It's easy for someone else to tell you what to do. Ya know, like "rules for thee, but not for me." I heard it a lot when I was running my business that failed. "Well, I mean, I wouldn't go work an overnight shift at the DG for $8/hr but, I mean, you could." The same thing has gone on during the peak FOMO & YOLO of the housing market as well. "Oh, your house is a major investment. Probably the biggest one you'll ever have. Don't you want this? Can't you pick up 5 more jobs to afford it?" Reminds me of the mortgage broker who told me, "I'd never take out an ARM, but, I mean, you could if you want to." 😠
I've been ringing the alarm bell for months now. The Fed wants to crash the job market. They want to see unemployment go up. So what would you do if picking up another job is not an option? What if you can't work a full-time job and then operate 2 or 3 side hustles to afford something? What then? Personally, those are questions I would want to seriously contemplate before making any type of major purchase.
Links I discuss in this episode:
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Welcome to the Causey Consulting Podcast. You can find us online anytime at CauseyConsultingLLC.com. And now, here's your host Sara Causey. Hello Hello and thanks for tuning in. First and foremost I want to say Happy Halloween. This is an inclusive program. So I want to try to hit other holidays that are coming up. Happy Samhain. I think All Saints Day and All Souls they're coming up as well as Dia de los Muertos. So whatever you choose to celebrate around this time of the year, I hope that it is a good experience. And now to the show. On October 17, Buzzfeed News published an article titled she bought her house as the market peaked. Now she regrets it. The byline reads record housing prices and rapidly rising interest rates have many people questioning the value and viability of home ownership. We're just house poor now. Yikes. On October 25, LinkedIn news published the article housing prices slump the most since 2009. Well, isn't that interesting? I feel like Dana Carvey as the church lady. Well, isn't that special. I'm thinking back to every realtor and broker who told me that we would never have another 2008 These loans are so solid. We are not in a housing bubble. The kinds of shenanigans and chicanery that happened back in oh six and oh seven ha. Oh, no. There's not that kind of financial hoopla and nonsense happening behind the scenes. These loans are solid. Right? Sure. So before I jump back over to BuzzFeed, I want to read from LinkedIn news. Housing prices have fallen the farthest since March 2009. During the financial crisis, as the Federal Reserve pushes up interest rates to curb the fastest consumer price inflation in decades. The s&p CoreLogic Case Shiller Index showed a 1.3% drop in August from July led by West Coast City's affordability issues accentuated by mortgage rates at close to 7% are cooling demand fastest in San Francisco, Seattle and San Diego. Nationally, prices are still 13% higher than a year ago. Demand is still strong and lower cost cities with thriving local economies. According to a Wall Street Journal index, with Johnson City, Tennessee topping the list, and of course, you have some commenters blinking on to this post to say, oh, housing prices are not crashing right now. No, things might be flattening out a little bit. The people are doing great. And I'm like, Who? Who still believes any of that. All right. So what a great segue over to BuzzFeed. In this article we read. Kristen Riggins had 30 days to move after her landlords management company told her they were selling the home she was renting with her three children. Unable to find an affordable rental in time rents in Columbus, Georgia were rising, Riggins ended up moving her family into a hotel uncertain of what to do next. She had been pre approved for a mortgage about a year earlier at a rate near 3.5%. So she started to look more seriously at buying. I said, Well, if I'm gonna pay this rent, I might as well buy she told Buzzfeed News. Like many people caught in the latest home buying rush. However, Riggins who processes medical claims for work was repeatedly outbid. Her agent said she would have to go above a home's asking price if she wanted to close a deal. I'm going to stop for a minute to say Doesn't that sound like the same BS that we're hearing from these posters? Oh, well, it might be flattening a little bit, but it's not crashing. These loans are solid housing prices will only continue to appreciate. Hmm, I'll continue to read. The last two years have been a chaotic and frustrating time for many buyers as low mortgage rates and record high rents stirred up an unprecedented hysteria to own a place to live. Yeah, I'm sorry, because I'm just like I'm clenching my teeth right now. Really? It stirred up an unprecedented hysteria, Huh? Huh? Did it did it? I guess one man's unprecedented hysteria is another man's. This was an artificially manipulated and jacked the hell up market. Still an enduring component of the American dream. It led to feverish bidding wars, hasty closings and poor or even waived inspections, all propelling home prices to new highs, then the Federal Reserve hit the brakes in response to inflation. and mortgage rates spiked in 2022 cooling the housing market and suddenly making homeownership even more unaffordable for many investors now expect home values to drop in 39% of US cities next year. And quote, Orlando miner has recorded a great video about this exact article and this exact topic, I will drop a link to it. And I'll also relink the information about sitting it out with purpose. This is why I think if you are in a non emergency non life threatening type of situation, and you can sit on the sidelines and wait for this to play out. It's probably not a bad idea. I cannot give you advice. I can't give you financial advice. I can't give you real estate advice. I can really only speak for myself and say, that's what I'm doing. I am sitting it out with purpose. I'm keeping an eye on the market locally because I know what's coming. I have good spidey senses. And I've seen this movie before. I lived through the Great Recession and global financial crisis, I was a grown ass adult at that point in time working and maintaining a household and a car payment and all that fun stuff. I know pretty much how these things play out. I can't claim to know exactly what the timing is going to be or exactly the way that this particular economic poopoo storm will take shape. I just know that I would not want to be left holding the bag on not only an overpriced house, or a place that is a lemon that needs tons of repairs, and is basically going to fall apart in the next stiff wind. Oh, and then on top of that, to add insult to injury, I have to pay a 7% interest rate. That is a huge no thanks for me personally. Before I go down and continue to read, I also want to draw attention to this dystopian situation we have suddenly making home ownership even more unaffordable for many. Yeah, no, duh. It's almost like this has been intentionally engineered to be that way. I mean, surely not. But I mean, it almost kind of looks like that, doesn't it? I published a blog post last week titled feudalism. 2.0. And I really think in my opinion, that's where we're at. We have this sad story on CNBC, that 63% of Americans are living paycheck to paycheck now. And that includes nearly half of people who earn six figures. But you know, remember that that toward the end of August, they told us that fewer Americans said they were living paycheck to paycheck and that inflation was beginning to ease. Hmm. Well, that sounds like a massive contradiction in terms, does it not? The media does talk out of both sides of its mouth, which is why I think it is important to watch what they do. Don't pay so much attention to what they say especially what they say out to the general public. Now what these bankers and fat cats and corporate tycoons say privately, what they say to their shareholders, to the investor to the board of directors that is worth taking note of, because it's sort of like, okay, well, here's the message that we give to the unwashed masses to kind of keep them calm, give them their bread and circuses and all that. But we're going to say to the board of directors and the investors and the people, you know that we really actually answer to what we think is going on. So if they're telling the investors and the Board of Directors behind the scenes that the economy is about to go to hell in a handbasket, but then they're telling the general public that inflation is beginning to ease and don't you worry about a thing because everything gonna be all right. I think it's worth noting the discrepancy there in language, I'm just saying. But in this article, about 63% of Americans living paycheck to paycheck, there's an even more dystopian quote, in my opinion from a notion IR at Lending Club, saying, being employed is no longer enough for the everyday American filed that away, because that exact thing is going to come up again in the BuzzFeed article. But here's the point I want to make before I move on, the middle class is shrinking. We have people that are getting moved up to the upper echelon, that just seem to have money that makes money that makes money, but then you also have lower income growing as well. So we really do seem to be living in a time where the rich get richer, and the poor get poor. And whoever's in the middle is the one that really gets the squeeze with it, we're not so but that seems to be the case. There's also an article that I linked to you can find it on medium you can find it on surviving, surviving tomorrow.org I'll drop a link. And it's a great article. Sad. I mean, it's not great and like, Oh, how wonderful way it's, it's great in that it's a wonderful piece of journalism about a terrifying topic and it discusses this idea of manufactured insecurity. And people getting into rental properties and having no other place to go, and essentially becoming a captive class of tenant. They have to stay here until they die because there's no other place for them to go. And here's what I think. When you look at one full time job not being enough to sustain you. I feel like manufactured insecurity goes beyond renting an apartment or a house trailer. To me it looks like workplace feudalism plus living situation feudalism equals feudalism feudalism, hello, connect the dots. I'll return now to the article on Buzzfeed. They have this little graphic with a for sale sign on it and it says here's what Buzzfeed News heard from regretful new homeowners around the country. Now because I live in the Midwest, and so does this commenter it really struck a nerve for me. Our realtor pushed us to increase higher than we wanted to to win the home. And now we are stuck with $80,000 in repairs, and homeless someone from Oklahoma writes. Yeah, you know, I've told you bird's eye view of what I've seen here in the Midwest, people with a burned out meth trailer, putting it on 10 acres and saying we want 600 $700,000 For this monstrosity. And in the fever pitch of FOMO. Last year, there were people who were succeeding at that. And mostly what I saw now I cannot speak to anybody else's experience. And I cannot speak to someone who's living in San Diego, someone who's in Boston, someone who's in Miami, Florida, your your experiences will differ. Okay, I all I can do is talk about what I've seen here in the breadbasket of the Midwest. And I saw so many poop houses, and what I would call problem child houses. It seemed like the sort of normal things that you find during a more balanced real estate market were just non existent. What do I mean by that? Things like, hey, we need to relocate to be closer to the grandkids, we want to retire and move south, or we need to relocate to be closer to elderly parents. I'm relocating in order to take a job. We're upsizing, we're downsizing, the normal things that you typically hear from a home seller, even if they're kind of hot air, and maybe they're trying to paper over some things that are less than desirable. You just didn't hear those things. Last year, at least I didn't, the houses were terrible. A lot of them were in awful condition, you could tell that there had been a lot of deferred maintenance. In some cases, people hadn't even bothered to tidy up, you would go and look at a place and there would be dirty dishes in the sink. There would be crud all over the floors. You know that feeling when you go into a movie theater where people have just willy nilly dropped popcorn and candy and soda all over the floor. And so your shoes stick to the concrete. That's how it was. And some of these houses just nasty, unkempt, dirty conditions and straight up nobody giving a damn, including the realtors, it would just be like, well, you either want this place or you don't. If there's ketchup stains all over the carpet, if nobody has cleaned it, if the roof is caving in, like who cares about your opinion, there was even a house that was for sale. It came across my radar because it came with 20 acres. And it's in a pretty decent area, a nice little decent agricultural area where everybody has some farmland, and they have their animals and kind of mind their own business. And the house, I don't even really know quite how to describe it to you. It was like the people had started a major renovation, and at some point said, Screw it, we just want to walk off Oh, but we want to get paid to just walk off. So the staircase was gone. In order to access the second floor of the house, you had to use a ladder. I'm not kidding. There were various other things in the house that were torn up and not finished. And when I talked to the realtor, I was like, Well, I don't know how you're gonna get like top of the market price for a situation where you literally can't even get to the second floor without using a ladder. Like what is that he has mobility issues, if they have balance issues, that whole second floor is going to be inaccessible to them. They'll have to hire help, you know, and in the midst of the FOMO going on in the housing market. There were also people using the house like an ATM pulling money out and doing spending money whether it was on junk like Gordon Gekko talks about in Wall Street to or they were doing renovations to their home. So there were a lot of builders and construction professionals that were either not available to do work or was like yeah, sure we'll come out and do this for you, but it's gonna really cost you it's just crazy. Okay, yeah, did that inflation you add to that supply chain issues and the cost of what lumber was like at that point in time? And so I told this, dude, I'm like, I don't know how you're gonna get top of the market price. pays for a place where the renovations are like half finished. Plus, nobody even really knows where these done to code. Did they have any kind of proper permits? Is this? Like, is this even safe? Is this legal? Like what's going on? And he laughed. This kid was so cocky. You know, I know this is gonna sound like Schaden, Freud and some of you love and light only people are gonna get mad when I say this. But like, if he goes under when the market crashes, like for real, for real, for real, I'm not gonna cry. You know, these people that were so arrogant that thought their doodoo didn't stink, sorry, probably should have treated people better and not thought that this was going to last forever. He was very arrogant. And he was like, well, I already have two cash offers in hand. We're just waiting to see if we get anything that's better than what we've already got. But they're both for asking price. And I'm like, what? Just, but you know, those people have to have a tremendous amount of buyer's remorse. If the house was gutted to that level, and you couldn't even go up a freaking staircase, you had to use a ladder because the staircase was Gonzo how much else was wrong with it? I'm just saying. So that's the kind of thing that I saw a lot of as well as people trying to get out of high crime areas. Hey, we don't we don't want to say anything to the buyer. But the people that live down the road are making meth or they have loud parties every night and there's smoke crack out in the street. I saw a lot of that stuff going on. So this doesn't surprise me this person that writes in saying yeah, we were told that we had over bid and now we're stuck with 80 grand and repairs and we're homeless. That sucks. I'll continue to read. As the frenzy tapers off, and the economy seems to be moving toward another recession. Some people who bought at the peak regret buying properties that now seem overpriced. Well, they don't seem overpriced they are and they were overpriced. We're not moving towards another recession, we're in a recession. Get real. Buzzfeed News heard from people around the country who bought a house in the last two years and said they now regret it financially. Overall, they described feeling trapped by rising housing costs no matter if they rented or bought and having little leverage against landlords, sellers and banks. Many ended up in multiple bidding wars against other buyers and felt the price they closed at was ultimately too high, but did not see another option as rents were also rising. Some who bought in the early months of the pandemic relied on video tours Before closing, because COVID restrictions prevented them from entering their future houses or touring them for as long as they would have liked. They later found costly problems with their homes that were not identified by their inspectors whom they often met through their agents or lenders and who felt they did not protect their interests. Meanwhile, home repairs have been slow and expensive due to pandemic related supply chain issues and labor shortages. And financing repairs is challenging when home values are set to decline in quote. Orlando miner points this out. In his video, I will also tell you this from my own personal experiences, I believe it is really a savvy move to be present when those home inspectors are around both when they do the inspection on the property you're selling, as well as the property that you're thinking about buying, be there, be able to walk with them be able to ask questions. And in my opinion, it's wise to be careful. And to make a good decision and who you choose for a home inspector. Someone who's not going to be Chicken Little that the least little thing is a catastrophe, but also not somebody that's going to be like reverse Chicken Little, nothing is wrong, everything's fine, nothing to see here move along, and then the whole place falls apart two months later. Because the truth is the system is really set up against you, in my opinion, and you're not going to have a whole lot of recourse. So if a realtor, a broker or a home inspector talks you into doing something against your better judgment and you go along and do it, they all leave. And a lot of these people have liability insurance. So if you even tried to do anything against them, you probably wouldn't get very far. Caveat emptor, let the buyer beware. The onus is on you to look out for yourself. And I personally would not want to hire a home inspection company or a home inspector that I felt like was in collusion with my realtor, or the sellers realtor or broker. As I've said many times before, in my opinion, it's smart to be careful when someone has a vested interest in parting you from your money, because that's going to be their ultimate priority. Not long ago, I had a broker who told me I would never take out an arm. I don't think they're very good decision but I mean you could if you wanted to really I would also not rely on photos or a video tour, because so many things can be obscured on a video tour, or on the photographs. There was a place that I drove by several months ago, I guess it was, I can't remember exactly seems like the weather was warm. So maybe it was spring or summer, I don't remember. But I driven by a place and the photos looked fine. And the price was high. But it was not as outrageous as some of the places around here have been. So I'm like, there has to be a catch. There has to be something going on here. And I want to find out what it is. Holy crap, Batman. Wow. So I get out to this place. And it was at the end of a dead end road, which I appreciated. I kind of liked the idea of being out somewhere, not out to the point where you can't get goods and services. You couldn't get a veterinarian out to take care of the animals. But you know, you're not in a heavily trafficked hated lots of people around type of situation as a crusty old introvert, you know, neighborhoods, subdivisions, and just heavily populated areas. No, no, no, no, I've put my time in. In those places. I heard a person online saying that now subdivisions are really just apartments with breezeways. Because you really just don't have much privacy. Whatever is going on with your neighbors rapidly becomes your problem too. And I'm like, huh, preach. Let the whole church say amen to that. Because it is a fact. Jack. It is. So get out. And I'm like, Okay, it's at the end of a dead end road. That's good. It's got quite a bit of property that goes with it says it's fully fenced. This is also good work dog. Oh my god. I don't know if you're familiar with the Hatfields and the McCoys. Some of you that don't live in the US, you may have never even heard of this, Google it. Look up the Hatfields and the McCoys. It was that kind of situation. A lot of it was clear to me that they wanted to get away from like, less than stellar neighbors involved in conflicts, and someone trying to run an amateur junkyard. It was horrible. And I'm like, There's no way in hell, there is no way in hell, that I would be interested in this kind of situation. But I really especially would not be interested in grossly overpaying for that type of situation. I think they finally after listing it with two or three different realtors and everyone failing to sell it. I think they finally just gave up. And I have pity and compassion for somebody being trapped in a Hatfields and McCoys situation, someone living across the street and up against an individual trying to have an amateur junkyard, I get it. But I'm not going to be the person to pay them money and bail them out of a bad situation. I can't do it. The onus is on me to look out for myself, my family, my animals. And so that for me is just a big old hell to the no. I'll continue to read. All these factors have left these owners wondering whether it was worth it. After all. I almost feel like it's a scam or a trick to get me into more debt. I worked so hard to get my credit up to even be able to apply for a mortgage. Reagan said homeownership is almost another way to keep people under quote. It sure is. Yeah. You know, in in the quiet part of the night, when I'm thinking about things, thinking about finances and how I want the next chapter of my life to play out. I want to be able to pull off this expansion to rescue and rehabilitate more animals. This is a thought that goes on in my mind, from a law of attraction and manifestation. I know some of y'all are not into that. So you can just ignore what I'm about to say. But from like a power, positive thinking and manifestation point of view. It's like I don't want to go too far into that which is unwanted. Because the unwanted to me is what if I'm stuck? What if this is the best of a bad situation for me, where I'm landlocked, I can't expand. I can't rehabilitate any more animals. I can't continue to pursue my passion. Because this is it. Like what if the opportunity never presents itself? What if we are in a system that's not just rigged, it's so freaking rig that wherever you are now is where you're going to be because they have made homeownership and these interest rates and the monthly payments and the property taxes and insurance. So MF ng expensive, that it's just out of reach. That is a thought that has gone through my mind. Many times I would be a liar if I told you otherwise. What I try to do is just get back into that deliberate creation mode and say, is that true? Can you poke holes in that theory? Do you really believe that? What come what goes up is not going to come down at some point? I don't know. I don't have an answer for that. But I absolutely agree with what she's saying that it's almost Another way to keep people under ensure the hill is I'll continue to read in May Reagan's $202,000 offer on a three bedroom home with a yard was accepted. But interest rates were rising. I started to back out so many times, especially when I was going through these bidding wards, bidding wars, say that a few times fast bidding wars and even with this, I didn't feel good about bidding that much. She said, I'll never forget when my agent did the paperwork and turned it in. I didn't get any sleep at night. I remember calling her the next morning and was like I'm thinking about backing out, maybe I should just find a place to rent. Regan said that the agent reminded her that a home is an investment, that when rates were lower, she could refinance and suggested she cut corners somewhere or tried to pick up a part time job in quote. God, Orlando also goes into this very well in his video. You know, as someone who's been in the job market every day for over a decade, one of the things that I want to point out, because you can go other places and have people talking about interest rates and how to do or not to do a refi. All of that might be unique perspective on this is from someone involved in the job market every single day, this idea of go pick up a part time job, go start some side hustles go work some overtime. What if that is not an option? Okay, wake up. The Fed has already said they want to crash the job market. They've already said they want to see unemployment go up. What are you going to do? If it is not an option? If it is not a viable option to pick up a part time job to help you make ends meet? What are you going to do then? If you haven't answered that question for yourself, you better wake the hell up and you better do it fast. If that sounds gloom and doom, if that sounds fear mongering, you can turn this episode off and go listen to bunnies singing and Barney the Dinosaur or whatever the hell but I'm telling you, you need to get your mind right about the job market. These realtors and brokers get to walk away at the end of the deal, and go on to the next poor person they want to manipulate. It doesn't have to be you. Please, please be careful, because in my opinion that is playing with fire. I saw this happen many times during the oil boom and bust cycles during a boom when the people involved in the energy sector could get insane raises. Or they could job hop and get an insane pay bump. Or if they were paid hourly, they were working so much overtime, and they would go and get a fancy house, they would go and get a toy hauler and they would go and get a boat, jet skis blah, blah, blah, blah, blah, they would get themselves so obligated, as though the oil boom would last forever. It doesn't. And then during the next bust cycle, the Repo Men were busy. That does not have to be you. You don't have to get yourself obligated for something that it requires overtime pay for you to afford. If it requires you to cut corners and get a part time job, I would be so very careful with that. So very careful. I would likewise be careful with people who say well, you can just refi later, there are criteria that must be met. In order for you to be able to do that. I am not a broker, I am not a professional financial advisor or planner, I would encourage you to talk to a professional who does not have a vested interest in selling you something and get the nitty gritty about what is involved in a refi I'm 99% sure that if you're upside down on the place and it is worth less than you paid for it, you can't do a refi please do your homework on that. One of the things that Orlando points out in his video is that a lot of people don't treat a home as an investment. It's a little bit of an unrealistic comment. For me, yes, your home can be an investment but here's the deal. Just like playing the stock market stocks are an investment. Stocks don't always make money. Okay, sometimes you may buy a stock or some cryptocurrency thinking you got a hell of a deal. Meanwhile, you wind up getting screwed. You may not wind up in the black, you may wind up in the red, and you need to be careful. Some investments don't pay off and in my opinion, buying an overpriced doodoo poop house with a bunch of problems is not going to be an investment that's likely to pay off. I can't tell you what to do. All I can say is I wouldn't want to be left holding the bag on something like that. Just my opinion. I'll continue to read. Riggins tried her best to shake off her nerves and move ahead with the sale. It was a relief to finally be able to move her kids out of the hotel but by the time she closed in July her mortgage rate was 6%. Setting off a chain of five financial consequences she was unprepared for. I feel like I bought more problems. She said, when we have those gut instincts, you know, if you make an offer on a place, and then you don't sleep so well, I feel like that's a sign. Now anyone is going to be nervous, especially if it's the very first time that you're buying a house, even if it's your sixth or seventh time, you're gonna be nervous, because it's a big decision. It's a major purchase. And so we always want to feel like we're doing the right thing. But if deep down in your gut, you kind of sort of know, I effed up, I probably shouldn't buy this place. I feel that it is important to honor that gut instinct and to listen to it. Because if you go to the realtor or the broker and ask them, Hey, I'm nervous, I'm getting cold feet, I think I want to back out. What do you think they're going to do? They're going to try to talk you down off the ledge because they have a vested interest in closing that deal. They're going to make a commission check. So we have to be careful about who we try to seek wise counsel from. Again, I cannot tell you what to do. All I would say is that if it were me if I woke up in the middle of the night, and I was like, Oh, God, I think I've effed up. I don't think this is the right decision. I think I better pull the plug. I would want to honor that feeling. I've lived long enough and I have enough good spidey senses that I know the difference between I'm a little anxious and nervous, but I'm okay. Versus I shouldn't do this. I know the difference. Know thyself. Know your own gut instinct please. Reagan's monthly rent and only been $800 a month. Her mortgage payment for a home of the same size is about $1,500. The house also needed repairs that her inspector did not catch. None of the kitchen appliances worked. There were electrical issues. The roof needed to be fixed. She found mold under the cabinets. I feel like I was really screwed over and put in a really bad space. She said Reagan's depleted her savings and has nearly maxed out her credit cards. Ah, awful for this woman which she previously kept only for emergencies. She downsized from an SUV to a sedan to reduce her car payments. Reagan's is getting by paycheck to paycheck now and earning extra money by working for Instacart and renting out her car. Still, there was no wiggle room to take her daughter out for her birthday this year. Record housing prices and rapidly rising interest rates have many people questioning the value and viability of homeownership. Sure, that's probably by design, just saying the median home sale price in the US has jumped by 34% to $440,300 in mid 2022, from $327,100 at the end of 2019. Meanwhile, mortgage rates rose this year to 6.7% from about 3.7% At the end of 2019. By this summer, a home purchase was unaffordable for a typical first time buyer intending to purchase a typical home according to the National Association of Realtors, funding necessary repairs beyond the mortgage payments while the prices of everyday goods continued to climb. has many new homeowners stretched thin in quote. Yeah, it does. I remember smartass. I think it was on maybe one of Orlando's videos I'd written a comment about who can afford these houses. When you factor in inflation and the fact that every time you go to the grocery store or the Walmart or the Dollar General it's more expensive than it was the week before. And some smartass wrote well, people who can afford it. And I'm like, listen, dude, who is that? These people that are at the top of the top of the top they're not taking out a mortgage they're buying outright. That's why these bots and trolls and mansplain errs infuriate me. Please do not listen to someone who is selling you a false bill of goods be so careful. So so careful. The house is elimine says Joshua Winget who bought a four bedroom home 40 minutes outside of San Diego in April for $730,000 which was $31,000 over asking after losing out on seven other houses winging it and his husband are now dealing with about $20,000 in repairs. Did we have a choice he said they had been living with a friend and needed to move whether it be renting or buying. Knowing that interest rates were expected to rise which would price them out they made the decision to buy we did what we could to get the best we could he said it's costing us 55% of our income and it sucks to have no free spending money. But at least we have a roof over our head when get plans to refinance if mortgage rates decline and is concerned deterring renting rooms out to make ends meet. They have another graphic that says the town that was lauded as the best schools and nicest people was crime infested, racist, and just an awful experience. We put our house up for sale after being threatened with a gun in our front yard, sold in three days and walked away. So the buyer in Louisiana, wow. I'm telling you, I saw that kind of crap here in the Midwest to people trying to get out to get away from drug heads, criminals, weirdo psychos. A lot of problem child houses. A lot of them. The spring after TJ Grace's landlord gave notice of a rent increase. She bought a house with her wife and the two friends they were living with. By the time we would look at something it had basically already been sold, she said, found that too heavy on the realtors would be super arrogant about it. Oh, there's really no point in us scheduling anything because we already have five offers in hand. So I mean, there's really no point in you coming to look, I mean, unless you're going to offer way over asking are you going to cope pony up like 100? Grand over asking? No. Okay, then fu Well, actually, I'm not the one that's going to be broke over who's gonna be you. They found a 1900 square foot home in the nearby neighborhood of Lakewood, Washington, it was noticeably smaller than the 3000 square foot they had been renting. But at 519,000 with a 4.9% mortgage rate it was what they could afford. Landlords can charge whatever they want, Gray said, But owning hasn't been any easier for them. Yeah, that's another reason why I would encourage you to go and check out that article on surviving tomorrow.org. Because this is happening across the board, we really cannot say well, it's just greedy landlords, or it's only greedy home sellers. It's really getting to a point where so many people are in that captive tenant class, you get somewhere that you can basically afford and you better stay there until you die. What kind of upward mobility is that? You know, I've talked before about being alive and well in the 80s. Now, we were told constantly you can be whatever you want to be, you're going to you've got that shot like Billy our ability, Joel says in Allentown, you've got a pretty good shot to get at least as far as your old man got. The idea was that you would do better than your parents and then your kids would do better than you and then grandkids would do even better than them and you would get to see all of this upward mobility within your lifetime. It sure as hell doesn't seem to be happening now. If you become a captive tenant, or a captive homeowner, I use owner in quotes because you have a mortgage so you don't really freakin own the place. How are you ever going to accomplish that? Almost like that's being engineered, isn't it? Well, her monthly mortgage payments are about as much as her rent was necessary repairs to the roof ended up costing$65,000. I almost can't even read that I think my heart skipped much more than the 12 to$17,000. The inspector had estimated before the sale closed. Meanwhile, Grace had quit her job as an administrative assistant in September 2021, one of the many who left their jobs during last year's great resignation, and has not yet found a new job even after submitting nearly 200 applications. This also kind of pokes holes in the two open jobs for every one unemployed person. People are just still in grandma's basement on that steamy cash, doesn't it? She works as a nanny now. But he's still job hunting and her wife is a cleaner. They split their housing costs for ways with their friends, were just house Pournelle she said those who bought at the peak of the market have no equity in their house when values fall. This is another reason okay, I saw this movie play out 2006 789 People got upside down. They took out those 125% loans, they put no money down they bought the place at more than it was really worth and when the market crashed, they were upside down. It's a scary scary thing. And it sucks to have to watch this playing out again. And therefore cannot borrow against their home's value to manage unexpected maintenance and repair costs. That leaves them using cash or other forms of loans, says Eric Roberson or Rober J, founder of beyond your hammock, a financial planning firm that works with people in their 30s and 40s. With families, you should really be thinking about this in terms of having cash set aside up front for any issues rather than trying to finance that said Jeremy bone, a financial advisor and founder of paceline wealth management. There are good options to finance this. That doesn't mean they're good ones. Or I guess I should say there are options to finance this. That doesn't mean they're good ones. Exactly that all of these brokers will tell you ways that you can do it doesn't necessarily mean that they're good. They have another blow to repair what should have been a six month build turned into 12 months due to material delays. After waiting so long for this house we moved in only to discover terrible craftsmanship and half done work think shower walls, not even grout it turns out there was also a worker shortage during the pandemic labor shortage, which means they couldn't fire any of the few workers they had which means poor work without consequence. Now we're spending money fixing our brand new house someone from Florida writes What a mess God what a mess. The rule of thumb How about how much to save for unexpected repairs varies based on the condition of the home and an owner's financial circumstances. Jason Blum Steen, CEO of Julius Wealth Advisors said he typically tells owners to save one to 4% of a home's value each year for housing expenses. LJ Jones, a financial planner and founder of developing financial put it at about $1 for every square foot per year. Right, of course. But so what happens with these people living paycheck to paycheck? What happens when they get in and a home inspector told him you're good? Everything's groovy, we're square, and then the whole damn thing falls apart. This is why I say it's easy for somebody else to tell you what to do. When they're not living your life, and they're not in your shoes. Rober J or rubbers, say however you want, I don't know, advises setting aside 2% of the value of a home each year on maintenance and repairs. Although he acknowledged it's a difficult time and not everyone can follow these rules of thumb. Noda experts also advise that homeowners think of their housing fund as separate from their emergency fund, which should be enough to cover three to six months of expenses in case of unemployment, it may be prudent for a homeowner who wants to protect themselves a little more from the unexpected to have a 12 month cash reserve rather than a three to six month Reserve said John Boyd, founder of MD are in wealth. Oh, of course, of course. Jesus. No wonder the middle class keeps getting smaller and smaller. Who who has this in the middle of hyperinflation? Oh yeah, I've got an emergency fund of 1212 months worth of expenses in case I get laid off. Oh, and then I also have an emergency fund that's 4% of the value of my house Give me a break. Almost sent something there. Still, Home Repairs can quickly deplete savings when even when they seem ample. Buzzfeed News spoke with other homeowners who were unable to thoroughly inspect their homes before closing due to health and safety restrictions during the early months of the pandemic and who are now dealing with 10s of 1000s of dollars in unexpected costs. in Westchester County, New York Sarah H. had bought a house for $670,000.11 grand above asking in mid 2020 When pandemic restrictions only allowed her and her fiance 20 minutes to view the property and prohibited them from bring anyone with him for a second opinion. Isn't that convenient? 20 minutes you've got 20 minutes to make this important life altering decision and you can't bring anybody with you for a second opinion. So many things I want to say right now that I'm just going to have to keep my mouth closed on because I don't want to get D platformed. Just just gonna. I'll continue to read. The sellers weren't the easiest people to work with. She said their inspector went in to see the house separately finding some asbestos and old termite damage. Sarah had to push hard for the sellers to let in a termite inspector a red flags she later realized I think he was rushed. He told her the house was fine, but turns out we have a horrible, horrible termite damage. Renovating the kitchen originally estimated to be a $40,000 project would now cost $80,000 Because of the damage the termites had wrought in that room alone. We know that the termite damage continues on throughout the house and that's only getting worse with time Sarah said and they have submitted some photos of the work having to be done. Well Sarah still loves the house. The financial impact has been hard to deal with payment for repairs has been coming from an inheritance savings and credit cards. But the couple has also had to deal with a shortage of supplies do the pandemic What really sucks are the projects we know we have to do but we can't get to right now. She said the basement floods and the skylight in the upstairs bathroom leaks. The neighbors honestly just feel bad for us. She said while she has looked at taking legal action against her inspector. She was told by friends and colleagues it would be too costly to pursue and difficult to win. Hmm, what'd I just tell you all? What did I tell you? A lot of these people know that it would be very very difficult for you to come back on them if they sit there and lie to you. The onus is on you to protect yourself. Sarah, who is an academic said she and her fiance, a researcher had set aside a sizable amount for emergencies about 40 $1,000 I would say, in juxtaposition to most people living paycheck to paycheck. 40 grand is one hell of a good nest egg for most people. I know a lot of you listening to this broadcast would say I'd throw my mom under the bus to get 40 grand in an emergency fund. But it just wasn't enough for all of the houses problems. While she would like to build back up a housing fund, they have other more immediate costs to consider. My son goes to daycare and it cost me $2,000 a month, like half of my paycheck, she said, I would love to save another 4% of the home's value, but it's just not feasible. In late 2020, see garland and their husband moved to Tacoma, Washington from Florida. Garland, who is non binary and trans say they weren't feeling like we're very accepted politically and socially in Florida, and decided to relocate to the West Coast. Because Garland has medical issues that put them at high risk during the pandemic, they relied on a realtor introduced by their lender. Isn't that something the realtor? They relied on a realtor who was introduced to them by their lender collusion to give virtual tours of the few places in their$300,000 price range. The house they eventually bought looked nice, and it was very clean, and there was no money in it. So it was empty. So you can imagine all your stuff there, they said. But the inspector caught some minor electrical problems and issues with the water heater, but missed major structural issues. I don't know. But how much are you willing to bet all of these people were in collusion with each other? The inspector, the broker, the realtor, I'm just saying very well could be the case. Here's another blurb. I budgeted Well, for a home when I first started looking, I put in over 20 offers and by the time I closed, I was at the very top of my budget. I didn't expect the cost of groceries and cost of living in general to shoot up as much as it did, and had very little cash left over after closing costs via in Texas, right. Yeah, that's another reason why these bots, these trolls, these mansplain errs that go on the real estate channels and they're like people are doing great. They can afford it. Everything's gonna be all right. That's why I want to punch them in the teeth. Or I guess if they're bots, they're non existent teeth. They're imaginary teeth. It's like people are suffering. People are getting themselves into a financial mess that they probably will never get out of. And you're you have the nerve you have the unmitigated gall to go on a channel and act like everybody's doing great people can afford it people gonna be all right Shut up. Garland and her husband drove across the country to their new home almost immediately when you walk in the house, you can tell there's something off with the floor. It felt almost like a waterbed or a trampoline garland said there were no joists under the floor. The house had settled on one side, we contacted our homeowners insurance and they're like we'll pay if a floor falls in. But until then you're on your own. Garland said Oh, wow. But see, that's something else that can very easily be obscured in photographs and a video tour. You're not going to know that until you've walked on that floor yourself. The tub in the house is only bathroom drained onto the floor. So they took sponge baths as they worked on possible solutions. Garland said they are dealing with repairs, when they can afford to the plumbing and tub have been fixed. The electrical wiring was updated and they've put in a support for the floor. It has all cost $50,000 So far, fixing the foundation will be another 40 grand. Wow. I fell out of love with the house almost immediately and I'm still struggling emotionally to want to be here. Garland said they also contacted an attorney about suing the inspector but we're told it would be a hard case to win and would probably not be worth your money to go after. Caveat am tour. The time to figure out whether someone is lying to you is before not after those who managed to buy record high prices the last two years may now find the true costs of owning non-viable. And what what an interesting way to put it the true costs of owning non-viable. At the current environment in which interest is high and demand is falling leaves them with few alternatives. Many people who bought a house and 2022 to no 2020 to 2022 are likely to be underwater with their mortgages for some time. As interest rates quickly go up forcing home prices to come down in order to make up for that said paceline wealth management's bone. They may not be able to sell for a number of years until prices will presumably recover. Yeah, not funny, in that funny and that sounds how on the one hand, they'll tell you prices will only appreciate the market is only going to get hotter. This is such a great investment probably the most important investment of your life, blah, blah, blah, blah blah But then at the same time you look in this article, and this person is saying they may not be able to sell for a number of years until prices will presumably recover. Yeah, it's like when you're on the front end of it and they want to get you into a red hot dumpster fire mess. They'll tell you anything. But after you're in the red hot dumpster fire mess, that's when they start to peddle it back. Oh, shit, man, sorry. You may be stuck here for quite some time because this market is gonna crash sorry. And then there's no consequence. Sounds like the Wall Street fat cats that come and ask for the sweet taxpayer money for their bailouts and they mercilessly screw the little guy and they never see a day in jail. how anybody can think in this country that we have free enterprise is beyond me. how anybody can think that we don't have crony capitalism that these wealthy a holes and hucksters are not protected. I don't know how you can't see that. I'm sorry. I don't don't. Homeownership has historically paid off as a long term investment. But it is not without risks. It can turn out in a number of different ways based upon market conditions. He said, unlike other financial assets, this is something that is a lifestyle choice. And if at some point you need to get money out of this financial asset, you can't always do it quickly. Or at all. Hmm, we see another blurb. My partner was laid off and the cost of everyday expenses has increased dramatically. We miss living in our 600 square foot apartment and having money in our savings account. Because we purchased at the top of our budget, we live paycheck to paycheck, whereas before we were able to save over$1,200 A month individually. Someone from Washington State. Yeah, see, that's the thing. That's the rub. If you're in a position where maybe the house or the apartment is cramped, but you're not house poor, might not be a bad idea to ride this out. Especially if you're able to put money in savings, you're able to put back some extra food and water. I can't tell you what to do. I just thinking about what this person in Washington state is saying they now miss their 600 square foot apartment because at least they had money. That's an important statement in my opinion. Reagan said she is not the first person in her family to own a home. No excuse me so that wrong Reagan said she is the first person in her family to own a home, which she is proud of. Although she regrets not having anyone to guide her through the process. She has put her mortgage into forbearance. And while her payments are on hold, now, interest is still accruing. She plans to save up to take care of the remaining repairs so that the house is in good enough condition to rent out. Then she and her kids can move in with her mother and Oklahoma to get back to a better spot financially. homeownership, she said may still be upheld as a central part of the American dream. But I don't think it's a dream. I honestly think in my situation, I was set up for failure and quote, wow. God, that's sad. It really is. I wish I could give you some kind of neat, tiny little summary here. But I can't just please be aware. Be aware of the the job market and what's happening there. Be aware of the fact that the Fed is telling you they want to see unemployment go up. Be aware of what's happening in the housing, housing market, even if you're not looking to buy or rent right now. Stay aware of how this could impact you and your family. I feel like at this point, it's not fear porn. It's not fear mongering, it's not drastic to say that The life you save could be your own. The neck you save could be your own. The money you save could be your own. Stay safe, stay sane. And I will see you in the next episode. Thanks for tuning in. If you enjoyed this episode, please take a quick second to subscribe to this podcast and share it with your friends. We'll see you next time.