Been trying to buy a house because my rent is going up(and it will continue to do so) and a mortgage would be around the same as what my rent will become in a few years anyway so I figure I might as well build equity and have a house for my family.
Thing is the current housing market is nuts. Houses are put on sale with strict deadlines of "accepting all offers due 12pm 5 days from now" creating a false sense of urgency and to top is off the process is super opaque. You dont know what other people are offering so unlike an actual auction you cant start low and hopefully get a good value. Nope it's a black box and the asking price isnt of any help because that was just an advertising tactic to get more people to look at the house.
So you have to do research based on past history of other homes sold in the area of the same type recently and then place a competitive bid based on that. Of course everyone else is also doing that so you have to make your bid "competitive" and give a little more. How much more is hard to say and you only really get the one bid. So 12 pm comes along and the anticipation in your stomach is insane because this could be it you could be a homeowner and you did put in a competitive bid, and then sometime between immediately and just before bed you get a message saying they went with another offer.
ITS SO DAMN FRUSTRATING! Houses that I bid $30,000 over asking price and someone still swooped in and bid even more. And of course since the process is a black box you dont get told what bid beat you out or what the other bids were(dont want the 2nd place bid to decrease their bid in the event the 1st place falls through). You'll find out eventual final sale price a few months from now when everything finishes closing. I imagine the issue is other people got frustrated with the game over the last few months and now if they see a house thats ok they go all in with their max offer instead of a smart offer.
Oh and the market is limited, but somehow out of sheer coincidence after one round of sales is done the realtors manage to find another round of homes to put on the market. I'm convinced the realtors are limiting the supply on purpose and letting homes trickle in because the ACT NOW PUT IN THE BEST OFFER OVER ASKING tactic probably doesnt work as well if there are more than a handful of homes for sale at a time.
Its so frustrating I just want a house to live in and raise my soon to be born child, and Im willing to pay you what you're asking for it! The worst part is the housing market in my area shot up a lot over the years. So these people playing bid wars are making 100k profit AT LEAST for a house they bought just 5 years ago! And then theres the old people who bought the house for pretty much nothing 30+ years ago
Sorry for my long wall of text rant
Wait. With the interest rates as high as they are if you can give it a year or so the market will cool rapidly. All those people bidding way over the value are taking on way more debt than they can afford and once job losses start increasing we are going to see another 2008ish crash.
My expectation is that high(-ish) interest rates will not lower prices; it will lock more people into their houses - chaining them with 2-3% mortgage rates so that they can't move up (since going from 2%-7% is something like a 40-50% increase in monthly payment). That will lower supply or, in hot areas, keep supply artificially low. Even for people who have to move, it becomes enticing (if financially feasibly) to keep the property as a rental as the mortgage with a low rate is almost certainly less than what you can command on the rental market. Even if you pay 10% to an agency and put aside another 10-20% for maintenance and replacement reserve, you can still break even on the mortgage, essentially having someone else pay off your loan while you keep the asset.
There won't be a bust like there was in '09 when everyone was forced to sell or be foreclosed. Ridiculously hot areas will fall back a small amount, but for the most part we'll see a flattening of value increase over the next 7-10 years, with tight supply propping up values more than other inflationary pressures. By then we'll be ready for another bubble. Younger Millennials and pretty much all of all of Gen Z are fuckd.
People have been saying this for decades though
I was planning on doing this and waiting to see what next year brings, but with my rent increasing and then increasing again it felt like a good time to get out. If Im going to be paying this much I'd rather it go to my own mortgage. Plus those higher interest rates would impact me too, and since my area was historically undervalued the places I want to live are only going to go up in price, even if it is less competitive.
Yeah we knew someone who couldn’t get approved for a loan because ‘they wouldn’t be able to afford to pay the mortgage’ so they’re still renting, paying close to double as rent.
And yet, come voting time, a bunch of people like this are either absent or voting "get the immigrants out" aka "get the less fortunate out". Not saying it's what your someone is doing, but it's common.
The idea that prices only go up is exactly what creates bubbles. I would be careful with that assumption. I do believe that governments will go to great lengths to prop up the value of homes as it has done in the past, but birthrates are declining in the developed world.
Also, when you get a mortgage, it takes years of paying interest before you start to make a dent in the principal and build equity. You're paying mostly interest until about 13 years into a 30 year loan. The bank always gets paid first.
Unfortunately it's no bubble. My area popped 60 years ago and it's only just recently started very slowly turning around. Climate change combined with good old bones are making the area a lot more appealing over time and for the first time in a long time we've started gaining population again. I can see the market slowing and the bidding wars stopping if the economy slows up, but it would take an absolute catastrophe to get prices to go down again.
I fear you are correct. While I believe the market is overvalued, I don't see a correction coming without extreme fallout. People are struggling and for many their home is their life savings.