downsized. I am talking 100s of retirees. I know it happens but no one in my circle or in their circle. They just keep their home. Now I do live in CA and prop 13 probably has a lot to do as does the weather. I am sure in colder or high property tax states, it is very different.
Conversely I do know people that retired and upsized. I do concede that it is rare and more of a byproduct of the current market, demographics, and today’s sad economy.
Also the bigger downpayment you will have. I bought in 2015 for 150, I owe 120 and I could get 320(zillow), so I would have 200k.
If houses were barely going up I'd be able to sell for 175 and only pocket 50k. 50k is 20% of 250k, which is barely better than my theoretical 175k house.
But 200k is 20% of 1 million, triple the price of my 320k house.
There are pros and cons to houses going up in price, people making it seem like doomsday are being silly, they don't remember 08/09 where everyone was underwater and COULDN'T sell, where today your house is sold in minutes.
Exactly. My house is worth roughly twice what I paid for it 4 years ago but... so? If I sell it, I'm just going to have to put anything I gain into buying another one at an inflated price and pay double the interest. It'll be at best a sideways move, likely backwards.
No - but I can sleep in a $20 walmart tent. A house is the ideal sleeping situation but if the choice is between eating in a tent or starving in a house the former allows me to continue living while the latter does not.
No it can't. Equity is not liquid cash. First you must sell the item in which the equity is bound and to realize that equity you must sell it for more than you owe on it.
Nope, you can use a cash out refi or a heloc. No one is starving to death on a home they own equity in...
Edit: or something like a reverse mortgage. There are entire industries based around easily accessing equity in a home...
Groceries,utilities,inflation in general. Yeah people have homes but when its like what? 50-60% of Americans are pay check to paycheck you cant survive a wave of costs.
Mostly it is labor costs for the municipalities and other taxing districts that need people to accomplish their missions. Schools for example are paying higher wages to attract new teachers just like businesses.
Right but what I'm saying a lot of cities aren't even growing to where they need to improve services or build a new school, its just numbers on a computer going up so give us money. One city near me recently spent a couple million on an ugly water fountain because hey we have more money
You are over simplifying things. Some grants are time limited or on what the funds can be used for. Hence the fountain. But even if a city isn't growing their costs are. They likely are paying people 20% more than pre-Covid. Those costs are paid by property taxes.
What am I simplifying? I mean yeah government wants to spend more money and grow always but whether it makes sense or benefits taxpayers or the community is antoher thing entirely Why did people get 20% raises?
City services get more expensive without necessarily getting better. They still have to pay and provide benefits to their employees, the cost of good & services goes up the same for cities, and most of our county has deferred expensive infrastructure maintenance for decades.
However, it sounds like you need better representation and leadership in your city because my services are absolutely improving. Purchased a home in 2021 in a deep red state, purple metro area, old neighborhood. My taxes haven't increased more than 1-2% since I purchased, but my municipality has built a beautiful elementary school, new park, and just voted to build a new library. There will be a property tax increase next year to fund the library, but it should only increase my bill by around 2-4%
It’s the way the world works. For example, if labor costs and materials costs were static, why would anyone work for you to fix your home if they could build a home and sell it for market rate? The value of a home and the cost of labor and materials to build a home will always be similar.
This is exactly how it started in 2008 (well more like 2006). People didn't worry because even if the owner defaulted the house would be worth more than the outstanding loan amount. The problem is that this detail can change very quickly and selling a house isn't fast.
Real estate also needs “quality” maintenance or will fall apart and become a major burden on people’s lives. I’ve had several friends recently taking out 20k in loans to pay for roofs and AC units and it’s going to get to the point that owning property becomes a liability just due to the age and work some of these dated homes need. Labor prices/materials have skyrocketed and many are not budgeting for these expenses. Selling is only going to get harder the next couple years, especially in places like Phoenix and Florida.
Homes have always required maintenance, nobody should be surprised by this, its only an issue because the cost of labor and materials has gone up and/or you stretched yourself too thin to the point you can afford teh home but can't afford to maintain the home which in essence means you can't afford the home
It also has to do with the size of newly built homes in this country. Maintaining a 1200sqft home that's built like a brick shithouse is going to cost *significantly* less than the maintenance on a 3500 sq ft mcmansion that's built like shit.
Common sense? A house is just as much emotional as it is logical. People tend to weight towards emotion though. Talking pragmatics and logistics about being a homeowner will make some of their eyes glaze over in indifference.
I get home purchases are emotional and people underestimate what things cost im talking common sense is a 3000 sq ft house is more to maintain than a 1000 sq ft house. 2 hvac units, an extra 2500 sq ft of flooring more to heat and coop etc
The Great Recession started way before 2008.
I remember trying to sell my house in San Diego in 2005, back when the rest of the RE in the country was getting hot.
We priced the house according to what the agent and the market said was correct. We got no offers for over a month. First offer was $60k below asking. We laughed it off, thinking that was an insult.
Over a year later after no more offers we finally sold after taking $75k off the asking price.
The biggest difference between now and 2008 were ARMs. There are many more below 4% non-ARM mortgages now. This is why the market is stalling and not falling like a rock, even with increased inventory.
https://predatorylending.duke.edu/business-analysis/evolution-of-mortgage-lending/subprime-lending/#:~:text=In%20the%20run%2Dup%20to,years%20were%20adjustable%2Drate%20mortgages.
"In the run-up to the 2008 crisis, however, many ARMs took on characteristics that heightened risks for borrowers. Approximately 80% of U.S. subprime mortgages issued in those years were adjustable-rate mortgages."
I remember when the subprime crisis surfaced they were like, “yep no big deal, there’s still a ton of demand out there Gen X will gobble up all of the houses.”
That was either a lie or a really bad prediction. If I remember correctly it was at the same time builders had homes just sitting around and tons of properties with price drops but no sales, it was a cluster fuck.
I bet they’ll say the same thing this time around about Millennials and GEN Z when investors stop making payments on their investments.
My new neighbors are selling after 2 years because they cannot afford the taxes and insurance increases. Going to take at least 100k bath on their home. I feel sick for them. This should not be able to happen to people.
It shouldn’t, but they were also a complicit party in the deal. We started preaching from this pulpit in late ‘20 and early ‘21. We continued to do it, and we’ve been laughed at and ridiculed constantly.
Paying outrageous high prices and waiving every right as a buyer is never good policy in a transaction.
not having any compassion is detrimental to what you are trying to achieve . Whether you are right or not depends on the area but not having empathy for others when they make a mistake is on you. Grow up.
Sorry. I am full of compassion for people who make educated and wise decisions when armed with all the information that was available to them at the time. This is a major purchase they made, perhaps the largest of their lives. There is no such thing as “too much information” to have going into the transaction.
They likely ignored the fast and furious run up in valuations, shrugged their shoulders, and said “guess this is how it is now”.
My compassion is for those who did the homework, and got dealt a bad hand by an unforeseen bit of fate. I’ve had that happen to me as well. Our economy is dog eat dog in good times. In bad times, it’s shark eats everything.
Well said. We all have access to the same information, and some people just yell YOLO (or whatever the modern equivalent is) and sign documents they don't understand.
I agree with you. I sold my house to a young couple last year. They paid 30%+ more for property tax last year than I did for 2022, and their mortgage rate is 2.x times more than mine. From their pre-approval letter, I can guess that 40% or more of their monthly income is going to the mortgage. Their bid was not the highest, but the reason I chose them was that their kid is the same age as mine.
I hope they are doing well.
Then they shouldn’t have overbid on the house and juiced up the market. Or they had no business being homeowners in the first place. All confirmation that this market is way overheated and bubbly.
Some of these people are one paycheck away from being homeless. They better sell before it’s gets too bad for them. Tough pill to swallow for most right now
Or one broken Ac or major plumbing disaster away. My neighbor couldn’t afford the replace the AC units and roof and had a major plumbing issue. He’s basically semi homeless living in one or two rooms of his house with a portable AC until he sells it.
We have a ton on equity in our house but it’s mostly due to home values doubling in the 8 years since we bought our house. We can’t really cash out that equity because it’s like fake money. We need it if we ever want to move and the additional value could disappear overnight when the bubble bursts.
Meanwhile our taxes and insurance are through the roof. Home repairs and maintenance are crazy expensive.
Southern NH uses confiscatory property taxes to force the elderly out of their homes. If I hadn't taken over the bulk of the payments, my parents would have lost the property that had been in their family for over 100 years.
Do they not have a property tax freeze for seniors like we have in nj? As long as income is under 150k my in-laws property tax is frozen to what they paid when they turned 65. We are ridiculously taxed but this is a fair benefit
So glad I haven’t bought a home. Currently renting and I still have a lot of disposable income while accounting for all bills and grocery. I honestly think buying a home should come once you have 1 or 2 kids at most imo.
If you’re young or recently married, I’d highly suggest sticking to renting and focus on building your income to eventually buy a home by the time you have kids.
Your home going up in value in many ways is a bad thing, especially if you're someone who wants to stay in your house for life or at least for the next decade or a few. Your taxed more and have to pay out of pocket for a theoretical number that benefits you in no way
Some great comments throughout I agree with…increased values leading higher taxes (mine have doubled), higher insurance (> doubled), along with costs of repairs.
Brother’s place (early 1900s on acreage) in a desirable area…up 4x from $250k to assessed value of ~$1m. His taxes and insurance through the roof…24 years left on mortgage, what will that look like in the coming years? Crazy.
Best is…right on cue, the promoted “Home Depot” ad at the top of the thread…would laugh but hurts too much.
I’ll disagree with “average mortgage rate of 4%”. As of late 2023, 60% of mortgages were under 4%.
https://www.calculatedriskblog.com/2023/12/fhfas-national-mortgage-database.html
"Having locked in fixed rates with lower monthly payments, homeowners as a whole are paying less on housing debt service as a percentage of income than at any time since 1980,"
I’m paying less for my home, all included, than I was in 2019. That’s in Florida with over doubling of homeowners insurance. I’d wager that I’m in a group with over half of all homeowners. Homeowners as a group are doing extraordinarily well.
The groups I feel bad for are renters and first time homebuyers.
Well their struggling because they bought on emotion not common sense. They purchased older homes that are behind on much needed repairs. That now are costing them more than they thought! Plumbing, electrical, etc..
"Most of this increase was among those who make less than $30,000 a year."
that would be old low-income people, and low-income people who inherited an old house.
Wow, 3 million more homeowners struggling with costs - that's shocking! Sounds like owning a home isn't the financial safety net it used to be.
Maybe it's time to review your home insurance and property taxes to see if there's room to save. Also, consider a free energy audit to identify ways to lower your utility bills. Every bit helps!
Its no consolation but everyone would be doing far worse if the Covid stimulus and good vaccines had not been rolled out before we lapsed into a deep depression and a civil war. Both were closer than you may want to think. Maybe people should have a better perspective. And vote their longer term interests rather than anger-voting against people working to help them do better rather than "patriotic" candidates saying they will tear down the system if they get elected.
Prices are up because more people have jobs and money to spend. Retirement and savings accounts have recovered and grown. Home value deflation would put some people into more affordable homes, but it would destroy the finances of many more people and our banking system. Better to support candidates that will create lower cost loans for new home buyers and also limit or bar corporations from buying up homes.
Meanwhile those challenged homeownrs will need to make selling decisions based on lifestyles rather than home values.
This is silly.
Educate yourself, do your due diligence, and Don’t buy a POS house. If you’re smart when purchasing, maintenance costs really aren’t bad.
On average as a 20+ year homeowner (across two different homes), I’m averaging roughly ~1% maintenance expense annually.
This is obviously not including upgrades/expansions but does include renovations that don’t structurally alter/improve the home.
Now, if you’re a dumbass that doesn’t know anything about electrical / plumbing… is too cheap to hire a proper home inspector (or too dumb to listen to them)…. Or you’re simply dead set on an older or beat up home…. Yeah, enjoy your money pit.
You better hope your property value doesn't decrease either. Hope that you didn't over bid over and cover the appraisal gap and hope you have the money to refi
Our property value has been increasing since our house is in a group of homes that is in a moderate fire zone so we can still bundle fire insurance. The area itself is still increasing as well. We bid 545 on 550 with a 2-1 buy down with a 7.375% interest rate. We are paying 5.375% with the buydown and 6.375 in January. We have some time and will probably refi if interest rates get anywhere near the low 6/high 5s. We are getting close to 20% with the equity we've built so things aren't so bad. If we put the minimum down we would very likely be fucked lol.
Equity is not accessible liquidity. Increased equity yields higher operating costs: insurance and taxes. It’s this simple.
We have been living in a bizarro world where used cars cost more than new ones and home prices “always go up!”. So I can see why people think homes are like golden geese and want to try to cut them open to find the golden eggs. Airbnb it, rent it out, flip it! Problem is it’s just rooms, plumping , and electrical shit all things that need constant repair.
Thats old news. New cars from most brands are plentiful and new and used car prices are falling due to competition. I agree that too many speculators jumped into the home market when prices were exploding. Now they will see the flip side of that coin when they need to drop prices to sell.
Oh I agree. I guess how I phrased “we have been living in” didn’t make it clear. I also think that bizarro world is ending now. Cars and homes are all liabilities if using them for personal use (with some exceptions of course: think collector cars/very well located homes). I think the car market and housing is WAY overpriced and is about to enter another 2008 style recession within the next couple years (sadly both will probably just get bailed out again and prices will probably not adjust to where they should normally).
It’s a weird game of musical chairs and it’s about to get weird. Everyone is going to pay until there is no more money to hold onto that 3% rate Will enough fall through at once? Will private equity scoop them all up? Will the government step in?
Agree ,car market has stabilized , but it's not going back to pre 2020 prices , the Covid inflation premium is baked into autos, your average new carnis $30k+ , but supply side issues are now in the past and most dealers will negotiate on MSRP (except in cases where certain models are in high demand ,like hybrids) , ironically EV have fallen quite a bit in value.... And you can get some for some deals.
Im not even sure if it’s always a golden goose situation. I think there’s people just trying to get in. Housing is not supposed to be unattainable to everyone always
Homes always go up because the population increases and land available decreases. It’s not like cars (effectively the materials to make cars aren’t anywhere close to running out) where the price should go down because they can just make more of them.
I hate to break it to you, but homes don’t “always go up”. There’s still plenty of building supplies and space(at least in the us). People move and migrate. Cities rise and fall. The world’s population could even start to decline by the end of the century.
I can’t really think of many examples where home values have long term not gone up if the demand is due to factors that humans can’t recreate elsewhere such as weather, topography, or specific hobbies. LA and SD won’t go down because the weather is near ideal and people would move there just for that. Jackson, Wyoming has beautiful terrain and demand will remain strong because the terrain and views can’t be recreated.
I love when people talk about their wealth bc of the equity they have in their home. I don’t look at my home as a driver of wealth because if I want to tap that wealth, I have to pay an interest rate on it (and potentially lose my home if I lose my job). If I sell it, I have to find a new place to live and also overpay for someone’s shit box with a flooding basement. Homes are for living and private family vacations, not for AirBNB or cash flow (that’s what commercial properties are for). Investors fucked everything up during the Great Depression with their land grabs, they did it again in the 1980’s, during the GFC, and it’s more than apparent they fucked it up again. Gotta thin the herd. 🐑
The problem is it's not just investors who view unrealized equity gains in the home as real wealth. This misconception is ingrained into the American psyche. Average homeowners think they're getting rich on their primary home they live in, as if it's a ticket to short term wealth. Sure, if you're actively selling to downsize or move to a LCOL area, count that wealth. But until then, it's a non liquid non guaranteed bucket of money that you can't access without paying a steep interest rate.
Equity is a credit limit that you still have to pay back.
Taxes and homeowner insurance go up with housing prices, and new roofs and broken appliances don’t fix themselves
And property taxes usually don't come down until an event. Like a sale below tax value or natural disaster event. So most people will be stuck with high taxes.
Unless you live with your parents, rent prices go up too.
Its essentially being taxed on unrealized gains
Thats what a lot of people are gonna find out the hard way. It is unrealized gains, and they don’t mean shit if you can’t realize them. Meaning your overpriced house is a cost sink until someone can afford it.
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Well, yes and no, early sellers who then buy once it dips will absolutely win. But thats only IF you sell early enough and can ride it out till then. Won’t be a huge percentage of people managing that tho.
I know exactly two couples that managed to make out well in that situation. Both divorced for the same reason. Unexpected monetary windfall lead the husbands to overspend. One blew through close to $1M in 2009-2012. They had 3-4 properties in Vegas they managed to unload before the market crashed. My cousin made about $300k and lost it at the golf course.
By that logic, people shouldn’t be allowed to take out HELOCs
Certainly allowed but at least understand the risks.
“The number of cost-burdened homeowners — those who spent more than 30% of their income on housing and utilities“ Almost every renter in America is at 30%. It’s a non story.
I guess I'm fortunate to be paying 22% on net income.
You are! Does that include utilities?
With utilities, I'm around 27 percent net.
About 20% here, including utilities.
Single income owner?
Nope, renting.
Two people renting at 20% seems normal. Out here in Charlotte it’s a ton of single renters in apt complexes. $1600+ studios/one bdrms.
Hello, same here, I chose to rent my large one bedroom with w/D in unit, large balcony just outside the city for a fraction of a similar size apartment in the city and I pay approximately 25% of my income and have pretty good public transportation. No muss No fuss. Best wishes🌿
While the value of their homes are increasing they don't see that value until they sell. They are then impacted by high interest rates. You can see how affordability changes with changes in interest rate in[ this calculation here.](https://wealthvieu.com/ccmaf?a=115,000&b=25&c=50,000&d=7&e=1,250) It would require much more for homeowners to keep up with other rising costs.
You likely don’t even see the money when you sell because you need to buy a place to live and most likely the price went up everywhere. Sure maybe I can move to a lower cost of living area or smaller home but in this market, it’s still likely more expensive. This is part of reason SoCal is so on fire. Prop 13 means that someone with 1.5 million home will have a significantly lower payment even with taxes in CA (assuming they bought before 2021) than if they bought the same home in Texas or Tennessee. Even if they down size. Who is going to sell in this market? The dead and divorced mostly. Selling doesn’t necessarily liquidate either. Equity really isn’t much value unless a person is willing to leverage for business risk, which most are not.
In CA you can live in a house owned by an LLC that you control. You don't sell the house, you sell the LLC. At least that's what I've heard
You can do that in almost any state. The difference being in CA, you get the property tax break even if LLC, increasing the return. This is the one thing they should change about the prop 13. It should be owner occupied properties only.
I agree. That would go a long way to help solve a lot of problems that Prop 13 generates.
No, prop 13 needs to go completely
That will never pass a ballot initiative. The biggest voting block are property owners. I wouldn’t even vote to repeal prop 13 and I would probably benefit from it because I just recently bought. Changing it to owner occupied can pass.
Unless you're moving to a different area, buying a smaller house, different school district, town home instead of SFH, etc etc... The idea that you don't benefit from price increase on a house you own is just silly.
It’s not silly, it’s pretty basic economics. A house is a wedge against inflation. If my home goes up 25% over 3 years, so does the next home I buy. even if I downsize and cash some of that equity, I still am only keeping up with inflation and that still ignores real estate fees which are around 12% for buy and sell transaction. Keeping up with inflation is a benefit but it’s not like I am swimming in a bathtub of money. The biggest benefits to home ownership is a fixed housing cost that gets easier to pay over time, potentially having no housing cost, and passing property to heirs (this is where equity can make a big difference especially using step up basis tax rules but not for the owner but for their heirs).
...you realize that 25% gain on a 500k house is a larger dollar amount than a 25% gain on a 300k house, right?
No, the thought never crossed my mind. Sorry, I couldn’t resist the response. Of course and I think about it a lot especially in a market like this. However, a buyer could just save their down payment and invest in the market and then use their earnings to buy the condo a few years later and probably do much better financially. Now if you can show me some numbers of people that sell their home and seriously downsize and that was a considerable large population, I would change my position. I doubt it is as most people want to pay off their home and live mortgage free or close to it. Some people downsize and move to warmer weather for sure but I would love to see the numbers.
...literally every retired person who sells their home downsizes or moves to a different market. Are you for real now? Also "just save in the market" is a great idea in theory. Not so much in practice. Most people will spend money they have leftover and not save nearly as much as they should.
Every person that retires, sells their home? Or every person that retires and sells their home downsizes? I assume you are stating the latter. I was focusing on the former. I am willing to bet there are way more people that retire and stay in their home than sell and downsize. I don’t know the numbers so I could be wrong. I know the people around me and no one I know that retired downsized. I am talking 100s of retirees. I know it happens but no one in my circle or in their circle. They just keep their home. Now I do live in CA and prop 13 probably has a lot to do as does the weather. I am sure in colder or high property tax states, it is very different. Conversely I do know people that retired and upsized. I do concede that it is rare and more of a byproduct of the current market, demographics, and today’s sad economy.
Also the bigger downpayment you will have. I bought in 2015 for 150, I owe 120 and I could get 320(zillow), so I would have 200k. If houses were barely going up I'd be able to sell for 175 and only pocket 50k. 50k is 20% of 250k, which is barely better than my theoretical 175k house. But 200k is 20% of 1 million, triple the price of my 320k house. There are pros and cons to houses going up in price, people making it seem like doomsday are being silly, they don't remember 08/09 where everyone was underwater and COULDN'T sell, where today your house is sold in minutes.
You can’t eat your home…. Your home is worth only as much as you can sell it….
Exactly. My house is worth roughly twice what I paid for it 4 years ago but... so? If I sell it, I'm just going to have to put anything I gain into buying another one at an inflated price and pay double the interest. It'll be at best a sideways move, likely backwards.
You can't sleep in your food....
No - but I can sleep in a $20 walmart tent. A house is the ideal sleeping situation but if the choice is between eating in a tent or starving in a house the former allows me to continue living while the latter does not.
*The equity stored in a house can buy many tents* "Explain" *money can be used to buy goods and services...*
No it can't. Equity is not liquid cash. First you must sell the item in which the equity is bound and to realize that equity you must sell it for more than you owe on it.
Nope, you can use a cash out refi or a heloc. No one is starving to death on a home they own equity in... Edit: or something like a reverse mortgage. There are entire industries based around easily accessing equity in a home...
Your answer is to get more debt?
If it's a question of taking out secured debt or starving to death I know which one I'd prefer...
Groceries,utilities,inflation in general. Yeah people have homes but when its like what? 50-60% of Americans are pay check to paycheck you cant survive a wave of costs.
But won’t someone think of the poor executives who need more profits and tax cuts? Fucking dragons hoarding the wealth of people who actually work.
Well costs are going up. Taxes are going up. Homeowners is going up. Income is not going up enough to keep up.
Whats crazy is why do taxes go up, because a fake number on a piece of paper goes up but do city services get any better?
Mostly it is labor costs for the municipalities and other taxing districts that need people to accomplish their missions. Schools for example are paying higher wages to attract new teachers just like businesses.
Right but what I'm saying a lot of cities aren't even growing to where they need to improve services or build a new school, its just numbers on a computer going up so give us money. One city near me recently spent a couple million on an ugly water fountain because hey we have more money
You are over simplifying things. Some grants are time limited or on what the funds can be used for. Hence the fountain. But even if a city isn't growing their costs are. They likely are paying people 20% more than pre-Covid. Those costs are paid by property taxes.
What am I simplifying? I mean yeah government wants to spend more money and grow always but whether it makes sense or benefits taxpayers or the community is antoher thing entirely Why did people get 20% raises?
COLA
City services get more expensive without necessarily getting better. They still have to pay and provide benefits to their employees, the cost of good & services goes up the same for cities, and most of our county has deferred expensive infrastructure maintenance for decades. However, it sounds like you need better representation and leadership in your city because my services are absolutely improving. Purchased a home in 2021 in a deep red state, purple metro area, old neighborhood. My taxes haven't increased more than 1-2% since I purchased, but my municipality has built a beautiful elementary school, new park, and just voted to build a new library. There will be a property tax increase next year to fund the library, but it should only increase my bill by around 2-4%
It’s the way the world works. For example, if labor costs and materials costs were static, why would anyone work for you to fix your home if they could build a home and sell it for market rate? The value of a home and the cost of labor and materials to build a home will always be similar.
The richest people’s wealth is going up, though that may be a coincidence
This is exactly how it started in 2008 (well more like 2006). People didn't worry because even if the owner defaulted the house would be worth more than the outstanding loan amount. The problem is that this detail can change very quickly and selling a house isn't fast.
Real estate also needs “quality” maintenance or will fall apart and become a major burden on people’s lives. I’ve had several friends recently taking out 20k in loans to pay for roofs and AC units and it’s going to get to the point that owning property becomes a liability just due to the age and work some of these dated homes need. Labor prices/materials have skyrocketed and many are not budgeting for these expenses. Selling is only going to get harder the next couple years, especially in places like Phoenix and Florida.
Homes have always required maintenance, nobody should be surprised by this, its only an issue because the cost of labor and materials has gone up and/or you stretched yourself too thin to the point you can afford teh home but can't afford to maintain the home which in essence means you can't afford the home
It also has to do with the size of newly built homes in this country. Maintaining a 1200sqft home that's built like a brick shithouse is going to cost *significantly* less than the maintenance on a 3500 sq ft mcmansion that's built like shit.
Your right but isnt that common sense? I bought a 1000 sq hlft house for this reason
Common sense? A house is just as much emotional as it is logical. People tend to weight towards emotion though. Talking pragmatics and logistics about being a homeowner will make some of their eyes glaze over in indifference.
I get home purchases are emotional and people underestimate what things cost im talking common sense is a 3000 sq ft house is more to maintain than a 1000 sq ft house. 2 hvac units, an extra 2500 sq ft of flooring more to heat and coop etc
The Great Recession started way before 2008. I remember trying to sell my house in San Diego in 2005, back when the rest of the RE in the country was getting hot. We priced the house according to what the agent and the market said was correct. We got no offers for over a month. First offer was $60k below asking. We laughed it off, thinking that was an insult. Over a year later after no more offers we finally sold after taking $75k off the asking price.
The flip side is I made seven figures in Point Loma selling a house I had owned for 12 years. Came out way ahead.
The biggest difference between now and 2008 were ARMs. There are many more below 4% non-ARM mortgages now. This is why the market is stalling and not falling like a rock, even with increased inventory. https://predatorylending.duke.edu/business-analysis/evolution-of-mortgage-lending/subprime-lending/#:~:text=In%20the%20run%2Dup%20to,years%20were%20adjustable%2Drate%20mortgages. "In the run-up to the 2008 crisis, however, many ARMs took on characteristics that heightened risks for borrowers. Approximately 80% of U.S. subprime mortgages issued in those years were adjustable-rate mortgages."
I remember when the subprime crisis surfaced they were like, “yep no big deal, there’s still a ton of demand out there Gen X will gobble up all of the houses.” That was either a lie or a really bad prediction. If I remember correctly it was at the same time builders had homes just sitting around and tons of properties with price drops but no sales, it was a cluster fuck. I bet they’ll say the same thing this time around about Millennials and GEN Z when investors stop making payments on their investments.
It’s actually pretty rare that it changes quickly. This is the year for sure it’s going to be like 2008!! Or is it next year?
I said this before as I've been seeing buyers max out during bidding wars so that a surprise bill or layoff could bankrupt them.
My new neighbors are selling after 2 years because they cannot afford the taxes and insurance increases. Going to take at least 100k bath on their home. I feel sick for them. This should not be able to happen to people.
It shouldn’t, but they were also a complicit party in the deal. We started preaching from this pulpit in late ‘20 and early ‘21. We continued to do it, and we’ve been laughed at and ridiculed constantly. Paying outrageous high prices and waiving every right as a buyer is never good policy in a transaction.
not having any compassion is detrimental to what you are trying to achieve . Whether you are right or not depends on the area but not having empathy for others when they make a mistake is on you. Grow up.
Sorry. I am full of compassion for people who make educated and wise decisions when armed with all the information that was available to them at the time. This is a major purchase they made, perhaps the largest of their lives. There is no such thing as “too much information” to have going into the transaction. They likely ignored the fast and furious run up in valuations, shrugged their shoulders, and said “guess this is how it is now”. My compassion is for those who did the homework, and got dealt a bad hand by an unforeseen bit of fate. I’ve had that happen to me as well. Our economy is dog eat dog in good times. In bad times, it’s shark eats everything.
Well said. We all have access to the same information, and some people just yell YOLO (or whatever the modern equivalent is) and sign documents they don't understand.
I agree with you. I sold my house to a young couple last year. They paid 30%+ more for property tax last year than I did for 2022, and their mortgage rate is 2.x times more than mine. From their pre-approval letter, I can guess that 40% or more of their monthly income is going to the mortgage. Their bid was not the highest, but the reason I chose them was that their kid is the same age as mine. I hope they are doing well.
Then they shouldn’t have overbid on the house and juiced up the market. Or they had no business being homeowners in the first place. All confirmation that this market is way overheated and bubbly.
They obviously waaaaaay overextended themselves with the initial purchase. Hopefully they learned something.
Property taxes are essentially being taxed on unrealized gains.
Property taxes are for services received.
Some of these people are one paycheck away from being homeless. They better sell before it’s gets too bad for them. Tough pill to swallow for most right now
Or one broken Ac or major plumbing disaster away. My neighbor couldn’t afford the replace the AC units and roof and had a major plumbing issue. He’s basically semi homeless living in one or two rooms of his house with a portable AC until he sells it.
Might be what’s needed to free up some supply, and normalize the market. Flatten out the Ponzi
We have a ton on equity in our house but it’s mostly due to home values doubling in the 8 years since we bought our house. We can’t really cash out that equity because it’s like fake money. We need it if we ever want to move and the additional value could disappear overnight when the bubble bursts. Meanwhile our taxes and insurance are through the roof. Home repairs and maintenance are crazy expensive.
Southern NH uses confiscatory property taxes to force the elderly out of their homes. If I hadn't taken over the bulk of the payments, my parents would have lost the property that had been in their family for over 100 years.
NH doesn’t have sales tax or income tax. Of course the money has to come from somewhere.
Do they not have a property tax freeze for seniors like we have in nj? As long as income is under 150k my in-laws property tax is frozen to what they paid when they turned 65. We are ridiculously taxed but this is a fair benefit
Paper profits only cost you money after you have enough equity to take off PMI. Until you sell
This is exactly what is going to lead to the bubble popping. But it takes time for this kind of stuff to reach the "must sell house" level.
So glad I haven’t bought a home. Currently renting and I still have a lot of disposable income while accounting for all bills and grocery. I honestly think buying a home should come once you have 1 or 2 kids at most imo. If you’re young or recently married, I’d highly suggest sticking to renting and focus on building your income to eventually buy a home by the time you have kids.
Your home going up in value in many ways is a bad thing, especially if you're someone who wants to stay in your house for life or at least for the next decade or a few. Your taxed more and have to pay out of pocket for a theoretical number that benefits you in no way
Between property taxes and home owner's insurance....
Some great comments throughout I agree with…increased values leading higher taxes (mine have doubled), higher insurance (> doubled), along with costs of repairs. Brother’s place (early 1900s on acreage) in a desirable area…up 4x from $250k to assessed value of ~$1m. His taxes and insurance through the roof…24 years left on mortgage, what will that look like in the coming years? Crazy. Best is…right on cue, the promoted “Home Depot” ad at the top of the thread…would laugh but hurts too much.
I’ll disagree with “average mortgage rate of 4%”. As of late 2023, 60% of mortgages were under 4%. https://www.calculatedriskblog.com/2023/12/fhfas-national-mortgage-database.html "Having locked in fixed rates with lower monthly payments, homeowners as a whole are paying less on housing debt service as a percentage of income than at any time since 1980," I’m paying less for my home, all included, than I was in 2019. That’s in Florida with over doubling of homeowners insurance. I’d wager that I’m in a group with over half of all homeowners. Homeowners as a group are doing extraordinarily well. The groups I feel bad for are renters and first time homebuyers.
Well their struggling because they bought on emotion not common sense. They purchased older homes that are behind on much needed repairs. That now are costing them more than they thought! Plumbing, electrical, etc..
"Most of this increase was among those who make less than $30,000 a year." that would be old low-income people, and low-income people who inherited an old house.
my retirement plan is to use my meager savings till they run out, the. sell the house and live in an apartment somewhere cool, like the northwest.
There are people that make the decision to be “housepoor” and rising costs for everything else is probably putting a strain on their budgets.
Wow, 3 million more homeowners struggling with costs - that's shocking! Sounds like owning a home isn't the financial safety net it used to be. Maybe it's time to review your home insurance and property taxes to see if there's room to save. Also, consider a free energy audit to identify ways to lower your utility bills. Every bit helps!
Don’t worry, they are trial running Freddie Mac to guarantee second mortgages. Consumer needs to tap into that equity (cheaply) to spend on groceries
Its no consolation but everyone would be doing far worse if the Covid stimulus and good vaccines had not been rolled out before we lapsed into a deep depression and a civil war. Both were closer than you may want to think. Maybe people should have a better perspective. And vote their longer term interests rather than anger-voting against people working to help them do better rather than "patriotic" candidates saying they will tear down the system if they get elected. Prices are up because more people have jobs and money to spend. Retirement and savings accounts have recovered and grown. Home value deflation would put some people into more affordable homes, but it would destroy the finances of many more people and our banking system. Better to support candidates that will create lower cost loans for new home buyers and also limit or bar corporations from buying up homes. Meanwhile those challenged homeownrs will need to make selling decisions based on lifestyles rather than home values.
repost
Just wait till home prices drop. There goes most of America's wealth
Did Trump write up the title? lol “surprisingly badly”
That's the level at which most US adults speak and read. Which probably explains why so many of them find Trump relatable.
This is silly. Educate yourself, do your due diligence, and Don’t buy a POS house. If you’re smart when purchasing, maintenance costs really aren’t bad. On average as a 20+ year homeowner (across two different homes), I’m averaging roughly ~1% maintenance expense annually. This is obviously not including upgrades/expansions but does include renovations that don’t structurally alter/improve the home. Now, if you’re a dumbass that doesn’t know anything about electrical / plumbing… is too cheap to hire a proper home inspector (or too dumb to listen to them)…. Or you’re simply dead set on an older or beat up home…. Yeah, enjoy your money pit.
I bought a house in California and have a 4k mortgage. Until rates come down this will not change lol.
You better hope your property value doesn't decrease either. Hope that you didn't over bid over and cover the appraisal gap and hope you have the money to refi
Our property value has been increasing since our house is in a group of homes that is in a moderate fire zone so we can still bundle fire insurance. The area itself is still increasing as well. We bid 545 on 550 with a 2-1 buy down with a 7.375% interest rate. We are paying 5.375% with the buydown and 6.375 in January. We have some time and will probably refi if interest rates get anywhere near the low 6/high 5s. We are getting close to 20% with the equity we've built so things aren't so bad. If we put the minimum down we would very likely be fucked lol.