Since the election I’ve kinda buried my head in the sand to try and stay sane, so I’m not sure what projections are looking like for the real estate market. Unfortunately I need to move pretty ASAP and I’m having the worst luck with rentals.
So, anyone have any advice or an idea of the outlook in the next few months?
How long will you live there? Generally 7 years is a good rule of thumb for rent vs buy. Selling is more hasstle and expense. 7 years of no rent increases (read inflation, and your raises) and some principal paydown mean typically your have done better. However that is a guess. Sometimes even one year is better to buy, sometimes 15 years is needed (new roof and other major evpenses) just to break even.
Things are only seemingly getting worse. I’d say buy while you can still afford to and there is inventory, who knows what kind of crazinesss is coming to the economy after January.
If things get too wild, sellers will remove inventory, only making both rent and existing inventory prices increase.
Not answering your question. But if you do buy, don’t listen to the realtor or loan officer about how big a loan you can afford. Both are incentivized to sell you the biggest house/loan. Neither will care when you’re struggling to pay for it.
You’re monthly payment plus insurance plus taxes should be something you could safely pay for six months while unemployed. If that’s impossible, get a small house. The worst possible situation is being house poor.
No but its only gonna get more expensive so do it if you can swing it.
I have no idea about the situation in the US but normally prices will always go up because inflation. Sometimes the price will flatline or go down for a bit because of lower interest rate on a loan but the also more people want to buy. More buyers == higher prices.
Some time ago I heard a story about a couple buying a house in the 80s in a big city for an extreme high price. Now that house is worth 20x more than it used to be.
But then again, I have no idea about the situation in your country. In my country even the cheapest houses are made to last at least 80 years.
Whatever bad luck you’re having with rentals is nothing compared to how badly home ownership can go, renting isn’t all that bad even if it is more expensive. What’s really expensive and financially distressing is a sudden and expensive furnace / roof replacement, flooding, fire, the list goes on
Mortgages aren’t going away anytime soon, start off with renting and see where that takes you before jumping into a $400,000+ loan
Well that’s a super nuanced answer though.
IF OP can afford a house AND can keep enough emergency savings to deal with an issue, it may still be better to buy. Rental money is just gone forever in exchange for not assuming any risk on the property, but it retains no value.
If OP can’t afford to buy at all, this post is stupid, so the question is really if there’s no money left for emergencies. In which case, the obvious answer is keep renting because a single point of failure pushing you out of your house is a bad proposition.
If there’s SOME money… It just depends on the house. Some of the failure points are covered by inspection, but it could be risky. Better to not max out your ability to borrow if at all possible.
First few years are spent in interest so it’s also going straight to the bank
Equity is uncertain in this market, especially with unexpected maintenance
Rent comfortably for a few years is still the better choice, buying a house now that might fall in price is a terrible risk
Depends how much money you have an the mortgage length you pick. Every payment covers some principle and some interest. There is no situation where you get a house and then just pay interest. This is a lack of understanding of how payments work.
The first few years are overwhelmingly paid towards interest and not the principal, it’s not an equal ratio throughout the mortgage. I think you missed some fine print
If you get into a mortgage then sell in 2 years you would have paid off less than 2 years worth of payments to the principal and you’re not getting that money back, that’s straight to the bank
“The first few years go to interest” and “the first few years are overwhelmingly paid toward interest” are not the same thing. The shorter the term, the smaller the total amount of interest paid is (and often the better the rates), and the more principal only payments you can make the lesser the interest paid.
Of course interest fraction is different by payment, but it’s not as though the first payments you make are a lost cause: mortgage payments are always contributing to your ownership, rent payments never are. It’s only a question of liquidity in the moment. Depending on the OPs situation rent could be more than a mortgage payment, in which case I know which I’d rather pay (as long as I could afford the insurance) if I wasnt planning to move right away.
A question of liquidity over decades with the liability of a big repair, and all for the hope of building equity and not paying rent in 20+ years
I’m paying more in rent than many of my friends with mortgages yet somehow their payments are shooting up with the rate changes, things are constantly needing repair and they’re stressed beyond belief
Not a problem here in the states: mortgage rates are fixed. Also once you put some equity in, you can usually leverage it. But it really depends on your personal circumstances.
The best time to buy is when you need to, it’s hard to time the market and if you are going to stay there for a long time all that matters is can you afford it. Where I live they sure seem overvalued, but when we bought our house I was sure it was overpriced and the theoretical value now is 2x that amount not even 5 years later, WTF? So my guess is we will see a downturn, especially with the new government, but really the best time to buy doesn’t always align with the best price.
Remember that maintenance on a house is expensive too, build that into your affordability calculation.
idk, house prices are rising, you may want to either buy as soon as you can or wait for the bubble to pop
There is strong likelihood of banking and us collapse. This also crashes housing.
If you would stop mortgage payments and squat if value goes down, and can get ultra high leveraged mortgage, then yes it’s a good time to buy.
Big risk to all investments right now, but housing could do worst.
I went with buying raw land out of the city, for me it’s a 30 minute drive and no traffic, my “rent” is under $200 for the year of property taxes. I own the land for less than 1 year of rent.
I can live in an RV, and I can build a house or convert a shed to live in so it’s super affordable, plus I have room for a garden to feed my family.
For anyone considering this, check your zoning laws. Years ago, to save money, I wanted to buy some land and put a trailer on it so I could save up to build something more permanent.
The laws did not permit that. Nor living in an RV. Or living in your car. We had to fight to get tiny houses here IIRC, but the cost savings for those isn’t as big as I would have hoped. (And being disabled, being able to do a lot of the work to save money wasn’t an available option.)
I’m not trying to step on your comment, but I read this as unrealistic? It sounds like you bought land, but don’t actually live on it currently. Like, you CAN live in an RV, but what are you actually doing with it now? Again, not trying to be a dick. I actually considered the exact same, but once we started crunching numbers on what we wanted, just buying the land and building on it was out of our budget.
It really really depends on the county and it’s rules, there are a few counties near here that have permits to live in an RV, the county I am in is a bit more restrictive and requires a building permit to have an RV.
Right now we are camping in the car as we wait for the septic, since it’s holidays things are a bit slow now.
Just look into what you can afford and what kind of loan you can get and see if it makes sense. I don’t think there’s going to be a crash because there is still a huge deficit of new building. I expect that there will be more housing built this year, but there’s still a high demand, so those new houses will be pricey. In the long term I expect more inventory to open up as the age group dying out is the largest age group. However, that inventory will be places that are less desirable to younger people. The population of small towns is about to shrink drastically.
I’m neutral on the housing market right now. People buying houses are generally living in them (or renting them), there’s very little house flipping like in 2005-06. There’s also no interest-only mortgages, so people actually have the cash flow to stay. Rates are probably not going up, but they might come down a little. If they do drop, I think prices will go up proportionately such that the monthly payment is the same either way. New housing is being built, but not fast enough to make a major impact on demand in the near term.
Altogether, I think housing in the US is “fairly” valued on a supply/demand basis at the moment. If we get a recession, prices might dip, but I would be very surprised to see another crash like 2007-09. However, I also don’t expect to see prices go up quickly from here other than in response to lower interest rates. So, if I were making a new purchase decision today, I’d be thinking about the following:
- Do I plan to stay 5+ years (the longer, the better)
- Can I comfortably afford to pay the mortgage (or is it at least comparable to rent)?
- Can I afford a major repair bill? Especially if any of the big ticket items will hit their typical end of life in the next 5 years.
Here are some of my major home maintenance expenses from the last 10 years:
- Water supply line to the house failed (polybutylene): $2.5k
- Tankless hot water unit failed: $3.5k
- Wildlife exclusion due to rats in the attic and crawlspace: $2k
- Electrical repairs due to rats in the crawlspace chewing on wiring: $3.4k
- Totally gut and rebuild kitchen & bathroom due to plumbing failure: $2k deductible, plus my homeowner’s insurance increased every year since
- Replaced failed mini-split HVAC system: $3.5k
- Dig up and repair sewage line that was clogged with roots: $3.5k
- New sod to repair the lawn after the plumbers dug it up: $1.5k
Those are the big items I recall that I had little choice in. I also replaced my way past end of life 2 zone HVAC system for about $30k. I could have kept the old one running longer and I could have gotten a cheaper replacement (maybe $22k), but the old system was struggling and couldn’t keep the house comfortable anymore. I seem to recall hearing a good rule of thumb is to set aside 1-2% of your home’s value every year for major maintenance and that seems about right from my experience.
I really doubt the guy who loves low interest rates, looks to be trying to devalue the dollar purposefully, and is a corporate landlord himself will make a lot of moves that purposefully deflate the price of housing. He may do it accidentally, but I kind of doubt that too. If Trump gets his way and deports a bunch of people, welp…guess what a lot of the construction labor pool is? A mortgage is essentially a long-term bet that the dollar will be worth less than it is today. If you can afford to get one at current mortgage rates, I would pull the trigger. If rates drop again you can refinance, but what you will never be able to do is get a 2025 offer accepted on a house that’s now worth much more in 2030. My main regret in buying my place–in the pants-shitting part of the early pandemic–was not doing it earlier.
Since 2008 the best time to buy has been when you have the money and find something appropriate. It’s no different now. Millennials have been hoping for a housing crash they could take advantage of for 16 years and it hasn’t materialized. Prices just keep going up and historical evidence suggests that will continue until another crash at an indeterminate point in the future. Trying to time that point is only going to leave you as a permanent renter.
Trying to work out house price trends is like trying to catch a falling knife. My advice would always be that you should just buy when you have the deposit and know you can make the mortgage payments.