Time to buy a home is now?

[Wild Style]

Seems the NYT is telling its readers now is the time to buy a home. I want to know who is paying these guys to write this dribble.

link

[ASH]

Re: Time to buy a home is now?

Seems the NYT is telling its readers now is the time to buy a home. I want to know who is paying these guys to write this dribble.

link

Well, if you believe in ka-POOM, then now might be an opportunity to get a fixed interest mortgage at a very low rate, and pick up a house at a pre-bubble price, even if you're not buying at the bottom. Then you have POOM to inflate away your mortgage debt... it worked for (my) daddy in the 70's and early 80's. Home prices will likely continue to fall during POOM (because of job losses, overshoot, and the fact that interest rates will be headed up), but this latter point means that the interest rates will be sky-high to match inflation, so someone who needs credit might not be able to buy when prices actually hit bottom. I wouldn't buy now, but it's not the dumbest idea ever (which, I suppose, would have been buying in like 2007 with an exotic mortgage). I myself am on the patented GRG55 "don't try to time the leading edge but instead wait for the time after POOM when low-interest loans are available again, but house prices haven't recovered from the massacre" plan. Of course, depending upon how fast land prices fall -- and how well my inflation hedges do -- I might also buy with cash in the middle of POOM. (And, you know, if POOM doesn't happen but I stay employed, then I might also get to buy when prices actually hit bottom.)

[rabot10]

Re: Time to buy a home is now?

Well, if you believe in ka-POOM, then now might be an opportunity to get a fixed interest mortgage at a very low rate, and pick up a house at a pre-bubble price, even if you're not buying at the bottom. Then you have POOM to inflate away your mortgage debt... it worked for (my) daddy in the 70's and early 80's. Home prices will likely continue to fall during POOM (because of job losses, overshoot, and the fact that interest rates will be headed up), but this latter point means that the interest rates will be sky-high to match inflation, so someone who needs credit might not be able to buy when prices actually hit bottom. I wouldn't buy now, but it's not the dumbest idea ever (which, I suppose, would have been buying in like 2007 with an exotic mortgage). I myself am on the patented GRG55 "don't try to time the leading edge but instead wait for the time after POOM when low-interest loans are available again, but house prices haven't recovered from the massacre" plan. Of course, depending upon how fast land prices fall -- and how well my inflation hedges do -- I might also buy with cash in the middle of POOM. (And, you know, if POOM doesn't happen but I stay employed, then I might also get to buy when prices actually hit bottom.)

Hold for a few years jmho

[ASH]

Re: Time to buy a home is now?

Hold for a few years jmho

Yes. I think that's the majority viewpoint around here, and it makes the most sense to me. I used to think that I'd have to time the leading edge, but GRG55's argument convinced me it wasn't necessary. Biding one's time seems smartest to me... it's just that buying now wouldn't be utterly stupid.

[rabot10]

Re: Time to buy a home is now?

Yes. I think that's the majority viewpoint around here, and it makes the most sense to me. I used to thido nk that I'd have to time the leading edge, but GRG55's argument convinced me it wasn't necessary. Biding one's time seems smartest to me... it's just that buying now wouldn't be utterly stupid.

Sorry bro it would be utterly stupid - I have so much data re foreclosues U would not belief it - just wait and U will be happy -and maybe name a kid after me for the advise - Ok u won't do that but U will be happy

good luck
rick

[rabot10]

Re: Time to buy a home is now?

Seems the NYT is telling its readers now is the time to buy a home. I want to know who is paying these guys to write this dribble.

link

Morgage brokers association who else?

[GRG55]

Re: Time to buy a home is now?

Yes. I think that's the majority viewpoint around here, and it makes the most sense to me. I used to think that I'd have to time the leading edge, but GRG55's argument convinced me it wasn't necessary. Biding one's time seems smartest to me... it's just that buying now wouldn't be utterly stupid.

Rick is right. Wait. Wait until your patience is exhausted & your wife, who wants her own home, is driving you crazy. Then wait some more.

There is nothing, absolutely nothing that indicates house prices will start rising anytime soon. And lots of reasons to believe they will keep falling for a while yet. Note the following chart shows the majority of the problem to come is not in subprime...

[c1ue]

Re: Time to buy a home is now?

Yes, wait.

My 'smart' friend - who really is brilliant at what he works at - insisted on buying a house in mid-2007.

As he is now discovering, he managed to buy almost exactly at the peak for local area prices - the area he bought in is one of the premier Bay Area neighborhoods.

Now he's going to discover whether the second part of this thesis (first part being why not buy since prices will not go down...BZZZT!):

30% inflation over 3 years with his income increasing at the pace of inflation.

Did I mention his mortgage to income ratio is 7?

Talk about going 'all in'...

[santafe2]

Re: Time to buy a home is now?

I have a different take on this as a home is probably not a great investment for non real estate professionals. The advice I've given is that if one can buy an equivalent home for what is being paid in rent, it's likely a better deal than renting. It's not yet the case here, but it's getting close as newer 3 bedroom homes have dropped into the $275,000-$300,000 range. That's down from a high of about $425,000 in the summer of 2005. At about $225,000, it's time to buy - if one really wants to own a home. This will not work everywhere as property taxes are quite high in some states.

Here are the current calculations I use:
Rent $1,200 a month, typical here
Home cost: $225,000
Downpayment: $25,000
Loan Amount: $200,000
Loan Rate: 6%
Payment: $1,179.50
Tax deduction: variable
Property tax: variable

I prefer this nuts-and-bolts approach to valuation for most people. It removes much of the emotion involved in the decision.

[BiscayneSunrise]

Re: Time to buy a home is now?

In my area, (south Florida) higher end homes are renting for about 1/3 of a mortgage payment would be.

For instance, a house with a $1,000,000 asking price is being rented at $3500/mo. A $2.5M asking price house is renting at $6500/mo. That is an incredible disconnect. So either the market price of the property has to come down or the rents have to go up. My guess is that it will be the former.

As an aside, a friend just bought a trophy house in one of our premier neighborhoods for $1.5M in a short sale. At the peak of the market it sold for $2.5M. THAT was really tempting but given the above formula its' true value may be about 700-800K.

PS: For those interested in working the math, property tax in S Florida for a $1.0M house is 20K/year.

[Wild Style]

Re: Time to buy a home is now?

In my area, (south Florida) higher end homes are renting for about 1/3 of a mortgage payment would be.

For instance, a house with a $1,000,000 asking price is being rented at $3500/mo. A $2.5M asking price house is renting at $6500/mo. That is an incredible disconnect. So either the market price of the property has to come down or the rents have to go up. My guess is that it will be the former.

As an aside, a friend just bought a trophy house in one of our premier neighborhoods for $1.5M in a short sale. At the peak of the market it sold for $2.5M. THAT was really tempting but given the above formula its' true value may be about 700-800K.

PS: For those interested in working the math, property tax in S Florida for a $1.0M house is 20K/year.

I am in S. Florida too. Did you hear about that penthouse in downtown Fort Lauderdale? It was 3 million at the height and the highest bid it got at auction was 300,000.

Overall home prices in S. Florida given income is still WAY off in my opinion.

[metalman]

Re: Time to buy a home is now?

In my area, (south Florida) higher end homes are renting for about 1/3 of a mortgage payment would be.

For instance, a house with a $1,000,000 asking price is being rented at $3500/mo. A $2.5M asking price house is renting at $6500/mo. That is an incredible disconnect. So either the market price of the property has to come down or the rents have to go up. My guess is that it will be the former.

As an aside, a friend just bought a trophy house in one of our premier neighborhoods for $1.5M in a short sale. At the peak of the market it sold for $2.5M. THAT was really tempting but given the above formula its' true value may be about 700-800K.

PS: For those interested in working the math, property tax in S Florida for a $1.0M house is 20K/year.

here's how i look at it.

if...

= $4mm in 2006

and...

= $400k in 2006

and every ad for a home looks like this...



then a couple of years later when a home means this...



or this...



then i'm down with this...

= $400k in 2010

[BiscayneSunrise]

Re: Time to buy a home is now?

I am in S. Florida too. Did you hear about that penthouse in downtown Fort Lauderdale? It was 3 million at the height and the highest bid it got at auction was 300,000.

Overall home prices in S. Florida given income is still WAY off in my opinion.

My sentiments exactly as housiing prices relate to income. And considering there is no way income is going to rise to catch up to housing, real estate must decrease to fall in line with median incomes.


I missed the story about the penthouse. Do you know the name of the building? I guess the bid wasn't accepted. They might be sorry they didn't take the 300K given there are some 30,000 condos on the S Florida market.

I toured an open house yesterday of a beautiful old Florida bungalow. On the water, primo neighborhood, an architectural gem. One prospective buyer was considering a purchase to do a tear down and stack townhouses on it. Apparently that potential buyer didn't get the memo on the state of the FIRE economy.

[Wild Style]

Re: Time to buy a home is now?

My sentiments exactly as housiing prices relate to income. And considering there is no way income is going to rise to catch up to housing, real estate must decrease to fall in line with median incomes.


I missed the story about the penthouse. Do you know the name of the building? I guess the bid wasn't accepted. They might be sorry they didn't take the 300K given there are some 30,000 condos on the S Florida market.

I toured an open house yesterday of a beautiful old Florida bungalow. On the water, primo neighborhood, an architectural gem. One prospective buyer was considering a purchase to do a tear down and stack townhouses on it. Apparently that potential buyer didn't get the memo on the state of the FIRE economy.

If I find the article I will post it here. It also mentioned a 3 million dollar house in Williams island in Miami that sold for 500,000 and a 2 million that sold for 350,000 on Williams Island also. When you look at incomes in South Florida, i am of the opinion we will most likely go back to 1998 prices. A lot of places are getting closer to that price but it seems the people near the downtown didn't get the memo yet. Cracks me up because it isn't like there is much going on in ANY of the South Florida downtowns to warrant any of these prices or stubborness.

[jimmygu3]

Re: Time to buy a home is now?

= $4mm in 2006
....
= $400k in 2010

And keeping in mind Biscayne's note above regarding property tax at $20k per million, do you think that the county and city governments will let that $80k/year go gently into that good night as property values are cut in half again and again? Hell no- just double the millage rate! Real estate will really be viewed as a can't-win investment when property taxes alone exceed rental income. Could we eventually see the day when prime real estate trades for $1, or even goes negative (kind of like underwater timeshares with fees that exceed what you would pay for a vacation rental)? Then you're basically renting from the government via property tax.

Jimmy