Am I crazy to buy a home right now?
December 17, 2022 9:44 PM
I had the possibly bad fortune to discover a subreddit about the putative real estate bubble. It's full of people who think it's madness to buy a home right now because basically it's 2008 all over again now and the market is going to tank next year. For complicated reasons, right now is when it makes sense for me to buy.
The housing market I'm looking at is down a lot already but...granting that You Are Not My Psychic, I'm seeking calm opinions: am I likely to regret this? Price are not down to what they were five years ago; they're just down to a point that doesn't make me blink in disbelief.
NB: I am not buying an apartment as an investment. I am buying a place to live.
The housing market I'm looking at is down a lot already but...granting that You Are Not My Psychic, I'm seeking calm opinions: am I likely to regret this? Price are not down to what they were five years ago; they're just down to a point that doesn't make me blink in disbelief.
NB: I am not buying an apartment as an investment. I am buying a place to live.
I agree you can't game these things. The only reason not to buy would be if you were buying to try to game the system in some way, like you were depending on flipping it or etc. If this is a house you like and can afford and can see yourself staying in for the foreseeable future, then do it.
posted by fingersandtoes at 10:06 PM on December 17, 2022
posted by fingersandtoes at 10:06 PM on December 17, 2022
My understanding that a key difference between 2008 and now is that post great recession it has gotten significantly harder to qualify for a mortgage. Moreover there is a housing shortage.
posted by oceano at 10:21 PM on December 17, 2022
posted by oceano at 10:21 PM on December 17, 2022
So it seems reasonable to me to buy a house to live in for the long term provided that a) you can afford it b) you want to be a home owner.
posted by oceano at 10:25 PM on December 17, 2022
posted by oceano at 10:25 PM on December 17, 2022
No, it's not 2008 all over again. That was a severe disaster caused by subprime lending, adjustable-rate mortgages, and resultant defaults/foreclosures.
In the near term, housing prices are likely to correct downward, due largely to increased interest rates. There is, however, no reason to think catastrophe is in the cards. If you can afford to buy now, just do it.
posted by desert outpost at 12:00 AM on December 18, 2022
In the near term, housing prices are likely to correct downward, due largely to increased interest rates. There is, however, no reason to think catastrophe is in the cards. If you can afford to buy now, just do it.
posted by desert outpost at 12:00 AM on December 18, 2022
No, I don't think it's crazy to buy a home right now as long as you can genuinely afford it and have a strategy in case interest rates rise. Don't overextend yourself.
We bought a couple of years ago and fixed our interest rates for several years. Some people who bought around the same time went on a variable rate or only fixed for a short time. They are not in a great position right now, whereas we have some inkling of hope that things might improve in a few years.
posted by kinddieserzeit at 12:53 AM on December 18, 2022
We bought a couple of years ago and fixed our interest rates for several years. Some people who bought around the same time went on a variable rate or only fixed for a short time. They are not in a great position right now, whereas we have some inkling of hope that things might improve in a few years.
posted by kinddieserzeit at 12:53 AM on December 18, 2022
Even if the market crashes, you won't be affected as long as you can still afford your mortgage and don't lose your job. So, don't get a variable rate mortgage and don't buy something bigger than you can afford. Property taxes have been increasing in my area and that means your escrow payment goes up, and that in turn increases your mortgage payment. If you were already struggling to make the payment, adding $50 or $100 a month might break your budget.
posted by soelo at 6:22 AM on December 18, 2022
posted by soelo at 6:22 AM on December 18, 2022
If any of these sentences describe your situation, it's probably a bad time to buy:
-- You are likely to need or want to sell the house within the next few years.
-- You are counting on the house value rising swiftly and consistently (like, you need the value to rise in order to then qualify for a home equity loan to then do needed work on the house).
-- The total expected costs at current lending rates (mortgage, fees, taxes, utilities, repairs, etc.) exceed what you will be able to comfortably pay over the coming years.
If you are buying a house to live in and plan to stay a fair while, then it's not a terrible time to buy. At some point in the future rates may drop enough to make it worth refinancing, but don't build your plan on this happening -- have a plan that works with where costs are now, and also a plan that works if values continue to drop over the coming year or two, potentially leaving you owing more than the house is worth ("upside down") for a while.
A good friend bought their house immediately before the last crash. It took years before their house value rose above what they owed. It would have been terrible if they had needed to move during that time, and it was stressful, but because they were sitting tight and could afford their mortgage, eventually it was all fine, just on a much longer timeline.
This isn't risk free, even if you have a longer timeline. There are places in the US that still haven't fully recovered from the last crash -- there is risk in buying real estate, despite how simple people in rising markets make it look to come out ahead buying and selling.
posted by Dip Flash at 6:52 AM on December 18, 2022
-- You are likely to need or want to sell the house within the next few years.
-- You are counting on the house value rising swiftly and consistently (like, you need the value to rise in order to then qualify for a home equity loan to then do needed work on the house).
-- The total expected costs at current lending rates (mortgage, fees, taxes, utilities, repairs, etc.) exceed what you will be able to comfortably pay over the coming years.
If you are buying a house to live in and plan to stay a fair while, then it's not a terrible time to buy. At some point in the future rates may drop enough to make it worth refinancing, but don't build your plan on this happening -- have a plan that works with where costs are now, and also a plan that works if values continue to drop over the coming year or two, potentially leaving you owing more than the house is worth ("upside down") for a while.
A good friend bought their house immediately before the last crash. It took years before their house value rose above what they owed. It would have been terrible if they had needed to move during that time, and it was stressful, but because they were sitting tight and could afford their mortgage, eventually it was all fine, just on a much longer timeline.
This isn't risk free, even if you have a longer timeline. There are places in the US that still haven't fully recovered from the last crash -- there is risk in buying real estate, despite how simple people in rising markets make it look to come out ahead buying and selling.
posted by Dip Flash at 6:52 AM on December 18, 2022
When the interest rates were very low, housing prices went up, especially in areas with a shortage.
Now that the interest rates are higher, those prices have stopped increasing, and the number of people putting in offers is much lower. I see many houses sitting on the market longer and offering price decreases.
The major downside facing you buying today isn't that houses are inflated, it's that interest rates are. The mortgage you can get today costs 30% more a month than they did a year ago.
However, the good news is that if you buy a house today with low housing demand, you can potentially refinance your mortgage down the road, getting both a low cost of house, and a low cost of mortgage. Many people say you usually want to buy houses when interest rates are high (and then refinance) vs buying when interest rates are low.
Hope this helps!
posted by bbqturtle at 6:55 AM on December 18, 2022
Now that the interest rates are higher, those prices have stopped increasing, and the number of people putting in offers is much lower. I see many houses sitting on the market longer and offering price decreases.
The major downside facing you buying today isn't that houses are inflated, it's that interest rates are. The mortgage you can get today costs 30% more a month than they did a year ago.
However, the good news is that if you buy a house today with low housing demand, you can potentially refinance your mortgage down the road, getting both a low cost of house, and a low cost of mortgage. Many people say you usually want to buy houses when interest rates are high (and then refinance) vs buying when interest rates are low.
Hope this helps!
posted by bbqturtle at 6:55 AM on December 18, 2022
If you’re buying a home as a long-term investment and are getting a fixed rate mortgage you can afford, I don’t think this is necessarily a bad time to buy. Interest rates are higher than they have been but if you get a fixed rate mortgage, you’ll be unaffected if they go up. A lot of those who had a hard time in 2008 were trying to sell because they had an adjustable rate mortgage they suddenly could not afford and/or were flipping houses. If you’re buying for the long-term, that should be less of a concern. Good luck!
posted by kat518 at 6:58 AM on December 18, 2022
posted by kat518 at 6:58 AM on December 18, 2022
My spouse and I bought a condo in July, as first-time buyers, and we're happy with our decision. According to Redfin the value is down 8%, but we don't care. We wanted to stop renting, and we think this home could meet our needs for decades. We were able to buy something under our maximum budget, and we chose to put extra into the down payment to give ourselves lower monthly mortgage payments, for peace of mind. (We understood the pros and cons of doing this.) We have a traditional fixed-rate mortgage.
Based on our experience, I'd suggest starting by finding a good local real estate agent...in January or February, since everything slows down over the holidays. We found ours by asking for recommendations in our local Buy Nothing group on Facebook, since we wanted to buy in the same area where we were renting. An agent should be able to help you navigate the local market and identify whether there's anything available that could meet your needs and budget while also being a decent value. Ours also helped us find a relatively good mortgage rate from a local bank that wanted us as a customer.
posted by dreamyshade at 7:24 AM on December 18, 2022
Based on our experience, I'd suggest starting by finding a good local real estate agent...in January or February, since everything slows down over the holidays. We found ours by asking for recommendations in our local Buy Nothing group on Facebook, since we wanted to buy in the same area where we were renting. An agent should be able to help you navigate the local market and identify whether there's anything available that could meet your needs and budget while also being a decent value. Ours also helped us find a relatively good mortgage rate from a local bank that wanted us as a customer.
posted by dreamyshade at 7:24 AM on December 18, 2022
I had the cash to buy a house a number of years ago but was advised that the housing market was going to blah blah blah.
My coworker at the time, making the same salary as me, bought a run down house for $350k in a grungy artsy downtown neighborhood. It’s now worth almost a million and she never even renovated it - it still looks rundown and has a terrible floor plan but the neighbourhood massively increased in desirability.
I did not buy a house at that time, saved my money and bought a house recently. My house was way more expensive and also had to be in a less-desirable area as I was priced out of the cool downtown area. I really regret not buying the first time around. I will also note that even for this house I was told that the market would blah blah but I bought anyway, the house has substantially increased in value and the neighbourhood has become more desirable, so it was an absolutely sound decision.
If you’re in a decent location (for instance, cities with geographical borders like lakes or rivers are good because they’re so contained and can’t sprawl, meaning the interior property values just climb consistently) then the market will do what it does but the value of the house will eventually just climb. Especially now that you can Airbnb all or part of your house and make a huge amount of money in a small time, I cannot see how buying a house can ever be a bad decision.
posted by nouvelle-personne at 7:30 AM on December 18, 2022
My coworker at the time, making the same salary as me, bought a run down house for $350k in a grungy artsy downtown neighborhood. It’s now worth almost a million and she never even renovated it - it still looks rundown and has a terrible floor plan but the neighbourhood massively increased in desirability.
I did not buy a house at that time, saved my money and bought a house recently. My house was way more expensive and also had to be in a less-desirable area as I was priced out of the cool downtown area. I really regret not buying the first time around. I will also note that even for this house I was told that the market would blah blah but I bought anyway, the house has substantially increased in value and the neighbourhood has become more desirable, so it was an absolutely sound decision.
If you’re in a decent location (for instance, cities with geographical borders like lakes or rivers are good because they’re so contained and can’t sprawl, meaning the interior property values just climb consistently) then the market will do what it does but the value of the house will eventually just climb. Especially now that you can Airbnb all or part of your house and make a huge amount of money in a small time, I cannot see how buying a house can ever be a bad decision.
posted by nouvelle-personne at 7:30 AM on December 18, 2022
Supply and demand are wildly different between 2008 and now. In fact, today's super tight supply (and tight rental market, with corresponding prices) is due mostly to the huge drop in building after 2008.
It's a weird time, too be sure. But anyone who tells you they're the same is full of $hit. Click 'close" and don't go back.
Some very good advice above.
posted by Dashy at 7:50 AM on December 18, 2022
It's a weird time, too be sure. But anyone who tells you they're the same is full of $hit. Click 'close" and don't go back.
Some very good advice above.
posted by Dashy at 7:50 AM on December 18, 2022
There seem to be a lot of articles being printed right now about it being a bad time to buy a house, and they all seem to be focused on how bad it is compared to previous times, as opposed to buying vs not buying. Right now the mortgage rate is lousy (compared to previous times), people who bought high during the pandemic don't want to risk selling at a loss, so there are fewer homes on the market to choose from (ctpt), therefore prices are still high (ctpt), and it's harder to qualitfy for a mortgage (ctpt).
But if you're asking whether it's smart to buy a house for you to live in, then I agree with the other posters - if you can afford it, and you are looking for a place to live in, and you are planning to look for the right house that you actually like (and not grab the first thing that looks affordable and panic-buy it only to find it needs massive repairs or has other major issues, like a lot of people did in 2020), then it's not a bad time to buy.
posted by Mchelly at 7:57 AM on December 18, 2022
But if you're asking whether it's smart to buy a house for you to live in, then I agree with the other posters - if you can afford it, and you are looking for a place to live in, and you are planning to look for the right house that you actually like (and not grab the first thing that looks affordable and panic-buy it only to find it needs massive repairs or has other major issues, like a lot of people did in 2020), then it's not a bad time to buy.
posted by Mchelly at 7:57 AM on December 18, 2022
I spent some time in that godforsaken subreddit too. Even there, the reasonable people would tell you that you can’t time the market and you should buy when it’s right for you. I think the important thing is to buy within your means and not plan to move for a while.
posted by lunasol at 8:02 AM on December 18, 2022
posted by lunasol at 8:02 AM on December 18, 2022
A bubble bursting just means prices go down. That‘s only a problem if you want/have to sell before they have recovered. So if you intend to live in the house for several years that is an entirely theoretical problem. The market price is only relevant if you’re actively buying or selling so you only lose money if you sell while the market is below where it was when you bought. So is it entirely risk free, no because your circumstances may cause you to want to move. But at that point you may become a landlord for a while. So you still don’t necessarily realise a loss.
posted by koahiatamadl at 8:29 AM on December 18, 2022
posted by koahiatamadl at 8:29 AM on December 18, 2022
There have been people predicting a massive house price crash for at least twenty years. And when the 2008 crash happened they were saying it would fall further soon... only for prices to start rising again. Ever since then the bubble is about to burst any day now, oh yes.
I'm not saying they'll never be right, just that you cannot predict which decade they'll be right in, never mind which year or month.
posted by fabius at 8:39 AM on December 18, 2022
I'm not saying they'll never be right, just that you cannot predict which decade they'll be right in, never mind which year or month.
posted by fabius at 8:39 AM on December 18, 2022
A lot of making big decisions is managing your own expectations and assessing which risk (or which regret) you would rather have. Would you be kicking yourself if home prices fell by ... I don't know, 10 percent, next year? Or would you just say "I love this house and am glad I jumped on it while it was for sale. Guess we didn't get the world's greatest deal, but oh well." (After all, even if "homes in the area," generically speaking, fell in value, your specific home will have gone on sale at the time that it did and not X months later.)
As for the prognosticating, this varies a lot by locale, but it can be instructive to look at Case Schiller history for a few places, to get a sense of how your locale fared in 2008 and how steep its recent run-up has been compared to other places. Then you could think about what underlying factors would justify that run-up (after all, if Google opened an office, then a steep run-up would be sustainable). There can be metrics useful in thinking that through. One thing I've heard lately is the idea that appreciation got pulled forward and that things will be flat for awhile; that makes sense to me, but who knows, really? Especially if interest rates keep going up or the economy gets bad, then prices might go down.
posted by slidell at 9:27 AM on December 18, 2022
As for the prognosticating, this varies a lot by locale, but it can be instructive to look at Case Schiller history for a few places, to get a sense of how your locale fared in 2008 and how steep its recent run-up has been compared to other places. Then you could think about what underlying factors would justify that run-up (after all, if Google opened an office, then a steep run-up would be sustainable). There can be metrics useful in thinking that through. One thing I've heard lately is the idea that appreciation got pulled forward and that things will be flat for awhile; that makes sense to me, but who knows, really? Especially if interest rates keep going up or the economy gets bad, then prices might go down.
posted by slidell at 9:27 AM on December 18, 2022
I just closed on a house on December 1 and moved in two days ago. Zero regrets here, mostly because 1) I plan to live in it for many decades, 2) the location is absolutely ideal, 3) I can afford the mortgage, even with the higher interest rate, and 4) there's a good chance I can refinance at some point. And because of those high interest rates, I got the house for under market value, so once I (hopefully) refi, it's going to feel like a STEAL. Go for it!
posted by leftover_scrabble_rack at 10:29 AM on December 18, 2022
posted by leftover_scrabble_rack at 10:29 AM on December 18, 2022
I bought a home less than a year ago to live in and have basically spent the time since then ignoring any and all news about the real estate market, as I plan to live here for at least a good decade and I have a fixed mortgage and the means to pay it. Whether it was a sound investment decision is something that I haven't been concerning myself with in the least, as it changes nothing for me. It's a place to live, first and foremost.
posted by Aleyn at 12:40 PM on December 18, 2022
posted by Aleyn at 12:40 PM on December 18, 2022
Those people (or others like them) are literally always predicting an imminent house price crash. They have no idea either.
The key question is always is it a sensible time in your life for you to buy.
I bought in June 2007 and spent a long time underwater on the house. However, the only reason it wasn't sensible to buy then was that I couldn't easily afford the work I needed/wanted to do on the house. When I eventually sold it after a decade, I came out very slightly ahead financially compared to if I had rented the whole time. And I'd lived in a house I liked.
So, if you can genuinely afford it, you're confident about your income source, and you're not overstretching your physical capacity to maintain a house (or condo or whatever), then buy.
posted by plonkee at 1:18 PM on December 18, 2022
The key question is always is it a sensible time in your life for you to buy.
I bought in June 2007 and spent a long time underwater on the house. However, the only reason it wasn't sensible to buy then was that I couldn't easily afford the work I needed/wanted to do on the house. When I eventually sold it after a decade, I came out very slightly ahead financially compared to if I had rented the whole time. And I'd lived in a house I liked.
So, if you can genuinely afford it, you're confident about your income source, and you're not overstretching your physical capacity to maintain a house (or condo or whatever), then buy.
posted by plonkee at 1:18 PM on December 18, 2022
It's full of people who think it's madness to buy a home right now because basically it's 2008 all over again now and the market is going to tank next year.
That only matters if you're planning to sell the home within 2-3 years. Since you say this is for a residence, not an investment, definitely buy now if you can get a fixed rate mortgage that works for you, and don't worry about what the market does, because once you close, the market vagaries won't matter to you.
Another nice bonus about buying now: in 3-4 years, when interest rates come down from the highs they're at now, you can refinance into a fixed mortgage at a much lower rate, and save a ton of money on your monthly payments.
posted by pdb at 2:54 PM on December 18, 2022
That only matters if you're planning to sell the home within 2-3 years. Since you say this is for a residence, not an investment, definitely buy now if you can get a fixed rate mortgage that works for you, and don't worry about what the market does, because once you close, the market vagaries won't matter to you.
Another nice bonus about buying now: in 3-4 years, when interest rates come down from the highs they're at now, you can refinance into a fixed mortgage at a much lower rate, and save a ton of money on your monthly payments.
posted by pdb at 2:54 PM on December 18, 2022
Not what you asked, but I would get some solid quotes on homeowners insurance just to be sure you can afford the payment. Many insurance payments seem to be going way up (like 200%) because construction supplies cost more with inflation.
posted by luckdragon at 3:39 PM on December 18, 2022
posted by luckdragon at 3:39 PM on December 18, 2022
We're not going to see a big market correction until we are no longer in a housing shortage. Yes, the rapidly hiked interest rates have been off-putting but there are only a few markets where home prices have dropped significantly (like 10%). Housing prices are still going up year over year in most areas. I bought a house less than a year ago and it's already worth 25% more than when I bought it. Even the 2008 'crash' was a tiny blip when you look at a 30 year chart of median home prices.
There was a time in the 80s when interest rates were double digits, so the current 7% is really only bad if you compare to the historic low rates during the pandemic.
If you can keep the property for at least 5 years, and can afford the mortgage, there's no real reason to wait. You can always refinance if interest rates fall again.
posted by ananci at 3:19 AM on December 19, 2022
There was a time in the 80s when interest rates were double digits, so the current 7% is really only bad if you compare to the historic low rates during the pandemic.
If you can keep the property for at least 5 years, and can afford the mortgage, there's no real reason to wait. You can always refinance if interest rates fall again.
posted by ananci at 3:19 AM on December 19, 2022
Thank you to everyone who responded. It was truly helpful.
posted by less-of-course at 5:29 PM on December 22, 2022
posted by less-of-course at 5:29 PM on December 22, 2022
This thread is closed to new comments.
The only reason I'd hesitate is if you thought you might not be there in 1-3 years. Try to buy a house with the aim of staying 5 years.
posted by hydra77 at 9:50 PM on December 17, 2022