46 minutes ago, mu2010 said:

 

Started looking seriously in March (2022). It's been pretty brutal, we lost a few bidding wars in April/May. Then in June there really just wasn't a ton on the market at all. We just got back from a two week trip so now going to get back into looking and hopefully find something in July or August.

 

But then we'll need to find an apartment or somewhere to live as my lease here ends at end of September.

On the one hand, I could see prices declining a decent amount as we get closer to the end of September. 
 

On the other hand, it also wouldn’t surprise me if the total volume on the market hasn’t improved much by then.  Lots of owners will choose to just sit on what they have and be happy where they are.  Developers are low on inventory so there won’t be high volume fire sales as interest rates increase simply because there isn’t that much to offload. And I don’t think flippers have been all that active during the pandemic, either. 

19 minutes ago, Gramarye said:

On the one hand, I could see prices declining a decent amount as we get closer to the end of September. 
 

On the other hand, it also wouldn’t surprise me if the total volume on the market hasn’t improved much by then.  Lots of owners will choose to just sit on what they have and be happy where they are.  Developers are low on inventory so there won’t be high volume fire sales as interest rates increase simply because there isn’t that much to offload. And I don’t think flippers have been all that active during the pandemic, either. 

 

I think we're so scarred from 2008 that most people don't understand that the incoming recession will likely be vastly different with real estate. 

 

Will things level off and probably even dip? No doubt. But the reason prices are high is because inventory is so low, ESPECIALLY in desirable areas. For instance, Ohio City, Tremont, Rocky River, Chagrin Falls all saw growth during the pandemic - I don't see any of those locales being able to drastically increase their for sale inventory. 2008 was driven by people over extending in places like Hinckley, North Ridgeville, Medina, Avon Lake, etc. and supply was being pumped by this feaux need for expansion. 

14 minutes ago, YABO713 said:

 

I think we're so scarred from 2008 that most people don't understand that the incoming recession will likely be vastly different with real estate. 

 

Will things level off and probably even dip? No doubt. But the reason prices are high is because inventory is so low, ESPECIALLY in desirable areas. For instance, Ohio City, Tremont, Rocky River, Chagrin Falls all saw growth during the pandemic - I don't see any of those locales being able to drastically increase their for sale inventory. 2008 was driven by people over extending in places like Hinckley, North Ridgeville, Medina, Avon Lake, etc. and supply was being pumped by this feaux need for expansion. 

Don't forget the entire subprime mortgage industry proliferation and the profit chasing by lenders. 

38 minutes ago, Gramarye said:

On the one hand, I could see prices declining a decent amount as we get closer to the end of September. 
 

On the other hand, it also wouldn’t surprise me if the total volume on the market hasn’t improved much by then.  Lots of owners will choose to just sit on what they have and be happy where they are.  Developers are low on inventory so there won’t be high volume fire sales as interest rates increase simply because there isn’t that much to offload. And I don’t think flippers have been all that active during the pandemic, either. 

I think prices may soften come fall/winter. That may be offset by cost of capital if the Fed moves rates up again.  

2 hours ago, Gramarye said:

On the one hand, I could see prices declining a decent amount as we get closer to the end of September. 
 

On the other hand, it also wouldn’t surprise me if the total volume on the market hasn’t improved much by then.  Lots of owners will choose to just sit on what they have and be happy where they are.  Developers are low on inventory so there won’t be high volume fire sales as interest rates increase simply because there isn’t that much to offload. And I don’t think flippers have been all that active during the pandemic, either. 

 

Towards end of May/beginning of June, certain houses I had my eye on were noticeably taking a bit longer to sell. Meaning, they take (gasp) 9-10 days, two full weekends. As opposed to just listing on Thursday and having an offer accepted by Sunday, which was the case in March-April. I haven't gone back to look at what price those went for but I'm assuming it's going to be reflected as a cooling of price growth and bidding wars, if not an outright decrease. You can also start to see some small decreases on MLS listings. I believe Yabo is correct that we are not going to see drastic decreases in these types of neighborhoods but even returning to 2021 prices would be nice at this point.

 

Inventory is definitely still low though, and people locked into low rates aren't going to be racing to sell their houses. It's a waiting game now, we're going with the patience strategy instead of the FOMO strategy. I've also been fortunate enough to be able to sock away a nice down payment fund so if rates go up and prices come down a bit, we'll just put more down.

Edited July 6, 20222 yr by mu2010

3 hours ago, mu2010 said:

 

I gotta get back to the bank and see if I can get a pre-approval letter for doubles. Third Fed is my main lender and they don't finance them but FFL i think does.

 

In theory we're open to doubles but haven't seriously pursued one yet.

I bought mine with a FHA loan first time buyers in 2008.    Not sure if the rules have changed. 

 

If you're going to find one, I would suggest a side-by-side rather than up/down.   Feels much more like a "real" home inside with bedrooms on separate floors.  

On 7/6/2022 at 7:00 AM, mu2010 said:

 

I gotta get back to the bank and see if I can get a pre-approval letter for doubles. Third Fed is my main lender and they don't finance them but FFL i think does.

 

In theory we're open to doubles but haven't seriously pursued one yet.

 

I'm under contract right now for a double between Detroit and Clifton. There's not many on the market right now. I think this was listed on a Friday and offer accepted by that Monday. For another property off of Franklin, I bid 10k over asking and lost by 15k - that one was the same deal - hit the market on a Friday and offer accepted that Monday.

$25 over asking? Damn.

11 minutes ago, TBideon said:

$25 over asking? Damn.

 

For the property I am under contract for, my winning offer was initially 6k over asking (best and highest offer in a multiple offer situation), then the seller dragged their feet, let another offer roll in that was another 4k higher than mine (10k above asking) and triggered an escalation clause I had used, leaving me the "winner" at 15k over asking.

 

This was with waiving inspections and the seller not allowing walkthroughs. They offered to let me walkthrough before formally accepting my offer, which bought time for the other offer to come through since they then gave their tenants 24 hours notice that I'd be coming.

Edited July 8, 20222 yr by infrafreak

On 7/6/2022 at 8:10 AM, YABO713 said:

Will things level off and probably even dip? No doubt. But the reason prices are high is because inventory is so low, ESPECIALLY in desirable areas.

 

In addition to low inventory (not enough homes being rehabbed or infill lots being developed within Cleveland, for example), there is a problem on the demand side with both new homeowners looking to buy and non-resident housing "investors."

Quote

For the county as a whole, the percent of properties acquired by investors nearly tripled from 2004
at 7.17 percent to 21.1 percent in 2020. The largest increase by percentage points occurred on the east
side of Cleveland. From 2004 to 2020, investor acquisitions in the east side increased by almost 30
points. This is nearly a threefold increase in less than twenty years. In fact, in 2020 investor acquisitions
in the east side exceeded the total by individual buyers, 45.76 percent to 44.79 percent.

https://www.wrlandconservancy.org/wp-content/uploads/2022/03/20220306_The-Impact-of-Investor-Activity-in-Cuyahoga-County.pdf

 

Should non-resident homeowners have to pay higher property taxes?  In Cuyahoga County, you can apply for a 2.5% reduction if you occupy the property you own.

https://fiscalofficer.cuyahogacounty.us/en-US/two-half-reduction.aspx

(On an approximately $6700 tax bill I get a credit of about $135, peanuts.)

 

Investors drive up the price of HOMES that someone else would live in and gain equity from over time.  In particular, investors are hurting the people who otherwise could buy a low-price home but cannot due to the price increases imposed by investment buyers. 

 

This is an example of capitalism creating a problem for low-income people to grow wealth from owning property that they also live in, shelter being one of our basic needs.  Government (sorry Yabo) has a role to play in compensating for those problems.  How should government address this problem in a way that doesn't unduly discourage investment in housing? 

 

I suggest that non-owner-occupiers should have to pay a higher property tax, and that property tax should be used to increase the supply of housing.  As the county Land Bank is about to do in East Cleveland (reported in Crain's, might be behind a paywall; https://www.crainscleveland.com/real-estate/cuyahoga-land-bank-and-east-cleveland-plot-33-acre-redevelopment-near-university-circle)

and to help provide a local match for government subsidized housing, such as the planned renovation of Woodhill Homes  (https://www.cleveland.com/realestate-news/2021/05/hud-awards-35-million-to-demolish-redevelop-decades-old-public-housing-complex-in-clevelands-buckeye-woodhill-neighborhood.html) or subsidizing housing rehabs for Low-to-Moderate-Income (LMI) buyers.

 

The owner-occupied discount in Cuyahoga County should be more than 2.5% to generate any kind of meaningful revenue.  Tax abatements awarded to new construction are probably much larger than this discount.

 

Thoughts?

The only issue I see with that is that landlords directly pass property tax increases to the tenants through rent increases -- at least "pro" landlords do. Maybe old ladies with inherited properties don't as much with existing tenants, but most people doing it for a living don't eat margin like that.

32 minutes ago, GCrites80s said:

The only issue I see with that is that landlords directly pass property tax increases to the tenants through rent increases -- at least "pro" landlords do. Maybe old ladies with inherited properties don't as much with existing tenants, but most people doing it for a living don't eat margin like that.

I agree, landlords will always try to pass along increases to tenants (successfully, until they can't find tenants). That's not unique to non-resident-landlords, and I think most rentals are multi-unit buildings without a resident landlord.  Landlord-tenant relations also are impacted by remotely located investor-landlords, with some different problems addressed with different solutions.  Rent controls have been employed -- that's a different subject.

 

If we're worried about poverty and helping people move out of poverty, owning a home is a way for a family to grow wealth over time.  To make that more possible for lower-income families, we need to increase housing supply relative to demand so that there is an available supply of low-cost entry for new owner-occupiers. 

 

If we want to increase housing supply, in general rising rents could encourage more construction (increase supply).  And I don't know which would predominate, but rising rents could increase demand by adding to the number of people seeking to escape the non-equity-generating rental market, and decrease demand by making it harder for renters to save for buying a house.

 

Investors buying single-family homes and competing with first-time homebuyers for homes to occupy are the problem -- increasing demand and decreasing supply for potential owner-occupied homes. 

 

How do you see landlords passing on property tax increases to tenants through rent increases being relevant to investors competing with first-time homebuyers buying homes to occupy and build wealth?

I don't know that homeownership is a great answer for poverty reduction.  The unexpected financial obligations of it can be extremely difficult for a family that's living hand to mouth to deal with.  This can negatively impact the family's housing situation and present and future financial situation.  It can also negatively impact the community around them if they can't keep up the obligations of homeownership.

 

Ideally, we should be finding ways to move people out of poverty, then possibly into homeownership if that meets their goals once they are more financially stable.

I'd say it's an important piece in reducing poverty. You're either paying someone else's mortgage/rent increases or your own, which you often recapture upon future sale. Non-investor homeowners also strengthen neighborhoods and communities compared to transient renters. As a whole it helps.

I will say, as someone who became a homeowner within the past couple of years, my partner and I are very fortunate that we had a decent amount saved up to spend on all the miscellaneous expenses that come with being a first time home buyer (lawn equipment, small repairs, etc.). For us, renting was definitely cheaper than owning, once all of the costs and upkeep are added up. If someone buys and doesn’t have a decent amount in savings, either they are very quickly going to go into massive debt, or their home is very quickly going to go into disrepair. 

I'm with @Xon this. I police in a neighborhood (Slavic Village) where almost  everyone is under the poverty line and it's very clear to me that many are nowhere near ready for homeownership as many lack the skills to even take care of the interior of their rentals. 

 

Pushing impoverished people into affordable homeownership before skills are built up can almost be more devastating, as that asset is now yours and you are responsible for all the issues that go with it. 

 

if you do have those skills then I agree with @TBideon, homeownership is always going to be a wealth building tool that can truly quickly pull you from the bottom. Even in a bad market atleast you're still paying yourself. 

 

 

As with any investment a lot of times it comes down to time horizon. The longer you keep it the more hot streaks you hit. As an investment class SFH isn't really all that good unless you're a quick flipper that does things cheaply and at scale. Nontheless, homeownership is indeed the much of difference that has made white people, in the aggregate, have greater wealth than minorities. 

2 hours ago, X said:

I don't know that homeownership is a great answer for poverty reduction.  The unexpected financial obligations of it can be extremely difficult for a family that's living hand to mouth to deal with.  This can negatively impact the family's housing situation and present and future financial situation.  It can also negatively impact the community around them if they can't keep up the obligations of homeownership.

 

Ideally, we should be finding ways to move people out of poverty, then possibly into homeownership if that meets their goals once they are more financially stable.

Homeownership rates in this country have hovered around 64-67% in the modern era. Back in the waning days of the Clinton admin, there was a huge push to increase homeownership rates across the country. In the early 2000s the fruits of this policy began to matriculate and homeownership rates did increase a few % points. However, we all know what happened in 2008 because of this policy. 
In order to raise homeownership rates, lenders needed to engage in riskier underwriting to qualify the borrowers and in turn it artificially inflated Home values for everyone else leading to a crash.  One of the key lessons learned is that 1/3 of the housing population being renters is probably a good thing 

10 minutes ago, Brutus_buckeye said:

Homeownership rates in this country have hovered around 64-67% in the modern era. Back in the waning days of the Clinton admin, there was a huge push to increase homeownership rates across the country. In the early 2000s the fruits of this policy began to matriculate and homeownership rates did increase a few % points. However, we all know what happened in 2008 because of this policy. 
In order to raise homeownership rates, lenders needed to engage in riskier underwriting to qualify the borrowers and in turn it artificially inflated Home values for everyone else leading to a crash.  One of the key lessons learned is that 1/3 of the housing population being renters is probably a good thing 

 

For the record, I'm saying that homeownership isn't necessarily good for people who are in or bordering on poverty.  I am not saying that 1/3 of the population being unable to afford homeownership is a good thing.  If we want to increase homeownership, we should decrease poverty.  But it isn't necessarily true that if we want to decrease poverty, we should increase homeownership.

Well then, I'd like to know what percentage of the 2008 crash can be attributed to homeownership being extended to disadvantaged groups and how much of it was tribal tattoo Chad and Karen asking to speak to the manager about a way bigger McMansion and matching Hummer H2s in 2005. It is hard to maintain an owner-occupied home when you're in proverty, but one user here constantly beats the drum about how bad it was to create a path to homeownership for disadvantaged groups while society and pop culture as a whole have been with the Chad and Karen narrative since like 2003. Note that Chad and Karen were portrayed as younger than the average homebuyer at the time, say 25-35, not college educated or had technical degrees and already had kids or would soon.

Edited July 14, 20222 yr by GCrites80s

6 hours ago, Foraker said:

Should non-resident homeowners have to pay higher property taxes?  In Cuyahoga County, you can apply for a 2.5% reduction if you occupy the property you own.

https://fiscalofficer.cuyahogacounty.us/en-US/two-half-reduction.aspx

(On an approximately $6700 tax bill I get a credit of about $135, peanuts.)

 

[snip]

 

The owner-occupied discount in Cuyahoga County should be more than 2.5% to generate any kind of meaningful revenue.  Tax abatements awarded to new construction are probably much larger than this discount.

 

Thoughts?

 

I don't know if this 2.5% homestead exemption is hidden in a state statute somewhere, but it's 2.5% in Summit County as well.

 

4 hours ago, X said:

I don't know that homeownership is a great answer for poverty reduction.  The unexpected financial obligations of it can be extremely difficult for a family that's living hand to mouth to deal with.  This can negatively impact the family's housing situation and present and future financial situation.  It can also negatively impact the community around them if they can't keep up the obligations of homeownership.

 

Ideally, we should be finding ways to move people out of poverty, then possibly into homeownership if that meets their goals once they are more financially stable.

 

3 hours ago, TBideon said:

I'd say it's an important piece in reducing poverty. You're either paying someone else's mortgage/rent increases or your own, which you often recapture upon future sale. Non-investor homeowners also strengthen neighborhoods and communities compared to transient renters. As a whole it helps.

 

I agree with both of these, because the critical question is at what price.  Homeownership was counterproductive to reducing poverty if you bought in 2007 around the peak of the bubble.  It might be counterproductive now, too, though I think the general consensus is that the price escalation recently has more to do with short supply than asset speculation.  There's no shortage of speculation with Wall Street buying up tremendous amounts of single-family homes in all-cash transactions to turn them into rentals, though.  And while I'm skeptical of government regulation of business and land use generally, I would make an exception for a stronger preference for owner-occupants, precisely for the reason TBideon said--it changes the culture of the neighborhood when you get more owner-occupants, especially long-term owner-occupants.  I don't think you'd get much support for that in many places, though, because you'd need to be clear-eyed about the economics of this market intervention: a ban on outside investors would, at least in the short and medium term, reduce the home equity of every property owner (whether owner-occupant or otherwise) in the neighborhood by barring well-funded, interested buyers from paying top dollar.

 

2 hours ago, amped91 said:

I will say, as someone who became a homeowner within the past couple of years, my partner and I are very fortunate that we had a decent amount saved up to spend on all the miscellaneous expenses that come with being a first time home buyer (lawn equipment, small repairs, etc.). For us, renting was definitely cheaper than owning, once all of the costs and upkeep are added up. If someone buys and doesn’t have a decent amount in savings, either they are very quickly going to go into massive debt, or their home is very quickly going to go into disrepair. 

 

Since rents generally go up over time, it's generally better to own if you've found where you want to live for the long term.  My mortgage is the same now that it was in 2013 when we bought our current house (or I guess I should say when we refinanced in 2017); I checked the rent on my old apartment that we left in 2013 and it's 50%+ higher than it was when I lived there.  That said, the financial surprises of "being your own landlord" are no joke, even if you're moderately handy and can do a lot of simple maintenance and repairs yourself.

 

A local nonprofit that I work with offers homebuyer education classes, especially for first-time homebuyers.  The largest funding source for those classes?  Banks.  They actually pay us to educate inexperienced homebuyers before they go out into the market.  It's effective.  The retention rate (those who've been through our program that are still in the homes they purchased afterward, assuming they did purchase one) is well above the area norm, especially after taking into account that most of those we serve are "low-and-moderate income" (LMI) purchasers.

1 hour ago, GCrites80s said:

Well then, I'd like to know what percentage of the 2008 crash can be attributed to homeownership being extended to disadvantaged groups and how much of it was tribal tattoo Chad and Karen asking to speak to the manager about a way bigger McMansion and matching Hummer H2s in 2005. It is hard to maintain an owner-occupied home when you're in proverty, but one user here constantly beats the drum about how bad it was to create a path to homeownership for disadvantaged groups while society and pop culture as a whole have been with the Chad and Karen narrative since like 2003. Note that Chad and Karen were portrayed as younger than the average homebuyer at the time, say 25-35, not college educated or had technical degrees and already had kids or would soon.

Chad and Karens and wannabe landlords were probably the biggest offenders. People using CRA loans were not the biggest defaulted. It was mostly loans from unregulated institutions that got too greedy. 

What makes SFH suck as compared to multifamily, mixed-use and commercial for rental/investment purposes are practical reasons. A entire roof, driveway, lots of plumbing, siding/exterior paint, a yard, sidewalks, often a basement, sometimes garages, utility hookups, washer/dryer etc. for only ONE unit. I don't care if you're getting $2000/mo -- that's a lot to deal with. It's a total market distortion caused by too little existing multifamily and mixed-use (but not too much commercial in good locations) for these corporate entities to invest in without becoming developers. You need to have way more SFH units to make money as compared to an apartment complex where all that stuff is shared (or doesn't exist) and the pipes won't freeze. Plus someone can start "small" with only $500K or so (don't believe these shysters that think you only need $50K) as opposed to a multifamily/mixed use developer who needs serious access to capital. Oh and when SFH goes down due to multiple maintenance issues it can take months to fix as compared to an apartment complex unit where about the most can go wrong is a dog ruined the carpet and a drunk ex-boyfriend smashed the toilet so you have your internal maintenance people go up there and fix it one day rather than hiring contractors.

 

Most people who are small-time in SFH either inherited them, are renting out their old house, can't think past SFH because they are unaware that it's not good for investment purposes, only have an SFH mindset due to American culture or are at the bottom of the super long Washington D.C. MetroRail station-length escalator that leads to being a corporate SFH investor.

9 hours ago, GCrites80s said:

What makes SFH suck as compared to multifamily, mixed-use and commercial for rental/investment purposes are practical reasons. A entire roof, driveway, lots of plumbing, siding/exterior paint, a yard, sidewalks, often a basement, sometimes garages, utility hookups, washer/dryer etc. for only ONE unit. I don't care if you're getting $2000/mo -- that's a lot to deal with. It's a total market distortion caused by too little existing multifamily and mixed-use (but not too much commercial in good locations) for these corporate entities to invest in without becoming developers.

Agreed.  "Ownership" has been too heavily focused on single-family homes.   Duplexes and inexpensive condos (much larger supply of both) would help. 

12 hours ago, Brutus_buckeye said:

the fruits of this policy began to matriculate

There's a lot of interesting analysis here, none of which I disagree, but I think most people, regardless of income level, are not looking for a SFH as an investor. They just need somewhere stable to live and, god willing, make most of it back (if not more) at some point. 

 

It's not an investment as is investing in equities, though no one is stopping homeowners from becoming educated in the field. People need to live somewhere at the end of the day, and they, with a million exceptions, should be able to recapture a lot of the upkeep costs.

 

That's why it should be encouraged. Why it's always a little disappointing when new construction turns out to be rentals, not condos. Why these out-of-state Blackrocks or foreign investors are incredibly damaging to society with their enormous portfolios and unethical rental increases/lack of maintenance. Homeownership is a healthy balance to those practices, especially to those with limited funds and are the most vulnerable.  

 

Edited July 14, 20222 yr by TBideon

12 hours ago, GCrites80s said:

Well then, I'd like to know what percentage of the 2008 crash can be attributed to homeownership being extended to disadvantaged groups and how much of it was tribal tattoo Chad and Karen asking to speak to the manager about a way bigger McMansion and matching Hummer H2s in 2005. It is hard to maintain an owner-occupied home when you're in proverty, but one user here constantly beats the drum about how bad it was to create a path to homeownership for disadvantaged groups while society and pop culture as a whole have been with the Chad and Karen narrative since like 2003. Note that Chad and Karen were portrayed as younger than the average homebuyer at the time, say 25-35, not college educated or had technical degrees and already had kids or would soon.

I think they are one in the same. Back in the late 90s, you had certain areas which were rental areas or renters were right on the fringe of middle class/poverty line.  While the goal to increase homeownership was a noble one, it required a lot of lenders to cut corners and push through marginal loans to meet the goals of HUD at the time. While it offered opportunties for the poorer individual to achieve homeownership, it also pushed and encouraged the Chad and Karen's to move up into artificially inflated more expensive property.

 

When you have millions of renters out there who will no longer be renters because they are going to get into a low level/entry level house, it pushes the value of those houses up because of the increased demand. It encourages others to move, pushing values up across the board and creates a supply shortage. The problem was that the supply shortage was created with fictitious money that was never going to be able to be paid back and it caused the whole thing to come crashing down.

 

The Chad and Karen's were really no different than the person in poverty buying the house. It had nothing to do with Chad and Karen, just like it had nothing to do with the person in poverty who gets a 200k home loan. the people were just vessels for the loan, the loan. The market did not care about the borrower at the time, it only took the theory that the asset was all that mattered and the asset would only increase in value no matter what the borrower did. 

https://www.nytimes.com/2022/07/14/upshot/housing-shortage-us.html

5 hours ago, Brutus_buckeye said:

I think they are one in the same. Back in the late 90s, you had certain areas which were rental areas or renters were right on the fringe of middle class/poverty line.  While the goal to increase homeownership was a noble one, it required a lot of lenders to cut corners and push through marginal loans to meet the goals of HUD at the time. While it offered opportunties for the poorer individual to achieve homeownership, it also pushed and encouraged the Chad and Karen's to move up into artificially inflated more expensive property.

 

When you have millions of renters out there who will no longer be renters because they are going to get into a low level/entry level house, it pushes the value of those houses up because of the increased demand. It encourages others to move, pushing values up across the board and creates a supply shortage. The problem was that the supply shortage was created with fictitious money that was never going to be able to be paid back and it caused the whole thing to come crashing down.

 

The Chad and Karen's were really no different than the person in poverty buying the house. It had nothing to do with Chad and Karen, just like it had nothing to do with the person in poverty who gets a 200k home loan. the people were just vessels for the loan, the loan. The market did not care about the borrower at the time, it only took the theory that the asset was all that mattered and the asset would only increase in value no matter what the borrower did. 

I think we've seen that it is difficult to get more than about 70% of the US to be homeowners rather than renters.  The problem isn't in that percentage, it's in the difficulty for low income families finding cheap housing that they can leverage into better housing over time -- thus building wealth.  The starting point for entry-level home ownership is just too high in most places. As others have noted, the purchase price is only the beginning of home ownership, particularly if it's a SFH with a yard, and its own driveway and roof that require maintenance. 

 

In general, housing appreciates at the rate of inflation, so unless you happen to want to sell at the right time when an area is "hot" you don't get rich on SFH, but you have a kind of forced and safe savings as you build equity. Something that can be passed on to the next generation or keep you comfortable in your old age.  If you have the discipline to save and don't get hit with too much rent increases you CAN build wealth while renting.  But the rent increases are out of your control.  Mortgage payments are more stable.

 

More basic for-sale apartments (condos) suitable for families starting on that trail of equity ownership is something that is lacking in the US.  Condos here are not only rare, but they seem to cater to the upper-middle to upper class buyers.  More housing construction is needed -- maybe the mix shouldn't be so limited to SFH and big for-rent apartment blocks. 

7 hours ago, Foraker said:

More basic for-sale apartments (condos) suitable for families starting on that trail of equity ownership is something that is lacking in the US.  Condos here are not only rare, but they seem to cater to the upper-middle to upper class buyers.  More housing construction is needed -- maybe the mix shouldn't be so limited to SFH and big for-rent apartment blocks. 

The problem with condos, especially in getting people into the homeownership route, is the condo fees that can vary widely depending on the condo.  Condo A selling for $150k and condo B selling at 150k are vastly different opportunities when you factor in the condo fees on the project.  A new purchaser who may not understand the condo dynamics could walk into a bit of trouble in some of these cases.

 

Regarding why condos are not as popular in the US, the main reason is that they are much harder to finance and the various rules for lenders make it difficult to build them. Back in 2008 they had a much higher default rate than other types of residential asset classes. I could be mistaken but I vaguely remember reading something about how Fannie and Freddie are not set up to easily finance condo projects which limits the ability to build them. 

14 hours ago, Brutus_buckeye said:

The problem with condos, especially in getting people into the homeownership route, is the condo fees that can vary widely depending on the condo.  Condo A selling for $150k and condo B selling at 150k are vastly different opportunities when you factor in the condo fees on the project.  A new purchaser who may not understand the condo dynamics could walk into a bit of trouble in some of these cases.

 

Regarding why condos are not as popular in the US, the main reason is that they are much harder to finance and the various rules for lenders make it difficult to build them. Back in 2008 they had a much higher default rate than other types of residential asset classes. I could be mistaken but I vaguely remember reading something about how Fannie and Freddie are not set up to easily finance condo projects which limits the ability to build them. 

 

Understand.  But education for a new buyer is critical whether you're buying a SFH (and have to think about mowing the lawn and other maintenance expenses) or buying a condo (and have to pay for the maintenance via a condo fee).  There aren't many quality houses for under $100k, but I would think that you could build a condo building with units selling for under $100k that would be more affordable than a SFH (and you'd have shared maintenance on the roof and common areas).

 

Condo buildings with fewer than 20 units are more common outside the US.

 

Not much we can do about the financial regulatory piece, but if the units were more common I think the lenders would be more comfortable dealing with them.

8 hours ago, Foraker said:

Condo buildings with fewer than 20 units are more common outside the US.

 

Not much we can do about the financial regulatory piece, but if the units were more common I think the lenders would be more comfortable dealing with them.

The issue is the shared wall component from what I understand and how it was explained to me. it creates a lot of risk and can lead to deterioration of other individual assets in the condo community through no fault of their owners. I think that is why Fannie/Freddie do not love to finance such developments and the rest of the banks take their cues from them. Now, this is separate than getting a Fannie/Freddie loan to purchase a condo which is done all the time for condo buyers. 

16 hours ago, Brutus_buckeye said:

The issue is the shared wall component from what I understand and how it was explained to me. it creates a lot of risk and can lead to deterioration of other individual assets in the condo community through no fault of their owners. I think that is why Fannie/Freddie do not love to finance such developments and the rest of the banks take their cues from them. Now, this is separate than getting a Fannie/Freddie loan to purchase a condo which is done all the time for condo buyers. 

 

I know you don't live in Cleveland, but can you explain why builders there say it's much harder to get for-sale units financed vs. rentals? 

Table from NPR with data from major metros showing how over or under built each is. Unfortunately, it looks like the data only runs to 2019. 
 

91. Columbus, OH Shortage 18,767 units short 2% short

122. Cincinnati, OH-KY-IN Shortage 10,245 units short 1% short

172. Cleveland-Elyria, OH Met needs but getting worse 5,397 units in excess 0.6% in excess

 

https://www.npr.org/2022/07/14/1109345201/theres-a-massive-housing-shortage-across-the-u-s-heres-how-bad-it-is-where-you-l

On 7/16/2022 at 2:41 PM, surfohio said:

 

I know you don't live in Cleveland, but can you explain why builders there say it's much harder to get for-sale units financed vs. rentals? 

From what I understood, the issue with condo vs Multifamily apartment was that the shared wall and separate ownership vs apartments have common ownership. 
 

also, back in 2008 condos had some of the highest default rates making it harder to finance newer projects where apartments had a major shortage. Regulators made a big push at that time for multi family policies to promote apartment construction. 
 

so there were a number of factors that encouraged construction of apartments vs condos the last decade

It's weird, condos depreciate because you don't own the land but apartment buildings appreciate because the landlord owns the land. Same with SFH. Houses don't appreciate so much as the land does. 

14 hours ago, GCrites80s said:

It's weird, condos depreciate because you don't own the land but apartment buildings appreciate because the landlord owns the land. Same with SFH. Houses don't appreciate so much as the land does. 

Apartments appreciate in price because of the rents they generate and the P&L that is created by the property. As rents go up and expenses go down the stream of income created by the apartment increases, and theoretically, it will annuitize over time. People are paying for a steam of income over time. 

 

With an owner occupied condo, the person lives there and is not creating an income stream (it comes from their job) so the asset does not rise in value. 

 

Land tends to be pretty stable and flat unless there are periods of speculation. Apartments do not increase in value because of the land (although in some cases that can be a factor, it generally means that the property could probably better better suited for something besides an apartment at that point). 

Apparently Ohio cities are the most likely to weather a housing downturn. 3Cs+A, apparently sometimes it pays to be less trendy 🤷🏼‍♂️
 

The 12 best cities to weather a housing-market downturn when a recession strikes

 

‘"If the U.S. does enter a recession, we're unlikely to see a housing-market crash like in the Great Recession because the factors affecting the economy are different," Sheharyar Bokhari, a senior economist at Redfin, said in a housing report. "But a recession — or even a continued economic downturn that doesn't reach recession levels — would impact some local housing markets more than others."

 

Redfin researchers looked at several indicators to rank cities on their chances of a housing market downturn in the case of a US recession. The fear, in this case, is that as the broader economy tightens, some home values may decline leaving homeowners holding a mortgage for more than the value of their investment.  

 

With buyer demand waning, Redfin's data shows cities with  rapidly rising home prices are more at risk of downturn. However, less trendy and more affordable markets — mostly those in the Rust Belt region —  remain resilient. This could mean real estate investments in these areas stand a better chance of weathering a housing slump if the US enters a recession.”

 

11. Columbus

 6. Cincinnati

5. Cleveland

 1. Akron

 

https://www.businessinsider.com/best-cities-real-estate-investment-recession-housing-prices-steady-strong-2022-8

On 8/4/2022 at 6:53 AM, amped91 said:

Apparently Ohio cities are the most likely to weather a housing downturn. 3Cs+A, apparently sometimes it pays to be less trendy 🤷🏼‍♂️
 

The 12 best cities to weather a housing-market downturn when a recession strikes

 

‘"If the U.S. does enter a recession, we're unlikely to see a housing-market crash like in the Great Recession because the factors affecting the economy are different," Sheharyar Bokhari, a senior economist at Redfin, said in a housing report. "But a recession — or even a continued economic downturn that doesn't reach recession levels — would impact some local housing markets more than others."

 

Redfin researchers looked at several indicators to rank cities on their chances of a housing market downturn in the case of a US recession. The fear, in this case, is that as the broader economy tightens, some home values may decline leaving homeowners holding a mortgage for more than the value of their investment.  

 

With buyer demand waning, Redfin's data shows cities with  rapidly rising home prices are more at risk of downturn. However, less trendy and more affordable markets — mostly those in the Rust Belt region —  remain resilient. This could mean real estate investments in these areas stand a better chance of weathering a housing slump if the US enters a recession.”

 

11. Columbus

 6. Cincinnati

5. Cleveland

 1. Akron

 

https://www.businessinsider.com/best-cities-real-estate-investment-recession-housing-prices-steady-strong-2022-8

 

Here's the Redfin study: https://www.redfin.com/news/metros-recession-risk-housing-downturn-2022/

 

The geographic trend is pretty clear.

 

Only one of the 12 best cities (El Paso) is in the south or west. The U.S. housing market I really think is fairly strong. But places like Boise and Las Vegas are so far into la la land right now, it's hard for me to imagine turning out very well.

 

NIMBYism is an issue that spans the political spectrum.  

On 8/7/2022 at 9:49 AM, freefourur said:

NIMBYism is an issue that spans the political spectrum.  

 

And should always be called out when it ventures into silliness, such as people advocating for housing as a right, then arguing against it when It's going to be built near to them.

Not sure if this thread is the best place for this. Please move if not...

 

 

Turning Downtown Residential: Why It's Poised to Happen

https://www.governing.com/assessments/turning-downtown-residential-why-its-poised-to-happen

Indiana, Kentucky and West Virginia graduates pick Ohio as one of the states they move to. Ohio graduates pick California, Illinois and New York. Sounds like a logical ascendancy...

 

 

23 hours ago, KJP said:

Indiana, Kentucky and West Virginia graduates pick Ohio as one of the states they move to. Ohio graduates pick California, Illinois and New York. Sounds like a logical ascendancy...

 

 

Hey these numbers aren’t bad. More than 75% of college grads staying in state strikes me as good. Much better than AZ and PA, two states I wouldn’t expect to beat in this metric.

Interesting that Milwaukee, St. Louis, Buffalo and a few others in the Midwest/Northeast aren't falling

 

8 hours ago, KJP said:

Interesting that Milwaukee, St. Louis, Buffalo and a few others in the Midwest/Northeast aren't falling

 

There have been some pretty positive articles about Buffalo recently, as well as personal anecdotes that the downtown and waterfront are changing for the better. Good to hear. Always gotta root for the Great Lakes cities. 

8 hours ago, KJP said:

Interesting that Milwaukee, St. Louis, Buffalo and a few others in the Midwest/Northeast aren't falling

 

I can’t read the article but from the map it looks like Cleveland is still rising too. The ones I see falling in Ohio are Cincinnati, Columbus, and Akron.

2 hours ago, LlamaLawyer said:

I can’t read the article but from the map it looks like Cleveland is still rising too. The ones I see falling in Ohio are Cincinnati, Columbus, and Akron.

I know at least in Columbus, prices became outrageous. They haven’t fallen much from what I have seen, but hopefully they continue to come down a bit.