We Can’t Afford Our Home Anymore!

[HI Bill]

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]
:

The house we bought in Fall of 2021 was a lot more than we wanted to spend $394/sf, and a lot larger (2600 sf vs 1500 sf), but we're happy we bought it.

Current estimates by Redfin show it's up 45% since then. Actual home sales in my community confirm we could get the estimated value or more. We've been receiving letters from realtors wanting us to sell.

We also couldn't afford to buy at this price point. I'm so happy we bought, as we have a small ocean view, great birds, and a pool. More home than I wanted or thought I could ever afford, and it's going up multiples of the mortgage payments each month in value.

 

[Another Reader]

I will pose the question here that I have asked in other fora - where is the money coming from? Is it the stock market? Increased job income? Generational wealth being passed down? Money flowing to the perceived safe haven from overseas? Millenial demographics combined with record ;ow interest rates?

 

[tmm99]

The price of my house has more than doubled in the last five years. Insane! Something is not right about this IMO...

 

[Koolau]

We got lucky on our 2009 "upgrade" when the condo we now own dropped 20% in price while the condo we owned only dropped 10%. The effect was to "trade even." The current condo quickly rebounded the 20% and then some! Heh, heh, I'd hate to have to buy our condo now but YMMV.

 

[old medic]

When did you buy at these prices? 1949?

LMAO... the original house next door that we bought 1st was built in 1949. This one was built by the son in 1974. We bought it as a foreclosure auction for $6500. It sat abandoned almost 10 years.

 

[Music Lover]

I bought my house in 1997 for $80k. Then a boom hit and 5 years later it was worth $280k. Then gradual small increases over the years until recently when prices have gone up again. It was worth $360 or so 2 years ago, it's now worth $420k - $450k.

I couldn't afford to buy my house if I was looking today. As it stands now, we'll probably sell in 5 years or so and then rent as we have a cabin and I'm getting tired of maintaining 2 places. But if the price keeps going up we might sell earlier to take advantage of the market.

 

[HawkeyeNFO]

I will pose the question here that I have asked in other fora - where is the money coming from?

From da bank! People are more in debt than ever!

Now, in some places, Chinese investors have come in with cash, but most often, da money is from the bank and the loan they provided. Check out how the limits on conforming loans have gone up. In my area, it's $970k now (that's up over $200k from 2020). Easy money, and it has been cheap for the past few years, with low interest rates.

 

[Chuckanut]

I heard an interesting interview with a professor of city planning (for want of a better description). He talked about the lack of land to build more housing in my area.

Then he mentioned that not far from me the county has zoned literally thousands of acres as agricultural use only. That's a lot of houses that won't be built. Add in the high cost of construction, and a time consuming permitting process, and one has a problem even without the Covid supply issues.

 

[jkern]

Hehe, I live out here in the Central Valley and the house is worth over 5X what I paid 33 years ago.

I live in Castro Valley and I bought my house 33 years ago. It's now worth 5.8 times more.

 

[ExFlyBoy5]

I heard an interesting interview with a professor of city planning (for want of a better description). He talked about the lack of land to build more housing in my area.

Then he mentioned that not far from me the county has zoned literally thousands of acres as agricultural use only. That's a lot of houses that won't be built. Add in the high cost of construction, and a time consuming permitting process, and one has a problem even without the Covid supply issues.

Eventually they will adjust the zoning...seems as they always do. It may not be in the next 5-10-20 years, but it will happen; more tax revenue and all. There is always a LOT of w*rk for lawyers that do land use planning and zoning.

 

[Looking4Ward]

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.

I suspect you are in a MUD and their capitalization costs have dropped due to new construction and additional paid taps, thus their lowering the effective tax rate a bit. The other municipal and school district taxing entities in this area have not reduced their effective tax rates at all and valuations typically lag a couple of years behind market. My bet is your current tax valuation is $100K or more less than what you actually paid. I'm seeing homes in this area on the tax rolls for $250K selling for $700k. Won't be long before the tax appraiser adjusts those values.

In other words, check back in after a couple of years and let us know how much your taxes have gone up. There is a homestead cap of 10% per year but that only means your taxes can still double every 7 years or so.

 

[ShokWaveRider]

3 more homes came up for sale last week in our development. Interesting to see how long they take to sell. One was 2,700 sqft and is pending already at $995k. A couple of others that we for sale before are still for sale. Out of 600 homes we have 5 for sale as of this morning, not including those that are pending or under contract. We are in NE Florida.

 

[EastWest Gal]

In 1998, we sold our 3 bedroom, 3 bathroom townhouse in Sunnyvale, CA for $360K. Today it would cost $1.5M. Major traffic, near railroad tracks, but the complex had a pool and is in the heart of Silicon Valley. Yes, we were paying for great weather with plenty of noise and air pollution, but I was hardly ever outside to enjoy the sunshine.

Our home in central PA cost $242K, and is larger than our townhome. At the time, houses were on the market for months here. Today it's estimated value is $414K, but it would probably go for more with our upgrades inside. Stable economy based on state government, military facilities in town and nearby, as well as multiple corporate headquarters. We could still afford it if we bought today. We bought well below what we could afford; house was only 5 years old. Within driving distance of NYC, Philly, Baltimore and Washington DC. Ski resort visible from our house. Appalachian Trail is about 5 miles from our house. Major medical 5 minutes away, several colleges nearby and one of the best school districts in the state. Very little traffic. Quality of life much better for a fraction of the price. We won.

A home's dollar value only matters when selling and buying. If it costs too much it screws up one's ability to save for retirement and also one's daily lifestyle.

 

[REWahoo]

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

No doubt. I took a look at the taxes from our house in San Antonio (lived there 2006-2012) and they have increased 46% from 2012 to 2021 (5.1% a year). The history shows (back to 2005) that there was ONE year that was cheaper...2009 and nothing but increases since then.

Yep, property taxes are one of the main reasons we moved from San Antonio to an unincorporated area in an adjoining county for retirement.

I looked up the 2021 numbers on our old SA house, which has a similar appraised value to our current house. After our recent property tax increases we are at ~$5,000/yr and the owner of our old SA house is paying ~$11,000.

Moving was one of the better financial decisions we have made.

 

[daylatedollarshort]

If my home burned to the ground today and the insurance company offered me the choice between paying to rebuild it or writing me a check for the same amount , I would have to seriously consider taking the check, selling the land, and moving someplace else.

The cost of housing in my area is so high that I could easily buy an equal if not better home for less money and probably pocket about 25% of the funds to spend on Blow That Dough activities. Besides my children are moving out of the area because they can't afford to buy here. Any place they move to would be significantly cheaper than here.

Hmmm.... I seem to be talking myself into moving even if the place never burns down.

Our kids and many of their high school friends have moved away, too, largely because of the cost of housing here (Bay Area). One year one of them had their high school friends get together in the Pacific Northwest because so many of their friend group had moved there, post college.

Home prices in our neighborhood have increased around a million dollars since we retired. Prop 13 keeps our property taxes low so it is not expensive for us to stay. Many of our older neighbors have aged out or cashed out so there are a lot of new faces now. I would not buy here today at current prices but between the weather, scenery and all the things to do it has been a nice place to be retired. I like running the numbers of selling or renting, but the reality is I am not sure where we would move to.

 

[Badger]

I bought our house around 1982 for $50k. It was the first house built on the street in 1955 and part of an estate that nobody seemed to want in the poor condition it was in. However I was much younger and willing to put in the sweat equity as I slowly made it habitable. It was also a couple of blocks from the ocean and a nice beach that was only easily accessible by the residents of the small town. In the past 10 years or so all the other houses were knocked down and replaced by McMansions so my house would now easily sell for $1.2 MM. Here is an illustration of what it is like.

 

[Pointby2]

We bought in Orange County in 1999. Paid $163/sq ft. Everyone said we over paid. Five years later, the folks we bought our home from decided Chicago wasn't for them and returned to OC looking for a replacement home in this neighborhood. Unfortunately, they were already priced out of the market as home prices doubled in those five years.

The house we sold in MN meanwhile, barely went up in price. Since then, this home, Zillow says is $500/sq ft and 1.3 million dollars.

There is no way we could afford to buy this house today. Luckily, we are in a great part of OC in a private, quiet area that we love. The only downside is our place is two stories, so as we age into it, we will have to deal with stairs.

 

[pjigar]

Yep, property taxes are one of the main reasons we moved from San Antonio to an unincorporated area in an adjoining county for retirement.

I looked up the 2021 numbers on our old SA house, which has a similar appraised value to our current house. After our recent property tax increases we are at ~$5,000/yr and the owner of our old SA house is paying ~$11,000.

Moving was one of the better financial decisions we have made.

We traded a large property tax bill for a much smaller one (4 times smaller) as well when we moved to the county last year. It just didn't make sense to pay for a privilege to have everything closer by just a 15 minutes.

 

[tmm99]

The value of my house doubled since we bought it a little over five years ago. I can't afford to buy this house now because
1) I would have to take money out of my tax-deferred account to pay for it and I would have to pay too much in taxes all at once, so that's not a feasible option.
2) Without a job or SS, I most likely wouldn't qualify for a mortgage.

 

[CO-guy]

I empathize with the OP's dilemma. We purchased our home around 10 years ago for $85/sf and put another $65/sf into renovations. At the time, homes were selling for around $150/sf so we felt as though we came out even. We refinanced a few years later and were pleased to see the home valued around $170/sf.

Our home is in a resort area that has recently experienced a dramatic increase in home prices. For each of the past three years, home values have increase by more than 20%. At this point, even rundown homes are selling for $300/sf and the average sale price of homes in our zip code is now over $350/sf.

At this point we couldn't afford to buy a 1br apartment in our town for what we paid for our home.

 

[ownyourfuture]

Now I know why there's such an insatiable demand for low income/affordable housing

 

[Magus]

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.

20% since 2016 isn’t bad at all, several of mine went up that much last year

 

[pdxgal]

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.

The value of my SF Bay Area condo has increased 6.6x in 27 years. Thanks to the power of leverage the ROI has been many times that, since i only made a 5% down payment. Best investment I ever made!

 

[pdxgal]

Now I know why there's such an insatiable demand for low income/affordable housing

Yes, the housing crisis is real in many parts of the country.

 

[Teacher Terry]

Home prices are skyrocketing in Reno. One of the reasons is because of all the California retirees who think Reno is cheap. We sold our 70 year old 1400 sq ft ranch for 400k in April. I bought a 2 bedroom condo for 211 which now sells for between 250-265. If I hadn’t bought immediately I would only be able to afford a 1 bedroom now.