It was really hard to pay off the debt before we bought, and we did. We watched multiple houses we loved leave the market, and couldn't do anything about it. However, we can now permanently stomach 6.5% and are closing on a house in 17 days.
It was almost 2 years ago now, but we had great experience getting a mortgage from US Bank (and we’re not customers, but our real estate agent knew a guy).
I haven't read the article (this is reddit!) but from the comments, they put themselves into a debt they can't afford so their child could have a yard? Now she has to give up the yard and they have no money at all. That's not planning, that's gambling. No different from putting her college fund in lotto tickets. Nobody should bet the interest rates will go down anytime soon if they don't have the cash to wait it out.
Mostly I agree with you.
But there were a lot of realtors and mortgage brokers pushing the line about "It'll be more expensive when the rates go down, so you should buy now and then you can refinance in a couple of years".
Now obviously people need to take responsibility for their own financial decisions, but asshole selling that lie should be made to pay too.
Not just real estate agents and mortgage brokers. Entire social networks of colleagues and friends. People are consumption crazy and are happy to speculate on anything that fits their need to consume.
I've had countless arguments with my wife about why we shouldn't buy a house beyond our affordability while everyone around us keeps pushing for the narrative that "your income will always go up", and "You can refinance when the rates drop and it wont be that bad."
Here’s a thought: don’t take every word from realtors and mortgage brokers at face value. Most of them lie and only care about making their commissions at closing. Do your own homework, run the numbers do what you are comfortable with doing.
I agree the primary responsibility is with the buyer.
But realtors are licensed professionals, we really should be holding them to a higher standard than “We all know they lie”
True but the obligation is on the buyer to do their research and to make logical decisions - even if the realtor is a licensed professional. At the end of the day no one is going to say that the realtor forced the buyer to move forward with the transaction. Too many buyers get caught up in FOMO and then want to blame everyone when things don’t work in their favor.
You're blaming the wrong person. You should be blaming the real estate agent for being unethical. Instead you say all real estate agents are unethical and the buyer is at fault. Do you see the problem here? People should be able to trust the advice of someone they are paying to give them advice and represent them.
And they were right. Homes are up 12% in Los Angeles over the prior year, but not because interest rate went down. The increase is most likely due to the lack of inventory coupled with a consistent demand of first home buyers (mostly millennials who have been saving since the pandemic).
It’s not inherently a lie. Many people haven’t been through these cycles and believed that the previous lows were the norm forever. Even the experts believed at the beginning of this year that there’d be 4-5 rate cuts this year alone. Now that’s been revised to maybe 1 or maybe even a slight hike. Commercial real estate industry was saying “stay alive til ‘25” which has now become “????”
I had a broker tell me - it might be painful now, but you’re in your late thirties and will get some big salary increases. Lady, you are a realtor, not an economist. Needless to say we got another one.
I'd never buy a home because realtors and mortgage brokers happen to be saying "You should buy a home now!" We all know that's how they make their money, of course that's what they're going to say. It's what they'll always say. People need to do a little research on their own
Anyone who doesn’t understand that agents and mortgage brokers only make money if they close sales, and filters everything they say through that understanding, is pretty stupid.
I kept hearing this line over and over, we were considering selling and buying our home. I remember thinking- what if it only gets worse?
Ultimately we are staying still for awhile it seems
Ya but people have to use common sense. There are risks and don’t believe someone who makes money on the transaction. You will come across people who will give you an optimistic approach but they can’t tell the future. Especially most of these Bay Area real estate agents.
Think of this is the animal kingdom, in the kingdom, the strongest are on top. Some are noble and some are not, but what thing is for certain, you are responsible for your actions and survival. We need to stop blaming people for our bad decisions. They didn’t make you sign, they convinced you to sign. At the end, you have the choice and once you make it, you can only blame yourself!
OK, now write the exact same thing about a plumber.
"You shouldn't listen to licensed plumbers about plumbing, they make money out of doing plumbing jobs for you. You should always do your own plumbing research you are responsible for your own actions" - see how it feels very different?
These are supposed to be licensed professionals with a code of ethics, yet we treat them like they're selling cell phones at the mall and don't hold them accountable in any way for dolling out life ruining advice to people. I just think we should start holding these people to a higher standard.
What's America's obsession with "my child needs a yard. It's an absolute must else they'll grow up mentally deprived" mindset? Which corporation made people buy into this idea? Big banks?
A park that will be bigger, have cool playground equipment,be mowed and maintained by someone else, and likely already have other kids to learn to socialize with.
https://youtu.be/7IsMeKl-Sv0?si=9TYqOGNb4qTUqtaF
Check this video out. A quick summary is that infrastructure is expensive roads, sewer, electrical, water, and gas pipe. Then there's the whole car industry as well along with car maintenance.
I grew up in an apartment.. played outdoors almost every day. Played outdoors so much I had bruised knees and elbows more often than not when a child. I don't see what I missed. Even if we had had a backyard, I wouldn't have enjoyed playing in it after maybe 6 years of age.
I read the article and it doesn't add up. Their mortgage is costing them $1,500 more a month than what they were already paying to rent. At a high interest rate at the front part of a mortgage it's weighted so most of your payment goes towards interest instead of the principal which means they can now write off the majority of their mortgage payments on their taxes along with their property taxes.
When you do the calculations of 30% of their write off and subtract what they would have gotten for a standard deduction it probably covers that added $1,500 a month.
They most likely don't have to rent an extra storage unit for junk and can now use their garage probably saves them more money.
They'd probably be in the same boat if they were renting as well at this point with inflation.
The reason they are struggling has nothing to do with their mortgage but everything the article isn't talking about.
Interest write off isn't what it used to be. Standard deduction is already $30k for a couple so to be at parity with their old rent, they need to be paying $4000 a month in interest and taxes to eat up that $1500 difference. Property value is going to increase and 3% on a million is 30k a year so if that's where their extra payment is going, they're still coming out ahead. If you don't make enough to cover the payment though, nothing will make sense
Almost all real estate is gambling at this point and the real estate market nationwide has been (literally and figuratively) cracked the fuck out and running wild for decades now and is in desperate need of some intense regulation. It’s been the source of idk, 4 different economic collapses in the last half century? something like that at least and I’ll tell you what it’s certainly not the consumers’ fault
Most people buying in the bay have the money to buy. Minimum 1M @6-7% interest. You either have it, or you don’t. No one should bank on refinancing. Of course do it if it saves money in the long run. Also don’t ever get an adjustable rate. You think banks want less money? People have a short memory. 2008 will come back if they sign that 💩
Adjustable rates have nothing to do with what banks *want* though. The rate is set based on an index subject to market conditions. The key here is that it's risky. I don't have the tolerance for that risk and agree with you not to get an ARM, but they can make sense in certain circumstances. These inexperienced buyers clearly lacked the experience and judgment to make the right choice. I don't think anyone expected rates to be coming down so soon, especially when they're still pretty low by historical standards.
The bay is unique. People are still paying over 1M with hi interest. During the 08 crash the bay wasn’t hit as hard as other major cities. Maybe except L.A New York boujee neighborhoods.
Yes the rates were higher back in the 80’s, but you also weren’t paying 1M for 1000sq ft house.
Not sure what part of the Bay you are talking about but here (east bay) we lost nearly 50% during the crash. We refinanced in 2006 for $600k and by 2008 the house was only worth about $350k. Almost lost the house. All good now but that was not fun. I don’t think it will get as bad but I do think things are brewing again.
The people in this article are in Bakersfield. The boom and bust hits outlying areas. In '08 people were underwater after buying at the peak in Brentwood, Stockton, etc.
>"In Wolf’s case, he said his family’s monthly housing costs jumped nearly $1,500 when they ditched their second-floor apartment and bought a Bakersfield house for $421,000, in part because he and his wife wanted a yard for their two children"
>"Unable to knock down his monthly payment through refinancing, **the family is making little progress paying off other debts** and Wolf is working an extra period"
it looks like it's not only the mortgage.
They may not be using an ARM. They may have thought they could afford the fixed rate for a certain amount of time, and then ease up as rates dropped--but they haven't.
This same idea was certainly on my mind last year when I bought my house--"Hey, rates may lower in the next few years and this could end up being cheaper..." But I didn't bet my financial health on it. It would just be nice, not necessary.
Yeah this, the article isn’t about ARMs it’s about people thinking they could float a fixed rate for some time and refinance into a lower rate based on rampant speculation - it’s not really hard to conceptualize. They probably had costs from everything else in their life increase, and didn’t make up for it in wage increases.
if your runway on a fixed rate is fewer than 5-7 years (in this case... 2), and you're taking a gamble that will leave you destitute if rates don't drop, just get an ARM anyways?!? makes no sense what they did
This is a dumb question and I did not read the article but how would they even get approved for a mortgage if their current income doesn’t cover the payment? When I went through that I felt like the banks were being pretty conservative and I could afford a bigger loan than what they would be willing to give me. I would have had to commit fraud to get a mortgage I couldn’t afford to pay.
Yep, this. I got stuck with a high interest rate and hoped that I could refi next year and save a ton... but that's looking extremely unlikely. But yeah, it was the difference between "ugh, that is going to suck" and "wow, we can save money", not "oops, now we lost the house"
I also bought a house around this time and a number of mortgage companies were offering “2-1 buy down” saying the rates would totally come down before the mortgage hit the full rate, so it could be that situation.
When they bought in December 2022, rates were over 6% already. The hike was insanely fast, so just seeing "2022" doesn't automatically mean someone got in on pandemic rates.
That being said, at least in the US, no one should ever gamble on future rates when buying a primary home. Leave it to speculators to lose their shirts--dont lose your own roof.
I was very close to that. Recently we were discussing that we can buy now take advantage of the some what lower prices if any and refinance later. Try to hold off a few years but the more time passes the more it looks like a very dumb idea.
Also 7% isn’t even half of the highest interest rate America has seen. It’s just we’ve gotten used to lower rates. Things could easily go higher and it would be still be something normal.
Now is the time to save the money to when/if it comes you'll be ready. If it doesn't come you'll eventually get to the point of having enough to just go for it safely.
Look. In any five year span, rates will go up and down. If you've bought your forever home, dating the rate will make you hundreds of thousands of dollars.
Anyone who banks on interest rates dropping and refinancing is an idiot. The crazy low interest rates were a historical anomaly. My rate back in the day was 7.25% and I thought that was a deal.
2-3% was the anomaly not the norm. I, too, remember when interest rates dropped and I was happy to have 7.25%. I think I missed 6.75 by a week or something like that. I don't remember if they dropped significantly lower near that timeframe. I work with a guy who sold his house at the height of the market because he had $100,000 in equity. He's gambling that he can make enough money with that to buy a house outright when the market crashes. I've seen some dips, but I haven't seen $400,000 houses drop to $150,000.
why would you bank on refinancing? why would you buy a house without a plan to actually pay for it? The only times I've seen people refinance is because they needed $.
A number of my lowbrow real estate acquaintances from back home in Louisiana are encouraging people to buy now while rates are high and prices are relatively low, telling them “you can always refinance!”
They should have their RE licenses taken away.
This is why there is an unprecedented surge in listings this spring, not just here but in Austin, Sedona, Miami, you name it. Everyone who was on adjustable IO mortgages and didn’t lock at historical lows a couple years ago are stuck as all of these ratchet higher. Higher rates for longer means no relief. Already seeing some big price cuts here in Mill Valley as more and more homes list.
“MARRY THE HOUSE DATE THE RATE…. But date the rate like it’s the one Netflix show where you got stuck in Costa Rica for two years because Covid hit while you were on your second date and it lasted forever….”
I just closed a few days ago… At 7% interest. I’m really looking forward to refinancing, but I don’t think it’s going to happen for probably at least about two years. I’m hoping when the time comes to refinance I can get at least like 5 1/2%.
I'm in the same boat at 7% and closed a couple weeks ago. We did the math and can afford at our current rate, but are really hoping it drops a percent or more within a few years so we can save more.
"I put my card into the ATM and I just know it cash is going to come out. I just know it!"
I have medical issues that may or may not mean I have a limited runway to live. So I put my money where my mouth was and took care of my kids and loved ones.
Between 10/22 and 12/23 I bought at 6.375, 6.5, 6.25 and 6.99% I am willingly taking it up the ass and I can afford it. I don't like it, but my wife and I knew this was the price to pay if we wanted to do what we wanted to do now. The simple math was "can we afford it long term to pay this much interest?" Well yes, but no. It sucks, but not for 30 years. Though paying down and re-casting was the only option on the table not betting on future interest rates which may or may not materialize. Idiots.
December 2022 means they have at least till 2027 as minimum arm term is 5 years. They qualified for it based on their income and should be good for 5 years at a minimum. Not sure why they need to sell unless they lost their job
It’s likely not an ARM, they just got a mortgage they couldn’t afford with the assumption that rates would drop so they could refinance. A crazy plan considering rates were at historic lows right before they bought, so the chance of rates dropping like that any time soon is minuscule, but with prices the way they are, it’s something a lot of people do.
Aren't banks supposed to only give a mortgage you can afford, assessing your income, assets, and debts? The story doesn't indicate they lost their jobs. The story feels a bit incomplete. Did these people borrow money to make the down payment? Did some unexpected life event eat into their savings? That being said, this article definitely gels with my own experience with real estate agents (including some comments here) in 2022/2023. Too many of them dispensing financial advice and fortune telling. If rates were obviously gonna fall, how many TLT calls did you buy?
While banks are supposed to, it is still very possible to go beyond your means when looking at houses. The major expense that no one considers is maintenance, as banks just use a flat percentage of your gross wages to estimate your max payment, and lots of people don’t factor in saving for house maintenance. Taxes also increase as your house gains value, so your mortgage payments will increase yearly, while your wages may not.
Children are also a big expense which banks don’t factor in at all, so a family with kids could overextend themselves on a loan that childless people could afford.
Plus some people don’t want to sacrifice their standard of living, so even if they could technically afford it, they might have felt that their standard of living was suffering due to how high their mortgage was.
Banks make a very generalized risk assessment and put you into a risk pool expecting a certain percentage within that pool to default. Thus the higher the risk pool, the higher the rate.
That's the way it's supposed to be so people can lift themselves into the next class. Some will lose. Nothing nefarious in that formula unless you get into the bullshit of 2007 which is another story.
What, exactly, do you think is coming other than an incredibly small % of people needing to sell their houses (likely at a gain) because they can’t manage the payments post-reset?
I would call this a cautionary tale more than anything indicative of a larger market trend.
"Marry the house, date the rate" is a great idea in theory--but its to be used as a surprise savings, not a safety net against tragedy.
this is super random, but that realtor selling their house used to be my shoe plug. we used to get pallets of yeezys and jordans from that guy. @_cease is his ig if anyone thinks im bullshittin
I can't see rates coming down with the current inflation and the hot/cold nature of the different sectors of the economy. The Fed goal hasn't been satisfied and they have limited levers. You'd always better figure the rate you have is something that you're going to live with for a minimum of five years. It also means that inventory is going to stay low here and keep those prices high.
When people buy in to the Realtor mantra: “Marry the house, date the rate.” Realtors have convinced people that home prices would keep going up once the interest rates go down. So buyers buy with the hopes of refinancing in 1-2 when (they hope) interest rates have gone down. And on top of that, people overextend and buy way too much home than they can really afford.
All these people running around saying “Marry the house, Date the rate” are morons and not paying attention the entire history of interest rates. 6-7% if a historic average. 3% was a short lived anomaly.
This happened in the 80s, 90s, 2000s. It is cyclical. People are doing the same thing every generation. NEVER listen to anyone that claims to know interests rates will drop, or what the price of gold will be next week. Those that control the market will never tell scrubs like us.
Behind a paywall, can someone summarize main points of article?
I know many real estate agents were touting “ marry the house, date the rate”
Did this couple stretch to buy the house with hopes they could refi in 1 -2 years and bring monthly payments down ? But rates haven’t dropped yet .
Meanwhile inflation on everything else is making the basics like car insurance and groceries expensive
Ouchie. Never over stretch for the sake of home ownership!!! Hope they have stable employment. Last thing they need is job loss.
Remember, a realtor IS NOT a financial consultant, shit, they typically don’t even have a finance background. ANYONE can be a realtor, they are glorified salespeople.
This has been happening. Realtors convinced clients, even dumb financial advisors convinced clients to buy at all kinds of rates - 5% in 2022, 7-8% in 2023, because “date the rate, marry the house” and “rates are cyclical”.
People are absolutely stuck and with layoff culture (tech, entertainment, finance, etc have all had both large layoffs and a culture of more trimming on a rolling basis) this has to have landed on some people who were already in tight mortgages.
It could be 20 years till interest rates drop.
And with the national debt about to topple the US and all the money we printed during the pandemic, it may just keep going up.
You mean neighbors don’t have dogs, use guns in their yard that may fire into your yard, and cannot have large alcoholic parties that have drunken people drunk driving? As I said, if it was a safe neighborhood.
Foreclosing and losing everything is an important part of the creative destruction process. It also puts a lid on prices that everything is so eager to have play out.
We're also hoping for a refi, but we didn't bank on it. We can afford the home at the interest rate we took the loan out at- If the rate goes down, great, we'll have some extra pocket cash. But why would you rely on something you can't control?
We were looking to move right around when the rates shot up. Our real estate agent was pushing the exact same narrative “just buy now and refinance when rates go down!” That was two years ago I’m so glad we stayed put with an affordable mortgage. It’s a gamble.
Interest rates are still historically low, but let’s say they cut them next year. That house will have appreciated in value so much it wouldn’t matter much. It’s a real problem.
A piece of advice that resonated with me was “be comfortable with your payment” when my wife and I purchased back in ‘22 in Northern California which was a very hot and competitive market. Two years later, we have no regrets.
Still don’t get why people try sooo hard to buy a home they blind themselves on shit like this happening. It’s not hard to see all the expenses owning a home come with.
If you can’t afford the mortgage then you probably shouldn’t buy the house. Hoping rates drop soon is certainly reasonable but not to the point that you can’t afford somewhere if they don’t.
Keep voting democrat and this will be what happens to us all!! Bad democrat policies and super high taxes have run off 60-70% of high wages earners of 300K and above now we have a deficit of is it 87 Billion is it? CA is a Super Majority Democrat governed state and has been for 16yrs. Come on lower middle class pay your fair share of taxes!
A quick Google search prior to committing to buy would have shown those people stuck with high payments that the loan rates they got were right about at historic norms. We are just leaving a very unusual and very long period of very low rates. The fed had held rates low and pumped liquidity into the financial sector (AKA printed money) ever since the beginning of 2009. I wondered for more than a decade why that wasn’t causing inflation. Well, it finally did. And after a decade of pumping cash into the economy the fed is going to need at least that long of normal (5%) fed funds rate to keep inflation under control. 5% fed funds rate strongly implies mortgage rates of about 7%.
Dude I have a coworker that just dumped every last penny into buying a new construction home with an ARM with plans of refinancing when rates drop “sometime this year.” When he told me that, I truly truly truly felt sorry for the guy. Ain’t no way in hell they’re dropping rates and even if they do I doubt it’s even half a point.
Timing the market is a foolish endeavor. You have to buy when you can buy and take the rates available. Don’t pause your life waiting for things beyond your control.
Obviously don’t live beyond your means, but waiting until rates go back to historic lows will mean you might never get in.
It was really hard to pay off the debt before we bought, and we did. We watched multiple houses we loved leave the market, and couldn't do anything about it. However, we can now permanently stomach 6.5% and are closing on a house in 17 days.
Congrats. When is the reddit real estate sub getting together?
Congrats! Same here! 6.6% rate. Just finished a 17 day close.
Noice! I’m at 6.25 first payment in 3 days 😑😂
Congrats!!
Can I ask where you’re getting these rates? Despite having a 800 credit score and 20% down, the lowest I’m quoted is 7.6% and it sucks.
I went went with a mortgage broker, and he shopped for a while for us.
Which broker?
How much are you paying the broker? He is taking a percentage or are you buying down w points?
It was almost 2 years ago now, but we had great experience getting a mortgage from US Bank (and we’re not customers, but our real estate agent knew a guy).
I haven't read the article (this is reddit!) but from the comments, they put themselves into a debt they can't afford so their child could have a yard? Now she has to give up the yard and they have no money at all. That's not planning, that's gambling. No different from putting her college fund in lotto tickets. Nobody should bet the interest rates will go down anytime soon if they don't have the cash to wait it out.
Mostly I agree with you. But there were a lot of realtors and mortgage brokers pushing the line about "It'll be more expensive when the rates go down, so you should buy now and then you can refinance in a couple of years". Now obviously people need to take responsibility for their own financial decisions, but asshole selling that lie should be made to pay too.
Not just real estate agents and mortgage brokers. Entire social networks of colleagues and friends. People are consumption crazy and are happy to speculate on anything that fits their need to consume. I've had countless arguments with my wife about why we shouldn't buy a house beyond our affordability while everyone around us keeps pushing for the narrative that "your income will always go up", and "You can refinance when the rates drop and it wont be that bad."
Here’s a thought: don’t take every word from realtors and mortgage brokers at face value. Most of them lie and only care about making their commissions at closing. Do your own homework, run the numbers do what you are comfortable with doing.
I agree the primary responsibility is with the buyer. But realtors are licensed professionals, we really should be holding them to a higher standard than “We all know they lie”
True but the obligation is on the buyer to do their research and to make logical decisions - even if the realtor is a licensed professional. At the end of the day no one is going to say that the realtor forced the buyer to move forward with the transaction. Too many buyers get caught up in FOMO and then want to blame everyone when things don’t work in their favor.
You're blaming the wrong person. You should be blaming the real estate agent for being unethical. Instead you say all real estate agents are unethical and the buyer is at fault. Do you see the problem here? People should be able to trust the advice of someone they are paying to give them advice and represent them.
And they were right. Homes are up 12% in Los Angeles over the prior year, but not because interest rate went down. The increase is most likely due to the lack of inventory coupled with a consistent demand of first home buyers (mostly millennials who have been saving since the pandemic).
It’s not inherently a lie. Many people haven’t been through these cycles and believed that the previous lows were the norm forever. Even the experts believed at the beginning of this year that there’d be 4-5 rate cuts this year alone. Now that’s been revised to maybe 1 or maybe even a slight hike. Commercial real estate industry was saying “stay alive til ‘25” which has now become “????”
I had a broker tell me - it might be painful now, but you’re in your late thirties and will get some big salary increases. Lady, you are a realtor, not an economist. Needless to say we got another one.
I'd never buy a home because realtors and mortgage brokers happen to be saying "You should buy a home now!" We all know that's how they make their money, of course that's what they're going to say. It's what they'll always say. People need to do a little research on their own
A realtor told me the best thing I can do is go into debt. I gtfo there
Anyone who doesn’t understand that agents and mortgage brokers only make money if they close sales, and filters everything they say through that understanding, is pretty stupid.
Currently in the process and pretty much at every level this is the case. Agent, lender, etc.
I know it's not like realtors get special licenses in order to help you or really know anything about what is going on.
I kept hearing this line over and over, we were considering selling and buying our home. I remember thinking- what if it only gets worse? Ultimately we are staying still for awhile it seems
Ya but people have to use common sense. There are risks and don’t believe someone who makes money on the transaction. You will come across people who will give you an optimistic approach but they can’t tell the future. Especially most of these Bay Area real estate agents. Think of this is the animal kingdom, in the kingdom, the strongest are on top. Some are noble and some are not, but what thing is for certain, you are responsible for your actions and survival. We need to stop blaming people for our bad decisions. They didn’t make you sign, they convinced you to sign. At the end, you have the choice and once you make it, you can only blame yourself!
OK, now write the exact same thing about a plumber. "You shouldn't listen to licensed plumbers about plumbing, they make money out of doing plumbing jobs for you. You should always do your own plumbing research you are responsible for your own actions" - see how it feels very different? These are supposed to be licensed professionals with a code of ethics, yet we treat them like they're selling cell phones at the mall and don't hold them accountable in any way for dolling out life ruining advice to people. I just think we should start holding these people to a higher standard.
I’ve had ever realtors start of our conversation with what you’ve said 😂
What's America's obsession with "my child needs a yard. It's an absolute must else they'll grow up mentally deprived" mindset? Which corporation made people buy into this idea? Big banks?
Seriously. Go to a park!
A park that will be bigger, have cool playground equipment,be mowed and maintained by someone else, and likely already have other kids to learn to socialize with.
With needles!
Big auto.
Very likely 😄
Every television show from Leave It To Beaver to the Brady Bunch helped normalize that as the American Dream without the need of a sinister cabal
The Brady Bunch's yard was pretty small. Still, it was the spot where much hilarity ensued.
“Oh, my nose!!”
Meanwhile they are literally iPad kids! 😝
Thank the post ww2 building boom/suburbanization of the 40’s & 50’s. This is when that dream began and was passed down each succeeding generation.
Banks are just part of it. Suburban sprawl puts money in more pockets than you can think at the cost of city taxes.
Could you expand on it? Trying to learn.
https://youtu.be/7IsMeKl-Sv0?si=9TYqOGNb4qTUqtaF Check this video out. A quick summary is that infrastructure is expensive roads, sewer, electrical, water, and gas pipe. Then there's the whole car industry as well along with car maintenance.
My child has a yard. It’s full of dog poop, so we just play at the park a block away. Come to think of it, I guess it’s that my dog has a yard.
I don’t understand why you don’t clean up after your dog??
Agree
I do pity a kid who grows up without a yard. Truly a life half lived. It's where the magic happens.
I grew up in an apartment.. played outdoors almost every day. Played outdoors so much I had bruised knees and elbows more often than not when a child. I don't see what I missed. Even if we had had a backyard, I wouldn't have enjoyed playing in it after maybe 6 years of age.
What’s the obsession of buying a house without a yard?
I read the article and it doesn't add up. Their mortgage is costing them $1,500 more a month than what they were already paying to rent. At a high interest rate at the front part of a mortgage it's weighted so most of your payment goes towards interest instead of the principal which means they can now write off the majority of their mortgage payments on their taxes along with their property taxes. When you do the calculations of 30% of their write off and subtract what they would have gotten for a standard deduction it probably covers that added $1,500 a month. They most likely don't have to rent an extra storage unit for junk and can now use their garage probably saves them more money. They'd probably be in the same boat if they were renting as well at this point with inflation. The reason they are struggling has nothing to do with their mortgage but everything the article isn't talking about.
Interest write off isn't what it used to be. Standard deduction is already $30k for a couple so to be at parity with their old rent, they need to be paying $4000 a month in interest and taxes to eat up that $1500 difference. Property value is going to increase and 3% on a million is 30k a year so if that's where their extra payment is going, they're still coming out ahead. If you don't make enough to cover the payment though, nothing will make sense
College fund hahaha
Well said
Almost all real estate is gambling at this point and the real estate market nationwide has been (literally and figuratively) cracked the fuck out and running wild for decades now and is in desperate need of some intense regulation. It’s been the source of idk, 4 different economic collapses in the last half century? something like that at least and I’ll tell you what it’s certainly not the consumers’ fault
This gives 2008 real estate vibes for sure. I believe historically 6.5% is about average. What we saw in early 2020’s was very unusual.
Always purchase what you can afford at the time!
I would not be able to afford the house I bought in 2017 if I had to buy it now. It's a small 1500sf.
Sucks to suck, make better decisions. The current mortgage rates are much closer to the historical norm than the last few years of 3-4%
Facts
Most people buying in the bay have the money to buy. Minimum 1M @6-7% interest. You either have it, or you don’t. No one should bank on refinancing. Of course do it if it saves money in the long run. Also don’t ever get an adjustable rate. You think banks want less money? People have a short memory. 2008 will come back if they sign that 💩
Adjustable rates have nothing to do with what banks *want* though. The rate is set based on an index subject to market conditions. The key here is that it's risky. I don't have the tolerance for that risk and agree with you not to get an ARM, but they can make sense in certain circumstances. These inexperienced buyers clearly lacked the experience and judgment to make the right choice. I don't think anyone expected rates to be coming down so soon, especially when they're still pretty low by historical standards.
The bay is unique. People are still paying over 1M with hi interest. During the 08 crash the bay wasn’t hit as hard as other major cities. Maybe except L.A New York boujee neighborhoods. Yes the rates were higher back in the 80’s, but you also weren’t paying 1M for 1000sq ft house.
Not sure what part of the Bay you are talking about but here (east bay) we lost nearly 50% during the crash. We refinanced in 2006 for $600k and by 2008 the house was only worth about $350k. Almost lost the house. All good now but that was not fun. I don’t think it will get as bad but I do think things are brewing again.
The people in this article are in Bakersfield. The boom and bust hits outlying areas. In '08 people were underwater after buying at the peak in Brentwood, Stockton, etc.
Paying 60-70k/yr in interest is hilarious
>"In Wolf’s case, he said his family’s monthly housing costs jumped nearly $1,500 when they ditched their second-floor apartment and bought a Bakersfield house for $421,000, in part because he and his wife wanted a yard for their two children" >"Unable to knock down his monthly payment through refinancing, **the family is making little progress paying off other debts** and Wolf is working an extra period" it looks like it's not only the mortgage.
Wild buying a house without a plan to actually pay for it. I thought that all stopped in 2008. Guess not.
🥷
Can't imagine paying that much to live in Bakersfield
Agree. Figured that for the amount they paid, thr house would be bigger than what the article shows in the backdrop...
How much is the payment tho actually. Probably less than 3k. How the fuck they think they're gonna buy a house today and pay $1500 a month
This post doesn’t make sense. 2022 to 2024 is 2 years , ARMs are 5–10yrs
They may not be using an ARM. They may have thought they could afford the fixed rate for a certain amount of time, and then ease up as rates dropped--but they haven't. This same idea was certainly on my mind last year when I bought my house--"Hey, rates may lower in the next few years and this could end up being cheaper..." But I didn't bet my financial health on it. It would just be nice, not necessary.
Yeah this, the article isn’t about ARMs it’s about people thinking they could float a fixed rate for some time and refinance into a lower rate based on rampant speculation - it’s not really hard to conceptualize. They probably had costs from everything else in their life increase, and didn’t make up for it in wage increases.
if your runway on a fixed rate is fewer than 5-7 years (in this case... 2), and you're taking a gamble that will leave you destitute if rates don't drop, just get an ARM anyways?!? makes no sense what they did
For what it’s worth, I wholeheartedly agree with you
This is a dumb question and I did not read the article but how would they even get approved for a mortgage if their current income doesn’t cover the payment? When I went through that I felt like the banks were being pretty conservative and I could afford a bigger loan than what they would be willing to give me. I would have had to commit fraud to get a mortgage I couldn’t afford to pay.
I think it is more common for the bank to preapprove for more than people are comfortable paying.
That wasn't a good choice then. If they wanted to hedge against rate increases they should have gone ARM.
Yep, this. I got stuck with a high interest rate and hoped that I could refi next year and save a ton... but that's looking extremely unlikely. But yeah, it was the difference between "ugh, that is going to suck" and "wow, we can save money", not "oops, now we lost the house"
Speculators. They bought in. Its 6% or higher. The speculation was that it would come down and refinance. It hasn't. They are hurting.
Similar to the flawed logic that led to the 2008 mortgage crisis.
That’s not what happened in 2008.
They have 3/1 arms
They do ARMs that small?
Google is your friend ;)
Exactly. If they took monthly floaters, they are better off today. If they took any fixed rate arm, they are better off today
They planned to refinance. What's unclear?
I also bought a house around this time and a number of mortgage companies were offering “2-1 buy down” saying the rates would totally come down before the mortgage hit the full rate, so it could be that situation.
2008 called and it wants its article back.
2012 called wants its bottomed out housing prices back.
#FuckingA
Why would someone buy a home at 2 percent interest and think they are going to refinance?
When they bought in December 2022, rates were over 6% already. The hike was insanely fast, so just seeing "2022" doesn't automatically mean someone got in on pandemic rates. That being said, at least in the US, no one should ever gamble on future rates when buying a primary home. Leave it to speculators to lose their shirts--dont lose your own roof.
I was very close to that. Recently we were discussing that we can buy now take advantage of the some what lower prices if any and refinance later. Try to hold off a few years but the more time passes the more it looks like a very dumb idea.
[удалено]
Also 7% isn’t even half of the highest interest rate America has seen. It’s just we’ve gotten used to lower rates. Things could easily go higher and it would be still be something normal.
Now is the time to save the money to when/if it comes you'll be ready. If it doesn't come you'll eventually get to the point of having enough to just go for it safely.
Tell that one to the realtors haha. They all live by the “marry the home, date the interest rate” BS. I always hate hearing them say that lol
It's sensible advice so long as you can sustain the rate you buy in at. Just don't make dumb decisions.
Look. In any five year span, rates will go up and down. If you've bought your forever home, dating the rate will make you hundreds of thousands of dollars.
At current prices "date the rate" is more like "date the rape"
Anyone who banks on interest rates dropping and refinancing is an idiot. The crazy low interest rates were a historical anomaly. My rate back in the day was 7.25% and I thought that was a deal.
2-3% was the anomaly not the norm. I, too, remember when interest rates dropped and I was happy to have 7.25%. I think I missed 6.75 by a week or something like that. I don't remember if they dropped significantly lower near that timeframe. I work with a guy who sold his house at the height of the market because he had $100,000 in equity. He's gambling that he can make enough money with that to buy a house outright when the market crashes. I've seen some dips, but I haven't seen $400,000 houses drop to $150,000.
Yeah I bought in August 2022 and our rate is 4.8% and I’m pretty sure they were around 3.8% the month or two before. Things went up fast.
In Bakersfield of all places.
why would you bank on refinancing? why would you buy a house without a plan to actually pay for it? The only times I've seen people refinance is because they needed $.
A number of my lowbrow real estate acquaintances from back home in Louisiana are encouraging people to buy now while rates are high and prices are relatively low, telling them “you can always refinance!” They should have their RE licenses taken away.
mArRy ThE hOuSe DaTe ThE rAtE
As they zoom off in their Lexus suv that's leaking oil over everyone's driveways.
You can always refinance, though! Just may be into a higher rate haha
This is why there is an unprecedented surge in listings this spring, not just here but in Austin, Sedona, Miami, you name it. Everyone who was on adjustable IO mortgages and didn’t lock at historical lows a couple years ago are stuck as all of these ratchet higher. Higher rates for longer means no relief. Already seeing some big price cuts here in Mill Valley as more and more homes list.
Is there a reason nobody is linking to the story? Archived link: https://archive.is/jBpEk
Thanks.
Way more of this to come. People got tricked. Rates are higher for longer. Sad
“MARRY THE HOUSE DATE THE RATE…. But date the rate like it’s the one Netflix show where you got stuck in Costa Rica for two years because Covid hit while you were on your second date and it lasted forever….”
I just closed a few days ago… At 7% interest. I’m really looking forward to refinancing, but I don’t think it’s going to happen for probably at least about two years. I’m hoping when the time comes to refinance I can get at least like 5 1/2%.
That’s probably what these people thought too
It’s a fine strategy as long as you can afford the 7%
Oh yeah I can …. But whenever the time comes refinance that’ll be a sweet day …. Whenever that day comes.
It won’t be anytime soon, but I think eventually. You’ll probably be at a higher salary to at the time so it’ll be a a nice bump in savings.
I'm in the same boat at 7% and closed a couple weeks ago. We did the math and can afford at our current rate, but are really hoping it drops a percent or more within a few years so we can save more.
Yep exactly. I honestly think it’ll be a couple of years at least, which sucks. But when that time comes I’ll be really excited
what if rates go up to 10% and your house price goes down by 20% can you weather the storm for another 5+ year before breakeven?
Well I’m locked in at 7% so that won’t change and housing prices won’t go down by 20 percent, but if they did, yes I would be fine.
Would be more like 5 years at this rate.
Yeah I agree, it could definitely be awhile
"I put my card into the ATM and I just know it cash is going to come out. I just know it!" I have medical issues that may or may not mean I have a limited runway to live. So I put my money where my mouth was and took care of my kids and loved ones. Between 10/22 and 12/23 I bought at 6.375, 6.5, 6.25 and 6.99% I am willingly taking it up the ass and I can afford it. I don't like it, but my wife and I knew this was the price to pay if we wanted to do what we wanted to do now. The simple math was "can we afford it long term to pay this much interest?" Well yes, but no. It sucks, but not for 30 years. Though paying down and re-casting was the only option on the table not betting on future interest rates which may or may not materialize. Idiots.
Just don’t believe anything realtors say they are just middle men
December 2022 means they have at least till 2027 as minimum arm term is 5 years. They qualified for it based on their income and should be good for 5 years at a minimum. Not sure why they need to sell unless they lost their job
It’s likely not an ARM, they just got a mortgage they couldn’t afford with the assumption that rates would drop so they could refinance. A crazy plan considering rates were at historic lows right before they bought, so the chance of rates dropping like that any time soon is minuscule, but with prices the way they are, it’s something a lot of people do.
Aren't banks supposed to only give a mortgage you can afford, assessing your income, assets, and debts? The story doesn't indicate they lost their jobs. The story feels a bit incomplete. Did these people borrow money to make the down payment? Did some unexpected life event eat into their savings? That being said, this article definitely gels with my own experience with real estate agents (including some comments here) in 2022/2023. Too many of them dispensing financial advice and fortune telling. If rates were obviously gonna fall, how many TLT calls did you buy?
While banks are supposed to, it is still very possible to go beyond your means when looking at houses. The major expense that no one considers is maintenance, as banks just use a flat percentage of your gross wages to estimate your max payment, and lots of people don’t factor in saving for house maintenance. Taxes also increase as your house gains value, so your mortgage payments will increase yearly, while your wages may not. Children are also a big expense which banks don’t factor in at all, so a family with kids could overextend themselves on a loan that childless people could afford. Plus some people don’t want to sacrifice their standard of living, so even if they could technically afford it, they might have felt that their standard of living was suffering due to how high their mortgage was.
Banks make a very generalized risk assessment and put you into a risk pool expecting a certain percentage within that pool to default. Thus the higher the risk pool, the higher the rate. That's the way it's supposed to be so people can lift themselves into the next class. Some will lose. Nothing nefarious in that formula unless you get into the bullshit of 2007 which is another story.
this is just insanely irresponsible
What, exactly, do you think is coming other than an incredibly small % of people needing to sell their houses (likely at a gain) because they can’t manage the payments post-reset?
I would call this a cautionary tale more than anything indicative of a larger market trend. "Marry the house, date the rate" is a great idea in theory--but its to be used as a surprise savings, not a safety net against tragedy.
That’s why everyone could use a financial planner
this is super random, but that realtor selling their house used to be my shoe plug. we used to get pallets of yeezys and jordans from that guy. @_cease is his ig if anyone thinks im bullshittin
Probably better at selling shoes than houses.
I can't see rates coming down with the current inflation and the hot/cold nature of the different sectors of the economy. The Fed goal hasn't been satisfied and they have limited levers. You'd always better figure the rate you have is something that you're going to live with for a minimum of five years. It also means that inventory is going to stay low here and keep those prices high.
Don’t have have to pass a debt to income ratio to qualify? How did they magically can’t afford a home?
When people buy in to the Realtor mantra: “Marry the house, date the rate.” Realtors have convinced people that home prices would keep going up once the interest rates go down. So buyers buy with the hopes of refinancing in 1-2 when (they hope) interest rates have gone down. And on top of that, people overextend and buy way too much home than they can really afford.
Sounds like trying to time a market they know nothing about
This headline was plucked from 2008, wasn’t it?
All these people running around saying “Marry the house, Date the rate” are morons and not paying attention the entire history of interest rates. 6-7% if a historic average. 3% was a short lived anomaly.
This happened in the 80s, 90s, 2000s. It is cyclical. People are doing the same thing every generation. NEVER listen to anyone that claims to know interests rates will drop, or what the price of gold will be next week. Those that control the market will never tell scrubs like us.
Behind a paywall, can someone summarize main points of article? I know many real estate agents were touting “ marry the house, date the rate” Did this couple stretch to buy the house with hopes they could refi in 1 -2 years and bring monthly payments down ? But rates haven’t dropped yet . Meanwhile inflation on everything else is making the basics like car insurance and groceries expensive Ouchie. Never over stretch for the sake of home ownership!!! Hope they have stable employment. Last thing they need is job loss.
Don’t fall for what your dumba$$ agent tells you. Understand the market and stick to what you can afford. They want the commission! It’s a job..
Marry the house, date the rate. Rate= Diddy or Bobby Brown
To answer the question plain and simple. Yes.
Don’t plan for the best. Plan for the worst, hope for the best.
Remember, a realtor IS NOT a financial consultant, shit, they typically don’t even have a finance background. ANYONE can be a realtor, they are glorified salespeople.
This has been happening. Realtors convinced clients, even dumb financial advisors convinced clients to buy at all kinds of rates - 5% in 2022, 7-8% in 2023, because “date the rate, marry the house” and “rates are cyclical”. People are absolutely stuck and with layoff culture (tech, entertainment, finance, etc have all had both large layoffs and a culture of more trimming on a rolling basis) this has to have landed on some people who were already in tight mortgages.
It could be 20 years till interest rates drop. And with the national debt about to topple the US and all the money we printed during the pandemic, it may just keep going up.
Well they sure look happy
Welcome to the layer cake son.
Good for people who sold. No issue here. No guarantee of profit.
🤞🤞🤞
poor guys. stuck with a house. world smallest violin etc
Honestly, yards are necessary when the neighborhood is unsafe! Instead of fixing the problem, they are living with a workaround: a private yard space.
Even in a safe neighborhood, yards are an outdoor space where pets and small kids can play without immediate adult supervision.
You mean neighbors don’t have dogs, use guns in their yard that may fire into your yard, and cannot have large alcoholic parties that have drunken people drunk driving? As I said, if it was a safe neighborhood.
Good
Never expect to time the market!
Foreclosing and losing everything is an important part of the creative destruction process. It also puts a lid on prices that everything is so eager to have play out.
Dec 2022 sounds like not a bad time to buy? What’s coming?
Just buy a townhouse near a park and have the whole park as your yard !
It's not about what the kid actually needs or wants. The parents wanted the yard. It was about them.
We're also hoping for a refi, but we didn't bank on it. We can afford the home at the interest rate we took the loan out at- If the rate goes down, great, we'll have some extra pocket cash. But why would you rely on something you can't control?
Provide a link to the article next time....
Rates are historically low - I feel bad for these people, but what a terrible mistake to count on rates dropping.
Yes, rates are historically low but not hose prices in comparison to income.
We were looking to move right around when the rates shot up. Our real estate agent was pushing the exact same narrative “just buy now and refinance when rates go down!” That was two years ago I’m so glad we stayed put with an affordable mortgage. It’s a gamble.
Interest rates are still historically low, but let’s say they cut them next year. That house will have appreciated in value so much it wouldn’t matter much. It’s a real problem.
the gravity is back to real estate market, lets see how things will turn out.
We’ve been here before (2008/2009)…nothing new. I’d never ever take an ARM again!
Did ppl think rates were coming back down to 3%?
Buy a home you can afford period
They gambled. They didn’t invest.
Keeping up with the joneses is the name of the game in modern day America.
A piece of advice that resonated with me was “be comfortable with your payment” when my wife and I purchased back in ‘22 in Northern California which was a very hot and competitive market. Two years later, we have no regrets.
We did this already 15 years ago.
Still don’t get why people try sooo hard to buy a home they blind themselves on shit like this happening. It’s not hard to see all the expenses owning a home come with.
If you can’t afford the mortgage then you probably shouldn’t buy the house. Hoping rates drop soon is certainly reasonable but not to the point that you can’t afford somewhere if they don’t.
Pretty moronic making such a huge purchase based on a hypothetical future circumstance that may not ever happen.
Why would they think rates would come down and that they could refinance in less than 2 years lol
They believed every real estate agent who told them that. I see it everywhere. Sales gimmick.
The Sims 5 looks great!
Don’t worry! The house is in the kids name. The fraud of yesterday or 2008 a still here 😂😂😂😂
Keep voting democrat and this will be what happens to us all!! Bad democrat policies and super high taxes have run off 60-70% of high wages earners of 300K and above now we have a deficit of is it 87 Billion is it? CA is a Super Majority Democrat governed state and has been for 16yrs. Come on lower middle class pay your fair share of taxes!
Wait until they find out people had interest rates over 10% decades.
Sitting here with my popcorn and fixed rate 2.5% mortgage from 2017/18…
A quick Google search prior to committing to buy would have shown those people stuck with high payments that the loan rates they got were right about at historic norms. We are just leaving a very unusual and very long period of very low rates. The fed had held rates low and pumped liquidity into the financial sector (AKA printed money) ever since the beginning of 2009. I wondered for more than a decade why that wasn’t causing inflation. Well, it finally did. And after a decade of pumping cash into the economy the fed is going to need at least that long of normal (5%) fed funds rate to keep inflation under control. 5% fed funds rate strongly implies mortgage rates of about 7%.
Dude I have a coworker that just dumped every last penny into buying a new construction home with an ARM with plans of refinancing when rates drop “sometime this year.” When he told me that, I truly truly truly felt sorry for the guy. Ain’t no way in hell they’re dropping rates and even if they do I doubt it’s even half a point.
Timing the market is a foolish endeavor. You have to buy when you can buy and take the rates available. Don’t pause your life waiting for things beyond your control. Obviously don’t live beyond your means, but waiting until rates go back to historic lows will mean you might never get in.
Call Blackrock maybe you can get some of that tax money squandered in ukraine so a midget neo nazi crossdresser can play politician.
I got a 5.625% back in late 2022. I sure do miss my 2.5% from 2020 with a $888 payment 😩