11 ms·

Ask HN: Is it the “worst” time to buy a house?

49 points by rootsudo 4y ago

You can't go a day, without seeing worrying "news." From the Federal Reserve raising rates, making mortgages more "unaffordable" to this summer leading in the most decrease "mortgage applications" since 2006. https://www.mpamag.com/us/mortgage-industry/market-updates/mortgage-applications-decrease-in-latest-mba-weekly-survey/408097 https://www.mpamag.com/us/mortgage-industry/market-updates/m... On the other hand, commercial real estate has their own problem, prime commercial space goes unleased, and majority of downtown cores are still empty, or heavily decreased occupancy. I'm on the opinion of, if you need a house, buy a house - because you do need a place to live. Yet, decreased supply, higher cost of loans and loan servicing seem to make it mirror 2006 - yet, mortgages are stronger than ever - but what about those covid mortgage forbearances? What do all of you think?

Ekaros 4y ago
Depends on market. And on if it is fixed rate. In those market that haven't raised too much probably still sensible with fixed rates. In more aggressively increased probably bad idea.
xnx 4y ago
Compared to what alternative?
al_borland 4y ago
Definitely not the worst time. While rates are going up, they are still relatively low. Back in the early '80s rates were up around 16%... that's really bad. It can get much worse than it is right now. If it happens to get better, just refinance. Home prices will also continue to rise over time. Not the at rate we saw over the last 1-2 years, but if someone is looking to buy today and decides to wait until prices come down, they will likely be kicking themselves in 5 years.
- phkahler 4y ago
  Home prices vary inversely with interest rates. Rates have been rising and are widely expected to continue rising. If that is the case then home prices will fall over the next few years.
  - paulpauper 4y ago
    not necessarily. A lot of demand many areas is due to people paying in cash , such as the Bay Area. Also, real estate did well in the 90s despite rising interest rates, same for 2007-2018.
  - al_borland 4y ago
    The rate of price increase will slow, but I doubt we'll see them fall. 2008 was the only time that has ever happened.
- vinyl7 4y ago
  > Home prices will also continue to rise over time. Glad to hear I'll be priced out of home ownership for the rest of my life! Hopefully zoomers will be okay with living in tents and vans
  - diob 4y ago
    Right, the hell is the plan for folks just being born?
    - imtringued 4y ago
      How long did it take for you to understand that we are born into a world where all the land is already claimed and must be bought from previous generations? We are born as illegal aliens into this world with no automatic right to be allowed to exist on this planet. The only thing we have is the benevolence of our parents and grandparents. The latter seem to have run out of benevolence, intentional or not. This is one of the reasons we aren't giving birth to the next generation. Because their parents have no basis to exist and therefore wouldn't want to force another generation to suffer the same fate.
  - jupp0r 4y ago
    There are super affordable places to live if you compromise a little.
- stolenmerch 4y ago
  My parents bought their first home in 1981 with a 30-year fixed rate mortgage of 16% interest. Imagine essentially putting a house on a credit card. They refinanced a few times and just kept plugging away at payments their entire working lives. Seemed fine to me, but I was also a kid and have no idea how much stress they actually went through. This was a $65,000 house with two incomes of about $6/hour each. Not sure how that compares to today's market.
  - ttpphd 4y ago
    $1 in 1981 is equivalent in purchasing power to about $3.22 today: https://www.in2013dollars.com/us/inflation/1981?amount=1 https://www.in2013dollars.com/us/inflation/1981?amount=1 2 incomes * 6 dollars/hr * 3.22 = 38.64 dollars/hr household 65,000 * 3.22 = 209,300
    - al_borland 4y ago
      It looks like that would mean about $4k/month after tax [0]. Putting 20% down to avoid PMI would lead to a payment of $1,192, using this calculator [1]. $1,192 / $4,024 = 29.6% That comes in just under 30% of net pay. The standard rule of thumb is to be less than 33% of gross pay. $1,192 / $5,417 = 22% Personally, I prefer using net pay, since that's what you actually have to spend and it's always good to have more room in the budget. These numbers don't seem unreasonable, and the median household income in 2020 was $67,521 [2], and nearly half the states have a median home price at this price or lower [3]. Here is median income by state as well [4], those in the middle are also around the $65k area to align with the homes in the middle around the $205k area... so it all kind of lines up if people aren't obsessed with leaving on a coast. This makes it seem like things haven't changed as much as people keep saying. [0] https://smartasset.com/taxes/paycheck-calculator#UIjlp8sv2w https://smartasset.com/taxes/paycheck-calculator#UIjlp8sv2w [1] https://www.mortgagecalculator.org https://www.mortgagecalculator.org [2] https://www.census.gov/library/publications/2021/demo/p60-273.html https://www.census.gov/library/publications/2021/demo/p60-27... [3] https://en.wikipedia.org/wiki/List_of_U.S._states_by_median_home_price https://en.wikipedia.org/wiki/List_of_U.S._states_by_median_... [4] https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_income https://en.wikipedia.org/wiki/List_of_U.S._states_and_territ...
- j7ake 4y ago
  The 16 percent interest rate is not necessarily bad. Back then you could put money in savings account and get 15 percent interest from the bank. Also the high interest rate means lower house prices, so you could buy a house in cash from savings alone.
- dominotw 4y ago
  > Back in the early '80s rates were up around 16%... What does the current rate matter though. FED is going to bring the rates back down as soon as they can. America is hooked to cheap money.
  - al_borland 4y ago
    Money can only be so cheap for so long, before the house of cards collapses. That's a bad middle to long-term strategy. American's just need to stop living the high life on borrowed money. Living within one's means makes life much better.
    - imtringued 4y ago
      How do you expect that to happen if there is no right to force savers to spend off their savings to eliminate debt? Also, a 0% interest rate can potentially be stable eternally. An eternally positive interest rate must collapse at some point.
codefreeordie 4y ago
If you need a house, and you can reasonably afford one that you like at today's prices, and you can cope with potentially being "stuck" in it for several years, then buy a house. It's impossible to know what will happen. Even after 2008, when it was obvious that the market had to fall because there were >1 million underwater homes that banks were sitting on with the fed letting them pretend they were still worth the old price, it was still impossible to know exactly where prices would end up or how long it would take. Personally, I tend to think that prices will drift downward slightly, moreso in places that are seeing big outmigration, but it's hard to say. If we keep seeing 10% inflation, then prices staying flat is actually the same thing as housing getting cheaper. Make good decisions based on the information you can have. You will always know more tomorrow.
- toomuchtodo 4y ago
  This ^ with the caveat that we’re already seeing prices soften in some markets and sellers making price cuts. The peak was likely within the last 45-60 days. Also consider inflation continues to run hot (~8%), which will force the Fed to raise rates faster (50bps->75bps), and per the Taylor rule, I would expect to see mortgage rates between 8-10% within the next year (depressing asset prices; people buy a payment). If the Fed has to pull a Volcker (~10-20%) to quell inflation, RE prices are in for some pain. https://fortune.com/2022/05/27/housing-market-correction-peak-mark-zandi-moodys-home-prices-outlook/ https://fortune.com/2022/05/27/housing-market-correction-pea... "The housing market has peaked…everything points to a rolling over of the housing market," Zandi says. "In terms of home sales, they're falling sharply. Housing demand is coming down fast. Home price growth [will] go flat here pretty quickly; we will see [home] price declines in a significant number of markets." —- Moody's Analytics chief economist Mark Zandi https://www.forbes.com/sites/jonathanponciano/2022/05/24/housing-market-boom-is-over-as-new-home-sales-implodeheres-what-to-expect-from-prices-this-year/ https://www.forbes.com/sites/jonathanponciano/2022/05/24/hou... "In short, the party is over," Pantheon Macro chief economist Ian Shepherdson said in emailed comments after the report, pointing out the collapse in sales follows a "steep downward trend in mortgage applications" as mortgage rates start to rise on the heels of the Federal Reserve interest rate hikes that started in March. https://en.wikipedia.org/wiki/Taylor_rule https://en.wikipedia.org/wiki/Taylor_rule https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html https://www.cmegroup.com/trading/interest-rates/countdown-to...
paulpauper 4y ago
I don't know. This question gets asked a lot. It depends on personal financial situation and other factors.
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echelon 4y ago
The federal government needs to decide if homes are an investment or the cornerstone of the American Dream - a personal shelter one owns and cares for, a foothold to grow a family, career, and wealth. Housing can't be both. Policies on taxation, lending, and subsidy can be used to push the balance one way or the other. I'd place my bets on housing prices continuing to trend up and to the left, but (as a homeowner myself) I'd be pleasantly surprised if they didn't.
- wintermutestwin 4y ago
  I wouldn't hold out much hope for a government solution to this cluster based on this: https://www.statista.com/statistics/257344/top-lobbying-spenders-in-the-us/ https://www.statista.com/statistics/257344/top-lobbying-spen... That said, a shift on local govt policies for short term rentals seems somewhat possible and could cause dramatic declines in the valuations of many impacted areas.
- slaw 4y ago
  Federal government decided long time ago that homes are an investment.
pengaru 4y ago
> I'm on the opinion of, if you need a house, buy a house - because you do need a place to live. If you have the luxury of being able to live anywhere (e.g. 100% remote work, or no need for work), there are some exceptionally affordable places to rent housing until the market cools and it's a better time to buy. I don't think it makes sense to buy high unless you have very limited options.
- 0des 4y ago
  Plenty of room (and bbq) down here, we'd be happy to have y'all.
  - daniel_iversen 4y ago
    Where is “down here” - hopefully you don’t mean Australia because we’ve had a housing bubble bigger than the US and we are just (probably) slowly about to come down from it :)
    - eckza 4y ago
      Probably Texas. There is... _so much Texas_ that isn't Austin or Houston or DFW or San Antonio. A lot of it's really great, too. I miss Texas.
      - chasd00 4y ago
        If in could live anywhere in Texas it would be Alpine. I was married in Marathon and I’ve always been drawn to that part of the state. I have roots and work in Dallas though so that’s where I am… for now.
    - deleted 4y ago
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  - jason-phillips 4y ago
    Howdy neighbor
- 4y ago
0des 4y ago
yes
trentthethief 4y ago
It is the best time to buy if you got a lot of cash.
vinyl7 4y ago
Yes, it's the worst time to buy a house. We're at the peak of the bubble, and things are about to start heading down hill. I anticipate that people who bought within the last 6 months will probably end up under water within a year or two.
- paulpauper 4y ago
  but what if the bubble bursts 4-5 years from now. Then this means that if may not ever go back to today's prices . As high as prices can seem, they can always go higher.
  - rxhernandez 4y ago
    I mean, they can only go meaningfully higher if people can afford those higher prices. I'm not convinced they can go much higher without wages going up substantially.
    - chemmail 4y ago
      The money came from the gov printing $2trillion for the pandemic from thin air. That got thrown into speculative investments like stocks, which had insane highs. Now the air wants it back. Everyone who had inflated net worth from stocks and other investments and leveraged from all those speculative assets will soon be in bad shape.
  - Matthias247 4y ago
    There's a super wide spectrum between "prices then will only increase 2% YoY", "prices will stay flat for a while", and "prices will go down significantly". And it will likely depend on the region which option will apply. For extremely supply constrained regions with high prices (like Vancouver), I don't expect a decrease. But my guess is as good as everyone elses.
    - hello_moto 4y ago
      Vancouver market is holding its fort at the moment. There might be older unmaintained house in desirable hood that went higher in Feb-March but unable to fetch that price again today but good product is good product and will demand premium in this region where land is a scarcity.
hsbauauvhabzb 4y ago
It highly depends on location. Not everybody lives in the US, I find it odd that Americans rarely post their country, and just assume the location of others.
- deleted 4y ago
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- javajosh 4y ago
  This site is hosted in America, and largely populated by Americans, so it's odd you find it odd. If you run a site in India for Indians, for example, would you find it odd if users assumed everyone lived in India unless otherwise stated?
  - Matthias247 4y ago
    > and largely populated by Americans that's an assumption. There's likely no stats on it, but I wouldn't be suprised if there's a large userbase outside the US (I'm not there, I know lots of users also not being in the US). > If you run a site in India for Indians, for example, would you find it odd if users assumed everyone lived in India unless otherwise stated? That's not really comparable. We are talking about one of the most well-known tech exchanges worldwide - so it is also of interest to many people outside the US. If silicon valley would be in India it wouldn't be odd if the site would be hosted there, and if international users would visit it.
    - javajosh 4y ago
      I'm going to assume that you're making this argument in good faith. But it's a bad argument in its structure. In particular you're misrepresenting what I'm saying, and implying I'm saying that no one other than Americans uses the site. That's not what I'm saying. I'm saying that most of the users are American. As such it makes practical sense to assume users are American unless they state otherwise. That's it. That's my point. I'm not saying that non-americans don't use the site. I'm not saying they're not welcome. Both of those statements are obviously false. Speculative outrage that defies common sense is a big component of the troubles liberal culture is experiencing today. It is always possible to take everything personally, so demonstrating that you can take things personally is profoundly uninteresting. And worse it distracts from the best thing about discussion: all the cool ideas we can share with each other.
01100011 4y ago
No one knows. The fed could give up trying to contain inflation and buying now could be a good move. Reversion to the mean is more likely though, and if that happens it would make now and the near future an absolutely terrible time to buy. Owning a home is a complex decision. No one can tell you without knowing more about your desired market, your career and life trajectory, your financial situation and your life goals. One thing you should not do though is to let FOMO drive your decision making process. Old folks like me remember 2006 and how strong FOMO was at the time. It seemed like most folks were going to be permanently priced out of the market. Right now looks nothing like 2006-08. There aren't a lot of ARM loans at risk and the risk from mortgage backed derivatives is much less. That said, we face an equally serious, if not more so(!!!) set of risks that could see the US GDP decline for a while. Generally, market corrections overshoot, and given the miscalculations of the Fed over the last few years I see no reason this time will be different. I am personally looking to buy a home and start a family but I am waiting despite being able to finally afford (barely) a house in my desired market. I think the market I'm looking at will correct at least 10% in the next 6 months. I may still delay the purchase even then just because of poor financial conditions overall. I may be wrong. I think probabilities are in line with my view, however.
- deleted 4y ago
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- iqkznnft 4y ago
  > Reversion to the mean is more likely though, and if that happens it would make now and the near future an absolutely terrible time to buy. Why? Couldn't you refinance in this situation?
  - 1123581321 4y ago
    In this situation, interest rates will be higher so you wouldn’t want to refinance. You also will have negative equity in the home, due to values falling, so may have trouble writing the loan.
  - creakingstairs 4y ago
kache_ 4y ago
Can you afford it? Do you need it? The only two questions you should be asking yourself.
jupp0r 4y ago
If anybody could consistently give you an answer that’s better than a guess they would be billionaire investment bankers already.
dominotw 4y ago
> if you need a house, buy a house - because you do need a place to live. what??
- onesafari 4y ago
  if you need a house, buy a house - because you do need a place to live.
  - dominotw 4y ago
    i must be homeless then
bluGill 4y ago
Who knows? Nobody. We can guess, but even then location location location is important. As is your personal future. Buying a house is a long term commitment, if you can't live there for seven years then it is probably wrong for you.
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temp8964 4y ago
There isn’t much bubble in the housing market. The supply simply can’t keep up with the demand. This is not the best time to buy, but not the worst either.
axg11 4y ago
If I were looking at buying in the next 0-36 months, I would wait at least 6 months. It’s entirely possible that economic conditions continue to slide, interest rates get to 7%+ and a deep recession reduces housing demand. The opposite of all these things could also be true. If conditions improve faster than expected, you can always quickly enter the housing search/market. Housing isn’t like most other markets that can move 20% in a day. You should be able to wait 6-12 months and closely follow the consensus on interest rates and housing market sentiment.
greatpostman 4y ago
Wait six months, if prices are going to crash, they will by then
tempsy 4y ago
If the reason you’re buying is because you need to upgrade your current living situation and you can afford the monthly payment then I don’t see what the issue is. If rates go back down you can always refinance. Given sales volume has dramatically slowed I personally wouldn’t engage in a transaction with a seller who thinks they have total leverage and force buyers to do things like waive inspection which many people do to win a house. It’s just not worth it.
- jrgoff 4y ago
  Something you may know, but I didn't before going through the home buying process: waiving inspection doesn't mean you can't get an inspection it means you don't get to do an inspection after making your offer and then use it to negotiate. It generally isn't a problem to get an inspection before making your offer and using that to inform whether you want to make an offer.
aenis 4y ago
I think noone knows, really. In 2008 it was a single cause driving the prices up and then sharply down. This time around it seems to be an equation with a few unknowns: when will the war end - and how. When will china end their zero covid policy (or how will it end). What will the policymakers do if supply-driven inflation eases? Very hard to predict. Just closed on a house in the Netherlands. I expect the prices to stagnate but not fall like they did in 2008. There is a limited supply, the demand is strong even at todays prices.
- piva00 4y ago
  Looking at the housing market from Sweden I feel your conclusion on stagnation will hold true until the floodgates of new construction supported by policy open, that won't happen soon... I can only envision a real fall in prices when I look at projects such as the miljonprogram from the 60-70s here in Sweden, mass building of shelters, left to its own devices the private sector will only try to game regulations to extract as much as possible from the land they own. A very visible gaming device is to constrain supply to always sell new units on or above current market prices even if you could potentially build faster, there is no incentive to sell cheaper.
  - aenis 4y ago
    Yup. And for small, dense countries like the Netherlands there are also physical constraints. The Dutch try to protect their landscapes, and new development happens in areas that dont encroach on the farmland. And also, the building code makes new developments relatively expensive, often significantly more so than existing buildings. There are also political and cultural issues at stake. The Dutch are a nation of proud homeowners, and the passing of accumulated wealth from one generation to the next allowed for the prices to keep growing.
orsenthil 4y ago
The best time to buy a house, especially your house, is when you are ready. The worst time is when you are not.
more_corn 4y ago
It’s not a bad time if you get a good deal. I bought when rates were at 3.25 but I just saw a place on Zillow that probably would have met my needs for more than a hundred thousand less than I paid for my place. Compare your total cost to renting. If you can own for about the same price as renting, do it. Even if it’s not optimal every dollar you spend on rent is gone. With a mortgage at least some of that is principal. Do we think housing prices will crash? Probably not. There’s a housing shortage.
jonahbenton 4y ago
Aggregate statistics are most commonly reported on, and some important aspects are nationalized- Fanny and Freddie securitization above all- but housing and pricing dynamics are highly, highly localized, even to the neighborhood. That's why it's "location, location, location". The one thing that will remain true is that fixed rate mortgages are an incredibly good deal for the buyer. Your rate and payments can only go down, not up. Astonishing such a financial product exists. If you can get approval for a loan the payments on which you can afford- with reasonable error bars for your 10 year income- and you can find a property in that budget you can stay in for 10 years- again, reasonable error bars around how the area and your life will change- do your diligence on the property, of course, but do the deal. Good luck.
daxfohl 4y ago
Nah, you can always refi if rates go down (after which home values will start going up again), and if rates go up then you can be thankful you have locked in. I never got a house till I had my second kid at age 40. I guess potentially I lost out on some appreciation, but I have never really considered a home an investment; I'd rather rent a cheap place and save more. I still don't like the hassle that comes with owning a place. But to each their own.
- __pache__ 4y ago
  Can't refi if you're under water...?
  - daxfohl 4y ago
    Don't buy more than you can afford.. That applies in any environment.
    - __pache__ 4y ago
      well, yeah, but my point is there are situations where you can't refi
      - daxfohl 4y ago
        Oh you're right. It went over my head somehow.
jurassic 4y ago
Somebody is always trying to call the top of the bubble, but nobody really knows. People told me I was being stupid for buying last year after the initial COVID price surge, and still my home's nominal value is up something like ~10% since then even as interest rates have risen. Math tells you that interest rates and prices should be inversely correlated, but accounting for the changing value of the currency units themself and changing supply/demand situation is something the simple understanding can't explain. With supply still very constrained in many markets and inflation seemingly here to stay, I have a hard time seeing a large correction any time soon. Your personal financial situation matters a great deal in the decision. I took the plunge last year because I had about ~$300k sitting in cash for a downpayment and inflation news was making me nervous. You probably don't want to be holding onto a lot of cash in this environment as dollars lose value and nominal prices continue to rise. Taking out a big debt at a moderate fixed interest rate seems like a great idea in a high-inflation environment, assuming the payments are comfortable for you to make and you don't mind staying in the home for the long term. If inflation exceeds your interest rate, the house is getting cheaper for you to own (in real terms) over time. If I hadn't bought a home I would've been strongly tempted to throw the money back into the market. But knowing I wanted to buy a home on a relatively short timescale this would've been a very poor decision, especially looking at how the market has performed since that time.
idrios 4y ago
Around the time of the dotcom crash in 2001, my dad was thinking about buying a house, but he was insistent that housing was a bubble and wanted to wait for the bubble to burst before buying. He was right about it being a bubble, but it still didn't crash for 7 years. It's all unpredictable but bubbles can last for way longer than you expect them to. Or they can burst at any minute.
- cudgy 4y ago
  CPI adjusted prices were lower in 2011 than they were in 2001, so your dad was probably onto something. The question is would rent have been cheaper or more expensive than home ownership over the time span in the area he would have bought a house. In many hot markets like California, renting was a better move during that time as rents were very cheap relative to the cost of the inflated housing prices during that time.
noduerme 4y ago
I take the approach that if the house is for living in, and you're not a contractor or in the business of improving and flipping properties, you shouldn't try to time the housing market. Whatever happens this year, it's going to look like a good decision in 10 years if you can make the payments. Rates are still pretty low, historically and as someone else said, if they drop, you can refinance You don't buy a house because the price is going to go up. You should look at it as a lifelong investment. The wisest and wealthiest people I know live by one iron rule: You never sell real estate. If you do make the decision to buy, though, come in as low as possible, lower than you think the seller would take, lower than your agent thinks, and see what happens. The market is softening and you want to get as much value as possible.
bsurmanski 4y ago
It mostly comes down to the fed, and their response to inflation. If you think their response will reign inflation in check, we'll probably see the market 'crash' and a recession like the late 80s. If you think their response will be soft, and persistent inflation is the new norm, we'll probably see the market act more like the 70s. Maybe they walk the line, but I don't see how that's possible. Monetary policy is just so of-the-mark right now. Another screwball is WFH. That could sap demand for large cities and push demand in suburbs and smaller towns.
anm89 4y ago
It's really really hard to say. Not only are prices really high but I think the potential variance in outcomes that I would personally project is at an all time high. There are forces pulling the market in polar opposite directions and it's going to be a relative matter of how those forces play out. Overall, I would buy right now if it really makes sense to you from a life perspective. I'd stay far away if your goals are speculative.
ianai 4y ago
I think it'll get better to buy as some of the manic, easy-money business decision stuff recedes. Granted, the traders use the metric of comparing volume to historical norms as insight into whether current prices are more momentary or long term. i.e. Increased trading volume suggests valuations actually are adjusting to the new level. But that's for stocks and much more liquid assets than real estate. Another odd-ball thing nagging at me is just population age characteristics, but this is truly long term. The boomer generation really was larger than all of its following generations by large measure. I wonder whether this could make longer term US characteristics look like Japan the last several decades for this reason.
fennecfoxen 4y ago
I just bought a house! Like, literally yesterday. And I was recently quoted in the Wall Street Journal regarding my home buying process: https://www.wsj.com/articles/home-buyers-are-finding-creative-ways-to-make-cash-offers-11654767001 https://www.wsj.com/articles/home-buyers-are-finding-creativ... Someone in the comments there made a metaphor about "catching a falling knife." I respect this skepticism, and suspect I may have safely caught such a knife. More thoughts: - If interest rates rise, the asset price bubble may deflate. This suggests the house's value on paper will fall — but unless the economy collapses, overall rents ought to be stable, and the cost of living on a typical property ought remain broadly similar. In the meantime, prices are still rising substantially in the area where I bought the house, notwithstanding recent headwinds in the mortgage market. - I expect real rents to rise over the next few years, due to general supply-and-demand issues and the dearth of new construction. I expect this nationwide; I further expect them to rise in the city where I bought. This should mitigate the pressure on the value of my asset. - I locked in a 4% interest rate. With a conforming loan of $647,200 that's something like $2200/mo in debt that's evaporating due to inflation. This is a substantial portion of the monthly payment. You will not get this good a deal, because rates are already going up. However, at current rates, you will still get free-money financing -- just not as much or for as long. - I sold stocks to pay for my down payment. The stock market fell a good little bit since I sold. If your equity is still in equities you have already taken a hit that I avoided. (I got lucky, I guess; I also sold company stock at a very attractive price.) And note that even though stocks have fallen, they are by many measures still somewhat overpriced by historical standards, particularly if rising rates brings about a recession, which it might. If my real estate is at risk from rising rates and falling asset prices, it has lots of company. (Even a nice safe bank account is losing value daily.) In conclusion, a lot depends on the specifics of where you're buying, how you're paying for it, and what you would do with the money instead. If you've got a wad of cash and wanted to make an all-cash offer, I'd preserve as much as you can against inflation, and save it for the recession in a year or two; you'll probably come out ahead.
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recursivedoubts 4y ago
the worst time in about a century, in fact: https://www.longtermtrends.net/home-price-median-annual-income-ratio/ https://www.longtermtrends.net/home-price-median-annual-inco...
zw123456 4y ago
When I was 25 (1985) I asked my Dad that exact question. He said, it's the worst time to buy a house and it's the best time to buy a house, and, that's always true. I asked him what he meant, and he said, it always seems like a bad time, but you can't really ever time it perfectly. You get a house you can afford. Do the best you can, work your way up, fixing it up, selling it and moving to one that's a little better. Then you wake up 40 years from now and you'll be glad you did it. That turned out to be true for me for sure, living in my dream home now, glad I dug deep and did it. It was tough going at first but, owning a home is still the little guy's best investment. It was true then and I think it still is.
- 01100011 4y ago
  Survivor bias. I can name a few friends who bought in 2005-06 and it was a terrible decision. They lost their nest egg and forever became renters. On average, I think you're correct. You will likely benefit in the long term in the USA buying a home due to the financial incentives and constant creep of inflation. That said, there is a comparative advantage to renting and investing your down payment in something other than real estate. You also maintain flexibility. Don't forget, the transaction costs on real estate are significant and the investment can often become quite illiquid. You have to have some stability in order to make a home purchase a good idea. Moving every 5 years or less will usually eat away at your principal over time and leave you with less wealth than if you'd just have rented.
  - MattPalmer1086 4y ago
    There are definitely better and worse time to buy, but in general it's good not to delay purchase for ages. I bought in London when prices were rising dramatically. It did feel like it was now or never at the time. We had held off buying for years, thinking that the crazy price rises were unsustainable. We were wrong, at least on any time frame that mattered for us. By the time we bought (I had some big pay increases) we ended up in a perfectly nice but small house that we could easily have bought for half the price 5 years earlier, and would have been affordable for us before I was better paid.
  - 4y ago
LouisSayers 4y ago
In NZ / Aus prices have skyrocketed something crazy... People talk about supply shortages, but a) there seems to be a lot of building going on b) people will pass away c) housing density seems to be increasing d) people's wages haven't risen as quickly as house prices e) interest rates are heading upwards. There will of course be new people coming of age and entering the market as well as immigration, but even so the price rises don't seem sustainable at all, and I imagine a lot of people will struggle to pay much higher interest rates with such high loan amounts... This is all just an observers viewpoint - it'd be interesting to see people actually crunch some numbers on items such as I've listed above. I also believe there'll be large differences depending on location - even within the same country. There are also changes in laws around housing- e.g. in NZ they're introducing laws to help increase density and reduce the perks for housing "investors". There's definitely a lot going on.
- andsoitis 4y ago
  > housing density seems to be increasing In contrast, in the United States: a) average home size has been steadily increasing over the last 5 decades b) living space per person has doubled over the last few decades c) price per square foot has remained steady https://www.aei.org/carpe-diem/todays-new-homes-are-1000-square-feet-larger-than-in-1973-and-the-living-space-per-person-has-doubled-over-last-40-years/ https://www.aei.org/carpe-diem/todays-new-homes-are-1000-squ...
ipaddr 4y ago
If you plan on buying in a big city jump in now. If you are planning to buy elsewhere things get complex.
Cupertino95014 4y ago
Timing any market is a fool's errand. One thing you can always do, though, is ignore the opinions of an interested party. Realtors are the prime example. They will always tell you that "houses always go up, and this period we're living through -- that'll be just transitory. So buy now." Ignore them. Another thing you can always do is ignore anything you read in the press. Those reporters just have space to fill, and they know nothing. If they do know anything, it's six months out of date. If you're sure we're in a secular downturn for housing, like after the 2007 crash, then waiting a bit will be appropriate. Otherwise, just do what makes sense for own situation, and don't worry what "they" say.
- cudgy 4y ago
  > Timing any market is a fool's errand. So just buy everything all the time and it will all work out? Smart money loves people with this philosophy; it gives them a nice supply of suckers to sell their obviously inflated assets. There is no need to time a market perfectly; one can gradually rotate out of overpriced assets and into underpriced assets using basic common sense measures. This is called investing as opposed to blind confidence or speculative hope of everything “just working out”. The ironic thing is that people with this philosophy of always buy and never sell or shift asset classes are inherently timing the market on when they will sell their risky stock assets … when they need to retire or when they need the money in x years.
  - Cupertino95014 4y ago
    > So just buy everything all the time and it will all work out? No, that's your interpretation. I should clarify what I meant there: it's about calling the bottom or calling the top, on a short-term basis. No one can do that. > one can gradually rotate out of overpriced assets and into underpriced assets that's different from timing the market. If you think you can do it, then publish your portfolio's performance over a long period of time (10 years or more).
- rootsudo 4y ago
  This. I've been reading 2005-2008 papers, again - as I was doing these back in school for current issues. It's exciting how some things never change. More fear and gloom nowadays though. But it's quite the ride, the worst would be a documentary like this - https://www.youtube.com/watch?v=OcrKdWcxS8c https://www.youtube.com/watch?v=OcrKdWcxS8c but this is a complete 180 from todays situation. We just don't have construction - and well, Lehigh Acres, FLorida has always been known to be a consilidated house of cards. But much of FLorida has been too, that's how Miami got founded, a bit and even Orlando which is a "bunch" of swamp land. So it's interesting, how lately I've been traveling and land/house are valued so differently in the west coast, e.g. California and entire pacific coast. Florida is pray to the alure of vacation homes of NorthEasters, while North Westers go to Arizona or New Mexico, another exciting migration pattern. Cash out, buy new place, live a life of excess and then, die?
MontyCarloHall 4y ago
Housing prices and interest rates typically have an inverse relationship. The inflation adjusted average monthly mortgage payment has been remarkably constant over the last 45 years [0], with the exception of: 1. The era of abnormally high interest rates of the early 80s. The greatly reduced demand for housing (and corresponding drop in housing prices) from 1980-1985 was not enough to offset 20% interest rates. Thus, mortgage payments were extremely high. 2. The housing bubble leading up to the 2007 crash. That time, high mortgage payments were due to abnormally high housing prices, not abnormally high interest rates. 3. The current housing bubble [*]. Whether now is the worst time to buy depends on whether rising interest rates will ultimately offset home prices. Home sales have fallen to April 2020 levels [1], but it’s too early to see a corresponding drop in prices. This may not happen for two major reasons IMO: 1. If interest rates rise to levels high enough that their effect on mortgage payments exceeds the corresponding drop in housing prices, à la the early 80s. I personally doubt this. 2. If the likely moderate increase in interest rates fails to cool the market at all. There may be enough cash buyers on the market (primarily institutional investors) that borrowing costs are irrelevant to housing prices. I find this plausible but unlikely. [*] I am very confident that the housing bubble isn’t going anywhere without increasing total housing supply, which hasn’t met demand for the past 15 years, ever since new home construction stalled after the Great Recession (and never recovered). I doubt this will change anytime soon. [0] https://www.motherjones.com/kevin-drum/2017/10/another-look-at-millennials-and-mortgage-payments/ https://www.motherjones.com/kevin-drum/2017/10/another-look-... [1] https://www.census.gov/construction/nrs/pdf/newressales.pdf https://www.census.gov/construction/nrs/pdf/newressales.pdf
imtringued 4y ago
It is always the worst time to buy a house. This is due to the monopoly nature of location.
fairytalemtg 4y ago
when you can afford it without other commitments or burdens, buy the house. Best is to have enough cash reserves. As mortgages rates are going up, job instability with layoffs underway, could result in foreclosures, also homes purchased for AirBB and other rental property may go down in demand with folks back in-person at office. Many many factors could cause a market correction for home prices to drop. So if you have cash reserves for 20% or higher for down payment, now might be a good time. You can refi it when the mortgage rates drop in the coming years.
tomcam 4y ago
First my bias: I love owning real estate because I’m naturally insecure and place a high value on control. Whimsical landlords are one of my least favorite things. They can cripple your financial plans. (So can not planning for house expenses.) I feel very strongly that your house shouldn’t be considered an investment, and that ideally you should buy a house you enjoy enough that even if the price dips you’ll still feel good living there long enough to pay the mortgage. Bonus: for me having a good place to live pays off because it makes earning extra money far far easier. Long after I made enough money to retire I ran side hustles because did I mention insecure ;) Also you probably know this, but it’s ALWAYS better to buy the worst house in the best neighborhood rather than the best house in the worst neighborhood. Much likelier to preserve most of its value in a downturn and to recover afterwards.
lamontcg 4y ago
I can't predict the future. But I think the residential housing market is due to correct. The Federal reserve is indicating that they will continue with 0.50bp tightening at every meeting through the end of the year, and then on until inflation is under control. They're mentioning Volker and talking tough on inflation. This is very different from the 0.25bp tightening and very measured "not too hot, not too cold" messaging from the Fed under Greenspan in 2003-2006 tightening cycle -- which still popped the housing bubble and led to the 2008 collapse. They're going to crash the economy to get wages back under control. That means inverting the yield curve. That means CMBS probably pops and another financial crisis. The stock market is already having a massive anxiety attack about it. I can't see how residential real estate doesn't adjust. And if the recent speculation that the only rescue for downtown commercial real estate in a remote-work world is condoizing into residential that means a flood of supply on the market. Given rising rates it is definitely time to buckle up though. The problem may be that at the best points to buy you may not be able to get a loan because you've lost your job.
rootsudo 4y ago
I wonder what it all means with today's market open. Is it opportunity to strike now, or do really be cautious and let the prices down down the next quarter.

arcticbull 4y ago

How so? The cost per square foot of the average American home has remained exactly the same, adjusted for inflation, since 1974. In major metros, it's artificial supply constraints that have kept prices going up, and those aren't about to ease. In SF for instance, over certain periods, the city added only 10% of the houses needed to keep up with job growth. Even a massive shock to the industry wouldn't have much real effect. I strongly suspect there won't be much to write home about on the housing front this time. Folks seem to think 'expensive' means 'bubble' - but houses have always cost what folks can afford to pay, otherwise, you know, they'd be less expensive.

0des 4y ago
Now do wages, adjusted for inflation, since 1971.
- arcticbull 4y ago
  They have also kept pace with inflation, why do you ask? [1] [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
  - baremetal 4y ago
    https://image.cnbcfm.com/api/v1/image/106972802-1636474969966-20211109-mobile-fallaback-i3rrt-growth-in-u-s-home-values-outpaces-that-of-incomes.png?v=1636475060 https://image.cnbcfm.com/api/v1/image/106972802-163647496996... from cnbc the growth of real estate prices vs wage growth. wage growth has been flat since the '70s.
    - arcticbull 4y ago
      Nothing in that article contradicts anything I said, you've missed some nuance. The BLS data shows that wages have kept pace with inflation. The Census Bureau data shows that the price per square foot of the average American home has remained the same since the 1970s. The spread is that the average new American home now has twice the square footage per person. [1] Of course in major metros, supply constraints keep prices high (and the gap between supply and demand is so large it would take something truly catastrophic to close the gap - SF barely had a 2008, for instance). Outside metros, houses have gotten enormous. In both places, families are smaller. I'm just saying, I don't see a housing bubble looking at price alone. [1] https://fee.org/articles/new-homes-today-have-twice-the-square-feet-per-person-as-in-1973/ https://fee.org/articles/new-homes-today-have-twice-the-squa...
BadCookie 4y ago
"The median monthly payment of a 30-year mortgage is up 56% year-over-year" And this number was calculated before rates went even higher last week. Source: https://www.calculatedriskblog.com/2022/06/30-year-mortgage-rates-increase-to-585.html https://www.calculatedriskblog.com/2022/06/30-year-mortgage-...
- arcticbull 4y ago
  Yeah but is that super relevant? Mortgage monthly payments overwhelmingly aren't up because, obviously, they're usually fixed for a 30 year period. This rate affects new buyers, and only temporarily as of course, they can refinance into lower rates in the future. Mortgage rates may be up compared to 6 months ago, but they're back where they were in 2018 when I bought my condo. People were screaming 'housing bubble' back then too. Even that is misleading because... Keep in mind that with an 8% inflation rate, a 5.85% interest rate on a 30-year fixed is a -2.15% real interest rate. Once you take into account mortgage interest tax deductions, the real interest rate is -4.5%. This is dramatically lower than last time we saw 5.85% interest rates (2018) when we had a 1-2% inflation rate. That's a real interest rate of +3.85%. Once you take into account mortgage interest tax deductions, the real interest rate was +1.5%.
  - wintermutestwin 4y ago
    >Keep in mind that with an 8% inflation rate, a 5.85% interest rate on a 30-year fixed is a -2.15% real interest rate. You are leaving out (as so many do): Taxes, Insurance and Maintenance. For example, where I live, those add up to a minimum of 3%. On top of all that, you need to factor in your personal stability - what's the risk that your career or partnership could intervene in your plans and force you to sell < 7-10 years out? If that happens, you are eating closing costs and potentially being forced to sell at a bottom out moment in house prices due to interest rate instability.
    - arcticbull 4y ago
      That’s fine but not relevant to my point. Those things also all existed last time nominal rates were at this level. My point is real rates are dramatically lower now than last time. This is going to keep demand high, maybe not from the same individual buyer as before but there’s a good reason we see institutional gobbling up all this real estate. The market doesn’t differentiate between institutional and retail buyers when a house goes up for sale. However all those property taxes and HOA fees are tax deductible for institutional buyers. I don’t think that’s good of course - and I’m not advocating people run out and buy a house either - I’m just saying, there’s a ton of factors that make “housing market collapse imminent” more of a pipe dream than a sure thing. How much did housing go down in SF during COVID? Charts say zero, and that’s during the biggest exodus of people actually living there in recent memory.
lamontcg 4y ago
If half of the commercial real estate is forced to convert to residential due to remote work then there's your new supply.
- arcticbull 4y ago
  With respect, remote work is over.
  - ls15 4y ago
    It barely has begun. Climate change and high gasoline prices are making remote work an absolute necessity. Travelling on a daily basis, just to look at another screen, will soon be seen as obscene. Like switching your rare real fur coats daily.
  - lamontcg 4y ago
    no it isn't, lol. https://news.ycombinator.com/item?id=31709394 https://news.ycombinator.com/item?id=31709394
    - arcticbull 4y ago
      I don’t see what SF has to do with anything? SF has made a number of incredibly poor anti-tech decisions that have pushed tech companies out of town. They kicked out Square, Stripe and PayPal (and I assume a myriad other payments companies, probably Airbnb) with Prop C. Of course people are leaving. Their jobs moved. I wouldn’t confuse a particularly poorly managed city for a broader trend. The same is certainly not happening a few towns over in South San Francisco where Stripe is now located, or in Cupertino, or in Menlo Park. Or at Tesla. Or every financial business in New York. Anecdotally every early stage startup I know is starting in person. Couple years from now, work from home will once again be the exception.

baron816 4y ago

> No one knows. The fed could give up trying to contain inflation One thing that we know absolutely will not happen is that the Fed will give up trying to fight inflation. The Fed has a duel mandate to stabilize prices and keep unemployment low, but really more important than either of those is that it’s predictable and does what it says it will do. Expectations play a really large role in monetary policy. Pretty much the whole reason they waited so long to start raising rates was because they said they weren’t going to raise rates for a long time.

0des 4y ago
> duel mandate I wish.
beebmam 4y ago
I keep seeing people make the assumption that the inflation that the world is currently experiencing is something that supply side monetary policy can stop. I'm skeptical of that assumption.
- 01100011 4y ago
  Correct me if I'm wrong, but doesn't the fed control the demand side by (indirectly?) controlling the money supply? If I understand correctly, the fed is currently trying to reduce demand to match the limited supply by pulling money out of the economy.
  - t-3 4y ago
    In my view, the money supply has very little to do with inflation for modern fiat currencies - especially USD. Dollars are not backed by tangible goods which can be valued, like gold. They are backed by "confidence", which can be roughly seen as something like the proportion of trade conducted using them. In this view, inflation would be caused by slowing economic activity, loss of USD trade dominance, and geopolitical shifts toward multipolarity. Nobody knows or cares about the number of dollars in the world, but we all see new economic currents flowing in Asia and the "global south".
  - wonnage 4y ago
    It's also kind of a sham, "reducing demand" basically means reducing the amount of cash people have to spend, since it currently exceeds the amount of goods we can supply. The nominal prices of things might go down but the average American won't be able to afford any more, since the whole point was to reduce demand. Even worse, higher rates tend to strengthen currency value, which makes imports cheaper but hurts domestic exports. It's already very hard to devalue the USD due to its status as a reserve currency and this exacerbates that problem. We run the risk of triggering a manufacturing recession, which will helpfully "reduce demand" with layoffs but not make anyone better off.

01100011 4y ago

> but unless the economy collapses This is a very real possibility in the next 18 months. Even if Russia stops attacking Ukraine, we have plenty of money that the fed is going to drain out of the economy. QT has barely even started yet. I'm not saying it is a certainty, but the chances are uncomfortably high that we will have a "hard landing", including high unemployment and a stagnant economy due to high borrowing costs. > dearth of new construction People thought we had a shortage of homes in 2005 as well. The market crashed and suddenly we did not. Supply is a function of what people are willing to pay and what sellers are willing to accept to relocate. > You will not get this good a deal Absolutely. Rates jumped 0.5% on Friday alone as the mortgage backed security market went "no-bid"(no one was willing to buy the securitized mortgages at current rates). > If my real estate is at risk from rising rates and falling asset prices, it has lots of company. This is not a good strategy to manage your money but you do you. Fortunately you do have tax advantages as a home owner so that does work in your favor vs other asset classes. This may not make sense for many people though. I'll say though that buying a home may turn out to be a wise move if you can keep making the payments and things recover. It is likely that we will continue to see inflation above the target rate because the fed is trapped between its mandates and the financial insolvency of the US government(currently running $1T USD deficits annually, and that after a spike in tax receipts due to asset inflation).

deleted 4y ago
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fennecfoxen 4y ago
> I'll say though that buying a home may turn out to be a wise move if you can keep making the payments and things recover. Oh yes. I could lose my job and get a new one with zero equity compensation and a 33% cut to base, and I’d still be pretty comfortable paying everything. And that’s by myself, not accounting for any of my wife’s income. > currently running $1T USD deficits annually, and that after a spike in tax receipts due to asset inflation Yes. I forecast this means more inflation. Or politicians choosing to actually make hard decisions and pay the price for their policies, which will happen only after much more inflation. I have locked in the price of shelter for the next 30 years and the more inflation the better this real estate deal looks.