I wonder if anyone here bought in the year leading right up to the crash?
I'll offer you an alternative perspective on runaway housing prices.
We bought our first house in August 2005 for 260k. I was 22. So not quite the very top before the crash of 2008 but very close to it. This was in the Frederick, MD area, arguably an extended Washington DC suburb. Lots and lots of commuters to DC and Baltimore.
After the crazy price appreciation of the past year, my house is probably worth 280-290k. It took almost 15 years for my house to become worth again what we paid for it in 2005.
We now live in Wilmington, NC where the price appreciation on homes is unreal. We've been looking at houses for the past 18 months and we've watched our desired-size home escalate in price from 250k to almost 350k. Our friends there bought a house in 2013 for 260k and now that same model in their neighborhood is reselling for almost 450k.
However, when you find homes older than 2005 in the Wilmington area and look at historical sales, I see echoes of the same thing, homes that are just now getting back to their 2006 peak prices.
It
feels damn hard to know what to do right now. I really would like to buy a house. We're about to be "homeless" in June. We'll be travelling around the country with no home base, and I've learned over the last couple years that having a home base makes me much more comfortable, knowing there's a place I can return to with ease.
But the headwinds right now make it feel like buying the top. Lumber at $1300 (normal is $300-400)? That's fucking insane! Housing demand so high that builders can cover the cost of lumber prices
and raise their profit margins? That's even crazier. We resorted to looking at new home communities because there are few existing homes for sale, and contracts go over asking, and we dealt with crappy realtors who just got into real estate because "it's like shooting fish in a barrel." One of the communities we'd looked at is built by DR Horton, and they just changed their business practice to
no longer signing a contract with a buyer until the house is partially built. Prices are accelerating so fast that they were making less than they could by agreeing to a price on a home 6 months before the closing date rather than 3 months before. Mind=blown.
Demand for lumber and homes has to stabilize eventually but will that be a slow return to normal or a big screeching halt? Plus no one knows if inflation is going to take off coming out of the pandemic and force the Fed to raise interest rates, creating additional downward pressure on house prices.
All those exceptional factors mean there is certainly the
possibility of a housing price collapse somewhere on the horizon. Or maybe things will just stop appreciating so rapidly. I wish I had a crystal ball!
We've recently become far less certain about where we want to end up long-term. Given the conditions I've listed above, and the run up in prices already, it no longer makes sense for us to look at homes. Not worth the risk of buying because we feel pressured to and end up with a repeat performance of our 2005 home. Plus rents are still in the toilet. We can rent a one-bedroom apartment in Wilmington for under $1000 a month and most all the nice complexes are running incentives like a free month. Demand is down. So there are some healthy alternatives out there. That's our personal situation.
An interesting footnote. Stocks have outperformed housing by a large margin. Housing in Wilmington is up something like 40-50% over the last year. VTSAX is up about 100%. So we haven't had the value of our down payment money eroded by rising home prices.