I got an email yesterday telling me times have never been better to refinance my home. They swore that they could get me a number that was more than double my current rate.
this post was submitted on 02 Nov 2023
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I chuckle evily whenever I get a call from my mortgage company asking me if I'm happy with my mortgage. At 2.25% darn right I'm happy being below the current risk free rate of return.
Never been better for banks maybe. I refinanced during the pandemic and went from a 30 year to a 15 and barely changed my monthly payment.
That's normal. You either cut years or cut monthly payment. Very rarely both unless rates are actively dropping.
A 15 yr saves you six figures over a 30 yr iirc so congrats!
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(11 replies)
break even?
makes it sound like like they're talking to investors not residents.
i dread to think how their "anslysis" works.
cant bear to do any more than skim this article though.
I'm not sure I quite understand what that means how would they even know if I've broken even or not?
I own my house but the only way I would know if I'd "broken even" was to constantly get it evaluated. Also is their analysis assuming that I'm going to do improvements or not?
Because you can buy a house, own it for 6 months and sell it again for a profit, and you can do that if you do renovations. Equally you can buy a house own it for 5 years and sell it and make a loss because you've not done any maintenance or renovations in that time.
I know for a fact the person I bought the house of hardly made any money on the sale because the roof has a giant hole in it. Obviously that brings the price down.
assumptions for closing costs, agent fees at the time of sale, home maintenance costs and interest payments
Break even being your house has increased in value by the amount you've spent on those expenses.
So it takes 13 years to get out from being upside down on the loan? Yikes
Not if I understand the phrase correctly. The house may be valued more than what is remaining on your loan, but you've spent a lot of money closing the house. So if you sold before the 13 years you would be able to pay off your loan but you would have lost money.
Gotchya, so if they had 0% or low down payment they would be upside down for 10+ years.
Based on the actual Zillow report, it's just based on home values across the board in different regions. So, these are averages. Of course, if you make more improvements and stuff, your result would vary.
Back in the 50s to 70 we teeated hoises more like food. No one bought up all tge bread at a grocery store in hopes of selling letter at a high profit. During this time houses inflated mostly along side wages.
The the dark times came. The risr of the secondary real estate market ment people couldcquickly trade mortgages* like stock. This decoupled house prices from wages and turn te whole 2nd market into a new stock market
*technically they are not mortgages but mortgage back securities
My house is an investment in the sense that I'm putting money into a giant hole as opposed to an infinite hole like renting. But no, I don't view it like I would a stock.
You can just click through to the actual Zillow report instead of Yahoo's article about it: https://www.zillow.com/research/years-to-profit-33215/
They discuss the analysis right there.
Just 13 years?
Was about to say. Why kind of not 30 year fixed loans are they offering now?
Even paying an extra 1/4 of my mortgage monthly only reduces it to like 22 years vs 30 lol.
It isn’t the amount of time it takes to pay off the house. It is the time it takes not to loose money on selling a house. The number was about 5 years when I purchased my home. You take the selling price of your home subtract the mortgage, taxes, and realtor fees. It now takes 13 years before you can sell your house and break even. This just makes investing in homes worse. It also makes buying a home more risky and inflexible.
Ahhhh now I get what you mean. Thanks for the clarification.
Why does it not crash?
Too many companies with deep pockets buying everything up to rent and then never selling. Once a company buys it, it's pretty much off the market forever unless that company goes bankrupt but then they either get a bailout or another company buys that one for cheap.
It never will. If it so much as dips, the ultra wealthy will buy up everything they can find, inflating it once again.
Regulations could stop it easily, but profits are apparently more important.
Along with what the other comment said, all the people that are buying that aren't corporations can actually afford the house they're buying largely due to the WFH change so they all moved out of cities with their large salaries and moved to low cost of living places, took all the affordable housing and since there's no economic collapse they will continue to be ok (thankfully I guess?) so there won't be a housing crisis other than the unaffordability crisis which isn't a crisis to capitalists it's just a feature of their market based system.
The solution "the market" chose was neofeudalism... Can't buy, only rent. "I take your income forever and continuously raise the rent until you can't afford it and then the next schmuck moves in. Where you go, who cares? Not my problem." Lovely society we have...
Why would it crash?
There's near limitless demand and deliberately limited supply. Any dips will come from lack of affordability on lending as interest rates rise, but you're talking hyperinflation for an actual crash.
So the house prices might drop by 20%, but you'll be able to borrow 20% less. So if you're fucked before any price drops, you're still fucked afterwards.
When will the bubble burst?
I don't think it will burst. It'll just slowly deflate as new houses come onto the market and demand eases. The main problem (at least where I live) is that there just aren't enough houses being built. I don't think we'll see a sharp price drop anytime soon because there are so many people waiting to buy.
The problem tends to be that houses are being built but they're not the right houses. They're all really expensive houses, there's nothing for first time buyers.
So true. Where I am, a podunk town in the deep south, most of the homes being built are 4 bed, 1800sf+. The 'starter' homes with 3 beds, 1200sf are still like $185k which is ridiculous compared to what people make around here.
Even building condominiums would be an improvement. Personally, I hate condos (because I own one) but at least it gives people the chance to own something.
I know you said compared to what people make, but I would kill to see a starter house for under 200k... Where I am (not NYC not Cali) the cheapest is 300k for a twice burned down glorified shed in a flood zone and in the worst parts of town. It's absofuckinglutley insane...
You may be right. I saw an article about a year ago that said the only way they saw out of the housing crisis was to build like crazy. And that makes sense but if the economy takes a nosedive then the buying may stop which could cause a crash. No one can predict the future, but markets do fall apart sometimes.
I think it's happening, at least in pockets. Housing developments that were abandoned after the 2008 crash are starting to spring to life again around here. Some of them have already doubled in size and one is getting ready to get about 10x as big.
I wonder this too, but I'm coming to believe that as long as investors are throwing money at housing and people need it, it might not burst. With enough wealth concentration, maybe it just all gets progressively bought up and rented out at insane prices, with growth coming from speculation among massive institutional investors.
But I haven't really thought of this deeply or looked into whether it's sound.
This is what you're seeing now where mega corps are buying up trailer parks and all the low end housing. Theyre cranking up the prices on these to justify cranking the prices on the mid range stuff and so on up the $ ladder.
There are no more low end housing being built anywhere. It's all 350k and up being built.
Thats the main problem really. The shitty stuff got priced where mid stuff used to be and there's no supply for first time buyers to use to build equity.