People who bought a home to live in lost nothing. People looking to "invest"/flip lost money. Investing is risky. People get burned all the time.
Right. Homeowners didn't lose money, they lost equity. Flippers lost money.
Yup, my wife and I are refinancing even though we're taking a massive hit on equity. We're not gonna ever be able to pay this house off, so might as well pay less per month towards an endless goal.
How long ago did you get your mortgage? Even 5 years ago the interest rates were rock bottom. Wouldn't refinancing today double your interest rate?
You're not wrong, but buying your grandparent's house in Texas is really difficult if they're still alive and if the house is their primary residence. The reason for this, as you might imagine in a state as wonderful as Texas, is that Texas doesn't want people to buy a family member's house from under them (good thinking) and then letting that family member continue to live there for free (bad thinking. Awful thinking. Awful turd state run by turd people). As a result, we got to watch the interest rates rise and rise while we waited for administrative shit to get taken care of.
Now we finally had enough in equity to buy down a loan a few points, wrap up the administrative costs into the new loan, and bring our interest rate down a little more than 2% from what it was. An extra $200/month might not sound like a massive savings to some, but that's our monthly coffee and milk covered (for now).
People who bought a home to live in lost nothing.
That's a pretty naive take. It's common for a couple to buy a small 2br house, have a kid or two, and then upgrade 2-5y later when the kids take up more space, or they have another kid. They often rely on building equity in their current home so that they can use it as a downpayment on their next one. But that plan completely breaks down if you spend all your savings on a downpayment for your first house, only to watch the house tank in value. Meanwhile, you're still on the hook for the original mortgage, which you may not be able to keep paying if the economic downturn cost you your job.
Just watch, in 2008 we saw people walk away from their mortgages, banks foreclosed the houses, put them up for auction for pennies, and sold it to themselves. Then a couple of years later made billions re-selling them for full price. It was downright criminal...
Of all the groups, people who bought their first house in the last 5y are absolutely going to be hurt the most by what comes next...
OK, so if all house values have crashed at the same rate (generally what happens in cases like this), the equity that they lost doesn't make much of a difference because they can buy a new, larger home with the difference still based on your new sell value.
Of course, this can mean being "underwater" but that literally does not matter in the big picture (besides of course the mental burden of having to give more than needed to corrupt banks), provided that you are still able to afford the mortgage. 2008 included massive job loss which means people would have had to walk away from their mortgages even if their houses appreciated as people without jobs could not buy the houses.
If you bought a mortgage you can't afford because you wanted a house during a huge bubble, then you already fucked yourself regardless of the market. Or if you lost you job in a bad market (like now), then it is really unfortunate and the billionaires and companies need to be compelled to actually pay their taxes to keep the unemployment payments running.
One thing to note on your first point: Generally speaking, the only time that equity loss doesn't make a difference is if there is no mortgage. If you do have a mortgage; When housing prices are stagnate or increase, you can sell your home for a similar one with little to no loss (the buyer of your house effectively pays off your old mortgage and you roll your equity into your new mortgage).
BUT, if prices tank while you still have a significant portion of your mortgage owed: you're screwed when you need to relocate. The sell price of your house won't cover the reminder of the mortgage. If you need to move, you either pay it off (hope you don't need to move for work) or foreclose. The bank is cool with either - they couldn't care less about you.
Edit: Clarity and typos.
In the 2008 crash, a friend's house was stolen by a bank. He was upside-down but making his payments, and the bank forced foreclosure anyway, sold the house to a subsidiary for an absurdly low price, and sold it two years later at a massive profit. My friend, his wife and son moved in with me. I'm hoping the CEO of that bank gets his own personal Luigi, and the first shot is in the guts.
That should definitely be illegal... Absolutely zero logic, just corruption.
Also hoping for the worst for that CEO, the board, and the entire management suite.
But that larger home lost even more equity.
Making you able to upgrade while taking on less debt, than if both houses rose 10%.
Then we have property taxes, which tends to be a yearly expense based on what nearby homes are trading for.
which you may not be able to keep paying if the economic downturn cost you your job.
That's a completely different factor, which isn't directly linked to housing costs. Housing can crash, if done properly without the economy being in a bad shape. Supply, demand and force owners to live in the house. Boom, price crash.
The people who gains something from house prices increases, are people that own multiple houses and people looking to downgrade.
People wanting to die in their current home, doesn't lose anything.
People looking to swap to a pricier home, doesn't lose anything.
People looking to enter the market, doesn't lose anything.
People looking to swap to a pricier home, doesn’t lose anything.
Here's a wrinkle: they probably gain. Say there's a crash and prices across the board drop 50%.
You're in a $600k house that's now worth only $300k. But you had your eye on a $900k house, that required an additional $300k for you to move into. It's now worth $450k, so you only need to come up with $150k to move up. So, if you have access to the necessary money, buying a more expensive house post-crash will cost you less.
It's a simplistic scenario, I leave out transaction costs, varying availability of credit pre- and post-crash. and the fact that price drops are seldom uniform for all houses, even in a smallish local market. But those considerations don't make that much difference to the main concept.
You're thinking of wealthy people who don't have a mortgage and "only have $150k more" to come up with. And as I explained above, it's not just the wealthy looking to move up to a pricier home; growing your house as the family grows is just standard practice for an American family over the last 70y.
It is a very common case for couples to put everything they own together to make a 20% downpayment (if they're lucky).
So for a $600k house, that's $120k downpayment and a $480k mortgage. We're saying the house loses half its value, so it's now worth $300k and their equity is now worth $60k. But they still have a $480k mortgage to deal with. If they sell the house for $300k and put all of that toward the mortgage, they still have to come up with $180k just to get the bank of their backs and have nothing to show for it! They could continue paying the mortgage, but it is worth far more than the house is. They're now at the point where it would be cheaper to walk away from the house, let the bank foreclose it, and then rebuy it (or a similar one) at $300k instead of $480k. But they won't have any money to do that with, and their credit will be demolished by the foreclosure, so they won't be getting another mortage any time soon. So that's not even a real option.
Not only is moving to a larger house to support a growing family no longer an option, they'll be lucky to still be in a house at all.
To which my only response is GOOD 👍
I like this joke: it's a true patriot who gets a parking ticket and says 'Hooray! The system works!'
It could be changed to the true capitalist who loses money on an investment and says 'Hooray for the free market!'
Capitalists have always hated competition, especially competitive markets. They'll rig markets to shelter themselves from competition if they can. They'll also take bailouts, subsidies, or any other kind of other people's money if they can get their hands on it.
A surgeon bid 20% over asking price to move from Phoenix to Austin, realized he didn’t like living there and moved back. Business Insider somehow blames all of this on new houses being built. Lol.
It is because of higher housing supply, even rents went down. This is exactly how markets work
He bid 20k over, which is 3% of the asking price of 595k. I agree with the other points, but 20% sounded way off
Oh, yeah must’ve misread the 20k as 20%. Point still stands, buying a house at its peak price then immediately selling it will yield a loss. It’s like buying a new car and then complaining that you had to sell it for used car price.
and not because the surgeon made a assumption that the house was gonna go up in value eventually, but it went the exact opposite.
It literally sounds like he'd never seen Texas before. Especially around the big cities it's a car centric hellscape unless you're in some very specific neighborhoods.
He came from Phoenix, I don't see how it was any different from where he came from. Also, he's a surgeon, he was probably in a decently walkable area and decent by Texas standards is a 5 minute drive to an upscale strip mall.
Former Austin resident here (1999-2022). The last house I owned there I bought in 2016 for $225k. In 2021 I was getting unsolicited offers for $750k (Zillow estimate in January 2020 was $450k). Finally sold it two weeks ago (didn't know if I'd need to move back for work) for $515k.
A: Double the price in a decade is insane. Triple had I sold in 2021 is beyond words.
B: Someone in 2021 paid $300k over the market value a year prior and is now severely upsidedown on their mortgage.
Austin was great, but that was obviously a bubble to anyone with any common sense.
My neighbor did that on his home paid 150k for house valued at 139k. He plans on selling this year be interested to see what he ask for it. But it is bad time to be a seller right now.
Yes. This is how real estate markets work (or don't).
In other news, people who bought gas guzzlers when gas was cheap are now taking devastating pump receipts.
Just reviewed my budget and paid almost $350 in gas last month on 2 fill ups. Fucking insanity. I don’t regret buying the truck though, amazing vehicle
You are the problem!
You know what you are, actually? You're like someone with an abusive spouse. "Yes, they beat me bloody from time to time—at the gas pump—but they make me feel good from time to time too. I love them."
I just thought I was someone that needs a truck for work :(
what kind of work and what kind of truck?
Real estate, gotta carry 6-8 ft sign posts from property to property, construction material etc. F-150
Houses aren’t investments. 😂
Their houses.. You live in them 🤣🤣 Who cares about value
Literally anyone who doesn’t want to spend the rest of their life in their current home cares. Retail and cars are the only half decent investment vehicles that the average person can partake.
When you pay off your house, you can refinance it for a new roof, a new AC, upgrading your car port, all the shit. But you can’t do that if you are loosing money on the house.
You sell your home and claim the equity in order to help buy your next home, next car, next plot of land, … it can literally help you retire. Imagine that… you have no savings, but you own a home that’s appreciated in value. You can now sell, downsize, pay off most of your debts… You can put yourself in a great position for the limited incomes of a 60-70yo.
Of course, all of that is under threat by the weakening middle class. Nonetheless, it’s not hard to see why people care about the value of their home.
Retail and cars are the only half decent investment vehicles that the average person can partake.
Those are both consumption, not investment. Cars are almost invariably a wasting asset. I've owned 15 cars in my life. I made a profit on only one, and that's not counting the labor I put into it. Just about anything you can buy retail also depreciates. Index funds and tax-free bonds at least earn you some money on your money.
You can now sell, downsize, pay off most of your debts… You can put yourself in a great position for the limited incomes of a 60-70yo.
I'm doing that now, though I have some savings and other investments as well. I have two houses and an apartment. We're selling the apartment, and the debt/equity ratio of the two houses now sits at 12%. We'll have the house we're living in paid off in a few months, before I retire, then I'm attacking the second mortgage on the other house (which is currently a high-end rental). After that, the first mortgage. The rental is running a positive cashflow already. There are tax reasons that it makes much better sense to hang onto the rental rather than selling it off.
If it works out according to plan, my disposable income post-retirement will be appreciably higher than it is now while I'm working full-time. So more free time, and more money. It'll go to my travel budget, I don't see increasing discretionary spending on anything else, I don't value material possessions, experiences matter more to me.
Bit of a long story, but the main point is that, with a bit of planning and a small amount of self-discipline, it can be done. I wasn't born into money, I grew up in a poor family. I don't have an absurdly large salary, but I'm good at planning, don't overspend and have never used credit except to buy houses. I married a woman who knows how to handle money. It may sound too easy, but there's not all that much to it. Stick to the priorities and have some contingency plans.
Now the only people who can afford boomer McMansions are boomers who all don't want to buy those but downsize instead.
Downsized housing is in the same type of homes first time home buyers also want, which is almost universally NIMBYed into oblivion, so now these downsized homes are a lot more expensive for what you get and there aren't nearly enough of them.
How boomers figured that them being the largest cohort, all owning giant homes, and all planning on selling them to smaller and smaller generations of people who've been largely locked out of home ownership would work for them is beyond me. Well they made that bed so I guess they get to sleep in it now.
You know it's bad when the Etsy home page has "sell home fast find buyers spell $15" as like the third promoted product from a witch in Minnesota.
These people bought as investment. Homes in my area peaked around $1.8M in 2023, now they are lucky to get $1.2M.
The real losers are people who got HELOCs to buy stupid shit and vacations, because all graphs extrapolate upward.
While I agree that that is where responsibility lies as things stand, I do kind of feel that given the unusual nature of the housing market and the fact that a considerable number of people persist in buying into booms might mean that we should restructure things to help discourage that.
Like, maybe...I don't know. Federal mortgage availability in a given metropolitan area could be conditioned on the Case-Schiller Index or something. That would tend to stabilize prices.
It'd also tend to discourage cities from blocking construction of new housing.
Yeah, buying high and selling low will do that to you.
If they were smart like me they would only be doing that with stocks.
As a lifelong renter who will never own a home: sucks to suck, try better next time, hedge your profit bets better next time
Welcome to the News community!
Rules:
1. Be civil
Attack the argument, not the person. No racism/sexism/bigotry. Good faith argumentation only. This includes accusing another user of being a bot or paid actor. Trolling is uncivil and is grounds for removal and/or a community ban. Do not respond to rule-breaking content; report it and move on.
2. All posts should contain a source (url) that is as reliable and unbiased as possible and must only contain one link.
Obvious biased sources will be removed at the mods’ discretion. Supporting links can be added in comments or posted separately but not to the post body. Sources may be checked for reliability using Wikipedia, MBFC, AdFontes, GroundNews, etc.
3. No bots, spam or self-promotion.
Only approved bots, which follow the guidelines for bots set by the instance, are allowed.
4. Post titles should be the same as the article used as source. Clickbait titles may be removed.
Posts which titles don’t match the source may be removed. If the site changed their headline, we may ask you to update the post title. Clickbait titles use hyperbolic language and do not accurately describe the article content. When necessary, post titles may be edited, clearly marked with [brackets], but may never be used to editorialize or comment on the content.
5. Only recent news is allowed.
Posts must be news from the most recent 30 days.
6. All posts must be news articles.
No opinion pieces, Listicles, editorials, videos, press releases, or celebrity gossip will be allowed. All posts will be judged on a case-by-case basis. Mods may use discretion to pre-approve videos or press releases from highly credible sources that provide unique, newsworthy content not available or possible in another format.
7. No duplicate posts.
If an article has already been posted, it will be removed. Different articles reporting on the same subject are permitted. If the post that matches your post is very old, we refer you to rule 5.
8. Misinformation is prohibited.
Misinformation / propaganda is strictly prohibited. Any comment or post containing or linking to misinformation will be removed. If you feel that your post has been removed in error, credible sources must be provided.
9. No link shorteners or news aggregators.
All posts must link to original article sources. You may include archival links in the post description. News aggregators such as Yahoo, Google, Hacker News, etc. should be avoided in favor of the original source link. Newswire services such as AP, Reuters, or AFP, are frequently republished and may be shared from other credible sources.
10. Don't copy entire article in your post body
For copyright reasons, you are not allowed to copy an entire article into your post body. This is an instance wide rule, that is strictly enforced in this community.