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I think there will be enough buyers, but I'm not a real estate guru.
From what I read, our 'lil metro area needs 20k homes on the market to be considered "healthy." I interpreted that as: Buyers and sellers are getting a fair deal. Right now, there's around 10k homes for sale.
From my point of view, homes are over valued.
But remember: We bought a fixer upper in 2009. And we remember what happened back then.
My opinion may be a bit skewed, but I wouldn't purchase our home now for what we could "probably" sell it for.
Keep in mind, we spent 10 years fixing our place up and upgraded as we went along. Our home was never gonna be a flipper or rental income investment.
Bad news (for some) is it will likely continue with low inventory.
To make matters worse,
1. I spoke to a VP yesterday from a big national lender. They just got new $2B funding. I heard this from another one a few weeks before that.
When they have funds to give, they'll lower their rates and become more aggressive in approving loans.
2. The Fed is likely going to start lowering rates sometime next year. This could be good and bad as existing homeowners have had a chance to adjust to 5.5 to 6% rates for a year plus. If they drop next year by .50 to 1%, those 3-4% interest rate homeowners may not balk at a low 5% rate in another neighborhood. So they list their home for sale. Inventory increases. Realtors and lenders are back to living the high life again.
Otoh, competition increases from buyers on the sidelines and of course those flippers and big corporations.
It's a never-ending game, right? Unless you buy the land and build it yourself.
Records show the Canadian owners bought it in 2011 for $150k. "The comps" in the area are going for $500k ish. Whatever their mortgage is, if they even have one, it's very low.
You brought up a couple of items that don't matter. re: what they paid... Analogy: if I find a $100 bill on the ground, should I sell it for $50?
Re: what they owe on a mortgage. If they owed $400K on the home because they bought it in peak and didn't want to claim bankruptcy, are you going to pay them more because they have a loan and you love their morals? No, you are going to pay the market rate.
Quote:
Originally Posted by PhoenixSomeday
But, "the market", right? lol. ¯\_(ツ)_/¯ I'd take that $100 / year for 3 years in a heartbeat.
The rental market in Surprise did not go up 60% in two years. Therefore, they could have gotten more than $1700 two years ago. Note: I am not condoning their worthless management and upkeep skills. But they got $2700 a month because they can. By definition, that IS the current market.
I do my best to pay under the market. And when I find a deal, that doesn't define the market price. Rather, it describes me finding someone who didn't know the market price of the item.
They are building apartments everywhere around the valley. As I drive around I can't help but wonder who is going to live in all these apartments? Where are they living now? Where are they going to come from?
The people that won't be able to find homes, Phoenix new home construction permits down 23% so far in 2023.
This article is pretty interesting. It's worth some thought. But I'm sure the closeminded will never consider that sometimes renting may be better for some people, even if they could afford to buy.
"Renting Is Better Than Buying a Home: Ramit Sethi’s Most Controversial Take on Wealth"
Quote:
Considering that a house is the biggest investment that most people will ever make, Sethi told the publication that he’s “tired of the blind obsession with homeownership in America.”
Sethi bases his position on three points:
1) His rejection of the common assumption that rent is always a waste of money that pays your landlord instead of paying yourself in the form of equity
2) His assertion that stocks have delivered better returns than real estate even with the recent surge in home prices.
3) His insistence that homeownership comes with a laundry list of secondary expenses that renters avoid.
According to Sethi, a lot of people aren’t aware of all the hidden fees — or “phantom costs,” as he calls them — in buying a house, which he claimed can typically add 30% to 50% to the monthly mortgage. These fees include property taxes, insurance, maintenance “and more.”
In May of this year, Kiplinger outlined many of the same hidden costs that Sethi mentioned in challenging the notion that renting is akin to throwing your money away. The publication concluded that even when buying pays off financially, renters retain the flexibility to make significant life changes, which homeowners forfeit.
One month earlier, in April, Forbes pointed out that, unlike stocks that you can quickly sell, equity is wealth that’s hard to tap into. Forbes also concurred with Sethi’s position that renting frees up time and money to grow your income and investments, particularly in big, expensive cities. That mirrors Sethi’s experience.
Sethi’s experience is not universal, however, and homeownership remains a worthwhile pursuit for millions. But he and many other credible money experts have effectively debunked the notion that renting is always a waste of money that represents failure unless you’re doing it to save for a down payment.
This article is pretty interesting. It's worth some thought. But I'm sure the closeminded will never consider that sometimes renting may be better for some people, even if they could afford to buy.
"Renting Is Better Than Buying a Home: Ramit Sethi’s Most Controversial Take on Wealth"
We agree. Many times it is MUCH smarter for someone to rent. Re: the 1st link, he missed more than a dozen of reasons why it's often bad math to buy a home.
But often, it is better math to buy. The biggest factor in when it is best to buy is based on the appreciation of the property. I have a few personal examples. A couple of places were wiser to buy and one where it was terrible math.
1. AZ. I bought it in 2011 for $185K and sold it for around $420K in 2020 after selling costs. Now it is worth $650K. I put in about $100K of improvements with $11,000 a year in expenses (no mortgage). It would have cost me $2K a month to rent that 3600 square footer plus electric, heat, etc.
2. AZ, I bought it in 2020 for $590K about $100K under the market. I've put in $50K. It's worth $1.1M. It cost me $15K a year in overhead (HOA, electric, water, etc). No mortgage. Rent would be $4.5K a month. I have $400K of "free money" (appreciation) which pays for gobs of rent for a decade. That's a winner.
3. MN. I stole a $590K home on one of the best lakes in Northern MN. It's on 10 wooded acres, 4 boatable restaurants, etc. 18 years later it is worth $1.1M but I put in $250K. Operating costs (heat etc) is about $18K a year. I use it no more than 4 months a year. I could have tripled my money in the stock market with an index fund. It would be MUCH better math to rent it for $15K x 4 months furnished and invest the $$'s.
Forgetting all of that, buying has all kinds of trade-offs. For me, I thoroughly enjoy dreaming about making something mine and changing it to personalize my home. I like the knowledge that someone cannot force me to leave because they are selling it and another 30 reasons.
So for ME, it's not necessarily about the ROI and math. Rather, it's about what is important to how I want to live. Analogy: what was my ROI on my past recent trips to France, Alaska, Cabo, Croatia, etc? The answer is the ROI of vacations is the world's worst investment! How much money could I have made if I did 't go out to eat 300 times a year? I can go on and on. Big picture: life should be a balance between ROI and personal enjoyment. And renting a home for me was never in the cards. Even with the terrible math of my home in MN, we have so many unbelievable memories. Not $1M or more worth of lost investments. But they were like 100 vacations all rolled up in one spot.
Though, I know we are going to eventually sell the place in MN and we will rent something furnished for the summer months. As life changes, it because about being hassle-free (owning a home IS a hassle). So is trying to get a landlord out to fix something or having your rent cranked up because they can. But as they say, YMMV.
It should be obvious that it not an open and-shut case (buying versus renting).
Last edited by MN-Born-n-Raised; 06-25-2023 at 04:48 AM..
This article is pretty interesting. It's worth some thought. But I'm sure the closeminded will never consider that sometimes renting may be better for some people, even if they could afford to buy.
"Renting Is Better Than Buying a Home: Ramit Sethi’s Most Controversial Take on Wealth"
I have been watching this conversation from afar. The author is looking at home ownership as strictly as an investment. He is comparing home ownership and the stockmarket. In my opinion that's ridiculous. A house is your home. A home is more than brick and mortar. Is a buyer buying a home? Or, are they buying a house? If they are buying a house strictly for future returns than they have missed the boat on why home ownership is so rewarding. Most people that invest in real-estate and own houses, HAVE A HOME that they live in, but own houses also. If you get my point.
This article is pretty interesting. It's worth some thought. But I'm sure the closeminded will never consider that sometimes renting may be better for some people, even if they could afford to buy.
"Renting Is Better Than Buying a Home: Ramit Sethi’s Most Controversial Take on Wealth"
While Ramit Sethi, the so-called expert in the article, has made a lot of money, his economic analysis is flawed.
Take his hypothetical of
Quote:
Every House Is Haunted by Phantom Costs
On June 8, about a month after he discussed the topic with CNBC, Sethi took to Twitter to flesh out his thoughts. Referring to typical aspiring homeowners, he tweeted:
“They see this:
2-bedroom house for $1,600 rent
2-bedroom house for $1,600 mortgage
And think: ‘Same price? I should build equity!'”
But he suggested that only the renter truly pays $1,600. He wrote, “Rent is the MAXIMUM you will pay, but a mortgage is the MINIMUM you will pay.”
According to Sethi, a lot of people aren’t aware of all the hidden fees — or “phantom costs,” as he calls them — in buying a house, which he claimed can typically add 30% to 50% to the monthly mortgage. These fees include property taxes, insurance, maintenance “and more.”
Here is the correct way to look at it.
When you own a home & live in it, you "pay yourself rent" in the amount of the fair market rental rate. This is, of course, not reported as income on an IRS form 1040, so that income is tax-free.
So in Sethi's hypothetical of owning a home with a $1600 monthly mortgage vs. renting a home at $1600/month, we can compare these directly.
Imagine you and I own otherwise identical houses right next to each other. Under normal circumstances, we live in the houses we own (the $1600 mortgage in his example). Imagine as a thought experiment that you rent your house to me for $1600/month, and I rent my house to you for $1600/month. Those cancel each other out.
But not when it comes to income tax time. When calculating our respective income tax obligations, each of us has jobs with income, and some investments in stocks/bonds, and under the hypothetical example, each of us would also report EXTRA rental income of $1600/month or $19,200 per year. We also have some deductible landlord expenses associated with that income. At the end off the day, though, we probably end up paying our marginal tax rate multiplied by the extra income to the IRS. Each of us is worse off in this hypothetical because we pay extra real taxes to the IRS.
So, coming back to reality... when we own a home & live in it, we are both landlord and tenant, and we "pay ourselves rent." If the fair market rental rate is $1600 per month, we have tax free income in the amount of $19,200 per year. Not too bad.
Sethi contrasts home ownership with investing in equities in the stock market. When we own the home we live in, we pay ourselves rent which is not taxed; when we own stocks and bonds, we receive dividends and interest which is taxed.
But this shouldn't be an either-or scenario. Equities and real estate are two separate asset classes, and modern portfolio theory teaches us to invest in multiple asset classes (stocks, bonds, CDs, real estate, fine art, rare gems, precious metals, etc). The trick is to figure out how much of your total portfolio to put in each, but that's another topic all together.
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What, no condos?
Look at the map where the Sea of Cortez is located. 
