Why do people want to buy houses when prices are dropping?
Some people don’t mind capital loss?
Because they smoke weed and don’t give a shit. Life’s short. Yolo
Don't time the market - especially on Bay area housing. Just buy when you're ready to and be prepared to hold for a while.
In short term it is clearly not the best option for investment. Yet some people don’t choose to optimize. That’s not reasonable to me.
You cannot "optimize" lol
Because some people don't care and just want their own house they can live in. Some people also realize they likely can't time the market anyways. Some people's life situation just make it the right time to buy. Sometimes I feel like people on Blind see the world in dollar signs and dollar signs only...
You are right. Lol. House and dollar are equivalent to some extent.
Still better than throwing away $3500 for a crappy 2 bedroom apartment. A million dollar home has mortgage + insurance of $4500-$5000. The homeowner can claim itemized deduction for Mortgage Interest and Property taxes (roughly $35k deduction, so additional 11k deduction compared to standard, not much but still). The difference of $1500 between rent and monthly payment of house for 10 years amounts to additional $180K (assuming the rents won’t go up) in homeownership. Lets say after 10 years the home price only goes up $100k (conservative) that means loss of $80k. The homeowner would lose $80k over the life (10 years) of homeownership. Meanwhile renter renting at $3500/mo will just throw away $420K over 10 years. If landlord evicts for any reason, add in the moving costs as well. Would you lose $420k or $80k? If the home price goes up by $300k you do the math. If the home price goes down by $400K then it is same as renting, but homeowner would have enjoyed bigger space, no landlord issues, and will have built equity in the home worth around $500k (plus remaining loan balance of $500k which is bad if no job, again same financial situation as renter, plus extra stress). There is a special strategy which I use to payoff my home mortgage super fast without spending any additional dime from my monthly budget. This can payoff my entire loan in under 10 years without changing my monthly payments. That means I’d be debt free even if the property goes down the hole after 10 years with loss equal to 10 year rental amount and I can sell and still get $600k of equity out. Only this strategy makes sense to stay profitable on home purchase in the face of adverse future economics.
Rent your home out?
HELOC ?
5% rule, quality of life, and peace of mind. If a home you live in happens to appreciate that's just gravy. Oh and prices are not dropping in desirable areas.
5% rule?
How do you not know the 5% rule?
Because they buy the dip
Find a Google parking lot in the Bay Area: you will see license plates from TX, WA, OR, MA, MN, WI, RI, ... all over the country. That’s the answer. Leasing offices will increase monthly rent by $100 in each year. People move into the Bay from all parts of the country and it won’t be sustainable for them to keep renting in the long term.
Is there like a good time? Like when prices are going up?
What crystal ball do you have to know that it’s “clearly not a good time”?
Last peak always make one think, in relative terms , it's x % cheaper... also, it's falling, but no one can accurately predict that it's done doing so... Last few stock crashes , more people lost money while catching falling knife than while investing it carefully... Lessons are not always learned...and unfortunately, past lessons are repeated in slightly modified way..