Boomers Are Winning a Battle for Housing
Short video pointing out some key points around leverage. If you are in the housing game you can trade up or down, but with leverage over time it's hard to get into the game.
Example:
A young couple just bought a house in our neighborhood for $785,000, the house sold in one day after a bidding war. This couple is buying at rates closer to 7%, and while they won that battle to buy, that's a significant portion of their income (most likely) compared to when I bought my first house for $325,000 at 5% rates and refinanced to 3% while the value has quadrupled over that time period.
I'm not a boomer, but my parents are, and they could sell their house and trade down and pay cash and have money left over, so many were focusing on the Millennial as the future of home buying, but at what price are they competitive?
There is little inventory anywhere, holding up prices ... people with cash can use that to 'buy down' their payment with larger down payments or pay cash and refinance later.
Mortgage Advisor Tip: As boomers are winning a battle for housing, that battle is not over, but we need to find ways to compete. Just as builders are winning by buying down rates and offering discounts on new houses, lenders must find ways to change the game they are playing to help younger buyers.
If you buy a house you are getting the benefits of leverage, meaning as houses go up yours is going up too, so you can use that to keep pace and buy another higher priced house. If you don’t own a house you are forced to try to save to ‘get in’ and you can’t easily keep up as your savings has no leverage.
Boomers were in a generation where most everyone has purchased a home and they’ve been riding that wave of appreciation for 50 years, so for young couples who are starting out they don’t have that ability to pay cash or sell an existing house and use a big down payment to make their cash flow work!
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