Housing prices, other issues---People are avoiding moving to Denver

I can speak from experience I have actually seen mortgage payments in excess of 5k with escrow. These same “kids” are in their late 20s or early 30s and have nice late model cars that they have 700-1k monthly payments on.

I actually investigated living in my Blue Bird BMC Class A in the Denver area in lieu of renting and after ready several anecdotes of folks that tried this, it is actually more expensive to do so. First off, the campgrounds only allow monthly discounted stays only during the off season (oct-mar ?) and they still charge you $1200-1500/mo plus utilities and they do not off full hookups so you need to play the honey wagon game or pay to be pumped out. You’ll be using a lot of pixies running electric heat as my diesel fired aquahot burns a gallon an hour which is insane for even eight hours runtime a day. Then when the busy season returns your rent goes up to like $2200/mo etc. Not worth it! I’m not even sure how passersby afford to camp around there even for a weekend. Many sites were well over $100-125 a NIGHT for a full hookup site that are on top of each other. Craziness. I pay $4/night for a USFS dispersed camp site with zero weirdos around me.
 
supton said:
While I have my fears of a 50 year mortgage, to play devil's advocate, young professionals just starting out could have the chance to lock in a house price early on while watching their income rise as the years/decades pass by. They could pay down principal as income improves in the future.

Most won't, but in theory, some could. Those who won't will become the next generation of renters. Not sure how I'd place my bets on how 50 year mortgages will play out...

Prior to federally backed mortgages, weren't most mortgages interest only? [Albeit a 5 year year term.] A 50 year mortgage isn't far removed from that. Seems like a regression to older times.
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You can make up a bunch of logical reasons if you want. My income will go up so I can pay more per month in the future and pay off early, lock in now and inflation will make the payment comparatively smaller, lock in now and the house will be more in the future, etc.

However all these used to apply to a 30 year mortgage as well. 50% of housing markets are now in price decline for the last 12 months. Not a collapse - but not growing either.

Lots of unknowns - like what is the interest rate premium going to be on 50 vs 30 fixed?

30 year fixed came into being post WW2. So you really have to ask yourself - is the current housing market stable if it requires a 50 year fixed now - when it didn't at any time during all the crazy different times for the last 70 or so years?

As for the 5 years interest only - thats still the standard for commercial real estate. But its a different world. Down payment is usually much higher, 20% being the absolute minimum. If at 5 years you want to refinance and the value has gone down at all - you need to put more down. I would honestly be much happier with this scenario than a 50 year subsidized by the taxpayer - because it would leave the bankers to manage it instead of the GSEs.
 
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Astro14 said:
Which gets you into a starter home at $700K, if you don’t mind being house-poor on 250K/year.
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I guess they could relatively house poor? But even with a $5k/month for 25yr mortgage payment, that leaves ~$10-11k/month left? One probably works from home, and they get a used $20k minivan, and don't have any extremely expensive hobbies? You can do some global travel every year, get some local season ski passes, some nice mountain bikes? Get a little camper trailer for behind the van, sounds like a pretty good 20's life to me!
They aren't driving two new large luxury SUV's and boarding a couple $60k horses, and popping a couple $200 bottles of wine every night, but I think they'd be doing OK otherwise? Presumably their income should climb a bit too?
 
Chipdumper said:
Don’t the Canadians run with 5-10 year mortgages?
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Yes, 5 years is pretty common, but its not to pay off the whole debt, its the duration that the interest rate is fixed for, usually of a 25-30yr mortgage. I guess it shares the risk for both the borrower and the lender if the interest rates change a lot, as there will be a new agreement at the end of 5 years. I just looked to see what they US does as I always assumed it would be the same, but obviously not!
 
IndyIan said:
Yes, 5 years is pretty common, but its not to pay off the whole debt, its the duration that the interest rate is fixed for, usually of a 25-30yr mortgage. I guess it shares the risk for both the borrower and the lender if the interest rates change a lot, as there will be a new agreement at the end of 5 years. I just looked to see what they US does as I always assumed it would be the same, but obviously not!
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I believe the United states is the only country that commonly fixes mortgage rates for 30 years. The government subsidizes the rate via Fannie / Freddie by guaranteeing the bonds that back the mortgages. This is why the government bailed both of them out in 2008. Guaranteeing the loan means investors are willing to fund the bonds at much lower rates than they would otherwise and the GSE's use those to fund the mortgages.

You can get what is known as an ARM - very similar to your 5 year fix. But almost no one does because the rate generally isn't that much less.
 
Many younger adults across the USA have given up hope on buying a house and will be renters for life.
The best situation for them is to inherit their parents’s house.

A house recently sold in my neighborhood for $1.15M and seller was asking $1.29M.
The house was remodeled and really nothing special….. nice but nothing special.
 
Astro14 said:
So, either the kids buying a $700,000 starter home are making $250K+ - or they are way over extended.
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I don't think anyone buying a $700K Starter Home is making $250K these days; they better be >$400k, which is becoming quite common for two younger professionals in their early 30's.
 
Denver has been loved to death. Wages haven’t kept up with the outrageous cost of living increases. Traffic is crazy too.

Not surprising it is undergoing a correction. It used to have a lot to offer, but it’s not worth the price anymore.
 
The Critic said:
I don't think anyone buying a $700K Starter Home is making $250K these days; they better be >$400k, which is becoming quite common for two younger professionals in their early 30's.
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400K household income is in the top 2% nationally. I don't think there is a abundance of young people in that income level in Denver, especially not in their 30's. I am sure there are a few but not enough to buy an fill the "average" homes up.
 
goingplacesanddoingstuff said:
I mean… I’m one of them, but it remains that Denver’s wages are significantly depressed for most roles.
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Really depends on the industry and segment. Some industries will have Denver market wages within 10-15% of Silicon Valley, other industries will approach it very differently due to market demand.
 
Dave Hess said:
Many younger adults across the USA have given up hope on buying a house and will be renters for life.
The best situation for them is to inherit their parents’s house.

A house recently sold in my neighborhood for $1.15M and seller was asking $1.29M.
The house was remodeled and really nothing special….. nice but nothing special.
Click to expand...

The house across the street from my childhood home (which the wife and I own, and the daughter and son-in-law are currently living in and paying for) recently went on the market for $1.15 million. Four days after listing, the homeowners, a young couple in their mid 20's, accepted an offer for $1.19 million.

They bought the home after the original owners passed away, and their kids (all friends of mine) sold it to the young couple. The young couple did some updating to make it their own, but decided they wanted to live closer to their own family, so they put it up for sale.

I watched this young couple work on the house and the yard while I was a caregiver for my parents. They worked very hard, and are enjoying the fruits of their labor.

The daughter and son-in-law ( in their 20's) also have worked hard in school, and achieved educations that put them in demand in the workplace, and able to command wages that allow them to afford a home.

When I was a young adult, you needed to have an education beyond just the ability to hold a minimum wage job to afford a home. All work is honorable and worthwhile, but minimum wage wouldn't allow me to live the kind of life I aspired to, and the same is true today. If anyone off the street can perform your job with little to no training, you aren't hard to replace, and you won't command a salary that allows you to buy a home.
 
SC Maintenance said:
400K household income is in the top 2% nationally. I don't think there is a abundance of young people in that income level in Denver, especially not in their 30's. I am sure there are a few but not enough to buy an fill the "average" homes up.
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Exactly. If you have to be in the top 2% of wage earners in order to get a “starter home“ then the area is horribly overpriced.
 
Astro14 said:
Exactly. If you have to be in the top 2% of wage earners in order to get a “starter home“ then the area is horribly overpriced.
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Not only horribly overpriced, but very low quality of life in some of these greater Denver area starter homes.

We looked at very modest new construction townhomes in the greater Denver area as a second home to be close to the grandkids.

Townhomes backed directly to i25, 2 x 4 construction and windows that were so cheap they provided almost no noise protection. The single car garage was so small one could open a Honda Accord door without hitting the garage drywall. Density of the development was tighter than a Spirit airline aircraft. All for $750k USD.
 
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