Are housing prices going up in your area? [Archive]

SteveinMN

12-7-13, 4:31pm

They're on their way back up here. In our mostly-blue-collar neighborhood, it took probably more than two three years to work through the glut of foreclosed properties; not that there were so many, but the lenders handled them poorly and caused their own delays. City code also made it difficult to sell properties as-is, and so some older neglected properties which were not economically salvageable ended up vacant until the City tore them down. Average sale prices dipped quite a lot as most sales were shorts and foreclosures and expensive houses just sat on the market, sometimes for years. Median prices dipped less and median in most neighborhoods near here is now back to where it was in 2003 or 2004.

I'd say most of the price recovery so far has been catch-up. I'd be surprised (and a little worried) to see prices continue to climb at the current rates. Despite what the government says, the economy still is quite slow. Job mobility is quite low and raises at work are still hard to come by. It's also still hard to qualify for good credit; I don't think the heyday of "liar's loans" is coming back any time soon.

But different areas have different prospects. Detroit, for example, probably will not see a housing bubble because there won't be that much demand for quite a while. Some of the housing markets hit hardest by The Great Recession saw big percentage moves up because prices fell so fast and so deep. They could see a little bubble. Kind of depends on the property. Around here, a clean three-bedroom single-family home with a yard in a decent location, no major issues, and a price under $200,000 will sell pretty quick regardless of the market. Any deviation from that norm will either cost in time or sale price. If you have a well-priced property with the features buyers want, you won't hurt as badly even if there is a bubble.

Rogar

12-7-13, 9:05pm

I've not seen official reports lately, but my impression for around here is that we had steadily rising prices earlier in the year, but things have leveled out the last few months. I expect the creep upwards in lending rates is going to turn into a slow walk soon and I am just guessing any more price increases are going to be slow, if at all.

jp1

12-7-13, 10:17pm

25% in a year sounds like bubble territory. Housing is the single biggest expense for the average American. Because of that the bottom line is that over the long run housing prices can't go up faster than incomes and in most parts of the US incomes are not only not rising, they're falling. Unless, of course, there's a high demand for a limited amount such as in ND due to the energy boom there. In most places though if prices fell way below their longterm average and are now getting back to that then maybe they'll just level off.

I worry though that the Fed's super aggressive policies of zero interest rates and massive money printing will just result in new bubbles, which is what the stock market currently looks like. Too much money being created that has to chase speculative returns since the low interest rates make safe investments almost non-existent. Some of the comments I've read about people's reasons for buying Twitter (one article I read quoted a guy who bought Twitter because he'd missed out on facebook and didn't want to miss this one. No thought to the fact that Twitter isn't, and doesn't have any plan on how to become, profitable) and such make me worried that we're already bubbling pretty bad in some areas.

bae

12-7-13, 11:59pm

It is odd. I just got the county assessor's statement for all of my properties here, and it says they all declined in assessed value since last year, where they had declined sharply from the 4-year-old assessment.

However, his press release also state the properties here had on average *risen* in value. Maybe he had overvalued me before, certainly each time I had appealed his valuations and won.

Local Realtors(tm)(R)(Pat.Pend.) seem to think our prices are slowly rising.

Our local real estate market is odd though, as about 1/2 the homes are vacation homes, the other are year-round homes, and they respond to very different pressures.

I'm just glad my house is paid for, and the roof stayed on in the storm last night.

Spartana

12-10-13, 1:31am

Thanks for the replies. Not sure if I should be more concerned or less to see that prices are going up everywhere :-)!

One common thing I'm seeing is that most of the houses being bought in my 'hood (and there have been many lately) are being bought by investors who do a bit of fixing and then rent them out - often to large family groups. There has been a real shift lately from home owners to renters, and the renters aren't keeping the houses up as well. Not sure how that will effect everything but it's certainly a big trend here - and not a plesant one just because of the large number of people (and their vehicles) that seem to be getting squeezed into the house - many which have been expanded to allow several apts behind the main house.

Gregg

12-10-13, 9:46am

We're actually in one of the sharper rising price periods that anyone here has seen. Bubbles aren't usually very dramatic here on the prairie because things usually just clip along slow and steady. We're running right around 10% appreciation where the norm is closer to 3% in average years.

A 25% rise in a year could be a bubble, but it is probably more of a short term correction from the crazy fall that hit prices in SoCal. If it goes like that for 3 or 4 years its likely time to take the money and run, but for a single year its probably more that pricing is trying to find equilibrium in a volatile market. Aka, there are still a whole lot of people that want to live in SoCal and still a limited supply so the market is trying to find a balance.

SteveinMN

12-10-13, 10:16am

There has been a real shift lately from home owners to renters, and the renters aren't keeping the houses up as well.
Yup. Renters typically don't have the same incentive to maintain a property. Unfortunately, lots of investor landlords don't really care, either, with "good enough" and some non-benign neglect carrying the day.

Not sure how that will effect everything but it's certainly a big trend here - and not a plesant one just because of the large number of people (and their vehicles) that seem to be getting squeezed into the house - many which have been expanded to allow several apts behind the main house.
Don't know how it is in California, but around here, the &$^@# government has put restrictions on how many people can live in a house (especially unrelated persons) and the use of outbuildings for habitation. But maybe that's just one of those inconvenient gooberment violations of privacy... ;)

Gardenarian

12-10-13, 2:25pm

Housing prices are increasing quickly in the SF Bay Area. It's always a little crazy here.

I'm also seeing more people buying places and renting them out (I'm renting out my cabin myself.)
Prices are still slightly below their peak, and I think people are buying then renting in the hopes that they will be able to cash out for a lot of money in a couple years. I wouldn't count on that; my feeling is any little fluctuations could make prices nosedive.

I'm not seeing a lot of people crammed into houses - housing is scarce and landlords can be very picky here.

I do see people adding outbuildings (guest houses, carriage houses) and renting those out but that's been going on for some time, though it has increased with the tiny house movement. There are more people interested in living in a small space.

Spartana

12-10-13, 10:59pm

Don't know how it is in California, but around here, the &$^@# government has put restrictions on how many people can live in a house (especially unrelated persons) and the use of outbuildings for habitation. But maybe that's just one of those inconvenient gooberment violations of privacy... ;) Yep the gosh dern goobermint :-) has put restrictions here also - of which I am very happy as the town next door is unincorporated and is getting multiple housing units on single home property galore. At least in my city it's no longer OK to build multiple housing unit on single house lots. So that has helped. However the owners get around the building codes by just adding onto the houses and then housing more people in what appear to be single family houses. Even the guy next door to me made his garage a rental unit - illegally of course. So if a place gets expanded to 6 bedrooms then they can legally have 2 - 3 people per bedroom - or 12 - 18 people living in one house. It can get crazy! I live in the largest Vietnamese community in the world outside of Vietnam so many people are immigrants who have lived in tighter quarters before so it's no biggie to them.

Spartana

12-10-13, 11:09pm

I do see people adding outbuildings (guest houses, carriage houses) and renting those out but that's been going on for some time, though it has increased with the tiny house movement. There are more people interested in living in a small space. I wish they were adding on small homes but they tear down a small (1,000sf) older home on a large single family lot and put up 2 - sometimes 3 - mcmansions and then house a huge amount of people. This photo shows what's happening in the next town over (about 2 blocks from my house). 2 mcmansions built on one large lot after tearing down what was once a tiny 1930's bungalow:

http://www.simplelivingforum.net/attachment.php?attachmentid=1339&d=1386731141

This house (and the almost exact one next they built next to it on the same lot) is one city block over from my house. Nice houses but they stretch all the way back into the full lot. Tiny older homes on either side dwarfed. Well at least the houses are nice looking:

http://www.simplelivingforum.net/attachment.php?attachmentid=1341&d=1386732269http://www.simplelivingforum.net/attachment.php?attachmentid=1340&d=1386732248

creaker

12-11-13, 9:29am

In my immediate area, we're pretty much back where we were in 2005 when prices last peaked (at least according to Zillow), although Boston as a whole has already surpassed that.

Tussiemussies

12-11-13, 3:30pm

Hi Spartana, we just checked the value of our home recently and it had gone up since we bought the house last year, approximately twenty thousand. Not a huge jump....

iris lilies

12-11-13, 9:49pm

I wish they were adding on small homes but they tear down a small (1,000sf) older home on a large single family lot and put up 2 - sometimes 3 - mcmansions and then house a huge amount of people. This photo shows what's happening in the next town over (about 2 blocks from my house). 2 mcmansions built on one large lot after tearing down what was once a tiny 1930's bungalow:

http://www.simplelivingforum.net/attachment.php?attachmentid=1339&d=1386731141

wtf is happening with the Victorian looking building with the roundish bay 2nd in from the right? Did you show this to torment me? Please dear god tell me this is NOT a Victorian being demolished, that breaks my heart.

The one on the right side of the photo has a style that is completely foreign to me I can't tell if is it old or new. But it kinda looks old. Certainly the brickwork is complex.

But in the end I suspect that these are newish things made to look old. Spartana, I would think think this is a good ting for your 'nabe if this stuff is happeneing a few blocks away. The replacement house is hideous. Notice how flat the windows are, they are just--ugh. double ugh.

Spartana

12-11-13, 10:28pm

wtf is happening with the Victorian looking building with the roundish bay 2nd in from the right? Did you show this to torment me? Please dear god tell me this is NOT a Victorian being demolished, that breaks my heart.

The one on the right side of the photo has a style that is completely foreign to me I can't tell if is it old or new. But it kinda looks old. Certainly the brickwork is complex.

But in the end I suspect that these are newish things made to look old. Spartana, I would think think this is a good ting for your 'nabe if this stuff is happeneing a few blocks away. The replacement house is hideous. Notice how flat the windows are, they are just--ugh. double ugh.DISCLAIMER: No Victorians were harmed in the making of these McMansion! Just a few quaint old bungalows and Craftman style homes.

Those are 2 new homes that are being built on one large lot. The house that was torn down (like the one in the other 2 photos) was an older 1930's bungalow. The lots on these older homes (and even in my 1950's 'hood) are between 1/2 acre to one acre. Once these places had front yards and huge backyards but as you can see, the new mcmansions being built encompass the entire lot front to rear and are often 2 stories.

The problem in my 'hood with these houses is that they aren't being lived in by single families - rather huge numbers of people (and all their cars in the street). They also dwarf the older tiny homes like mine and are so huge they literally block out the sun! Fortunately for me, my house is the last house at the end of a 4 house culdesac so even if my next door neighbors decide to build a behemoth or 2 that encompasses the whole lot, I'll still have some space on the other side instead of starting up at a huge wall that is the side of a house.

ETA: this is the type of home that these mcmansions are replacing. This one was "saved" by the city because it has some historical value. It, along with some other "period historic homes" have been put in a small park for people to see. However, there are still tons of similar places being razed to build mcmansions that are the size of the entire lot.

http://www.simplelivingforum.net/attachment.php?attachmentid=1342&d=1386816483

iris lilies

12-12-13, 12:43am

DISCLAIMER: No Victorians were harmed in the making of these McMansion! Just a few quaint old bungalows and Craftman style homes.

...

awwwww, good, but I like craftman bungalows a lot, too. And the tiny one in your last photos is adorable.

That house 2nd in from the right then is a weird California style of new house, I can't grok it. You people are crazy.

Float On

12-12-13, 10:16am

Spartana

12-12-13, 5:02pm

New construction is up again in our area but I've also noticed a ton of houses that have gone on the market in just the last 2 weeks. I'm not sure what's up with that. At first I thought a majority were 2nd homes (we're a lakes tourism area) but they aren't they are for the most part young families....maybe they are moving up out of "starter homes" or maybe they are just leaving the area for a town with an economy not based on tourism. I've seen a lot of sales going on right now as well. I'm wondering if it has to do with the end of the tax year - maybe getting tax breaks or something. Or maybe it's due to the belief that if the Government shuts down again in Jan, that the housing market will fall. Or maybe that the government will raise interest rates (prime lending rate) soon and mortgage rates will rise. Probably a bit of all that plus a more stable economy.

Spartana

12-12-13, 5:10pm

awwwww, good, but I like craftman bungalows a lot, too. And the tiny one in your last photos is adorable.

That house 2nd in from the right then is a weird California style of new house, I can't grok it. You people are crazy.

Yes we have some very fancy "facades" on the new McMansions going up around here. However the back of the houses are just one giant square to accommodate as much square footage as possible. And when they put 2-houses-on-one-lot they are often mirror images of each other as in that other photo. Until recently, most mcmansions being built around here have just been in new tracts. And building codes require that they have grassy lawns in both front and back yards and some space (minimal) between adjacent homes. But that's not the case when they expand an already existing home or raze it and build a new one...or 2. They can build a house that only has to have a few feet (maybe 4) from all it's lots property line. And now that they are expanding into old tract 'hoods like mine, it looks very crazy and mish-mashy. Dinky little houses sandwiched between giant behemoths. I don't know if that will increase housing prices or decrease them if you have one of those dinky old 1000 sf houses squeezed in between a couple of 5000 sf mcmansions.

Teacher Terry

12-13-13, 12:05am

That is really sad that they are tearing down the houses for huge new ones:( You rarely see that around here. Older homes have a lot of character. I would think it would increase the value of the smaller homes. I can see where it would block people's views/sun, etc. Some new homes are pretty ugly too!

RosieTR

12-13-13, 12:14am

Housing here is pretty tight, both renting and purchasing so I'd imagine it's going up. I have been seeing more hiring signs around so not sure if that's seasonal or the economy getting better or what, but that also usually portends higher real estate prices. This won't help us since it would just mean higher property taxes, but whatever. I hope to god that the prices are going up in Phoenix though, since we're trying to sell there. They have been going up fast but I think the area over-corrected during the bust and is now trying to get back to normal. One can only hope.

redfox

12-13-13, 1:51am

pinkytoe

12-13-13, 10:20am

Up, up and up. Here, they refer to the giant new houses as stealth dorms as they are basically outlawed except in one or two areas near campus. We have pretty strict laws about how many non-related people can live in one structure. Also incentives for getting rid of lawns which I think is a good thing. In my hood, it is common knowledge that if one of the older homes goes on the market, it will either get completely renovated (double in size) or get replaced. It appears that the new paradigm for size is no less than 2800sf. Although I never intended to grow old in this house, it might be our best strategy to stay put. It would not be easy to find another neighborhood that is so close to everything we need/like at a price we could afford. And that in itself, adds greatly to its value. Prices have gone up so much here that we would have to move to the far-off suburbs or another less economically vital place to be able to buy another house.

SteveinMN

12-13-13, 10:33am

perhaps renting is a better option. What's the wisdom out there?
I think it depends mostly on what you want out of a home. If home for you does not need to be more than a safe comfortable shelter, or if you think you'll need to move often for work opportunities or lifestyle changes, renting makes a great deal of sense. However, it does mean relying on someone else (the landlord/management company) to respond to problems and maintain enough solvency to not lose the property, you are paying with your rent a premium that covers the expenses of empty properties, and you do give up possible capital appreciation of the property.

It's hard to say if what we're seeing in the housing market now is true improvement or just another swing of the pendulum. Despite the fact that the perpetrators of the mortgage crisis were never prosecuted, I think lenders will display a little more prudence in making loans, so it's unlikely we'll see the "you'd-be-an-idiot-to-not-buy-a-house" rush we saw in the mid-'00s. OTOH, without that financial appreciation, there may be other places in which to put money which will yield more than paying a mortgage and its interest and maintaining and improving a property.

Clear as mud, eh? :)

Gregg

12-13-13, 1:06pm

For our last purchase we tried to simply take appreciation out of the mix. Its not essential to our retirement so we just assumed there would be no appreciation on any house we picked other than equity gains for improvements made. Since, in the longer term, depreciation is unlikely we planned using a home value that remained steady for our entire life. In the end we decided to buy because we both love to tinker, renovate, buy paint in any color but beige, garden, etc. That said, we could have rented a house like the one we bought for a couple hundred bucks less per month than owning it costs. Most friends we know are in roughly the same situation. If money is the first consideration its not uncommon that renting ends up being a bargain.

Teacher Terry

12-13-13, 4:21pm

I really think that you need to see what it would cost to rent a comparable house for what you are paying now. Also I agree with Greg that you need to think about is it important to be able to paint, etc. For me that is very important. Also just because you would not qualify to buy does not mean that your spouse would not so maybe you could still own. Or could you sell & buy something smaller? It is a really big decision.

Spartana

12-13-13, 7:26pm

Prices in Seattle are going up. We're assessing what selling would mean. I'll never qualify for another mortgage with my student loan debt, so if we sell, I at least will be renting for the rest of my life. Being 58 & struggling for both income & to save for retirement, perhaps renting is a better option. What's the wisdom out there?I'm a big fan of renting just for the flexibility alone - as well as having a landlord to fix everything and pay for it! I have spent a lot of time going over the buy vs. rent thing for myself and I think it is kind of a toss-up.

I think it mostly depends on HOW you want to live and what your needs and wants are as well as your lifestyle. Do you have a big family? Pets? Need space to garden or do projects? Would you need a larger home or condo (maybe the size of the place you currently own) or just a small apt? Want to be able to decorate or improve the property however you want? Want to stay in one place for a long period of time? Do you want to live in an expensive housing area where rentals would be cheaper? All those things need to be taken into consideration as well as finances. Look at what it is you need and want, and then look at all the financial considerations.

Renting a small place or apt is easy to figure out the costs - basicly monthly rent plus a few utilities. Many places actually include some utilities (water, trash, sewer, cable, internet) so you may only have a gas or electric bill and they will most likely be much lower if you live in a small place. You will have to cover all those utility expenses plus property taxes, insurances, and all your maintenance and repairs (and your "life-energy" in time to do all the maintenance and repairs) as well as your mortgage and interest when buying. Add to that the cost to buy a home (all those fees and interest) and sell a home (all those fees and agent commission) and the fact that you'll generally have to tie up a substantial amount of your liquid assets (cash!!) in the form a down payment. That may leave you house rich but cash poor. On the plus side you can then do whatever you want to the place, will possibily (likely) gain some reasonable equity over time to off set those extra expenses you incur with ownership, and once it's paid off you can probably live cheaper than renting (maybe ) and always sell or take out a HELOC to get cash if needed.

As for me, even though I currently own a paid off house, renting a small apt would probably be best. As a single, childless person who is a minimalist, doesn't need much space, doesn't enjoy things like gardening, projects, lawn care or home maintenance, likes to just lock the door and leave for a few months without worrying about the place (and as a worry-wart this is a biggie for me), just has a small dog and has no plans to get more pets, etc... - a small inexpensive rental apt would be perfect. It would probably cost a lot less per year for both the monthly rental and the minimal utilities than what I would pay if I owned a place and had to pay things like property taxes, insurance, maintenance, and utilities. And that would be without including any mortgage payment, interest, down payment and all those closing costs to buy or sell a home. So it might be both financially wise for me to rent as well as much better for me life-style wise. I figure I can live inexpensively and invest the money I save on a mortgage and all the other stuff involved with home ownership in order to off-set the price increases that I will experience in the future. And I won't have that constant worry about something happening to my biggest financial investment and losing everything (Fires and Floods and Earthquakes - OH MY!!). The only drawbacks for me are that rental prices will rise and my income/investments might not keep pace, or that where ever I keep my money (which would be somewhere safe and insured) couyld tank and I'd lose it all.

As a sidebar: On the property tax issue - I know several people here who pay a very large amount in property taxes each year (I believe Catherine said hers was $8K/year - YIKES) and that they are constantly increasing. I'm in Calif and our property tax rate is low (1% of the purchase price with only a 2% max increase per year) so we can project what our base property tax rate will be for the life of ownership. Would seem scary owning in other places where increase happen each year with increases in market value. So how would that effect your buy/rent decisions?

bae

12-13-13, 7:38pm

As a sidebar: On the property tax issue - .... So how would that effect your buy/rent decisions?

I'm not sure it would at all - the landlord is highly likely to simply pass along the increased cost of taxes to his tenants, which is what I do for all my rental properties. Or to walk away and let it rot/burn, if unable to pass along costs (see "rent controlled apartments"...)

Spartana

12-13-13, 7:44pm

I'm not sure it would at all - the landlord is highly likely to simply pass along the increased cost of taxes to his tenants, which is what I do for all my rental properties. Or to walk away and let it rot/burn, if unable to pass along costs (see "rent controlled apartments"...) True but then with a rental, if you are flexible, you can choose to leave and go rent somewhere cheaper. Or if you are renting in a state like Calif, tax increase would be minimal. Or if you are renting an apt, those increases would be distributed across the many tenants rather than just one person bearing the full load. I know around here rents seem to increase at about $50 to $100/month each year. Extrapolate that across many years and it's a huge amount of increase so anyone who rents really does need to make sure their income/investments can keep up.

ApatheticNoMore

12-13-13, 8:46pm

I know around here rents seem to increase at about $50 to $100/month each year. Extrapolate that across many years and it's a huge amount of increase so anyone who rents really does need to make sure their income/investments can keep up.

My rent has increased far far less than that (between $25-$31 a month a year - whether I round up the years I've been renting and so on accounts for the range). Yea, yea, this post contains forward looking statements (well not really) past performance is no guarantee of future results. (any day now I suppose I should expect my rent to double - just to get even with me :~))

SteveinMN

12-13-13, 8:48pm

redfox

12-13-13, 9:44pm

One other factor to consider is the availability of rental properties. In this area, there is a lack of the highest-demand rental properties, so rents are going up -- it's that much less competitive with owning.

Actually, this is quite significant in Seattle, as rents are very high. We could not rent what we're currently paying a mortgage for. Thus, if we sell & then rent, we'd downscale considerably. After talking it over with DH today, we committed to staying in our home for a few more years. Long enough to wrap up the current spate of home improvement projects at least!

redfox

12-13-13, 9:48pm

Lainey

12-14-13, 7:37pm

And this just in from WaPo -- new mortgage rules:
http://www.washingtonpost.com/realestate/the-new-mortgage-rules-that-are-likely-to-affect-your-next-home-purchase/2013/12/12/756fec90-5dba-11e3-be07-006c776266ed_story.html?tid=sm_fb

Good for Richard Cordray, and the new Consumer Bureau. Took a while to overcome the political obstruction, but seems like fed regulators are back on the right track.

In somewhat related news, my home re-fi this year saved me at least $225/month but interestingly my loan was sold before my first mortgage payment was even made. I thought that dumping mortgages on Fannie Mae had slowed down, but apprently not.

SteveinMN

12-14-13, 9:12pm

interestingly my loan was sold before my first mortgage payment was even made. I thought that dumping mortgages on Fannie Mae had slowed down, but apprently not.
The lender for my rental-property re-fi (the same lender used for the original purchase) informed me as part of the voluminous associated paperwork that they were going to ship out my loan as soon as it began. They simply failed to tell me where it would end up...

San Onofre Guy

12-14-13, 10:30pm

Tussiemussies

12-14-13, 10:38pm

In the area we live in rentals per month for a decent size apartment or home that a family can live are very high. Don't know how the younger generation will be able to save up for a mortgage payment, unless they live home with Mom and Dad. That is what my brother had to do, even though he is a policeman and his wife was a school teacher at the time, they had to live with her parents for a few years even though my brother had sold a townhouse he had for a few years and was given the downpayment by my Dad, it still was not enough...

sweetana3

12-15-13, 7:25am

Rant over housing expectations:

I think the younger generation is going to have to make some sacrifices. Used to be (when I was their age :-) ) you saved and saved and bought or rented something small to start. We did not start with 2500 square feet homes or 2 bedroom apartments.

My parents had 900 square feet home with unfinished partial basement for a family of 5 and then when 6 added one more bedroom and enlarged the dining room. I started in a converted double car garage on an unpaved driveway. We did not move into the fancier apartments this landlord owned.

We both had stable jobs. Then we found a good deal on a double wide trailer and then found a deal with a friend on a tiny WWII house. I guess the trappings of a showy life never meant much to us. We needed housing and a good deal.

Even today we have one of the simplest houses on our street. I do drool over the huge new one down the street but it is just too big and would take a chunk of our savings to buy outright and to fill with stuff.

If i was starting out, I would be looking for a studio or tiny one bedroom with a low rent in a safe close to work area. It would reduce rent, utilities, and commuting cost. A young friend even rented a room in an elderly woman's home for awhile to save and have the time to find a better place. There are still options that many turn their noses up at.

Another young friend who is a Phd candidate in Oakland lives with his wife and new baby in a simple walkup apartment without laundry and with no car to save money. They are doing fine. They know that they will be moving when he gets his doctorate and saving money is important. Their goals and priorities are clear.

SteveinMN

12-15-13, 10:51am

Used to be (when I was their age :-) ) you saved and saved and bought or rented something small to start. We did not start with 2500 square feet homes or 2 bedroom apartments.
That's true. But I think the day of the "starter house" is gone. Given the cost of living in choice locations -- typically where there is no more real estate to develop -- and the no-longer-certain increases in house prices, the house you buy probably is going to be the house you'll stay in for a while.

That said, I agree that there are many creative ways to save money on housing early on, as you mentioned, and that it might be a good time to assess critically whether it is necessary to have 2500-3000 square feet in which to live daily life. Then again, this is a generation that has taken it as given that you need to buy an SUV as soon as you start having babies because goodness knows you can't get by with a vehicle that has less interior space. >8)

iris lilies

12-15-13, 11:05am

Rant over housing expectations:

I think the younger generation is going to have to make some sacrifices. Used to be (when I was their age :-) ) you saved and saved and bought or rented something small to start. We did not start with 2500 square feet homes or 2 bedroom apartments.

...

Do you mean they won't be able to get granite countertops and double sinks in the master bathroom? Do you mean that there may not even BE a master bathroom?

hahahaha.

Over Thanksgiving I had my usual HGTV marathon while babysitting my neighbors dogs and house. If I hear "oh double sinks, good!" one more time I'm going to scream. We have double sinks in our bathroom and not once in 25 years have DH and I ever used the bathroom at the same time, we have never needed them.

I was a docent at our neighborhood's house tour and was stationed in a big old house that had some nice historic features. The kitchen had been newly redone and it was--typical. Nothing special, nothing really nice, just new dark cabinets and granite countertops. But every 5th person who came through the doorway commented on how "great" it was. I was unable to see the greatness. The "great" thing about this house was its original walnut staircase that had been rebuilt carefully, and the original paneling in the dining room. Also, the owner had taken down every original window and had it rebuilt, now that is TRULY "great" but no one will ever comment on that even though it's one of the most important things anyone could do for this house.

pinkytoe

12-15-13, 12:08pm

I was subjected to the House Hunter type shows while at in-laws during T'Giving. My in-laws watch this stuff for hours. It amazed me that all these very young couples had budgets of $600K or more to work with. After watching a few, I thought I was going to be ill because of the incessant whining. DD, now 30, bought her first house here two years ago (with boyfriend) for around $200K and that was a real stretch for them at the time. She could sell now for $250K and it will continue to appreciate as they bought location (close in) rather than house. It will make a nice rental when and if they buy something "nicer".

ApatheticNoMore

12-15-13, 3:02pm

The whole starter house idea seems financially completely moronic (UNLESS you are paying all cash). So you do know that you will pay far more than the cost of the house when you are done buying a house due to all the interest (how much depends on the interest rate). And you are going to do this again and again more than one time in your life? Credit cards are required to say if you pay x month you will have paid y by the time it is paid off, what if houses were? :)

I think there's no getting around the fact that housing costs some places have increased more than inflation and more than wages and it's not just about increased expectations (it's just plain old math). I've been renting a 1 bedroom or studio for 15 years. Whether people have had to reduce their exceptions to get housing. Well I've seen that many have, and those that haven't have very good paying jobs. It's pretty much what you'd expect.

sweetana3

12-15-13, 7:04pm

Mortgage financial disclosure forms have always been required to detail the full amount of interest paid if the loan is paid off on schedule.

Properly chosen starter homes (not those in mass produced vinyl villages) remain in demand. Homes in good school districts that have upgrade potential and are adequately maintained will be desireable to future purchasers.

And every decision is based on where you live. I live in a low cost urban area with a huge variety of homes from desireable small single family units to multimillion dollar mansions. You can still custom build on acreage or live on top of the Conrad Hotel in a condominium. Almost too much choice. If I lived in Chicago, NYC or SF and many other places, the whole discussion would change.

SteveinMN

12-15-13, 7:06pm

The whole starter house idea seems financially completely moronic (UNLESS you are paying all cash). So you do know that you will pay far more than the cost of the house when you are done buying a house due to all the interest (how much depends on the interest rate). And you are going to do this again and again more than one time in your life? Credit cards are required to say if you pay x month you will have paid y by the time it is paid off, what if houses were? :)
Almost anything you buy on long-installment credit will cost frightfully more in total than the purchase price. What drove starter houses was the substantial increases in house prices year after year. Buy your starter for $100,000, sell it in 2-3 years for $125,000, have several thousands of dollars to put down on the next ($175,000) house, rinse and repeat. No, you never own a house free and clear. But you were in increasingly nicer houses and had a house payment that was augmented by earlier profits and -- one hoped -- increased income. Now that housing is no longer a guaranteed-payoff slot machine, that model is broken. But it did work for many people for years.

Spartana

12-16-13, 6:14pm

Lindi, buy real estate as a place to live and lock in your coast of housing. My monthly housing costs for my $850,000 valued house in Orange County is about $2,000 per month for mortgage, taxes, insurance and maintenance. That is pretty cheap when rent for a two bedroom apartment is $1,500. But it is more than that, this is the family home. I am not a fan of buying real estate with a non spouse partner.

I agree. A house should be more of a lifestyle purchase than a financial one. However, as you pointed out, you can often come out way ahead (or at least break even) financially when buying rather than renting in the long run - once you sell the place. I think over time, if a person is already a home owner, then you'll see your mortgage become much less then rentals (at least for those with fix rate mortgages and low rates property taxes). But that might not be true for people looking to buy right now. The added expenses over a 30 year mortgage might make renting more financially attractive. For instance, would your house, if you where buying it in this current market, be as affordable when compared to renting? If your house is now worth $850K you'd need both a pretty darn big down payment as well as a large mortgage. Plus your base property taxes alone would be $8,500/year - not counting all those other things like school bonds, etc... that they tack on to your property tax bill. That, coupled with stuff like insurances, utilities, maintenance and repairs that you may not pay when renting, might make renting look really really good :-)! Especially if it left you house rich but cash poor for many years while it increased in value and equity grew. I know if I had kept my first house (also in "The O.C.) that I bought in 1996 it would be much more affordable then a similar rental house (maybe a kin to a one bedroom apartment in the O.C.). But if I were to buy the same place now, it would be much much cheaper for me to just rent.

I actually do currently own another house in "The O.C." with my sister (will sell next year most likely) and as you know prices have been rising pretty dramaticly this last year. Kind of looking like the pre-2007 boom and makes me a bit skittish about waiting to sell. However, if I was to buy this place now, after the approx. $150K plus increase just this last year alone, it would be unaffordable to me. I don't plan to buy another place in OC once we sell this place due to price as well as other reasons. So I will be moving somewhere more affordable and then deciding if I should buy again or ren once I plan to be somewhere permanetly.

jp1

12-17-13, 1:24am

Our rent in san francisco is a lot. Close to $2,900. However, we live in a really nice, new, large 2 bedroom 2 bath place that is pretty much perfect for us in every way except its cost. We've gone to open houses in our neighborhood (the Sunset, not one of the more pricey neighborhoods in the city) and found that the best we could do buying is get an older house that's got less living space than we currently have, and which needs a fair amount of work (ancient furnaces, ancient kitchens, knob and tube wiring, etc) for well over $700k purchase price. The monthly cash flow would be $700-$1000 more than our current rent, not to mention the down payment and the cost of upgrading the house to be safe, let alone as nice as where we live currently. (and a 30 year mortgage...) If we could afford it, and we planned to live here for forever, I'd consider spending the money. But we can't and we don't. As it is we put well over $1,000 per month into savings on top of both of us putting a good chunk of money into 401k and IRAs and at some point in the next several years I expect we'll move out of the city to somewhere quite a bit cheaper. I would leave today since I could, if I wanted, work from home anywhere in the western 1/3 of the US. At his current job SO doesn't have that luxury so at some point we need to figure out what our next step is. For now, though, we enjoy living in the city, and SO makes way more here than he could make in any place with a lower housing cost so our current situation makes sense for us. Our rent is unlikely to go up drastically in the near future so we'll continue to put away money towards a significant down payment on a home somewhere else in the next few years. And we'll avoid the massive transaction costs of buying/selling a house in a high priced real estate market.

gimmethesimplelife

12-17-13, 3:24am

Housing prices in Phoenix are going up, up, up! It's amazing to me how quickly they have risen since about February 2012. This is not one of the better nor one of the worst job markets, and I don't see a lot of good paying middle level jobs being created. What I have seen is a lot of houses being bought up with cash and then rented out.

Something else as an aside - I remember back during the real estate boom in Phoenix in 2005 and 2006 - I was working at an upscale nationwide pizza restaurant based out of California - there's clues there if anyone is interested in the name of the place - and I was making what I consider very good money. Real estate was going crazy here and unemployment was so low that we were able as servers to make our schedules two weeks out of the month - seriously, the power was that much on the servers side as we were then quite hard to replace. I used to take trips down to Tucson and stay at the hostel there and then go on down to Nogales before the cartel gore started there. Anyhow, point of the story - on the way down on the Crucero bus - the bus would pass housing developments in Casa Grande, about an hour away from central Phoenix. It was a drive until you qualify kind of place - and I would actually see people camping out in front of sales offices ready to pounce on whatever property they could. I remember thinking then - what goes up must come crashing back down, which to me has always been one of the ugly truths of capitalism. And sure enough, the market there did quickly collapse. And now it is rising again way too fast and I wonder if we are going to have another collapse.

Personally, I think there are two ways to lower housing bills - one, leave the country for somewhere less expensive, which it seems more people are doing but it's hardly a flood of people yet, or two - move somewhere with less expensive housing. A case in point for those liking urban life might be Pittsburgh, which I have mentioned before. Too far away from Mexico for me but I think it might work for other people. And then I guess there is always downsizing to cut the bill down, too. Rob

SteveinMN

12-17-13, 11:05am

Personally, I think there are two ways to lower housing bills - one, leave the country for somewhere less expensive, which it seems more people are doing but it's hardly a flood of people yet, or two - move somewhere with less expensive housing.
Nothing is free, though. Typically, housing costs are lower in areas with fewer "amenities" -- like the tiny [and dying] rural towns in outstate Minnesota or cities in poorer states like Mississippi and Alabama. A good friend of mine moved to Texas because the cost of living was much lower than it was here in Minnesota. But he constantly bemoaned the level of medical care available to those of limited income (like him) and he was ticked off royally that the cops did not put much of a priority when his house was burglarized (yeah, it's well down the priority list when you've got very few officers and lots of other crimes). So it seems you get to pay somehow. It just becomes a question of what you're willing to pay for.

sweetana3

12-17-13, 12:17pm

I think Indianapolis is a great compromise. Urban area with 1 million population in the whole area, terrific hospitals and other medical facilities, entertainment and a huge library system, variety of colleges and IUPUI right downtown, sport facilities, conservative spenders in the state but not as backward as some of the southern states and not as expensive as IL or OH. Wide variety of housing stocks both rental and purchase. Competition in retail fields helps to hold down costs. Big and new airport to get out of town.

Cons: Weather has the full four seasons with cold icy winter (as in right now) and hot summers. We are not a big hub so you almost always have to stop somewhere and pick up the bigger flight if trying to get out of town. But at least there are choices. I could go thru JFK, Detroit, Atlanta, etc. to get to Europe. Bus system exists and I have used it but not as convenient as in a more dense urban area.

Teacher Terry

12-17-13, 2:17pm

Steve, you are so right! I have lived in the Midwest with a lower cost of living except for property taxes but great services for people that need it. Same thing when I lived in a small town in upstate NY. Now I live in in NV with crazy low property taxes but no services for people in need. You absolutely get what you pay for. There is no free lunch. Also as someone that has moved 30 times mostly for job opportunities for either spouse or myself I can tell you that sometimes just saving $ is not enough. After awhile you get rooted in a place, have good friends, etc and it is not worth it to move somewhere else just to save $. At one point we thought about moving somewhere where houses are cheaper but in the end just decided the right thing for us was to downsize to a much smaller house & have been really happy with that decision.

Spartana

12-18-13, 2:19am

Well I just heard on the news that Calif home prices have dropped 12% since Oct and that the major purchasers this past year, investors, are now sitting on the sidelines and no longer buying. They attributed it to rising house prices and rising mortgage rates and possible winter slow-down. They said sellers would have to reevaluate their asking price and go much lower. So while it's not a bust, it's certainly a bit of a slow down and correction maybe. Not that it matters too me too much as I always planned to sell next year anyways irregardless of the prices. But thought it might be wiser to sell sooner rather than later (and it probably was but I think I might have missed that boat). What I'll do next is rent/travel and just play it by ear. Find the dream hovel in the dream city and then maybe think about settling down permanently someday.

Spartana

12-18-13, 2:27am

Nothing is free, though. Typically, housing costs are lower in areas with fewer "amenities" -- like the tiny [and dying] rural towns in outstate Minnesota or cities in poorer states like Mississippi and Alabama. A good friend of mine moved to Texas because the cost of living was much lower than it was here in Minnesota. But he constantly bemoaned the level of medical care available to those of limited income (like him) and he was ticked off royally that the cops did not put much of a priority when his house was burglarized (yeah, it's well down the priority list when you've got very few officers and lots of other crimes). So it seems you get to pay somehow. It just becomes a question of what you're willing to pay for.

This is something I want to avoid when looking at lower cost housing areas. I'm pretty much a city girl (albeit a smaller city girl - no big metropolises for me) and like all those amenities but the housing prices (even a tiny one bedroom condo) can be pretty prohibitive. Especially since I want to stay on the more northern parts of either coasts. That's one reason renting (a tiny one bedroom) might be more doable for me as I can live much cheaper in a nicer area then I could if I bought.