Ask HN: Is it the “worst” time to buy a house?
You can't go a day, without seeing worrying "news." From the Federal Reserve raising rates, making mortgages more "unaffordable" to this summer leading in the most decrease "mortgage applications" since 2006. https://www.mpamag.com/us/mortgage-industry/market-updates/m...
On the other hand, commercial real estate has their own problem, prime commercial space goes unleased, and majority of downtown cores are still empty, or heavily decreased occupancy.
I'm on the opinion of, if you need a house, buy a house - because you do need a place to live.
Yet, decreased supply, higher cost of loans and loan servicing seem to make it mirror 2006 - yet, mortgages are stronger than ever - but what about those covid mortgage forbearances?
What do all of you think?
171 comments
[ 3.2 ms ] story [ 224 ms ] threadHome prices will also continue to rise over time. Not the at rate we saw over the last 1-2 years, but if someone is looking to buy today and decides to wait until prices come down, they will likely be kicking themselves in 5 years.
Glad to hear I'll be priced out of home ownership for the rest of my life! Hopefully zoomers will be okay with living in tents and vans
This is one of the reasons we aren't giving birth to the next generation. Because their parents have no basis to exist and therefore wouldn't want to force another generation to suffer the same fate.
2 incomes * 6 dollars/hr * 3.22 = 38.64 dollars/hr household
65,000 * 3.22 = 209,300
Putting 20% down to avoid PMI would lead to a payment of $1,192, using this calculator [1].
$1,192 / $4,024 = 29.6%
That comes in just under 30% of net pay. The standard rule of thumb is to be less than 33% of gross pay.
$1,192 / $5,417 = 22%
Personally, I prefer using net pay, since that's what you actually have to spend and it's always good to have more room in the budget.
These numbers don't seem unreasonable, and the median household income in 2020 was $67,521 [2], and nearly half the states have a median home price at this price or lower [3].
Here is median income by state as well [4], those in the middle are also around the $65k area to align with the homes in the middle around the $205k area... so it all kind of lines up if people aren't obsessed with leaving on a coast.
This makes it seem like things haven't changed as much as people keep saying.
[0] https://smartasset.com/taxes/paycheck-calculator#UIjlp8sv2w
[1] https://www.mortgagecalculator.org
[2] https://www.census.gov/library/publications/2021/demo/p60-27...
[3] https://en.wikipedia.org/wiki/List_of_U.S._states_by_median_...
[4] https://en.wikipedia.org/wiki/List_of_U.S._states_and_territ...
Also the high interest rate means lower house prices, so you could buy a house in cash from savings alone.
What does the current rate matter though. FED is going to bring the rates back down as soon as they can. America is hooked to cheap money.
American's just need to stop living the high life on borrowed money. Living within one's means makes life much better.
Also, a 0% interest rate can potentially be stable eternally. An eternally positive interest rate must collapse at some point.
It's impossible to know what will happen. Even after 2008, when it was obvious that the market had to fall because there were >1 million underwater homes that banks were sitting on with the fed letting them pretend they were still worth the old price, it was still impossible to know exactly where prices would end up or how long it would take.
Personally, I tend to think that prices will drift downward slightly, moreso in places that are seeing big outmigration, but it's hard to say. If we keep seeing 10% inflation, then prices staying flat is actually the same thing as housing getting cheaper.
Make good decisions based on the information you can have. You will always know more tomorrow.
https://fortune.com/2022/05/27/housing-market-correction-pea...
"The housing market has peaked…everything points to a rolling over of the housing market," Zandi says. "In terms of home sales, they're falling sharply. Housing demand is coming down fast. Home price growth [will] go flat here pretty quickly; we will see [home] price declines in a significant number of markets." —- Moody's Analytics chief economist Mark Zandi
https://www.forbes.com/sites/jonathanponciano/2022/05/24/hou...
"In short, the party is over," Pantheon Macro chief economist Ian Shepherdson said in emailed comments after the report, pointing out the collapse in sales follows a "steep downward trend in mortgage applications" as mortgage rates start to rise on the heels of the Federal Reserve interest rate hikes that started in March.
https://en.wikipedia.org/wiki/Taylor_rule
https://www.cmegroup.com/trading/interest-rates/countdown-to...
Housing can't be both.
Policies on taxation, lending, and subsidy can be used to push the balance one way or the other.
I'd place my bets on housing prices continuing to trend up and to the left, but (as a homeowner myself) I'd be pleasantly surprised if they didn't.
That said, a shift on local govt policies for short term rentals seems somewhat possible and could cause dramatic declines in the valuations of many impacted areas.
If you have the luxury of being able to live anywhere (e.g. 100% remote work, or no need for work), there are some exceptionally affordable places to rent housing until the market cools and it's a better time to buy. I don't think it makes sense to buy high unless you have very limited options.
There is... _so much Texas_ that isn't Austin or Houston or DFW or San Antonio.
A lot of it's really great, too. I miss Texas.
Where?
There's this thing, you may have heard of it, it indexes the World Wide Web and allows you to search that index free of charge. They call them search engines, a popular one is Google at https://google.com, but I presently prefer https://duckduckgo.com.
A cursory search using obvious keywords reveals that Cambodia is one such place, where one can apparently live in downtown Phnom Penh for less than $500/mo.
Don't post this type of stuff here.
https://news.ycombinator.com/newsguidelines.html
The folks that got their life situation updated due to Covid19 should think and let it simmer for a while.
I have coworker that decided to move far, outside major tech city and now with RTO and recession, he's seeing less remote opportunity with the same high level of income as the major tech city.
So we may have high inflation even if housing prices don't participate. Given the changes in rates, it seems unlikely house prices will continue the way they have.
And it will likely depend on the region which option will apply. For extremely supply constrained regions with high prices (like Vancouver), I don't expect a decrease. But my guess is as good as everyone elses.
There might be older unmaintained house in desirable hood that went higher in Feb-March but unable to fetch that price again today but good product is good product and will demand premium in this region where land is a scarcity.
The cost per square foot of the average American home has remained exactly the same, adjusted for inflation, since 1974.
In major metros, it's artificial supply constraints that have kept prices going up, and those aren't about to ease. In SF for instance, over certain periods, the city added only 10% of the houses needed to keep up with job growth. Even a massive shock to the industry wouldn't have much real effect.
I strongly suspect there won't be much to write home about on the housing front this time.
Folks seem to think 'expensive' means 'bubble' - but houses have always cost what folks can afford to pay, otherwise, you know, they'd be less expensive.
[1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
from cnbc
the growth of real estate prices vs wage growth. wage growth has been flat since the '70s.
The BLS data shows that wages have kept pace with inflation.
The Census Bureau data shows that the price per square foot of the average American home has remained the same since the 1970s.
The spread is that the average new American home now has twice the square footage per person. [1] Of course in major metros, supply constraints keep prices high (and the gap between supply and demand is so large it would take something truly catastrophic to close the gap - SF barely had a 2008, for instance). Outside metros, houses have gotten enormous. In both places, families are smaller.
I'm just saying, I don't see a housing bubble looking at price alone.
[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...
And this number was calculated before rates went even higher last week.
Source: https://www.calculatedriskblog.com/2022/06/30-year-mortgage-...
Mortgage rates may be up compared to 6 months ago, but they're back where they were in 2018 when I bought my condo. People were screaming 'housing bubble' back then too. Even that is misleading because...
Keep in mind that with an 8% inflation rate, a 5.85% interest rate on a 30-year fixed is a -2.15% real interest rate. Once you take into account mortgage interest tax deductions, the real interest rate is -4.5%.
This is dramatically lower than last time we saw 5.85% interest rates (2018) when we had a 1-2% inflation rate. That's a real interest rate of +3.85%. Once you take into account mortgage interest tax deductions, the real interest rate was +1.5%.
You are leaving out (as so many do): Taxes, Insurance and Maintenance. For example, where I live, those add up to a minimum of 3%. On top of all that, you need to factor in your personal stability - what's the risk that your career or partnership could intervene in your plans and force you to sell < 7-10 years out? If that happens, you are eating closing costs and potentially being forced to sell at a bottom out moment in house prices due to interest rate instability.
The market doesn’t differentiate between institutional and retail buyers when a house goes up for sale. However all those property taxes and HOA fees are tax deductible for institutional buyers.
I don’t think that’s good of course - and I’m not advocating people run out and buy a house either - I’m just saying, there’s a ton of factors that make “housing market collapse imminent” more of a pipe dream than a sure thing.
How much did housing go down in SF during COVID? Charts say zero, and that’s during the biggest exodus of people actually living there in recent memory.
2018 purchase prices were much lower than now, so your argument about rates isn’t convincing me. It’s the combination of obscene prices and moderate rates that is the issue. Obscene prices only made a bit of sense when rates were pushing under 3%.
I’m a homeowner, so it’s not in my interest to see prices fall, but I also don’t see why anybody would buy my house today given how high the payment would be. I would not be able to rent it out for anywhere near that number. So the situation appears very unstable to me.
I don’t expect 8% inflation to persist for 30 years. Do you? You’re right that if we average 8% inflation over the next 30 years, folks should buy the biggest house they can get approved for as long as rates are below 8%. But that’s taking a pretty big risk. Inflation has never run that hot for that long in the U.S. before. The Fed targets 2% inflation and has spent most of the last 14 years falling short of their target.
But we are in a new financial regime now, and nobody really knows what’s going to happen for sure.
https://news.ycombinator.com/item?id=31709394
I wouldn’t confuse a particularly poorly managed city for a broader trend. The same is certainly not happening a few towns over in South San Francisco where Stripe is now located, or in Cupertino, or in Menlo Park. Or at Tesla. Or every financial business in New York. Anecdotally every early stage startup I know is starting in person.
Couple years from now, work from home will once again be the exception.
forced selling can also increase supply.
Indeed, it seems you did come to that conclusion, but still commented about it being unclear?
He has to put in his 2 cents about a whole class of people behaving oddly. Indeed, the whole post seems to be a setup to complain about Americans being America centric.
> "Ask HN: Is it the “worst” time to buy a house in the US?
I can't help but think it is simply implicit American exceptionalism. It's an assumption, commonly made by Americans, that on the web we assume everything refers to the US unless otherwise specified. I'm not suggesting any bad faith on OP's part, it's an unconscious bias.
that's an assumption. There's likely no stats on it, but I wouldn't be suprised if there's a large userbase outside the US (I'm not there, I know lots of users also not being in the US).
> If you run a site in India for Indians, for example, would you find it odd if users assumed everyone lived in India unless otherwise stated?
That's not really comparable. We are talking about one of the most well-known tech exchanges worldwide - so it is also of interest to many people outside the US. If silicon valley would be in India it wouldn't be odd if the site would be hosted there, and if international users would visit it.
I'm not saying that non-americans don't use the site. I'm not saying they're not welcome. Both of those statements are obviously false.
Speculative outrage that defies common sense is a big component of the troubles liberal culture is experiencing today. It is always possible to take everything personally, so demonstrating that you can take things personally is profoundly uninteresting. And worse it distracts from the best thing about discussion: all the cool ideas we can share with each other.
Looks like Californians take the top spot, followed by Germans and Canadians.
No, ‘it’s’ not odd, you find it odd. Your opinion/feeling is not fact, despite you labelling it as such.
Interestingly the vote count went up during American off peak and dropped substantially during the American day. I don’t care about vote count, but I think it’s relevant here.
Where should you draw the line? Surely not at "more Americans than non-Americans". In your postulated example, I suspect the number of people in India would well exceed 50%.
I think the simple proposition is this: this site has a sufficiently high non-US audience that it can reasonably be expected you specify your post only concerns the US.
Owning a home is a complex decision. No one can tell you without knowing more about your desired market, your career and life trajectory, your financial situation and your life goals.
One thing you should not do though is to let FOMO drive your decision making process. Old folks like me remember 2006 and how strong FOMO was at the time. It seemed like most folks were going to be permanently priced out of the market.
Right now looks nothing like 2006-08. There aren't a lot of ARM loans at risk and the risk from mortgage backed derivatives is much less. That said, we face an equally serious, if not more so(!!!) set of risks that could see the US GDP decline for a while. Generally, market corrections overshoot, and given the miscalculations of the Fed over the last few years I see no reason this time will be different.
I am personally looking to buy a home and start a family but I am waiting despite being able to finally afford (barely) a house in my desired market. I think the market I'm looking at will correct at least 10% in the next 6 months. I may still delay the purchase even then just because of poor financial conditions overall. I may be wrong. I think probabilities are in line with my view, however.
Why? Couldn't you refinance in this situation?
One thing that we know absolutely will not happen is that the Fed will give up trying to fight inflation.
The Fed has a duel mandate to stabilize prices and keep unemployment low, but really more important than either of those is that it’s predictable and does what it says it will do. Expectations play a really large role in monetary policy. Pretty much the whole reason they waited so long to start raising rates was because they said they weren’t going to raise rates for a long time.
I wish.
I'm skeptical of that assumption.
Even worse, higher rates tend to strengthen currency value, which makes imports cheaper but hurts domestic exports. It's already very hard to devalue the USD due to its status as a reserve currency and this exacerbates that problem. We run the risk of triggering a manufacturing recession, which will helpfully "reduce demand" with layoffs but not make anyone better off.
I'm not thinking of the next year or two. I'm thinking longer term and want to secure my financial future and not gamble it away.
I wouldn't bet my mortgage on hi-tech stock. My mortgage limit must be from my regular paycheck using the commonly accepted debt:income ratio. I excluded stock out of the calculation.
Stock is a mean to pay more on annual prepayment.
Do you need it?
The only two questions you should be asking yourself.
what??
Buying a house is a long term commitment, if you can't live there for seven years then it is probably wrong for you.
If conditions improve faster than expected, you can always quickly enter the housing search/market. Housing isn’t like most other markets that can move 20% in a day. You should be able to wait 6-12 months and closely follow the consensus on interest rates and housing market sentiment.
If rates go back down you can always refinance.
Given sales volume has dramatically slowed I personally wouldn’t engage in a transaction with a seller who thinks they have total leverage and force buyers to do things like waive inspection which many people do to win a house. It’s just not worth it.
Just closed on a house in the Netherlands. I expect the prices to stagnate but not fall like they did in 2008. There is a limited supply, the demand is strong even at todays prices.
I can only envision a real fall in prices when I look at projects such as the miljonprogram from the 60-70s here in Sweden, mass building of shelters, left to its own devices the private sector will only try to game regulations to extract as much as possible from the land they own. A very visible gaming device is to constrain supply to always sell new units on or above current market prices even if you could potentially build faster, there is no incentive to sell cheaper.
If you think their response will reign inflation in check, we'll probably see the market 'crash' and a recession like the late 80s.
If you think their response will be soft, and persistent inflation is the new norm, we'll probably see the market act more like the 70s.
Maybe they walk the line, but I don't see how that's possible. Monetary policy is just so of-the-mark right now.
Another screwball is WFH. That could sap demand for large cities and push demand in suburbs and smaller towns.
Overall, I would buy right now if it really makes sense to you from a life perspective. I'd stay far away if your goals are speculative.
Do we think housing prices will crash? Probably not. There’s a housing shortage.