Generation X was hit the hardest by the last housing bubble. My husband and I bought our first single family home in our mid-30s just as the housing fervor started to escalate. We started to panic when we couldn’t even get on waiting lists for many subdivisions. Finally, we signed a contract with our new home builder before even driving over to look at the actual lot we had chosen on a plot map. Now it seems a new housing bubble is forming as echo-boomers seek to buy their first homes. In some cases, the older Millennials are buying step-up homes. Perhaps Gen-X’ers are smart enough to sit this one out. I can see too many signs that I wouldn’t come out ahead if I sold or bought a new home in my Florida community even though the new homes are attractive.
Stretching to afford payments
According to a recent article by Market Watch, more than half of Americans are struggling to pay their mortgage or rent payments. Experts say home prices have increased by 20 percent in the past couple years. In order to move, I’d have to find a newer home, which would come with a higher price tag as well as higher property taxes. I am not going to trade my $900 a month mortgage payment for a $1,400 payment. Like other Americas, I’d have to stop saving for retirement or get a second job in order to make the higher payments. I think many echo-boomers who purchase expensive new construction homes will eventually lose their home to foreclosure because they don’t realize they are buying during a new housing bubble.
Giving away my home
Nearly all of the homeowners who are selling homes in my neighborhood are practically giving away their homes to Millennial buyers who can’t afford the new construction homes. Some go into foreclosure or sell their homes for less than they owe through a bank-approved short sale. But even in the case of traditional sales, the younger buyer is purchasing the home for less than the original owners paid. I spent almost 10 years paying on my mortgage and investing in my home with new floors and landscaping. Even though Realtors are starting to walk door-to-door asking homeowners to list their homes, I notice they specialize in “short sales.”
Getting out from under
According to Market Watch, the rising home prices mean fewer people are underwater on their mortgages. I only have equity in my home because I paid on my mortgage for almost 10 years. I can probably only sell my home for the base price I bought it for, but not including the cost of upgrades or improvements. Homes that weren’t bought during the bubble often appreciated in value. For young people buying during this echo housing bubble in my Florida community, I think they may be in for a rude awakening. While there is always a market for new construction homes, fewer people are willing to pay as much for even a slightly lived-in home.
When housing crashes a second time, I can only hope it doesn’t completely destroy my home value. As a person who would eventually like to purchase a new home, I’m waiting for builders to have too much inventory and not enough buyers. Since everything in real estate goes in cycles, I am sure it will happen soon enough.
More from this contributor:
Making Our Move Before the Next Bubble
Money Moves We Made to get in a Lower Tax Bracket
Financial Setbacks for my Sandwich Generation