Bringing It All Back Home: RE Correction 2.0

[karim0028]

Re: Bringing It All Back Home: RE Correction 2.0

I think we'll see rents in the future more closely follow actual housing values. They have been way out of sync. So in the future it may make little difference if you buy or rent. I remember my brother renting beach view homes in Florida 5 or 6 years ago for $1200 month. These were homes listed at over $750k! Nuts!
Personally, I tend to think if you can grab a 4% loan now and buy the house right, you probably wont regret it. Normally Don, I'd agree about paying cash, but I just think $250k in Gold/Oil would have a better payoff!

I agree with karim that housing with take a hit with rising rates, but how much? In some cases homes in my area are already selling below what the construction cost is to build them. That means no more will be built until prices rise. No construction means a zero replacement rate of homes that are wearing out . Especially in older, in town areas this will be a big factor. Theoretically, home prices will never fall below the replacement cost. At least not for long. In general have too many homes, but that differs with price range, location, etc. In my area we don't have enough mid sized, mid priced homes. We have a lot of McMansions and we have a lot of tiny starter home home stuff. Not so much in between. So my neighborhood has done well through this bust. I'd say if you are buying, and buy a home like that, you can't go wrong. Just don't expect to make anything either.

How much housing prices fall in a high interest rate environment depends on how much inflation is as well.. But, in general i would buy cash in a high rate environment bc you buy at the lowest nominal price and when money is expensive and leveraged assets are cheap. I guess a 4% loan with a super low monthly payment would be allright, just expect that you will be losing principal if you ever wanted to sell and if circumstances turned worse for you (god forbid), you would be putting up cash ~ 30-40% of current homes value in a high interest rate environment.

[karim0028]

Re: Bringing It All Back Home: RE Correction 2.0

This really depends on whether you have a reliable inflation adjusted future income stream ample to cover the mortgage payments.

If yes, you might best borrow the money for the home. If you could have paid cash, then keep that money available somehow, as a hedge, to cover the mortgage if you need to.

If no, then the best guaranteed return on an investment is not paying someone else interest. Stay out of debt.

Yup, if you've got the cash then it should be allright... If your just starting out and are young, dont have the majority of the amount in cash and are working a job then i dont really think a future inflation adjusted cash flow stream is assured.

[ThePythonicCow]

Re: Bringing It All Back Home: RE Correction 2.0

Where I live the mobile home parks are NOT somewhere you would want to live. But then they really have not added any new "parks" around here in years. The land values were too high.

Yes, especially in areas with higher land values, trailer parks can definitely be the dumps. Through much of the Southern U.S., from Florida to Texas at least, the trailer mobile home manufactured home market is quite a bit healthier than in other areas I've lived.

Also, yes, the guys selling you a trailer are happy to up sell you. It is similar to selling cars, just a higher price ticket, and a typically even less well informed buyer. The base model price leader can be a good deal, if you find a reliable manufacturer. In cars, that means a white car with a stick shift, the small engine and no fancy electronic braking/traction stuff. That's what I drive (for a car.) In trailers, it's similar (I won't bore you with the details ...) They don't make a whole lot of money on the base model; the profits are in the extras.

Note the important role that credit (aka debt) plays in that pricing model. Most folks buying cars and homes can't just plunk the cash down. So if they can get stuff they'd really like to have, but could never afford on the open market, then being offered easy credit to fund it has a strong appeal.

The price difference between an adequately constructed trailer and a site-built home in some markets can be substantial. My brand new trailer cost me less than 6 per-cent of what I got for my former 40 year old Silicon Valley McMansion bungalow. They have the same floor space and my trailer has higher quality electrical, plumbing and insulation, and similar HVAC and framing. Even a new site-built stick home in this area of North Texas would have cost me perhaps 3 to 5 times as much as my trailer, for similar form, fit and function.

The low entry price helps my real-estate taxes as well. Those taxes are based on the price. The difference in taxes between this trailer and my former McMansion would buy another brand new trailer every ten years.

[flintlock]

Re: Bringing It All Back Home: RE Correction 2.0

I don't think anything is assured these days!

[karim0028]

Re: Bringing It All Back Home: RE Correction 2.0

I don't think anything is assured these days!

And thus is the nature of debt.....

[ThePythonicCow]

Re: Bringing It All Back Home: RE Correction 2.0

I don't think anything is assured these days!

That's for sure!