Buying A House: C or D?

If you bought a home anytime between 2010 and now, mortgage rates are meaningfully higher than whatever rate you have on your current home, so moving means paying more for the same amount of house (often hundreds or even thousands of dollars per month), even after you account for whatever equity you have accumulated from your own home's rising price. There are certain buying years in the past decade or so where your mortgage interest rate is likely half of current rates. So there's not a lot of incentive to sell your home as long as you can afford your payment. And there aren't a lot of current homeowners with ARMs or subprime mortgages that legit can't afford their homes. Hence low inventory.

well, yes. the point is inventory is rising.

Hmm. I’ll look into this tomorrow.

While active listings as tracked by https://t.co/tBRH4VE5ZA won’t be a perfect match with MLS data, it (Vegas) shouldn’t be off like this. https://t.co/96ADTWjv3O

— Lance Lambert (@NewsLambert) June 5, 2023

in one market, not nationally if you read the thread

(even putting aside the potential data issue, xp)

we all know inventory is low, and why it's low. you're missing the point.

but if you want to write a paragraph explaining why mortgage payments go up when mortgage rates go up then far be it from me to stand in your way.

new housing inventory due to suburban sprawl vs. less inventory in areas that won't/can't sprawl anymore ... is that the point?

kinda doubt caek would be a fan of the development model of Henderson, NV

I went to a house party in Henderson once

Lee Hazlewood spent his last years in Henderson.

im not a fan to be honest. I mean it'll be nice getting some of the money back we put in, assuming I dont die first, but this being stuck in one place is the pits

― But who are we doing it versus? (sunny successor), Friday, May 26, 2023 1:23 PM (six days ago) bookmarkflaglink

Sometimes i daydream about a natural disaster that flattens our house when none of us are home and somehow all the animals are safe. oh the freedom.

― But who are we doing it versus? (sunny successor), Friday, May 26, 2023 1:54 PM (six days ago) bookmarkflaglink

really hard to feel sympathetic tbh

― budo jeru, Thursday, June 1, 2023 10:46 AM (three weeks ago) bookmarkflaglink

Eh, your sympathy wasnt exactly my goal. if i still lived in the city/country i grew up in i would never even come close to being able to afford to buy a house. Doubtful on the renting without sharing too. However, i live in one of the poorest states in the US now and housing is ridiculously cheap. So, yeah, Id prefer renting for the ability to move about.

I'm now living in the model home version of my own condo, I had to put 98% of my stuff into storage but (hahaha) they let the vinyl stay because it looks cool. A giant wall of CDs however does not entice buyers I guess.

I love living in my house, but my current feeling is that I would have been fine not owning if there were stronger tenant protections and better/more rental houses available in my area.

Out of curiosity just checked. For $1200/mo more than my current total cost, I could rent a shittier, smaller house in a worse location in my town.

owning a house really means something different depending on where you are living and who lives with you imo

OTM

Somebody on npr just said that divorce is down because ppl can't afford to move

Ugh

tbf, I think they meant, "If you are living in an upper-middle-class home and have a mortgage at 3%, it discourages you from taking out a new mortgage to buy YET ANOTHER upper-middle-class home at 6%."

tl;dr. They are talking mostly about rich people problems. No one knows what - gasp - RENTERS do when their marriages deteriorate. That is beyond our purview to contemplate.

NPR fucking sucks -- news at 11

would it not also....apply to renters

Budo you may be right, but I am not sure a better option arises in its absence (vs. a worse option).

Like, sure, like most of us I want better options than NPR, the Washington Post, the New York Times, and for that matter the Democratic Party.

Unlike most of us, I am not sure that the institutions that would/could rush in to fill the resultant vacuum would be better.

owning a house really means something different depending on where you are living and who lives with you imo

― mh, Monday, June 26, 2023 2:37 PM (five hours ago) bookmarkflaglink

There's definitely much more incentive to own one in that I have kids and want them to grow up in a place and not multiple places. I would consider renting again once they move out permanently.

Not convinced that inventories are low simply because selling would mean a higher interest rate mortgage. In Australia, inventories are low too, which is holding up prices. But we don't have mortgages with an interest rate fixed for the duration. Like the UK, most homeowners are on a variable rate mortgage or on 2 or 3 year fixed rate mortgages. But still we have the low inventory/prices holding up dynamic, so something else is going on.

well yeah it's never just one factor is it? where i live the mortgage interest rates plus lack of inventory are crippling the market, and there's no quick solution to the inventory problem.

In 2021 I bought a "house" (older double wide in a park where I pay monthly rent in the lot) and it's... fine but not exactly where we want to be for the rest of our remaining time. So last week I bought nearly 20 acres of unimproved land about an hour south of us. Initial plan is off-grid infrastructure and a group of tiny houses/cabins and eventually live there full time and have a pet sanctuary while managing the natural wetland area as well as we can. So - come camp?

That sounds amazing! It will be a lot of hard work no doubt but what a project!

tha does sound good. all my Grand Designs fantasies.

radio 4 did a 'but what about the renters?' piece the other day, re the interest rate increases. but the estate agent they talked to was more interested in telling them about the bloke who'd just sold his 14 rental properties because the paperwork was now too much of a faff.

Bless

Jaq, that's awesome!

tbf, I think they meant, "If you are living in an upper-middle-class home and have a mortgage at 3%, it discourages you from taking out a new mortgage to buy YET ANOTHER upper-middle-class home at 6%." tl;dr. They are talking mostly about rich people problems. No one knows what - gasp - RENTERS do when their marriages deteriorate. That is beyond our purview to contemplate.

this is less of a rich people problem than a middle class/working class problem, esp. if there are kids. Because it isn't just a sell one house and buy another house, it's a "support two households with the same income that only had to support one" ... It's often less "sticker shock" for renters to move, though it depends on a bunch of things

I know people who are going through this right now - they're selling the house and renting two apartments nearby, which is still significantly more combined than their house payments, although their house had appreciated since they bought it so they benefited from that at least. You do have to be pretty well off to think about buying a second home while keeping the first.

you just have to get married again immediately

I joke, but a friend’s sister-in-law kind of did this

We’re going back to renting.

This is how I break it down.

Pros:

The rent is the most you pay each month for housing. The mortgage is the least you pay.

Problems are someone else’s problem.

We’re able to afford a nicer home in a nicer neighborhood than if we bought. This is NYC. YMMV.

We can move more easily.

Cons:

Rent goes up every year.

Might have to move when you don’t want to.

Neither:

Equity vs “throwing your money away” only relevant if house prices definitely rise faster than whatever else you’d do with the money (not true for us).

you are a much smarter guy than i am but im lost at that final one

nb this may be explained by the irish housing market ofc

Well the last point also assumes that a mortgage costs more than rent, freeing up "extra" monthly money to go into savings. Probably still true in NYC, but where I am e.g. we bought our house in 2014 at a low interest rate, and since then rents around here have gone up tremendously. Our mortgage is definitely lower than rent we'd be paying for a comparable place right now. But that's a function of when we bought, obviously.

speaking *purely financially* (i.e. forgetting you need somewhere to live, and that security and stability are worth something)...

i totally concede that buying a house is rarely a bad financial move for most people, and usually a pretty good one.

- you are forced to invest (otherwise you are homeless), which is a good behavioral hack because it means that most people "save" more than they otherwise would

- you are investing money in an appreciating asset (in most places)

- you are investing it in a way that is heavily tax-advantaged (in most places)

but there are downsides:

- you are locking your money up in a way that you can't get at unless you move house, which is expensive and inconvenient.

- buy buying a house, you are actually doing something quite risky: concentrating all your savings in a single investment rather than diversifying. house prices might fall (unlikely but not impossible in many places, but happening right now in canada and NZ for example. it does happen!). and house prices might go up, but at a rate of return less than you could get by doing something else with the money (e.g. suppose house prices go up 5%/year and the stock market goes up 10%/year).

so *purely financially*, renting makes sense if you can do it for cheap enough that you save money vs a mortgage payment (this is true in most cities!) and you trust yourself to invest the money you save in ways that have less risk and/or more reward than a single house (this is often not true, depends very much on your outlook, circumstances, etc.)

id find it hard to see how ill do any better than just paying off the mortgage and having the place for life but yeah renting the place would be significantly more expensive than current mortgage is id guess also

xp

xp, yeah changing rates etc. matter a lot. right now renting is "cheaper" almost everywhere in america, but fwiw that was true in a lot of cities even when mortgages were at 3%.

to invest the money you save in ways that have less risk and/or more reward than a single house

like what, for example?

to be clear, i'm talking about moving to NYC. i.e. the choice isn't between a five year old mortgage at 2.75% and renting. it's between buying a 2 bed place with a 6% mortgage and renting a three bed place for 2/3 the monthly housing payment. so it makes the financial case easy for us.

but like i say, even if renting cost more, there *are* financial downsides to having your biggest (and for many people only) savings being 1) a single asset 2) that you can't actually sell.

but like i say, even if renting cost more, there *are* financial downsides to having your biggest (and for many people only) savings being 1) a single asset 2) that you can't actually sell.

xp you are also iirc paying 1 mortgage in another expensive city already, so you have a decent chunk invested in residential property. And some mortgage tax breaks have total mortgage limits, etc. So it is a special case.

xp lol, totally agree!

like, it also really, really sucks to move when you rent!

like what, for example?

― budo jeru, Thursday, July 6, 2023 4:12 PM (three minutes ago) bookmarkflaglink

in the US?

you can get the same average return with less risk by investing in real estate in a diversified way (e.g. a REIT, buying shares of lots of buildings rather than 100% of one building).

you can get twice the annual return with more risk (but in a way that probably doesn't matter if you're saving on decade+ timescales) by investing in the stock market.

right now renting is "cheaper" almost everywhere in america

Definitely not true here.

Btw guys my pro tip is to pay off your mortgage, then you don't have any monthly payments, hope that helps!

even paying a tiny bit extra in the first few years has an outsized influence on total debt!

you are also iirc paying 1 mortgage in another expensive city already, so you have a decent chunk invested in residential property

yup. the financial arguments against home ownership break down in CA (where we live for now, and where we own). house prices appreciate faster here than basically anything else you can own (lmao) except lottery tickets, and receive insanely preferential tax treatment thanks to suicidal ballot measures. it would be better if this weren't true. it isn't (as) true in the place we're moving to, which is where we're renting there.