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(Fortune)   Home prices set to plummet from unaffordable to significantly less yet still unaffordable. That can only mean one thing: your rent is going up again   (fortune.com) divider line
    More: News, Late-2000s recession, Great Depression, Goldman Sachs, Morgan Stanley, Business cycle, National home price declines, Subprime mortgage crisis, Financial crisis of 2007-2010  
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962 clicks; posted to Business » on 04 Oct 2022 at 1:15 PM (9 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



25 Comments     (+0 »)
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2022-10-04 11:59:35 AM  
TFA:  IF A HOUSING MARKET HAS A NEGATIVE PERCENTAGE, IT MEANS HOME PRICES THERE ARE LOWER THAN EXPECTED WHEN FACTORING IN LOCAL INCOMES. DATA FOR THE SECOND QUARTER OF 2022.

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So one of the most expensive housing markets in the country is underpriced.  Gotcha.

In other news, if this is accurate, Flagstaff, you're screwed.

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/same for parts of Florida, AZ, and Las Vegas.
 
2022-10-04 1:28:39 PM  
Oh, does this mean we're going back to the bitterly ironic situation where my friends' mortgages are significantly less than my rent? Because that was super, duper fun.
 
2022-10-04 1:29:44 PM  
Prices dropped, but the amount you'd pay per month is generally higher if you bought now, due to rapidly rising interest rates.  Home buyers aren't winning right now.
 
2022-10-04 1:30:37 PM  

austerity101: Oh, does this mean we're going back to the bitterly ironic situation where my friends' mortgages are significantly less than my rent? Because that was super, duper fun.


No, because their interest popped by several full percentage points.  On a $300k house, it means a LOT more cost per month.
 
2022-10-04 1:32:40 PM  
Places like Idaho and such that have experienced huge runups are going to drop, but I don't see how demand will drop enough to significantly lower prices in places like Southern California where supply is already extremely tight and signs point to new starts/permits dropping.  With no supply, you end up with places like the Bay Area and Vancouver BC that stall rather than drop precipitously with the rest of the market
 
2022-10-04 1:47:43 PM  
Five percent? Ten Percent?

Blah... our house has appreciated so ridiculously much since we moved in (2014) that the housing market around here (DFW) can drop by 50% and our house would still be worth more than what we paid for it.
 
2022-10-04 1:48:40 PM  

Khellendros: austerity101: Oh, does this mean we're going back to the bitterly ironic situation where my friends' mortgages are significantly less than my rent? Because that was super, duper fun.

No, because their interest popped by several full percentage points.  On a $300k house, it means a LOT more cost per month.



If they have a 30 year fixed mortgage, then they would remain unaffected by recent interest rate hikes
 
2022-10-04 1:48:55 PM  

Khellendros: Prices dropped, but the amount you'd pay per month is generally higher if you bought now, due to rapidly rising interest rates.  Home buyers aren't winning right now.


Exactly this. When the price lowers 7%, but my purchasing power has gone down 15%, then it's not much of an offset nor an ability for me to purchase.
 
2022-10-04 1:51:46 PM  

espiaboricua: Five percent? Ten Percent?

Blah... our house has appreciated so ridiculously much since we moved in (2014) that the housing market around here (DFW) can drop by 50% and our house would still be worth more than what we paid for it.


At a minimum, your house should appreciate at the rate of inflation.  Let's just assume 3% on average since 2014.  That means your house should at a minimum be able to sell for (1.03)^8 over the price you paid.  That's 1.27.  So if you paid $300,000, you need to sell it at a $380,000 to keep up with inflation.
 
2022-10-04 1:55:49 PM  

Eightballjacket: Khellendros: austerity101: Oh, does this mean we're going back to the bitterly ironic situation where my friends' mortgages are significantly less than my rent? Because that was super, duper fun.

No, because their interest popped by several full percentage points.  On a $300k house, it means a LOT more cost per month.


If they have a 30 year fixed mortgage, then they would remain unaffected by recent interest rate hikes


If a homeowners have any type of fixed rate mortgage, then they're unaffected by rate changes.
 
2022-10-04 1:58:08 PM  

Rapmaster2000: espiaboricua: Five percent? Ten Percent?

Blah... our house has appreciated so ridiculously much since we moved in (2014) that the housing market around here (DFW) can drop by 50% and our house would still be worth more than what we paid for it.

At a minimum, your house should appreciate at the rate of inflation.  Let's just assume 3% on average since 2014.  That means your house should at a minimum be able to sell for (1.03)^8 over the price you paid.  That's 1.27.  So if you paid $300,000, you need to sell it at a $380,000 to keep up with inflation.


I mean, no it shouldn't?

If you wrote that 'at a minimum, your car should appreciate at the rate of inflation' you'd be laughed at; but there's no real reason why a house should appreciate with inflation, it's something that you're getting use out of (and not paying rent for, though that's maybe offset by property taxes), it depreciates and requires repairs etc.

What you say is true for someone buying a house as an investment; but I don't really care about whether those people can turn a profit relative to inflation or not, that's not really my (or society's) problem
 
2022-10-04 1:59:28 PM  

espiaboricua: Five percent? Ten Percent?

Blah... our house has appreciated so ridiculously much since we moved in (2014) that the housing market around here (DFW) can drop by 50% and our house would still be worth more than what we paid for it.


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Texas. The only way to win is not to play on texas. evar.
 
2022-10-04 2:01:39 PM  

Gdiguy: Rapmaster2000: espiaboricua: Five percent? Ten Percent?

Blah... our house has appreciated so ridiculously much since we moved in (2014) that the housing market around here (DFW) can drop by 50% and our house would still be worth more than what we paid for it.

At a minimum, your house should appreciate at the rate of inflation.  Let's just assume 3% on average since 2014.  That means your house should at a minimum be able to sell for (1.03)^8 over the price you paid.  That's 1.27.  So if you paid $300,000, you need to sell it at a $380,000 to keep up with inflation.

I mean, no it shouldn't?

If you wrote that 'at a minimum, your car should appreciate at the rate of inflation' you'd be laughed at; but there's no real reason why a house should appreciate with inflation, it's something that you're getting use out of (and not paying rent for, though that's maybe offset by property taxes), it depreciates and requires repairs etc.

What you say is true for someone buying a house as an investment; but I don't really care about whether those people can turn a profit relative to inflation or not, that's not really my (or society's) problem


Of course they'd laugh at you, because who would expect anyone to compare the appreciation of a home with the depreciation of a car?
 
2022-10-04 2:01:43 PM  

austerity101: Oh, does this mean we're going back to the bitterly ironic situation where my friends' mortgages are significantly less than my rent? Because that was super, duper fun.


My mortgage is $485/month all in (taxes/escrow/insurance). Just increased from a whopping $470.

/would recommend
 
2022-10-04 2:02:55 PM  
I bought my Dad a new house for $335k in 2020. He had a previous house we sold, so he rolled the Equity in it, but due to his only income be SS I had to sign the mortgage and we manage his finances for him.   I got a cold call of an all cash offer for $475k for that house.   The market is still stupid.  Dad has maybe 2-5 years left he can live at there.  We will see what things look like at that point.
 
2022-10-04 2:03:25 PM  

Rapmaster2000: espiaboricua: Five percent? Ten Percent?

Blah... our house has appreciated so ridiculously much since we moved in (2014) that the housing market around here (DFW) can drop by 50% and our house would still be worth more than what we paid for it.

At a minimum, your house should appreciate at the rate of inflation.  Let's just assume 3% on average since 2014.  That means your house should at a minimum be able to sell for (1.03)^8 over the price you paid.  That's 1.27.  So if you paid $300,000, you need to sell it at a $380,000 to keep up with inflation.


I suppose that's true, but a $300,000 home in 2014 should have been a nice McMansion with four bedrooms, two and a half bathrooms, and a finished basement.  It was more likely an overpriced, three bedroom, one bathroom that needed a lot of work.
 
2022-10-04 2:03:50 PM  
Housing can be one of the following:
- a profitable investment
- affordable

We keep choosing the former, to our society's detriment.
 
2022-10-04 2:04:13 PM  

Gdiguy: Rapmaster2000: espiaboricua: Five percent? Ten Percent?

Blah... our house has appreciated so ridiculously much since we moved in (2014) that the housing market around here (DFW) can drop by 50% and our house would still be worth more than what we paid for it.

At a minimum, your house should appreciate at the rate of inflation.  Let's just assume 3% on average since 2014.  That means your house should at a minimum be able to sell for (1.03)^8 over the price you paid.  That's 1.27.  So if you paid $300,000, you need to sell it at a $380,000 to keep up with inflation.

I mean, no it shouldn't?

If you wrote that 'at a minimum, your car should appreciate at the rate of inflation' you'd be laughed at; but there's no real reason why a house should appreciate with inflation, it's something that you're getting use out of (and not paying rent for, though that's maybe offset by property taxes), it depreciates and requires repairs etc.

What you say is true for someone buying a house as an investment; but I don't really care about whether those people can turn a profit relative to inflation or not, that's not really my (or society's) problem


If your comparison is "worth more than we paid for it", then you're referring to the house as an appreciating asset/investment.  That's why I created a baseline.

We should make it clear that houses don't appreciate.  Land does.  But when people say "my house" they mean "my real estate".  They're not talking about just the physical structure.

The land my house is on is worth more than the house.  It's a 60 year old, small house, on 1 acre in the city.  When I sell this place, the first thing the new buyer will do is tear it down and build a house 3 times as big.
 
2022-10-04 2:34:03 PM  

Eightballjacket: Khellendros: austerity101: Oh, does this mean we're going back to the bitterly ironic situation where my friends' mortgages are significantly less than my rent? Because that was super, duper fun.

No, because their interest popped by several full percentage points.  On a $300k house, it means a LOT more cost per month.


If they have a 30 year fixed mortgage, then they would remain unaffected by recent interest rate hikes


Read my post directly before the one you quoted.  I'm talking about people who are trying to buy/move now.  Prices dropping means nothing if you're paying hundreds more a month in interest.
 
2022-10-04 3:32:42 PM  

Khellendros: I'm talking about people who are trying to buy/move now.


Well, you're talking about home buyers, and you're correct, but austerity101 - to whom you responded - was describing his friends' mortgages, which means they're homeowners, hence Eightballjacket's response.

I don't think anyone here is in disagreement, there's just communication issues.  ;-)
 
2022-10-04 3:42:37 PM  

espiaboricua: Five percent? Ten Percent?

Blah... our house has appreciated so ridiculously much since we moved in (2014) that the housing market around here (DFW) can drop by 50% and our house would still be worth more than what we paid for it.


I'm not quite in that boat. But I bought my place 4 years ago and it has increased over 20% (maybe more if you take improvements into account).

But since I'm fixed rate and also don't plan on selling in the next decade...bring it down. Property taxes should follow.
 
2022-10-04 5:26:51 PM  
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2022-10-04 9:54:04 PM  
 

austerity101: Housing can be one of the following:
- a profitable investment
- affordable

We keep choosing the former, to our society's detriment.


Supply and demand isn't just a good idea. It's the LAW. For example, immigration pushed up the landlords' wealth by $3.7 trillion from 2010 to 2020. https://www.newamericaneconomy.org/housingmap/

"Economics is a subject that does not greatly respect one's wishes." Nikita Khrushchev, Premier - USSR
 
2022-10-05 12:08:19 AM  
Given that home prices doubled and tripled since 2019, a ten percent decrease in housing prices from today would not even be a thorough correction.
 
2022-10-05 7:06:09 AM  
We bought in 2020 in a well established neighborhood built in the 1970s. We have a HOA that is voluntary and only has the power to pave roads which I didn't join even though it's only 20 dollars a year. Our house value has gone up 30% already. I keep getting sight unseen offers for ridiculous sums of money that are tempting.

Only problem is if we sell where the fark do we move to? There's no new housing and when I ask that question I just get crickets and a quick disconnect.

The way this market is my children will never be able to afford a house because even shiat boxes cost triple what I paid for my first house twenty years ago.
 
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