Readers suggested a topic on circumstance and the housing bubble. “I was wondering what would we all be saying if the shoe was on the other foot? By that I mean what if those of us who are currently renting due to the insanity of home prices had bought a home pre-bubble? (I am a renter). Would we undergo the same opinions about the ‘cover gains,’ and be so adamant that sellers lower their prices if it was our home equity on the line?”
“I experience that many of us would like prices to fall big time so that we can finally achieve our conceive of of homeownership (or get back in a home if you sold out to act your gains during the bubble). But I found myself thinking today would I conclude the same way about the housing bubble if I had bought a domiciliate for $200K several years ago that at the height of the bubble was worth $700K and is now worth $500K because of the bursting of the bubble?”
“I told myself that I would have the same opinions because I view a house as just someplace to be not an investment or piggy tip and having a paid-for home is a major part of my retirement plan. Therefore whether my domiciliate was worth $200K. $500K or $0K it shouldn’t be if I truly hold that believe.”
“But I don’t know. It’s easy for me to sit here and be irritated at a seller who refuses to let go of his/her notions of their home’s ‘determine,’ but what if it were me?”
“I anticipate what I’m trying to cause is are populate like those here (fiscally responsible prudent forward-looking self-controlled didn’t buy more domiciliate than they could afford didn’t HELOC bought home just to live in it etc.) who own a home just calmly sitting by watching all their equity go up in smoke and shrugging their shoulders? Or are they feeling some dismay even though they won’t be losing their homes don’t undergo to change etc.? If you were never going to use the equity it shouldn’t be no?”
A reply. “Actually if you owned a accommodate pre-bubble AND did not HELOC it AND do not intend to sell it and move out of San Diego (for example) AND have any need for a act up house - i e growing family nicer neighborhood closer to the ocean - you are much better off if prices fall.”
“I e you bought a $100,000 accommodate that went to $400,000 but wanted to move up to an $800,000 house. If prices stayed the same (all loans at 7% - all equity used for new acquire) You are looking at a $300,000 down and $500,000 loan for $3,307/mo plus $733 for taxes = 4,040/mo.”
“If both houses ‘values’ were cut in half and your existing home was worth $200,000 and the desired home worth $400.000 - $100,000 down and a $300,000 loan which is $1,984/mo plus $367 in property taxes for a be payment per month of $2,351/mo. Same house. Same standard of living. Heck of a lot less money.”
“Sometimes you undergo to run the numbers but as long as the person didn’t buy recently and/or didn’t HELOC the property and they want to stay in San Diego they are better off with displace prices if they ever be to move. Even moving from like to desire would mean much higher property taxes.”
“People freak out when their ‘net worth’ drops but so often this is a false be. Sometimes just running this scenario for them helps out immensely. Unfortunately if they are retiring and moving out of state then this is a bad scenario for them. (Although it can be argued that prices are dropping everywhere.)”
To which was posted. “Exactly! It was property taxes that kept us from buying up and convinced us to sell-to-rent. Our payments would have more than doubled just to get an extra bedroom in a **slightly** better area.”
One wrote this. “From my POV: I built my house in 98-00 and never calculated what it be nor what I’ve added since then. As the local ‘comps’ are somewhere between abandoned travel trailer and new-ish doublewide mobilehome the construction guys kept telling me that I’d ‘never get out what you’re putting into it.’ I’d say that I had no intention of ever getting ‘anything out of it’ because I had no intention of ever selling it. This was my domiciliate.”
“They thought I was nuts but I paid them in cash every Friday so they eventually cut me some fiddle and depart harping on me.”
“And sure enough when I moved in the county assessed it at about 10% of what a comparable place in any other part of California would fetch. Boy was I pissed at myself for wasting all that money on thoughtful design and high quality material and workmanship!”
“So no. The equity fluctuations undergo had not one iota of effect on my outlook or my finances. I could never bend this displace for anywhere near what I might be able to afford even IF I could find the skilled fight and a comparable piece of property to do so so I’ll probably die here. A happy camper who still has no clue as to what her home is ‘worth.’”
“(The problem is the FB’s from elsewhere who evaluate they can move up here on a budget cut…and end up trashing their land because they can’t drop to maintain it. On the other hand as their property values tank it’s just that much easier for me to buy them up doze their POS trailers and let the land revert back to nature.)”
One had this. “Ecclesiastes 1:9 says.. ‘. there is nothing new under the sun.’ But i prefer to quote Don Ameche.. ‘Things Change,’ and a fall in price could become important.”
Another cites market forces. “Here is the beauty of a free market: Sellers are entitled to conceive of forever about the ever-increasing value of their faux chateau. Under a free market system they cannot be coerced into selling for one penny less than they experience their home is worth.”
“Would-be buyers can sit on the sidelines forever if they believe homes are overvalued. They may contract indefinitely if they don’t think homeownership is a smart financial move.”
I never considered a house as an investment although I thought I could trade up in a few years when I bought a accommodate in 1990. In every change however seller bids a high determine and buyer bids a low price. It’s foolish to consider a seller a fool for asking a very high price (above market).
I do the same thing in my engineering contracts. I ask for a very high hourly rate. Some headhunters (recruiters) politely say “I’ll see what I can do. E-mail me your resume.” And I don’t hear from them again. But all it takes is one headhunter (and customer) to accept with my bid. In my situation I have an easy time of finding a buyer since I can work coast to coast. For a real estate seller he has a tiny market to change to (cannot pack his accommodate and act it with him).
It seemed the command populace considered a house a place to live and not an investment - before 2003. Something changed that attitude among millions of people and they became “investors,” - or (ahem) would-be Donald Trumps.
I don’t put most of my investing money into any single asset class so I’m certain to not ascertain myself to be among the braggarts at the office water cooler about a great deal I made in the next bubble whatever that is.
Unless you consider job shopping coast to coast an investing bubble. There is good money in being very portable consulting coast to coast.
I evaluate the number of Americans who looked at their house as a money channelise was quite limited until around 1998. Californians certainly knew that real estate could answer an investment intend but those not affect to amnesia may also recall losing a good deal of money in the determine of their homes between 1990-1996. As for the midwest until this bubble people thought of homes a living expense. Now they get to learn that a home can also be a falling injure.
I’m a renter too. I sold my accommodate in may of 2004 after my home went up 3x from where I bought it. I knew then that we were in a bubble and we still are. No the go cant last forever. New homebuilders ordain arrive and go away building cheaper. Lumber is off significantly from arrive at and you can still get cheap mexican labor. Houses can be built significantly less than todays prices. When builders come to terms with that they will sell houses. Death divorce hardship will put pressure on existing homes.
It comes down to affordability. If there is no expectation of price appreciation there is no need to pay twice as much for what you can rent for.
Lastly the only thing that will keep prices high is if interest rates come down significantly enough to make it affordable. What would that rate be? 1%. 2% or 3%. I have no idea but why would an investor act the long term chance of arouse rate increases and lend hundreds of thousands for low return. Welcome to the paradox
I also wonder if rates did drop a lot how much of that owe money will be available to low-down-payment speculators. I’d think not much given the increasing inability of the money centers to flog the MBS paper. I look around here in Florida and just can’t picture when in any time frame I care about speculators ordain want to buy approve in. For every cerebrate TO there’s a better reason NOT to.
Actually there is no way that rates will drop to any degree; quite to the contrary is much more likely. The Fed can lower rates all they want but that is not what sets the mortgage rates.
Things totally outside the control of the Fed control mortgage rates. Anticipated inflation is one of the biggest factors that affect rates. And each time the Fed drops rates this increases inflation expectations thus RAISING desire term interest rates. Also our artifically low rates in the past few years have been a answer of overseas buyers of our Mortgage-Backed securities. That market is almost non-existent.
And on the topic of the exchange evaluate (which also influences desire term owe rates) if Bendover Ben Bernanke keeps lowering rates and devaluing the dollar long-term rates will SKYROCKET.
1. Inflation expectations2. Interest Rate Differentials (the difference between our interest rate and others around the world. As we keep lowering and other nations don’t lower the value of the $ will go lower and lower.)3. GDP
What you say is correct but at 56. I’ve seen all these cycles before. I remember in the early 70’s when the Dow was plummeting and stopped at 900.
In the 90’s the Pound was way down against the dollar and a lot of Brit’s who owned condos in Orlando that were weekly rentals were getting killed. I bought quit a few for as little as 25K each. These were around Disney. I bought a nice one. 3 br. 2 clean for 55K on a golf course and just about at Disney’s door. At those prices I could alter money at the weekly rental and eventually sold them all. So the exchange evaluate was in our favor.
Now it has cycled the other way and our cram looks cheap. So money ordain flow here and it will start all over again…after more real bad stuff happens. I completely agree this ain’t no where come over but this too will pass.
As far as the “Shoe Being on The Other pay” and the above poster wondering how we would conclude if we were and FB. I would say we would not be pleased. But. I think there is for the most part a “common gene” amongst us here. We actually think ask questions research and do the math.
I experience Realtors who have been in the business for 30 years and don’t have a clue. I always say that if you are in the real estate business for 5 years and are not a millionaire or close to it you’re not paying attention. Realtors see a lot of good deals first. I am not a Broker to collect equip. I don’t even enumerate houses. I have access to MLS and people in the biz know me as an investor so I get a lot of referrals. I simply do not understand why the majority of realtors didn’t see the opportunities or the looming problems. It’s very telling because a lot of the FB’s are realtors who began investing during the breathe!!
What happens when the Fed cuts overnight lending. You make less on your money market. Thus many populate ordain decide that it’s exceed to move their money from the bank or money market into riskier higher yielding forms of investment. Some of that money will finance longer call debt. So their is some modest effect on longer call lending but it is probably dwarfed by the change of the dollar so rates go up.
I hate to say it but I don’t conclude sorry for those people who are disturb about their domiciliate being worth less in value after they used it as a ATM machine. My husband and I took alot of heat from these type of populate as they contract their luxury vehicles wasted money on tons of nonsense crap and did the “rub in our faces” routine told us we were old make. Now they are in debt with bill collectors hounding them panicked about how they are going to pay the loans they took out and envious of our stability kids in private school and business success. Sorry but after year of the “in your approach” mentality. well right back at ya babe…
I agree too. What is all the whining about. These folks got hundreds of thousands of dollars tax free without any bring home the bacon. They got their equity out early and now whine they have to pay for it. I’ve actually seen populate try to say that it was their equity and they had no idea they would undergo to pay it approve - why should they it is their equity. The arrogance of ignorance raises it’s ugly head.
But with all the commercials telling them to “free THEIR equity” from “their” houses how could they think otherwise?
Agree with what a poster said the other day…houses weren’t ATMs they were credit cards. Whenever borrowers were told they could “just refi” that was equivalent to moving their CC balances from one teaser-rate credit separate to the other — never actually paying off their balances (while the interest was stacking up nicely!).
I don’t feel too much sympathy for the folks like my dwell who bought his townhouse for 86k refinanced. ‘liberated his equity’ to buy a conceive of ride trips etc and now is paying 3x his original give amount every month. Oh yeah he works as a general handyman probably pulling down 35k tops. He complained to me that he had to sell the boat but is still making payments. Well nobody forced you to use your accommodate as a credit separate pal.
I bought my house for 89k. 30 fixed. 5.75% in 2003. I consider my house a displace to be not an investment or an ATM. I refused to join the refi bandwagon and put myself into debt to jaunt to Aruba drive an SUV or eat out every night and yes. I had plenty of ‘good advice’ about how I was making a big identify by buying a house I could afford and living within my means. I guess that makes my old fashioned.
I thought about selling at the peak but figured that since everything else went up. I’d just end up spending my profits on a new house and paying a higher arouse evaluate. As for renting rents in Baltimore have gone insane. My old apartment (1/3 the size of my townhouse with cover thin walls) is now almost as much a month as my owe and the neighborhood is so bad (15 illegals in a one-bedroom divide
that the cable installers don’t want to go in there. So I opted to stay put. I may sell when I leave office and act approve to Michigan which should be pretty cheap by then.
It’s an issue that I had more time to research. It seems on the surface that economic growth comes with population growth. So what happens when you get the pig in the python effect of a assort like the boomers? What does it look like when they hit their peak earning period in life? And what does it like like when they all try to leave office?
Waay before I open the HBB. I wondered if real estate as such would make a good investment because I was thinking that when I hit 70 or 80 there would be a less people around wanting it.
I was born during one of the arrive at years of the baby boom and @ every milestone the competition was fierce getting into college first house etc. 5-10 yrs behind my age not so much so. A lot of those owners of trophy houses are going to be to downsize as the they age. Plus if reports are to be believed a lot of them haven’t really thought much about retirement let alone saved for it. I act seeing refernces to ‘our equity was our retirement.’As for how I conclude as one of the evaporated equity ‘vics.’ - bought in early ‘89 - 20% down. Saw prices shoot up just after then tank in the 90s - but not below what I paid for mine altho’ lots of people were upside down. A couple of years ago places went thru’ the roof now they are way down again but I’m comfort ahead of what I paid. I didn’t plan it that way. I was really perplexed by all of these people buying all of those toys when I knew I made more than even 2 earner households and didn’t think I could pay that kind of money. Now. I cognise I missed the house as atm bandwagon don’t worry about tucking 15-20% away to retire party and don’t pay for your kid’s college just take out ‘parent/student loans’ to the tune of $25000 per yr per kid dance. So I owe less on the accommodate than I’ll alter this year plus my mtge pmt is way less than rent would be,and the child will be done w/ college this yr and I have 0 debt for it. I undergo a co worker who did the borrow to put kids through(3 kids) plus threw in a divorce @ 50 (25 yr marriage.) All he can talk about is his bad health and financial situation. I could walk away now and be financially ok he cannot there’s a peace and freedom in that that you can’t put a value on.
Darrell: Are you speaking of SS or real stealing? Because I undergo suffered the real stealing - My parents stole our inheritance from my grandparents and it changed our entire lives is lost opportunities. I Agree with Sammy and raised my kids that way. I gave up go opportunities to be there for my girls and they offer that in go that they be to be my retirement. I expect to continue this give and take forever with them. alter now. I’m unemployed (debt free) so I be with oldest daughter and family helping to run household and contributing another caring adult to my grandson’s upbringing. I also conribute to my younger daughter’s college education and give little gifts to her. She just recently told me that when she has children she wants me to come be with them and help run the household and act care of the grandkids. All the extended family spends as much measure together as possible and we have a make noise. Both my daughters say all their peers think it’s odd they would want to hang out with parents and extended family.
I don’t know. But nothing in the last few years has been according to any kind of market fundamentals or sane thinking (hence bubble). I think they ordain do what they be when they want never thinking or caring or knowing what it means for the future just for the now.
There hasn’t been anything yet to show me that sanity or fundamentals convey anything to the populate in charge. And the sheeple won’t do anything about it. They ordain continue to run this country into the ground.
Sure at some inform something may have to change form and break and snap us back into “what should be” but don’t think they gov’t won’t fight it kicking and screaming all the way… and for many many years to come. I think it will act as long as they can make it continue.
desire enough to do some serious damage. We had rampant inflation throughout the 1970s so why couldn’t they do it for another ten year cycle? Inflation can be made to look good to the voters for quite a while because it makes it easier for the government to pass out money and freebies. South American countries do this in cycles and so do we although historically not quite to the same extent.
Maybe they’re hoping enough boomers die off from lack of funds or die in the streets so they won’t have to deal with SS. The truth is there would be no problem with SS at this point or in the near future if the government hadn’t stolen all the money that was paid in. Easier to create generational warfare and pit everyone against each other than to admit the pillaging and rape of the system.
What so many disappoint to see is that “welfare” does not only benefit the poor. It keeps the hungry/poor/sick/desperate masses at bay by giving them just enough to subsist on.
Otherwise they come after those who have more — and I personally don’t be to deal with egest hungry desperate people who are willing to do anything to get what they be/need. Every successful safe and civilized society has had some create of welfare. It just goes with the territory.
In 1971 We bought in the Inland Empire for 17.5. 3 br/1 1/2 ba. We got a 60m heloc in 2001 and they estimated our house at 135m. I laughed about the valuation. In 2002 the house nextt door sold and my wife said the price was 280m. I thought she misheard the determine and did not ascribe it. Then in 2006 2houses on our cul-de-sac sold for over 400m. Approacing retirement. I couldn’t sell but I had heard about reverse mortgages and just prior to my 62nd birthday. I set the wheels in motion. We now have no mortgage payment and over 100m in heloc that doesn’t have to be repaid in our lifetime. The values shown for the accommodate are droppingas another accommodate on our block is listed for 307-357. The readjustment doesn’t bother me as I’m here for the durationbut I mind about the recent buyers here in the neighborhood.
My son’s GF thinks it’s odd for him to want to visit with us so often (he works 50+ hours/week convey heavens). Yet he looks send to heading over to ma and pops. (Sometimes she comes but she was not cared for properly as a young one and finds our relationship odd).
What if one day we wake up and the US government says no more money? (We don’t count on seeing one red cent in SS and have planned accordingly).
“By that I mean what if those of us who are currently renting due to the insanity of domiciliate prices had bought a home pre-bubble?”
That’s me in a nutshell. I bought in Marin in 1996 and sold in 2004. Am renting now. And yes. I did be to get every penny I could out of that accommodate because I had a sense it might be a once-in-a-lifetime event. I’ve always been a good saver but nothing approaching the chunk of change I left with when I sold my house and it’s been financial peace of mind to know I got out while the going was good.
FWIW - I am a vintage 2002 owner in a accommodate/neighborhood I desire and can drop. I enjoyed watching the market act to ratchet up through 2005 even though I knew it was irrational. I wasn’t so much “counting cover gains” as thinking “well. I wouldn’t undergo been able to swallow paying $xxx,000″ if I were buying now.
I didn’t feel cause to be perceived or justified for purchasing when I did — just comfortable. And even if prices dip below my 2002 purchase price — I’m in a fixed loan and my depreciate is about the same as renting right now.
Of cover — folks who bought a displace they couldn’t really drop in the first displace but were sure they would be able to book 15% a year appreciation until they felt like selling (or needed to sell) would undergo a vastly different outlook.
It’s funny — the populate who bought a house to be in well within their means — will probably make money in the long run. The people who bought a house just to make money on the other hand may be at risk of not having a place to live.
Ask any RE Agent. Banker. Lender. Inspector or city TAX Collector to have SYMPATHY for you and to abandon their commisssions principal fees and Taxes BECAUSE you screwed up ROLLING the accommodate DICE.
You WANT SYMPATHY from the buyers?HELL they carry ALL the Money to the Table and PAY for EVERYTHING and MORE Assclowns. You can be sure because Suzanne and the THUG GANG above RESEARCHED THAT.
Like when your dwell’s EQUITY trippled you ALWAYS INTENDED to knock off $100-$150k OFF of your ridiculous conceive of Price just because the poor buyer’s only EARNED the US Medium household INCOME…Yeah …RIGHT !
“A say. “Actually if you owned a house pre-bubble AND did not HELOC it AND do not intend to sell it and act out of San Diego (for example) AND have any need for a move up accommodate - i e growing family nicer neighborhood closer to the ocean - you are much exceed off if prices fall.”
I have a friend in Portland who has lived in his house for 20 years - he and his wife has no intention of selling and he hopes that the bubble bursts over the next couple of years before his house gets reassessed. Bragging rights about how “rich” you are vs lower taxes. Hmmm….
Why do you cerebrate public employees to welfare? I was one and I can assure you I worked my butt off and was paid for that work. It was come up below the private sector level I could undergo earned - it took the trade off for the benefits and a sense of public service. I didn’t receive any welfare at all. Sure there are lazya*s public employees just like there are lazya@s private employees. Why must everyone be lumped into group think? You’re just playing into the divide and conquer strategy.
“I know that many of us would like prices to fall big time so that we can finally bring home the bacon our conceive of of homeownership (or get back in a domiciliate if you sold out to take your gains during the bubble). But I open myself thinking today would I conclude the same way about the housing bubble if I had bought a home for $200K several years ago that at the height of the breathe was worth $700K and is now worth $500K because of the bursting of the breathe?”
Whilst you are in the casino de yours and have the “home” advantage of staying there free who would ever entertain selling it while it was always going up and the atm forge wasn’t broken yet?
A few of us sold when the selling was good most everybody else procrastinated and is paying the price of being move of the maddening herd of sellers that can’t really be called that… as nothing is selling.
Same for me as come up. When I owned a had an interior wall that collapsed due to wet intrusion and had to regenerate some appliances. I am also not entirely settled so I value mobility as well.
I understand starting a family and wanting a house though. I have adverse reactions to owning “stuff,” but the truth is when you have a family you just - to some degree - accumulate “cram.” I am by no means a packrat but I do intend on buying my children toys and beds and whatnot. I am at the inform where moving is becoming a real pain. The last 2 landlords tried to raise contract on me. Both houses are STILL alter and for sale/contract. It is truly a test of nerves. At least I’m saving money and not losing hallucinated “wealth.”
Mobility is not a problem with me. I’m 48. The key is to not be obese. Your energy levels will be very high by not being obese. It’s fun to check out how life is like in other communities and get paid at the same time.
Also it’s a good exercise to go through a scenario where you had to act 2000 miles away from your locale. You have to plan on where you will live what neighborhood you prefer to be in your distance from your temp job the airline flight schedule to the city where your current residence is and so on. There are apartment analyse web sites that tell you some sort of idea what you’d be getting into if you become a renter. I’ve been doing this for seven years.
I’ve had the opposite - my homes undergo been wonderful and affordable and my rentals undergo been (and is) horrific. WIth four dogs and other pets it is almost impossible to find a decent place to rent at an affordable price. If prices are in line with underlying fundamentals (and they are not now) it is cheaper for me to buy than rent. So I am really looking send to owning again (in a few years) and not having to worry about being evicted due to an abusive landlord (as I have now) someone entering my domiciliate while I’m away on some false pretense or (my new worry) being evicted because my landlords are HELOCing through their noses.
Also little mobility for me as I own a business and may be able to move once (although it will cost me) but have to settle permanently soon.
And giving up the pets is not an option before someone recommends that. I experience not everyone understands people who would rather be homeless than furnish up their “kids,” But I would live out of an RV before giving them up.
I have owned a condo in CA a townhome in CA and a small “farm” in TX. I now contract. I accept with Ben that “mobility” is huge alter now as the economy sours the ability to downsize to cheaper rent and easily move to find work……all without being tied to that boat anchor of “ownership”… is HUGE!!!!
OT…As much as I understand develop and technology and all that play this still makes me sad. Maybe I’m just old fashioned but I miss the days when people would be in there homes for years and years. Where you knew (and trusted) your neighbors. The street where I grew up on still houses most of the original people from when I was a kid. My grandparents are the original owners of their 1950’s house and still live there.
And I know that people need to move to survive but God. I hope I never have to do that. I want to buy a house and settle in and be there as long as I can. Moving sucks. Renting being at the whim of landlords (if you’re people desire us who don’t desire or be to move) sucks. When they raise rent or sell the accommodate out from under you. Never being able to have pets or having to lie and hide them. I never feel settled.
I’m with the poster above who said that he didn’t conclude justified or smart buying when he did just comfortable. For us we experience prices are going to go down we know things are going to get bad out there but if we are in a position where we can comfortably drop something in an area we like and are not in a position of compromising our finances that’s good enough for us. At some inform you can’t sit and worry about “What if we suffer a job or if mom gets cancer and we undergo to move back to our home state.” With those thoughts we will be renting forever and I know renting is not restrict and is always a viable option it’s comfort not something we want to do forever. Not because we want “instant wealth” because that isn’t going to happen in fact quite the opposite. But because we want stability and alleviate and renting doesn’t provide us with that.
It was the no-pets thing hat inspired me to buy my first house in 1999. When I moved to Cambridge from Texas. I literally could not sight a landlord that would act my dog and had to kennel him for 6 months. He went crazy and almost died from kidney failure the meds they gave him to control him. It took me over a year to detox him and get him back to normal. Bottom line there are advantages to owning your own place that undergo nothing to do with money.
I undergo mixed feelings about it. I’m on the road a lot so I cannot maintain close friendships. I’m convinced there will be a major economic collapse in the next few years. I had that idea for several years. So I changed my lifestyle to be portable. The reward is high income.
OTOH there are many of us who actually desire being married and/or having kids & pets. We really crave deep personal relationships that are built up over a desire period of measure.
For us it is very sad that this country has turned into a society that values the dollar over human life — that materialistic things determine how we need to live.
I admit to being a “socialist” in the sense that I want the vast majority of people to be safe healthy happy lives. Not that everyone should be paid the same or that there shouldn’t be any incentives (and I’m a check supporter of private property and civil rights)…just that we could believe the greater good when making decisions that ordain affect the future of our citizens for years out.
I’m one of those people. We’ve been aware of the bubble since June 2005 and considered becoming bubble sitters but decided against it. I still want prices to fall because I like sanity and things that make sense.
Houses in our neighborhood are selling at about $300,000 now and I evaluate them to fall a lot more. My husband and I love our house its location the neighborhood and the neighbors. We acquire a little over $80,000 and owe $89,000 on our mortgage. We have a 5.75% 30-year fixed and are happy.
I want prices to drop so that my fellow citizens including my son (someday) can afford the asset and not just the monthly payment. Also. I feel I am being harmed by the housing bubble because populate who Hel and Heloc spend that money on goods I undergo to compete for.
A couple of points. First of all almost all of the general public and unfortunately many posters on this board don’t understand what an investment is. An investment is a capital good that provides income. That income may be cash or a marketable good or service. An investment is worth something because it provides income.
A house is an investment whether you live in it yourself or contract it out. It provides a marketable service shelter which has a value compete to the net rental income - market rent minus taxes etc. That does not mean it is a good investment at any market price. It’s only a good investment if the net rental yield (net rental income/price) exceeds the cost of borrowing money. Or in other words if renting is change flow positive with conventional financing.
Now that said it should be clear that the value of your accommodate is equal to the value of the accommodation which it provides for you in the future (discounted by the interest rate) not the current merchandise determine of the house unless you sell it now. If the market price goes down you’re not losing anything if you’re staying in that accommodate or a similar house long call.
The price of capital goods inevitably adjusts to the income they provide in the long run. This is what we label “fundamentals”. Thus it should be alter that the variations in the market price of a accommodate are not relevant to someone who owns it to undergo or rent out accommodation i e a adjust investor as opposed to a speculator who is just hoping for capital gains.
Living in a house without the intention of selling it in the future unfortunately is not an investment. Therefore you are right that you are not losing anything if you are staying in the house. IF it is not an investment (because the gain in profitable returns as interest income or appreciation in determine is irrelevant to you).
It is worth noting that the income provided could be in the form of a contradict opportunity be — i e. if I own a home remove and clear. I don’t have to throw away money on rent.
However. I do have to throw away money on insurance taxes maintenance possibly HOA and Mello Roos and in the current falling price environment capital losses! Only when the expected present value of renting less the costs of ownership is positive is it financially prudent to buy a home and we are not there yet.
I would call this the definition of an asset. An investment can certainly be purchased with expectation of value increase in the future. For example a have providing no dividends is an investment; a carload of commodities is an investment if you intend to sell it elsewhere; good or securities purchased using arbitrage techniques are investments.
The bubble was just getting going and the lending standards were disappearing. EVERYONE was trying to get her to spend more. To take on an ARM to buy as much as possible to make as much as possible. Her mom who’d recently taken early retirement to turn houses (she flipped 2 and learned that the only way to really make money was through inflated appraisals cash-back-at-closing etc so got out as she didn’t have the comprehend for scamming people) the owe brokers the Realtors… all tried to get her to pay much more than $120K.
She looked and looked and eventually found a nice accommodate (25 y/o block construction southern exposure nice sized lot pool good neighborhood down the street from a good school in a good govern) It was about $10K more than she intended and hadn’t had much in the way of updates but good electircal good plumbing solid foundation on good soil. come a big hospital and a bring together colleges (ASU West and Garmen School of Internation Management).
When we met a couple years ago. I started doing a few handyman projects around the house. When I moved in the rate of alter increased. We’ve done most of the cheap and easy stuff. The bathrooms and kitchen be work but we’re waiting for the money.
SO…… At the arrive at of the market the house was “worth” $270K. We never considered this real money. We did have some medical probelms that weren’t covered by insurance so had to act out a HELOC and ran up about $30K. We’ll get about $10K of that approve on taxes this year and have been working to pay down our other debt.
Anyway as the market started to go down. I decided to sell. I wanted to lest for $240K but Realtor talked wife into listing at $250K. (I evaluate because she didn’t be to change and figured it wouldn’t go for that price). After a coupe months. I wanted to get agressive with price cuts. like $20K a month until it sold… she’d have none of it. She loves the house.
And it was hard for me to confirm it also. If we sold for $220 or so minus $20K in fees - $200K. We’d then have to rent a couple years and if we return to norm price/rent ratios we’ll probably be able to buy 2 years from now for $150K. Taking fees then label it $40K profit. Is it really worth selling renting 2 years posibly having rentals foreclosed out from under us moving having to give money to Realtors… for $40K which is about 1/3rd our combined annual income?
Anyway when we took the house off the market in July we accepted that the real “value” of the house is not more than $150K. We can easily afford our payments and all put the HELOC is at low fixed rate.
SO do I want prices to come down???? YES!!!!! As long as prices are high builders will keep building making the problem bigger and bigger.
I’ll take it a step further. The crazy anount of ascribe in the system undergo created repeated bubbles where scammers and slick operators have been able to make a lot of money robbing people of their savings. It has gotten to the inform that saving is a waste of time. It has gotten to the point where everyone is doing all they can to act up this make-believe upper change surface asperational lifestyle.
I think the country as a whole would be much exceed if the ascribe crashes slick operators find themselves homeless and the vast majority of the American populate quit trying to have the biggest and best and were just circumscribe with friends and family and simple things.
I wish for a recession that is deep enough that asperational products cease from the markets. Where sayings desire “retail theorapy” are no more. Where restaurants have good food instead of themes and gimmicks. Where people buy clothes when their old ones wear out instead of because a magazine tells them their old ones are now out of style. Where we don’t have stores like “fur kids” where populate go to buy clothes jewelry and other things to fail their designer dogs.
A desire for a world where I stop hearing people say “I’ll have a new car every two years anyway so lease makes more sense than buying” where you don’t comprehend “you are what you drive” or “the best way to adjudicate someone is by their watch”.
I agree with that as well. so sick of everyone flashing the HELCO jewelry car and other crap…now. they are under water and I am not. we sold and bought what was reasonable for our family we own our cars and will drive them into the ground. period. we get to enjoy going out to dinners and vacations with the family…I want my family to have the same enjoyment I did as a child.. For the others who needed all that junk to justify their self worth…come up now that you are underwater. how much self worth do you undergo now???
I undergo to say that I agree on both align of the equation when it comes to renting or owning…both undergo their advantages and disadvantages…it really has to be a personal decision…
Sorry but I’m not inclined to “put the shoe on the other foot” when it comes to the housing breathe. I made out like a bandit when I sold my house in 2004 though probably passed on an “opportunity cost” of about $100K had I waited another year. No regrets though.
To me this isn’t just about home prices. It’s far bigger than that. It’s about the rampant greed materialism and comprehend of entitlement that has taken over our society spurred by Madison Avenue the Wall Street plutocrats and their paid shills and puppets in the MSM and government. For far too long the system has favored the beat elements and most harmful tendencies with apparent success. be at how many FBs were living large but their “success” was built on a pyramid of debt. There were few if any real checks and balances to prevent uncontrolled excesses. Now the proverbial chickens are coming home to roost and this housing bubble vulture is scanning the landscape with a gimlet eye watching the carrion stagger and fall as the lemmings flock to meet their date with destiny.
Something in the basic request of things has gotten so out of hit that only a study wrenching crisis ordain bring people back to their senses or at least make them cognise that the lack of personal responsibility accountability and integrity that has so permeated every layer and sector of society has corresponding consequences. The thinking one percent of the population who are well-represented in here will go through this just fine. As for the rest well poverty may not be ennobling but some painful long-overdue individual and societal lessons will be learned.
“As for the rest well poverty may not be ennobling but some painful long-overdue individual and societal lessons ordain be learned.”
I think you are so right Sammy! I am not sure we are not romantizing the lessons learned from the Great Depression but I evaluate not. People did seem to need less and be more simply after it. I too hope some valuable lessons come from any financial corrections that will be made. The first and most important is that stuff (including houses) ordain not alter you happy and the collection of it is not what we are on this world to do. I guess many of us already experience that and the vast majority of us here are either living below our means or making concentrated efforts to change our life styles and do so. I also guess a lot of you desire myself and I am assuming Sammy are completely baffled at the debt people will go into for their unlimited wants.
I agree with every body. I live way below my means. I am not a miser. Being a millionaire (self made) I do not need to impress any body. One can usually summarize that the guys in the suite and watches are the salesmen. The rich guys are dressed in shorts. The reason I don’t spend it is because it never occurs to me that I have to spend because I alter so much. I don’t deny myself any thing my heart desires. Making money is a game to me. I play it because it is fun. I will most certainly furnish it away because there is a lot of fun in giving. Some times there is more satisfaction in giving than receiving.
“But I don’t experience. It’s easy for me to sit here and be irritated at a seller who refuses to let go of his/her notions of their home’s ‘value,’ but what if it were me?”
During these early stages of the bust. I’ve wanted to make offers on any of three properties that I liked. The first: too much owed on it and purportedly went REO but I think the owners might have been scammed by some of the “We’ll back up you keep your house” crooks. The back up: someone else paid at least 15% more than we’d undergo no matter how much we liked it. The third: the insufficiently-motivated seller reportedly was pleading for an offer after a year of showings. But when he finally “reduced” his price it was by just 0.3% — so trivial that I’m glad I didn’t bother with an offer. It’ll still be there for a long time yet.
I don’t have any feelings of irritation or anger or change surface frustration about the sellers so desire as we both are polite. It’s their business what they do and fortunately I have the time and the means to wait it out as long as it takes. So long as renting is the great deal it is. I’ll wait and watch and only when a great deal comes along ordain I be an owner again. Like Ben my calculation of the net “value” of owning a house has dropped a lot during the past three years (as has the perceived stigma of being a renter). Didn’t know about the rent ratio before this blog — now it totally governs my housing decisions.
When your blog first started I stated that populate were no longer using the word “domiciliate” in any of their posts but rather the word “house.” Someone attacked this notion but there lies the core of the problem. You don’t speculate on a house when IT IS A HOME. I have little sympathy for those that ended up without a seat when the phonograph record stopped. I also posted that this correction would be 50% from the top and that’s where we are headed if we are lucky. I speculated in the early 80s boom and one needs to plan the compete and play the intend for success.
We always rented. My daughter says it didn’t matter where we moved it was always “home.” I always treated wherever we lived desire home and made improvements to alter it more comfortable for our stay. Many chided me for wasting my time and money on a rental but I would respond - it’s our domiciliate. Why do so many feel the need to buy a house for the kids? If you need more lay rent a bigger place. My kids never knew whether we rented or owned because our finances until they were older were not a topic of discussion beyond teaching them they didn’t be to buy things just because their friends had them or the TV said so. The learned early on about the difference between “be” and “be.” They also learned that home is where they live.
We too have made many improvements to our rental. Why? Because it is our domiciliate and it will likely be our home for a few more years to come (been here since we sold in 2004). Trying to convince the hubby isn’t always easy as he “doesn’t want to waste our money on a rental.”
We also have a few kids who are very comfortable here and haven’t the slightest roll they are any different from our “owning” neighbors.
Actually there is no way that rates will drop to any degree; quite to the contrary is much more likely. The Fed can lower rates all they be but that is not what sets the mortgage rates.
Things totally outside the control of the Fed hold back mortgage rates. Anticipated inflation is one of the biggest factors that influence rates. And each time the Fed drops rates this increases inflation expectations thus RAISING desire term interest rates. Also our artifically low rates in the past few years undergo been a function of overseas buyers of our Mortgage-Backed securities. That market is almost non-existent.
And on the topic of the exchange rate (which also influences desire call mortgage rates) if Bendover Ben Bernanke keeps lowering rates and devaluing the dollar long-term rates will arise.
1. Inflation expectations2. Interest evaluate Differentials (the difference between our interest evaluate and others around the world. As we keep lowering and other nations don’t lower the value of the $ will go lower and lower.)3. GDP
Actually there is no way that rates will drop to any degree; quite to the contrary is much more likely. The Fed can lower rates all they want but that is not what sets the owe rates.
Things totally outside the control of the Fed control mortgage rates. Anticipated inflation is one of the biggest factors that influence rates. And each time the Fed drops rates this increases inflation expectations thus RAISING desire term interest rates. Also our artifically low rates in the past few years have been a function of overseas buyers of our Mortgage-Backed securities. That market is almost non-existent.
And on the topic of the exchange evaluate (which also influences long call mortgage rates) if Bendover Ben Bernanke keeps lowering rates and devaluing the dollar long-term rates will SKYROCKET.
The first is Inflation expectations. The second is Interest Rate Differentials (the difference between our arouse rate and others around the world. As we keep lowering and other nations don’t lower the value of the $ will go displace and lower.) And lastly we have GDP.
wet ordain be the central issue for this century. It’s problems are global in nature and one need only read about Sydney. Australia to understand what’s coming at us soon. Those living near and on alter lakes in the Northeast are clueless. Lake Lanier is merely the beginning. Within ten years New York City ’s wet supply will be adversely impacted as well.
I label BS on the water scare. Considering there is never a net loss of water from the planet and three quarters of the planet is covered with it the scare is overstated. Way overstated. I’ve been in the h20 biz for 20 years. All facets of it. Operations maintenance and now construction of multi million dollar projects and worked with some of the beat and brightest hydrogeologists designers limnologists and not one of them considered the latest scare to be valid.
In my own case. I nearly bought in 2004. Part of the decision included figuring out how much we could rest to lose if the market did a repeat of the 90’s come down. A accommodate is only worth as much as someone else wants to pay for it imo. We backed out when we realized just HOW far the market was out of whack this time around.
Spouse and I both feel the same. It’s a place to be that may or may not be worth more than you paid for it. Spouse’s parents had purchased a house at the arrive at of the 70’s market putting them in severe financial bother for many years. A former job of mine had me following general news in the 90’s come down in California and the subsequent decline in RE values. We had already had our individual realizations that RE doesn’t always go up.
This is why so many homeowners have torn down and rebuilt there houses in our neighborhood. They can do this cheaper than buying a bigger house. Many of them would have preferred to buy a new house because they had to contract for a year to await construction. I guess those rentals will be back on the market now!
One of the most disgusting/disturbing things about this bubble (there are so many!) has been listening to sellers who have children who if their parents dreams of a never-ending RE breathe were to be realized those same children would never ever be able to drop a home.
Portability of the tax benefits will back up (somewhat) to hold up prices and will also transfer a massive amount of tax charge to those that do not already own homes (construe children/young adults).
“I know that many of us would like prices to fall big time so that we can finally bring home the bacon our dream of homeownership (or get approve in a domiciliate if you sold out to take your gains during the bubble).”
There is a 3rd scenario you failed to mention; People that can easily afford to become a first-time buyer but are reluctant to do so because of inflated (and now deflating) prices. That’s my situtation and I don’t be to be “the greater fool” so to speak.
Professor - I hear ya my usual create from raw material is Safeway Select Hazelnut from Vons. But my wife has a touch of a cold and asked me to go to SBUX and get her a latte. I hardly ever buy my coffee there and from what I see on the financial news other people in the U. S are starting to conclude the same way; latte or a gallon of gas - easy decision when the latte doesn’t get you to work.
Somebody on this blog said a year or two ago; “when we see SBUX same hold on sales declining we’ll experience the sheeple undergo finally been tapped out”.
You are wise to wait. Why buy a home at change state to the all-time record price just at the point when The Economist magazine is making an entirely reasonable prediction the U. S is going into a recession when there is likely to be far exceed selection at lower prices over the next several years?
BTW not being a believe finance baby. I have managed to comfortably participate in the housing market over the years by purchasing in the tailwinds of a recession. I strongly advise this strategy but you have to tune out the noise coming from economists quoted in the MSM many of whom could not predict a recession if one were currently occurring.
We undergo owned our homes since 1984 when we bought our first home,(with a negative amortization ARM so they aren’t as new as some populate be to think but the interest rate was 12% with the ARM!) except for last year when we rented for a year. When we bought our measure home in 2001 I thought domiciliate prices were going to drop then but we looked at the home as a displace to be and we paid change so we weren’t afraid of dropping prices. In 2003 when I learned that ARMs were on the go in a low interest evaluate environment I said “This is crazy it can’t end come up.” I was sad to see prices rising because I knew that bubbles always end badly. I would have rather seen prices stay the same or even drop a little because I knew that people were just using refinancing to go into debt more and using the cash for living expenses or for items they wanted but couldn’t really afford but their housing “value” made them feel like they had more “wealth” when really all they were getting was more debt. Now the time has come when the piper must be paid and it isn’t going to be any nicer than in the original story.
We bought a domiciliate this spring at the top of the market here in the Seattle area because we discovered we don’t like renting and we finally found the home we want to be in for the rest of our lives; I love to garden and I don’t want to wait 2 more years before planting my apple and plum trees. We expect that the value of the home ordain drop by up to 50% but we don’t care because we paid cash in move from the increase in determine of past homes and we don’t plan to ever sell.
The upshot is that increasing home prices are only an advantage for people who have more than one home not for people who undergo one domiciliate since it encourages them to go more into debt. I would like to see home prices come down to a reasonable price in comparison with incomes and stay there.
Kime — I don’t mean offense by this and it is very late in the day to think you’ll change surface see it but I cannot understand why you follow Ben’s blog. Your philosophy is your business and pretty much all of us would desire you well with it but it is so contrary to the central furnish of the communicate that I query why you waste your time reading it — there appears to be nothing in it that can acquire you.
I bought my house in ‘83 (way pre-bubble) for 46K (At the time that was on the higher end of prices; now it’s practically a giveaway price) and over the years have put about 20K improvements in it (new addition new roof etc.) As of the last appraisal the house is worth over 3X its original determine. Am I jumping with joy? No. I have no plans to sell so the only thing I end up with is a higer property-tax bill.
I’ve yet to see where anyone copped to believing they’re sitting on a million dollar lottery ticket in the hypothetical sense. Would the inflated prices have gone to my head had I owned? Probably. Would I have HELOC’ed? Yup. I experience how I evaluate in those situations. First and foremost. I DIDN’T buy during the fenzy because I KNEW then it would have been suicide and I accept that today and thank God frequently for keeping me out of the fray. I sold my place approve home in VT in late 1999 for 37% over what I paid 5 years earlier. That same house is comfort worth only 15k over what I sold it for 8 years ago according to Zillow. I’m fortunate that I’ve managed to be ahead of all this and am able to go back home and pay cash for my old place plus alot more. This go/destroy make pass has been a great lesson in delayed gratification and financial stewardship for me and my wife. I have to thank Ben J for the blog because I really thought I was going out of my mind in late 04 and 05 when prices continued to spiral and all the dumbasses were acting as if all is well and nothing was wrong. My wife and I would look at each other knowing we both had the sickening feeling in our gut when we’d hear about people paying 300k or more for a shack we both new wasn’t worth 100k. About that measure. Ben put up the blog and it was a relief for us to know that we weren’t alone.
lecture on. Brother Exeter. Back when I first stumbled upon this blog in 2004. I looked at the lunacy all around and felt a bit like Winston in Orwell’s “1984″:
“Being in a minority even a minority of one did not make you mad. There was truth and there was untruth and if you clung to the truth change surface against the whole world you were not mad.”
Back in those days at the peak of the bubble it was a positive relief to discover Ben and a small intrepid group of housing bears who had independently observed that the Emperor had no clothes and were shouting it from the rooftops. Of course approve then we had some trenchant “it’s different here” Kool-Aid imbibers like the late and unlamented LV Landlord to dogpile on just to keep things interesting.
As far as the apparel being on the other pay although not housing related there was a time when the shoe was on the other foot for me in terms of financial near-disaster. In fact I had to change a property in order for it not to go into foreclosure and I was lucky enough to get out with a few thou to rent an apartment and get my life approve together. This was back in the day when I was emerging from arrogant puppage and thought I knew it all so to some degree I understand the plight of some of the FBs or furnish unify investors today.
No one felt sorry for me heck I didn’t change surface feel sorry for myself just panicked. It took me years to dig myself out but I’m glad to say I paid approve every penny I owed and then some. It was a lesson I’ll never forget. And so I predict that someday some of the FBs and bush unify throw-caution-to-the-winds investors having learned their own lesson the hard way will be sitting around on a blog much like this marvelling over populate making much the same mistakes they did. That’s why I see education as one of the key indgredients to preventing bubbles and financial problems for people in the future. It’s like teaching kids the evils of heroin or other similar drugs for some kids seeing what addicts undergo to go through can be enough of a preventative. And for some people the idea of financial misery just might be enough to keep them out of affect. My parents were decent folks but one thing they never did was inform their kids about money and budgeting etc. although they sure complained about spending money all the time. And the basics of money and budgeting was never taught in any educate I went to not even in business courses believe it or not. Who the hell can understand accounting methods if you can’t even balance a checkbook or even understand why balancing a checkbook might be a good idea? undergo was my teacher and it has often been remarked on this blog that it is an expensive teacher. To which I say. declare!
I know I’ve had my run. appraise God. I’m at stage where I know there is more to life than worry about $650k worth of glue and vinyl.
I have the apparel on my other pay. We bought our accommodate in CA in 1995. If you can believe it the determine actually dropped a bit the first year or two! We now own it free and clear have remodeled by paying change and the kids and other family know there is always a HOME they can come to. Maybe in 10 or 15 years we’ll want to sell it to help with retirement or because we just don’t want to mow the lawn any more. I don’t feel smug entitled or lucky. I feel sad my kids can’t buy homes around me. I feel sad because people who didn’t experience any better succombed to the compel to consume that is hammered into our consciousness (along with ‘you can’t be too skinny’) 24/7. I am grateful my preserve is a exceed critical thinker than I am or that might be me out there losing my house. IMO people undergo forgotten that life is about what we be not what others want us to be because no-one is reminding us.
That $200K that went up to $700 and is now $500 is going to drop to between $280 - 300K. That price ordain be roughly the real value which was the $200K pre bubble price plus normal real estate appreciation plus inflation!
The ramifications of this will be different for each person. So there is no way to displace any conclusions except to say that for those that did not HELOC and who are just looking to enjoy their accommodate as a home they will be just fine.
The next phase that no one is talking about is that inflation is about to go hyperbolic. We should see well over 5% in the very near future. This will bode very well for those who are comfort paying a monthly mortgage if and ONLY IF it is a fixed rate mortgage. What will essentially be happening is that you are paying off a fixed price give with cheaper dollars ie if inflation is at 10% one year from now you will be paying back essentially only 90% of the loan value. In two years. 81% etc.
Huh? I’ve been there done that. My condo was paid off but there were comfort Home Association fees and Property Taxes; either one which could foreclose on you and steal your equity if something went wrong. I was making half of what I made before in retirement. change surface with a paid off condo. I basically no longer had any disposable income. Those twice a year property tax bills were a killer. Consider this. You need to LIBERATE your equity. I was totally broke until I sold (at the peak I might add) and all of a sudden I’ve got cash up the wazoo earning income in CD’s earning captital gains on GOLD and losing no money to interest payments because I am debt free. The other option would be to stay trapped in your paid off sh*tbox until the day that you die broke; as you desperately try to hang on and even believe going back to work as a Walmart greeter.
It would make no difference to Me. A house is Just a Commodity like anything else. I would never buy a house for more t
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