For us the big problem when rates were low was that any place we could afford that was halfway decent got snapped up before we even had a chance to look at it. The couple of places we did manage...
For us the big problem when rates were low was that any place we could afford that was halfway decent got snapped up before we even had a chance to look at it. The couple of places we did manage to make an offer on had other prospective buyers who were offering way above asking. Once rates went up we finally managed to buy a place we liked, and because the market had cooled off we were even able to haggle a bit on the price.
Yeah, I had a bit of real estate investment training a while back. Not enough to get into the business, and I feel morally squidgy about fixing and flipping for a living, but enough to notice the...
Yeah, I had a bit of real estate investment training a while back. Not enough to get into the business, and I feel morally squidgy about fixing and flipping for a living, but enough to notice the houses in my neighborhood that don't have any signs of life and be able to track down ownership and make offers based on an understanding of the kind of work that a neglected house would need. I'd be fine with a major fixer-upper, so I wouldn't be depending on what's on the market anyway. It means a lot more legwork, but with a likelihood of a better deal. It's the only way I'd be able to buy in my beloved neighborhood anyway.
I wouldn't feel bad at all for fixing and flipping. The truth is that many of us grew up being told to study and only study and pick up no practical skills whatsoever: for helpless folks like us...
I wouldn't feel bad at all for fixing and flipping. The truth is that many of us grew up being told to study and only study and pick up no practical skills whatsoever: for helpless folks like us an old window or outdated cabinets are enough to strike a potentially dream home from the list. Yes we can hire someone but the amount of mental stress is just insurmountable.
Morally squidgy would be hiding structural defects with plywood/drywall and selling. Buying a house you know will fall apart in 10 years and selling it to folks as a forever home is morally bankrupt.
Actually evaluating sturdy houses and making them livable for folks is a community service for those without the skills
I appreciate you saying that, but nothing I've ever seen shows that people actually do the nice things you've described without it being a significant markup. Broadly, no improvement to a house...
I appreciate you saying that, but nothing I've ever seen shows that people actually do the nice things you've described without it being a significant markup. Broadly, no improvement to a house raises the purchase price as much as the improvements cost. As such, fixing and flipping is all about doing the cheapest, fastest surface level things to make a house look good. The only reason I would do it right would be to have a house of my own; I couldn't make a living doing it for others unless they were very rich, and I grew tired of working for wealthy out of touch boomers.
I was really really close to feeling comfortable closing on a house this winter, the rate drops in september make everything look like it was finally time to take the step. Of course, the fool was...
I was really really close to feeling comfortable closing on a house this winter, the rate drops in september make everything look like it was finally time to take the step. Of course, the fool was me because I didn't immediately lock in a rate and ended up shopping around first. Queue rates rising nearly 1.5% in a month and egg on my face. Back to renting forever I go!
Meanwhile in Canada, I'm not financially literate enough to understand a promotion a investment firm is running. From their calculator it looks like if one has a cool few million dollars to invest...
Meanwhile in Canada, I'm not financially literate enough to understand a promotion a investment firm is running. From their calculator it looks like if one has a cool few million dollars to invest with their company, they'll rebate your mortgage hard enough that you effectively pay ZERO percent interest on your $4million dollars loan.?
Which means I can live in a new mansion using borrowed money for no interest at all while my actual millions are invested in the market making far above 5%??
Anyway their rates for regular people are still far below 7%
How did folks do it in the 80s with 20% interest? Huge lump sum and very very very cheap houses relative to earnings right?
Comment box Scope: comment response, information Tone: neutral Opinion: some, at the end Sarcasm/humor: none A 30-year mortgage was more like 16.6% at the peak in 1981, which is a big difference...
Comment box
Scope: comment response, information
Tone: neutral
Opinion: some, at the end
Sarcasm/humor: none
How did folks do it in the 80s with 20% interest? Huge lump sum and very very very cheap houses relative to earnings right?
A 30-year mortgage was more like 16.6% at the peak in 1981, which is a big difference from 20%. That's like having an unfavorable personal loan (or a really, really bad auto loan on an abysmal credit score), but it's not like a credit card. The average for the decade of the 1980s was 13.7%, which is high, but a 3% difference from the peak is also big. By 1986 it was 10.4%. That's high, but not that high. 10.4% is like a car loan if you have bad credit, which people do all the time.
Houses in 1980 didn't cost as much in absolute terms. In 1980 the average home price was $300k in 2023 dollars, compared to about $500k in 2023 (in 2023 dollars). Houses in 1980 were smaller, less complex (it wasn't as common to have AC back and other systems then), and the underlying assets to construct a house (land, materials, labor) were not as expensive. None of this air-tight stuff. I think people were also more comfortable fixing more things in their homes themselves, so there was less need to be somewhere pristine.
As you say, houses were also cheaper relative to earnings. Apparently adjusted for inflation, the price-to-income ratio in 1985 was about 3.5 whereas today it's about 5.8. So even though wages have risen, house prices have grown faster. (Fun fact: I got interviewed by the author of that article once. Idk where to find it though.)
Because homeowners like treating their home as an appreciating asset, they feel incentivized to lobby local government to artificially limit supply so that their homes become more valuable over time. In my opinion homes should never be considered a naturally appreciating asset. The government ought to construct more housing directly in order to counteract this trend.
OH thank you for the link and this is news to me, having heard all my life from Boomers that they made it through 20-plus percent interest rates. I should have known something was fuzzy because...
OH thank you for the link and this is news to me, having heard all my life from Boomers that they made it through 20-plus percent interest rates. I should have known something was fuzzy because said Boomers also managed to afford many other things at a time when they supposedly were working to the bone to pay the mortgage off. Canadian rates broke 20% for a couple months but for much of the decade it was 15% or less.
5.8x earnings would be a dream in my area.
"the average price of a home is $1,211,700" in Vancouver 2023, when the median household income is $86,988, making the most folks could afford to borrow at a mortgage of $329,650, at the rates then of 5.29%. Maybe folks would have to form households of 8 income earners to go all in on the median home or something I don't know what they expect us to do.
Comment box Scope: comment response Tone: neutral Opinion: yes Sarcasm/humor: none It's possible that a family member of yours had a 20%+ mortgage rate, but that would be a couple standard...
Comment box
Scope: comment response
Tone: neutral
Opinion: yes
Sarcasm/humor: none
having heard all my life from Boomers that they made it through 20-plus percent interest rates
It's possible that a family member of yours had a 20%+ mortgage rate, but that would be a couple standard deviations from the mean. (That specific aggregation of data doesn't exist, so I'm just speculating, but 4%+ above average at the absolute peak seems like an aberration.)
There were no FICO credit scores in the '80s crisis, but they would have had to be considered really sub-prime using whatever creditworthiness metrics the bank was using to get a deal that bad. They're unlikely to have paid off a median-sized loan (let's say $240k in today's dollars) at more than 20%. Imagine having $240k of credit card debt. Even with a fairly good salary, I'd calculate that to be an absurd payoff period. If their household inflation-adjusted income was $38k, how much can you really allocate to that debt? Even a generous 40% of income after tax, or about $1k/mo, would not mathematically work.
If they had a 20%+ mortgage, it was probably fairly small, being made up for with a very large down payment, or they refinanced almost immediately. Not to devalue the work I'm sure they did put in to get rid of their debt, but they are probably exaggerating.
"the average price of a home is $1,211,700" in Vancouver 2023, when the median household income is $86,988, making the most folks could afford to borrow at a mortgage of $329,650, at the rates then of 5.29%. Maybe folks would have to form households of 8 income earners to go all in on the median home or something I don't know what they expect us to do.
That is staggering.
I think people have always relied on family support for buying property (dirty little secret of the middle class: they didn't ever pull themselves up by their bootstraps), but that is a ridiculous figure. A generous extended family (two sets of parents, four sets of grandparents) could potentially cover a down payment. Six households could, in principle, cover that $900k difference if they borrow against their own properties. This only works if you have a lot of living relatives who already own their homes and are all comfortable donating a couple hundred thousand dollars to one of their presumably many grandchildren.
My suspicion is that a lot of people who end up buying property in a place like Vancouver have a combination of high family contributions and have just saved a ridiculous amount by living with family for many years, rather than living on their own. I don't know how else you would do that on even a somewhat above-median wage. Maybe if you had 10 roommates, or you're building your way up in equity to a place like Vancouver by buying elsewhere first, more cheaply.
There's a reason I don't own property. And I don't even live in a "HCOL" city.
Number of housing units in the US in 1980: 87,740,000 Number of people in the US in 1980: 226,545,805 People per housing unit in 1980: 2.58 Number of housing units in the US in 2020: 140,760,000...
Number of housing units in the US in 1980: 87,740,000
Number of people in the US in 1980: 226,545,805
People per housing unit in 1980: 2.58
Number of housing units in the US in 2020: 140,760,000
Number of people in the US in 2020: 331,449,281
People per housing unit in 2020: 2.35
You know, I thought it would have gone the other way, but there's actually more housing per person today than there was in 1980.
Comment box Scope: comment response Tone: neutral Opinion: none Sarcasm/humor: none More people live alone in 2020 than in 1980, which places significant pressure on supply. You can't really...
Comment box
Scope: comment response
Tone: neutral
Opinion: none
Sarcasm/humor: none
More people live alone in 2020 than in 1980, which places significant pressure on supply. You can't really divide the number of people by the number of housing units because that doesn't reflect the actual distribution of households.
In 1980, there were about 18.3 million single-person households in the US out of a total supply of 87.7 million homes (about 20% of the market). In 2020, there were 36.2 million single-person households in the US out of a total supply of 140.8 million homes (about 25% of the market). Much of this is driven by higher quantities of unmarried young people.
As another commenter noted, unoccupied housing is also a contributing factor, but I can't find data earlier than 2000.
Part of the problem is that many people today are also trying to live in places that are actually nice to live in: walkable, near public transit, access to amenities, streets that aren't 50mph arterials, etc. There is extremely limited supply of this kind of housing, which drives up property values of those places that do exist. The reason there is such limited supply of this housing is due to an array of local zoning regulations making it difficult to build housing as well as excessive minimum parking requirements, excessive setback requirements, and other limitations that make it difficult to build moderate-density housing that is considered walkable.
Probably worth checking what proportion of that housing is occupied housing, and what proportion is owner-occupied. I'm not sure whether the stats there will look different, but I think they'd be...
Probably worth checking what proportion of that housing is occupied housing, and what proportion is owner-occupied. I'm not sure whether the stats there will look different, but I think they'd be interesting either way.
My guess is that the particulars of the investment firm's promotions contain enough financial management fees to make up for the mortgage interest. Unless they have a fantastic track record of...
My guess is that the particulars of the investment firm's promotions contain enough financial management fees to make up for the mortgage interest. Unless they have a fantastic track record of beating the market, you're probably not coming out ahead.
While we should expect the election to continue making for a volatile rate environment, it's not the only game in town. This week sees the return of highly relevant economic data with Friday's jobs report being the most important, by far. Each of the past two jobs reports has had a huge impact on rates due to wide deviations from expectations. If Friday's report is anywhere nearly as surprising, the impact on rates should play out on a similar scale.
Seems like I'm not buying for a while yet. Time to save like mad for when the market turns, I guess?
For us the big problem when rates were low was that any place we could afford that was halfway decent got snapped up before we even had a chance to look at it. The couple of places we did manage to make an offer on had other prospective buyers who were offering way above asking. Once rates went up we finally managed to buy a place we liked, and because the market had cooled off we were even able to haggle a bit on the price.
Yeah, I had a bit of real estate investment training a while back. Not enough to get into the business, and I feel morally squidgy about fixing and flipping for a living, but enough to notice the houses in my neighborhood that don't have any signs of life and be able to track down ownership and make offers based on an understanding of the kind of work that a neglected house would need. I'd be fine with a major fixer-upper, so I wouldn't be depending on what's on the market anyway. It means a lot more legwork, but with a likelihood of a better deal. It's the only way I'd be able to buy in my beloved neighborhood anyway.
I wouldn't feel bad at all for fixing and flipping. The truth is that many of us grew up being told to study and only study and pick up no practical skills whatsoever: for helpless folks like us an old window or outdated cabinets are enough to strike a potentially dream home from the list. Yes we can hire someone but the amount of mental stress is just insurmountable.
Morally squidgy would be hiding structural defects with plywood/drywall and selling. Buying a house you know will fall apart in 10 years and selling it to folks as a forever home is morally bankrupt.
Actually evaluating sturdy houses and making them livable for folks is a community service for those without the skills
I appreciate you saying that, but nothing I've ever seen shows that people actually do the nice things you've described without it being a significant markup. Broadly, no improvement to a house raises the purchase price as much as the improvements cost. As such, fixing and flipping is all about doing the cheapest, fastest surface level things to make a house look good. The only reason I would do it right would be to have a house of my own; I couldn't make a living doing it for others unless they were very rich, and I grew tired of working for wealthy out of touch boomers.
I was really really close to feeling comfortable closing on a house this winter, the rate drops in september make everything look like it was finally time to take the step. Of course, the fool was me because I didn't immediately lock in a rate and ended up shopping around first. Queue rates rising nearly 1.5% in a month and egg on my face. Back to renting forever I go!
Meanwhile in Canada, I'm not financially literate enough to understand a promotion a investment firm is running. From their calculator it looks like if one has a cool few million dollars to invest with their company, they'll rebate your mortgage hard enough that you effectively pay ZERO percent interest on your $4million dollars loan.?
Which means I can live in a new mansion using borrowed money for no interest at all while my actual millions are invested in the market making far above 5%??
Anyway their rates for regular people are still far below 7%
How did folks do it in the 80s with 20% interest? Huge lump sum and very very very cheap houses relative to earnings right?
Comment box
A 30-year mortgage was more like 16.6% at the peak in 1981, which is a big difference from 20%. That's like having an unfavorable personal loan (or a really, really bad auto loan on an abysmal credit score), but it's not like a credit card. The average for the decade of the 1980s was 13.7%, which is high, but a 3% difference from the peak is also big. By 1986 it was 10.4%. That's high, but not that high. 10.4% is like a car loan if you have bad credit, which people do all the time.
Houses in 1980 didn't cost as much in absolute terms. In 1980 the average home price was $300k in 2023 dollars, compared to about $500k in 2023 (in 2023 dollars). Houses in 1980 were smaller, less complex (it wasn't as common to have AC back and other systems then), and the underlying assets to construct a house (land, materials, labor) were not as expensive. None of this air-tight stuff. I think people were also more comfortable fixing more things in their homes themselves, so there was less need to be somewhere pristine.
As you say, houses were also cheaper relative to earnings. Apparently adjusted for inflation, the price-to-income ratio in 1985 was about 3.5 whereas today it's about 5.8. So even though wages have risen, house prices have grown faster. (Fun fact: I got interviewed by the author of that article once. Idk where to find it though.)
Because homeowners like treating their home as an appreciating asset, they feel incentivized to lobby local government to artificially limit supply so that their homes become more valuable over time. In my opinion homes should never be considered a naturally appreciating asset. The government ought to construct more housing directly in order to counteract this trend.
OH thank you for the link and this is news to me, having heard all my life from Boomers that they made it through 20-plus percent interest rates. I should have known something was fuzzy because said Boomers also managed to afford many other things at a time when they supposedly were working to the bone to pay the mortgage off. Canadian rates broke 20% for a couple months but for much of the decade it was 15% or less.
5.8x earnings would be a dream in my area.
"the average price of a home is $1,211,700" in Vancouver 2023, when the median household income is $86,988, making the most folks could afford to borrow at a mortgage of $329,650, at the rates then of 5.29%. Maybe folks would have to form households of 8 income earners to go all in on the median home or something I don't know what they expect us to do.
Comment box
It's possible that a family member of yours had a 20%+ mortgage rate, but that would be a couple standard deviations from the mean. (That specific aggregation of data doesn't exist, so I'm just speculating, but 4%+ above average at the absolute peak seems like an aberration.)
There were no FICO credit scores in the '80s crisis, but they would have had to be considered really sub-prime using whatever creditworthiness metrics the bank was using to get a deal that bad. They're unlikely to have paid off a median-sized loan (let's say $240k in today's dollars) at more than 20%. Imagine having $240k of credit card debt. Even with a fairly good salary, I'd calculate that to be an absurd payoff period. If their household inflation-adjusted income was $38k, how much can you really allocate to that debt? Even a generous 40% of income after tax, or about $1k/mo, would not mathematically work.
If they had a 20%+ mortgage, it was probably fairly small, being made up for with a very large down payment, or they refinanced almost immediately. Not to devalue the work I'm sure they did put in to get rid of their debt, but they are probably exaggerating.
That is staggering.
I think people have always relied on family support for buying property (dirty little secret of the middle class: they didn't ever pull themselves up by their bootstraps), but that is a ridiculous figure. A generous extended family (two sets of parents, four sets of grandparents) could potentially cover a down payment. Six households could, in principle, cover that $900k difference if they borrow against their own properties. This only works if you have a lot of living relatives who already own their homes and are all comfortable donating a couple hundred thousand dollars to one of their presumably many grandchildren.
My suspicion is that a lot of people who end up buying property in a place like Vancouver have a combination of high family contributions and have just saved a ridiculous amount by living with family for many years, rather than living on their own. I don't know how else you would do that on even a somewhat above-median wage. Maybe if you had 10 roommates, or you're building your way up in equity to a place like Vancouver by buying elsewhere first, more cheaply.
There's a reason I don't own property. And I don't even live in a "HCOL" city.
Number of housing units in the US in 1980: 87,740,000
Number of people in the US in 1980: 226,545,805
People per housing unit in 1980: 2.58
Number of housing units in the US in 2020: 140,760,000
Number of people in the US in 2020: 331,449,281
People per housing unit in 2020: 2.35
You know, I thought it would have gone the other way, but there's actually more housing per person today than there was in 1980.
Comment box
More people live alone in 2020 than in 1980, which places significant pressure on supply. You can't really divide the number of people by the number of housing units because that doesn't reflect the actual distribution of households.
In 1980, there were about 18.3 million single-person households in the US out of a total supply of 87.7 million homes (about 20% of the market). In 2020, there were 36.2 million single-person households in the US out of a total supply of 140.8 million homes (about 25% of the market). Much of this is driven by higher quantities of unmarried young people.
As another commenter noted, unoccupied housing is also a contributing factor, but I can't find data earlier than 2000.
Part of the problem is that many people today are also trying to live in places that are actually nice to live in: walkable, near public transit, access to amenities, streets that aren't 50mph arterials, etc. There is extremely limited supply of this kind of housing, which drives up property values of those places that do exist. The reason there is such limited supply of this housing is due to an array of local zoning regulations making it difficult to build housing as well as excessive minimum parking requirements, excessive setback requirements, and other limitations that make it difficult to build moderate-density housing that is considered walkable.
Probably worth checking what proportion of that housing is occupied housing, and what proportion is owner-occupied. I'm not sure whether the stats there will look different, but I think they'd be interesting either way.
My guess is that the particulars of the investment firm's promotions contain enough financial management fees to make up for the mortgage interest. Unless they have a fantastic track record of beating the market, you're probably not coming out ahead.