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.
People wanting to die in their current home, doesn’t lose anything.
They do if they put their life’s savings into the house with the intention of leaving it to their kids. Yeah, it sucks when an investment goes south, and yeah, that’s just how it goes sometimes, but they DID lose something.
People looking to swap to a pricier home, doesn’t lose anything
Again, families often need to move to larger (i.e. pricier) homes. This isn’t reserved for the wealthy class.
People looking to enter the market, doesn’t lose anything.
I don’t know if you’ve been watching where people have been putting their money when they can’t afford a house, lately. Have you noticed how everything is being speculated on? Tried to buy any pokemon cards lately? Seen the meme stocks? Crypto? Labubu? Young people haven’t been putting their money in housing, so yeah, they won’t get hit directly when the housing market collapses. But what do you think happens to all those secondary “investments” when housing suddenly becomes more affordable?
A lot of young people think they’re making investments right now, but as soon as housing falls, they’re going to be left holding a bunch of worthless cardboard over night.
We have a big complex house of cards built on the assumption that housing prices always go up. But they’ve really only gone up proportional to what the boomer generation has been able to afford. Now that boomers are dying out, demand for expensive housing is cratering, and the house of cards is going to collapse and have many secondary and tertiary effects. There will be very few people who “don’t lose anything.”
Yeah, it sucks when an investment goes south, and yeah, that’s just how it goes sometimes, but they DID lose something.
Sounds like the inheritors lost something.
Again, families often need to move to larger (i.e. pricier) homes. This isn’t reserved for the wealthy class.
Which becomes easier to afford if housing is cheaper.
A lot of young people think they’re making investments right now, but as soon as housing falls, they’re going to be left holding a bunch of worthless cardboard over night.
The end game buyers of such collectibles, won’t be impacted enough from a housing crash to stop them from collecting.
Also far from everyone is speculating on collectibles, it’s a high risk high reward gamble to do so. Which unopened Lego boxes has proven. With the added sprinkle on top you need to be able to hold the items for decades
That’s fine if you’re fine with it, as long as you understand what’s about to happen. What I don’t get is your “fuck them, got mine” attitude about it. It doesn’t help to welcome the worst for everyone around you. What helps is empathy.
I truly hope you are not negatively impacted by what comes next. Cheers.
There’s nothing “fuck them, got mine” attitude about this, the only one losing to a housing market crash are the well offs; It’s a net benefit for the vast masses of society
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.
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.
It is because of higher housing supply, even rents went down. This is exactly how markets work
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.
You should have kept it and lived in it forever instead of using it as an unregulated way to gain wealth.
I moved out of Texas you dummy. Why would I keep a house somewhere I don’t live in. I guess I could have kept it and become a scumbag landlord instead of making it available to homebuyers. Eternal wealth through hoarding!
Lol you didn’t make it available to anyone but private equity or another asshole using real estate as financial gain.
How could you possibly know that? Are you living in their walls? Did you stalk the buyer to make sure they weren’t a black rock employee?
Because starter homes are half a million dollars, you moron.
Everyone here really appreciates your financial advice… not.
Everyone here is a fucking capitalist moron.
And? Make more, average home where I live is 700k. Stop shitting on everyone be better
Manosphere has entered the chat.
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What in the ever living fuck are you talking about? He sold a house he could not live in. He literally has two choices: let it sit empty (wasteful) or rent it out (be a landlord, blocking someone who wants to buy a home for their use). You have no fucking clue who he sold that to. It could have been anyone from a normal person to a flipper to private equity.
gaining wealth is the intedned way to use capitalism, working for a living is just a hack
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.
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.
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.
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.
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
Cost of a new gas guzzler is $30k or more. A tankful of gas is $100. Which is more devastating, even if you refill once a week?
and the gas guzzlers themselves are overpriced.
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.
Houses aren’t investments. 😂
Tell that to people who bought from 2011-2019. I’m on home number 5 and my wealth is tied to buying my first place in 2011
Congrats on missing the point. Houses SHOULD NOT be investments. They are working that way right now, which incentivizes the kind of behavior we are seeing. Yeah, I’m also living great because I bought in 2012, but that was not why I bought a house then (I just wanted to have my own space where I could play guitar without annoying my neighbors) and should not be why anyone either buys or sells a house. Tying wealth to the roof over your head is bad. Tying retirement to the roof over your head is worse. It used to be that parents would pass down their house to their children when they retired. Now the parents sell their house to pay for their retirement, and kids get stuck with paying for a stratospherically priced house.
I’m not saying you did anything morally or ethically wrong by buying a house then selling it for a profit to move into a new house, but the reason you made so much money was because normal people who just want a place to call their own had to compete with flippers, multinational investment firms, private equity, hedge funds, rich foreign nationals trying to move money out of their country, etc. Those entities are turning a roof over a person’s head into profit… instead of a roof over a person’s head.
and the gas guzzlers themselves are overpriced.
That’s the is/should fallacy. Yes they are, and it causes problems. But in almost the entire developed world, that’s the current situation.
As a lifelong renter who will never own a home: sucks to suck, try better next time, hedge your profit bets better next time
