‘Brutal,’ ‘crazy’ housing market has Seattle-area homes selling half-million over asking price

[Ain't That Something]

My house went up like 75K already

BRUH IN 2 YEARS MY EQUITY IS UO 200 K

 

[Sad Bunny]

BRUH IN 2 YEARS MY EQUITY IS UO 200 K

We got in at the right time

I’m glad I didn’t rush and did it in my own time.

 

[97Pac]

Exactly. It's getting to the point where people are addicted to demonstrations and protests. They are romanticized by it

Misguided hate

 

[Conan]

Facts, I did the same shyt for a 700k house. I put down about 90 though.

How much would that house rent for in today's market?

 

[Geek Nasty]

How can we take advantage of this market and make profits?

Dont know. I don't trust real estate prices wont collapse.

I really feel that this market has been artificially propped up (how or why I cant say). I just don't understand how you can have a historic economic shutdown without any noticeable change to markets. Those losses have to be hiding somewhere.

EDIT: unless COVID stimulus spending was really designed to float corporate America.

 

[BaldingSoHard]

I'm glad you provided numbers. Let's look at the numbers.

First of all, I'm going to challenge your claim of rent increasing 8.8% per year. Going back 30 years (looking at a standard mortgage length), based on the Consumer Price Index for all urban customers, rents increased by 3.3% per annum. In that same period of time, homes have appreciated at an average of 4.4% per annum. The stock market has historically delivered returns of 9.9% per annum on average.

Alright. Now let's run the numbers for a house purchase of 600k. You put down 40k. So you get approved for a mortgage of 540k at 3.8% (going off Google's average rates). You only put down 6.6% so you got to pay PMI (1% on loan value) until you hit 20% Equity to Value ratio right? The average property tax rate rate nationwide is 1.1%, let's use that. The rule of thumb is to budget 1.5% for home maintenance, and 0.7% for home insurance. Oh right, can't forget average closing cost of 4% on buying, and 6% on selling.

We are going to take a sample breh and place him in two scenarios. Scenario A: he buys the house using the numbers on hand. Scenario B: he rents for 30 years. Key point: we assume that if breh in Scenario B is paying less on a monthly basis than breh in Scenario A, the delta is automatically invested in the market, and allowed to mature until the end of 30 years. If at any point breh A is paying less than breh B, then breh A invests the delta in the market.

So for example, breh A has to come up with 40k for the down payment and 24k for the closing costs, cash. Breh B does not have to come up with that amount. So he can place that 64k in an index fund tracking the market, and forget about it for 30 years, and at the end it is worth $1.09M. In the beginning, Breh A's monthly payment is $4720, and breh B has to shell out $3500 for rent. So breh B gets to invest $1220 that month. 20 years down the line, breh A is paying $6478 in monthly expenses, and breh B's rent is $6682. So breh A gets to place $204 in the stock market that month.

At the end of the 30 years, breh A sells the house. He pays selling costs, and pays long term capital gains on the profit (minus a $500k deduction granted to married couples). In addition, he liquidates his stock portfolio and pays long term capital gains on what he was able to invest once his monthly house payments were less than the rental apartments of breh B.

For breh B, at the end of 30 years, he liquidates his stock portfolio, and pays long term capital gains tax.

Who came out better? I created a spreadsheet to evaluate both scenarios and figure this out.

Breh A made a post tax profit of $1.31M.
Breh B made a post tax profit of $1.67M.

Both did very well, but at the end, breh B (rent breh) outperformed breh A (house breh) by 360K.

Now you may be saying I fudged the numbers. I'll upload the spreadsheet to a common link if desired so anyone can check my math.

You may also be saying I'm not taking into account mortgage interest deductions. That is fair, but it doesn't come close to eliminating the impact of compound interest on money saved from renting early on in this scenario.

You may also say the answer is dependent on interest rates, estimates for home maintenance and tax and so on. That is correct, but I never argued there was a definite financial answer to the rent or buy question. It depends on the numbers.

But to correct an erroneous point you made, you absolutely can rent and build equity. And you build equity using the money you would have pissed away on interest, home maintenance, property tax, closing costs, the down payment... early on in the life of the mortgage. It's called opportunity cost in economics, and it's only when you ignore this significant factor, does rent seem like throwing money away.

Bruh you put a lot of work into this and I commend what you did here but most of these numbers are just all the way off.

$600k home with $40k down payment is $560,000 loan not a $540,000 loan, for example.

But let's even simplify this and take all the stock market stuff out for Breh A and just assume he simply bought and sold his house and paid taxes on it.

So a property worth $600,000 appreciating at 4.4% for 30 years will be worth $2,246,052.83
Breh A sells the house and is sitting (momentarily) on top of ($2,246,052.83 - $134,763.17[6%]) for a gross total of $2,111,289.67
That amount minus original property value of $600k minus $500k exemption gives us $1,011,289.67 that he has to pay taxes on.
Long-term capital gains on real estate is 20%, so breh ends up paying $202,257.93 in taxes for a final after-tax profit of $1,909,031.74
That's higher than the number you have here, without any stock market stuff.

Please check my math and let me know if I missed something.

 

[Rekkapryde]

Bruh you put a lot of work into this and I commend what you did here but the numbers just don't look right to me.

Let's simplify this and take all the stock market stuff out for Breh A and just assume he simply bought and sold his house and paid taxes on it.

So a property worth $540,000 appreciating at 4.4% for 30 years will be worth $2,021,447.54
Breh A sells the house and is sitting (momentarily) on top of ($2,021,447.54 - $121,286.85[6%]) for a gross total of $1,900,160.70
That amount minus original property value of $540k minus $500k exemption gives us $860,160.70 that he has to pay taxes on.
Long-term capital gains on real estate is 20%, so breh ends up paying $172,032.14 in taxes for a final after-tax profit of $1,728,128.56
That's higher than the number you have here, without any stock market stuff.

Please check my math and let me know if I missed something.

real estate is the new stock market for companies. that's why they are buying up so many residential properties. this should not be allowed.

 

[chineebai]

anytime someone buys a million dollar house im like how the fukk do they afford it especially in NY where every house is a mil, theres so many people with money out there

 

[UberEatsDriver]

anytime someone buys a million dollar house im like how the fukk do they afford it especially in NY where every house is a mil, theres so many people with money out there

Bingo

 

[BaldingSoHard]

real estate is the new stock market for companies. that's why they are buying up so many residential properties. this should not be allowed.

Agreed.

 

[Standing on business]

anytime someone buys a million dollar house im like how the fukk do they afford it especially in NY where every house is a mil, theres so many people with money out there

And a lot of them are foreigners

 

[Wild self]

No, I think like a breh that didnt want to get fukked anymore by CAC employers which im sure that is who you answer to...because I know if you live in the U.S. you punching in right now for a rich CAC ...see me I dont work for em, I partner with em to get my money and go on about my way..whether its the banks, business partners, suppliers, etc...your line of thinking is why Black folk will never move ahead and why we are dominated by the chinese, jews, and latinos in our own areas...you all bark and no bite, shyts weak...I moved off of that when I left my 20s

So you become just like your CAC boss by exploiting the poor. Owning your own house is one thing, but to be a vulture capitalist with no integrity to rent it to WORKING CLASS PEOPLE by overcharging them, just to stick it to CaCS, is counterproductive. You basically another CAC to the poor working class.​

 

[Ain't That Something]

We got in at the right time

I’m glad I didn’t rush and did it in my own time.

I'm almost tempted to sell

 

[Sad Bunny]

I'm almost tempted to sell

I feel you but with the market it’ll be hard to find another house. And rent is ridiculous so ride it out. It should only increase from here

 

[SadimirPutin]

If you have the money to pay 500k over asking for a house you have the money to stick that shyt into a fund or other investment vehicle and wait for the housing market to regain some fukking sense

The housing market is way too out of whack to overpay......houses are not made out of rare earth asteroid materials for people to be this fukking pressed.