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The bubble seems to be back. My parents bought their house in 2011 (my dad had the foresight to buy at the low point). The house has miraculously gone from $700
by dvt 9y ago
The bubble seems to be back. My parents bought their house in 2011 (my dad had the foresight to buy at the low point). The house has miraculously gone from $700k to $1.1m in less than a decade.
I've come to terms with the fact that unless I win the startup lottery (or there's another 2007-2008 crash), I'll probably never be able to afford a house in California.
- swampthinker 9y agoDon't worry too much. The American economy generally runs on 69 month cycles (on mobile, sorry for no source). In about 6-7 years you will be able to buy a home again.
- tehlike 9y agoI am not entirely sure: https://www.paragon-re.com/trend/3-recessions-2-bubbles-and-a-baby https://www.paragon-re.com/trend/3-recessions-2-bubbles-and-...
- tehlike 9y agoI think we are past that cycle so far. It could burst anytime, but in the bay area the impact probably won't be that high.
- slantedview 9y agoSure you can, probably just not in one of the urban areas, particularly the bay area.
- gok 9y ago$700k to $1.1m in 10 years is about 4.6% annualized...that doesn’t seem that crazy.
- stouset 9y agoIt's actually pretty terrible when you throw in that they bought at the bottom of the market, and likely paid at least 3% monthly in financing costs.
- gok 9y agoWell it was actually the last top of the market; it bottomed out a year later. They probably could have gotten it for much less in 2008.
- dvt 9y agoSorry, they actually got it in 2011, had to double check Redfin.
- stouset 9y agoThat's only a 4.5% rate of growth over 10 years. And that's boosted heavily by the incredible fortune of having bought at the low point. If they financed at 3%, they only made a 1.5% return on their money. If your parents had put that same money in the stock market, they would have made something like a 7% return and have well over $1.4mm — or possibly much, much more depending on the exact timing. They could easily have afforded $3,000/mo or more of rent (in the 2007 market) — assuming they financed the house — and still come out well ahead. Especially when you throw in insurance, maintenance, etc.
- dvt 9y agoThey actually got it in 2011, my mistake. Had to double-check.
- candiodari 9y agoSure, but it's probably boosted by the 10x leverage that mortgages allow. Let's say it cost $1M with $100k money down, interest-only loan. You get the 1.5% on the $1M, not on the $100k. So if you measure it like that you get $15000 interest on $100k, so in reality this is a 15% per year return, not a 1.5% return. Works the same in reverse when house prices go down, of course.