Mortgage Rates (2 Viewers)

[Buckna]

I don't understand how it works but I recently heard from a dad on our kids softball team that he just bought a house. He tried to get the seller to somehow transfer the current loan over to him at the lower existing rate. Didnt know this was a thing They were hesitant to do so and instead he did the math and showed them what a higher rate does to him and instead negotiated a couple hundred thousand off the price to account for the higher rate. (1 mil plus loan). He said he then Bought down the rate for the first couple years (also didn't know you could do that) with the idea that rates will come down in 2-3 years and then he can refi. He's in the commercial real estate development business and obviously has a lot of knowledge on how to swing deals.

Every so often I’ll window shop Redfin. One listing yesterday included the assumable VA loan at 2.75%. I’ll assume that’s a big time selling point even if it’s just half the mortgage (due to growth / paying down the mortgage).

Yes, if the seller is willing (and able) to do assumable that is big selling point. Most agents knew nothing about assumable until the last 18 months but they are learning quickly. The biggest issue is in many of today’s cases the house appreciated well above original purchase price vs the current outstanding amt of the loan. The buyer has to come up with the difference in net price so potentially that could be much larger than a normal downpayment.

 

[-OZ-]

I don't understand how it works but I recently heard from a dad on our kids softball team that he just bought a house. He tried to get the seller to somehow transfer the current loan over to him at the lower existing rate. Didnt know this was a thing They were hesitant to do so and instead he did the math and showed them what a higher rate does to him and instead negotiated a couple hundred thousand off the price to account for the higher rate. (1 mil plus loan). He said he then Bought down the rate for the first couple years (also didn't know you could do that) with the idea that rates will come down in 2-3 years and then he can refi. He's in the commercial real estate development business and obviously has a lot of knowledge on how to swing deals.

Every so often I’ll window shop Redfin. One listing yesterday included the assumable VA loan at 2.75%. I’ll assume that’s a big time selling point even if it’s just half the mortgage (due to growth / paying down the mortgage).

Hopefully someone told that vet that their benefits will be tied up in that mortgage if they are looking to buy after selling. Unfortunately, and infuriating so, vets get used and abused by realtors and lenders all the time.

I still think the VA needs to change that rule once the buyer assumes the mortgage. It really shouldn’t be hard to change and would help at least a few sellers which helps buyers.

 

[Chadstroma]

I don't understand how it works but I recently heard from a dad on our kids softball team that he just bought a house. He tried to get the seller to somehow transfer the current loan over to him at the lower existing rate. Didnt know this was a thing They were hesitant to do so and instead he did the math and showed them what a higher rate does to him and instead negotiated a couple hundred thousand off the price to account for the higher rate. (1 mil plus loan). He said he then Bought down the rate for the first couple years (also didn't know you could do that) with the idea that rates will come down in 2-3 years and then he can refi. He's in the commercial real estate development business and obviously has a lot of knowledge on how to swing deals.

Every so often I’ll window shop Redfin. One listing yesterday included the assumable VA loan at 2.75%. I’ll assume that’s a big time selling point even if it’s just half the mortgage (due to growth / paying down the mortgage).

Hopefully someone told that vet that their benefits will be tied up in that mortgage if they are looking to buy after selling. Unfortunately, and infuriating so, vets get used and abused by realtors and lenders all the time.

I still think the VA needs to change that rule once the buyer assumes the mortgage. It really shouldn’t be hard to change and would help at least a few sellers which helps buyers.

I disagree mildly for a few reasons.

1. If you did allow that, the potential for abuse would be tremendous.
2. The VA benefit is meant for the direct personal use of the vet. I understand selling 'easier' could help the vet in terms of selling but overall this really is transfering the VA benefit to people who did not earn it.
3. In this market, it is more a question of the buyer saving money. They still have to qualify for that loan AND have enough liquidity to make up for the short fall. That typical buyer is not someone that is hurting financially but like the guy mentioned above is just trying to get the best deal possible. That is fine and all but it doesn't need to be aided on the government dime.

 

[Orange&Blue]

thanks

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

Lenders have tightened down on it a lot and the terms aren't nearly as good as they used to be, but a lot of people buy STRs as "second homes" with the intent to used the property themselves some as well, in which case there are 10% down products available. It's not like it was in the golden age post-covid where you could essentially get the same terms you could on a primary mortgage, but saves cash out of pocket.

STRs are my main business (I own several and am a property manager for others) so happy to help how I can on STR related questions.

Any chance you’d be around eastern South Carolina?

I’m a lawyer so definitely not playing loose with rules which could get me disbarred. But we’d plan to be there at least two weeks a year anyway.
Almost definitely using a management company.

I believe 14 days is the number of days you need to reach per year so if you're there 2 full weeks that would probably do it, but I'm not a lawyer so not legal advice and all that.

Just be very upfront with the lender about it. There are some lenders that are more amenable to this than others (even STR focused lenders out there now that expect this kind of thing). I would imagine a big bank would scoff at it.

So.... yes and no.

There are loan guidelines if you are doing a conforming conventional loan (which you typically are doing if doing a second home). Lenders can add to the rules but can't take away from the rules. Here is a copy and paste from Fannie Mae guidelines (Freddie Mac is basically the same) for what is considered a second home (and you agree to in the terms of the loan and not doing them would amount to mortgage fraud):

So more detail from what I gave here. The interesting thing is that they don't define the time limit here so that is given up to interpretation which I have always got back from lenders as being defined as two weeks. This, though, gives leniency. If the mortgage docs are written up as the guidelines then one week or a couple of long weekends etc would be "some portion of the year".

Second Home Properties​

The table below provides the requirements for second home properties.

✓	Second Home Requirements
	must be occupied by the borrower for some portion of the year
	is restricted to one-unit dwellings
	must be suitable for year-round occupancy
	the borrower must have exclusive control over the property
	must not be rental property or a timeshare arrangement 1
	cannot be subject to any agreements that give a management firm control over the occupancy of the property
	must be underwritten in DU and receive an Approve/Eligible recommendation, with the exception of high LTV refinance loans required to be underwritten in accordance with the Alternative Qualification Path (see B5-7-03, High LTV Refinance Alternative Qualification Path).

1. If the lender identifies rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above).

An LLPA applies to certain loans secured by second homes. This LLPA is in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix.

- - -
For non-QM/portfolio STR loans, they can make up whatever rules they want to since they are either keeping them on the books or packaging into MBS directly to the secondary and not being sold to Fannie or Freddie but then again, the STR mortgages should normally be more restrictive than a second home would be as they would be considered riskier.

thanks for the info.

had been considering going in on a beach house with a relative, but based on this information it would have be as a commercial loan.

 

[-OZ-]

I don't understand how it works but I recently heard from a dad on our kids softball team that he just bought a house. He tried to get the seller to somehow transfer the current loan over to him at the lower existing rate. Didnt know this was a thing They were hesitant to do so and instead he did the math and showed them what a higher rate does to him and instead negotiated a couple hundred thousand off the price to account for the higher rate. (1 mil plus loan). He said he then Bought down the rate for the first couple years (also didn't know you could do that) with the idea that rates will come down in 2-3 years and then he can refi. He's in the commercial real estate development business and obviously has a lot of knowledge on how to swing deals.

Every so often I’ll window shop Redfin. One listing yesterday included the assumable VA loan at 2.75%. I’ll assume that’s a big time selling point even if it’s just half the mortgage (due to growth / paying down the mortgage).

Hopefully someone told that vet that their benefits will be tied up in that mortgage if they are looking to buy after selling. Unfortunately, and infuriating so, vets get used and abused by realtors and lenders all the time.

I still think the VA needs to change that rule once the buyer assumes the mortgage. It really shouldn’t be hard to change and would help at least a few sellers which helps buyers.

I disagree mildly for a few reasons.

2. The VA benefit is meant for the direct personal use of the vet. I understand selling 'easier' could help the vet in terms of selling but overall this really is transfering the VA benefit to people who did not earn it.

Why not just make it so the terms of the loan only transfer to a person qualified to get a VA loan? I honestly thought that was the case already.
I see no reason not to allow a veteran to assume a VA loan from another veteran with the terms already provided; then taking the first veteran / seller off that VA loan entirely.

 

[-OZ-]

thanks

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

Lenders have tightened down on it a lot and the terms aren't nearly as good as they used to be, but a lot of people buy STRs as "second homes" with the intent to used the property themselves some as well, in which case there are 10% down products available. It's not like it was in the golden age post-covid where you could essentially get the same terms you could on a primary mortgage, but saves cash out of pocket.

STRs are my main business (I own several and am a property manager for others) so happy to help how I can on STR related questions.

Any chance you’d be around eastern South Carolina?

I’m a lawyer so definitely not playing loose with rules which could get me disbarred. But we’d plan to be there at least two weeks a year anyway.
Almost definitely using a management company.

I believe 14 days is the number of days you need to reach per year so if you're there 2 full weeks that would probably do it, but I'm not a lawyer so not legal advice and all that.

Just be very upfront with the lender about it. There are some lenders that are more amenable to this than others (even STR focused lenders out there now that expect this kind of thing). I would imagine a big bank would scoff at it.

So.... yes and no.

There are loan guidelines if you are doing a conforming conventional loan (which you typically are doing if doing a second home). Lenders can add to the rules but can't take away from the rules. Here is a copy and paste from Fannie Mae guidelines (Freddie Mac is basically the same) for what is considered a second home (and you agree to in the terms of the loan and not doing them would amount to mortgage fraud):

So more detail from what I gave here. The interesting thing is that they don't define the time limit here so that is given up to interpretation which I have always got back from lenders as being defined as two weeks. This, though, gives leniency. If the mortgage docs are written up as the guidelines then one week or a couple of long weekends etc would be "some portion of the year".

Second Home Properties​

The table below provides the requirements for second home properties.

✓	Second Home Requirements
	must be occupied by the borrower for some portion of the year
	is restricted to one-unit dwellings
	must be suitable for year-round occupancy
	the borrower must have exclusive control over the property
	must not be rental property or a timeshare arrangement 1
	cannot be subject to any agreements that give a management firm control over the occupancy of the property
	must be underwritten in DU and receive an Approve/Eligible recommendation, with the exception of high LTV refinance loans required to be underwritten in accordance with the Alternative Qualification Path (see B5-7-03, High LTV Refinance Alternative Qualification Path).

1. If the lender identifies rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above).

An LLPA applies to certain loans secured by second homes. This LLPA is in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix.

- - -
For non-QM/portfolio STR loans, they can make up whatever rules they want to since they are either keeping them on the books or packaging into MBS directly to the secondary and not being sold to Fannie or Freddie but then again, the STR mortgages should normally be more restrictive than a second home would be as they would be considered riskier.

thanks for the info.

had been considering going in on a beach house with a relative, but based on this information it would have be as a commercial loan.

I’d be happy to occupy it for you, brother.

 

[Orange&Blue]

thanks

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

Lenders have tightened down on it a lot and the terms aren't nearly as good as they used to be, but a lot of people buy STRs as "second homes" with the intent to used the property themselves some as well, in which case there are 10% down products available. It's not like it was in the golden age post-covid where you could essentially get the same terms you could on a primary mortgage, but saves cash out of pocket.

STRs are my main business (I own several and am a property manager for others) so happy to help how I can on STR related questions.

Any chance you’d be around eastern South Carolina?

I’m a lawyer so definitely not playing loose with rules which could get me disbarred. But we’d plan to be there at least two weeks a year anyway.
Almost definitely using a management company.

I believe 14 days is the number of days you need to reach per year so if you're there 2 full weeks that would probably do it, but I'm not a lawyer so not legal advice and all that.

Just be very upfront with the lender about it. There are some lenders that are more amenable to this than others (even STR focused lenders out there now that expect this kind of thing). I would imagine a big bank would scoff at it.

So.... yes and no.

There are loan guidelines if you are doing a conforming conventional loan (which you typically are doing if doing a second home). Lenders can add to the rules but can't take away from the rules. Here is a copy and paste from Fannie Mae guidelines (Freddie Mac is basically the same) for what is considered a second home (and you agree to in the terms of the loan and not doing them would amount to mortgage fraud):

So more detail from what I gave here. The interesting thing is that they don't define the time limit here so that is given up to interpretation which I have always got back from lenders as being defined as two weeks. This, though, gives leniency. If the mortgage docs are written up as the guidelines then one week or a couple of long weekends etc would be "some portion of the year".

Second Home Properties​

The table below provides the requirements for second home properties.

✓	Second Home Requirements
	must be occupied by the borrower for some portion of the year
	is restricted to one-unit dwellings
	must be suitable for year-round occupancy
	the borrower must have exclusive control over the property
	must not be rental property or a timeshare arrangement 1
	cannot be subject to any agreements that give a management firm control over the occupancy of the property
	must be underwritten in DU and receive an Approve/Eligible recommendation, with the exception of high LTV refinance loans required to be underwritten in accordance with the Alternative Qualification Path (see B5-7-03, High LTV Refinance Alternative Qualification Path).

1. If the lender identifies rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above).

An LLPA applies to certain loans secured by second homes. This LLPA is in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix.

- - -
For non-QM/portfolio STR loans, they can make up whatever rules they want to since they are either keeping them on the books or packaging into MBS directly to the secondary and not being sold to Fannie or Freddie but then again, the STR mortgages should normally be more restrictive than a second home would be as they would be considered riskier.

thanks for the info.

had been considering going in on a beach house with a relative, but based on this information it would have be as a commercial loan.

I’d be happy to occupy it for you, brother.

lol...

I'll let you get first dibs

 

[Stoneworker]

10-yr Treasury up nearly 20bps to almost 4.2% since Tuesday's Fitch downgrade of U.S. debt, Fannie and Freddie.

Mortgage rates sure to follow (if they haven't already).

 

[ghostguy123]

So my 19 year old daughter has gotten herself together pretty well working full time the last year, saved up some money, established some credit, and looks to be in a decent position to buy a starter home and be on the road to financial bliss.
Well, except for one problem. The same monthly payment right now only gets you about half the house compared to just a few years ago. There's literally nothing livable near us that is actually affordable.
I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

 

[The Z Machine]

How can we lobby to get nationwide,, universal assumable mortgages?? It would open up a lot of stagnant "locked in" houses out there.

 

[The Z Machine]

I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

I do too. But the number of 18-24 year olds that can afford to buy a house must be really small. I am much more concerned with the 30 year old with a kid on the way that cannot afford a starter home despite "playing the game right" his or her whole life.

 

[Chadstroma]

I don't understand how it works but I recently heard from a dad on our kids softball team that he just bought a house. He tried to get the seller to somehow transfer the current loan over to him at the lower existing rate. Didnt know this was a thing They were hesitant to do so and instead he did the math and showed them what a higher rate does to him and instead negotiated a couple hundred thousand off the price to account for the higher rate. (1 mil plus loan). He said he then Bought down the rate for the first couple years (also didn't know you could do that) with the idea that rates will come down in 2-3 years and then he can refi. He's in the commercial real estate development business and obviously has a lot of knowledge on how to swing deals.

Every so often I’ll window shop Redfin. One listing yesterday included the assumable VA loan at 2.75%. I’ll assume that’s a big time selling point even if it’s just half the mortgage (due to growth / paying down the mortgage).

Hopefully someone told that vet that their benefits will be tied up in that mortgage if they are looking to buy after selling. Unfortunately, and infuriating so, vets get used and abused by realtors and lenders all the time.

I still think the VA needs to change that rule once the buyer assumes the mortgage. It really shouldn’t be hard to change and would help at least a few sellers which helps buyers.

I disagree mildly for a few reasons.

2. The VA benefit is meant for the direct personal use of the vet. I understand selling 'easier' could help the vet in terms of selling but overall this really is transfering the VA benefit to people who did not earn it.

Why not just make it so the terms of the loan only transfer to a person qualified to get a VA loan? I honestly thought that was the case already.
I see no reason not to allow a veteran to assume a VA loan from another veteran with the terms already provided; then taking the first veteran / seller off that VA loan entirely.

No, you don't have to be VA benefits to assume a VA loan. You just need to qualify for the loan like you any loan. A veteran to veteran is a whole different story and I would be with you 100% on that. It changes the whole dynamics of it all. I will say that I am not 100% sure that if a vet did assume a VA loan that it would be tie up the benefits for the seller but my guess is that it would just like it would for a non-vet to assume it.

 

[Chadstroma]

thanks

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

Lenders have tightened down on it a lot and the terms aren't nearly as good as they used to be, but a lot of people buy STRs as "second homes" with the intent to used the property themselves some as well, in which case there are 10% down products available. It's not like it was in the golden age post-covid where you could essentially get the same terms you could on a primary mortgage, but saves cash out of pocket.

STRs are my main business (I own several and am a property manager for others) so happy to help how I can on STR related questions.

Any chance you’d be around eastern South Carolina?

I’m a lawyer so definitely not playing loose with rules which could get me disbarred. But we’d plan to be there at least two weeks a year anyway.
Almost definitely using a management company.

I believe 14 days is the number of days you need to reach per year so if you're there 2 full weeks that would probably do it, but I'm not a lawyer so not legal advice and all that.

Just be very upfront with the lender about it. There are some lenders that are more amenable to this than others (even STR focused lenders out there now that expect this kind of thing). I would imagine a big bank would scoff at it.

So.... yes and no.

There are loan guidelines if you are doing a conforming conventional loan (which you typically are doing if doing a second home). Lenders can add to the rules but can't take away from the rules. Here is a copy and paste from Fannie Mae guidelines (Freddie Mac is basically the same) for what is considered a second home (and you agree to in the terms of the loan and not doing them would amount to mortgage fraud):

So more detail from what I gave here. The interesting thing is that they don't define the time limit here so that is given up to interpretation which I have always got back from lenders as being defined as two weeks. This, though, gives leniency. If the mortgage docs are written up as the guidelines then one week or a couple of long weekends etc would be "some portion of the year".

Second Home Properties​

The table below provides the requirements for second home properties.

✓	Second Home Requirements
	must be occupied by the borrower for some portion of the year
	is restricted to one-unit dwellings
	must be suitable for year-round occupancy
	the borrower must have exclusive control over the property
	must not be rental property or a timeshare arrangement 1
	cannot be subject to any agreements that give a management firm control over the occupancy of the property
	must be underwritten in DU and receive an Approve/Eligible recommendation, with the exception of high LTV refinance loans required to be underwritten in accordance with the Alternative Qualification Path (see B5-7-03, High LTV Refinance Alternative Qualification Path).

1. If the lender identifies rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above).

An LLPA applies to certain loans secured by second homes. This LLPA is in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix.

- - -
For non-QM/portfolio STR loans, they can make up whatever rules they want to since they are either keeping them on the books or packaging into MBS directly to the secondary and not being sold to Fannie or Freddie but then again, the STR mortgages should normally be more restrictive than a second home would be as they would be considered riskier.

thanks for the info.

had been considering going in on a beach house with a relative, but based on this information it would have be as a commercial loan.

Technically not commercial but an investment loan but yea- happy to help. (commercial would be like buying a building or strip mall or warehouse etc.)

 

[Chadstroma]

thanks

@Chadstroma - not sure this is the right place, but if someone were to get into short term rentals, I assume 20% down is almost required, but how much else would you budget a year or two out? I assume an extra 5% for commissions and inspection, another 10-20% for any maintenance issues. Is that a fair estimate?

Lenders have tightened down on it a lot and the terms aren't nearly as good as they used to be, but a lot of people buy STRs as "second homes" with the intent to used the property themselves some as well, in which case there are 10% down products available. It's not like it was in the golden age post-covid where you could essentially get the same terms you could on a primary mortgage, but saves cash out of pocket.

STRs are my main business (I own several and am a property manager for others) so happy to help how I can on STR related questions.

Any chance you’d be around eastern South Carolina?

I’m a lawyer so definitely not playing loose with rules which could get me disbarred. But we’d plan to be there at least two weeks a year anyway.
Almost definitely using a management company.

I believe 14 days is the number of days you need to reach per year so if you're there 2 full weeks that would probably do it, but I'm not a lawyer so not legal advice and all that.

Just be very upfront with the lender about it. There are some lenders that are more amenable to this than others (even STR focused lenders out there now that expect this kind of thing). I would imagine a big bank would scoff at it.

So.... yes and no.

There are loan guidelines if you are doing a conforming conventional loan (which you typically are doing if doing a second home). Lenders can add to the rules but can't take away from the rules. Here is a copy and paste from Fannie Mae guidelines (Freddie Mac is basically the same) for what is considered a second home (and you agree to in the terms of the loan and not doing them would amount to mortgage fraud):

So more detail from what I gave here. The interesting thing is that they don't define the time limit here so that is given up to interpretation which I have always got back from lenders as being defined as two weeks. This, though, gives leniency. If the mortgage docs are written up as the guidelines then one week or a couple of long weekends etc would be "some portion of the year".

Second Home Properties​

The table below provides the requirements for second home properties.

✓	Second Home Requirements
	must be occupied by the borrower for some portion of the year
	is restricted to one-unit dwellings
	must be suitable for year-round occupancy
	the borrower must have exclusive control over the property
	must not be rental property or a timeshare arrangement 1
	cannot be subject to any agreements that give a management firm control over the occupancy of the property
	must be underwritten in DU and receive an Approve/Eligible recommendation, with the exception of high LTV refinance loans required to be underwritten in accordance with the Alternative Qualification Path (see B5-7-03, High LTV Refinance Alternative Qualification Path).

1. If the lender identifies rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above).

An LLPA applies to certain loans secured by second homes. This LLPA is in addition to any other price adjustments that are otherwise applicable to the particular transaction. See the Loan-Level Price Adjustment (LLPA) Matrix.

- - -
For non-QM/portfolio STR loans, they can make up whatever rules they want to since they are either keeping them on the books or packaging into MBS directly to the secondary and not being sold to Fannie or Freddie but then again, the STR mortgages should normally be more restrictive than a second home would be as they would be considered riskier.

thanks for the info.

had been considering going in on a beach house with a relative, but based on this information it would have be as a commercial loan.

I’d be happy to occupy it for you, brother.

lol...

I'll let you get first dibs

second dibs after me

 

[Chadstroma]

10-yr Treasury up nearly 20bps to almost 4.2% since Tuesday's Fitch downgrade of U.S. debt, Fannie and Freddie.

Mortgage rates sure to follow (if they haven't already).

Yea, a kick in the balls.

 

[Chadstroma]

So my 19 year old daughter has gotten herself together pretty well working full time the last year, saved up some money, established some credit, and looks to be in a decent position to buy a starter home and be on the road to financial bliss.
Well, except for one problem. The same monthly payment right now only gets you about half the house compared to just a few years ago. There's literally nothing livable near us that is actually affordable.
I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

It is rough as heck for FTHB's but on the other side... renting sucks even more.

 

[Chadstroma]

How can we lobby to get nationwide,, universal assumable mortgages?? It would open up a lot of stagnant "locked in" houses out there.

I am not sure who would lobby for it. AIME, my professional trade organization, has been doing a strong state by state push on lobbying to get the veterans with disability status- who in most (all?) states get reduced or eliminated property taxes have it implemented pre-closing versus post which means we have to collect taxes and fund escrow even though the vet will not pay taxes and then get all that money back a couple of months later. Moronic. Another one is starting to push to end trigger leads. A long list of things that they want to get to eventually, that is not on the radar at all. MAYBE the NAR (National Association of Realtors) would be game to lobby for it as they still get paid either way and they are a very powerful lobbying group.

 

[ghostguy123]

So my 19 year old daughter has gotten herself together pretty well working full time the last year, saved up some money, established some credit, and looks to be in a decent position to buy a starter home and be on the road to financial bliss.
Well, except for one problem. The same monthly payment right now only gets you about half the house compared to just a few years ago. There's literally nothing livable near us that is actually affordable.
I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

It is rough as heck for FTHB's but on the other side... renting sucks even more.

Does renting suck even more though? For say a $150,000 home at current rates only a couple thousand bucks of the principal is paid off in the first 2 years. Renting for a couple years (here anyway) allows you to save more than that amount of principal (pretty easily) over the course of those 2 years.
Obviously buying and staying in the same home for a long time is better, but that's clearly no guarantee someone will do that when just starting their life.

Heck, I've been looking for another rental but it's negative cash flow. It's close to break even putting 20% down, not even factoring in upkeep.

 

[Chadstroma]

So my 19 year old daughter has gotten herself together pretty well working full time the last year, saved up some money, established some credit, and looks to be in a decent position to buy a starter home and be on the road to financial bliss.
Well, except for one problem. The same monthly payment right now only gets you about half the house compared to just a few years ago. There's literally nothing livable near us that is actually affordable.
I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

It is rough as heck for FTHB's but on the other side... renting sucks even more.

Does renting suck even more though? For say a $150,000 home at current rates only a couple thousand bucks of the principal is paid off in the first 2 years. Renting for a couple years (here anyway) allows you to save more than that amount of principal (pretty easily) over the course of those 2 years.
Obviously buying and staying in the same home for a long time is better, but that's clearly no guarantee someone will do that when just starting their life.

Heck, I've been looking for another rental but it's negative cash flow.

No matter what the interest rate on a mortgage is, the cost of renting is 100%. Homeowning has a pretty standard over time including booms and busts a 5% appreciation. Renting has none. In times of high inflation where the mortgage payment does not change though insurance and taxes will generally go up, rent has been up 8% and in normal times usually ranges from 2-3% YOY. As you know, landlords do not rent with negative cash flow.... hence you are not buying because rental comps are not there (likely because people can't afford them as is). When renting, you are paying the landlords mortgage, higher taxes (no homeowners exemption), and insurance plus more for maintenance/fixing and more for income.

Renting sucks for the renter. Great for the landlord as long as they have a half way decent renter.

Sure, there are instances that renting make sense but it is a financial trade off. And of course that doesn't mean that all people have the choice of owning but for those who do and don't have a very specific reason not to- renting sucks.

 

[STEADYMOBBIN 22]

So my 19 year old daughter has gotten herself together pretty well working full time the last year, saved up some money, established some credit, and looks to be in a decent position to buy a starter home and be on the road to financial bliss.
Well, except for one problem. The same monthly payment right now only gets you about half the house compared to just a few years ago. There's literally nothing livable near us that is actually affordable.
I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

It is rough as heck for FTHB's but on the other side... renting sucks even more.

Does renting suck even more though? For say a $150,000 home at current rates only a couple thousand bucks of the principal is paid off in the first 2 years. Renting for a couple years (here anyway) allows you to save more than that amount of principal (pretty easily) over the course of those 2 years.
Obviously buying and staying in the same home for a long time is better, but that's clearly no guarantee someone will do that when just starting their life.

Heck, I've been looking for another rental but it's negative cash flow.

No matter what the interest rate on a mortgage is, the cost of renting is 100%. Homeowning has a pretty standard over time including booms and busts a 5% appreciation. Renting has none. In times of high inflation where the mortgage payment does not change though insurance and taxes will generally go up, rent has been up 8% and in normal times usually ranges from 2-3% YOY. As you know, landlords do not rent with negative cash flow.... hence you are not buying because rental comps are not there (likely because people can't afford them as is). When renting, you are paying the landlords mortgage, higher taxes (no homeowners exemption), and insurance plus more for maintenance/fixing and more for income.

Renting sucks for the renter. Great for the landlord as long as they have a half way decent renter.

Sure, there are instances that renting make sense but it is a financial trade off. And of course that doesn't mean that all people have the choice of owning but for those who do and don't have a very specific reason not to- renting sucks.

My only pushback, and it’s mild…

Not sure why a 19 y/o would want the responsibility of owning a house. (Your circumstance is not typical being that you’re in the rental game)

You can rent in nice areas that maybe you can’t afford to purchase.

 

[FreeBaGeL]

As you know, landlords do not rent with negative cash flow....

Not that it says anything about your broader point (which I agree with), but plenty of landlords buying right now are renting with negative cashflow.

SFH LTRs here locally sell in the $300k-$400k range for little 1-3br bungalows and rent for $800-$1000/mo and people can't buy them up fast enough. It's hard to satisfy even the 1% rule in most markets now, outside of boring midwest areas with the nation's worst appreciation potential.

 

[DA RAIDERS]

I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

I do too. But the number of 18-24 year olds that can afford to buy a house must be really small. I am much more concerned with the 30 year old with a kid on the way that cannot afford a starter home despite "playing the game right" his or her whole life.

this is harsh, but they should have bought when they were giving money away. i refi'd twice in that period. 2.75 is crazy. thanks chad!

 

[DA RAIDERS]

@Chadstroma are aitds still a thing? all inclusive trust deeds. they were a thing for a minute 20-25 years ago

 

[-OZ-]

I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

I do too. But the number of 18-24 year olds that can afford to buy a house must be really small. I am much more concerned with the 30 year old with a kid on the way that cannot afford a starter home despite "playing the game right" his or her whole life.

this is harsh, but they should have bought when they were giving money away. i refi'd twice in that period. 2.75 is crazy. thanks chad!

there are many reasons the 30yo might not have purchased a home a couple years ago. Often people change jobs or get transferred within their company. Or they’ve been in graduate school, just got married, etc. We bought this house when I was 39 after renting for over a decade and moving every few years. Got really lucky with our timing.

 

[ghostguy123]

So my 19 year old daughter has gotten herself together pretty well working full time the last year, saved up some money, established some credit, and looks to be in a decent position to buy a starter home and be on the road to financial bliss.
Well, except for one problem. The same monthly payment right now only gets you about half the house compared to just a few years ago. There's literally nothing livable near us that is actually affordable.
I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

It is rough as heck for FTHB's but on the other side... renting sucks even more.

Does renting suck even more though? For say a $150,000 home at current rates only a couple thousand bucks of the principal is paid off in the first 2 years. Renting for a couple years (here anyway) allows you to save more than that amount of principal (pretty easily) over the course of those 2 years.
Obviously buying and staying in the same home for a long time is better, but that's clearly no guarantee someone will do that when just starting their life.

Heck, I've been looking for another rental but it's negative cash flow.

No matter what the interest rate on a mortgage is, the cost of renting is 100%. Homeowning has a pretty standard over time including booms and busts a 5% appreciation. Renting has none. In times of high inflation where the mortgage payment does not change though insurance and taxes will generally go up, rent has been up 8% and in normal times usually ranges from 2-3% YOY. As you know, landlords do not rent with negative cash flow.... hence you are not buying because rental comps are not there (likely because people can't afford them as is). When renting, you are paying the landlords mortgage, higher taxes (no homeowners exemption), and insurance plus more for maintenance/fixing and more for income.

Renting sucks for the renter. Great for the landlord as long as they have a half way decent renter.

Sure, there are instances that renting make sense but it is a financial trade off. And of course that doesn't mean that all people have the choice of owning but for those who do and don't have a very specific reason not to- renting sucks.

What's the cost of buying for the first couple/few years right now? 95%? Plus the overall monthly payment will be higher than rent (at least around me anyway), and this isn't factoring in maintenance cost.

I remember back in the not too distant past where you could buy a decent house that would be much higher quality than what you can rent, and do it for like 50-75% the cost of the rental.

Wow, that has changed (again, at least around where I live, maybe everywhere??)

For myself personally, even though I'd like to look into another rental, it seems like it makes more sense to just invest whatever money I was going to use to purchase.

I'm a bit skeptical of the continued appreciation angle as well. My novice perspective sees flattening of home prices for the next 5-10 years. It seems like, unless getting a great deal, this is only a prudent time to buy if buying your forever home.

 

[Stoneworker]

So my 19 year old daughter has gotten herself together pretty well working full time the last year, saved up some money, established some credit, and looks to be in a decent position to buy a starter home and be on the road to financial bliss.
Well, except for one problem. The same monthly payment right now only gets you about half the house compared to just a few years ago. There's literally nothing livable near us that is actually affordable.
I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

It is rough as heck for FTHB's but on the other side... renting sucks even more.

Does renting suck even more though? For say a $150,000 home at current rates only a couple thousand bucks of the principal is paid off in the first 2 years. Renting for a couple years (here anyway) allows you to save more than that amount of principal (pretty easily) over the course of those 2 years.
Obviously buying and staying in the same home for a long time is better, but that's clearly no guarantee someone will do that when just starting their life.

Heck, I've been looking for another rental but it's negative cash flow.

No matter what the interest rate on a mortgage is, the cost of renting is 100%. Homeowning has a pretty standard over time including booms and busts a 5% appreciation. Renting has none. In times of high inflation where the mortgage payment does not change though insurance and taxes will generally go up, rent has been up 8% and in normal times usually ranges from 2-3% YOY. As you know, landlords do not rent with negative cash flow.... hence you are not buying because rental comps are not there (likely because people can't afford them as is). When renting, you are paying the landlords mortgage, higher taxes (no homeowners exemption), and insurance plus more for maintenance/fixing and more for income.

Renting sucks for the renter. Great for the landlord as long as they have a half way decent renter.

Sure, there are instances that renting make sense but it is a financial trade off. And of course that doesn't mean that all people have the choice of owning but for those who do and don't have a very specific reason not to- renting sucks.

What's the cost of buying for the first couple/few years right now? 95%? Plus the overall monthly payment will be higher than rent (at least around me anyway), and this isn't factoring in maintenance cost.

I remember back in the not too distant past where you could buy a decent house that would be much higher quality than what you can rent, and do it for like 50-75% the cost of the rental.

Wow, that has changed (again, at least around where I live, maybe everywhere??)

For myself personally, even though I'd like to look into another rental, it seems like it makes more sense to just invest whatever money I was going to use to purchase.

I'm a bit skeptical of the continued appreciation angle as well. My novice perspective sees flattening of home prices for the next 5-10 years. It seems like, unless getting a great deal, this is only a prudent time to buy if buying your forever home.

Agreed. It is not a universal rule that buying is better financially than renting. There's a whole bunch of financial factors at work that usually only a spreadsheet can quantify accurately

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up
- Points upfront for mortgage origination and other transaction fees
- Property taxes
- Homeowners insurance costs
- HOA fees (huge for condos, townhomes and certain neighborhoods)
- Utility costs (water and heat included in most rentals)
- Home repair and maintenance costs
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade)

If you're going to live in a solid structure in one place for a long time (i.e. 6-7 years), then the numbers generally will work in favor of buying is what I've found

But you have to run the numbers, and generally speaking the shorter the hold, the more in favor of renting.

 

[Chadstroma]

@Chadstroma are aitds still a thing? all inclusive trust deeds. they were a thing for a minute 20-25 years ago

I haven't seen them but being my position in RE, I wouldn't really ever see them as a transaction using them would exclude a guy like me. Maybe one of the realtors could chime in as they would see transactions that have seller financing (this is basically a form of seller financing) where I would not.

 

[Chadstroma]

So my 19 year old daughter has gotten herself together pretty well working full time the last year, saved up some money, established some credit, and looks to be in a decent position to buy a starter home and be on the road to financial bliss.
Well, except for one problem. The same monthly payment right now only gets you about half the house compared to just a few years ago. There's literally nothing livable near us that is actually affordable.
I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

It is rough as heck for FTHB's but on the other side... renting sucks even more.

Does renting suck even more though? For say a $150,000 home at current rates only a couple thousand bucks of the principal is paid off in the first 2 years. Renting for a couple years (here anyway) allows you to save more than that amount of principal (pretty easily) over the course of those 2 years.
Obviously buying and staying in the same home for a long time is better, but that's clearly no guarantee someone will do that when just starting their life.

Heck, I've been looking for another rental but it's negative cash flow.

No matter what the interest rate on a mortgage is, the cost of renting is 100%. Homeowning has a pretty standard over time including booms and busts a 5% appreciation. Renting has none. In times of high inflation where the mortgage payment does not change though insurance and taxes will generally go up, rent has been up 8% and in normal times usually ranges from 2-3% YOY. As you know, landlords do not rent with negative cash flow.... hence you are not buying because rental comps are not there (likely because people can't afford them as is). When renting, you are paying the landlords mortgage, higher taxes (no homeowners exemption), and insurance plus more for maintenance/fixing and more for income.

Renting sucks for the renter. Great for the landlord as long as they have a half way decent renter.

Sure, there are instances that renting make sense but it is a financial trade off. And of course that doesn't mean that all people have the choice of owning but for those who do and don't have a very specific reason not to- renting sucks.

What's the cost of buying for the first couple/few years right now? 95%? Plus the overall monthly payment will be higher than rent (at least around me anyway), and this isn't factoring in maintenance cost.

I remember back in the not too distant past where you could buy a decent house that would be much higher quality than what you can rent, and do it for like 50-75% the cost of the rental.

Wow, that has changed (again, at least around where I live, maybe everywhere??)

For myself personally, even though I'd like to look into another rental, it seems like it makes more sense to just invest whatever money I was going to use to purchase.

I'm a bit skeptical of the continued appreciation angle as well. My novice perspective sees flattening of home prices for the next 5-10 years. It seems like, unless getting a great deal, this is only a prudent time to buy if buying your forever home.

In some areas that have seen very high appreciation rates they could end up outstripping rental comps.... because you just can't find renters that can afford it which is the only reason the rental comps have downward pressure right now. Rental comps will always push up as long as there are renters who want it and can afford it. The want is there but the afford is not because of how high these comps have gone up recently.

Here is the thing, this isn't a picture, this is a video. The landlords who have had the property a couple of years are raising their rent and they are pocketing the extra cash flow. Renters carry that burden.

As for appreciation, again, my statement is that over time including booms and busts over geographic areas, appreciation is pretty much locked in at 5% when you look at the data over the last 100 years or so. The chart will show huge upswings and downswings all over the place but you can draw a straight line at 5% and it all averages out. There are always outliers and RE of course is about location, location, location so this is a macro statement. As for being flat, we are still significantly and dramatically low on inventory. That low inventory isn't just because people aren't selling it is because building has not kept up with population growth. In the 2010's we built so few housing units that you have to go back to the 1930's to have a lower total number built. We have a ways to go to really catch up with demand. Short of an economic disaster where people are living in the streets.... and not just in L.A., S.F. or Portland but everywhere because they have no jobs.... demand will keep putting pressure on values. We simply have more people than places to live.

 

[Chadstroma]

Agreed. It is not a universal rule that buying is better financially than renting. There's a whole bunch of financial factors at work that usually only a spreadsheet can quantify accurately

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up
- Points upfront for mortgage origination and other transaction fees
- Property taxes
- Homeowners insurance costs
- HOA fees (huge for condos, townhomes and certain neighborhoods)
- Utility costs (water and heat included in most rentals)
- Home repair and maintenance costs
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade)

If you're going to live in a solid structure in one place for a long time (i.e. 6-7 years), then the numbers generally will work in favor of buying is what I've found

But you have to run the numbers, and generally speaking the shorter the hold, the more in favor of renting.

Again, I did not say "universal rule" but the overwhelming majority of people in stable living situations are better off buying.

I have a friend that loves to live in different places. I don't think that they have ever resigned a lease. When the lease is up they move somewhere else. Sometimes different cities or even states. For them, buying would be moronic. Renting makes sense because of what they want to do. However, that doesn't mean that they are financially better off because they are renting, it just means the extra cost of renting makes sense for them because of what they choose to do.

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up Yes, this is true. Now compare that to the amortization schedule of renting.
- Points upfront for mortgage origination and other transaction fees Yes, there are costs to buying.
- Property taxes Paid for in rent and actually a higher tax rate as there is no homeowners exemption.
- Homeowners insurance costs Paid for in rent.
- HOA fees (huge for condos, townhomes and certain neighborhoods) Paid for in rent.
- Utility costs (water and heat included in most rentals) Not sure about the most statement but paid for in rent.
- Home repair and maintenance costs Paid for in rent.
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade) You mean like the financial capital? Rental comps are typically much higher than the cost of OO ownership let alone NOO. In fact, do this.... for those who own.... go to Zillow (prob the only time I will tell people to go to that crap site) and type in your home. Look at the rental comp. Then compare to your PITI and report back the +/- of cash flow from what you pay and what you could rent for. In fact, I will start a new thread asking people to do that.

 

[BeTheMatch]

Agreed. It is not a universal rule that buying is better financially than renting. There's a whole bunch of financial factors at work that usually only a spreadsheet can quantify accurately

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up
- Points upfront for mortgage origination and other transaction fees
- Property taxes
- Homeowners insurance costs
- HOA fees (huge for condos, townhomes and certain neighborhoods)
- Utility costs (water and heat included in most rentals)
- Home repair and maintenance costs
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade)

If you're going to live in a solid structure in one place for a long time (i.e. 6-7 years), then the numbers generally will work in favor of buying is what I've found

But you have to run the numbers, and generally speaking the shorter the hold, the more in favor of renting.

Again, I did not say "universal rule" but the overwhelming majority of people in stable living situations are better off buying.

I have a friend that loves to live in different places. I don't think that they have ever resigned a lease. When the lease is up they move somewhere else. Sometimes different cities or even states. For them, buying would be moronic. Renting makes sense because of what they want to do. However, that doesn't mean that they are financially better off because they are renting, it just means the extra cost of renting makes sense for them because of what they choose to do.

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up Yes, this is true. Now compare that to the amortization schedule of renting.
- Points upfront for mortgage origination and other transaction fees Yes, there are costs to buying.
- Property taxes Paid for in rent and actually a higher tax rate as there is no homeowners exemption.
- Homeowners insurance costs Paid for in rent.
- HOA fees (huge for condos, townhomes and certain neighborhoods) Paid for in rent.
- Utility costs (water and heat included in most rentals) Not sure about the most statement but paid for in rent.
- Home repair and maintenance costs Paid for in rent.
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade) You mean like the financial capital? Rental comps are typically much higher than the cost of OO ownership let alone NOO. In fact, do this.... for those who own.... go to Zillow (prob the only time I will tell people to go to that crap site) and type in your home. Look at the rental comp. Then compare to your PITI and report back the +/- of cash flow from what you pay and what you could rent for. In fact, I will start a new thread asking people to do that.

I agree with this, but you're leaving out lots of other things that I think even things out more.

Like a new roof, and appliances, and furnaces and air conditioners and flooring and siding and gutters and on and on and on.

Sure, you can say that's all built into the rent too, but now all of the sudden the two sides are a lot closer.

 

[Chadstroma]

Agreed. It is not a universal rule that buying is better financially than renting. There's a whole bunch of financial factors at work that usually only a spreadsheet can quantify accurately

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up
- Points upfront for mortgage origination and other transaction fees
- Property taxes
- Homeowners insurance costs
- HOA fees (huge for condos, townhomes and certain neighborhoods)
- Utility costs (water and heat included in most rentals)
- Home repair and maintenance costs
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade)

If you're going to live in a solid structure in one place for a long time (i.e. 6-7 years), then the numbers generally will work in favor of buying is what I've found

But you have to run the numbers, and generally speaking the shorter the hold, the more in favor of renting.

Again, I did not say "universal rule" but the overwhelming majority of people in stable living situations are better off buying.

I have a friend that loves to live in different places. I don't think that they have ever resigned a lease. When the lease is up they move somewhere else. Sometimes different cities or even states. For them, buying would be moronic. Renting makes sense because of what they want to do. However, that doesn't mean that they are financially better off because they are renting, it just means the extra cost of renting makes sense for them because of what they choose to do.

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up Yes, this is true. Now compare that to the amortization schedule of renting.
- Points upfront for mortgage origination and other transaction fees Yes, there are costs to buying.
- Property taxes Paid for in rent and actually a higher tax rate as there is no homeowners exemption.
- Homeowners insurance costs Paid for in rent.
- HOA fees (huge for condos, townhomes and certain neighborhoods) Paid for in rent.
- Utility costs (water and heat included in most rentals) Not sure about the most statement but paid for in rent.
- Home repair and maintenance costs Paid for in rent.
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade) You mean like the financial capital? Rental comps are typically much higher than the cost of OO ownership let alone NOO. In fact, do this.... for those who own.... go to Zillow (prob the only time I will tell people to go to that crap site) and type in your home. Look at the rental comp. Then compare to your PITI and report back the +/- of cash flow from what you pay and what you could rent for. In fact, I will start a new thread asking people to do that.

I agree with this, but you're leaving out lots of other things that I think even things out more.

Like a new roof, and appliances, and furnaces and air conditioners and flooring and siding and gutters and on and on and on.

Sure, you can say that's all built into the rent too, but now all of the sudden the two sides are a lot closer.

I would be happy to pocket my $1700 a month extra cash flow a month of my renters money to pay for the roof, appliance, furnace, HVAC, etc when needed. I will still come out on top and it won't be close.

 

[CR69]

Agreed. It is not a universal rule that buying is better financially than renting. There's a whole bunch of financial factors at work that usually only a spreadsheet can quantify accurately

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up
- Points upfront for mortgage origination and other transaction fees
- Property taxes
- Homeowners insurance costs
- HOA fees (huge for condos, townhomes and certain neighborhoods)
- Utility costs (water and heat included in most rentals)
- Home repair and maintenance costs
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade)

If you're going to live in a solid structure in one place for a long time (i.e. 6-7 years), then the numbers generally will work in favor of buying is what I've found

But you have to run the numbers, and generally speaking the shorter the hold, the more in favor of renting.

Again, I did not say "universal rule" but the overwhelming majority of people in stable living situations are better off buying.

I have a friend that loves to live in different places. I don't think that they have ever resigned a lease. When the lease is up they move somewhere else. Sometimes different cities or even states. For them, buying would be moronic. Renting makes sense because of what they want to do. However, that doesn't mean that they are financially better off because they are renting, it just means the extra cost of renting makes sense for them because of what they choose to do.

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up Yes, this is true. Now compare that to the amortization schedule of renting.
- Points upfront for mortgage origination and other transaction fees Yes, there are costs to buying.
- Property taxes Paid for in rent and actually a higher tax rate as there is no homeowners exemption.
- Homeowners insurance costs Paid for in rent.
- HOA fees (huge for condos, townhomes and certain neighborhoods) Paid for in rent.
- Utility costs (water and heat included in most rentals) Not sure about the most statement but paid for in rent.
- Home repair and maintenance costs Paid for in rent.
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade) You mean like the financial capital? Rental comps are typically much higher than the cost of OO ownership let alone NOO. In fact, do this.... for those who own.... go to Zillow (prob the only time I will tell people to go to that crap site) and type in your home. Look at the rental comp. Then compare to your PITI and report back the +/- of cash flow from what you pay and what you could rent for. In fact, I will start a new thread asking people to do that.

And add in the average net worth of a homeowner is 40x that of a renter. I think it’s like $200k to $5k?

 

[-OZ-]

Agreed. It is not a universal rule that buying is better financially than renting. There's a whole bunch of financial factors at work that usually only a spreadsheet can quantify accurately

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up
- Points upfront for mortgage origination and other transaction fees
- Property taxes
- Homeowners insurance costs
- HOA fees (huge for condos, townhomes and certain neighborhoods)
- Utility costs (water and heat included in most rentals)
- Home repair and maintenance costs
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade)

If you're going to live in a solid structure in one place for a long time (i.e. 6-7 years), then the numbers generally will work in favor of buying is what I've found

But you have to run the numbers, and generally speaking the shorter the hold, the more in favor of renting.

Again, I did not say "universal rule" but the overwhelming majority of people in stable living situations are better off buying.

I have a friend that loves to live in different places. I don't think that they have ever resigned a lease. When the lease is up they move somewhere else. Sometimes different cities or even states. For them, buying would be moronic. Renting makes sense because of what they want to do. However, that doesn't mean that they are financially better off because they are renting, it just means the extra cost of renting makes sense for them because of what they choose to do.

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up Yes, this is true. Now compare that to the amortization schedule of renting.
- Points upfront for mortgage origination and other transaction fees Yes, there are costs to buying.
- Property taxes Paid for in rent and actually a higher tax rate as there is no homeowners exemption.
- Homeowners insurance costs Paid for in rent.
- HOA fees (huge for condos, townhomes and certain neighborhoods) Paid for in rent.
- Utility costs (water and heat included in most rentals) Not sure about the most statement but paid for in rent.
- Home repair and maintenance costs Paid for in rent.
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade) You mean like the financial capital? Rental comps are typically much higher than the cost of OO ownership let alone NOO. In fact, do this.... for those who own.... go to Zillow (prob the only time I will tell people to go to that crap site) and type in your home. Look at the rental comp. Then compare to your PITI and report back the +/- of cash flow from what you pay and what you could rent for. In fact, I will start a new thread asking people to do that.

And add in the average net worth of a homeowner is 40x that of a renter. I think it’s like $200k to $5k?

That’s a bit chicken vs egg though. Except there’s a strong case to be made that wealthy buy, not that buying makes you wealthy.

 

[ghostguy123]

Agreed. It is not a universal rule that buying is better financially than renting. There's a whole bunch of financial factors at work that usually only a spreadsheet can quantify accurately

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up
- Points upfront for mortgage origination and other transaction fees
- Property taxes
- Homeowners insurance costs
- HOA fees (huge for condos, townhomes and certain neighborhoods)
- Utility costs (water and heat included in most rentals)
- Home repair and maintenance costs
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade)

If you're going to live in a solid structure in one place for a long time (i.e. 6-7 years), then the numbers generally will work in favor of buying is what I've found

But you have to run the numbers, and generally speaking the shorter the hold, the more in favor of renting.

Again, I did not say "universal rule" but the overwhelming majority of people in stable living situations are better off buying.

I have a friend that loves to live in different places. I don't think that they have ever resigned a lease. When the lease is up they move somewhere else. Sometimes different cities or even states. For them, buying would be moronic. Renting makes sense because of what they want to do. However, that doesn't mean that they are financially better off because they are renting, it just means the extra cost of renting makes sense for them because of what they choose to do.

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up Yes, this is true. Now compare that to the amortization schedule of renting.
- Points upfront for mortgage origination and other transaction fees Yes, there are costs to buying.
- Property taxes Paid for in rent and actually a higher tax rate as there is no homeowners exemption.
- Homeowners insurance costs Paid for in rent.
- HOA fees (huge for condos, townhomes and certain neighborhoods) Paid for in rent.
- Utility costs (water and heat included in most rentals) Not sure about the most statement but paid for in rent.
- Home repair and maintenance costs Paid for in rent.
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade) You mean like the financial capital? Rental comps are typically much higher than the cost of OO ownership let alone NOO. In fact, do this.... for those who own.... go to Zillow (prob the only time I will tell people to go to that crap site) and type in your home. Look at the rental comp. Then compare to your PITI and report back the +/- of cash flow from what you pay and what you could rent for. In fact, I will start a new thread asking people to do that.

And add in the average net worth of a homeowner is 40x that of a renter. I think it’s like $200k to $5k?

Yeah, there's obvious reasons for that.
Problem is, if you want to buy now, the "gotta live there at least 3 years" rule is now closer to a 5-10 year rule.
That and actually affording a down payment is not quite as easy these days.

But yeah, obviously long term owning a home is better.

 

[Chadstroma]

And add in the average net worth of a homeowner is 40x that of a renter. I think it’s like $200k to $5k?

That’s a bit chicken vs egg though. Except there’s a strong case to be made that wealthy buy, not that buying makes you wealthy.

It comes down to this... renters- poor or rich, do not add to their net wealth. Homeowners are adding to their net wealth from the same monthly liability that is going to be paid one way or another. Renting poor will most likely stay poor. Home ownership, opens a pathway to wealth building instead of building landlords wealth.

 

[The Z Machine]

And add in the average net worth of a homeowner is 40x that of a renter. I think it’s like $200k to $5k?

That’s a bit chicken vs egg though. Except there’s a strong case to be made that wealthy buy, not that buying makes you wealthy.

It comes down to this... renters- poor or rich, do not add to their net wealth. Homeowners are adding to their net wealth from the same monthly liability that is going to be paid one way or another. Renting poor will most likely stay poor. Home ownership, opens a pathway to wealth building instead of building landlords wealth.

Sure. If you can ever get a down payment together, qualify for a mortgage, keep up the payments and maintenance for however long it would take to earn real value.

That's a path not available to everyone.

 

[Stoneworker]

And add in the average net worth of a homeowner is 40x that of a renter. I think it’s like $200k to $5k?

That’s a bit chicken vs egg though. Except there’s a strong case to be made that wealthy buy, not that buying makes you wealthy.

It comes down to this... renters- poor or rich, do not add to their net wealth. Homeowners are adding to their net wealth from the same monthly liability that is going to be paid one way or another. Renting poor will most likely stay poor. Home ownership, opens a pathway to wealth building instead of building landlords wealth.

It is not the same monthly liability that is going to be paid one way or the other.

For example, selling costs are just one (of many) often overlooked expenses of home ownership that renters never pay.

For simplicity, assume a 10-year hold and a $1 million house. Selling costs will be approx 6% (to the RE broker racket) and call it $30K home prep (painting, carpet, repairs, etc). That's $90K.

Amortize $90K over a 10 year hold (120 months) and that's an extra $750 / month right there that's never paid by renters.

 

[Chadstroma]

And add in the average net worth of a homeowner is 40x that of a renter. I think it’s like $200k to $5k?

That’s a bit chicken vs egg though. Except there’s a strong case to be made that wealthy buy, not that buying makes you wealthy.

It comes down to this... renters- poor or rich, do not add to their net wealth. Homeowners are adding to their net wealth from the same monthly liability that is going to be paid one way or another. Renting poor will most likely stay poor. Home ownership, opens a pathway to wealth building instead of building landlords wealth.

It is not the same monthly liability that is going to be paid one way or the other.

For example, selling costs are just one (of many) often overlooked expenses of home ownership that renters never pay.

For simplicity, assume a 10-year hold and a $1 million house. Selling costs will be approx 6% (to the RE broker racket) and call it $30K home prep (painting, carpet, repairs, etc). That's $90K.

Amortize $90K over a 10 year hold (120 months) and that's an extra $750 / month right there that's never paid by renters.

Out of how much equity gained over the 10 years. How much does the homeowner have after?

Now do the math on paying rent for 10 years. How much money does the renter have after?

And you are right. It isn't the same liability because renters typically pay more.

 

[culdeus]

Math in states that Trump hated has gotten a little worse, ability to write off the full SALT up to the AMT level made Texas/Cali/NY rates more tolerable. With property tax rates in Texas so high it's now my largest single expense. So the whole "you pay X in rent, you get back 0" thing doesn't really have nearly as much weight as it did. You have a 3% mortgage in Texas odds are you pay vastly more in property taxes than interest. And if you factor taxes+insurance the math starts to degrade further. Was nice when you could see that as a writeoff. Nope, standard deduction now.

 

[ghostguy123]

And add in the average net worth of a homeowner is 40x that of a renter. I think it’s like $200k to $5k?

That’s a bit chicken vs egg though. Except there’s a strong case to be made that wealthy buy, not that buying makes you wealthy.

It comes down to this... renters- poor or rich, do not add to their net wealth. Homeowners are adding to their net wealth from the same monthly liability that is going to be paid one way or another. Renting poor will most likely stay poor. Home ownership, opens a pathway to wealth building instead of building landlords wealth.

It is not the same monthly liability that is going to be paid one way or the other.

For example, selling costs are just one (of many) often overlooked expenses of home ownership that renters never pay.

For simplicity, assume a 10-year hold and a $1 million house. Selling costs will be approx 6% (to the RE broker racket) and call it $30K home prep (painting, carpet, repairs, etc). That's $90K.

Amortize $90K over a 10 year hold (120 months) and that's an extra $750 / month right there that's never paid by renters.

Out of how much equity gained over the 10 years. How much does the homeowner have after?

Now do the math on paying rent for 10 years. How much money does the renter have after?

And you are right. It isn't the same liability because renters typically pay more.

Someone starting young and fresh basically has two choices. Buy and be house poor, or rent.

I can't believe how different it is right now than 3-4 years ago. Mind bottling. I think it's literally twice the monthly payment for the exact same house.

 

[-OZ-]

I can't believe how different it is right now than 3-4 years ago. Mind bottling. I think it's literally twice the monthly payment for the exact same house

If you’re lucky. Most of the increase in property value here has been since 2020, it would cost us 3.3x in PI to buy this house today.

 

[ghostguy123]

I can't believe how different it is right now than 3-4 years ago. Mind bottling. I think it's literally twice the monthly payment for the exact same house

If you’re lucky. Most of the increase in property value here has been since 2020, it would cost us 3.3x in PI to buy this house today.

Needless to say, that is jacked up.
I'm so glad I bought my primary residence in 2015 along with a couple rentals around that time as well.

If I tried to start that journey right now, wow, it's a night and day difference as to how that would look.

 

[The Z Machine]

Come to Baltimore where prices have exploded by 15% appreciation in 10 years!

 

[Chadstroma]

Rates suck.

That is it. Thank you for coming to my Ted talk.

 

[madshot31]

I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

I do too. But the number of 18-24 year olds that can afford to buy a house must be really small. I am much more concerned with the 30 year old with a kid on the way that cannot afford a starter home despite "playing the game right" his or her whole life.

this is harsh, but they should have bought when they were giving money away. i refi'd twice in that period. 2.75 is crazy. thanks chad!

there are many reasons the 30yo might not have purchased a home a couple years ago. Often people change jobs or get transferred within their company. Or they’ve been in graduate school, just got married, etc. We bought this house when I was 39 after renting for over a decade and moving every few years. Got really lucky with our timing.

I am 37 and basically all my friends and wife are in that 32-35 YO demographic. Literally, every person I know didn't make "good" money until the past 1-3 years. Be it going through university and grad school, working up to journeyman in the trades (both for yours truly), or being an entrepreneur, these people have been racing their gross income and down payment against the market for a decade and getting smoked. Hell, my family just turned the corner on gross income but were able to purchase previously due to an inheritance lump sum that removed 3-4 years off our timeline and pushed us ahead. Unfortunately for the market, these people don't want to drop crazy money on non-maintained starter homes in rough areas and would rather wait and build a bigger snowball for the mid game. This is from a Northern California perspective in the foothills and suburbs. There is 100% bubble approaching these parts for McMansions over the next decade where there are not nearly enough new starter homes or just homes that haven't been ignored for 25-40 years. SOOOO many homes just falling apart that are massive sqft here, and ask for a ransom to buy.

 

[belljr]

I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

I do too. But the number of 18-24 year olds that can afford to buy a house must be really small. I am much more concerned with the 30 year old with a kid on the way that cannot afford a starter home despite "playing the game right" his or her whole life.

this is harsh, but they should have bought when they were giving money away. i refi'd twice in that period. 2.75 is crazy. thanks chad!

there are many reasons the 30yo might not have purchased a home a couple years ago. Often people change jobs or get transferred within their company. Or they’ve been in graduate school, just got married, etc. We bought this house when I was 39 after renting for over a decade and moving every few years. Got really lucky with our timing.

I am 37 and basically all my friends and wife are in that 32-35 YO demographic. Literally, every person I know didn't make "good" money until the past 1-3 years. Be it going through university and grad school, working up to journeyman in the trades (both for yours truly), or being an entrepreneur, these people have been racing their gross income and down payment against the market for a decade and getting smoked. Hell, my family just turned the corner on gross income but were able to purchase previously due to an inheritance lump sum that removed 3-4 years off our timeline and pushed us ahead. Unfortunately for the market, these people don't want to drop crazy money on non-maintained starter homes in rough areas and would rather wait and build a bigger snowball for the mid game. This is from a Northern California perspective in the foothills and suburbs. There is 100% bubble approaching these parts for McMansions over the next decade where there are not nearly enough new starter homes or just homes that haven't been ignored for 25-40 years. SOOOO many homes just falling apart that are massive sqft here, and ask for a ransom to buy.

Wait so you were 21ish when playing GOW ......that explains so much

 

[madshot31]

I feel bad for the 18-early 20 something's who are hard working, responsible, and looking to start off the right way. The housing market for them is not feasible, and even renting eats up a higher percentage of their income than ever.

I do too. But the number of 18-24 year olds that can afford to buy a house must be really small. I am much more concerned with the 30 year old with a kid on the way that cannot afford a starter home despite "playing the game right" his or her whole life.

this is harsh, but they should have bought when they were giving money away. i refi'd twice in that period. 2.75 is crazy. thanks chad!

there are many reasons the 30yo might not have purchased a home a couple years ago. Often people change jobs or get transferred within their company. Or they’ve been in graduate school, just got married, etc. We bought this house when I was 39 after renting for over a decade and moving every few years. Got really lucky with our timing.

I am 37 and basically all my friends and wife are in that 32-35 YO demographic. Literally, every person I know didn't make "good" money until the past 1-3 years. Be it going through university and grad school, working up to journeyman in the trades (both for yours truly), or being an entrepreneur, these people have been racing their gross income and down payment against the market for a decade and getting smoked. Hell, my family just turned the corner on gross income but were able to purchase previously due to an inheritance lump sum that removed 3-4 years off our timeline and pushed us ahead. Unfortunately for the market, these people don't want to drop crazy money on non-maintained starter homes in rough areas and would rather wait and build a bigger snowball for the mid game. This is from a Northern California perspective in the foothills and suburbs. There is 100% bubble approaching these parts for McMansions over the next decade where there are not nearly enough new starter homes or just homes that haven't been ignored for 25-40 years. SOOOO many homes just falling apart that are massive sqft here, and ask for a ransom to buy.

Wait so you were 21ish when playing GOW ......that explains so much

Yep, doing drywall during the day and gears at night from 19-23 while saving up for college. Met the wifey the first week of transferring to a four-year school, three days before GOW3 came out. Disappeared from the face of the Earth for a month and she basically moved into my place, then told her about gaming and Gears, found out she gamed as well, played co-op for an hour, went to Target to get a second tv/xbox/GOW3, and the Gears love story was made. It still to this day is the multiplayer experience she compared all competitive games to. I still remember her meeting a lot of the crew and warning her about @UniAlias (who since went to our wedding and we saw in Europe). The best of times

 

[belljr]

It just explained why my 37-year-old *** was getting handed all the time lol

3 was near when I stopped a lot I think. That had the avalanche?

 

[madshot31]

It just explained why my 37-year-old *** was getting handed all the time lol

3 was near when I stopped a lot I think. That had the avalanche?

Yes sir!

 

[WaltonGoggins]

Agreed. It is not a universal rule that buying is better financially than renting. There's a whole bunch of financial factors at work that usually only a spreadsheet can quantify accurately

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up
- Points upfront for mortgage origination and other transaction fees
- Property taxes
- Homeowners insurance costs
- HOA fees (huge for condos, townhomes and certain neighborhoods)
- Utility costs (water and heat included in most rentals)
- Home repair and maintenance costs
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade)

If you're going to live in a solid structure in one place for a long time (i.e. 6-7 years), then the numbers generally will work in favor of buying is what I've found

But you have to run the numbers, and generally speaking the shorter the hold, the more in favor of renting.

Again, I did not say "universal rule" but the overwhelming majority of people in stable living situations are better off buying.

I have a friend that loves to live in different places. I don't think that they have ever resigned a lease. When the lease is up they move somewhere else. Sometimes different cities or even states. For them, buying would be moronic. Renting makes sense because of what they want to do. However, that doesn't mean that they are financially better off because they are renting, it just means the extra cost of renting makes sense for them because of what they choose to do.

- Amortization schedules are heavily front-loaded with interest (effectively rent), therefore it's several years before home equity of any significance actually builds up Yes, this is true. Now compare that to the amortization schedule of renting.
- Points upfront for mortgage origination and other transaction fees Yes, there are costs to buying.
- Property taxes Paid for in rent and actually a higher tax rate as there is no homeowners exemption.
- Homeowners insurance costs Paid for in rent.
- HOA fees (huge for condos, townhomes and certain neighborhoods) Paid for in rent.
- Utility costs (water and heat included in most rentals) Not sure about the most statement but paid for in rent.
- Home repair and maintenance costs Paid for in rent.
- Opportunity costs of financial capital put to work in elsewhere in lieu of invested in the home (especially now, with interest rates so high and bull market for more than a decade) You mean like the financial capital? Rental comps are typically much higher than the cost of OO ownership let alone NOO. In fact, do this.... for those who own.... go to Zillow (prob the only time I will tell people to go to that crap site) and type in your home. Look at the rental comp. Then compare to your PITI and report back the +/- of cash flow from what you pay and what you could rent for. In fact, I will start a new thread asking people to do that.

Your friends still should have bought a home years ago with basically free money absurd low rates in a city where many want to live, if they had, they probably would be living rent free in a cheaper city/area right now or close to it from the difference in their mortgage (at rock bottom low rate) to current rental market and they'd always have a home base or be able to borrow money from it from the equity. People forget rent vs home ownership borrowing off your home is always available, renting is not.