Good time to buy a home? Granted how low rates are at this minute?

[tmosley]

Wait what? Who's defending the housing market? I'm saying you SHOULDN'T buy. I'm saying wait for the resets. To do otherwise is to invite certain disaster.

 

[WaltM]

Wait what? Who's defending the housing market? I'm saying you SHOULDN'T buy. I'm saying wait for the resets. To do otherwise is to invite certain disaster.

people like Jordan, brandonyates and zippy are defending the housing market, not you.

 

[jrkotrla]

Thank you all for the input thus far. Yeah I am 25 and have a decent income and was thinking of splitting this with my brother since with our combined incomes we should be able to afford the house.

This makes me fear for you. Only with both incomes you can afford the house? what if one of you loses his job? What if one of you gets a once in a life-time job opportunity halfway across the country?

If you can not afford the payment by yourself, you can not afford the payment.

As for interest rates, I'd rather buy when rates were high (total price is fairly constant, as interest rates decrease, prices tend to rise) and then refinance when interest rates decreased again. But that's just me.

 

[Liberty Rebellion]

Shadow inventory refers to the homes that are in default and have been abandoned by the former owners, but have not been foreclosed upon because the banks don't want to book the loss in their sale (nor do they want to pay for their upkeep).

They are able to avoid taking the loss because they have been bailed out.

In some cases they aren't even abandoned by the former owners. My sister and bro-in-law lived in their house without making a payment for 7 months. They finally decided to move into an apartment, but it wasn't b/c the bank was forcing them out. There is a TON of inventory out there


Here's another look at that chart posted earlier, which is one of the reasons I'm not buying a home anytime soon and also b/c housing prices in my area are only back to 2004 prices. I'm waiting for 2000 prices and lower

 

[Zippyjuan]

This makes me fear for you. Only with both incomes you can afford the house? what if one of you loses his job? What if one of you gets a once in a life-time job opportunity halfway across the country?

If you can not afford the payment by yourself, you can not afford the payment.

As for interest rates, I'd rather buy when rates were high (total price is fairly constant, as interest rates decrease, prices tend to rise) and then refinance when interest rates decreased again. But that's just me.

Definately an important point. One should also not go into the purchase of a home with a girlfriend/ boyfriend as co-signer or needing their income along with yours to make the purchase. Like marriage, buying a house is a long term commitment. Borrowing to help with the down payment is a different story- if things change you can still pay that back but if you needed their money to make your payment and things don't work out you would be in big trouble. This is why I have emphasized "that you are able to afford" when I describe buying a house.

 

[WaltM]

Definately an important point. One should also not go into the purchase of a home with a girlfriend/ boyfriend as co-signer or needing their income along with yours to make the purchase.

so true, same with newly weds for the matter.

 

[WaltM]

In some cases they aren't even abandoned by the former owners. My sister and bro-in-law lived in their house without making a payment for 7 months. They finally decided to move into an apartment, but it wasn't b/c the bank was forcing them out. There is a TON of inventory out there


Here's another look at that chart posted earlier, which is one of the reasons I'm not buying a home anytime soon and also b/c housing prices in my area are only back to 2004 prices. I'm waiting for 2000 prices and lower

I'm ignorant, wtf is ARM?

 

[AmericasLastHope]

I'm ignorant, wtf is ARM?

Adjustable Rate Mortgage: http://en.wikipedia.org/wiki/Adjustable-rate_mortgage

 

[Pennsylvania]

If you are looking for a home, just wait a couple of years, and you will be able to buy one with the cash you saved, with no need to waste money on interest.

Just curious, are you referring to dollar or PM savings, and how much?

ETA: ah, rereading the thread I see you're referring to PMs. Still curious how much (in PMs) you'd expect to thrown down on a median-priced home. AFAIK median home-price levels have never dipped below around 100 oz. gold. Do you expect them to go lower than this? Much lower?

 

[tmosley]

Just curious, are you referring to dollar or PM savings, and how much?

ETA: ah, rereading the thread I see you're referring to PMs. Still curious how much (in PMs) you'd expect to thrown down on a median-priced home. AFAIK median home-price levels have never dipped below around 100 oz. gold. Do you expect them to go lower than this? Much lower?

Well, like I said, I don't have a particular target in mind, it's just that I see a tsunami coming, and thus think that now is not the time to be buying beachfront property (as it may be washed away). Wait until after the tsunami breaks and rolls back, and you will see a more realistic set of prices. I don't know what they will be, except that they will be quite a bit lower than they are now.

In terms of PMs, they may be a LOT lower. 25 oz of gold is not out of the question. Indeed, as the US goes the way of Detroit, you may find that property is worth even less than that, perhaps 5 oz of gold, or even 1 oz of gold. Or maybe it will only go down to 90 oz of gold. No way to know until it happens.

 

[Pennsylvania]

If we really do hit hyperinflation, I find it very difficult to believe the prices of homes in terms of gold won't set unprecedented lows as people scramble for liquidity. This should all be very "entertaining" to say the least.

 

[fgd]

I sold my home during the bubble and am renting for less than a mortgage payment. I will buy in 2012-13. Every doubling of interest rates means an instant 50% drop in all residential real estate. If we go to 1980s rates then real estate will drop by 75-85%. The math does not lie.

 

[Jordan]

I sold my home during the bubble and am renting for less than a mortgage payment. I will buy in 2012-13. Every doubling of interest rates means an instant 50% drop in all residential real estate. If we go to 1980s rates then real estate will drop by 75-85%. The math does not lie.

So when interest rates went from 7-8% in 1976 to 18-20% in 1980 home prices dropped by 75-85%?

 

[tmosley]

So when interest rates went from 7-8% in 1976 to 18-20% in 1980 home prices dropped by 75-85%?

People today don't have enough cash to buy a home. If mortgage rates go up, that cuts directly into the money available to buy. In the 70's and 80's, people were still savers, and as such still had money to buy homes.

But yes, there was a RE crash from 81-83 due to rate increases.

 

[Pennsylvania]

People today don't have enough cash to buy a home. If mortgage rates go up, that cuts directly into the money available to buy. In the 70's and 80's, people were still savers, and as such still had money to buy homes.

I believe Peter Schiff agrees with that assessment:

In addition, the collapse of the mortgage securitization market means houses must be cheap enough for our limited pool of domestic savings to supply the funding, as we will likely lose access to much of the foreign funding that fueled the bubble.

 

[InPaulWeTrust]

This makes me fear for you. Only with both incomes you can afford the house? what if one of you loses his job? What if one of you gets a once in a life-time job opportunity halfway across the country?

If you can not afford the payment by yourself, you can not afford the payment.

As for interest rates, I'd rather buy when rates were high (total price is fairly constant, as interest rates decrease, prices tend to rise) and then refinance when interest rates decreased again. But that's just me.

No, no...the idea is that with both of our incomes combined it would make it that much easier to own a home. We could each support our own payments separately, but since we are close we figured if we did follow through with this plan we could do it together.

However your statement is searching for a guarantee of no job loss, there is no such thing for anyone in life so your point is rather moot as anyone could potentially lose their jobs in the same situation, or lose their savings, or whatever the case may be. This is a risk everyone takes whether in a good job market or a bad one, granted the risk is higher in times like these but the truth is it can happen at any time.

It was just an idea we threw around and I figured I'd post a thread about it since housing related threads tend to get the most hits and I wanted to see what you guys thought, do or have done.

 

[Zippyjuan]

I sold my home during the bubble and am renting for less than a mortgage payment. I will buy in 2012-13. Every doubling of interest rates means an instant 50% drop in all residential real estate. If we go to 1980s rates then real estate will drop by 75-85%. The math does not lie.

I had a friend suggest I do something similar. In my situation, my combined mortgage and property taxes and homeowner's fees are lower than the cost of renting a similar unit in my area (about $300 a month less on a one bedroom- I own a one bedroom condo). It is still worth more than twice what I bought it (it got to about three times what I got it for) and I am several years closer to having it all paid for. If I had sold, I would be paying more money to rent and if I bought it back today my assesment would be higher so I would have higher property taxes and still have 30 years of payments to make instead of only having about three more years left on it. I would be far worse off if I followed his advice.

So what happened to housing prices when rates hit 20 or 25% in the 1980's (interest rates on mortgages tripled between 1977 and 1981- nearly doubling in 1981 alone)? Where is the collapse in prices?

http://mysite.verizon.net/vzeqrguz/housingbubble/

Compare that chart to what interest rates on mortgages have done:

http://mortgage-x.com/trends.htm

 

[Zippyjuan]

People today don't have enough cash to buy a home. If mortgage rates go up, that cuts directly into the money available to buy. In the 70's and 80's, people were still savers, and as such still had money to buy homes.

But yes, there was a RE crash from 81-83 due to rate increases.

Few people have ever had enough cash to buy a home- even in the 1950's, 60's, 70's, whenever. That is why there has been a strong mortgage industry. You are right about the fact that rising interest rates means that they cannot afford the same priced home but now can only afford a lower priced one if interest rates go high. You are also right about people having a lower savings rate- that effects how much of a down payment people can put down on a place.

But that does not necessarily mean a further 50- 75% collapse in housing prices. When demand goes down a seller has two options. One is to try to ask a lower price. Second is to take it off the market and not sell it- either rent it out or continue to live in it themselves. If they feel the prices are too low compared to what they think theirs is worth, they will take the second option. This reduces the supply of homes on the market and brings supply/ demand into better balance. Sure there will be people forced to sell for various reasons but they are not the majority of the market.