Housing Market Forecast

[Steve73]

My opinion - if they plan on staying in the area for next 5 or more years, buy, but see my points below. I don't think we will see prices drop. I think what we are seeing is prices have been pulled forward, so I think housing prices will remain flat-ish to maybe slight increases over the next 5 years. Refi when rates drop to lower their payment.

Sounds like they make good money, they should try to save up to 20% down. Will make them a stronger buyer.
If they have to go FHA, be sure the PMI can be removed when they reach 20% equity. I know some friends who are now well over 20% PMI, but terms of their loan won't let them remove it.

Last thing to consider is budget. When they start a family, will both continue to work? If no, they should buy based on one income. If yes, consider child care costs into the equation.

In my opinion - Rent because you are saving, or because your situation is temporary (want flexibility in up-sizing, down sizing and relocating).

** not a financial advisor. Take my advise with a grain of salt and a tequila shot.

 

[BlkGS]

I think it will be highly location dependent. Where I live? Forget it about it. We continue to show up on lists of top places to move to/live. Even a nation-wide housing collapse would have little effect here.. IMO.

Two good pieces of advise I have received.

1. You can never time the market, you will always lose.
2. There is never a bad time to buy real estate.

The best advice I would give them is to make sure they save up 20% + closing costs, and buy when they find the house they want. Even in a bubble burst - they will still come out way ahead in the long run (assuming they keep the house for the long-term). They can re-finance whenever interest rates drops.

People having been waiting for prices to come down since COVID. They have only gone up.

I agree with this overall. In the South, ESPECIALLY F lorida, prices are never coming down.

I don't think there will EVER be enough single family homes built to meet demand. While it's a major component of what most people want in life, there's a lot of people.in government and education that think they're the worst thing ever and everyone should live in high density housing (except them). Beyond that, all the new homes I see going up are on tiny lots without much appeal. So the houses that may be available in the future might not meet what they want.

Houses are one of the things that you can easily refinance if rates go down. While I understand the cost aspect of high rates right now, I wouldn't just rent hoping rates go down. Rent prices go up with interest rates as well, and so it's worth it to buy (within your means) at a higher interest rate and refi if rates go lower if you find the right house.

Story time. I moved back to FL during COVID. Most everyone told me it was a bad idea to buy a house because "prices would crash". We couldn't find a house we liked and were set to rent for a year, until we found our house the last day we were here. Our house has nearly doubled in value since we bought it. We could not afford to buy it at today's prices. We will never sell it because the interest rate is so low.

We have been considering buying a second property as an investment for the kids, because by the time they are old enough to buy a house, homes will be generational assets almost exclusively, and we want to set them up as best we can.

 

[BlkGS]

I would assume inheritance daddies money, or tech industry. Maybe Only Fans in todays world. It certainly is not common. Me and my wife are top 5% in our state and a $1 million dollar home would pretty tough to pull off.

Lots of inheritance money, but even more people that are just in MASSIVE debt.

The number of people I see who make less than my wife and I that drive 2 new high end vehicles, paid more for their house, go on toma of trips, etc... It's insane.

I think a huge percentage of people contribute nothing to their 401k, and are paycheck to paycheck but live a lavish lifestyle.

 

[adrianp89]

I think a huge percentage of people contribute nothing to their 401k, and are paycheck to paycheck but live a lavish lifestyle.

I think this is it. I see the same thing - then remember I am saving around 30% of each paycheck.

 

[BlkGS]

I think this is it. I see the same thing - then remember I am saving around 30% of each paycheck.

It's gonna be a HUGE problem later on for our generation. Lots of people with no wealth accumulated, social security will be useless at best, and people with no paid for assets. No homes, no cars, no savings. At some point our generation won't be of working age anymore, and will have nothing to fall back on.

 

[adrianp89]

It's gonna be a HUGE problem later on for our generation. Lots of people with no wealth accumulated, social security will be useless at best, and people with no paid for assets. No homes, no cars, no savings. At some point our generation won't be of working age anymore, and will have nothing to fall back on.

I have this feeling that somehow my 401k withdrawals will be taxed higher to pay for them.

 

[BigN8]

Saw and article this morning that those eligible for SS benefits at year 2033 may have to wait until 69 years old.

 

[Coult45]

I don't think I saw this mentioned yet...the one thing that hasn't changed in a LONG time is the value of sweat equity. Every house we've purchased (7) over the past 33 years or so has needed work. Some of it was significant, some was just modernization and upgrades. Nearly all of it was done by my wife and me, learning as we went, and all of it paid off financially. There are a lot of deals out there right now. A willingness to buy a project can get young buyers into a better house earlier, but takes work to turn it into the house they really wanted. My kids aren't interested in that type of purchase right now, so they're still on the sidelines with many others, waiting for the right deal for them.

 

[BlkGS]

I have this feeling that somehow my 401k withdrawals will be taxed higher to pay for them.

That's why I have avoided Roth IRAs overall. I all but guarantee those are getting taxed on the way out when I'm of age to use them. I'd rather not get taxed up front and know I'm getting taxed on the back end than get tax up front hoping they won't tax me again.

 

[BlkGS]

I don't think I saw this mentioned yet...the one thing that hasn't changed in a LONG time is the value of sweat equity. Every house we've purchased (7) over the past 33 years or so has needed work. Some of it was significant, some was just modernization and upgrades. Nearly all of it was done by my wife and me, learning as we went, and all of it paid off financially. There are a lot of deals out there right now. A willingness to buy a project can get young buyers into a better house earlier, but takes work to turn it into the house they really wanted. My kids aren't interested in that type of purchase right now, so they're still on the sidelines with many others, waiting for the right deal for them.

Agreed. The amount of people who are able to do work is low, which is amazing since there is a YouTube for literally everything.

I think the bigger problem is people buy a fixer upper but can't afford to buy the stuff for the fixes. Our house for example needed hurricane windows, we knew this going in and it was priced accordingly. It was 30 grand to put them in. We had the money because of the equity from our old house, but that's a big entry barrier for people. Same goes for doing floors, HVAC, roofs, etc. You gotta have the money for that stuff on a fixer, vs rolling it into your 30 year loan.

 

[the MfM]

I don't think I saw this mentioned yet...the one thing that hasn't changed in a LONG time is the value of sweat equity. Every house we've purchased (7) over the past 33 years or so has needed work. Some of it was significant, some was just modernization and upgrades. Nearly all of it was done by my wife and me, learning as we went, and all of it paid off financially. There are a lot of deals out there right now. A willingness to buy a project can get young buyers into a better house earlier, but takes work to turn it into the house they really wanted. My kids aren't interested in that type of purchase right now, so they're still on the sidelines with many others, waiting for the right deal for them.

We’ve bought/renovated 6 in 20. At first we were thinking about what families would want done in the houses. Then we realized everyone looking at the houses was a retired couple relocating from out of state. Young families can’t afford the area.

Now we do everything with universal design in mind…first floor bathroom and bedroom are a must.

…pro tip never sell to a lawyer from Chicago!

 

[djetok]

I've always thought this forum has a good cross section of knowledge and advice. So I'm interested in feedback on what most of you think is going to happen with the housing market?

A little back story. My daughter has recently gotten married, graduated college, and her and my SIL are both starting new careers. They are looking forward and will be starting a family soon. Currently they are renting a 3 bedroom house. They seem to be dead set on owning a house. So they have started looking and going to open houses.

I just don't see it happening. I think house prices are still bloated. There seems to be a shortage of houses, and to me it's still a sellers market. I believe the shortage is primarily due to many people being locked in to their current home due to having already low interest rates. My wife and I included. We'd love to downsize, but why would we give up a 2.8% interest rate? As much as my SIL and daughter want to get into home ownership and start creating equity, I feel like leasing and waiting for a better deal is smarter right now. It has to correct at some point right? My advice to them over dinner last night was to continue leasing a home and wait for better interest rates, or housing prices to come down, or both.

Man, that DFW market is pretty nutty still huh? North of you in OKC prices are still high and the inventory is starting to stack up. Of course school is out so it is house buying time. I work in the construction industry and it is slowing down as well. Rates are just too high in a bad economy. The prices are dropping here slowly. Of course DFW vs OKC markets they are not even close to the same.

 

[kgower]

Agreed. The amount of people who are able to do work is low, which is amazing since there is a YouTube for literally everything.

I think the bigger problem is people buy a fixer upper but can't afford to buy the stuff for the fixes. Our house for example needed hurricane windows, we knew this going in and it was priced accordingly. It was 30 grand to put them in. We had the money because of the equity from our old house, but that's a big entry barrier for people. Same goes for doing floors, HVAC, roofs, etc. You gotta have the money for that stuff on a fixer, vs rolling it into your 30 year loan.

There are Conventional Rehab loans available as well as for Government loans FHA 203K) and VA. These are purchase and rehab in one. Of course, each has their specific rules regs and qualifying requirements.,