5 ms·

They do say the long real-estate cycle is 15-18 years. 2007 is 17 years ago. While I don't like that type of rule of thumb, I can clearly feel why it makes sen

They do say the long real-estate cycle is 15-18 years. 2007 is 17 years ago. While I don't like that type of rule of thumb, I can clearly feel why it makes sense. I am on the brink of buying my first home as it is. And having seen peers having earned several hundreds of thousands from their houses over the past 4-5 years really adds pressure and FOMO. I guess that is the sign to be extra cautious on buying. And I also think that this feeling is quite prevalent creating the perfect storm for a financial crisis.

ethbr1 3y ago
With regards to residential property, after watching the last 20 years I've decided demand is the music to valuation-musical-chairs. If demand falls, then prices go down. Otherwise, they track inflation (multiplied by desirability of the area you're looking in). Which basically means: buy in areas with growing populations, good economies, and good achool zones.
bdw5204 3y ago
Now is probably not the right time to buy because interest rates are at the highest levels in recent memory. Nobody in their right mind is selling right now unless they are being forced to out of financial desperation. The commercial real estate crisis is a different problem based on the pre-2020 assumption that it was a good investment because remote work would never be widespread.
- ethbr1 3y ago
  If parent has access to US-style fixed-rate, refinance-without-penalty mortgages, the interest rate isn't a major component. Provided you can carry the payments, what do you care? Buying now: interest is deductible on itemized taxes, can refinance when rates drop, build any home value appreciation Buying later: your rent money is literally doing nothing for you, you've missed home value appreciation, and you need to pay more for a home in the future Systemic home valuation decreases is the bigger threat to watch for (i.e. keep an eye on prices:incomes, etc).
  - IggleSniggle 3y ago
    That's the classic line of reasoning re rent/buy. But if you're taking out a loan to buy a house, you're still paying rent, you're just renting money instead of housing. And now you're responsible for everything that happens to your property for at least the next 5 years if not 30 just to make it worth it on the closing costs vs renting.
    - madsbuch 3y ago
      Yep, right now the cost of money is more expensive than renting a house at 80% financing. So on top of this, if you decide to buy a house at 500k, you lock up 100k and still pay more in interest + HOA than ren for comparative apartment. In conclusion: It only makes sense to buy right now, if I have an expectation that the price will go up on the home. /edit: Added the conclusion
      - lotsofpulp 3y ago
        > In conclusion: It only makes sense to buy right now, if I have an expectation that the price will go up on the home. What if someone does not want to deal with the volatility of a landlord, such as rental terms changing, or the property being sold, or the owner not maintaining the property? At a minimum, being able to ensure you don’t have to move your family due to landlord changing their mind is worth something.
        madsbuch 3y ago
        you have protections around these things in most places, and especially in Denmark. also, renters I am referring to are commercial renters (so definitely not the cheapest ones).
      - ethbr1 3y ago
        If you're putting 80% down in the US, I'd suggest the thought process is wrong. With good credit on a good property, 95% LTV isn't uncommon. Looking at residential property as a forever home is wrong. You're buying an asset, that happens to also let you not pay rent. Consequently, you want (1) value stability (see earlier qualities) and (2) leverage (as you get to keep all the profits and offset the interest). 80% LTV = 5x leverage of down-payment 95% LTV = 20x leverage of down-payment Given that your net rate of return should also be against your down-payment, shrinking that substantially boosts effective return at time of sale.
- threetonesun 3y ago
  The current rate is pretty close to the median rate for the last 50 years. My suspicion is we'll soon see the great Boomer sell-off as they try to get out at the top of the market, many of my friends (millennials and GenX) share the same stories of trying to get their aging parents out of mostly empty SFHs.
  - hiatus 3y ago
    > share the same stories of trying to get their aging parents out of mostly empty SFHs. Where are they moving to? My aging parents do not want to go to a condo or apartment, they have gotten used to living alone and don't want to deal with neighbors stomping on the floor above them, for instance.
    - francisofascii 3y ago
      Many people go to Florida. Eventually you kinda of have to go to assisted living, right?
      - hiatus 3y ago
        Not everyone does. My grandmother died in her own home, with an aid coming to assist with daily caretaking. Though having taken care of a dying relative myself, it weighs on you and I'm really not sure if I could do it again.
- no_wizard 3y ago
  >Now is probably not the right time to buy because interest rates are at the highest levels in recent memory. Nobody in their right mind is selling right now unless they are being forced to out of financial desperation. It sure would be nice if selling out of financial desperation meant lower housing prices. This sure isn't the case though, even today. That would make the case for higher cash to loan ratios. People still bought houses in the early 1980s when rates were dramatically higher than today. First and foremost shouldn't housing be seen as a public need vs a profitable asset anyway? This sort of thinking is what leads to so many average Americans becoming obsessed with home values. I don't think real estate as asset squares well with we need real estate to live adequate lives, but I digress

ethbr1 3y ago

With regards to residential property, after watching the last 20 years I've decided demand is the music to valuation-musical-chairs. If demand falls, then prices go down. Otherwise, they track inflation (multiplied by desirability of the area you're looking in). Which basically means: buy in areas with growing populations, good economies, and good achool zones.

bdw5204 3y ago

Now is probably not the right time to buy because interest rates are at the highest levels in recent memory. Nobody in their right mind is selling right now unless they are being forced to out of financial desperation. The commercial real estate crisis is a different problem based on the pre-2020 assumption that it was a good investment because remote work would never be widespread.

ethbr1 3y ago
If parent has access to US-style fixed-rate, refinance-without-penalty mortgages, the interest rate isn't a major component. Provided you can carry the payments, what do you care? Buying now: interest is deductible on itemized taxes, can refinance when rates drop, build any home value appreciation Buying later: your rent money is literally doing nothing for you, you've missed home value appreciation, and you need to pay more for a home in the future Systemic home valuation decreases is the bigger threat to watch for (i.e. keep an eye on prices:incomes, etc).
- IggleSniggle 3y ago
  That's the classic line of reasoning re rent/buy. But if you're taking out a loan to buy a house, you're still paying rent, you're just renting money instead of housing. And now you're responsible for everything that happens to your property for at least the next 5 years if not 30 just to make it worth it on the closing costs vs renting.
  - madsbuch 3y ago
    Yep, right now the cost of money is more expensive than renting a house at 80% financing. So on top of this, if you decide to buy a house at 500k, you lock up 100k and still pay more in interest + HOA than ren for comparative apartment. In conclusion: It only makes sense to buy right now, if I have an expectation that the price will go up on the home. /edit: Added the conclusion
    - lotsofpulp 3y ago
      > In conclusion: It only makes sense to buy right now, if I have an expectation that the price will go up on the home. What if someone does not want to deal with the volatility of a landlord, such as rental terms changing, or the property being sold, or the owner not maintaining the property? At a minimum, being able to ensure you don’t have to move your family due to landlord changing their mind is worth something.
      - madsbuch 3y ago
        you have protections around these things in most places, and especially in Denmark. also, renters I am referring to are commercial renters (so definitely not the cheapest ones).
    - ethbr1 3y ago
      If you're putting 80% down in the US, I'd suggest the thought process is wrong. With good credit on a good property, 95% LTV isn't uncommon. Looking at residential property as a forever home is wrong. You're buying an asset, that happens to also let you not pay rent. Consequently, you want (1) value stability (see earlier qualities) and (2) leverage (as you get to keep all the profits and offset the interest). 80% LTV = 5x leverage of down-payment 95% LTV = 20x leverage of down-payment Given that your net rate of return should also be against your down-payment, shrinking that substantially boosts effective return at time of sale.
threetonesun 3y ago
The current rate is pretty close to the median rate for the last 50 years. My suspicion is we'll soon see the great Boomer sell-off as they try to get out at the top of the market, many of my friends (millennials and GenX) share the same stories of trying to get their aging parents out of mostly empty SFHs.
- hiatus 3y ago
  > share the same stories of trying to get their aging parents out of mostly empty SFHs. Where are they moving to? My aging parents do not want to go to a condo or apartment, they have gotten used to living alone and don't want to deal with neighbors stomping on the floor above them, for instance.
  - francisofascii 3y ago
    Many people go to Florida. Eventually you kinda of have to go to assisted living, right?
    - hiatus 3y ago
      Not everyone does. My grandmother died in her own home, with an aid coming to assist with daily caretaking. Though having taken care of a dying relative myself, it weighs on you and I'm really not sure if I could do it again.
no_wizard 3y ago
>Now is probably not the right time to buy because interest rates are at the highest levels in recent memory. Nobody in their right mind is selling right now unless they are being forced to out of financial desperation. It sure would be nice if selling out of financial desperation meant lower housing prices. This sure isn't the case though, even today. That would make the case for higher cash to loan ratios. People still bought houses in the early 1980s when rates were dramatically higher than today. First and foremost shouldn't housing be seen as a public need vs a profitable asset anyway? This sort of thinking is what leads to so many average Americans becoming obsessed with home values. I don't think real estate as asset squares well with we need real estate to live adequate lives, but I digress