Time to buy a home is now?

[grapejelly]

Re: Time to buy a home is now?

in my neighborhoood, a $600K home rents for $2500.

$600K costs to own:

$3500 in interest
$1000 in upkeep
$ 500 in taxes
$ 100 in insurance
-----------
$5100/month

Does a $2500 per month negative cash flow represent a sound investment?

[jayers4647]

Re: Time to buy a home is now?

The federal government will give/print so many dollars to the states and the locals that this will reduce real estate taxes and be another lift for homebuyers.
It seems to me that the efforts to keep everyone in their house will only intensify during the next four years.
The highly inflationary scenario will continue to reduce the nominal costs of your mortgage as in EJ's 100% inflation debt chart.
It may not be the best time to buy a house, but it could be close to that window.

[BiscayneSunrise]

Re: Time to buy a home is now?

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.

South Florida is an interesting case. On the east side of town, in the beach and water front communities you have an enormous amount of visible wealth. Mansions, yachts, Bentleys, etc. The problem is that almost all of that money was made elsewhere and the people are keeping second or retirement homes on the water. it gives one a skewed sense of how well the local economy is doing.

In the central and west sides of town the picture is significantly different with local people struggling in a declining economy. I've begun calling Broward County (Ft Lauderdale) a new era rust belt town. Parts of Palm Beach County are just as bad. As wildstyle pointed out to me in a PM, Miami is somewhat better because it has some real industry but all the major central business district and beach areas here are filled gleaming skyscrapers, empty monuments to an unsustainable mania. The local economy here is not strong enough to keep them occupied and now with worldwide troubles, the wealth from other areas can't be counted on to keep them filled either.

As wild points out, the general sentiment among people here who are realists is that we will settle around 1998 prices.

[BiscayneSunrise]

Re: Time to buy a home is now?

The federal government will give/print so many dollars to the states and the locals that this will reduce real estate taxes and be another lift for homebuyers.
It seems to me that the efforts to keep everyone in their house will only intensify during the next four years.
The highly inflationary scenario will continue to reduce the nominal costs of your mortgage as in EJ's 100% inflation debt chart.
It may not be the best time to buy a house, but it could be close to that window.

However, given that housing has bottomed then for houses to become affordable then wages would have to increase to restore affordability. I'm certainly not seeing that nor do I expect to see it for some time to come.

[Wild Style]

Re: Time to buy a home is now?

South Florida is an interesting case. On the east side of town, in the beach and water front communities you have an enormous amount of visible wealth. Mansions, yachts, Bentleys, etc. The problem is that almost all of that money was made elsewhere and the people are keeping second or retirement homes on the water. it gives one a skewed sense of how well the local economy is doing.

In the central and west sides of town the picture is significantly different with local people struggling in a declining economy. I've begun calling Broward County (Ft Lauderdale) a new era rust belt town. Parts of Palm Beach County are just as bad. As wildstyle pointed out to me in a PM, Miami is somewhat better because it has some real industry but all the major central business district and beach areas here are filled gleaming skyscrapers, empty monuments to an unsustainable mania. The local economy here is not strong enough to keep them occupied and now with worldwide troubles, the wealth from other areas can't be counted on to keep them filled either.

As wild points out, the general sentiment among people here who are realists is that we will settle around 1998 prices.

The buys in Miami are going to be grand. Miami Herald have been putting out silly articles about how there are few condos on the market downtown Miami etc. Well this one site I go to looked into who bought these condos. Seems the bank "sells" many units to another arm of their business. A lot of that is going on for one reason or another.

As for the east side of Broward like Sailboat Bend, Progresso Village, Flagler Village, Rio vista, Victoria park and a few others, I don't see those places doing so well. I think a lot of those people's income will/is drying up or will dry up. I mean just drive around some of these areas, the number of for sale signs and foreclosures is climbing and quickly. As I mentioned before, very few places on the east have much going for it. I mean there are few large companies down there. Also the shopping downtown is horrific. I don't even mean high end shopping either. If you live in Sailboat bend, to get to Target, wallmart, Sam's club or other places were people are shopping at you have to go north or back out west. They don't have a farmers market, meat market or anything else like that either. They have little to no mass transit etc. and I don't see that changing anytime soon. IF poom happens gas is going to be horrific. Having to drive needlessly to get your necessities wont make much sense. I really can't imagine a good outcome for Broward.

[tree]

Re: Time to buy a home is now?

This thread started referring to a NYTimes story.

Did anyone notice that the article in question was at one point the #1 most-emailed story at the NYT site?

It was.

[BK]

Re: Time to buy a home is now?- Federal Govt helping hand

Does anyone else expect local towns and Cities to be in a big ole financial mess?
Won't the very inflation that the Federal Govt will create make it very expensive for Towns/Cites to run operations. Will Federal Money inflows be enough to prevent crisis hitting lots of Towns in the USA.

Towns/Cities seem SUPER sensitive to inflation. 70% of the Budgets are for Wages and benefits and they burn lots of Petroleum products. When home prices are soaring folks are happy to pay higher property taxes and the costs can be covered.

Won't the Federal helping hand just allow Towns to continue to function - they may still need to raise taxes or fees. No more floating Bonds for Playgrounds and fancy trash hauling trucks and angry home owners who don't want higher taxes.

How many Cities or Towns will be forced into bankruptcy in the crisis that is before us?

My emotions get the best of me at times - does anyone else see this as a possibility??

[Wild Style]

Re: Time to buy a home is now?- Federal Govt helping hand

Does anyone else expect local towns and Cities to be in a big ole financial mess?
Won't the very inflation that the Federal Govt will create make it very expensive for Towns/Cites to run operations. Will Federal Money inflows be enough to prevent crisis hitting lots of Towns in the USA.

Towns/Cities seem SUPER sensitive to inflation. 70% of the Budgets are for Wages and benefits and they burn lots of Petroleum products. When home prices are soaring folks are happy to pay higher property taxes and the costs can be covered.

Won't the Federal helping hand just allow Towns to continue to function - they may still need to raise taxes or fees. No more floating Bonds for Playgrounds and fancy trash hauling trucks and angry home owners who don't want higher taxes.

How many Cities or Towns will be forced into bankruptcy in the crisis that is before us?

My emotions get the best of me at times - does anyone else see this as a possibility??

isn't this happening on some scale now? Wasn't it Alabama that was on the verge of bankruptcy? I guess if/when poom happens we will see even more issues and I would guess city lay offs will take a uptick? I know NYC has frozen hiring as of last year.

[ASH]

Re: Time to buy a home is now?

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

Fortunately, my wife has no particular desire to own a home, and a strong desire to do the shrewd thing.

[ASH]

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'...

Not a bet I'd be eager to take. The real sticking point for me is the notion of wages keeping pace with inflation.

[raja]

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.

What if there is hyperinflation? Treasury bills and cash will be wiped out.

What if some sort of draconian government penalties or confiscation were enacted that would decimate gold profits?

What if the hyperinflation scenario is worldwide as all economies print more fiat? Off-shoring of assets would be a total loss.

How can you preserve wealth?

RE . . . . . . . IMHO

[ASH]

Re: Time to buy a home is now?

What if there is hyperinflation? Treasury bills and cash will be wiped out.

What if some sort of draconian government penalties or confiscation were enacted that would decimate gold profits?

What if the hyperinflation scenario is worldwide as all economies print more fiat? Off-shoring of assets would be a total loss.

How can you preserve wealth?

RE . . . . . . . IMHO

The thought has occurred to me, too. However, one normally has to plan based upon what they think is most likely to happen, while having insurance for the less likely events that could upset that plan. In my case, the plan is to wait and buy later, and the insurance is my parents' rural homestead and the means to secure it. But, you know, I've had a kind word to say about goats before.

[Rantly McTirade]

Re: Time to buy a home is now?

The article-both the author and the interviewees commentary-had a lot of statements from the view of 'housing as an investment' viewpoint, confirming that prices have not bottomed yet.
Housing is a consumption good that will likely maintain its' value vs. general price inflation;at the very best, perhaps 0.5% per year over said general inflation. If you find a house you like, can comfortably afford it based on an 'old-school' mortgage and have no plans to move-i.e., try to resell it-for a good 5-6 years minimum, then buy it. Otherwise, ignore it.

[raja]

Re: Time to buy a home is now?

The thought has occurred to me, too. However, one normally has to plan based upon what they think is most likely to happen, while having insurance for the less likely events that could upset that plan. In my case, the plan is to wait and buy later, and the insurance is my parents' rural homestead and the means to secure it. But, you know, I've had a kind word to say about goats before.

Of course, everybody's situation is different, so different strategies apply . . . .
I'm retired, and I'm just trying to preserve what I've got so I don't have to go to work in Walmart :eek:

In trying to prepare for most possible future scenarios, my approach as follows:

I'm about 20% gold, 45% TIPS (paying 2.3% + CPI rate), 30% RE and 5% shorts (gambling money). Plus a self-sufficient level of chickens, goats, sheep, cows and crops.

The gold and TIPS are subject to the dangers of government intervention and hyperinflation, respectively. But the gold won't go to zero, and I figure with that and the RE I'll at least have something "real" and safe from hyperinflation. I will probably lose money on the RE as housing prices continue down, but we bought recently and got some good deals. The good part is that rents will always be paid in the "coin of the realm", whatever that turns out to be.

I'm assume assuming that whatever happens, I'm going to lose some money . . . but I'm trying to minimize the amount with this three-prong strategy.

For your parents' rural homestead, make sure the roof and fencing is in good condition, and that you have enough seed, tools and salt.

Let's hope it doesn't come to that . . . .

[LargoWinch]

Re: Time to buy a home is now?

I finnd this basic tool usefull when assessing a "buy vs rent" scenario.

Simply input a negative annual home appreciation amount and see what happens...

http://www.nytimes.com/2007/04/10/bu...et&oref=slogin


I'm with RickBishop, Ash and al. on this: wait it out.

I am a currently a renter and plan to exchange 100oz of gold in the next decade for a median house in Toronto (mortgage free).