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The interest rate is hurting everyone who can't buy houses with cash. High interest rates have also helped crash the real estate market, so even if you just own

by bbqfog 2y ago

The interest rate is hurting everyone who can't buy houses with cash. High interest rates have also helped crash the real estate market, so even if you just own a home, you've taken a bath since the high interest policy has been implemented.

kelnos 2y ago
To be fair, the real estate market in the US has always been super distorted (mostly due to the existence and availability of the 30-year fixed-rate mortgage itself), and encourages people to do stupid things. People should not consider their primary residence to be an investment; in truth it should be an expense and a liability. But the expectation here (fueled by market-distorting policy) is that home values always go up, and that homeowners can expect to sell their house in some amount of years at a profit. As houses get older, their value should decrease. Even large-scale renovations often should not push the value up quite as much as one would hope. Certainly the value of land can go up, based on housing/zoning policy, coupled with supply and demand in a particular area. At any rate, most things are temporary. Interest rates are headed downward again, and the Fed expects to make more cuts. Presumably we won't get back down to zero, but that's probably a good thing. Also let's consider history: interest rates are still objectively not all that high right now. They're on par with or lower than what rates were in much of the 90s, and even some of the 00s. It's only the 10s that saw zero rates. And hell, go back to the 80s and prior, and the current rate situation looks delightfully low. > High interest rates have also helped crash the real estate market, so even if you just own a home, you've taken a bath since the high interest policy has been implemented. A note on this: so what? What matters is the cost of comparable housing. If my house has lost 25% of its value, it stands to reason that similar houses in similarly-desirable locations will have lost a similar amount, and still be affordable for me if I wanted to sell my house and move. But again we run into the problems caused by the 30-year fixed-rate mortgage! Anyone who has bought a house with a mortgage recently enough, at a price high enough, might be in a situation where they can't move because they won't be able to sell their current house at a high enough price in order to pay off their mortgage (and still have enough of a down payment for their next house). This is a problem we've created for ourselves, and it's super annoying.
- zeroonetwothree 2y ago
  House values do decrease over time. It’s the land value that increases. For example my house has decreased $100k in value since I bought it (many years ago) but the land has increased around $700k in the same time.
  - forgetfreeman 2y ago
    Weird. All of my property doubled on structure value in the last 5 years. Acreage value has barely blipped up.
    - bpt3 2y ago
      A well-maintained structure will also increase in value because the cost of material to replace it increases over time. It should track inflation pretty closely, but that's not always the case. It also sounds like you're basing your statement on your tax assessment, which implies that your tax assessor has correctly allocated the value increase to the appropriate category. That has not been the case very frequently in my personal experience.
      - forgetfreeman 2y ago
        Nah, I'm basing it on market value of comparable properties in the area. I am deeply grateful that nothing's been re-assessed yet.
        svachalek 2y ago
        So you're comparing the price of developed housing to farmland? That's not what people mean when comparing the price of land to improvements.
        forgetfreeman 2y ago
        No, I'm not doing that either. I watch lot prices pretty closely in the same areas I own property. Lot pricing (acreage) in this market didn't move much during or since the pandemic. Meanwhile 1000sq ft single family homes built in the 60s and in desperate need of restoration are currently selling in the 180k-250k range, whereas pre-pandemic I could buy as many as I could handle for less than a hundred grand a pop. Meanwhile the cost of a quarter acre building lot has nudged upwards maybe 10%. I'm guessing something about this strikes you as weird, thus the assumption that I don't know what I'm about? I don't have a cogent explanation to offer you for the vagaries of local real estate prices, I'm just reporting the facts on the ground.
listenallyall 2y ago
...and yet, the currently "high" interest rates are lower than the average in the 2000's (2000-2009), 1990's, 1980's (much, much lower) and 1970's. There is a proclivity to wash over a lot of the difficulties, constraints, and "norms" of earlier generations and making the current economic times seem so much worse. Things like living with multiple roommates (2-4) in your 20's is MUCH rarer today, as is sharing a bedroom with a sibling. Vacationing frugally at a nearby lake, not some international expedition. Packing a box lunch. I agree that by many measures, times are tough, but also, the base expectation level has definitely increased dramatically.

by bbqfog 2y ago

kelnos 2y ago

To be fair, the real estate market in the US has always been super distorted (mostly due to the existence and availability of the 30-year fixed-rate mortgage itself), and encourages people to do stupid things. People should not consider their primary residence to be an investment; in truth it should be an expense and a liability. But the expectation here (fueled by market-distorting policy) is that home values always go up, and that homeowners can expect to sell their house in some amount of years at a profit. As houses get older, their value should decrease. Even large-scale renovations often should not push the value up quite as much as one would hope. Certainly the value of land can go up, based on housing/zoning policy, coupled with supply and demand in a particular area. At any rate, most things are temporary. Interest rates are headed downward again, and the Fed expects to make more cuts. Presumably we won't get back down to zero, but that's probably a good thing. Also let's consider history: interest rates are still objectively not all that high right now. They're on par with or lower than what rates were in much of the 90s, and even some of the 00s. It's only the 10s that saw zero rates. And hell, go back to the 80s and prior, and the current rate situation looks delightfully low. > High interest rates have also helped crash the real estate market, so even if you just own a home, you've taken a bath since the high interest policy has been implemented. A note on this: so what? What matters is the cost of comparable housing. If my house has lost 25% of its value, it stands to reason that similar houses in similarly-desirable locations will have lost a similar amount, and still be affordable for me if I wanted to sell my house and move. But again we run into the problems caused by the 30-year fixed-rate mortgage! Anyone who has bought a house with a mortgage recently enough, at a price high enough, might be in a situation where they can't move because they won't be able to sell their current house at a high enough price in order to pay off their mortgage (and still have enough of a down payment for their next house). This is a problem we've created for ourselves, and it's super annoying.

zeroonetwothree 2y ago
House values do decrease over time. It’s the land value that increases. For example my house has decreased $100k in value since I bought it (many years ago) but the land has increased around $700k in the same time.
- forgetfreeman 2y ago
  Weird. All of my property doubled on structure value in the last 5 years. Acreage value has barely blipped up.
  - bpt3 2y ago
    A well-maintained structure will also increase in value because the cost of material to replace it increases over time. It should track inflation pretty closely, but that's not always the case. It also sounds like you're basing your statement on your tax assessment, which implies that your tax assessor has correctly allocated the value increase to the appropriate category. That has not been the case very frequently in my personal experience.
    - forgetfreeman 2y ago
      Nah, I'm basing it on market value of comparable properties in the area. I am deeply grateful that nothing's been re-assessed yet.
      - svachalek 2y ago
        So you're comparing the price of developed housing to farmland? That's not what people mean when comparing the price of land to improvements.
        forgetfreeman 2y ago
        No, I'm not doing that either. I watch lot prices pretty closely in the same areas I own property. Lot pricing (acreage) in this market didn't move much during or since the pandemic. Meanwhile 1000sq ft single family homes built in the 60s and in desperate need of restoration are currently selling in the 180k-250k range, whereas pre-pandemic I could buy as many as I could handle for less than a hundred grand a pop. Meanwhile the cost of a quarter acre building lot has nudged upwards maybe 10%. I'm guessing something about this strikes you as weird, thus the assumption that I don't know what I'm about? I don't have a cogent explanation to offer you for the vagaries of local real estate prices, I'm just reporting the facts on the ground.

listenallyall 2y ago

...and yet, the currently "high" interest rates are lower than the average in the 2000's (2000-2009), 1990's, 1980's (much, much lower) and 1970's. There is a proclivity to wash over a lot of the difficulties, constraints, and "norms" of earlier generations and making the current economic times seem so much worse. Things like living with multiple roommates (2-4) in your 20's is MUCH rarer today, as is sharing a bedroom with a sibling. Vacationing frugally at a nearby lake, not some international expedition. Packing a box lunch. I agree that by many measures, times are tough, but also, the base expectation level has definitely increased dramatically.