7 ms·

As a curiosity, how many people in this thread are home buyers that sat on the sidelines over the past year or two and are now waiting for prices to drop? I’m

• adam_arthur 4y ago
  This was the same logic used by bulls in the GFC. Turns out “cash on the sidelines” disappears quite fast when assets broadly devalue. Housing is correcting faster than GFC, though it remains to be seen if it ends up deeper. But when it falls at this pace, people start to get cold feet
  • Enginerrrd 4y ago
    What's GFC in this context?
    • adam_arthur 4y ago
      The Great Financial Crisis, e.g. 2008, housing bubble etc
• TSiege 4y ago
  I'm with you there and I know several others who are too. I don't see home prices coming substantially for hot markets for this exact region
• boringg 4y ago
  Depends on the location but I would say that there are going to be a lot of people who bought homes on expected gains in equity / salary that haven't priced in inflation. Ive been watching homes in a couple markets and the prices have come off and things aren't moving quickly. If you want to see significant drops in pricing thats going to depend how the winter macro economic environment hits everyone. Next summer is when you will see movement is my suspicion.
• colinmhayes 4y ago
  Home prices won't drop unless people are forced to sell by massive unemployment. Otherwise they'll just sit.
  • symlinkk 4y ago
    Half of the posts here over the last few days are about layoffs. Maybe we are in the midst of “massive unemployment”?
    • nativespecies 4y ago
      Lol this is just the beginning.
  • nradov 4y ago
    Some owners will also be forced to sell as adjustable rate mortgage monthly payments increase. Those have still been popular among small investors (and some individual homeowners trying to live beyond their means).
    • nativespecies 4y ago
      Only 10% of mortgages are ARMs and a smaller subset of these folks may not be able to afford and forced to sell. This is not going to be the hail mary people need.
      • adam_arthur 4y ago
        Institutional investors, flippers, etc almost all use revolving credit lines that adjust with the fed funds rate. Investors have been ~20% of the market in recent days. The smart ones hedged for interest rate risk, but most didn’t
• ramesh31 4y ago
  >I’m in that camp and I’m starting to suspect there are enough people in that camp that any noticeable drop in prices will be immediately met by strong demand, even at current rates. Same. I dropped out of the market last year after refusing to take part in the insanity. No, I am not going to waive all contingencies, give you 5% earnest, and bid over appraisal, for the hope of having my offer selected. Hopefully this will change with the corporate money drying up.
  • nemo44x 4y ago
    The price of a home is what people that want to live in the area are willing to pay per month (important detail!) to live there. This is made up of the principal, the interest, and property taxes. As interest rates fell more and more, the interest part of the monthly payment went lower and the principal part went higher. Coupled with inflation, we saw dramatic rises in prices. Interest rates are going up so we'd expect to see prices go down, and they likely will in some markets. However, we are also seeing inventory dry up since who wants to sell their house and get a new mortgage at a massively higher rate? With a low interest rate and inflationary pressures, current home owners are living for free. They can leverage this as well as their appraisals have all shot up.
  • xenadu02 4y ago
    I've made this comment before but you can correctly time a downturn and still end up worse off than people who buy at the height of the market. You lose upside, low interest rates, and continue paying rent (which has zero return). It depends on how long you can hold out during a bear market and what exactly interest rates do. Plus there's the quality of life factor if the home you purchase is a better fit for your life... spending 10 years in a home you don't enjoy has a mental cost to it. FWIW we borrowed $2m at 2.5% (thanks Bay Area prices!) Thanks to that low rate even if the house drops in value by 30-40% we still come out ahead on the mortgage cost assuming we stay in the house. And it is likely any money not spent on the down payment or paying it off early can be invested which thanks to the current market and interest rates can take a risk to get a good return (stocks are discounted right now) OR easily find safe investments that exceed the mortgage APR. Plus we have a house that fits our family way better with a lot more space. We also have knock-on effects (installed Solar with a <5 year payback, something renters can't do). It is hard to imagine a scenario where waiting out this downturn would have worked out better for us.
• timmg 4y ago
  I'm in that camp, kinda. We're looking for a small "vacation place". The area we wanted to buy in saw ~40% increase in the first half of this year. We hope it goes back down the same amount (but have no idea!) In my case, I think it is increased AirBnB demand. Don't know if that will start to ebb.
• ddorian43 4y ago
  > any noticeable drop in prices will be immediately met by strong demand, even at current rates As long as people are okay with buying insanely overpriced homes they will not fall. But careful, you might be fired too. Or lending may be even higher later (forcing lower prices). Or rates will be high be many years. Or you'll go underwater and not be able to refinance. Or your taxes will also go up. Or maybe you need to move/divorce. Or maybe you die and your next-of-kin can't pay the house and be foreclosured. Or maybe you can dump the cash in bonds/stocks and make more money. You may have more kids and need to move to a bigger house and be forced to sell at a loss. For that and more, /r/REBubble/
• d136o 4y ago
  We bought at pretty much the rock bottom of 2020/2021 interest rates (nothing like wiring away your hard earned money on the very same day when the US capitol was being overrun and the government seemed just about to topple…) We had to work hard to avoid areas in SF that had been overbid. We didn’t find a bargain but we found a good deal, something that the prior owners needed to let go off but which wasn’t in a super popular area. This was in a hot market. So I think in the coming market you will find good opportunities. So, as I obsess over listings today pondering if there might be an opportunity… I think that there will be good deals to be had, but not necessarily steals. In the Bay Area, people trip over themselves to live in a few neighborhoods so I think prices in those highly sought after areas won’t reach absolute bargain levels. But If you are prepared and ready to step in you can already find properties that I think are marked down. I’ve been watching closely dreaming of a place for our parents, or maybe more space for us, or maybe a rental… Great SNL skit: https://youtu.be/yEfsaXDX0UQ https://youtu.be/yEfsaXDX0UQ
  • acquacow 4y ago
    > SF...good deal.. There are no good deals in SF, those are probably the worst deals you can find in the country at any point in time.
    • wewtyflakes 4y ago
      I have not found that to be true unless you are looking for a standalone single family home. If you are looking at condos, SF has had good deals during the pandemic as that particular market segment has been hammered.
    • d136o 4y ago
      Ultimately you have to live somewhere and people don’t choose to live in the cheapest place “in the country at any point in time.” At the time we bought we found a house that gave us more space than the apartment we rented previously and where our newly arrived daughter could spend her first few years. It’s not one of the trendy neighborhoods and yet it’s close to downtown SF and the peninsula, where we work. We can afford it on one income. All those factors made it a good deal for us. I feel ok about it so far, but I’m certainly open to the possibility that there are better options.
• wollsmoth 4y ago
  boomers are going to start downsizing or moving to retirement communities eventually. I'm holding back part because of what you said, and part because I can't really make up my mind about where I want to live long term. Happy to rent and collect index funds in the mean time.
  • mikestew 4y ago
    boomers are going to start... Whatever the Boomers are going to start doing, the majority of them have probably already done it. I'm the last of the Boomers, depending how you measure, and typical retirement age is single digit years away for me. The first of them started whatever they were going to start doing close to fifteen years ago.
    • wollsmoth 4y ago
      maybe, my parents are in the middle and they'll probably stay in their house for another 5-10 years I guess.
    • dwater 4y ago
      Then the next major milestone for the early ones then will be assisted living and death, both of which will free up homes and other assets.
      • mrguyorama 4y ago
        The big trick is that a lot of systems right now for older folk are built around taking over legal custody of their home, as payment for end of life care or for living money because boomers didn't save for retirement. I don't think we are going to see boomer housing turnover to younger generations. The boomers broke basically every system and process designed to let the next generation get on their feet.
        • wollsmoth 4y ago
          maybe not via inheritance, but in most cases these homes will be sold on the market or the land will be redeveloped into other housing.
• dougmwne 4y ago
  But the mortgage payment is in the process of skyrocketing. Even if home values drop, the majority of people are going to have less ability to buy a house as more of that money will go to the bank.
  • notch656a 4y ago
    That rewards savers. It also means savers end up saving more money, as higher interest rates reduce demand for loans creating downward pressure on the real estate market. The spenders of what they didn't have got rewarded for long enough.
    • symlinkk 4y ago
      Yeah just put some change in your piggy bank every now and then and eventually you’ll have $400,000!
      • notch656a 4y ago
        Even when I was a forklift driver, a job available in practically every middle-sized low COL midwest city, I could save $10k a year by only spending on necessities. That's only like 15 years to buy a house somewhere like a middle-sized Midwest town with forklift jobs. Not too shabby if you can buy a house by 33. The piggy-bank method does work. Maybe more people should be doing it rather than us having a system inflating the hell out of our economy through loans with negative real interest rate.
        • symlinkk 4y ago
          I just Googled it and the average forklift driver salary is $40k. After tax and retirement you’re taking home around $2500/mo. After putting $1200 in your piggy bank you’re left with $1300 to pay for rent, food, gas, car, phone. I seriously do not think that is possible, let alone pleasant.
          • cjrp 4y ago
• SkyPuncher 4y ago
  My wife and I just bought. The problem for us is the inventory has completely dried up. Our market has a lot of second homes. People who wanted to cash out already have. The people who weren't ready to sell, seem to be willing to "wait it out". In the long run, it doesn't _really_ matter. We're well within our budget and plan to be in this home for a very, very long time.
  • notch656a 4y ago
    The people that aren't selling are still paying upkeep and property taxes. Unless they live in it, they will tire of the financial bleeding eventually and start to understand the "sunk cost fallacy."
    • SkyPuncher 4y ago
      Correct. However, second homes are a bit different. They don't get used as often and the financial bleeding is viewed different. They're also in a market where AirBnB/VRBO is extremely lucrative. If you can tolerate a bit of pain from renting it out, there's really no finanicial bleeding.
      • option 4y ago
        local regulations ruin AirBnB/VRBO in most places in CA
        • rchaud 4y ago
          Good, the regulations are for the benefit of residents, not faux-hoteliers.
          • notch656a 4y ago
            Airbnb was benefitted me many times as a resident when the renter protections in my city made renting difficult. Renting an airbnb allowed my landlord to bypass renter protections which made it very low friction to use airbnb whereas signig a lease was nigh impossible because landlords wanted all kinds of evidence I'd be a good renter as it was so hard to kick a renter out. By using Airbnb, I was able to continue living and working in the city by ceding away my rental protections in exchange for not needing good credit and other assurances for the landlord. Win-win.
• andsoitis 4y ago
  We bought a year ago. Since you cannot predict the future I recommend not waiting “for prices to drop”. Instead, buy a house when you find one you love and that you can afford. Houses are not widgets- each have pluses and minuses and optimizing for price won’t make you happy.
  • notch656a 4y ago
    Usually you cannot, but the fed has expressly told us they will be raising interest rates. They could be lying, but I think this is one of the few times you can "predict the future" and expect rising interest rates to influence demand.
    • droopyEyelids 4y ago
      Yep. Powell specifically said they're targeting the housing market and need to reduce prices until people can afford to buy homes again.
      • asdff 4y ago
        I thought the median home price has been pegged to the median salary of the given area for the last 50 years? How can prices fall if salaries don't?
        • yazaddaruvala 4y ago
          The Fed wants average salaries to fall. Either through more unemployment, or lower salaries. Reducing the housing demand, and therefore prices or at least price growth.
        • fshbbdssbbgdd 4y ago
          US median home sale price increased about 40% since 2020: https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MSPUS Wages increased about 15%: https://fred.stlouisfed.org/series/CES0500000003 https://fred.stlouisfed.org/series/CES0500000003 So home prices grew faster. Also, since mortgage interest rates have gone up higher than pre-pandemic, homes affordability is even worse.
• 2fast4you 4y ago
  I’m gonna be buying once my lease is closer to done. I’ve been watching the prices fall in a nearby city for about a year
• onion2k 4y ago
  As a curiosity, how many people in this thread are home buyers that sat on the sidelines over the past year or two and are now waiting for prices to drop? Waiting for a price drop doesn't really work. Firstly, when prices start to drop people stop selling. You might want a cheaper house but the supply will be severely limited so you probably won't get what you really want. Secondly, when prices drop it usually comes with other changes in the market. Mortgage lenders are weirdly skittish at the moment, and they stop lending the instant anything looks bad. If you need a high loan-to-value mortgage (eg 90% of the purchase price) you probably won't get it in a downturn. I bought a place about 18 months ago and got a 5 year fixed interest mortgage because I figured we're going into a period of inflation and maybe recession so interest rates will probably go up. My timing was off a bit but it's going to save me a fortune over the next few years (and then I get a huge shock when the fix rate ends... yay!)
  • qqqwerty 4y ago
    > Firstly, when prices start to drop people stop selling. Most people who sell their home also buy a new one at the same time. So if those folks remove themselves from the market, it doesn't really change anything as they are decreasing both the supply and demand by an equal amount. The net balance in supply and demand comes from first time buyers, investors (both buying and selling), immigration vs emigration, and the elderly (moving to care facilities or passing away). Investors have significantly reduced purchases, and as economic conditions deteriorate I expect them to start selling (for example a lot of AirBNB hosts bought at the top of the market and are starting to get nervous as bookings are declining). Basically, you can have a market with record low inventory and still see significant price decreases if demand is also low. The fact that we have record high employment and inflation and we are still seeing prices either level off or decline is very concerning. If employment starts declining we are certainly going to see a lot more selling pressure.
• tristanb 4y ago
  Me - I can't imagine it changing, in the Bay it also blows my mind houses that were 1.3MM pre pandemic are now up to 2.3MM
  • disgruntledphd2 4y ago
    Even well before the pandemic, Bay Area prices were out of line with fundamentals (i.e. completely insane).
• stephencanon 4y ago
  Prices aren't going to drop significantly in major markets because political forces won't allow it--there are simply too many retiring people with the bulk of their assets tied up in their house. Probably prices will get eroded by higher-than-usual inflation until they come down to somewhat sensible numbers in real dollars, which is somehow more politically palatable, but that's a much more gradual process, so there won't ever be a "great time to buy" in that scenario.
• sytelus 4y ago
  It won’t. Real estate is on track for at least 20% crash from here. People with 3% rates don’t want to sell and move to 7%. So, they are renting out at loss and therefore renting is becoming amazingly cheaper compared to buying. This further reduces demand and increases supply and it’s a classic recursive cycle that will only accelerate as rates will go up even more for next 6 months. My advice would be to rent house of your dream for next year while housing crashes. The best time for buying would be when interest rate hits below 4%.
  • quonn 4y ago
    Why would renting become cheaper? Most people have told me that there will be less people buying so more are renting, therefore rental prices go up. Right?
    • factsarelolz 4y ago
      Right. Rentals are scarce and sky high in my area.
    • bequanna 4y ago
      The number of households artificially increased as a result of student loan payment deferments and the general COVID free money bonanza. More households = more rental demand = higher rent. Expect that to revert to the mean (people move back in with their parents, get roommates) if this is a long, deep recession. Less demand = lower prices.
• qqqwerty 4y ago
  I am in that camp as well. But... my rent is less than half the cost of a mortgage (including taxes and insurance) for a similar place. And this doesn't even account for maintenance costs. My landlord prefers long term tenants, so has shown no interest in raising our rent, and even if they did we are under rent control which will limit the damage. And while we are definitely paying under market rent, it is not by that much. So I feel fairly confident we can find something similar on short notice, and with more time could probably find a really good deal. So after years of holding our down payment money in low interest savings accounts, I am now moving it into CDs and bonds that have nice returns which will result in a nice chunk of change. And if prices don't come down anytime soon, I am more than happy to keep renting. I think prices would need to drop by almost 40% before I would really consider buying at this point. For context, I am in the Bay Area so it might be a somewhat unique situation to our market. But in the four years that I have been renting at this particular location, rents have not really moved much while house prices are up 50%.
  • slaw 4y ago
    Unfortunately CDs and bonds rates are way below inflation, so you are going to lose money if you don't buy assets. I am in similar situation and don't know what to do.
    • qqqwerty 4y ago
      Inflation is trending down and there are plenty of long term CDs and bonds with decent rates that will almost certainly mature long after this current inflationary period comes to pass. The Fed has given strong signals that they intend to tackle inflation regardless of the cost. So locking a 10+ year CD or bond at current rates is almost certainly going to beat inflation in the long term. Also FWIW, I do expect rates to continue to rise for a few more months, so I am keeping plenty gradually rolling my savings into these investments.
      • slaw 4y ago
        Inflation is trending down from 9% to 6%. The longest CDs I can find are for 5 years only with 4.25% rate. 6%-8% inflation could stay for a decade.
• importantbrian 4y ago
  Well, the problem with this strategy is it assumes you're employed and still in a financial position to buy a house once prices drop. Housing price drops are rarely disconnected from wider economic issues. If you're unlucky enough to be in the 13% at Facebook then you're likely going to be unable to take advantage of lower house prices when they finally drop.
• wefarrell 4y ago
  We were thinking about buying for ourselves but opted not to. However we did hedge that decision by buying my mother in law an apartment and essentially becoming her landlords. We timed it as well as we possibly could have and locked in 2.5% on a 30 year in December of 2020.
• SevenNation 4y ago
  > I’m in that camp and I’m starting to suspect there are enough people in that camp that any noticeable drop in prices will be immediately met by strong demand, even at current rates. What you're missing is that when the bottom is in nobody will want to buy a house. They'll be way too terrified or plain incapable of acting. Afraid of losing their job. Of further declines. Of the bottom falling out of the economy. Of homelessness invading their area. Of they job they lost.
• cableshaft 4y ago
  Almost bought a second home a year ago to get out of (and sell) our starter home. Was looking at houses with a realtor, a few new constructions, etc. Both glad and not glad we didn't buy at the time. Glad because everything is likely to crash at this point and we would certainly have an underwater mortgage, but not glad because with the more than doubled mortgage rate since we were looking, it'd be stupid to sell our current home and upgrade now (especially with prices still high), so now we feel stuck (granted, stuck in a home with a fairly cheap mortgage payment, so it could be worse, but stuck nonethless). We also held off on refinancing during the super low mortgage rates, because we were pretty sure we were going to buy a new house so it would have just been wasted money, but now it's obvious it would have saved us some money. I had a feeling that would be the case, but my wife seemed adamant we were going to move last year (until we both got too busy with work), so I held off on pursuing it.
• c7b 4y ago
  It's an interesting question, but you might also want to ask which markets people are based in. While the overall economy, interest rates and other factors do correlate to some extent, of course, some other important fundamentals (and price movements) can vary significantly even within the same country.
• FollowingTheDao 4y ago
  You will be catching a falling knife. You think people are going to jump in while prices are falling? That's not how it works. And what part of economic collapse do you all not get yet?
• thenoblesquid 4y ago
  We have waited the last couple years, so it's no sweat to wait another year or two for the prices to correct and interest rates to come back down to Earth.