Hi Marcus, thank you for the video, very informative and extremely helpful. I have been feeling like the house prices have exploded since covid so I was shocked to see MKE was not effected by that big bubble, I did not think that was the case! I don't yet understand why everyone thinks the market is going to keep climbing to infinity after it has already climbed so much. There is room for it to reduce and with the economy cooling, and inflation getting under control, I am hoping to see some decline in the market so I can be a buyer and not feel like I'm buying at the top of the market.
Glad to hear! You are applying stock market thinking to the issue, let me offer a different perspective. What you see in home price increases is to a large extend is the devaluation of the US dollar. You have to bring more dollars to buy the same house than last year, which is basically the cost of land+labor+materials. Back in 1960 you could buy a nice brand new home for $21,000, today it's more like $600,000. You can google long-term home price charts for the US. But that's not even the main point: when you buy a house with a 30y fixed mortgage you lock in the monthly cost. Unlike rent, it is not going to change. If the value of the house would go down next year, it does not matter unless you wanted to sell it. There was no time in US history where home prices did not go up over a ten year period, including 2008. If you are renting a small house that will cost you probably $24,000 per year and you have nothing to show for. If you spend $24,000 on mortgage payments, you have at least paid a portion of that money into your own pocket, increased your net worth and gained some tax write offs. And over enough time the equity is very likely to increase. We have a housing shortage in Milwaukee, I do not see a good reason why sellers would start discounting their homes next year.. home prices are what's called "downward-sticky". People just don't sell. Would you go back to 1960 and buy a couple houses if you could or rather pay rent?
Hi Marcus, thank you for the video, very informative and extremely helpful. I have been feeling like the house prices have exploded since covid so I was shocked to see MKE was not effected by that big bubble, I did not think that was the case! I don't yet understand why everyone thinks the market is going to keep climbing to infinity after it has already climbed so much. There is room for it to reduce and with the economy cooling, and inflation getting under control, I am hoping to see some decline in the market so I can be a buyer and not feel like I'm buying at the top of the market.
Glad to hear! You are applying stock market thinking to the issue, let me offer a different perspective. What you see in home price increases is to a large extend is the devaluation of the US dollar. You have to bring more dollars to buy the same house than last year, which is basically the cost of land+labor+materials. Back in 1960 you could buy a nice brand new home for $21,000, today it's more like $600,000. You can google long-term home price charts for the US. But that's not even the main point: when you buy a house with a 30y fixed mortgage you lock in the monthly cost. Unlike rent, it is not going to change. If the value of the house would go down next year, it does not matter unless you wanted to sell it. There was no time in US history where home prices did not go up over a ten year period, including 2008. If you are renting a small house that will cost you probably $24,000 per year and you have nothing to show for. If you spend $24,000 on mortgage payments, you have at least paid a portion of that money into your own pocket, increased your net worth and gained some tax write offs. And over enough time the equity is very likely to increase. We have a housing shortage in Milwaukee, I do not see a good reason why sellers would start discounting their homes next year.. home prices are what's called "downward-sticky". People just don't sell. Would you go back to 1960 and buy a couple houses if you could or rather pay rent?