I have always found the "Real Estate Market" to be very situational. Trying to paint a one size fits all narrative for everywhere form Maine to Miami is silly. Certain sunbelt cities are absolutely buyers markets and other places are still sellers markets.
I think many major metro areas are starting to see levels of inventory that we have not seen since the late 2010s.
My hot take is that home's are not good "investments". My case study. My parents bought a home in 2010 for 225k that is now worth ~500k. However, they ended up paying ~170k in interest and approximately, this is a very rough guess, 50k on a new HVAC, Roof, Appliances, water heater, and other odds and ends. They also had to pay 15 years of homeowners insurance and property tax. 500-225-170-50=55. They made ~55k before accounting for home owners insurance and property tax. Please correct my math if I am wrong, but that was a 1.57% annualized return before accounting for homeowners insurance and property tax.
I don’t understand your math.
If they’ve paid 175k in interest, they didn’t also spend $225,000. Maybe they put 20% or 45k down?? Use the down payment, not the sales price.
And then throw it away because they haven’t sold.
In college, I bought a $100k home a mile from where I grew up with 5% down and monthly payments (PITI + PMI) that were comparable to rent for a similar property. I wasn’t aggressive at paying it down, but a refi lowered the rate and knocked a few years off the mortgage. Before age 50, I was debt free. My mother lived into her 90’s staying in the home my folks purchased in 1958.
If I reach 90, I will similarly have over 40 years with drastically reduced housing expenses. This is what I’ve “made” on that initial $5000 investment + capital improvements.
I made my living on Wall Street. There isn’t a low-risk investment product that will take a $5000 investment and turn it into a large enough annuity in 25 years to generate $30,000/year in income continuing in perpetuity and adjusting for inflation. You can do that on a margin, however. And the only margin investment available to the average bloke is real estate with a mortgage. I don’t have to sell, and my home is already generating a return.
When I moved in, my neighbor Peggy (same age as my mom) was renting the same size house that I purchased. Peggy was Black. And in the 1950’s in my town, realtors would not show Black couples the newly constructed housing that my white parents were able to purchase. Peggy & Bill had no choice but to rent. Eventually, her rent took up such a large share of her income that Peggy needed to move to subsidized housing where rent was capped at 30% of income.
My mother lived right around the corner from the Subsidized Senior Apartments and her Taxes & Utilities were similar to Peggy’s rent.
When Peggy died in her 90’s, there was no home value for her children to inherit. When my Mom died there was.
There’s more: From the time my parents paid off their mortgage in 1978, they saved what that monthly mortgage payment would have been. When my Father retired, they saved his pension and her Social Security, living on only his SS. It took them far too long to get that money invested in an index fund (But, heck, savings account interest was actually something in the 80’s so, whatever. Can’t cry about it now). The point is, there was plenty for Mom to have privately hired in-home aides for the last year of her life + leave an inheritance. And over the years she had the room to take in her children to live for stretches of time when needed.
Peggy needed a subsidized apartment and Medicaid. That’s not staying in your home of 50+ years in the twilight of your life. It’s a shared room, nursing home bed and restrictions on hours & number of visitors. It’s also isolation during a pandemic.
The wealth gap between Black Americans and other racial groups is about real estate and who was shut out of the market. It’s no longer the 1950’s, red-lining has long been illegal and the disparity should eventually cease to exist. But there’s a case to be made for reparations to the generations who should have been able to buy homes in their 20’s who were shut out of the market and forced to rent.
You might wonder why Peggy didn’t just buy the house I purchased. It should have been affordable for her. And perhaps she could have. But she was already in her 60’s. I was in my early 20’s. She was already too old that she’d never have decades of mortgage free living.
My advice:
Buy on a margin, when you are young.
Don’t over pay.
