We Can’t Afford Our Home Anymore!

[Midpack]

Sorta tongue in cheek.

The house we bought Summer 2019 was a little more than we wanted to spend, but we’re happy we bought it.

Current estimates today are 40% higher than we paid, actual home sales in my neighborhood confirm we could definitely get that much if not more based on actual current comps. [Our old house up north has not appreciated nearly as much, good for us - but speaks to actual affordability]

So if we were relocating today, there is NO WAY we’d look at this house or this neighborhood!

I am sure there are others here with even more extreme cases, hence the thread.

We don’t plan to sell so no issue, but it is an odd thought, we really wouldn’t buy this house at this price today.

But if we’re in a housing bubble (probably) it’ll be affordable again one day (soon).

 

[MRG]

We moved 5 years ago and paid $150 a square foot. In 5 years that has changed to $300-350. Nobody in our neighborhood could afford their homes at these prices.

 

[ShokWaveRider]

We could but would not want to. We would love to downsize, but it is not financially viable. If we were new to the market, we would not pay what our home is worth for it. The Tax bill alone would almost triple. Thanks to Tax portability though we would not have to worry about that part. But the areas where we would like to live, have no reasonably sized homes, and all have pools, which we do not want. It is a dilemma that is not purely financial.

 

[wrigley]

My house is valued about 4X more than we paid for it. No way in hell I would buy it for that much and I like it!


Mike

 

[aja8888]

At ages 78 and 76 in a desirable 55+ community of 437 single family homes, we are here for the long run (which is not too long from what I calculate!).

Where else could we find a beautiful single level, 21 year old 2,000 sq. ft. home for what we paid 7 years ago ($212,000). And the roof, A/C, furnace, kitchen appliances, and landscaping is all new within 10 years. These homes in the community is selling for mid $300's - $550 K+, depending on square footage.

In addition, the location has three major hospitals and numerous other medical facilities within 1.5 miles of us. And the kids/grandkids are all in the area.

Any house that comes up for sale in our development is sold within a few days (of course we know this is a hot RE market country wide).

 

[Chris7]

We bought a long time ago. House is now about 2x what we paid. We probably would be able to still afford it assuming we were moving from somewhere where we had similar gains.


Our first house dipped in value about 3-years after we purchased it. It eventually went back up and them some and allowed us to buy what we know have.


We bought this house in the middle of the last run-up and have never had it go below its original value, but those that bought at the end lost value and now would just barely show a profit. That is with about a 7 to 10-year time frame.


That would be my fear for buying now. We seem at a "top" and if housing dips, how long before you recover?


Property taxes are a big issue at the current valuations. Mine would almost triple and I don't want to lock in a fixed cost like that.


cd :O)

 

[freedomatlast]

Same here. Bought a great home in the nicest neighborhood in the area during March 2020 right before prices skyrocketed. Now prices are in the insanity arena but people are still buying the ones that come up for sale relatively quickly.

 

[Aerides]

Ours would sell today for about 3.5x the price DH paid about 22 years ago. Property taxes are protected in my state to a degree, with portability between the sold property and the new one, so that's not a worry.

But the ~20% gap in price between where I am and my desired "next" home is now much bigger in actual dollars, and in some cases in percent, as the bigger nicer homes are commanding an even bigger gap.

IE, say my house used to be $400 - and my ideal next home was $500. Today mine is $700, but those others are $900-$1000, and some are asking $1.3 (and getting it).

 

[steelyman]

I bought last May (8 months ago). If you believe Zillow (questionable at best), the value is up 16%. That does agree with comps. I have no plans to move anytime soon so it’s not really relevant to me in practice.

 

[Tadpole]

I think the local tax man drives prices up but can't figure out how. All I know is that he gets lots more money but the tax increase initiatives never stop even though the property tax collections stay well ahead of inflation.

 

[Ronstar]

I don't know what ours would sell for today (maybe $600k), but my research tells me that I can't find anything similar in many parts of the country for less than $1m. Prices in Illinois are not keeping pace with elsewhere.

 

[mountainsoft]

Current estimates today are 40% higher than we paid... So if we were relocating today, there is NO WAY we’d look at this house or this neighborhood!

We paid $20K for our 1.95 acres in 1991. Back then it was a somewhat undesirable area, very rural, hundreds of acres of dense forest. Beautiful.

We built our garage for $13K in 2000, and $60K to build our house in 2004.

Today our home is estimated over $500K and is surrounded by $1.5 Million estate homes. We could never afford to buy here now.

Sadly, there is no where in our county anymore that we could afford. If we wanted to move we would have to move far away from here, probably to another state.

Thankfully, barring a major disaster (wildfires or serious health problems) we plan to live out the rest of our lives here. Our little oasis in the land of McMansions.

 

[statsman]

I think the local tax man drives prices up but can't figure out how. All I know is that he gets lots more money but the tax increase initiatives never stop even though the property tax collections stay well ahead of inflation.

That is one thing I am grateful for having moved from California to Texas. What you described is California, particularly where we lived in Silicon Valley. Here in our area of Central Texas, house values have spiked the past couple of years, but the property tax rate has gone down. They take in money required for the voter-approved projects, and that's mostly it. Was surprised to see our total property tax rate drop the past couple of years by 11%. Our tax bill for 2021 was actually less than it was for 2020. *Never* saw that in the 32 years of owning a house in California.

 

[statsman]

The house we bought Summer 2019 was a little more than we wanted to spend, but we’re happy we bought it.

Current estimates today are 40% higher than we paid, actual home sales in my neighborhood confirm we could definitely get that much if not more based on actual current comps.

The house build we purchased in late 2018 (moved in June 2019) pretty much sounds like this. Zillow (FWIW) has us a bit over 50% higher than what we paid, and this is easily in line with the recent house sales in our area.

I feel bad for our kid, who purchased a house in the same city right after Thanksgiving last year. For a house worth about 25% less than ours, they paid almost 10% more than we did. But they are very happy homeowners after having rented for the past 5+ years.

 

[38Chevy454]

Our little oasis in the land of McMansions.

I like that quoted above. Seems so true where an area the in the past was more rural with some smaller places. Then it is developed with big houses on small lots. It seems nobody wants a larger yard. All the new housing subdivisions around my house is on very small 0.1 acre or so lots. I'm on 2.5 acres and very happy.


On the original question, it would be a stretch to buy our current house. We built new construction 2300 sq ft ranch with a big detached garage and an inground pool back in 2017. Duplicating what we have today would be probably $200-300K more cost than what we paid. Materials, labor and land costs have all risen a lot on the almost 5 years since we began our build.

 

[Another Reader]

Gotta love Silly Valley... House is worth 6.3 times what I paid 33 years ago... Most of the original owners or early second owners could not afford to buy here or anywhere else in the area at this point.

 

[kgtest]

I bought our home at $120/sq ft back end of 2014,
just over 7 yrs later its up $50/sq ft per zillow and would likely be in a multiple offer situation above list if we sold due to lowest inventory since 1980 in our state/city. In fact I hardly see any for sale signs out right now which take that FWIW, but likely because nobody even needs to bother putting one out before the contract is signed and delivered. (You ever see a for sale sign in the yard of those homes on Million Dollar Listing...no they contract before that ever happens).

The kicker, the PO of our home, paid $136/sq foot and took a $16/sq ft loss to move onto the lake across town when they sold to us. And also added $15k/yr to their property tax bill...ahh the Good Life's HCOL.

We have no intentions of selling, but if we did it sure would be a good time in terms of appreciation with a +5% annual gain since we purchased. Our roots are too deep. We would also have to consider the costs we incurred 'managing' the asset, the 40k deck and patio rebuild, irrigation system, landscape and hardscape work, and all the annual maintenance that goes into it. We have the Water Heater, washer, dryer, refrigerator and furnace all break on us and so far fixed everything ourselves but washer, dryer and fridge. Added a garbage disposal, repainted the whole home, fixed the garage door multiple times, replaced all the outlets and light switches plus covers, replaced some door hardware, swapped a few light fixtures and broken ceiling fans, weather stripping, replaced a door, replaced some failed glass units, and probably a bunch of little stuff I can't remember. We had the recurring expenses of furnace filters, light bulbs, lawn fertilizer, mulch replenishment, grass seed, softener salt, water filters.

Isn't home ownership great? It's better than cutting a check to a landlord reaping the profits, dealing with unruly neighbors that come through the revolving door with gentrification, and not having the freedom to remodel and do work on the home as if it were your own...improving it. Yeah home ownership is still better then getting rents raised on us every year.

 

[REWahoo]

That is one thing I am grateful for having moved from California to Texas. What you described is California, particularly where we lived in Silicon Valley. Here in our area of Central Texas, house values have spiked the past couple of years, but the property tax rate has gone down. They take in money required for the voter-approved projects, and that's mostly it. Was surprised to see our total property tax rate drop the past couple of years by 11%. Our tax bill for 2021 was actually less than it was for 2020. *Never* saw that in the 32 years of owning a house in California.

I think you may have seen a unicorn.

Our TX property taxes have increased every year over the last six and are up more than 20% from where they were in 2016.

 

[kgtest]

Gotta love Silly Valley... House is worth 6.3 times what I paid 33 years ago... Most of the original owners or early second owners could not afford to buy here or anywhere else in the area at this point.

That is impressive and almost unbelievable. I mean it is believable since its California...but a little insane at the same time.

In 33 yrs stocks should double at least 6 times as well, which means your physical home's asset minus expenses is almost keeping up with some of the best performing stock portfolios.

 

[ExFlyBoy5]

Same story with us, and I think that's remarkable because we are in flyover country (albeit pretty close to a mid-sized city) and bought only 3 years ago. No way would I pay the price that it would command today. Even more remarkable is that we bought a 5 acre wooded lot behind us as a buffer for any development...although that would be minimal since the adjacent lots are all minimum 5 acres by code (I know, that could change)...for a very reasonable price. In just 3 years, the cost to buy a similar lot is double if not a little bit more. They are building "across the way" from us and the houses are going under contract before the walls are put up.

I don't like the increased taxes though even though there is a limit to how fast they can rise.

 

[jollystomper]

We got our periodic tax assessment earlier this month. The good news, it increased our home value by over 25%. The bad news, now we have to pay property taxes on the higher valuation . C'est la vie...

I am still astounded at what our realtor friends say they could sell our house for (even higher than the assessment). In theory we could afford their estimates, but we still feel we ourselves would not buy our house at those prices. Maybe we just don't get out enough to look at other houses...

 

[statsman]

I think you may have seen a unicorn.

Our TX property taxes have increased every year over the last six and are up more than 20% from where they were in 2016.

Maybe. We'll see going forward, but dropping the overall tax rate from 2.68% to 2.38% was not smoke and mirrors. Part of this may be related to the sizable number of new homes in the area, adding to the property taxpayer pool to draw from.

I suspect when the new home builds start tapering off, we'll get a real sense of where the property tax bills are headed in our area.

 

[Bamaman]

The trouble with selling an appreciated home is that buying another home will also be at either an appreciated price or a new home built with expensive wood and labor. You come out well on one end, but may not purchase another home at such a great deal.

We sold our McMansion 2 years old and downsized 1,300 square feet to 4,000 square feet. With a 1 acre lot, we're in it for $89 a square foot and my wife just loves her new pool.

We did well on our move. But our community's real estate is booming with over 4,000 new homes in the process of being built on top of existing homes on the market selling fast. It all speaks to a dynamic job market in this, The Rocket City.

And at 71 years old, we have no more moves left in us.

 

[CRLLS]

Not all areas have seen the rise in home prices. I don't consider my home an investment. It is a hedge against renting. As an example, Zillow says our home has increased about 13% total over the last 16+ years. Not a great investment. I'm not sure what the equivalent rent would have increased. FWIW, RE taxes have increased ~60%. By comparison, inflation increased 43% over the same period.

 

[aja8888]

Here's a short read on U.S. housing prices - January update:

https://wolfstreet.com/2022/01/25/t...ary-update-starting-to-look-like-a-mixed-bag/

House prices spiked further in some cities, including by a crazy 32% year-over-year in Phoenix. In other cities, price increases slowed. In the Boston metro, house prices remained flat for the second month in a row. And in the San Francisco metro, condo prices fell for the third month in a row. That’s the range, according to the S&P CoreLogic Case-Shiller Home Price Index today.