I am panicking

[rachits]

After this week's bombshell, I've told my wife (who's been bugging me to buy a house) that if she wants to, we can start seriously looking for a house to buy.

Earlier, I kept telling her prices are going to keep dropping and we don't want to just throw away money. Here in the SF bay area, in the more desirable parts, prices haven't yet dropped much yet (maybe 10%ish). Recession is only beginning to hit the job market here. But I am so scared the massive expansion of the Fed balance sheet and the monetization of treasuries is going to blow up in everyone's face.

Half of me wants to wait and see and hold PMs. The other half wants to go out and borrow as much as I can at these rates I'll likely not ever see again in my lifetime. The loan rates above the GSE limits, last I checked were only decent if they were ARMs (5%ish). 8% if 30 year fixed. Not sure if the recent news has dropped them any.

[metalman]

Re: I am panicking

After this week's bombshell

what bombshell?

[bpr]

Re: I am panicking

Half of me wants to wait and see and hold PMs. The other half wants to go out and borrow as much as I can at these rates I'll likely not ever see again in my lifetime. The loan rates above the GSE limits, last I checked were only decent if they were ARMs (5%ish). 8% if 30 year fixed. Not sure if the recent news has dropped them any.

Every decision I ever made in a panic I wound up regretting at some point.

Since 2003, when I first would've qualified for a mortgage, I've based my living situation on the premise that you can always renegotiate the rate of a loan; you can not renegotiate the purchase price of your home. I have, however, made some concessions as far as quality of life goes, but I feel that I will be better off because of it. I'm sure you know what that's like.

On the other hand, a decision as important as buying a first home is very personal and needs to be weighed against not only economic but also quality of life considerations for both you and your family. If you're buying in a panic, though, you also run the risk of buying just to buy, and not taking the time to find the right place at a reasonable price.

Whatever your decision, I wish you the best.

[metalman]

Re: I am panicking

Every decision I ever made in a panic I wound up regretting at some point.

Since 2003, when I first would've qualified for a mortgage, I've based my living situation on the premise that you can always renegotiate the rate of a loan; you can not renegotiate the purchase price of your home. I have, however, made some concessions as far as quality of life goes, but I feel that I will be better off because of it. I'm sure you know what that's like.

On the other hand, a decision as important as buying a first home is very personal and needs to be weighed against not only economic but also quality of life considerations for both you and your family. If you're buying in a panic, though, you also run the risk of buying just to buy, and not taking the time to find the right place at a reasonable price.

Whatever your decision, I wish you the best.

will the gov't be able to shove rate so low over the term of your mortgage?

will housing prices fall or rise over the term of your mortgage?

that's what you need to decide...

[BrianL]

Re: I am panicking

What is your living situation right now?

My wife and I went from apartment to buying a house. We probably would have gotten most of what we wanted by renting a house instead. Our house is likely down about 10-15% over the last 5 months. Not a massive problem as we bought expecting to stay in it 10 years or more, but a concern if a job forces us to move some time.

Talk with your wife about your concerns openly. Don't let this become a regret or an issue down the road. Find out what her needs/desires are pushing towards home ownership and see if you can find a compromise.

[globaleconomicollaps]

Re: I am panicking

think about this:

what bombshell?

Did the Fed actually do what they said they would do? that was published Jan. 28. today is march 20th. The markets didn't respond as they expected so they waited two months and made another stronger statement. The dollar dropped a few percent, but next week everyone will forget and it will be back to deflation as usual. take a close look at this paper:
http://www.debtdeflation.com/blogs/2...liersofcredit/
Bernenke has tried hard to produce inflation for some time, but he is using a flawed model of how the economy works. As a result he is underestimation by a factor of 25 the amount of money needed to create inflation:

To make a serious dent in debt levels, and thus enable the increase in base money to affect the aggregate money stock and hence cause inflation, Bernanke would need to not merely double M0, but to increase it by a factor of, say, 25 from pre-intervention levels. That US$20 trillion truckload of greenbacks might enable Americans to repay, say, one quarter of outstanding debt with one half—thus reducing the debt to GDP ratio about 200% (roughly what it was during the DotCom bubble and, coincidentally, 1931)—and get back to some serious inflationary spending with the other (of course, in the context of a seriously depreciating currency). But with anything less than that, his attempts to reflate the American economy will sink in the ocean of debt created by America’s modern-day “Roving Cavaliers of Credit”.

The important thing right now is to look with clear eyes at the situation right now and ask yourself is the direction of things up or down? In the distant future, say a year or so Berneke will get religion and pump $20 trillion into the economy, but what we are experiencing right now is decreasing wages, consumer prices, commodities, and stocks. I sold GTU today at an all time high. I will buy again when gold hits $800

[audrey_girl]

Re: I am panicking

i am a very big fan of diversification - readily admit that I in no way can time any market anywhere, so i have tried to discipline myself to keep x % in cash, % in pm, x % in stocks (yes - still, mostly energy), and x % in real estate.

granted real estate has been very ugly these last few years, but I still believe in it long term, especially if you are going to live in it, and especially in a place like CA with the demographic trends, and especially as a way to diversify your assets.

here are two great articles that may help you out with your decision:

http://www.financialsense.com/fsu/ed...2007/0404.html

http://www.financialsense.com/fsu/ed...2007/0313.html

good luck and God bless you with whatever decision you make

regards

ag

[vanvaley1]

Re: I am panicking

After this week's bombshell, I've told my wife (who's been bugging me to buy a house) that if she wants to, we can start seriously looking for a house to buy.

Earlier, I kept telling her prices are going to keep dropping and we don't want to just throw away money. Here in the SF bay area, in the more desirable parts, prices haven't yet dropped much yet (maybe 10%ish). Recession is only beginning to hit the job market here. But I am so scared the massive expansion of the Fed balance sheet and the monetization of treasuries is going to blow up in everyone's face.

Half of me wants to wait and see and hold PMs. The other half wants to go out and borrow as much as I can at these rates I'll likely not ever see again in my lifetime. The loan rates above the GSE limits, last I checked were only decent if they were ARMs (5%ish). 8% if 30 year fixed. Not sure if the recent news has dropped them any.

I live in the Bay Area...be it at the south end of the valley. If somebody is quoting you 8% fixed for 30 years look around and do some shopping. Think ya could do better. Pick the area ya want, wait for a house that fits your needs, and hope your company doesn't downsize or get absorbed by another one. The really good areas will hold their value the longest...but they...like everything else will go down sooner or later in a market like we have today.

Tell your realtor exactly what you want. Believe me, in this market he/she will find it for you. Then be patient and watch the market and your industry that's employing you carefully. When you and misses feel comfortable about job security, housing price stability, and the neighborhood... make your move.

[santafe2]

Re: I am panicking

After this week's bombshell, I've told my wife (who's been bugging me to buy a house) that if she wants to, we can start seriously looking for a house to buy.

Earlier, I kept telling her prices are going to keep dropping and we don't want to just throw away money. Here in the SF bay area, in the more desirable parts, prices haven't yet dropped much yet (maybe 10%ish). Recession is only beginning to hit the job market here. But I am so scared the massive expansion of the Fed balance sheet and the monetization of treasuries is going to blow up in everyone's face.

Half of me wants to wait and see and hold PMs. The other half wants to go out and borrow as much as I can at these rates I'll likely not ever see again in my lifetime. The loan rates above the GSE limits, last I checked were only decent if they were ARMs (5%ish). 8% if 30 year fixed. Not sure if the recent news has dropped them any.

You can start by apologizing to your wife for the "bugging me" comment. Then you might have the room to explain that SF will be late to the downturn. I'm sure you're correct but I've been married for a long time and I can assure you that your approach is flawed. I've no real spreadsheet expertise here but i do have a wife and two girls. From them, I've learned to see the world is more than a slice/N/dice formula.

[kartius919]

Re: I am panicking

Sound reasonable advise from AG. In real terms, real estate has a ways to fall. However, any asset class at this point is better than US dollar holdings. With real estate, you can down 20% giving you nice leverage to offset some losses from real price decline assuming the dollar collapses in the next couple years. If this is for a home rather than investment, sounds like a good purchase right now. Not everything can be valued in dollar and cents. Just make sure you can keep up with payments and have sufficient other hard assets.

[BrianL]

Re: I am panicking

Sounds familiar.

I'm 32% cash, 8% PM, 13% bonds/treasuries, 22% equities (mostly energy and S&P500), 25% real estate.

Hopefully I have something left when this is all over. :| I'm probably light on PMs by itulip standards, but I just don't have the heart to go much higher. I just want enough in PMs to have a safety net.

...I'm continuous fighting off the temptation to invest in photography gear though...

[kartius919]

Re: I am panicking

BTW don't panic. You still have time. Find a house you and your wife both love and can afford.

[rachits]

Re: I am panicking

8% only for the amount over 650k. I didn't really shop around that much. I was just going to the loan agent to see how much I can get at roughly what rates. I'll also have to put 30-35% down.

Thanks for the replies. My wife might not fully understand the risks, but she clearly understands the numbers.

The way it looks right now, I'll probably extend my current lease by 6 months (BTW, this is the first time we got a reduction in rent since 2002). I'll keep my current cash in inflation hedges, and worst comes worst, I shouldn't be too badly off.

[BrianL]

Re: I am panicking

Zillow.com has continuously updated rates by state. The lenders I talked with were surprised how accurate the numbers were relative to what they were offering. It might be worth checking out for general numbers.

Edit: Or at least the trends were right, if they specific numbers themselves weren't accurate.

[ThePythonicCow]

Re: I am panicking

As a result he is underestimation by a factor of 25 the amount of money needed to create inflation

When the big engine starts to seize up because the oil in it is turning to sludge, then adding more sludge won't help.

Calculations of how -much- money would be needed to replace that lost due to asset bubble collapses are misleading. Such calculations presume that the dollar and T-Bills are still highly liquid, and we just need to "plug the leak in our swimming pool and pour in more water."

The water is turning to mud, and the swimming is getting difficult. No amount of additional mud will help.