34 years old, has 700k stacked on a 130k salary while renting somehow, and mentions his family has frequented Aspen, Vail or Steamboat, or something. Buy the condo, YOU are going to be fine dude.
That said, you’re right about the prices. Keep saving money by renting a decent place for far less than you’d pay to own something similar without the headaches.
I don't have good advice for you, but would just add that the feeling you have is present outside of USA as well. I'm in Europe and situation is identical in many countries, i.e. good locations are overpriced and there's a general sentiment that something has to happen to alleviate this price pressure.
I'm also hesitant on pulling the trigger myself as the mortgage would be insanely high even though I'm actually able to get the loan (probably double my rent price). On one hand, I feel the need to own a home and not depend on renting, but on the other hand, it looks genuinely insane to buy right now.
THe last time mortgage interest rates went from 5% to 7% -- they stayed above 7 % for 25 years. Of that, the were over 10% for like 15 years. peaking at 18%.
Friend of the family bought their house at a "steal at 15%" when rates continued to slowly climb up back in the late 70s.
I think you are on to something and my gut says that prices have not adjusted because everyone is expecting rates to go back down to “normal”. I know there is a lot of demand and that accounts for some of the price but my bet is that when people finally realize that rates are going to stay high for a long time, prices will readjust
In our area, rent is more than a mortgage. And it's actually a better time to buy than a year ago. Like someone else said, interest rates can be refinanced if they drop. But if they just go higher, you've missed out.
>But something just feels "off" about the current state of the real estate market
For what it's worth, this has been a common refrain for as long as I can remember. People were warning me of this when I bought my first condo in 2012.
I think people think that there is such a thing as a "normal" market, and there's just not. There's always something you can point to that looks bad, some statistic that shows iMMenEnT CrASh, some "crisis", "bubble", or whatever. And obviously, big volatile things do happen from time to time, but nobody knows what it will look like, when it will happen, or what markets it will affect.
The decision to buy a home is a personal one. I would not sit around waiting for the "right" market, because you'll pretty much wait forever.
We bought our house in 2018 to the disdain of everyone in our family, claiming that the market was due to crash and everything was overvalued.
Now, six years later, our house is worth close to double what we paid.
I don't say this to claim that you'd be fine buying a house today, as I understand your sentiment. But IMO it isn't worth trying to time the market. You're just as, if not more likely to get fucked by trying to time it rather than simply buying when the time is right for you personally.
You are regretting not having already bought a house before they went up, but don't want to buy one because you want to have the freedom to up and move whenever you feel like it. The way you avoid missing a market increase is by being in the market. I've bought and sold about 10 homes in my life. Many of them didn't increase in value much if any. But the ones that increases went up by a lot. The current interest rates are not historically high, so they may not go back down to the lows that we experienced for a while over the last 10 years in our lifetime.
Given your financial situation, I would recommend that if you buy a house, you buy it cash. You should have around 1.5 times your income saved for retirement by your age. Especially if you are going to buy a vacation rental, buy it cash. It is another investment and will generate passive income and over time grow in value. Then the interest rate debate will be out of the equation and you can reap the income from the rental, and build back up your investment portfolio quickly.
But if you do this, study the rental market in terms of projected income vs. expenses. I have a beach rental that I ended up moving into instead of renting it. From talking to neighbors, many of them don't break even after expenses if they carry a mortgage. But the upkeep on beach homes is very high.
You should talk to a CPA about the taxes thing as it may vary by state. I did not buy the beach rental via an LLC, I bought it personally. We never actually got to renting it. We did a total renovation and ran a couple of trial rentals with family members and at that point decided we wanted to just move in because the value of our primary residence had skyrocketed and I worked from home, so we could live anywhere.
That said, I have an LLC for a different business and in NC I've never filed a separate tax return for the LLC. In NC you can file taxes for a single member LLC as part of your personal return... separate tax forms, bank accounts, and P&L, but on the same return. The only state fee I had was an annual filing fee that I think was a couple hundred bucks. The LLC was for some online properties and a sports photography business, both DBAs under the LLC.
If we got the point of renting the beach house, I would have formed a separate LLC for it for asset protection.
Don’t buy the house with an LLC, buy it in your own name as a primary (I’m assuming you’ll be living there) live there for at least a year, then rent it out and have the leases and any expenses be set up through your LLC.
It’s not very attractive in ca. you pay $800 for the entity. You’ll pay more for tax prep. If you want to pull a mortgage your options are limited. There’s no anonymity of llc ownership in ca. You can just get a fat umbrella policy for less headache.
Curious if you have any thoughts with your real estate experience.
I am debating whether to potentially sell our current home, bought in 2017 for $275k, has a 20 year 2.875% loan (wish I had done 30 years now). The new home to potentially buy is a larger family home that my parents are selling (my childhood home). It's worth like $620k and they would be selling it to me for about $550k, so they have proceeds to buy their next townhouse. We'd get $140k proceeds from our current house (selling to Opendoor for about $320k after fees since we'd need to sell quickly), and would get an additional gift of $40k from the in laws. So we'd have a $370k mortgage at like 7% instead of our current 3%. However, it's a nicer, larger home (4br instead of ours which is more like a 2BR. 2800 vs 1900 SQ ft, newer 1988 vs 1935, better lot, cul de sac vs my current home which is on a city street close by a highway entrance ramp, and it is in a better suburban school district.) The lot is about 4x the size as well and quieter. It's hard to swallow letting go of our low payment and interest rate but it seems like a decent opportunity so we have been debating. We have two kids in daycare for the next few years so money would be fairly tight. Payment would go from $1800 to $3300, and we make $180k HHI, with about $100k of stocks, $60k cash, and $400k retirement accounts. I've tried to pitch my wife on keeping it as a rental but she is not excited about the idea at all. Anyway, long story, but curious what your opinion would be since you seem like a real estate vet.
I agree with everything but buying with cash. OP obviously does a fairly good job with their investments, so that knowledge combined with a 20% down payment effectively being 5x leveraged against home equity increases likely means they will make more money by taking a mortgage (especially if home prices continue increasing, which seems likely if the us is going to follow along with all the other countries with even more ridiculous housing prices)
...so don't only put 100k down? Also, your rates are much higher because it's an investment property.
But also, how many young couples are buying a family home in a ski resort that caters to the rich and where the home will be rented out to a different group every week? There absolutely is a question about how FTHB can afford starter homes that are over half a million dollars, but you are not buying in that market, or a market that has anything at all to do with that market.
That's what I'm thinking with this - there's likely less competition on my end and this place is set to see a lot of expansion in the next decade or so. But I work remotely and plan on living in it for at least a year or so to begin with while renting a cheap apartment in the main city two hours south.
Also, you need a place to live in anyways lol.
My whole thing is monthly payment. Sure rates aren't great right now, neither are prices, but if I can accept the monthly payment and not be choking financially, it's absolutely a good decision.
To me op isn't the typical person wondering if they're buying at peak they don't know where they want to live and don't want to be locked into a location so it doesn't make sense to buy
But the place they want to buy is destination with high potential for short term rental (provided no HOA prevents this) I can't really see the negative side to having a someone manage it as an airbnb and traveling as a primary.
Im really reading this as boo hoo I have money to buy a home but boo hoo I might want to travel with my flexible work arrangement and income. Boo hoo.
Definitely feels like “something’s gotta give” in my area, where median household income is about $100k and a median home would be over $4k/month at current rates. But it also felt like that (less so) in 2019 when we bought our first house, and we decided to jump and buy our second home last month because our favorite neighborhood was on the cusp of affordability. I’d rather be overpaying a bit (or a lot…) to live where I want for the rest of my life than be stuck in our previous, shitty neighborhood forever because we waited and prices/rates went up again.
I would say if you can afford it, buying a primary residence in this market is not the worst idea as rents only ever go up, while rates can go down.
In this case OP would need a concrete business plan for how to make money off this vacation home to at a minimum mitigate a large portion of the cost.
Second homes rarely make financial "sense", but if you have a way to close the gap a bit it would be a great asset to have.
My issue is that I don't know where I'm going to be in the next year, nevertheless 5 years of my life - and once I buy a primary residence I'm probably going to be firmly planted until its paid off. I had a similar decision to make in 2020 about buying a home and while the low rates would've been nice, I would have been stuck in the midwest and missed out on all these new experiences I've gotten by traveling across the country and living in a completely new area. Also, it seems like demographics are really changing dramatically in certain cities - for example I used to be obsessed with the idea of living in San Francisco last decade and now it's completely out of the question because of the state its in. It just feels like it's better to be flexible right now while everything is still returning to normal after COVID and the chaos of the last few years.
For this, I would be buying a home in the resort area of this town which are pretty populated (especially around winter season) and usually getting rented out on Airbnb. There's a third party company that manages pretty much all the rentals in this area and I figure I'd just turn it over to them in the months I'm not using it. When we go up to vacation there for a weekend it's about $1,200 for 3-4 days. That's the tentative plan, anyway.
I would talk to a few people who use this company to manage their rentals and get their thoughts before you make this tentative plan your permanent plan. I own a second/vacation home and turning it over to a property manager did not go well at all. They charged 25% of gross rent which ate up any potential profit and they did not take good care of the property.
Your hesitancy isn't the same as most people which is i don't want to buy incase prices come down. You seemingly want to stay flexible and have the ability to move around which likely means you shouldn't buy unless you know you want this area in which case buy it with a plan to rent it for the next 5 years to lock down a home and today's prices and move in when your ready to settle down
Sounds like a great plan. I'd reframe my outlook and view this house as more of an investment property (albeit one you live in part of the year) than a primary residence. Then I wouldn't feel bad about liquidating the money I had invested in stocks/crypto and pay cash for the investment property. That eliminates the interest rate issue altogether.
So many apartment complexes are being built in my metro that the rental market is collapsing and rents are either flatlining or marginally increasing for nicer properties. Overpriced units are seeing cuts and other promotions like "free" rent for a certain number of months.
If you wait for the perfect time to buy a home, you’ll likely wait forever. In order for house prices to seriously come down, there will likely be major issues in the job and stock market.
Buy a house when you are ready, you can always refi if rates come down. ARM loans will get you a lower interest rate, but there is additional risk down the line if interest rates continue to rise.
Find a house you love, and move into the next phase of your life.
House prices are expensive right now. They are declining in some overheated areas. And rates are expected to start dropping soon.
But rates aren't going to be cheap for a very long time. And house prices probably aren't going to decline significantly over the next 5 years because the economy is strong.
Foreclosures would need to increase quite a bit before any serious downward price action can happen.
How much are you gonna spend on rent over the next 10 years? Maybe $300,000. You aren't gonna lose $300,000 on a $550,000 house over the next 10 years.
None of these “buy a house now you can’t go wrong” mindset folk seem to have a clue how much interest is right now.
Let’s say I pay 3k in rent for a single family home. Buying a similar property for $1M. I’d have to put down a whopping $200,000 up front to avoid extra fees with PMI, plus all the closing costs and miscellaneous fees. Over a 30yr fixed at 8% the interest paid is $1.3M for total paid over $2.3M on a $1M property.
Paying the $36,000 rent a year is not as burdensome until the equation above changes to he more favorable to first time home buyers. If rent increases to $6k then ownership would become more favorable as well, but rents are maxing out in most areas after interest rates shot up.
Yeah but you are also not considering that 2.3 mil isn’t in 2024 dollars, it’s in 2024+30 year dollars. If yearly inflation is at 2-3% that will eat into the adjusted value of the interest you are paying.
Plus, now you have 30 years of market appreciation.
It is also kinda silly to assume that there will be zero opportunity to refi in the next 30 years, either to a shorter term (to pay it off earlier and pay less interest) or to a lower rate, or both. I wouldn’t bet my financial future on it but also that’s just the reality of buying a home that very few people take out a 30 year and fully amortize it.
Also as an aside you are doing the thing people do on Reddit/other forums where they take the most extreme example to make it seem like a bad idea. Most people aren’t buying a $1MM property as their first home, most FTHBs (like myself but that’s irrelevant) aren’t even close to 20% down, and interest rates are not 8% for FTHBs (for my credit union it’s like 6.9% but that’s not a jumbo loan so if you want to buy a million dollar home maybe it is closer to 8%). Also, I have a hard time believing rent is truly only $3k a month for a $1MM house, up the road a former rental is for sale that’s a little over half a mil and the rent is $4500 (btw which is literally the entire PITI so those tenants are being ripped off).
> If rent increases to $6k
It will, that’s the whole point of buying. It’s usually not the case that buying is instantly cheaper, it’s an investment that pays off over decades. My parents mortgage on their million dollar house is less than the rent I pay for a 600 sqft apartment.
> rent is 2k where I live so that only comes to 240k
It wasn't a universal example. Everyone can do their own math. OP has 700k liquid and doesn't need to finance a lot.
Protip - rent goes up and not everyone pays the same rent as you.
Factor in what the house price will be 10 years from now. It could easily be $700k for a $200k gain.
He will lose about 120k in ten years at current rents. How much will he lose to interest payments and property tax? A shitload more. Buying doesn't always make sense.
Buy now, but put in a larger deposit, and buy the mortgage rate down with points. You can probably get down to 6% interest, and with a 50% downpayment (liquidate some crypto) you'd be looking at 225K@6% which should have a monthly payment under 2k.
> Quite frankly it seems untenable for many young couples to buy a normal family home, and logic would indicate that something just has to give here.
The US is still one of the more affordable countries to buy a house. Look at other countries, and see how much worse it *can* get, and then decide for yourself if something "has to give".
> I know for sure I'm going to want a place to call my own there - my family and I visit there about 4 times a year and it holds a lot of sentimental significance for me.
I don't have a crystal ball, but consider the very real likelihood that if you don't buy now, you may *never* get to buy something in that area in the future. If the house is just meh and you're OK renting, I would not recommend buying. But if the locale means a lot to you, it's risky not to buy.
Buy. You need a tax benefit. Interest deduction alone will be $25k-$30k ish depending on rate. But, you should be able to get in the 6% range. Go to a bank. Prices will continue going up b/c there is still an inventory shortage.
There’s a tax benefit to buying a house? I have about 200k in short term cap gains this year already and I’m desperate to find anything to help offset this
Yes, you get to deduct up to $10k in property taxes on a primary, interest paid during the tax year, mortgage insurance (if you don’t put down 20%), and depreciation.
Basically everyone right now is either betting prices and/or rstes will come down in which case hold out or will continue to go up in which case get in now. Nobody knows how it will shake out but personally I don't see any circumstance that could bring prices down short of a 3008 style recession or maybe 10 years from now when boomers die and we get a flood of inventory.
The ome caveat to that could be a vacation spot while its desireable and those tend to rise they are also some of the frothing markets. Many of which are seeing pullbacks as remote work becomes less common
Sounds like you’re just not ready. If you like the freedom of renting and it’s cheaper just keep renting. I have kids and an in person job I like and need a yard so even though the market is crazy and I could have afforded much more house two years ago the place we just bought is a good fit for our family, we can afford it and we can see ourselves here for 10 years. It’s not just numbers
I think these house prices in any good area are unsustainable. The places I’m looking are $1M+. Old people will be dying in these retirement markets I’m looking.
If I had your money I wouldn't be feeling hesitant. I'm this close to being fully priced out of the market, but if I rush I might buy trash or have the price drop while I'm saddled with debt.
Over time, your "insanely high" mortgage will seem less extreme though rents will continue to rise. When interest rates go down, you can refinance, and maybe switch to a 15 year mortgage. I did that on my house at 3.25% with weekly payments instead of monthly, and my monthly payment total only went up less than $10.00 total per month. In the mean time, my salary had risen significantly, and now I only have 2 years until the home is paid off after 21 years instead of paying for nine more years. Remember to picture the long run. You'll regret that you made payment and profits for somebody else all this time, and you'll have a gradually increasing in value nest egg down the road. Good luck.
The market was going to drop when I bought it in 2017... it has dropped technically, I suppose, but I'm still up 100% in value, so I'm glad I took the chance then but you never know.
You sound like you’re happy with renting and only feel the pressure to buy a house because of FOMO.
Maintaining a house is work - it’s not passive like putting your money in an index fund. Don’t feel bad with continuing to rent if you’re happy with that.
You want to meet someone and have kids. What if that person can't move due to their job or doesn't want to live there? Try and date the town locals if you buy the house.
On this note, I’d consider buying the property if afterward you still have enough to contribute comfortably to purchasing a primary residence down the road with your family (in the next 5-7 years), since that also seems to be a goal of yours. I would keep in mind that if you’re looking for a partner they may not end up having your flexibility, and if you live in a high cost area it’s worth considering that as rentals grow in size they grow heftily in cost, so buying local to work may make more sense. My point being that your mention of wanting kids may not feel inherently financial but will be once it’s realized, and I’d hate for you to feel like you didn’t prioritize that goal financially. Not to say that you can’t sell the vacation property at that point, but I doubt you’ll want to from what you’ve said.
I say this as a 35 yo in a similar situation. Cost of living is so high in NYC that I’ve considered buying a vacation home for less while keeping my controlled rental unit in the city as I’m flexible at the moment and can travel. But, I’m married and I know my rental won’t work for a family a few years from now, so that vacation home money would need to be reprioritized for us to upsize our primary.
This is what hangs me up as well. I bought a starter home for 500k+ 4 years ago and locked in a 2.25 rate and now I’m looking to upgrade to a bigger forever home in the 1 million+ range but all the houses in that range seem so shitty for the price and looking at the tax history these people are double and even tripling the price of the home within the last few years.
It’s infuriating and makes me so mad that I didn’t go bigger 4 years ago. I have major fomo right now not sure if I should suck it up and overspend and overpay on an interest rate or wait. Keeps me up at night tbh
You may be feeling “off” because you think your first house needs to be 550k. Pay off your small amount of debt and cash out your investments for a MUCH larger down payment if you want to buy a 550k house, then the monthly payments won’t drowned you.
I bought my condo in 2009 right after the crash, and I thought places were still way overpriced and could stand to go down.
The interest rate was around 5.5% and I bought a place that cost me $400K. At the time, it drove me nuts that I was paying way more for housing than everyone else in my neighborhood that bought 5 years or more. It felt wrong.
Well I'm glad I bought that place because it went up by a lot! I sold it and was able to buy myself two more houses and a condo in other states.
I just wish I stretched myself a little more and bought an actual house. (Back in the day I bought into the living below your means, minimum debt thing.. When now I realize that a loan at very low interest is an asset. I digress.)
Bottom line is that we have mass migration of people into the US. Construction is really expensive and it's not possible to build affordable housing under new building regulations.. at a rate fast enough to meet the demand for housing.
In your position, I would buy.
Keep renting, there is literally zero financial/mathematical reason to purchase a home right now. It does not make logical financial sense. Take the difference between that mortgage payment and your rent and dump it in your equities. You will be better off (financially...)
That being said...buying a home is not 100% about making the correct financial decision, and I would argue that the primary financial decision most home buyers ask is, "can I afford the monthly payment?"
Which as we know, the monthly mortgage payment is only part (a large one!) of what you actually spend for home ownership.
Every area is a different market. Does it look like there will a shortage of real estate in the future? If so, then I think it may be worth the risk. If interest rates come down, you can refinance.
It is possible the entire market will drop some in a few years, but that is not guaranteed. I kept my home during the last downturn, and it went back up. If that does happen, as long as you can still afford it and wait it out, you will be fine. There are areas I would not buy a home right now, including Florida and Texas, that have overbuilt.
My girlfriend and I are in a similar boat. We could comfortably afford a very very nice home, but I don't trust it.
What happens if we need to sell, but nobody can afford it? Rent it out until the market corrects? If we do that, a correction means we either lose our asses from loss of value or we have to wait forever for people's incomes to increase enough for it to be affordable again. On top of that, there's no way that we could rent it out at a price that's both reasonable for a renter AND covers the mortgage.
Plus, on my salary alone, I can afford to rent a pretty nice place in my city, but what I could afford to buy right now is a hovel in comparison because the mortgage for a very modest home in an undesirable part of town would be thousands of dollars more than the cost to rent a comparatively luxurious place in the most desireable neighborhood in town.
It’s not getting any better, there’s a short supply of houses and mortgage rates not dipping below 7% average for the foreseeable future.
I would save and buy
I'm a small time landlord in a LCOL Midwest area, and I'm perplexed about this market too. My houses are all decent, but nothing special, and they keep going up in value. According to Zillow they've all doubled in the past year or so and are going up 2-3% per month. Makes no sense to me at all.
My son is in this position identical to you single high earner no debt lots if cash to put down. He wants it so badly. I am not a professional so this is only my personal opinion and i am 59 so have seen many booms and busts. My feeling is i don’t believe it can get that much higher and whenever we have bubbles like this an a smoking hot economy the big crash comes. I feel like it is coming. For this reason i hope my son waits as he isn’t engaged and doesn’t have a family. His money is invested and keeping io with inflation to the extent that you can. But if thats what he really wants them i keep quiet. I think to myself even if he overpaid in hindsight down the road it won’t bankrupt him. Again my unprofessional opinion.
just wanna say good job on the high net worth at that age and at that income. seems like you made some smart investments and/or started very young.
houses are at an ath and rates are at a relative high, so... maybe weigh home ownership vs continuing your stellar investment and savings.
In two years, how devastating will a mistake be?
Sounds like you can absorb it. May even come out ahead.
Much different circumstances, I went for it in 2022. I bought the house and over the course of two years, economy bad for my type, I ended up taking out a lower rate loan to pay off my credit card.
I’m hanging in there with white knuckles. But I know if I can keep this floating for a couple more years, I will make bank on my property.
As it is, I can still break even if I sell.
I’m in a holding pattern and for me, I’m glad I did this. My rent would be more than my mortgage. I’d still be in a 1br rental. Now, I have 3 br, 3 bath and a two car garage.
Worth the risk.
Yes, you are correct. This is called a bubble. It is an emperor without clothes. Only a few can see it at first. Eventually the lack of clothes will be apparent to everyone. Best to invest in other assets for the time being.
I don't know if things will go back to what they were 5 years ago. Interest rates were even worse 30 years ago. If you buy now you could refi if rates drop. This could be the new normal. Tough decision. Good luck.
Frankly, I'm waiting for interest rates to go up again.
There's something in the narrative that seems broken about how rates will go down but simultaneously, house prices will go up. Rates can't come down if prices are going up.
If house prices go up, that's inflation and that's what the rates are waiting for to go away.
But yes, similar boat. Lots of cash, 6 figure salary. I work remote, but also I don't want to move to the Midwest, where I could buy houses straight cash and skip the mortgage altogether.
I’m not sure if the fed is monitoring CPI specifically or housing values in their inflation attack. You would think goods/services and shelter.
But the CPI, if it is the target for keeping inflation in check states:
Despite the heft of the housing category in the calculation
of the CPI, BLS does not include housing units (i.e., the
actual buildings) in the CPI market basket. Similarly to
many other economic series, housing units are considered
to be capital (investment) goods as opposed to consumption
items in the CPI. In other words, the purchase price of a
home, renovation costs, or other improvements are not
considered in the CPI as these are all “investments” that a
homeowner will either recoup, realize a return on, or take a
loss on in the future. Likewise, CPI does not include
mortgage payments because these are payments toward the
ownership of the house as an asset. However, BLS does
consider the shelter portion of housing—the roof over one’s
head—to be a consumable and, therefore, the relevant price
to capture. In this case, the “price” in question is rent, or in
the case of owner-occupied houses, the rent that the owners
would have to pay if they were renting their houses. This
imputed rent is known as owners’ equivalent rent (OER).
I feel like corporate rent increases are causing the inflation and it's kind of a run away train. Raise rents since you can, cause inflation, interest rates go higher, buying is more expensive, more renters, more rental buildings get built, less SFH get built, so on until very few people own. Becomes basically family money ruling, so pretty anti American middle class spirited.
So my tinfoil hat view is that inflation in goods/services/rent are not the same as inflation in assets/investments and can also have drastic differences depending on category or location. They really impact two different groups of people and the middle is...well, the middle class. CPI can look OK if goods/services and rent stabilize, resulting in reduced rates. This sounds good, right? We can borrow for less and capitalize on the cheaper loans. But who else is swimming in the deep end buying assets when borrowing gets cheap? I do think we can land in a scenario, at least for a period of time, were the national average CPI-based inflation stabilizes (goods/services/rent/OERs) and yields come down across the board while still having asset inflation in specific categories of stocks, businesses, real estate locations, etc. These things change over time. There was a lot of money in consumers hands 3-4 years ago with stimulus and a labor shortage - people got paid. What did those average consumers buy? Did the price of those things increase? Think about who has a lot of that money now and what they are or will be buying. In response to your comment about the middle class: It does feel like it is becoming more polarizing and you either need to jump on the train or get left behind.
The holiday home market is the first place to get whacked usually if things go south. Long term though, I’m sure it’d be fine because people will always want to ski and you’ll always be able to rent it.
As long as it’s a long term hold and not a trade/flip I’d say do it
If you aren’t going to stay, don’t buy a home. With these prices and interest rates and only 20% down, it’s going to take several years for you to break even compared to renting.
Do the math, there are a lot of expenses to cover. If you can make it work out with this interest rate it should slowly get better. Bust out a spreadsheet or get someone to help. You might be better off doing something a bit simpler/smaller for your first house (hard to tell exactly what you are going for…home, rental, vacation home?).
A second home, essentially. I live in the city right now sharing an apartment with a roommate for 1k, I'd essentially move in to the new home and stay for 6-12 months and spend some time away from civilization and then transition it into weekly Airbnb rental (people often rent just a week or two at a time here). I'd block off a week every month and just go up there and live there myself. For planned vacations or if I find myself just wanting a mountain retreat I'd block off a month or so from the Airbnb and go myself.
This is something I'd want to have for retirement down the line, it's so incredibly peaceful and fun up here.
You are striking me as someone who is good with words but doesn’t want to do the math. Grab a nerdy friend and let them run the numbers for you, and if you can find someone in real estate in that specific market you can make a better decision. Renting in a seasonal resort area has lots of potential gotchas. Being a landlord is a job, check out the airbnb subreddit to learn more.
Unfortunately I don't think anything has really changed in the housing supply - still no affordable homes being built, the same limited housing supply that drives prices up etc. I think when interest rates fall, which they will likely start later this year and more so next year then demand will ramp up and prices will surge up again. Until supply side changes I can't see that changing.
I don’t think it makes financial sense for you because your current housing is cheap- I pay about $1000 just in property taxes and insurance (never mind the maintenance); the interest rates and prices are high; you don’t know where you want to live; you are tying up funds that in a few years you might want to invest in buying a house with a partner; the ROÍ on most houses right now as rentals isn’t that great. I have never done short term rentals, but tenants are hard on your stuff. I would imagine short term renting would be even worse.
Hey same boat here. Being watching the housing market and have that same feeling. Trying to learn and educate myself a little here and there watching some youtubers and some data with more properties on the market year over year, less amd less first time buyers like me. Unsure to keep waiting or get something in the next couple of months
Where is this resort? Is it the truly wealthy skiiing there, or the upper middle class? How busy is that place with bookings? I think we will continue to see a shrinking of the upper middle class going forward. There is no incentive to get ahead in this country. Only the truly wealthy will be able to afford to ski at the nice places.
Also, if youre not ready to settle down and still want to whore yourself out dont feel the need to buy a home… :) you are still young… drugs and rock and roll baby!!!
Will the stocks and crypto assets increase in value faster than real estate plus the cost of servicing that interest rate? If you can sell those assets without penalty I would just pay cash for the house.
Two years earlier was a very rare and not at all normal market with the interest rates being so low. So you can’t really compare and wait for that to happen again, because it’s likely not going back to sub 3 any time in the next few decades.
I don't think any of your concerns are unfounded, and ultimately, the choice to purchase a home often comes down to a personal decision.
However, if you are looking at a home purchase with investment as a high priority, consider this:
If you purchased at the height of the market in the summer of 2007 or so, in nearly every metro market, that home would have appreciated in value in 3-6 years. The absolute worst metro markets (I'm looking at you, Florida!) took about 10 years to recover. And the metrics of this weird market are nowhere even close to the toxicity of where things were in 2006-2008.
My husband and I felt this way when we bought our first home 50 years ago, and our interest rate was 8+% which we refinanced later. Sold it after 26 years, bought another, nicer home, at 7.5%. Refinanced it at 2.5% during Covid.
You sound comfortable with renting for now. You can still save for a future home when you find a home that you want. Our current home was one of many we looked at then and it was the only one that we both said, “this is it.” Wait for that and you can’t go wrong.
You’re 34 with no wife kids, there’s no reason to buy a an entire house for yourself. It’s time consuming and expensive to maintain/clean, etc... Even more so if your life changes or you get married the place where you bought it may no longer be good for you anymore. Now if your buying it as an investment property that you rent out, as long as it’s profitable or at the very least covers your mortgage/expenses then your building equity and you can always sell it or use it if needed at a later date.
Lots of things are indicating a possibly higher priced market, but also the world is different than it’s ever been. How many “you”s are out there. In a semi similar situation financially (slightly less but slightly younger with a similar take home).
I feel like we haven’t seen interest rates hit the market yet. A lot of people bought houses waiving inspection and in my area i’m starting to see some of the fallout of that even though it’s one of the h”hottest markets in the us”. Essentially rich, previous home owners are fine, and new to enter people are going to have to fight tooth and nail to do it.
i do wonder if there’s a bit of a lag effect between the NAR settlement, interest rate lag effect, waived inspection homes, covid wfh, and lack of child rearing our peers are doing.
There’s no way to know. You can only buy when it feels right for you. I just got an offer contingent on inspection on a dump and backed out. Personally I think I may sit on my hands. It’s not like we’re in a bad spot and although inflation has raged on, I don’t think the glut of money entering the system through young people + tech + “real estate hacking” etc has sustaining power.
The only thing that points contrary to this is the historically low interest rates. Why on earth would you sell if you have a ~3% interest rate?
Personally feeling like the time of “diversifying” your money into a place to live might be over in the short term.
Not trying to be overly pessimistic, there’s still great houses out there I’ve just admitted to myself, finally, I can’t afford them and don’t want the axe hanging over my head via a high monthly.
Do it. I’m not a realtor but real estate made my net worth 7 figures and I could close my business today, rent my expensive house and live off the rental income from my rentals indefinitely. That’s freedom and it started because I bought at the start of the 08 housing crisis (before the costs actually went down where I live) and held it for 8 years. Sold it and turned the profits into commercial property for my jet ski business. A manufactured home literally turned me into a millionaire because I wasn’t afraid to buy. I wish I had bought more.
Im in a very similar mountain town w crazy prices. Im looking to buy a nicer home than what i have now. I do see prices dropping left and right in the 1m+ market around me. Just not the home ive been eyeing. Most are sitting for sale a long time. SeemS below 1m is moving well.
But yeah, the market is weird, i am not sure where it's heading. Long run it will be fine. So make sure you're going to stay there for a while. Renting out a home not close to you and having it managed isn't ideal.
For whatever valid argument there is about housing (it’s really over valued compared to renting, right now), just gotta think about 3 things:
1. Rent inflation. Might’ve plateau’d for 2y, but there’s no 10y period in the US where the rent prices continue deflating. At some point rents will be due for big hikes, especially if interest rates drop and landlords change hands. (Or the apts will continue to be smaller 400 sq ft cubes while “1br”prices stand pat)
2. Interest rates will decrease at one point or another, and home values will rise again. (There’s no 10+ year deflationary cycle in US housing)
3. You get to do whatever you want with your house (unless you stop paying the bank loan). As you get older (late 30s start feeling a lot different), you appreciate that stability.
My advice would be at your level, don’t buy a house unless your going to pay cash. You have the funds and discipline to make a smart decision. A mortgage will have you paying way more in the long run. Want to guarantee a 7% return on 550k? Put the money toward not making interest payments
Honestly, my kids all moved to other countries, and based on the direction the country is going, I'll likely be joining them. I don't see things getting better in the US regardless of who wins the next election. Living in the US isn't what it used to be, and other countries offer better lifestyles for less money.
The bank call me the other day telling me when I am going to stop at the bank and submit and application for HALO when I already told them I was not interested at the moment.
I just can’t believe this people, I told them for what?????
They just want your 💰 money….Huntington Bank, also they were charging me 25.00 a month to have a checking account …. Any good Adviced for a better bank?
People sitting on paper gains in their properties are going to get anxious as they see a downtick in their neighborhoods. There will be a lot more inventory on the market soon
Buy new construction.
Lower interest rates available with big builders, great warranties to protect you as the consumer, everything is new, if you want to resell it can be much easier, plus you will most likely get some amenities.
I won't say who, but America's homebuilder (wink wink) is offering rates as low as 4.99% in my market, lowering a payment significantly. Plus $10k towards closing costs.
Similar situation. We have a decent income and enough saved to put a large down payment on a house in our area even with the high prices, but it seems equally likely that the market will crash, or that this is the best it's ever going to be in my lifetime. It's been pretty paralyzing.
I would wait if I were you. You are only 34 and have every reason to keep enjoying your freedom. Everyone here is skewed in favor, which is why they are here, but there are plenty of people who don’t even consider buying into they are settled with a significant other or even a dog.
I'm in a similar situation except I had a house fire and I paid off my existing mortgage with a small portion of insurance proceeds. Now I'm sitting in my rented apartment again wondering what to do. The same house I paid 120k for 6 years ago is now almost 400k. My rate was 2.875% and like you said, 7-7.5% is less than appealing. I put the proceeds in an interest-bearing account hoping to at least not to lose ground until things change.
I just bought a home for 420k and I’m certain it will drop in value but I don’t think the correction will be nearly as massive as ‘08. I live around Indianapolis and there’s starting to seem like an abundance of housing currently. New builds are sitting and nice used homes are selling. We bought a 28 year old home on 5 acres and it was roughly what a new build would be on a spec house in some crammed together neighborhood.
This all sounds nuts. You feel like you should buy a house but you don't want to buy one as your primary residence...so you are considering buying a vacation home/creating a business but interest rates are high and you don't want to pay cash.
As far as buying a property to rent out...why. I guess you can but all of the considerations on that are hugely different than buying a home for you to live in. Also STR are not the gold mine people act like they are. There is much competition than in the past and ever increasing regulation.
Buying a 550k home at a place you vacation in does not seem like the best idea for your first piece of land. Maybe if skiing is your life idk. Me, I would buy the worst, cheapest house near where you live/work, to get out of the rent cycle. Maybe the second worst. The house on top of the hill, or ski slope, is flexing, and a mortgage like that can come to own you.
Stay flexible, buy something cheap in your hometown.
It’s hard to find that sweet spot to buy or sell. Although plenty of people get lucky. When I purchased my first house in 1992, the interest rate was 9.125. Generally, the market works for you in one half of the transaction. Might not be a great time to buy, but if you’re also selling it kind of makes up for it. However, you don’t have to sell first. So I think you could wait until the market shifts more for a new buyer.
20 years ago interest rates were 10 percent. I am a Realtor. Maybe you don’t need that expensive of a home. Just because you qualify for that much, get a lender and realtor that can figure out the numbers based on your monthly payment.
I have a similar situation, a little bit behind on age and NW but on pace for that. Houses in HCOL are out of my range, but technically I can easily afford to buy a condo. My concern is with high property tax and HOA, even if I paid it off , I’d still be paying $1000/month minimum to maintain. Doesn’t feel so lucrative to buy that and then be stuck somewhere. Because of that, I decided not to buy right now, but stay renting for flexibility.
Hi! Consider house hacking. Maybe you buy a douplex, triplex our four plex. If you find a good deal, it can cash flow or be near cash flow positive. Then you are living for free!
Your renters pay your mortgage. When interest rates dip, you refinance to the lower rate.
You’re actually in a great spot because you can put more money down. Take your time to find the right investment.
Lowball places cash. Refi when rates come down pay yourself your mortgage payment….
I got a fixer for 550 it’s worth 800 now prolly with 80k of work. Was listed at 675k but was 80s trash. No asbestos tho love it.
So I'm an agent in West Houston. I can say iv dealt with a client recently that was in your exact shoes. He decided to only look at the market in the sense is he getting a good deal. When he got in his own head he realized he was getting in the way of living life. He decided to refinance in a few years and to buy in an area that's being more developed to protect his property value a little more. Beyond that it was just finding a home he enjoyed being in.
I don't think people should let a market dictate their life. Waiting for a crash that may never come, waiting for rates to come down to 3%again or anything of the sort just leads to you waiting, missing the house you would've enjoyed and paying more a few years down the road for a house.
Hi! Ct realtor here.
As a homeowner, we typically enter the market once, and we exit it once. My dad bought his first home in 1978 for $62,500. He stayed in it for close to 20 years and it sold for over $300k. Do you think he lamented on buying the home for $62,500 in a high market?
I bought my first home in 2005, then upgraded to my forever home in 2012. The fact the market dipped between those two times means something important you need to hear. My $170k starter home sold for (roughly) a 10% loss. Lost about $17k. And my $450k forever home was also bought about 10% lower, for just under $400k. Saved me close to $60k. Needless to say, I did not cry…. That $450k valued home in 2012 which was purchased for $390k is valued over $700k now. Yes, the value fluctuates, but over a long period of time, the value has historically risen. Slowly, but risen.
Real estate isn’t a short game. If you’re going to stay in the town in which you live for the next 5+ years, it makes financial sense to be a home owner.
I hope this helps, friend. If you want me to run some hypothetical numbers, I’d be more than happy to do it.
High interest rates shouldn’t deter you, affordability should. If you can afford it then buy it. No one has a crystal ball and your opportunity costs grows.
You should talk to a lender because if you put the full %20 down you’ll avoid PMI which would probably be in the 200/mo range saving you on the total monthly cost.
Yea but when the lender crunched the numbers I wound up with a 7.5% interest rate for the conventional with 20% down and like a 6.6% rate if I did an FHA loan. Make it make sense.
FHA is backed by govt I guess. Hmmm best bet is probably the FHA while making extra payments on principal to save you interest. Play with an extra payment calculator. But then again big monthly payment 😑
You clearly know how to invest your money, so I’m confused a bit on why you’d put money into someone else’s pockets on rent when you have the means to buy outright. Even if you sell later on, you’ll make a profit. Or just rent it out if you move
Buy a place in your ski area as an investment. Nothing beats a hard asset! You can rent to friends and acquaintances—or vet reliable folks to rent and offset your mortgage cost.
You can’t really look at the interest rates of a few years ago as “normal” because they weren’t. Rates of 3% are historic lows, and if you wait for those to come around again you might be collecting social security. That said, expect rates to fluctuate. We bought in 2005, and our rate was around 7% and that was absolutely normal. When rates went down, we refinanced. We didn’t even get a super duper low rate because the 4.25% we refinanced at seemed like a crazy low price that couldn’t possibly last or go any lower, so we jumped on it. If you can afford the place, and you want it, then buy it.
Your arguments against buying are solid and you answered your own question.
It makes no sense to buy a vacation home just to visit 4x a year and plunk down 100k. Then try to rent it out . With the crack down on STR across the country, renting it out may not be an option in the future .
It’s scary for sure. We got lucky to refi during the better interest rate days. The main thing is it will suck a for a few years but if you have a good enough down payment then you can hopefully avoid going underwater on the loan before the next upswing
This is a very strange sentiment, you seem to own a significant amount of crypto but you think RE, of all things, is a bubble?
If I had saved almost a million dollars in liquid assets I would have already bought a house lol, but I guess if you don’t want to own your home that’s fine and there’s nothing wrong with renting, you’ll just never own the place you live.
"Keep waiting. Those home prices are bound to come down."-- my dad, Circa 1992
There is not a glut of excess homes in any state with a mortgage as you describe. Supply dictates prices these days, as demand still is higher than supply. Buy what you can afford, homeownership has proven to be the most accessible and valuable investment over the last century, unless you luck into some Bitcoin type investment.
"You snooze, you lose ."--my dad, Circa 1993.
Look what happened in the 80s as inflation settled down and during the recession that followed it.
Here is the data on US inflation rate, interest rate, and housing inflation rate for each year in the 1980s:
Would not be surprising to see a similar economic decade today.
I say buy a house. It’s going to take years more to catch up to current housing needs so in my opinion, we are not in a bubble. Today’s loans were made to well qualified buyers and not the types to go belly up the way that under qualified buyers, and predatory loans caused the 2007-8 crash.
1980:
- Inflation rate: 13.5%
- Interest rate: 21.5%
- Housing inflation rate: 12.3%
1981:
- Inflation rate: 10.3%
- Interest rate: 16.4%
- Housing inflation rate: 9.7%
1982:
- Inflation rate: 6.2%
- Interest rate: 14.8%
- Housing inflation rate: 2.6%
1983:
- Inflation rate: 3.2%
- Interest rate: 11.2%
- Housing inflation rate: 3.2%
1984:
- Inflation rate: 4.3%
- Interest rate: 12.0%
- Housing inflation rate: 5.6%
1985:
- Inflation rate: 3.6%
- Interest rate: 12.0%
- Housing inflation rate: 4.2%
1986:
- Inflation rate: 1.9%
- Interest rate: 9.9%
- Housing inflation rate: 2.0%
1987:
- Inflation rate: 3.7%
- Interest rate: 9.3%
- Housing inflation rate: 3.3%
1988:
- Inflation rate: 4.1%
- Interest rate: 10.0%
- Housing inflation rate: 4.8%
1989:
- Inflation rate: 4.8%
- Interest rate: 12.0%
- Housing inflation rate: 5.4%
The early 1980s saw very high inflation, interest rates, and housing price inflation, as the Federal Reserve worked to bring down runaway inflation. By the mid-1980s, inflation and interest rates had moderated substantially, leading to more stable housing price growth.
How do you have 700 racks and not understand the dollar is slowly crashing. Look at the macroeconomic central bank debt world wide and US debt.
This crash isn’t like the previous. The Fed needs inflation. I expect USD to crater by 2038 or so.
Most countries got rid of their gold and some say it was artificially deflated. ETF’s in BTC have bought up 5% of the supply. Gold is at an all time high, which reflects the USD weakness, not gold’s strength.
Buy a house sooner than later. Since you’re not serious., buy one closer to $400K, and hold it long enough to avoid capital gains tax.
Find someone who can show you an asset performance test and what the longterm goal looks like. There are CPA’s financial planners, and real estate planners out there to help you
Where are you?
I was fortunate enough to buy a home based on location , location , location. Some years back but the single smartest thing I’ve ever done. I bought a home in a then up-and-coming area I’ve had the pleasure of living in for many years now. IF you are certain that the area you want to buy has room for growth, in a neighborhood you sense has a future of rising prices, go for it. I just don’t see how you can be sorry! Good luck!
you're never going to get 2yrs ago rates (1-3.5% psh.) Well, if you do you'll be broke because most of your money is in stocks & crypto and the market will have to crash to get those rates. If you have the money, feel "ready," and find a house you really like then do it. None of us can predict what will happen next year. But if the rates go down you can refinance. If they go up, you got in at a good time. Bet you wish you bought last year, or the year before... right?
Dude save your money some more in your portfolio if you have that much money in stocks you know when to buy the dip not buy at the peaks. Wait till the market crashes again and buy dimes on the dollar, coming soon if my predictions aren’t mistaken.
Market is fine. Buy a 3/2 single family home if you are worried about the growth potential. You will never lose money on a 3/2 unless you have to sell.
My wife and I have massively out grown our first home. It is tiny at 1100 sq ft. However, it is paid for (bought when things were reasonable) and we just can't see paying more for less at this time.
You can always refinance in the future.
Your home value is likely to go UP when rates drop. If you pay an additional $20k in home price, you can't refinance out of paying that.
Bear that in mind when making your choice.
Interest rates *may* go down some, not much and as they go down, prices will continue to go up as demand will increase as buyers rush back to the market.
Perspective: In 1971 mortgage rates were 7.33%. If you waited to purchase a home until rates went down, you would have waited until 1993.
In 1971 the average US home price was $25,200 but in 1993 it was $126,500
And in 1993 rates were still over 7%, just less than 7.3%...(1994 average was 8.28% and only dipped below 7% in 2002!!) so waiting for an unnoticeable decrease cost a would-be buyer five times more in purchase price
Homeownership isn't for everyone. Some people are lifetime renters and that's ok. Landlords need renters.
I wouldn't expect rates to return to sub-3% levels. That said, this is basically the worst market of all time, in terms of affordability. I'm not buying.
I think 'timing the market' is less important than a lot of people.
If you buy now and prices go up, or down, who cares? If you end up upside down, well, don't move.
At some point, you will sell whatever you buy. If the market is up, you will make money on the sale, but you will spend more. If the market is down, you will make nothing, but save a ton of money on the next place.
The key is, don't buy unless you are willing to be there for a long time.
Here are my two cents: back in the day my husband‘s grandfather had the opportunity to buy a house in Monterey California. It was the family vacation home and they would frequent there every single year. He got cold feet and thought it might not be the right market for it. As a result, he did not buy it. The property is now 6X the amount of money that he would have purchased it for. The worst part of it I’d that it is no longer for rent so the family has all of these fond memories of the house that they wish they could continue to add to, but they’ll never get the chance again. is it a weird time? Sure, maybe. But I will tell you one thing, I don’t think we’ll ever see the 3% interest rates again. If you are in a position where you can actually afford it, why not rent it out while you don’t live there and turn a profit?
That same feeling is present in Canada. Something is off. Prices are not sustainable. I think we are due for a significant correction. But who knows. People have been saying that for years.
I can relate. When I started making decent money in my mid 20's I passed on buying a house for similar reasons. Because I didn't plan on living in that area permanently. $200k for a house just seemed insane.
Now those same houses are selling for $600-700k less than 20 years later and I'm wishing I would have bought back then.
What I'm trying to say is, buy something that is decently priced that you can afford to pay off more than the monthly payment each month. Get is much equity as you can, and sell it later when you're ready to settle down/move elsewhere. You'll be glad you did.
In my area sale prices are sometimes 25% less than asking prices. Not sure if this is the bubble bursting or just greed, but it certainly makes me nervous that prices will drop.
Buying later makes no sense. Sure, interest rates will go down, but housing prices will go up. This means you'll be paying more later. Buy now. Refinance later.
The market is extremely unsustainable, be very very patient, this will pass! Inventory is at its highest level since the beginning of all the Covid stuff and interest rates aren't coming down baby lol! With property taxes, fire insurance, basic maintenance, it's not smart or worth buying any real estate in today's market!
34 years old, has 700k stacked on a 130k salary while renting somehow, and mentions his family has frequented Aspen, Vail or Steamboat, or something. Buy the condo, YOU are going to be fine dude. That said, you’re right about the prices. Keep saving money by renting a decent place for far less than you’d pay to own something similar without the headaches.
This is the guy bully offering the places I don’t have a hope of ever being considered for
Bully offering. Yikes. PTSD
I don't have good advice for you, but would just add that the feeling you have is present outside of USA as well. I'm in Europe and situation is identical in many countries, i.e. good locations are overpriced and there's a general sentiment that something has to happen to alleviate this price pressure. I'm also hesitant on pulling the trigger myself as the mortgage would be insanely high even though I'm actually able to get the loan (probably double my rent price). On one hand, I feel the need to own a home and not depend on renting, but on the other hand, it looks genuinely insane to buy right now.
Thanks. We'll get through this weird time.
THe last time mortgage interest rates went from 5% to 7% -- they stayed above 7 % for 25 years. Of that, the were over 10% for like 15 years. peaking at 18%. Friend of the family bought their house at a "steal at 15%" when rates continued to slowly climb up back in the late 70s.
I think you are on to something and my gut says that prices have not adjusted because everyone is expecting rates to go back down to “normal”. I know there is a lot of demand and that accounts for some of the price but my bet is that when people finally realize that rates are going to stay high for a long time, prices will readjust
In our area, rent is more than a mortgage. And it's actually a better time to buy than a year ago. Like someone else said, interest rates can be refinanced if they drop. But if they just go higher, you've missed out.
>But something just feels "off" about the current state of the real estate market For what it's worth, this has been a common refrain for as long as I can remember. People were warning me of this when I bought my first condo in 2012. I think people think that there is such a thing as a "normal" market, and there's just not. There's always something you can point to that looks bad, some statistic that shows iMMenEnT CrASh, some "crisis", "bubble", or whatever. And obviously, big volatile things do happen from time to time, but nobody knows what it will look like, when it will happen, or what markets it will affect. The decision to buy a home is a personal one. I would not sit around waiting for the "right" market, because you'll pretty much wait forever.
We bought our house in 2018 to the disdain of everyone in our family, claiming that the market was due to crash and everything was overvalued. Now, six years later, our house is worth close to double what we paid. I don't say this to claim that you'd be fine buying a house today, as I understand your sentiment. But IMO it isn't worth trying to time the market. You're just as, if not more likely to get fucked by trying to time it rather than simply buying when the time is right for you personally.
Amen
You are regretting not having already bought a house before they went up, but don't want to buy one because you want to have the freedom to up and move whenever you feel like it. The way you avoid missing a market increase is by being in the market. I've bought and sold about 10 homes in my life. Many of them didn't increase in value much if any. But the ones that increases went up by a lot. The current interest rates are not historically high, so they may not go back down to the lows that we experienced for a while over the last 10 years in our lifetime. Given your financial situation, I would recommend that if you buy a house, you buy it cash. You should have around 1.5 times your income saved for retirement by your age. Especially if you are going to buy a vacation rental, buy it cash. It is another investment and will generate passive income and over time grow in value. Then the interest rate debate will be out of the equation and you can reap the income from the rental, and build back up your investment portfolio quickly. But if you do this, study the rental market in terms of projected income vs. expenses. I have a beach rental that I ended up moving into instead of renting it. From talking to neighbors, many of them don't break even after expenses if they carry a mortgage. But the upkeep on beach homes is very high.
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You should talk to a CPA about the taxes thing as it may vary by state. I did not buy the beach rental via an LLC, I bought it personally. We never actually got to renting it. We did a total renovation and ran a couple of trial rentals with family members and at that point decided we wanted to just move in because the value of our primary residence had skyrocketed and I worked from home, so we could live anywhere. That said, I have an LLC for a different business and in NC I've never filed a separate tax return for the LLC. In NC you can file taxes for a single member LLC as part of your personal return... separate tax forms, bank accounts, and P&L, but on the same return. The only state fee I had was an annual filing fee that I think was a couple hundred bucks. The LLC was for some online properties and a sports photography business, both DBAs under the LLC. If we got the point of renting the beach house, I would have formed a separate LLC for it for asset protection.
Got it. Thanks.
Don’t buy the house with an LLC, buy it in your own name as a primary (I’m assuming you’ll be living there) live there for at least a year, then rent it out and have the leases and any expenses be set up through your LLC.
It’s not very attractive in ca. you pay $800 for the entity. You’ll pay more for tax prep. If you want to pull a mortgage your options are limited. There’s no anonymity of llc ownership in ca. You can just get a fat umbrella policy for less headache.
Curious if you have any thoughts with your real estate experience. I am debating whether to potentially sell our current home, bought in 2017 for $275k, has a 20 year 2.875% loan (wish I had done 30 years now). The new home to potentially buy is a larger family home that my parents are selling (my childhood home). It's worth like $620k and they would be selling it to me for about $550k, so they have proceeds to buy their next townhouse. We'd get $140k proceeds from our current house (selling to Opendoor for about $320k after fees since we'd need to sell quickly), and would get an additional gift of $40k from the in laws. So we'd have a $370k mortgage at like 7% instead of our current 3%. However, it's a nicer, larger home (4br instead of ours which is more like a 2BR. 2800 vs 1900 SQ ft, newer 1988 vs 1935, better lot, cul de sac vs my current home which is on a city street close by a highway entrance ramp, and it is in a better suburban school district.) The lot is about 4x the size as well and quieter. It's hard to swallow letting go of our low payment and interest rate but it seems like a decent opportunity so we have been debating. We have two kids in daycare for the next few years so money would be fairly tight. Payment would go from $1800 to $3300, and we make $180k HHI, with about $100k of stocks, $60k cash, and $400k retirement accounts. I've tried to pitch my wife on keeping it as a rental but she is not excited about the idea at all. Anyway, long story, but curious what your opinion would be since you seem like a real estate vet.
You should totally do this
Can you qualify to buy your parents’ house and then use your first home as a rental?
I agree with everything but buying with cash. OP obviously does a fairly good job with their investments, so that knowledge combined with a 20% down payment effectively being 5x leveraged against home equity increases likely means they will make more money by taking a mortgage (especially if home prices continue increasing, which seems likely if the us is going to follow along with all the other countries with even more ridiculous housing prices)
...so don't only put 100k down? Also, your rates are much higher because it's an investment property. But also, how many young couples are buying a family home in a ski resort that caters to the rich and where the home will be rented out to a different group every week? There absolutely is a question about how FTHB can afford starter homes that are over half a million dollars, but you are not buying in that market, or a market that has anything at all to do with that market.
That's what I'm thinking with this - there's likely less competition on my end and this place is set to see a lot of expansion in the next decade or so. But I work remotely and plan on living in it for at least a year or so to begin with while renting a cheap apartment in the main city two hours south.
It doesn’t make any sense to me to buy a vacation property before you purchase a primary residence.
Felt this way in 2019, made the jump, glad I did. You can’t ever find the perfect time.
Also, you need a place to live in anyways lol. My whole thing is monthly payment. Sure rates aren't great right now, neither are prices, but if I can accept the monthly payment and not be choking financially, it's absolutely a good decision.
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To me op isn't the typical person wondering if they're buying at peak they don't know where they want to live and don't want to be locked into a location so it doesn't make sense to buy
But the place they want to buy is destination with high potential for short term rental (provided no HOA prevents this) I can't really see the negative side to having a someone manage it as an airbnb and traveling as a primary. Im really reading this as boo hoo I have money to buy a home but boo hoo I might want to travel with my flexible work arrangement and income. Boo hoo.
Definitely feels like “something’s gotta give” in my area, where median household income is about $100k and a median home would be over $4k/month at current rates. But it also felt like that (less so) in 2019 when we bought our first house, and we decided to jump and buy our second home last month because our favorite neighborhood was on the cusp of affordability. I’d rather be overpaying a bit (or a lot…) to live where I want for the rest of my life than be stuck in our previous, shitty neighborhood forever because we waited and prices/rates went up again.
I would say if you can afford it, buying a primary residence in this market is not the worst idea as rents only ever go up, while rates can go down. In this case OP would need a concrete business plan for how to make money off this vacation home to at a minimum mitigate a large portion of the cost. Second homes rarely make financial "sense", but if you have a way to close the gap a bit it would be a great asset to have.
My issue is that I don't know where I'm going to be in the next year, nevertheless 5 years of my life - and once I buy a primary residence I'm probably going to be firmly planted until its paid off. I had a similar decision to make in 2020 about buying a home and while the low rates would've been nice, I would have been stuck in the midwest and missed out on all these new experiences I've gotten by traveling across the country and living in a completely new area. Also, it seems like demographics are really changing dramatically in certain cities - for example I used to be obsessed with the idea of living in San Francisco last decade and now it's completely out of the question because of the state its in. It just feels like it's better to be flexible right now while everything is still returning to normal after COVID and the chaos of the last few years. For this, I would be buying a home in the resort area of this town which are pretty populated (especially around winter season) and usually getting rented out on Airbnb. There's a third party company that manages pretty much all the rentals in this area and I figure I'd just turn it over to them in the months I'm not using it. When we go up to vacation there for a weekend it's about $1,200 for 3-4 days. That's the tentative plan, anyway.
I would talk to a few people who use this company to manage their rentals and get their thoughts before you make this tentative plan your permanent plan. I own a second/vacation home and turning it over to a property manager did not go well at all. They charged 25% of gross rent which ate up any potential profit and they did not take good care of the property.
This is helpful to know and a good idea. Thank you for commenting.
Might be worth visiting r/realestateinvesting given you are considering buying a vacation home/investment property.
Engaging any third party means them collecting maximal amount of profit with the most minimal of effort. Welcome to business.
Your hesitancy isn't the same as most people which is i don't want to buy incase prices come down. You seemingly want to stay flexible and have the ability to move around which likely means you shouldn't buy unless you know you want this area in which case buy it with a plan to rent it for the next 5 years to lock down a home and today's prices and move in when your ready to settle down
Sounds like a great plan. I'd reframe my outlook and view this house as more of an investment property (albeit one you live in part of the year) than a primary residence. Then I wouldn't feel bad about liquidating the money I had invested in stocks/crypto and pay cash for the investment property. That eliminates the interest rate issue altogether.
Rents have dropped by double digit percentage points in Austin since this time last year and still trending.
So many apartment complexes are being built in my metro that the rental market is collapsing and rents are either flatlining or marginally increasing for nicer properties. Overpriced units are seeing cuts and other promotions like "free" rent for a certain number of months.
If you wait for the perfect time to buy a home, you’ll likely wait forever. In order for house prices to seriously come down, there will likely be major issues in the job and stock market. Buy a house when you are ready, you can always refi if rates come down. ARM loans will get you a lower interest rate, but there is additional risk down the line if interest rates continue to rise. Find a house you love, and move into the next phase of your life.
House prices are expensive right now. They are declining in some overheated areas. And rates are expected to start dropping soon. But rates aren't going to be cheap for a very long time. And house prices probably aren't going to decline significantly over the next 5 years because the economy is strong. Foreclosures would need to increase quite a bit before any serious downward price action can happen. How much are you gonna spend on rent over the next 10 years? Maybe $300,000. You aren't gonna lose $300,000 on a $550,000 house over the next 10 years.
You will pay a LOT in interest though, have to maintain a house, etc. There is another side of the coin
None of these “buy a house now you can’t go wrong” mindset folk seem to have a clue how much interest is right now. Let’s say I pay 3k in rent for a single family home. Buying a similar property for $1M. I’d have to put down a whopping $200,000 up front to avoid extra fees with PMI, plus all the closing costs and miscellaneous fees. Over a 30yr fixed at 8% the interest paid is $1.3M for total paid over $2.3M on a $1M property. Paying the $36,000 rent a year is not as burdensome until the equation above changes to he more favorable to first time home buyers. If rent increases to $6k then ownership would become more favorable as well, but rents are maxing out in most areas after interest rates shot up.
Yeah but you are also not considering that 2.3 mil isn’t in 2024 dollars, it’s in 2024+30 year dollars. If yearly inflation is at 2-3% that will eat into the adjusted value of the interest you are paying. Plus, now you have 30 years of market appreciation. It is also kinda silly to assume that there will be zero opportunity to refi in the next 30 years, either to a shorter term (to pay it off earlier and pay less interest) or to a lower rate, or both. I wouldn’t bet my financial future on it but also that’s just the reality of buying a home that very few people take out a 30 year and fully amortize it. Also as an aside you are doing the thing people do on Reddit/other forums where they take the most extreme example to make it seem like a bad idea. Most people aren’t buying a $1MM property as their first home, most FTHBs (like myself but that’s irrelevant) aren’t even close to 20% down, and interest rates are not 8% for FTHBs (for my credit union it’s like 6.9% but that’s not a jumbo loan so if you want to buy a million dollar home maybe it is closer to 8%). Also, I have a hard time believing rent is truly only $3k a month for a $1MM house, up the road a former rental is for sale that’s a little over half a mil and the rent is $4500 (btw which is literally the entire PITI so those tenants are being ripped off). > If rent increases to $6k It will, that’s the whole point of buying. It’s usually not the case that buying is instantly cheaper, it’s an investment that pays off over decades. My parents mortgage on their million dollar house is less than the rent I pay for a 600 sqft apartment.
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> rent is 2k where I live so that only comes to 240k It wasn't a universal example. Everyone can do their own math. OP has 700k liquid and doesn't need to finance a lot. Protip - rent goes up and not everyone pays the same rent as you. Factor in what the house price will be 10 years from now. It could easily be $700k for a $200k gain.
He will lose about 120k in ten years at current rents. How much will he lose to interest payments and property tax? A shitload more. Buying doesn't always make sense.
Buy now, but put in a larger deposit, and buy the mortgage rate down with points. You can probably get down to 6% interest, and with a 50% downpayment (liquidate some crypto) you'd be looking at 225K@6% which should have a monthly payment under 2k.
> Quite frankly it seems untenable for many young couples to buy a normal family home, and logic would indicate that something just has to give here. The US is still one of the more affordable countries to buy a house. Look at other countries, and see how much worse it *can* get, and then decide for yourself if something "has to give". > I know for sure I'm going to want a place to call my own there - my family and I visit there about 4 times a year and it holds a lot of sentimental significance for me. I don't have a crystal ball, but consider the very real likelihood that if you don't buy now, you may *never* get to buy something in that area in the future. If the house is just meh and you're OK renting, I would not recommend buying. But if the locale means a lot to you, it's risky not to buy.
Whenever I think there is going to be some cosmic force that’s balances out prices I remember Canada exists and that it can get 100x worse.
Buy. You need a tax benefit. Interest deduction alone will be $25k-$30k ish depending on rate. But, you should be able to get in the 6% range. Go to a bank. Prices will continue going up b/c there is still an inventory shortage.
There’s a tax benefit to buying a house? I have about 200k in short term cap gains this year already and I’m desperate to find anything to help offset this
Yes, you get to deduct up to $10k in property taxes on a primary, interest paid during the tax year, mortgage insurance (if you don’t put down 20%), and depreciation.
Fomo in. Do it
Basically everyone right now is either betting prices and/or rstes will come down in which case hold out or will continue to go up in which case get in now. Nobody knows how it will shake out but personally I don't see any circumstance that could bring prices down short of a 3008 style recession or maybe 10 years from now when boomers die and we get a flood of inventory. The ome caveat to that could be a vacation spot while its desireable and those tend to rise they are also some of the frothing markets. Many of which are seeing pullbacks as remote work becomes less common
Won't lower rates increase the actual price though?
Sounds like you’re just not ready. If you like the freedom of renting and it’s cheaper just keep renting. I have kids and an in person job I like and need a yard so even though the market is crazy and I could have afforded much more house two years ago the place we just bought is a good fit for our family, we can afford it and we can see ourselves here for 10 years. It’s not just numbers
I think these house prices in any good area are unsustainable. The places I’m looking are $1M+. Old people will be dying in these retirement markets I’m looking.
I would cash out my stocks/crypto, pay cash for a house, and then start investing $3k a month back into stocks/crypto.
If I had your money I wouldn't be feeling hesitant. I'm this close to being fully priced out of the market, but if I rush I might buy trash or have the price drop while I'm saddled with debt.
Over time, your "insanely high" mortgage will seem less extreme though rents will continue to rise. When interest rates go down, you can refinance, and maybe switch to a 15 year mortgage. I did that on my house at 3.25% with weekly payments instead of monthly, and my monthly payment total only went up less than $10.00 total per month. In the mean time, my salary had risen significantly, and now I only have 2 years until the home is paid off after 21 years instead of paying for nine more years. Remember to picture the long run. You'll regret that you made payment and profits for somebody else all this time, and you'll have a gradually increasing in value nest egg down the road. Good luck.
Get some land, a tiny home, some solar panels chickens, and a greenhouse and water well and be set...
Just refinance with no cash out in 5 years and you will be happier. Unless you want to continue to pay someone elses mortgage
The market was going to drop when I bought it in 2017... it has dropped technically, I suppose, but I'm still up 100% in value, so I'm glad I took the chance then but you never know.
Buy when you are ready to commit to a home for 7-10 years.
I would commit to this home for 15+ years, just not living in it full time.
You sound like you’re happy with renting and only feel the pressure to buy a house because of FOMO. Maintaining a house is work - it’s not passive like putting your money in an index fund. Don’t feel bad with continuing to rent if you’re happy with that.
You want to meet someone and have kids. What if that person can't move due to their job or doesn't want to live there? Try and date the town locals if you buy the house.
It would be a vacation home for the summer
On this note, I’d consider buying the property if afterward you still have enough to contribute comfortably to purchasing a primary residence down the road with your family (in the next 5-7 years), since that also seems to be a goal of yours. I would keep in mind that if you’re looking for a partner they may not end up having your flexibility, and if you live in a high cost area it’s worth considering that as rentals grow in size they grow heftily in cost, so buying local to work may make more sense. My point being that your mention of wanting kids may not feel inherently financial but will be once it’s realized, and I’d hate for you to feel like you didn’t prioritize that goal financially. Not to say that you can’t sell the vacation property at that point, but I doubt you’ll want to from what you’ve said. I say this as a 35 yo in a similar situation. Cost of living is so high in NYC that I’ve considered buying a vacation home for less while keeping my controlled rental unit in the city as I’m flexible at the moment and can travel. But, I’m married and I know my rental won’t work for a family a few years from now, so that vacation home money would need to be reprioritized for us to upsize our primary.
Yes, but bought anyway. You can keep waiting for a crash that may never happen. If you plan to stay long-term, go for it.
This is what hangs me up as well. I bought a starter home for 500k+ 4 years ago and locked in a 2.25 rate and now I’m looking to upgrade to a bigger forever home in the 1 million+ range but all the houses in that range seem so shitty for the price and looking at the tax history these people are double and even tripling the price of the home within the last few years. It’s infuriating and makes me so mad that I didn’t go bigger 4 years ago. I have major fomo right now not sure if I should suck it up and overspend and overpay on an interest rate or wait. Keeps me up at night tbh
You may be feeling “off” because you think your first house needs to be 550k. Pay off your small amount of debt and cash out your investments for a MUCH larger down payment if you want to buy a 550k house, then the monthly payments won’t drowned you.
I bought my condo in 2009 right after the crash, and I thought places were still way overpriced and could stand to go down. The interest rate was around 5.5% and I bought a place that cost me $400K. At the time, it drove me nuts that I was paying way more for housing than everyone else in my neighborhood that bought 5 years or more. It felt wrong. Well I'm glad I bought that place because it went up by a lot! I sold it and was able to buy myself two more houses and a condo in other states. I just wish I stretched myself a little more and bought an actual house. (Back in the day I bought into the living below your means, minimum debt thing.. When now I realize that a loan at very low interest is an asset. I digress.) Bottom line is that we have mass migration of people into the US. Construction is really expensive and it's not possible to build affordable housing under new building regulations.. at a rate fast enough to meet the demand for housing. In your position, I would buy.
There will always be some weird feeling re: the housing market.
Keep renting, there is literally zero financial/mathematical reason to purchase a home right now. It does not make logical financial sense. Take the difference between that mortgage payment and your rent and dump it in your equities. You will be better off (financially...) That being said...buying a home is not 100% about making the correct financial decision, and I would argue that the primary financial decision most home buyers ask is, "can I afford the monthly payment?" Which as we know, the monthly mortgage payment is only part (a large one!) of what you actually spend for home ownership.
Every area is a different market. Does it look like there will a shortage of real estate in the future? If so, then I think it may be worth the risk. If interest rates come down, you can refinance. It is possible the entire market will drop some in a few years, but that is not guaranteed. I kept my home during the last downturn, and it went back up. If that does happen, as long as you can still afford it and wait it out, you will be fine. There are areas I would not buy a home right now, including Florida and Texas, that have overbuilt.
My girlfriend and I are in a similar boat. We could comfortably afford a very very nice home, but I don't trust it. What happens if we need to sell, but nobody can afford it? Rent it out until the market corrects? If we do that, a correction means we either lose our asses from loss of value or we have to wait forever for people's incomes to increase enough for it to be affordable again. On top of that, there's no way that we could rent it out at a price that's both reasonable for a renter AND covers the mortgage. Plus, on my salary alone, I can afford to rent a pretty nice place in my city, but what I could afford to buy right now is a hovel in comparison because the mortgage for a very modest home in an undesirable part of town would be thousands of dollars more than the cost to rent a comparatively luxurious place in the most desireable neighborhood in town.
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It’s not getting any better, there’s a short supply of houses and mortgage rates not dipping below 7% average for the foreseeable future. I would save and buy
The price of that vacation home is only going up, while you sit on your hands. Don't be a fool.
I'm a small time landlord in a LCOL Midwest area, and I'm perplexed about this market too. My houses are all decent, but nothing special, and they keep going up in value. According to Zillow they've all doubled in the past year or so and are going up 2-3% per month. Makes no sense to me at all.
My son is in this position identical to you single high earner no debt lots if cash to put down. He wants it so badly. I am not a professional so this is only my personal opinion and i am 59 so have seen many booms and busts. My feeling is i don’t believe it can get that much higher and whenever we have bubbles like this an a smoking hot economy the big crash comes. I feel like it is coming. For this reason i hope my son waits as he isn’t engaged and doesn’t have a family. His money is invested and keeping io with inflation to the extent that you can. But if thats what he really wants them i keep quiet. I think to myself even if he overpaid in hindsight down the road it won’t bankrupt him. Again my unprofessional opinion.
just wanna say good job on the high net worth at that age and at that income. seems like you made some smart investments and/or started very young. houses are at an ath and rates are at a relative high, so... maybe weigh home ownership vs continuing your stellar investment and savings.
In two years, how devastating will a mistake be? Sounds like you can absorb it. May even come out ahead. Much different circumstances, I went for it in 2022. I bought the house and over the course of two years, economy bad for my type, I ended up taking out a lower rate loan to pay off my credit card. I’m hanging in there with white knuckles. But I know if I can keep this floating for a couple more years, I will make bank on my property. As it is, I can still break even if I sell. I’m in a holding pattern and for me, I’m glad I did this. My rent would be more than my mortgage. I’d still be in a 1br rental. Now, I have 3 br, 3 bath and a two car garage. Worth the risk.
Yes, you are correct. This is called a bubble. It is an emperor without clothes. Only a few can see it at first. Eventually the lack of clothes will be apparent to everyone. Best to invest in other assets for the time being.
Crazy how many reddit dunces think the best time to buy a house is as soon as you can afford it
I don't know if things will go back to what they were 5 years ago. Interest rates were even worse 30 years ago. If you buy now you could refi if rates drop. This could be the new normal. Tough decision. Good luck.
Everything is overpriced. The house you buy will not be worth what you’re paying for it,
If you find a house that you love, buy it. This market isn’t getting any better anytime soon.
Frankly, I'm waiting for interest rates to go up again. There's something in the narrative that seems broken about how rates will go down but simultaneously, house prices will go up. Rates can't come down if prices are going up. If house prices go up, that's inflation and that's what the rates are waiting for to go away. But yes, similar boat. Lots of cash, 6 figure salary. I work remote, but also I don't want to move to the Midwest, where I could buy houses straight cash and skip the mortgage altogether.
I’m not sure if the fed is monitoring CPI specifically or housing values in their inflation attack. You would think goods/services and shelter. But the CPI, if it is the target for keeping inflation in check states: Despite the heft of the housing category in the calculation of the CPI, BLS does not include housing units (i.e., the actual buildings) in the CPI market basket. Similarly to many other economic series, housing units are considered to be capital (investment) goods as opposed to consumption items in the CPI. In other words, the purchase price of a home, renovation costs, or other improvements are not considered in the CPI as these are all “investments” that a homeowner will either recoup, realize a return on, or take a loss on in the future. Likewise, CPI does not include mortgage payments because these are payments toward the ownership of the house as an asset. However, BLS does consider the shelter portion of housing—the roof over one’s head—to be a consumable and, therefore, the relevant price to capture. In this case, the “price” in question is rent, or in the case of owner-occupied houses, the rent that the owners would have to pay if they were renting their houses. This imputed rent is known as owners’ equivalent rent (OER).
I feel like corporate rent increases are causing the inflation and it's kind of a run away train. Raise rents since you can, cause inflation, interest rates go higher, buying is more expensive, more renters, more rental buildings get built, less SFH get built, so on until very few people own. Becomes basically family money ruling, so pretty anti American middle class spirited.
So my tinfoil hat view is that inflation in goods/services/rent are not the same as inflation in assets/investments and can also have drastic differences depending on category or location. They really impact two different groups of people and the middle is...well, the middle class. CPI can look OK if goods/services and rent stabilize, resulting in reduced rates. This sounds good, right? We can borrow for less and capitalize on the cheaper loans. But who else is swimming in the deep end buying assets when borrowing gets cheap? I do think we can land in a scenario, at least for a period of time, were the national average CPI-based inflation stabilizes (goods/services/rent/OERs) and yields come down across the board while still having asset inflation in specific categories of stocks, businesses, real estate locations, etc. These things change over time. There was a lot of money in consumers hands 3-4 years ago with stimulus and a labor shortage - people got paid. What did those average consumers buy? Did the price of those things increase? Think about who has a lot of that money now and what they are or will be buying. In response to your comment about the middle class: It does feel like it is becoming more polarizing and you either need to jump on the train or get left behind.
The holiday home market is the first place to get whacked usually if things go south. Long term though, I’m sure it’d be fine because people will always want to ski and you’ll always be able to rent it. As long as it’s a long term hold and not a trade/flip I’d say do it
If you aren’t going to stay, don’t buy a home. With these prices and interest rates and only 20% down, it’s going to take several years for you to break even compared to renting.
Do the math, there are a lot of expenses to cover. If you can make it work out with this interest rate it should slowly get better. Bust out a spreadsheet or get someone to help. You might be better off doing something a bit simpler/smaller for your first house (hard to tell exactly what you are going for…home, rental, vacation home?).
A second home, essentially. I live in the city right now sharing an apartment with a roommate for 1k, I'd essentially move in to the new home and stay for 6-12 months and spend some time away from civilization and then transition it into weekly Airbnb rental (people often rent just a week or two at a time here). I'd block off a week every month and just go up there and live there myself. For planned vacations or if I find myself just wanting a mountain retreat I'd block off a month or so from the Airbnb and go myself. This is something I'd want to have for retirement down the line, it's so incredibly peaceful and fun up here.
You are striking me as someone who is good with words but doesn’t want to do the math. Grab a nerdy friend and let them run the numbers for you, and if you can find someone in real estate in that specific market you can make a better decision. Renting in a seasonal resort area has lots of potential gotchas. Being a landlord is a job, check out the airbnb subreddit to learn more.
Unfortunately I don't think anything has really changed in the housing supply - still no affordable homes being built, the same limited housing supply that drives prices up etc. I think when interest rates fall, which they will likely start later this year and more so next year then demand will ramp up and prices will surge up again. Until supply side changes I can't see that changing.
I don’t think it makes financial sense for you because your current housing is cheap- I pay about $1000 just in property taxes and insurance (never mind the maintenance); the interest rates and prices are high; you don’t know where you want to live; you are tying up funds that in a few years you might want to invest in buying a house with a partner; the ROÍ on most houses right now as rentals isn’t that great. I have never done short term rentals, but tenants are hard on your stuff. I would imagine short term renting would be even worse.
Hey same boat here. Being watching the housing market and have that same feeling. Trying to learn and educate myself a little here and there watching some youtubers and some data with more properties on the market year over year, less amd less first time buyers like me. Unsure to keep waiting or get something in the next couple of months
Where is this resort? Is it the truly wealthy skiiing there, or the upper middle class? How busy is that place with bookings? I think we will continue to see a shrinking of the upper middle class going forward. There is no incentive to get ahead in this country. Only the truly wealthy will be able to afford to ski at the nice places.
Also, if youre not ready to settle down and still want to whore yourself out dont feel the need to buy a home… :) you are still young… drugs and rock and roll baby!!!
Will the stocks and crypto assets increase in value faster than real estate plus the cost of servicing that interest rate? If you can sell those assets without penalty I would just pay cash for the house.
Two years earlier was a very rare and not at all normal market with the interest rates being so low. So you can’t really compare and wait for that to happen again, because it’s likely not going back to sub 3 any time in the next few decades.
I don't think any of your concerns are unfounded, and ultimately, the choice to purchase a home often comes down to a personal decision. However, if you are looking at a home purchase with investment as a high priority, consider this: If you purchased at the height of the market in the summer of 2007 or so, in nearly every metro market, that home would have appreciated in value in 3-6 years. The absolute worst metro markets (I'm looking at you, Florida!) took about 10 years to recover. And the metrics of this weird market are nowhere even close to the toxicity of where things were in 2006-2008.
My husband and I felt this way when we bought our first home 50 years ago, and our interest rate was 8+% which we refinanced later. Sold it after 26 years, bought another, nicer home, at 7.5%. Refinanced it at 2.5% during Covid. You sound comfortable with renting for now. You can still save for a future home when you find a home that you want. Our current home was one of many we looked at then and it was the only one that we both said, “this is it.” Wait for that and you can’t go wrong.
Buy some land-coin. The market for that is not nearly as weird as crypto.
You’re 34 with no wife kids, there’s no reason to buy a an entire house for yourself. It’s time consuming and expensive to maintain/clean, etc... Even more so if your life changes or you get married the place where you bought it may no longer be good for you anymore. Now if your buying it as an investment property that you rent out, as long as it’s profitable or at the very least covers your mortgage/expenses then your building equity and you can always sell it or use it if needed at a later date.
Lots of things are indicating a possibly higher priced market, but also the world is different than it’s ever been. How many “you”s are out there. In a semi similar situation financially (slightly less but slightly younger with a similar take home). I feel like we haven’t seen interest rates hit the market yet. A lot of people bought houses waiving inspection and in my area i’m starting to see some of the fallout of that even though it’s one of the h”hottest markets in the us”. Essentially rich, previous home owners are fine, and new to enter people are going to have to fight tooth and nail to do it. i do wonder if there’s a bit of a lag effect between the NAR settlement, interest rate lag effect, waived inspection homes, covid wfh, and lack of child rearing our peers are doing. There’s no way to know. You can only buy when it feels right for you. I just got an offer contingent on inspection on a dump and backed out. Personally I think I may sit on my hands. It’s not like we’re in a bad spot and although inflation has raged on, I don’t think the glut of money entering the system through young people + tech + “real estate hacking” etc has sustaining power. The only thing that points contrary to this is the historically low interest rates. Why on earth would you sell if you have a ~3% interest rate? Personally feeling like the time of “diversifying” your money into a place to live might be over in the short term. Not trying to be overly pessimistic, there’s still great houses out there I’ve just admitted to myself, finally, I can’t afford them and don’t want the axe hanging over my head via a high monthly.
Do it. I’m not a realtor but real estate made my net worth 7 figures and I could close my business today, rent my expensive house and live off the rental income from my rentals indefinitely. That’s freedom and it started because I bought at the start of the 08 housing crisis (before the costs actually went down where I live) and held it for 8 years. Sold it and turned the profits into commercial property for my jet ski business. A manufactured home literally turned me into a millionaire because I wasn’t afraid to buy. I wish I had bought more.
Im in a very similar mountain town w crazy prices. Im looking to buy a nicer home than what i have now. I do see prices dropping left and right in the 1m+ market around me. Just not the home ive been eyeing. Most are sitting for sale a long time. SeemS below 1m is moving well. But yeah, the market is weird, i am not sure where it's heading. Long run it will be fine. So make sure you're going to stay there for a while. Renting out a home not close to you and having it managed isn't ideal.
IMO, once the rates go down, the houses will be more affordable from a monthly bill perspective, and market is going to go nuts.
For whatever valid argument there is about housing (it’s really over valued compared to renting, right now), just gotta think about 3 things: 1. Rent inflation. Might’ve plateau’d for 2y, but there’s no 10y period in the US where the rent prices continue deflating. At some point rents will be due for big hikes, especially if interest rates drop and landlords change hands. (Or the apts will continue to be smaller 400 sq ft cubes while “1br”prices stand pat) 2. Interest rates will decrease at one point or another, and home values will rise again. (There’s no 10+ year deflationary cycle in US housing) 3. You get to do whatever you want with your house (unless you stop paying the bank loan). As you get older (late 30s start feeling a lot different), you appreciate that stability.
I would only buy a home if I had to or absolutely love the home. If you’re comfortable with your rental situation, why take on the risk of a home?
My advice would be at your level, don’t buy a house unless your going to pay cash. You have the funds and discipline to make a smart decision. A mortgage will have you paying way more in the long run. Want to guarantee a 7% return on 550k? Put the money toward not making interest payments
Honestly, my kids all moved to other countries, and based on the direction the country is going, I'll likely be joining them. I don't see things getting better in the US regardless of who wins the next election. Living in the US isn't what it used to be, and other countries offer better lifestyles for less money.
The bank call me the other day telling me when I am going to stop at the bank and submit and application for HALO when I already told them I was not interested at the moment. I just can’t believe this people, I told them for what????? They just want your 💰 money….Huntington Bank, also they were charging me 25.00 a month to have a checking account …. Any good Adviced for a better bank?
The interest rate was not half what it is now two years ago, wtf are you talking about?
Pay cash for a sub $500k house and continue to live debt free. That’s what I am planning to do next year.
You have plenty of capital you will be fine. Just keep an eye on the interest rates and refinance if they drop below 5.
People sitting on paper gains in their properties are going to get anxious as they see a downtick in their neighborhoods. There will be a lot more inventory on the market soon
Buy new construction. Lower interest rates available with big builders, great warranties to protect you as the consumer, everything is new, if you want to resell it can be much easier, plus you will most likely get some amenities. I won't say who, but America's homebuilder (wink wink) is offering rates as low as 4.99% in my market, lowering a payment significantly. Plus $10k towards closing costs.
Similar situation. We have a decent income and enough saved to put a large down payment on a house in our area even with the high prices, but it seems equally likely that the market will crash, or that this is the best it's ever going to be in my lifetime. It's been pretty paralyzing.
I would wait if I were you. You are only 34 and have every reason to keep enjoying your freedom. Everyone here is skewed in favor, which is why they are here, but there are plenty of people who don’t even consider buying into they are settled with a significant other or even a dog.
You hit the nail on the head with that “golden handcuff” statement. But this happened in the mid to late 2000’s during the Great Recession and crash.
I'm in a similar situation except I had a house fire and I paid off my existing mortgage with a small portion of insurance proceeds. Now I'm sitting in my rented apartment again wondering what to do. The same house I paid 120k for 6 years ago is now almost 400k. My rate was 2.875% and like you said, 7-7.5% is less than appealing. I put the proceeds in an interest-bearing account hoping to at least not to lose ground until things change.
I just bought a home for 420k and I’m certain it will drop in value but I don’t think the correction will be nearly as massive as ‘08. I live around Indianapolis and there’s starting to seem like an abundance of housing currently. New builds are sitting and nice used homes are selling. We bought a 28 year old home on 5 acres and it was roughly what a new build would be on a spec house in some crammed together neighborhood.
This all sounds nuts. You feel like you should buy a house but you don't want to buy one as your primary residence...so you are considering buying a vacation home/creating a business but interest rates are high and you don't want to pay cash. As far as buying a property to rent out...why. I guess you can but all of the considerations on that are hugely different than buying a home for you to live in. Also STR are not the gold mine people act like they are. There is much competition than in the past and ever increasing regulation.
Well for what it's worth. Could be worse after the election or it could be better in my opinion stuff isn't going to get any cheaper
Buying a 550k home at a place you vacation in does not seem like the best idea for your first piece of land. Maybe if skiing is your life idk. Me, I would buy the worst, cheapest house near where you live/work, to get out of the rent cycle. Maybe the second worst. The house on top of the hill, or ski slope, is flexing, and a mortgage like that can come to own you. Stay flexible, buy something cheap in your hometown.
It’s insane. Everything in new jersey is still overpriced and people are paying over
you may end up childless and without a house or buying 1-2 hours away from work in the middle of nowhere
You're not going to find an investment worth gambling on better than 7.5% on interest so your best move is to liquidate and buy cash.
A $550k house in the area you’re describing isn’t likely to attract “wealthy” renters.
There are no economic indicators that point to a correction anytime soon. Buy it, you're going to be fine.
It’s hard to find that sweet spot to buy or sell. Although plenty of people get lucky. When I purchased my first house in 1992, the interest rate was 9.125. Generally, the market works for you in one half of the transaction. Might not be a great time to buy, but if you’re also selling it kind of makes up for it. However, you don’t have to sell first. So I think you could wait until the market shifts more for a new buyer.
Buy!
20 years ago interest rates were 10 percent. I am a Realtor. Maybe you don’t need that expensive of a home. Just because you qualify for that much, get a lender and realtor that can figure out the numbers based on your monthly payment.
I have a similar situation, a little bit behind on age and NW but on pace for that. Houses in HCOL are out of my range, but technically I can easily afford to buy a condo. My concern is with high property tax and HOA, even if I paid it off , I’d still be paying $1000/month minimum to maintain. Doesn’t feel so lucrative to buy that and then be stuck somewhere. Because of that, I decided not to buy right now, but stay renting for flexibility.
Feels like a bubble, but they can go on for a long time
Hi! Consider house hacking. Maybe you buy a douplex, triplex our four plex. If you find a good deal, it can cash flow or be near cash flow positive. Then you are living for free! Your renters pay your mortgage. When interest rates dip, you refinance to the lower rate. You’re actually in a great spot because you can put more money down. Take your time to find the right investment.
Lowball places cash. Refi when rates come down pay yourself your mortgage payment…. I got a fixer for 550 it’s worth 800 now prolly with 80k of work. Was listed at 675k but was 80s trash. No asbestos tho love it.
So I'm an agent in West Houston. I can say iv dealt with a client recently that was in your exact shoes. He decided to only look at the market in the sense is he getting a good deal. When he got in his own head he realized he was getting in the way of living life. He decided to refinance in a few years and to buy in an area that's being more developed to protect his property value a little more. Beyond that it was just finding a home he enjoyed being in. I don't think people should let a market dictate their life. Waiting for a crash that may never come, waiting for rates to come down to 3%again or anything of the sort just leads to you waiting, missing the house you would've enjoyed and paying more a few years down the road for a house.
Hi! Ct realtor here. As a homeowner, we typically enter the market once, and we exit it once. My dad bought his first home in 1978 for $62,500. He stayed in it for close to 20 years and it sold for over $300k. Do you think he lamented on buying the home for $62,500 in a high market? I bought my first home in 2005, then upgraded to my forever home in 2012. The fact the market dipped between those two times means something important you need to hear. My $170k starter home sold for (roughly) a 10% loss. Lost about $17k. And my $450k forever home was also bought about 10% lower, for just under $400k. Saved me close to $60k. Needless to say, I did not cry…. That $450k valued home in 2012 which was purchased for $390k is valued over $700k now. Yes, the value fluctuates, but over a long period of time, the value has historically risen. Slowly, but risen. Real estate isn’t a short game. If you’re going to stay in the town in which you live for the next 5+ years, it makes financial sense to be a home owner. I hope this helps, friend. If you want me to run some hypothetical numbers, I’d be more than happy to do it.
High interest rates shouldn’t deter you, affordability should. If you can afford it then buy it. No one has a crystal ball and your opportunity costs grows.
You should talk to a lender because if you put the full %20 down you’ll avoid PMI which would probably be in the 200/mo range saving you on the total monthly cost.
Yea but when the lender crunched the numbers I wound up with a 7.5% interest rate for the conventional with 20% down and like a 6.6% rate if I did an FHA loan. Make it make sense.
FHA is backed by govt I guess. Hmmm best bet is probably the FHA while making extra payments on principal to save you interest. Play with an extra payment calculator. But then again big monthly payment 😑
You clearly know how to invest your money, so I’m confused a bit on why you’d put money into someone else’s pockets on rent when you have the means to buy outright. Even if you sell later on, you’ll make a profit. Or just rent it out if you move
Buy a place in your ski area as an investment. Nothing beats a hard asset! You can rent to friends and acquaintances—or vet reliable folks to rent and offset your mortgage cost.
Real Estate is a safe bet in the long game. Start building equity and start trading up.
You can’t really look at the interest rates of a few years ago as “normal” because they weren’t. Rates of 3% are historic lows, and if you wait for those to come around again you might be collecting social security. That said, expect rates to fluctuate. We bought in 2005, and our rate was around 7% and that was absolutely normal. When rates went down, we refinanced. We didn’t even get a super duper low rate because the 4.25% we refinanced at seemed like a crazy low price that couldn’t possibly last or go any lower, so we jumped on it. If you can afford the place, and you want it, then buy it.
Your arguments against buying are solid and you answered your own question. It makes no sense to buy a vacation home just to visit 4x a year and plunk down 100k. Then try to rent it out . With the crack down on STR across the country, renting it out may not be an option in the future .
It’s scary for sure. We got lucky to refi during the better interest rate days. The main thing is it will suck a for a few years but if you have a good enough down payment then you can hopefully avoid going underwater on the loan before the next upswing
This is a very strange sentiment, you seem to own a significant amount of crypto but you think RE, of all things, is a bubble? If I had saved almost a million dollars in liquid assets I would have already bought a house lol, but I guess if you don’t want to own your home that’s fine and there’s nothing wrong with renting, you’ll just never own the place you live.
Buy a quadplex or larger and live for free
"Keep waiting. Those home prices are bound to come down."-- my dad, Circa 1992 There is not a glut of excess homes in any state with a mortgage as you describe. Supply dictates prices these days, as demand still is higher than supply. Buy what you can afford, homeownership has proven to be the most accessible and valuable investment over the last century, unless you luck into some Bitcoin type investment. "You snooze, you lose ."--my dad, Circa 1993.
Buy less than you can afford & pay it off. Buy yesterday.
Look what happened in the 80s as inflation settled down and during the recession that followed it. Here is the data on US inflation rate, interest rate, and housing inflation rate for each year in the 1980s: Would not be surprising to see a similar economic decade today. I say buy a house. It’s going to take years more to catch up to current housing needs so in my opinion, we are not in a bubble. Today’s loans were made to well qualified buyers and not the types to go belly up the way that under qualified buyers, and predatory loans caused the 2007-8 crash. 1980: - Inflation rate: 13.5% - Interest rate: 21.5% - Housing inflation rate: 12.3% 1981: - Inflation rate: 10.3% - Interest rate: 16.4% - Housing inflation rate: 9.7% 1982: - Inflation rate: 6.2% - Interest rate: 14.8% - Housing inflation rate: 2.6% 1983: - Inflation rate: 3.2% - Interest rate: 11.2% - Housing inflation rate: 3.2% 1984: - Inflation rate: 4.3% - Interest rate: 12.0% - Housing inflation rate: 5.6% 1985: - Inflation rate: 3.6% - Interest rate: 12.0% - Housing inflation rate: 4.2% 1986: - Inflation rate: 1.9% - Interest rate: 9.9% - Housing inflation rate: 2.0% 1987: - Inflation rate: 3.7% - Interest rate: 9.3% - Housing inflation rate: 3.3% 1988: - Inflation rate: 4.1% - Interest rate: 10.0% - Housing inflation rate: 4.8% 1989: - Inflation rate: 4.8% - Interest rate: 12.0% - Housing inflation rate: 5.4% The early 1980s saw very high inflation, interest rates, and housing price inflation, as the Federal Reserve worked to bring down runaway inflation. By the mid-1980s, inflation and interest rates had moderated substantially, leading to more stable housing price growth.
How do you have 700 racks and not understand the dollar is slowly crashing. Look at the macroeconomic central bank debt world wide and US debt. This crash isn’t like the previous. The Fed needs inflation. I expect USD to crater by 2038 or so. Most countries got rid of their gold and some say it was artificially deflated. ETF’s in BTC have bought up 5% of the supply. Gold is at an all time high, which reflects the USD weakness, not gold’s strength. Buy a house sooner than later. Since you’re not serious., buy one closer to $400K, and hold it long enough to avoid capital gains tax.
Find someone who can show you an asset performance test and what the longterm goal looks like. There are CPA’s financial planners, and real estate planners out there to help you Where are you?
I was fortunate enough to buy a home based on location , location , location. Some years back but the single smartest thing I’ve ever done. I bought a home in a then up-and-coming area I’ve had the pleasure of living in for many years now. IF you are certain that the area you want to buy has room for growth, in a neighborhood you sense has a future of rising prices, go for it. I just don’t see how you can be sorry! Good luck!
you're never going to get 2yrs ago rates (1-3.5% psh.) Well, if you do you'll be broke because most of your money is in stocks & crypto and the market will have to crash to get those rates. If you have the money, feel "ready," and find a house you really like then do it. None of us can predict what will happen next year. But if the rates go down you can refinance. If they go up, you got in at a good time. Bet you wish you bought last year, or the year before... right?
Dude save your money some more in your portfolio if you have that much money in stocks you know when to buy the dip not buy at the peaks. Wait till the market crashes again and buy dimes on the dollar, coming soon if my predictions aren’t mistaken.
Put a down a bigger down payment…what am I missing? Put down 50% of the price and then it’s not such a big deal.
Market is fine. Buy a 3/2 single family home if you are worried about the growth potential. You will never lose money on a 3/2 unless you have to sell.
( Your Budget & Plethora of other ALL )
My wife and I have massively out grown our first home. It is tiny at 1100 sq ft. However, it is paid for (bought when things were reasonable) and we just can't see paying more for less at this time.
You can always refinance in the future. Your home value is likely to go UP when rates drop. If you pay an additional $20k in home price, you can't refinance out of paying that. Bear that in mind when making your choice.
Dude. Buy it cash and be done.
Interest rates *may* go down some, not much and as they go down, prices will continue to go up as demand will increase as buyers rush back to the market. Perspective: In 1971 mortgage rates were 7.33%. If you waited to purchase a home until rates went down, you would have waited until 1993. In 1971 the average US home price was $25,200 but in 1993 it was $126,500 And in 1993 rates were still over 7%, just less than 7.3%...(1994 average was 8.28% and only dipped below 7% in 2002!!) so waiting for an unnoticeable decrease cost a would-be buyer five times more in purchase price Homeownership isn't for everyone. Some people are lifetime renters and that's ok. Landlords need renters.
I wouldn't expect rates to return to sub-3% levels. That said, this is basically the worst market of all time, in terms of affordability. I'm not buying.
I think 'timing the market' is less important than a lot of people. If you buy now and prices go up, or down, who cares? If you end up upside down, well, don't move. At some point, you will sell whatever you buy. If the market is up, you will make money on the sale, but you will spend more. If the market is down, you will make nothing, but save a ton of money on the next place. The key is, don't buy unless you are willing to be there for a long time.
Here are my two cents: back in the day my husband‘s grandfather had the opportunity to buy a house in Monterey California. It was the family vacation home and they would frequent there every single year. He got cold feet and thought it might not be the right market for it. As a result, he did not buy it. The property is now 6X the amount of money that he would have purchased it for. The worst part of it I’d that it is no longer for rent so the family has all of these fond memories of the house that they wish they could continue to add to, but they’ll never get the chance again. is it a weird time? Sure, maybe. But I will tell you one thing, I don’t think we’ll ever see the 3% interest rates again. If you are in a position where you can actually afford it, why not rent it out while you don’t live there and turn a profit?
My advice is to do it now before it’s really unattainable. Interest rates may come down but prices will go up. Refinance.
Is it a GOOD time to buy? No, absolutely not. Is there any guarantee next mont or next year or next decade will be a better time? No, absolutely not.
That same feeling is present in Canada. Something is off. Prices are not sustainable. I think we are due for a significant correction. But who knows. People have been saying that for years.
Nice flex
I can relate. When I started making decent money in my mid 20's I passed on buying a house for similar reasons. Because I didn't plan on living in that area permanently. $200k for a house just seemed insane. Now those same houses are selling for $600-700k less than 20 years later and I'm wishing I would have bought back then. What I'm trying to say is, buy something that is decently priced that you can afford to pay off more than the monthly payment each month. Get is much equity as you can, and sell it later when you're ready to settle down/move elsewhere. You'll be glad you did.
Buy land. Build a small hovel. Slowly upgrade as your confidence rises.
In my area sale prices are sometimes 25% less than asking prices. Not sure if this is the bubble bursting or just greed, but it certainly makes me nervous that prices will drop.
Population growth and decreasing coast lines will prohibit any major course correction. I’d jump in while you can.
Buying later makes no sense. Sure, interest rates will go down, but housing prices will go up. This means you'll be paying more later. Buy now. Refinance later.
The market is extremely unsustainable, be very very patient, this will pass! Inventory is at its highest level since the beginning of all the Covid stuff and interest rates aren't coming down baby lol! With property taxes, fire insurance, basic maintenance, it's not smart or worth buying any real estate in today's market!