Don't buy a home if you can't afford it

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Don't buy a home if you can't afford it

Brandon Stone
Member since 2018 · 13 posts · 12 votes

I see EVERY realtor on IG/ TIK TOK/ whatever; saying it's going to get more expensive to buy a home if you wait. You are a pumper.  The inventory problem has not corrected itself, so prices could continue to rise, and if there is an interest rate drop, house prices could boom. This is assuming that all things remain constant. This leads me back to my point, do not buy a house, or real-estate, if you can't afford it. If people actually start waiting for interest rates to come down, this will help bring the inventory back up. Additionally, I could potentially see tons of people defaulting on their mortgages if they continue to buy places they cannot afford. I see this as the only way we move into a recession. Please do not FOMO into deals, as this could cause much market pressures. Take your time, wait for rates to drop, and inventory will begin to come back if we take this attitude as a collective. If you can afford to keep buying, be my guest! Now is not the time to gamble though. Save money, live comfortably, and wait for your moment.

Thoughts? 

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Scott E.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
3y
Quote from @Brandon Stone:
Quote from @Scott E.:

Sounds like you have a crystal ball. I'm jealous. I could do a lot with one of those things. 


 Im just thinking and trying to be proactive. I think its more of having a contrarian mindset. I remember trading stocks 1.5/2 years ago thinking that I was the best trader of all time, only to finish the year negative lol. Nobody has a crystal ball, but I think what I said makes a lot of sense from a macro economic perspective. Whats your take on things?

I think that nobody has a way of forecasting what the future holds in the real estate market. Nobody knows where things will be in 3 months, 6 months, 12 months, 18 months. Not even the most skilled economists or biggest hedge funds out there. It is literally impossible to forecast with any degree of accuracy.

That being said, you asked for my take on things so I'll throw it out there (although to re-iterate, my opinion is meaningless). I think that 18-24 months ago there was a large pool of buyers who were sitting on the sidelines waiting for prices to come down. And now that pool of buyers has ballooned even further, because nowadays you have that same pool of buyers from 18 months ago PLUS an additional pool buyers who are ready to purchase, but this time everybody is waiting for rates to come down. Not to mention all of the inventory issues that we had back then are even worse today. If I had to guess, if/when rates go down, prices will go up. Which means that now might be a good time to buy a residential property. I'd rather buy a deal now and refinance later than wait for lower rates only to pay more for the house.

I can't help but look back to 2011 when I bought my first house (and the dozens of deals I've done since then). There have always been people trying to push a narrative based on their view of the economic conditions that it was a bad time to buy in 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, and now 2023.

If you have strict underwriting criteria, you're in the right market, you buy deals under market value, and you deeply understand your sub-market, it is my opinion that it is never a bad time to buy.

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  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    3y

    People like to live above the means no matter where the interest rates are, it's why the nations debt is crazy high and people buy things they can't afford. I do agree to not just buy to buy. If you are looking at deals then you need to be smart. Run your #'s and have reserves. 

    5Reply
  • Scott E.
    Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
    3y

    Sounds like you have a crystal ball. I'm jealous. I could do a lot with one of those things. 

    1Reply
  • Brandon Stone
    OP
    Member since 2018 · 13 posts · 12 votes
    3y
    Quote from @Scott E.:

    Sounds like you have a crystal ball. I'm jealous. I could do a lot with one of those things. 


     Im just thinking and trying to be proactive. I think its more of having a contrarian mindset. I remember trading stocks 1.5/2 years ago thinking that I was the best trader of all time, only to finish the year negative lol. Nobody has a crystal ball, but I think what I said makes a lot of sense from a macro economic perspective. Whats your take on things?

    2Reply
  • Scott E.
    Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
    3y
    Quote from @Brandon Stone:
    Quote from @Scott E.:

    Sounds like you have a crystal ball. I'm jealous. I could do a lot with one of those things. 


     Im just thinking and trying to be proactive. I think its more of having a contrarian mindset. I remember trading stocks 1.5/2 years ago thinking that I was the best trader of all time, only to finish the year negative lol. Nobody has a crystal ball, but I think what I said makes a lot of sense from a macro economic perspective. Whats your take on things?

    I think that nobody has a way of forecasting what the future holds in the real estate market. Nobody knows where things will be in 3 months, 6 months, 12 months, 18 months. Not even the most skilled economists or biggest hedge funds out there. It is literally impossible to forecast with any degree of accuracy.

    That being said, you asked for my take on things so I'll throw it out there (although to re-iterate, my opinion is meaningless). I think that 18-24 months ago there was a large pool of buyers who were sitting on the sidelines waiting for prices to come down. And now that pool of buyers has ballooned even further, because nowadays you have that same pool of buyers from 18 months ago PLUS an additional pool buyers who are ready to purchase, but this time everybody is waiting for rates to come down. Not to mention all of the inventory issues that we had back then are even worse today. If I had to guess, if/when rates go down, prices will go up. Which means that now might be a good time to buy a residential property. I'd rather buy a deal now and refinance later than wait for lower rates only to pay more for the house.

    I can't help but look back to 2011 when I bought my first house (and the dozens of deals I've done since then). There have always been people trying to push a narrative based on their view of the economic conditions that it was a bad time to buy in 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, and now 2023.

    If you have strict underwriting criteria, you're in the right market, you buy deals under market value, and you deeply understand your sub-market, it is my opinion that it is never a bad time to buy.

    10Reply
  • Brandon Stone
    OP
    Member since 2018 · 13 posts · 12 votes
    3y

    100% agree.


    but if you can’t afford it, I wouldn’t push it right now. 8% or whatever is a lot of interest. 

    2Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y
    Quote from @Brandon Stone:

    100% agree.


    but if you can’t afford it, I wouldn’t push it right now. 8% or whatever is a lot of interest. 


     One of the things the bank does when qualifying people for a mortgage is to assess if they can afford it or not.  Most people should be able to look at what their mortgage payments would be, and their current expenses (eg rent) and determine how well that works.  

    In Canada, our mortgages are different and while someone may have a 25 year mortgage, we have to renew them every 1-5 yrs; so changes to the interest rates have a big impact on their current mortgage.  For the last 5 years or so when looking to get a mortgage, the banks don't use the current mortgage rates, but a higher one to see if you qualify.  You still pay the current mortgage rate, but they knew the rates wouldn't stay at 2.5% forever.

    0Reply
  • Jeremiah Dunakin
    Member since 2022 · 186 posts · 192 votes
    3y

    I good deal is a good deal I suppose. A year ago intrest rates were 5/5.5. People were saying wait to buy until rates go down. Today rates are around 7/7.5. People are saying wait till it goes down. At some point (not saying you have to buy to buy) people have to accept the environment they operate in. While I don’t have a crystal ball. I can read. All signs are pointing to rates continuing to rise. The feds have signaled that they may not be slowing down on rate hikes. Add to the credit downgrades of USA, federal govt spending money like drunken sailors in Ukraine and also at home. Also making it harder for oil production which in turn will continue to raise prices of literally everything. Lumber will go up as will shingles, solar panels, electric cars, chicken, tires, pants, dog food. This in return will continue to have freeze in place. I said all that to say in my opinion (which is bout worthless) rates are not gonna drop anytime soon. The CPI will continue to be off the chart and true inflation( what we pay for everyday) will continue to be at 50% and higher compared to a couple years ago. I bet people were saying man I wish I would got in at 5.25 percent, I’m thinking people in a year or two will say I wish I would have got in at 7%

    0Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    The market is not going to get better anytime soon. If you are an investor that allows sales tactics to cause them to make rash investments, this is not the industry for you. 

    3Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Brandon Stone:

    I see EVERY realtor on IG/ TIK TOK/ whatever; saying it's going to get more expensive to buy a home if you wait. You are a pumper.  The inventory problem has not corrected itself, so prices could continue to rise, and if there is an interest rate drop, house prices could boom. This is assuming that all things remain constant. This leads me back to my point, do not buy a house, or real-estate, if you can't afford it. If people actually start waiting for interest rates to come down, this will help bring the inventory back up. Additionally, I could potentially see tons of people defaulting on their mortgages if they continue to buy places they cannot afford. I see this as the only way we move into a recession. Please do not FOMO into deals, as this could cause much market pressures. Take your time, wait for rates to drop, and inventory will begin to come back if we take this attitude as a collective. If you can afford to keep buying, be my guest! Now is not the time to gamble though. Save money, live comfortably, and wait for your moment.

    Thoughts? 


     

    If people actually start waiting for interest rates to come down, this will help bring the inventory back up. --->

    If interest rae going down, price is going up still, because that's the market for FTHB regardless of inventory status.

    If rate going down it does not mean that inventory is raising because people still needs to live somewhere.

    Having said, regardless of rate activity, home price is still going to rise, the difference is the velocity of the appreciation or how fast it moves.

    With the current rate of inventory and price appreciation during price rise, home price would just increase between Q1 and Q2 before slowing down in Q3/Q4 timeframe.


    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Brandon Stone:
    Quote from @Scott E.:

    Sounds like you have a crystal ball. I'm jealous. I could do a lot with one of those things. 


     Im just thinking and trying to be proactive. I think its more of having a contrarian mindset. I remember trading stocks 1.5/2 years ago thinking that I was the best trader of all time, only to finish the year negative lol. Nobody has a crystal ball, but I think what I said makes a lot of sense from a macro economic perspective. Whats your take on things?


     stock market is reflection of money supply velocity. If velocity is reducing thus stock would go down by itself , before a rebound.
    But if you invest in SPYL/NVDL/JEPI/TSLY only you would make money regardless from double digit cashflow LOL.

    0Reply
  • Kyle Sosnowski
    New to Real Estate · NJ · Member since 2023 · 71 posts · 20 votes
    3y
    Quote from @Scott E.:
    Quote from @Brandon Stone:
    Quote from @Scott E.:

    Sounds like you have a crystal ball. I'm jealous. I could do a lot with one of those things. 

     Im just thinking and trying to be proactive. I think its more of having a contrarian mindset. I remember trading stocks 1.5/2 years ago thinking that I was the best trader of all time, only to finish the year negative lol. Nobody has a crystal ball, but I think what I said makes a lot of sense from a macro economic perspective. Whats your take on things?

    I think that nobody has a way of forecasting what the future holds in the real estate market. Nobody knows where things will be in 3 months, 6 months, 12 months, 18 months. Not even the most skilled economists or biggest hedge funds out there. It is literally impossible to forecast with any degree of accuracy.

    That being said, you asked for my take on things so I'll throw it out there (although to re-iterate, my opinion is meaningless). I think that 18-24 months ago there was a large pool of buyers who were sitting on the sidelines waiting for prices to come down. And now that pool of buyers has ballooned even further, because nowadays you have that same pool of buyers from 18 months ago PLUS an additional pool buyers who are ready to purchase, but this time everybody is waiting for rates to come down. Not to mention all of the inventory issues that we had back then are even worse today. If I had to guess, if/when rates go down, prices will go up. Which means that now might be a good time to buy a residential property. I'd rather buy a deal now and refinance later than wait for lower rates only to pay more for the house.

    I can't help but look back to 2011 when I bought my first house (and the dozens of deals I've done since then). There have always been people trying to push a narrative based on their view of the economic conditions that it was a bad time to buy in 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, and now 2023.

    If you have strict underwriting criteria, you're in the right market, you buy deals under market value, and you deeply understand your sub-market, it is my opinion that it is never a bad time to buy.


     Loved this reply Scott.

    Very relatable opinion.

    1Reply
  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    3y

    A couple of thoughts:

    8% is high in comparison to the last 15 years, but not over the last 30+. There have been interest rates in the double digits. You can ask your parents and grandparents.

    I agree, don't buy a house you cannot afford, but that is in any market. That isn't special to today.

    If I could comfortably afford it, I would be buying right now in a heartbeat. Less competition, Sellers are becoming more open to concessions (just got a price reduction of $91K for one of my investor clients) and as mentioned before, if and when rates drop, FOMO will likely kick in, and while everyone else is scrambling to buy, you can to bank on the appreciation and just refinance.

    I also don't think some people strategize well. Because of the tax benefits of owning, they can adjust their W2 tax withholdings to offset some of the pain (consult a CPA or tax advisor). I had a house hacker do it and was able to offset over $600 a month in savings.  

    There is always an excuse not to buy, but that's why the phrase is "don't wait and buy, buy and wait."

    0Reply
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