Housing market predictions
Wife and I are going through the home buying process in what most people would call a low cost of living area. For reference, homes are about 180-400k where I live in New York State.
I heard the horror stories but I had no idea how bad the issue is. I'll get to that in a minute.
I am curious what's going to happen with housing. Because on one hand, it seems like it's going to continue to rise until there is genuinely no such thing as middle-class home ownership. On the other hand, I see some troubling signs that remind me of a bubble.
The housing market will continue to be unaffordable
-I keep hearing that it's a supply issue. That we need to double the number of houses for things to get better. I also hear this isn't happening and that immigration is a factor. Sounds like a dog whistle but I'm curious if there is any truth to this.
-Other developed nations are worse. Many have 40-50 year mortgages and some countries even have multi-generational mortgages. This shows that it could get worse.
-Companies and wealthy individuals trying to make us all rent forever. Of course they would like nothing more and they'll probably keep working on this.
The current market is not sustainable
-There is a feeding frenzy on every single home that goes for sale in my area. Total shit boxes with sagging roofs are selling no problem and way above asking.
-The bank approved my wife and I for way too much money. We have student loans and daycare costs. The amount they approved us for would absolutely put us in the negatives every month. I thought that wasn't supposed to happen anymore. It feels strange and reckless for the banks to do that. For reference, we make about 100k/year combined but student loans and childcare take up a significant chunk of that. They approved us for $300k to get a home. We could get a $2400/mo* mortgage, which immediately wipes out 50% of our take-home pay. We ran a budget and even avoiding any purchases that aren't literal necessities, we would be running a deficit every month. We could never buy a shirt, a baby toy, a makeup product, a movie ticket, or even a pair of shoes and we would still be in the negative. Nevermind what would happen if one of our very modest, very used vehicles needed to be replaced or repaired. Obviously we didn't bid anything near 300k on any home. Wife's mom offered to front some inheritance money (give my wife some money now and then just leave the inheritance to her sister to make up for it) and we weren't even close still.
-When did a married nurse and teacher become completely priced out of the market? Is that a sign of a normal and healthy market? Now, to be fair, my wife could increase her salary if she wanted to go back to working in the emergency room. She doesn't want to do that while we have a baby at home and I understand that completely. But you would think we would be able to afford something.
I am clearly speaking from a position of relative privilege here. I recognize that. I grew up in a foreclosed and auctioned home that was old and small. My parents moved to an economically depressed town to get that house because they had no money and no help. There was no "borrowing a few grand from an inheritance" for them and if my wife wasn't in the picture that would never be an option for me either. I think my wife and I are doing a lot better than many other people in this area. What are couples who work at Amazon doing? Just saying fuck it and renting forever?
Anyway, I'm half venting and half asking. What is the actual endgame here for Americans? What happens next?
According to Marx the proletariat will rise up and overthrow the bourgeoisie to install a socialist state that will benefit everyone, not just a few.
I think while that sounds pretty great, it's unlikely. It's hard to revolt when you're worried about where your next meal is coming from or you're exhausted from a 12hr shift. So realistically, things will just gradually suck more and more for the non-rich, and there will be gradually more and more people in that class as wealth concentrates in fewer and fewer hands, as wealth likes to do - until the climate wars really kick off and we usher in the future that Mad Max predicted. I am a little unsure exactly when we're supposed to start wearing the BDSM gear in that future. It would be pretty embarrassing to go too early on that one.
This is the perfect amount of grim and hilarious.
Well we did have our opportunity to switch to gas masks full time and we blew it.....
This works to the point until the next meal isn't coming then you don't even have that to loose.
So I guess it's at the point of cutting back until it fails then put a bit more work in an hold.
"Don't time the market."
Determine the kind of property that you like, then save up and look all around and relocate if you have to.
Definitely! And that's what we're doing. This isn't a "time the market" post but more of a "what the hell is happening?" post. But we can't really relocate. I'm a tenured teacher and unfortunately I would be giving up a lot of earned and future benefits by relocating.
I do okay for a young teacher, healthcare is great, and I'm working on increasing my salary by earning 30 more credits on top of my masters. I'm also on my way to a longevity bump. None of this would transfer at a new school.
Most teachers will tell you that schools trap you. Which is okay because I love my district. But yeah I would lose a lot by relocating and you don't get it back at a new school.
As a future public school teacher I can't wait to be trapped. I've worked in private school.daycare the last 15 years and am chomping at the bit to get on all the benefits public school employment offers over private. I live in a nice area, and plan to continue living here the rest of my life (blue state, decent QOL, lots of nature and open space for my family to enjoy, etc).
But yeah, the cost of living is only going to get worse. My wife wants to move to a nicer house, but like you we're on a combined income of about $100k right now, and even if we bumped that to $120k over the next 5 years I don't think it'll allow us to move to a larger house. We were lucky and got our home cheap in 2018. It's doubled in price already.
Good luck with your future in public education!!! For me at least, the healthcare is phenomenal and the (perhaps meager) pension is definitely a wonderful help for the future. My advice to you is to join the union immediately and obviously get tenure. If your district offers Master's +30 pay bumps, do it ASAP. I will get a raise when I finish my 30 credits and it will factor into my raises every single year from now on. I am doing my credits as fast as possible and it should take me about a year total. Over the next 30 years of my career I will make, at bare minimum, $90k more than someone who didn't take the classes. That doesn't account for my yearly raises being higher due to the bump. I think over the lifetime of my career it ends up being 120k more than someone who doesn't take them.
I feel your pain. I’m a teacher, and my husband makes about what I do. We don’t have kids though, and for a while, “Double Income; No Kids” was the “dream” — it meant you were living life on Easy Street!
After renting and saving for years, we bought a house in 2018. We had to buy at the absolute top of our price range. Everything below that was outright junk or needed tens of thousands of dollars of absolutely necessary repair. We didn’t have those thousands, of course, because all of our savings was going towards our down payment.
Now, only six years later in 2024, our home value (according to Zillow) has risen an astounding 60% since we bought it. Seemingly every person I talk to that’s older than me thinks this is excellent and is excited for us that we’ve gained so much wealth! Meanwhile every person I talk to that’s my age or younger thinks this is absurd and indicative of a huge problem (myself included). Our home was barely worth what we paid for it but we had to do that to beat other offers. It is absolutely not worth its current estimate.
It’s also worth noting that we’re not in a mansion or anything. Our house is old and only a touch over 1,000 square feet.
We would 100% not be able to afford our current house if we were to buy it right now. We wouldn’t be able to live in the same neighborhood — possibly even the same city. Continuing to rent would barely be an option for us either. We bought a house when we did because rents were rising so sharply that it was cheaper to have a mortgage (and again, this was before things went absolutely off the rails there too).
When my husband and I graduated college, “Double Income; No Kids” meant effortless ease in life. A decade later, when we got our home, it changed to mean “lucky to get a modest house.” Now there’s not even the guarantee of housing. The standards have shifted rapidly and quite dramatically.
Also, that’s looking at the best case scenario! Add in a kid/kids and the cost of daycare (which, I’m sure you well know, is like paying a mortgage on its own) and it’s clear that something is very deeply wrong.
I realize I’m mostly complaining and being a downer, but hopefully this is coming across as commiseration. You and your wife deserve better, and it’s both ridiculous and frustrating to me that public servants like us get the short and very expensive end of the stick. I’m sorry, and I wish things were better for you and your family.
Same boat here.
Older folks: "wow what a great investment, congrats!"
Millenials: "wow that's fucked"
Like I'm happy that we got lucky, but I think it's ridiculous that I wouldn't be able to afford my own house if it came onto the market today.
This is the best take on the generational difference that I've seen yet.
I have had several boomers and X-ers tell us how great it is that our condo gained 50k in equity. All I feel is heartbreak for the people who were just a couple years behind me on buying their first piece-of-shit starter condo. Single-family homes feel totally out of reach for us and yet we're still better off than the younger folks who are feeling that less-than-single-family condos are out of reach for them.
Yeah, it's fucked up. This condo has gotten shittier since we moved in. It shoudn't cost 50k more.
We closed on our house in March of 2020, right as the world was about to collapse. Started the house-buying process December/January just before covid became a household word. I remember going to open-houses and thinking "hmmm should I be shaking these people's hands?" I'll never forget the feeling of going into the closing and thinking "fuck fuck fuck fuck fuck what am I doing, I am about to lock myself into hundreds of thousands of dollars of debt right as the world plunges into chaos". Never in my wildest dreams could have imagined that the house would almost double in value within 2 years.
It's completely arbitrary. The house is basically the same, hell it's technically worse now since the roof and all appliances are a few years older than they were when we bought it. I'm not smarter or better or more successful than anyone else just because I lucked into purchasing a house at the EXACT right time to ride the wave. No amount of saving or frugality over that time period would have gotten me even close to what I would need to buy this house today. And that's fucked.
This was said in a different context about programming, but it’s also true for prices. How people value a thing is largely based on the thing’s context, not the thing itself. For anything durable like a house, that context includes people’s guesses about the world’s future. But we don’t know the future and it’s out of our control.
True. The only thing Ive always said about investing in real estate here in the cold and frosty north of Canada is that its that housing is not an option. You can survive in Hawaii in a tent, and maybe half the US States. But at -42c last winter, no one was surviving without secure, warm shelter. So in my view, there's no safer bet than owning an absolute necessity. You can survive a winter without Apple stock, not so without shelter.
I could have written much of your post about paying for a totally not worthwhile house and then seeing the price go bananas thereafter.
Time: 2015 October
Location: one hour (as the ambulance drives) outside of Toronto, very undesirable part of the city where the cops frankly told me NO DO NOT LIVE HERE with your child. Note, we did not experience any crime in 5 years there, aside from stolen flower pot once, probably drunk teens. Very highly visible poverty and quite visible drug use.
Numbers for reference: purchased 100+ year old house that needed immediate electrical, and soonish new roof. $200k. In 5 years sold for $400k. Current market prices around $500k, 600k if new kitchen installed and if basement finished.
I should re-stress that at no point in time should this house and this neighborhood be worth $200k we paid. But our then mortgage payments were $711 a month, whereas the cheapest possible rent for far smaller apartment units in even scarier parts of Toronto were minimum $2500/month.
Edit:
Epilogue: we "cashed out" and are now living in an even lower cost of living area in Rural Atlantic Canada: a have not community in a have not province in the have not region.
The only advice aside from "get a time machine" or "have rich parents", is to go even lower cost and standard of living. Don't fear the poverty stricken neighborhoods, try to have careers that allow for flexibility to living locations. With the money you save, you can afford visiting huge cities and do rich people things with your child for their enrichment a few times a year.
It's insane. I would absolutely be up for an initiative to build extra housing on my land for young people to just live and get their footing, with no profits to myself whatsoever, if I knew how to build a house.
As a Calgarians, we just went from the place where most of the country didn't want to live because of the politics to the fastest growing city in the fastest growing province in Canada.
CBC did a great write up - they track the population growth, where people are coming from and what it's doing to the city.
Here's a good article on why the supply and demand signals never line up for housing: We Need to Keep Building Houses, Even if No One Wants to Buy
As far as what you are approved for, most lenders look at a total debt to income ratio of no more than 35-40% of gross income. Their risk is hedged because the loan is backed with collateral, which they vet much more thoroughly at the underwriting stage, which happens after you get an offer accepted. Things like the condition of the home, how much you were approved for, etc, will go into a final decision.
But yeah, it's tough. And there are many other factors, such as developers being incentivized to build more expensive homes rather than the traditional starter homes. Counties and municipalities could regulate that better by simply requiring a certain number of units per acre in certain zones. They could also offer tax incentives to develop affordable housing, or even invest in development themselves, but that means costs up front and less revenue in the future from property taxes. And most of them kowtow to existing home owners who want to see value keep going up, which is slowed by large amounts of new affordable housing.
Bear of luck!
I'm a system administrator for mortgage company, so I see a lot of how it (hypothetically) operates. I'm not a loan officer, but the basics of how a person qualifies for a loan are a combination of the following factors:
Those variables, among a vast number of others, go into calculating your risk as a borrower and therefore your rate (or whether you qualify at all). A lot of lenders are going to heavily lean on Automated Underwriting Systems (AUS) like Fannie Mae's Desktop Underwriter or Freddie Mac's Loan Product Advisor. But there are still human underwriters in the mix.
@Wolf_359, if you are a first-time homebuyer, you might take a look at what down payment assistance (DPA) programs are available where you live or want to live. A good loan officer should already know about these and suggest them to you, but not all loan officers are very good. (Ultimately, they're salespeople, and a lot of salespeople are idiots.) However, since they are paid entirely on commission, they really want you to qualify for a loan, especially right now when the market is so, so bad, so you shouldn't even have to bring stuff like this up.
One other thing to take in consideration is that loan officers will give you a prequalification letter that is often referred to as a preapproval letter. However, as far as regulatory agencies are concerned (especially when it comes to the HMDA regulation), a loan officer's prequalification letter is not the same as a preapproval letter from a lender that has had an actual underwriter underwrite your credit. The distinction doesn't mean a lot, but it is technically there. And it's why you can have a "preapproval letter" from a loan officer and still get denied by an underwriter.
If anyone has questions about the mortgage process from an insider of sorts, I would be happy to answer them.
EDIT: I totally forgot a bunch of stuff. Like, for example, the importance of having a good appraisal. Or income/employment verification.
Wow, thanks! Great to get insight from someone involved in the job.
We own a condo and we, perhaps stupidly, bought it together with both of our names on the loan. Do you suspect we will therefore not qualify for any DPA programs? I had never heard of them before.
Also, how are you feeling about the state of the housing market? It seems like some people in this thread are kind of downplaying the struggle while others are in total agreement that it's a bloodbath out there. What are your feelings?
If you own a condo, I suspect you would not qualify for first-time homebuyer DPA programs. But I'm not sure. Certainly something to ask your loan officer.
Oh, it's fucking horrible. Layoffs everywhere. Refinances have basically evaporated (and they were super hot during the pandemic). As I understand it, smaller mortgage companies are dying off left and right. Loan officers who used to be big time producers are barely scraping by. I have to imagine that a lot of the smaller-producing loan officers are involuntarily getting out of the business altogether. And the National Association of Realtors (NAR) settlement is hitting the realtor side hard, too. (At smaller lenders like mine, referrals from realtors are a huge source of business for loan officers and therefore our company.) So it's just bad all around.
My wife used to be a loan processor and got laid off in January 2023 because of this. She's had to move out of the industry altogether. (Which is honestly for the best for us in the long term — putting all of our eggs into one basket was not wise anyway.) I don't know how representative my company is of all of the other smaller lenders out there, but every department has been eviscerated. Processors, underwriters, closers, shippers, post closers, the secondary department, appraisers… Everyone is hurting.
In the long run, I'm not terribly optimistic about the industry I have fallen into. I used to work in compliance and now am the system administrator for our mortgage software. I've been at this company for over 10 years and it's scarily quiet. We keep hoping rates will come down but they just never seem to. At least not enough.
In the long run, I'm sure this will work like every other sector of the economy — the biggest players will gobble up all of the smaller ones, to the detriment of consumers and competition. On top of that, the GSEs (Fannie Mae and Freddie Mac) are certainly pushing towards more automation — more robust automated underwriting, "collateral underwriting" that obviates appraisals or, at the very least, the human review of them. I know that they are aiming to eventually automate processors and underwriters out of existence. I can't imagine that the other back office people will last much longer. I suspect that the mortgage industry of 2040 is going to look virtually unrecognizable from the one that existed in 2015. And it will involve a lot fewer people.
Outside my company, I have to imagine that title/escrow companies are hurting badly, too. But at least they still get business from cash buyers, I suppose.
Having said all that, I can't help but recognize that there are a lot of parasites that have latched on to the real estate industry. From realtors, to lenders, to title companies… There are a lot of people with their fingers in the pie. The NAR settlement might help reduce some of the unnecessary costs that buyers encounter because, let's face it, in 2024, realtors don't do nearly enough to justify their enormous commissions.
Companies like Rocket Mortgage are also putting market pressure on smaller lenders like mine which focus a lot on the human touch. If people don't want or care about that anymore, what use are loan officers? I'm sure it won't be long before an AI can be trained to evaluate a borrower's qualification factors and present them with all of the potential program options that might be available to them. What rate do you want? Do you want to buy down that rate? Would you prefer a higher rate and lower closing costs? Hypothetically, a loan officer helps you with that, but as the financial crisis showed, they don't automatically have a fiduciary obligation to guide you towards the best product for you. And there are so many program options out there that I'm sure loan officers unintentionally miss things all of the time that might be to the benefit of their borrowers.
So, yeah, in short, I would say "bloodbath" is an apt description of what things have looked like since the pandemic-fueled refi boom collapsed and rates shot up. If I'm still in this industry in 10 years, it might be a miracle. (And I have no idea what else I would be doing instead. My manager thinks I would be a good system administrator for any other type of software like the one I work on now. But what are LLM AIs going to do to jobs like that?)
Sorry, that was kind of rambly. But there's a lot going on in this industry… None of it good. Not for us and not for borrowers, either. If it was up to the mortgage industry, there would be affordable homes everywhere and rates would be super low again. But with the low supply and affordability crisis and the Fed keeping rates high, that's not happening anytime soon.
Thanks! I know my post shows my ignorance when it comes to finances and housing, but I'm still totally shocked at what they approved us for. Seriously, we going deeper into debt every single month at that price. It's like the banks are assuming people will walk to work naked and survive on nothing but rice and water. My wife and I live well within our means as far as what we purchase but we still could never make it work if we bought a 300k house. Not even close.
The bank isn’t your financial advisors. Their responsibility is to themselves, to not offer so much money that they’d lose a lot if they had the repo the house. Otherwise, if you want a loan, they’ll give it to you. What size of loan you can afford is your decision.
Ding ding ding! The amount they're willing to lend someone is more correlated with their financial risk tolerance and how much they expect to reap back in projected house value, over the dead bodies of the young crushed under this debt.
Well, it depends on exactly where you're getting your loan from, but the incentives are different for which player in the game we're talking about.
Upfront, the loan officer, who is paid on commission, wants you to get the biggest loan you can possibly qualify for. Their commission will cap out at some point, but in general, they are paid more if your loan amount is higher. (This also makes their referral partners happy, since realtors are also paid more on higher purchase prices.)
Next, a lot of lenders are not servicers — we would say they do not "portfolio" their loans. Thus, after you are approved and the loan funds, the lender want to sell that loan on the secondary market to a servicer (what we call "an investor"). Again, higher loan amounts are better, but they also want a loan that is capable of withstanding an investor's scrutiny. The last thing a small lender wants is what we call a "buyback," which is where the intended investor forces the original lender to buy the loan back because of some sort of defect (e.g., signatures missed on some form, some number that was calculated wrong).
And then the servicer makes money based on you making your payments. The last thing they want is for you to have an early payoff (EPO). If you sell the house or refinance to a different lender/servicer, they aren't going to make any more money from your payments. The servicer bought the loan on the expectation that they were going to be able to make money from you making those payments.
The absolute last thing anyone wants is for you to not make your payments and for them to foreclose on the house. Foreclosed homes don't sell well and usually have a myriad of problems, often caused by vandalism from the bankrupted former owners. Because the bank is trying to get out of the house as fast as possible while also spending as little as possible, they will do little to nothing to make any repairs and they aren't going to be very accommodating for a potential buyer. Realistically, this is something the bank wants to avoid — they are a servicer not a real estate company. Selling foreclosed homes is not typically what they make money on.
In all of this isn't even touching how investors use the loans that are being serviced as part of collateralized debt obligations (CDOs), made famous by the financial crisis. These also lose value if too many of the constituent loans go into default. But I don't really know a lot about that, just that they are instrumental in getting investors to want to buy loans in the first place. (Or, to look at the bigger players in the mortgage industry, the banks that do portfolio their own loans, why loans are made at all.)
Everyone also wants to avoid getting fined by regulators. Whether that's the CFPB, HUD, state auditors, or what have you, they are a big presence in the mortgage industry (for obvious reasons).
Having said all of that, there are certainly bad actors everywhere. And right now the mortgage market sucks, which incentivizes more shenanigans. Fortunately, after the financial crisis, there's a lot less that lenders can get away with, but one look at mortgage industry news will show you how often companies are still paying big fines for doing shit they aren't supposed to.
Agreed! That's why we responsibly decided to take significantly less into our home search. I'm just surprised that irresponsible people are even eligible for that much.
They're expecting people to always always always pay into their house debt, at the expense of credit card and other debt. They expect magic grandparents instead of childcare, and they expect magic inheritance instead of regular income.
They expect to re-coup at a huge profit from forced sales on those who can't make it work and go bankrupt.My understanding is that banks nearly always lose out when a house is foreclosed on.
Oh! (Quick search) They do, actually, you're right. I will amend my comment. Thank you :)
I just haven't lived in a location and period of time when distressed homeowners couldn't just sell at a personal loss quickly in order to fully pay the bank off. I hadn't thought about it before and I appreciate your giving me the opportunity to look this up.
I feel you, as a single guy I feel even more hopeless since I don't even have the hopes of a duel income scenario to help ease the burden of home ownership. Honestly starting to think about looking for a "marriage for tax purposes" kind of situation.
My wife and I went to the courthouse and got married on a whim one day because we did the math on what she was paying in health insurance versus what we could save by putting her on mine.
We had been dating a long time and knew we would get married anyway. We just didn't know that our wedding would be done in the local courthouse with $1.00 rings from Goodwill that we picked up on the way there.
Our families were pissed! But every time we go to one of our friends' weddings and see the $20-$40k they're spending on a single afternoon, we feel pretty goddamn good about our decision.
Sorry my friend. Do you have student loans by the way? Because getting married can totally screw you on loans if you don't do it right! Keep it in mind for later.
I'm actually debt free luckily, I only went to community college and got a decent trust and safety job off of my experience moderating online communities. 5 years ago I'd be able to afford the house of my dreams, today I probably can't even afford a townhouse.
Your marriage story echos mine, though we had only been dating 3ish years. Except we splurged and went to Vegas to get married by Elvis and got some cheap titanium rings that we never wear anymore because we hate jewlery on our fingers. We spent $1500 on our wedding, half of that in gambling money. I had friends spend almost that much on a terrible-tasting cake.
Been married 14 years now, 2 kids. Highly reccomend getting married for the insurance.
Wedding parties can be fun...but not really that much more when you factor the cost against a backyard BBQ.
Yeah, I didn't expect my family to be as mad as they did that I just went and got married one day. Where I lived, notaries can marry people and the city library offered free notary services. Bonus points was the notary we got looked like Santa Claus. The only cost I had to pay was for the marriage license. All in, was like $200. Instead of spending all the usual money (and time), we ended up getting a mortgage for a house later that year.
:D great job! Seeing your frugal wedding story and esp the $1 rings fills me with a strong sense of satisfaction and hope for the younger generation.
Wanna get married? I'm a single guy as well and I've definitely thought about this. Because otherwise, I'll probably never own my own place. I'm not even looking for a detached SFH; a small 2bdr/1ba condo or townhouse would do.
I got a job offer recently which almost doubles my income! Unfortunately, it's on the coast (I'm in the Midwest) and I have to move, and it looks like my housing costs are going to double, maybe even triple. Joy.
Yeah, this market is especially rough for first-time homebuyers who have no equity from a previous home to help reduce their mortgage obligations. In my area, the market has calmed down though. The house behind me was bought and flipped by Opendoor, but it has sat for sale for almost 2 months now and they've dropped the price 3x according to Zillow. There is also lot of new residential construction in my area, so supply is certainly helping.
However, even if there are corrections, I don't think that housing pricing will ever go back to what it was. Construction labor and materials cost both rose significantly over the past 5 years. Materials have fallen quite a bit from their peak, but like everything else affected by inflation, they'll never go back to what they were. This, and potentially the availability of land in your area, will likely continue to constrain supply.
Banks have always offered to lend more money than one should really be spending on housing. I'm not 100% sure of this, but I don't think that childcare costs are counted in your DTI ratio which is what gets used for mortgage approval calculations.
You're fortunate that you live where you do, because $300k wouldn't even get you a townhouse here anymore, which is crazy because I bought my 3200sqft house for $360k in 2017.
Childcare costs are not calculated in DTI. We learned that during this process.
Pretty crazy if you think about it because that's the one thing people would never ever forego. My kid has to eat even if it means I can't. He has to be watched so I can work. Like, there is no amount of debt or suffering I wouldn't endure to meet his basic needs. And yet it's the one thing they don't take into account. Very interesting!
Another little bit of privilege I didn't mention is that we actually do own a little condo/townhouse currently. We bought it just before COVID and the value has obviously increased. We bought this place for a mere 80k and it's already worth 130 (at least). We could probably get more because we've had several private offers at 130. It needs a lot of work but I seriously wouldn't be surprised if we could list it and get 150 or 160.
We would stay here but it's very, very small and we don't fit now with the kid. It's becoming unmanageable and we're going to have to start paying for storage just to squeeze in another box of diapers, haha.
That's a rather relevant detail to omit, my friend. I wouldn't call it privilege - I think that's really diluting the meaning of the word. But I do think it weakens your argument that starter homes are now unobtainable for the middle class.
Well, perhaps. But we bought it before COVID and it was pretty easy to get. Now they are selling in days and mostly to cash buyers way above asking.
It's great if these condos are only 130k now, except it doesn't help if the offers being accepted are all cash, no inspection, and the sellers are getting 20-30 offers each. That's not exactly great for people getting a starter home.
Wife and I already agreed we weren't going to sell our condo to a landlord or company if we could help it, even if it meant a cash offer.
Edit: I also would clarify that this condo is much more in the style of an apartment. And it needs a lot of necessary work. I'm not complaining about four walls and a roof, but I'm just thinking that it's insane how my condo would be unobtainable post-covid for a young couple with careers. This condo was our "financially conservative and living within our means" decision before covid. Now it's straight up expensive for this area. The 50k in equity doesn't help us much because the house prices have gone up just as much. It sure does put us in a better spot than someone who has been renting though, and that's kind of my point. Even we are struggling, so what are they doing?
I wouldn't discount the much higher cash offers just out of the kindness of your hearts.
We once sold at a massive discount to some [redacted] with a sob story, about how hes going to do so much good for the community and blah blah blah, only for him to turn around and flip it immediately. It could be true that he looked at the profits and conclude he can do greater good with it than without, but our good intentions became a reason for him to lie in the end.
If you could afford to lose out a little for a small family that's really great, but don't beat yourselves up too much over if it if you'll stand to be generous in other ways. That little family might be motivated to sell to a company if there's too much of a discrepancy.
Good point. I guess that's worth thinking about. Though, if a family with a child was offering 10k less, I think we would have to very seriously consider that it's worth attempting to do the right thing.
I'm extremely against corporate ownership of homes. I've heard all the free market arguments and many people have tried to spin it as a good thing - I genuinely don't see how it can be a good thing. I think it's greed at the highest level imaginable.
I've recently come to the firmer believe that financial freedom makes me a more generous person. If I don't really need the extra ten, I hope I would be as generous as yourselves and do the right thing too :) good for both of you and what a blessing to be on the same page together on such a good thing!
I hope you guys will absolutely be able to help a small family just starting out, and may your kindness be reward seventy fold.
I wanted to respond again to your comment because something was gnawing at me.
I don't want to seem argumentative because that's not where this comment is coming from at all. Genuinely, it was just something my heart was telling me to share.
I said owning the condo was a privilege because I think my entire life is very privileged right now. My mother-in-law helped us with a used vehicle a few years back, we had help getting a dishwasher, and we bought this condo for cheap just before the market totally surged and gave us a free 50k in equity.
A decade ago I was addicted to opiates and painting houses to get high while racking up credit card debt. I was desperately sick and mentally ill from the drugs. I got government assistance to go to rehab.
A decade before that I was living with my brothers and single mom in an old house in an old town. My grandma helped my mom a ton in those days so she could make it work.
A decade before that, I was born into a foreclosed and auctioned home (a genuine shit box) to a drug-addicted father who would later be totally absent from my life. We were so, so poor. My grandma provided free childcare so my mom could get job training and make it work. She eventually left my dad and we moved into a rental home.
My adult life after rehab has been nothing but second chances and me getting things I don't deserve - at least not more than any other person who is currently worse off than I am. I have an amazing job and an amazing family. But I didn't get it through sheer hard work or intelligence. So much of it was people helping out, programs that helped me or my family, and dumb luck.
There are people out there who never used drugs, never wronged anyone, and made far smarter choices with far less help than we ever got, and many of them are struggling much worse than us. I'll be honest, while teaching has some major problems, this job is higher paying and much easier than any other job I had before. It's funny to me how the highest paying jobs are usually the easiest and most cushy. Because I truly wouldn't go back to painting houses or washing dishes for pretty much any amount of money. Miserable, back-breaking work.
I honestly consider everything in my life right now to be a huge privilege that I have to earn by trying to be grateful and decent.
In general the poorest people work the hardest, no doubt. The job market exploits most people. Anyone that doesn't have power to negotiate is getting exploited.
Completely understood. I think that's a great attitude and I misinterpreted you at first. Generally, when people talk about their privilege on the internet, they're referring to things they were gifted or otherwise don't deserve (see "white privilege"). When I said I wouldn't call owning a condo privilege, I was agreeing with the spirit of your subsequent post - that this is something you've worked for and deserve.
I do sort of view it the same and I think white privilege is a huge part of it. I would be much more likely to have a felony for my drug use I were black. And without the meager (but still real) generational wealth that allowed my wife's mom to help us, I would be in a much worse position. A car payment would for sure exclude us from the housing market right now. And buying a house right now may net us tens of thousands in equity that we can pass to our child someday - maybe. That's a huge privilege. It puts us in a totally different spot than someone whose mom couldn't help with a single used car a few years ago. It multiplies over years and generations.
But anyway, I do see your point. There is some personal responsibility and hard work involved too.
Ahh, yeah totally understandable. I get that they don't include child care costs in that calculation, there are alternatives to daycare for some people such as parents working different shifts so that one is able to stay home or other family members chipping in. Not saying that either of those are options for you, but I'm glad that they don't penalize purchasing power simply for having children.
The equity for your existing residents could help, but if at all possible, it is in your best interest to not be required to use it for your down payment. Otherwise, the sale of your house at a certain price becomes a condition of sale for your new house, which is made clear during the offer. This would make your offer less attractive in the event that you submit an offer while competing with others. It also gives you some breathing room when it comes to payments.
Best of luck to you, and keep your chin up. It's most definitely a tough market out there for everyone, but you seem to be going about it the right way.
OH that's a totally different ball game if you already own, and at such a ridiculously low price tag as well.
My revised advice is to stay exactly where you are and ride it all out. Hang out with folks from Hong Kong Singapore et al, where they house more people in extremely small spaces.
You guys can be mortgage free in a few years if you play your cards right. Being mortgage free and no risk of eviction, job downturns and layoffs etc provides an immense mental health boost.
Admittedly, I grew up in HK where 4 people squeezed into apx 500sq ft. My grandparents place upstairs housed 7 adults in under 667sq ft, so it's normalized.
But yeah..... Debt makes me less generous and more anxious. 80k you can't even buy a new truck at that price today. I would rent a storage unit and continue living there as long as there isn't a clear financial freedom next jump.
I personally am of the opinion that waiting it out here is a poor choice. I think there is more of an upper limit on the max value of this condo. I think housing costs will continue to rise and we are probably better off getting a foot in the door now. Plus, we "need" the space now. I'm tripping over things to move things to get what I need. Kids take up so much space.
I realize this is a very American thing to say. People have been raising mutliple kids in single-room living situations for centuries. I get that.
That's an entirely fair position to take as well, and the decision will ultimately depend upon your risk tolerance, stability/resilience factors, and personal mental fortitude. Most people I know are doing exactly what you're doing, and the past several decades have rewarded them enormously.
Back in 2010, a good friend sold their (then relatively cheap) townhouse, and using that capital bought a single house for 1.2m. They were stretched and the mortgage is huge and long, but it also means their net worth increased significantly. They're however, house poor and cannot afford to take other investment risks or make changes to their lifestyles, with the stess that comes along. However, both are positioned to inherit big time and have emergency parent money, public health care, govt jobs and the house is in one of the most desirable cities in the world.
Different friend tried to sell their small cheap house to buy their dream home. Their small cheap house didn't manage to sell for unfathomable reasons: beautiful house, updates everywhere, professionally staged, gorgeous pictures, fair price, hot neighborhood. As the possession date approached for their huge new house with heavy debt came, their mental health reached an all time low. Their families don't have the deep pockets to see them through and the gap mortgage payments were absolutely killing them. They were forced to sell beneath their absolute minimum. Then some small unfortunate events which cost money also haopened. The switch and the strain cost them so much and put them so deep into the hole that they eventually had to sell, and are now renting at exorbitant prices, unable to buy again.
BUT. Bigger risk bigger reward like you point out.
Another plus side is that by buying a lot of extra space in a desirable part of the world, if things get tight financially you will have the option to rent out extra spaces to keep afloat.
So buying bigger isn't strictly negative: higher risk but much higher reward. Some factors that would gnaw at my extremely risk adverse heart: (1) if I didn't have family wealth that could spot me through an extended unemployment or injury or illness, (2) if my country didn't have non-employment related health care, (3) if the location is a tier 3 or worse city, if the city has negative population growth or is full of dying elderly people or poor employment prospects or otherwise liquidity might be a problem, (4) if the area might be susceptible to a huge, unrecoverable natural disaster.
Having kids must be tough. My girlfriend and I are at about $100k combined gross and can pay $2500/month rent while not living paycheck to paycheck. Maybe you could make a sacrifice on your disposable income for a few years until your kid can go to public school instead of daycare. I also don't know what payment plan you are on for your student loans, but you might be able to lower the monthly payments and push the maturity date further out.
Having kids is absolutely brutal and it's a financially terrible decision - but it's not a decision you make for financial reasons. Daycare is about $250-$300 per week for in-home (which is the cheapest option around here). So yeah, it's at least $1000 per month for a single child. Fortunately I'm off in the summer and we won't need childcare for those weeks.
Nevermind the fact that kids need diapers and formula, toys and clothes, blankets and bedsheets, etc. They're just a money pit. We know we greatly sacrificed in our material quality of life to have a baby and we have more or less accepted that because we love him so much.
My guess is that the rise in housing costs is partially due to mass affluence, rather than concentration of wealth. There are lots of older people who have fewer children, so they can give their kids pretty substantial help.
Combine that with higher construction costs and various other things that make new housing more expensive.
There are other trends that result in higher housing demand too, like more single people who want their own place rather than sharing an apartment.
We just went through this process recently and I'm inclined to say that it will not get better anytime soon. There are two scenarios:
Either way, it's not getting better for the people that have neither cashflow or cash on hand. Theoretically one is supposed to accumulate the cash on hand over time to save up, but with rental prices how they've been that's not going to happen.
I'm surprised to hear you say that they approved you so high, since I felt like I was getting an enthusiastic colonoscopy throughout every second of the mortgage process, and that despite being in a relatively well-off DINK scenario we were skating on the edge of acceptability. I think it probably varies by lender; we used a large national bank and I imagine you get some variance with smaller brokers, credit unions, etc.
The only way we fix this is by doing everything that the market has shunned in recent decades. We need large-scale, multi-unit housing, and not something built to be "luxury condos" or whatever. Just spam densely-built housing in the 1000-sqft range. Not cheap, not shoddy - just not fancy, either.
The problem is that the money required to build "luxury" units is a fairly marginal increase over the money required to build the sort of affordable housing I'm describing, so given the choice any developer would choose to build the more valuable sort of property. This is a scenario where we probably need government incentives to encourage the necessary sort of development.
How are you defining your take-home pay? For these purposes, the bank will look at your income after taxes and insurance. Your retirement savings would be considered part of your take-home pay. In an emergency, you can always pause your 401k savings.
I'm a teacher so I have a pension and a modest 403b.
Because of the housing situation I'm only putting $200 a month into my 403b. It's literally all I can spare and even that really sucks for me every month.
I also put $50 into my kid's savings account every month since I don't want him to go through this later in life. His mom and grandma do the same.
In theory I could free up a few hundred a month but I don't know if pausing retirement money at 30 years old is a smart move. Feels like one of those things you should never do. Pretend the money isn't there kind of thing. Really I should be increasing the amount I put in there but...yeah I don't know how that's possible right now.
Do you make any contributions/withdrawals to the pension?
I agree that it isn't wise to divert retirement savings, especially so early in your career. But the analysis the bank is doing is an emergency analysis. They're asking, if you had a real emergency, would you still be able to pay this mortgage?
Consider if one of you lost your job. What could you do in an emergency? You could probably cut a lot of costs and still make that mortgage, including many costs that would otherwise be necessities. For example, if one of you is out of work, your childcare budget disappears. The parent out of work is a stay-at-home parent until they find new work. Their car? Unless it's paid off, it's sold. And even if it is paid off, you remove it from insurance, lower your premium, and never drive it until you're both working again. Retirement savings? Those are on hold until you're both working again.
This is the kind of analysis your bank is doing when they approve you for a mortgage. They assume that you'll be willing to cut absolutely everything to keep your house.
I guess I'm struggling to see where your take-home pay calculation comes from. You make $100k/year. If $2500/month is half your take-home pay, that means your take-home pay is $60k/month. Payroll and income taxes are not that high, even for a person living in New York.
But really, as far as determining what is possible, you would need to share a lot more about your finances, which you understandably may not want to do. Are you driving two late-model large SUVS/trucks? That's a common thing that gets people. Most Americans literally drive themselves into poverty.
The point is, using what numbers we have, $2500/month is what you would have after taxes, insurance, retirement, and housing costs. That's $30k a year. Plenty of people survive on $30k as their gross income. Not easily, but they do it.
You're still making $100k per year. That's not what it used to be, but it is still enough to afford a basic home in most areas. You're still making substantially more than the US median household income.
Apologies, I misused the term "take-home" in this instance. What I really meant was "how much money is being deposited in my bank account every month."
I have healthcare taken out ahead of time, union dues, and then obviously all the other nonsense. I also take out $200/month for my retirement which is much less than I should be taking out but truly all I can spare.
The point of this post wasn't to say that I'm totallly screwed and can't make ends meet. We're very fortunate in many ways. I guess my point was that we have very little hope of getting a house anywhere in our area in the near future and we have two "middle class" careers between us. I worry that America's middle class is finally gone when a teacher and nurse can't have one child and a modest two bedroom home that isn't a total renovation project. Because the houses in our price range are selling in no time with many, many offers. Worse, the vast majority of them require serious updates. I'm not talking about paint and a kitchen. I'm talking more like a furnace, a roof, windows, and who knows what else since inspections are not happening. If I was more comfortable sharing my exact location I do think we could all have a good laugh at the Zillow listings that are selling within a few days in my area. I think you might be surprised honestly. If you buy a $220k home that needs $30k in repairs to fix the absolute basic necessities, did you really buy a $220k home?
We will be okay in the end even if it means staying here and shifting our perspective on what a "family home" looks like in terms of size and comfort. I mostly just feel really bad for people my age who are trying to break into the market right now. Especially if they have a job that doesn't pay great and doesn't have all the benefits my job has. I said in another comment somewhere that I can't easily leave this area because teachers tend to get trapped by their districts with benefits that accumulate over time and don't transfer between schools. I am finally in a situation where I have accumlated some benefits and would stand to lose a lot of progress toward future gains by moving.
It's a tradeoff, like everything else.
The fact that you’re having to defend or explain feeling like currently things are crazy, in my opinion, is just further evidence of how crazy things are lol. Like yeah you could be worse off but how did a household with two “public service”-type jobs become not enough to afford housing? Not everyone can be an engineer or a software developer, kids and sick people have to go someplace.
Thanks for this comment. It does help remind me that I'm not insane for thinking these things.
I don't live in a city. I live in a rural/suburb area where you used to be able to get a really nice home with two careers and multiple children. I guess I figured that with two careers and one child, we could get a modest starter home at this stage in my life. Sure, it would be an outdated and small house with a couple bedrooms and one bathroom, but that's not feeling realistic anymore. Honestly, if we didn't get this run-down condo before COVID, I don't think we could even dream of getting it now. We could afford it monthly, sure. But I don't know how we would beat out 20 other offers when some of them are straight cash.
The YIMBY movement has been scoring lots of wins across America in both red and blue states because the only solution is to build, build, build. Density and increased supply of housing are the only answers.
America has let local NIMBYs stop almost all development to push their housing values up for decades. This is a difficult fight to win politically at the local level but there has been a lot of success at attacking this at the state level where NIMBYs can’t just overwhelm a city council meeting.
But in the end we need to stop using housing as the vehicle for building middle class wealth. There’s no inherent reason that housing needs to grow in price over time. Look at a place like Tokyo where prices have been flat for a decade because they actually build housing and treat it as a use good, not a quasi investment.
I read the whole thread and feel the numbers don't add up to the difficulty. A lot of that has to do with the student loans, I imagine. So I guess my advice is to just stay where you are and pay off your student loans as fast as you can because the interest rates are typically very high on those. If the interest rates are > 7% you should definitely sink every last dollar into those immediately.
Also, what down payment would you make on your next home purchase? You sound like you have around $70k from the sale of your condo towards the new home and the numbers I'm running on a $300k home in NY are $2100/month. If you have more personal savings then the monthly payments come down even more. Or at $250k, it's $1600/month.
I think the cost of having a child is the hardest part actually, but worth it!
As for your numbers, you're a bit off. Seems like you didn't include accurate property taxes, closing costs, or something else.
We have about 50-70k in equity on this condo depending on what it sells for. Let's say 70 on the high end.
250k home
Put the 70k in equity toward the new home
subtract 15k for closing costs
that's 55k down toward the actual cost of the home.
That's $1901/month.
300k home with the same math is $2310. My "take home" after I pay union dues, taxes, and health insurance out my check is about $2400. So that's essentially gone and we haven't even paid utilities.
We are now left with my wife's take home pay - pretty much the same exact amount - to pay for:
-Utilities
-Gas in our cars (no public transport out here and we drive 15-30 min to work)
-car insurance
-car repairs (like the tires that just cost me $400 or the brakes and rotors I put on my wife's car myself that still cost $250)
-groceries
-childcare
-diapers
-formula (wife breastfed for months but lost her entire supply the minute she went back to work)
-our clothes, baby clothes (which we usually get free or cheap from facebook)
-baby "equipment" like carseats and miscellanious stuff
-makeup, shower products, and other assorted things
-medication and doctor's appointments
-random emergencies that come up
-everything else
We are super lucky we bought reliable used cars a few years back with cash. No car payment beyond the car insurance. If we had even super low car payments we would be in worse shape. I don't know what the car market is like where you are but here in NY we still have to contend with rust and even the rust buckets are expensive these days. Nevermind the fact that they're money pits once they get like that. My previous car - a wonderful Mazda 3 from 2006 - was great until it got rusty and old. Then it was 2k every six months to fix some bullshit and I kept thinking it had to be the last big fix. It never was. I kept it too long trying to be frugal.
Anyway, not trying to win an argument or anything. I just wanted to be accurate and possibly add perspective to that scenario. In short, we cannot afford a 300k home for sure. Even 250 feels pretty horrible and is probably a financially stupid decision as far as our month-to-month is concerned. I'm afraid that banking on raises is just going to leave us in the same spot in five years as the market continues to climb. The only positive to waiting is that my wife could go back to the ER or something when the kid is a little older. Right now it's just not feasible for her to be working nights and weekends.
My apologies! I don't have a child myself so I don't have a good grasp of what those expenses are like. I also didn't factor in closing costs. My advice is still the same for tackling high interest rate debts first before you consider buying a home, for three reasons. And I don't mean to sound preachy with the below. I understand that your situation is way more nuanced than a stranger on the internet is going to know.
The first is that high interest rates just really suck. If your loan is 7%, it's like making 8.3% on investments, but risk-free. More if your tax brackets end up higher than the 12% I'm using for federal. Put another way, every extra dollar you put towards your 7% loans would be like making a free 8.3%.
The second is that your child is only a baby for so long. While they're young, they really don't mind the small space. Use that to your advantage.
The last reason is that larger homes are more likely to have more problems. You mentioned the floor warping in your condo, which isn't great. I guess you have to balance the likelihood of that getting worse and messing with your financials versus staying put and saving up for longer. I don't know.
I feel for your situation, I really do. I hope you find the right home at a great price. What you have going for you is that you and your partner both have great jobs that are pretty steady in employment. Over time your salaries will rise too, even if it feels stretched thin now.
Thanks! I'm not financially literate to understand how paying a dollar on 7% translates to an 8.3% benefit. If you have the time and energy, would you elaborate?
I am financially literate enough to tackle high high interest rate loans first but I'd love more specifics on what you're saying.
As for the condo, I don't see it having major structural issues.
It's more a situation where the floors may need to be jacked up, stabilized, and then levelled, perhaps by just shimming the subfloor even.
I guess we are just so cramped here that I have a hard time putting a dime into this place. I used to do home improvement projects here all the time because they improved my life. Now I can't help but ask, "will I get every penny of this project back in equity?" Because if the answer is no, I don't see myself staying here long enough for it to be worth it.
This place was a great place to live and save money through our respective college programs. It was much cheaper and nicer than the dilapidated party central apartments we lived in prior.
I know we will be okay in the end. But I really don't think a lot of others will be. My youngest brother is 7 years younger than I am and I don't see how he gets into the housing market when he's fresh out of college. I'm going to tell him to work his ass off, wait to have kids until 30 like we did, and just get into something as soon as it becomes feasible.
I'm worried prices are going to spike after interest rates go down but maybe the market will at least become a little less competitive if more people are willing to move due to lower rates.
Happy to! I'll try to not assume anything here so if I explain something you already know, sorry.
I made the assumption that your marginal tax rate (the rate that any more income gets taxed at) is 17.85%, composed of both federal and NY state taxes. I used this calculator to arrive at that number, but depending on your deductions and exact numbers, 17.85% could be something higher.
Now imagine a scenario where you have an extra $1000. You could invest that $1000. Now in this scenario, if you made 8.52% profit (sorry, original 8.33% was a rougher estimate) on your investments, that's great! You'd have $1085.20. But the government gets their share too, so you get taxed at 17.85%. on the profits of $85.20. $85.20 - ($85.20 * 0.1785) is $69.99 (let's say $70).
So, if your investments return 8.52%, after taxes, it's like you made 7% profits only. If you have a loan that's charging you interest of 7%, paying $1000 towards it is like making 7%, but there's no taxes involved when you're paying off a loan, so that 7% is 7%. Versus investing money where you need to make 8.52% in order to effectively get 7%.
I hope that made sense, but honestly I'm kind of doubtful of my ability to explain that. I guess the gist of it is "If you took this money and invested it, how much would you actually gain after taxes? Versus the interest rate on the loans". Also, one benefit of paying off a high interest loan is that you know for sure you're getting a return on your investment. If you invest your money, there could be down years or a bad investment, so there's some "risk" to it that there isn't when you're paying off a loan.
I wouldn't pay off my car loan early even though I can, because the interest rate on that loan is so low at 1% that I could just make 5% sticking it in a high yield savings account and even after taxes, it still comes out greater than the 1% I'm losing to the loan's interest.
Housing is a highly emotional topic. Everyone has an opinion. I always listen to the experts, especially when they have a track record of being right.
Robert Shiller is the economist to listen to in terms of valuations of stocks or housing, and he is sounding alarm on stocks more than housing right now.
Shiller's claim to fame is the book Irrational Exuberance. It actually has three claims to fame.
It was published first right before the dot com crash, and warned the stock market was overvalued. It introduced the concept of a cyclically adjusted price/earnings ratio as a way to warn you if companies are overvalued vs their historical ten year earnings.
It was revised two years before the housing market crash, and warned of the housing market bubble. It introduced the concept of the case-shiller index, which accurately tracks unimproved house price increases, and if memory serves correctly, it also used the concept of a price rent ratio, similar to a price earnings ratio for stock markets.
It was published eight years ago for the third time, and warned that everything was overvalued, in particular, bonds. If it weren't for COVID, he might have called that perfectly as well, as it stands, it took four years for bonds to peak during COVID and seven years for bonds to fall back to earth.
It doesn't mean that housing is or isn't a good investment. Shiller said housing was pricey eight years ago, and it has only gone up since then. It simply means it is expensive, but no one knows what that means for future price direction.
Thanks for sharing this. I'm excited to sit down and read this in a bit.
The book itself is incredibly dry.
I can't say where the market is going to go, but my philosophy is that a house is a house first and foremost, not an investment. I would personally make the decision based on how feasible the payments would be, assuming no refinancing, and the intrinsic value of owning the house to you.
For sure! We aren't thinking in terms of making an investment. We are thinking in terms of monthly payment versus what we "need" in a home for the family. We aren't looking for anything special. A modest two bedroom home would be fanstic. Just sucks that our monthly payments would wipe us out. The argument could be made that it's our fault for having a child, but it seems like an economy that makes you choose between housing and one child (with two "decent" and "real" careers) is not an economy that is doing particularly well.
I take some pleasure in frugality, so I think I'd stick to the condo and save and invest the difference. There's a lot of uncertainty I think with the future of the country, and I think realistically the common person won't be bailed out, especially if it's a slow-burn issue. Small homes used to keep the kids out of the house and playing, so I don't think it would be too bad.
It's tough. This condo needs at least $20k in work. Needs a furnace and the condenser on the a/c crapped out on us. It's a thin, tall condo that shares walls with neighbors on both sides. The upstairs bedrooms are extremely hot in the summer so I think that the a/c is worth fixing for the baby. I have also fixed my washer and dryer by hand multiple times now to keep them running. But they're way past the end of their natural life cycle. Our floors are all slanted inward toward the center of the home and I think it needs to be addressed somehow. I did put some pole jacks in the basement to prevent it from getting worse but we are currently just using risers so our furniture near the walls doesn't tip over toward the center of our rooms (lol). Oh and our refrigerator isn't long for this world either. But those are relatively cheap I guess if we just get an old and ugly one.
Yeah, I guess the question is whether we invest in this place more or get out and into something more spacious. Don't need a ton of space either. Even something similarly sized with a basement would be fine since we would have some storage.
Yeah, you'll definitely want to avoid the trap of owning things that are cheap in the short-run but expensive in the long-run. Structural issues with the condo would be especially concerning.
Maybe if you got the repairs done and got a storage unit, you could turn the basement into more living space for your baby. It would be expensive from what you said, but a whole lot cheaper than trying to buy a bigger house.
There's a really interesting website for Swiss renters/prospective home buyers to calculate the long-term costs/value of each situation. The website is https://rentbuy.top and the calculator's GitHub page is here.
It seems very robust and accounts for a lot of different expense situations (as well as property appreciation), not just the cost of a mortgage. It then gives a very detailed view of home ownership over the time period you choose.
Coincidentally, they made a Reddit post yesterday in /r/Switzerland titled "Is it better to 'die with a mortgage'? I updated my 'rent vs. buy' calculator to hopefully answer." and people talk about some of the issues outlined by OP, but with a view of Switzerland. If you don't want to give Reddit a click, here's an archive.is link.
Just adding that Im in Canada but the situation and economics are very similar, if not worse. Unlike the US, our economy is fairly weak and the ONLY sector thats really booming is housing. Which isnt good when a necessity becomes an investment commodity. Our gov has gone absolutely bonkers on immigration too - a country of only 39M adding 1M new immigrants a year is not sustainable.
Here in AB we're having a massive amount of investors flooding the province because we are the "most affordable" place left in Canada and thats rapidly disappearing. People who own median priced homes out east in Toronto are sitting in 1.3M homes and have so much equity they can take out second mortgages or lines of credit and come buy another home here where the median home is half that price. Im part of a real estate investors group online and contractors are offering pre-construction multi-family buildings and they are immediately snapped up (and its prime territory for fraud).
Fortunately all my adult children were smart and bought homes as soon as they could and they are all sitting pretty. My tenants on the other hand, are getting the short end of the stick. Between mtg rates jumping astronomically and extremely low vacancy (less than 1%) the rents keep jumping.
Very glad for your children! Has to be a relief for you.
I think as climate change continues to rear its ugly head, Canada is going to be an incredibly desirable place to live and do business. Might not see it in your lifetime but certainly your kids' or grandkids'.
I'm certainly looking forward to things as I'm relocating from a low cost of living, albeit tiny shit-tier town with nothing else going for it, to a larger area with a higher cost of living. I need my house to sell just so I can cover a 60,000-80,000 down payment just so I can afford something better than the house in leaving.