I am panicking

[ThePythonicCow]

Re: I am panicking

The house you live in has a big impact on your quality of life. Bigger than most other things.

It also has a big impact on your mobility. A house ties you down for a while in the same place, with a high cost of moving. When raising a family while holding a job that will likely last, this is good. When making major changes to ones living and occupational arrangements, this is bad, and apartments are likely a better choice.

[ThePythonicCow]

Re: I am panicking

It's shocking.

Yeah.

I sold a 3 bed, 2 bath home for $750K in the San Francisco Bay area, and found (though decided not to purchase) a nicer, newer bigger variant in the Dallas - Fort Worth area that listed for $115K.

The price runup of housing in a few areas, such as in coastal California and parts of Arizona, Nevada and Florida was crazy.

[c1ue]

Re: I am panicking

The house you live in has a big impact on your quality of life. Bigger than most other things. This is somehing that women seem to know better than men. If you can find a house that you are confident you can afford, and that offers the living experience you want from a permanent home, I would say go ahead and buy it. You may lose some money by doing so, versus waiting another year or two. But it's OK to spend money to acquire quality of life. That's what money is for. The alternative is to spend a year or two of your life to save money when prices fall. How many years have you got left?

Just remember it's a buyer's market out there - don't compromise. If current prices are still forcing you to compromise on things you really care about, then you can afford to wait.

Unlucky,

I'm glad you had that last couple of sentences in there.

Because otherwise the first part could also be used by realtors.

I'd just like to point out again that the difference between the mortgage payment for a $200K house at 1% interest is only $3.22 as compared with a $105K house at 6.25% interest.

1percent-note.png

6percent.png

The corollary? The amount of money you lose should you buy at house at $200K @ 5% interest vs. a $105K house at 5% interest isn't $95K.

It is $210K.

The only difference is that once you hit that point, your choice is losing $95K now or $210K spaced out over the 20-odd years left in your loan.

This is what all those underwater mortgage holders (NOT homeowners) are looking at now.

[flintlock]

Re: I am panicking

Yeah, pretty much any decent 3 bedroom house will put you back at least a million dollars (so I wouldn't have to borrow much money at 8%). And I'm talking about the 2nd tier areas, San Carlos, Belmont, etc., not Palo Alto / Atherton and such. We both work in the tech industry and been squirreling away our money for the last decade or so, and recently are looking to actually get a nice place.

Curious what a place like that would rent for?

I don't know that area but I do know my uncle saw his "decent 3 bedroom house" in San Diego lose a ton of value in a short period. Luckily he heeded my Dad's advice and sold it a few years ago. They also thought their area was so special it was immune to the bubble. Found out otherwise. Be careful.

[metalman]

Re: I am panicking

how very peculiar to get this question here at itulip. dozens of articles and spot on housing bubble forecasts since 2002. hmmmm.

then i'm thinking, aha! the bullhorn and the kazoo!

the bullhorn says...
- housing prices rise long term
- a house is a road to a comfortable retirement
- everyone should own a home
- losers rent
- mortgage debt is wealth

itulip says...
- housing prices tend to fall for 5 - 7 years in a normal 10 yr boom/bust cycle but due to the housing bubble will fall for 10 to 15 (starting in 2006)

as soon as you leave itulip, what do you hear?

- housing prices rise long term
- a house is a road to a comfortable retirement
- everyone should own a home
- losers rent
- mortgage debt is wealth
- housing prices rise long term
- a house is a road to a comfortable retirement
- everyone should own a home
- losers rent
- mortgage debt is wealth
- housing prices rise long term
- a house is a road to a comfortable retirement
- everyone should own a home
- losers rent
- mortgage debt is wealth
- housing prices rise long term
- a house is a road to a comfortable retirement
- everyone should own a home
- losers rent
- mortgage debt is wealth
- housing prices rise long term
- a house is a road to a comfortable retirement
- everyone should own a home
- losers rent
- mortgage debt is wealth
- housing prices rise long term
- a house is a road to a comfortable retirement
- everyone should own a home
- losers rent
- mortgage debt is wealth
- housing prices rise long term
- a house is a road to a comfortable retirement
- everyone should own a home
- losers rent
- mortgage debt is wealth
- housing prices rise long term
- a house is a road to a comfortable retirement
- everyone should own a home
- losers rent
- mortgage debt is wealth

so, no surprise then, is it that this question keeps coming up.

here's the deal...

housing prices will fall until 2015 - 2020.

period. if you want to own an asset that will fall in price for another 6 to 11 yrs, then buy a house now.

either that, or forget everything you learned here at itulip... don't sell tech stocks in mar 2000, buy 10 yr tbonds in 2000, buy gold in 2001, sell real estate in 2006, sell stocks in 2007.

instead... listen to the bullhorn...

- gold is for morons... only goes down
- buy and hold stocks... only go up
- housing prices go up

etc.
etc.
etc...

[flintlock]

Re: I am panicking

Yeah.



The price runup of housing in a few areas, such as in coastal California and parts of Arizona, Nevada and Florida was crazy.

Exactly! And the bigger they are the harder they fall.

Some good advice on here. Buy a house you can truly afford. By that I mean if a job is lost, you're in a car accident, have an illness, etc. Stuff happens. Don't assume you'll always be able to sell if you need to. Ask anyone in Florida about this. Keep in mind its just a house. And while I understand SF has a strong appeal and you need to be there for your jobs, things can change. I'd say you can only expect higher taxes in California with all their budget troubles. Like others have said, we are probably just now entering a depression. What will be the demand for $1million homes in a depression? Its hard to say.

While you could time things right and actually come out better on this, is it worth the risk? I see more downside than upside frankly. Treating a home as an investment is so FIRE economy anyway.

I think your instincts to hold off are correct.

[GRG55]

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.

If I understand your post you are concerned that by waiting you may end up with significantly higher borrowing costs?

If mortgage rates increase what do you think that will do to housing prices in a State like California, with unemployment already over 10%? 'Frisco's a nice place, but not immune from what's going on all around...

[cjppjc]

Re: I am panicking

If I understand your post you are concerned that by waiting you may end up with significantly higher borrowing costs?

If mortgage rates increase what do you think that will do to housing prices in a State like California, with unemployment already over 10%? 'Frisco's a nice place, but not immune from what's going on all around...

Exactly. What was the result of lower interest rates on home prices.

[FRED]

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.

It is notable that housing prices continue to decline rapidly even though the government is throwing everything and the kitchen sink at the bond market to maintain low interest rates.

The official iTulip position remains as it has since 2005: a 10 to 15 year decrease in residential real estate prices that began in that year will continue until 2015 to 2020 depending on the timing of an eventual rise in interest rates. The housing price decline will accelerate when interest rates eventually rise. In the final stage of the house price collase we will experience three factors driving down prices: post bubble asset price deflation that is nearing and end, falling incomes due to unemployment that is only beginning, and falling affordability due to high interest rates.

[cjppjc]

Re: I am panicking

It is notable that housing prices continue to decline rapidly even though the government is throwing everything and the kitchen sink at the bond market to maintain low interest rates.

The official iTulip position remains as it has since 2005: a 10 to 15 year decrease in residential real estate prices that began in that year will continue until 2015 to 2020 depending on the timing of an eventual rise in interest rates. The housing price decline will accelerate when interest rates eventually rise. In the final stage of the house price collase we will experience three factors driving down prices: post bubble asset price deflation that is nearing and end, falling incomes due to unemployment that is only beginning, and falling affordability due to high interest rates.

I'm sure this chart has been shown before. It seems like 1960 to 1990 was flat except for a couple of spikes. I hate inflation adjusted charts. I don't think we go down till 2015 or 2020. It seems to me that you wont know the bottom till you've been scraping along it for a long long while. Maybe 2015 - 2025.


From Wikipedia, the free encyclopedia

[FRED]

Re: I am panicking

For the original analysis see: The Next Bubble

[Jay]

Re: I am panicking

For the original analysis see: The Next Bubble

FRED, why is it that you say the bounce back in home prices will take 15-20 years from 2006, while in the graph it looks to be 2013-2014, a 7-8 year downswing? Am I missing something, or does this graph not take into account job losses and interest rate increases?

[jimmygu3]

Re: I am panicking

While you could time things right and actually come out better on this, is it worth the risk? I see more downside than upside frankly. Treating a home as an investment is so FIRE economy anyway.

I think your instincts to hold off are correct.

Well said, flintlock. It takes a while for everyone to wake up from 25 years of brainwashing. Like my sister, who has taken a beating in real estate and is determined to make it up- by buying more real estate!

Signs of wage inflation will be one of the main indicators that a housing bottom is in. If unemployment keeps rising and salaries stagnating or dropping, housing prices cannot gain positive momentum.

Jimmy

[raja]

Re: I am panicking

how very peculiar to get this question here at itulip. dozens of articles and spot on housing bubble forecasts since 2002. hmmmm.

then i'm thinking, aha! the bullhorn and the kazoo!

the bullhorn says...
- housing prices rise long term
- a house is a road to a comfortable retirement
- everyone should own a home
- losers rent
- mortgage debt is wealth

itulip says...
- housing prices tend to fall for 5 - 7 years in a normal 10 yr boom/bust cycle but due to the housing bubble will fall for 10 to 15 (starting in 2006)


so, no surprise then, is it that this question keeps coming up.

here's the deal...

housing prices will fall until 2015 - 2020.

period. if you want to own an asset that will fall in price for another 6 to 11 yrs, then buy a house now.

Maybe true . . . unless there is a hyperinflation. :eek:

[Mn_Mark]

Re: I am panicking

I personally believe in Real Estate as the ultimate hold of value, much like gold is.

In my thinking, real estate is no more an ultimate store of value than any other thing that people commonly use. Real estate provides housing services - a place to live. It is not an investment - it does not generate a cash flow, it generates a constant stream of expenses. I want my money in investments that generate a cash flow that I can use to buy more investments that generate cash flows, and thus eventually become financially independent. For now, most of my money is in cash and PM because of the turbulence of the times and my evaluation that there do not appear to be any investments (cash-flow generating assets) that are a bargain.

Meanwhile, an apartment provides me with essentially the same housing services that a house would, at a better bargain. The only thing I can't do with it is have a garden (which I can have at a local community garden if I really want one) or modify the structure. I can live with that.

At some point it an analysis will suggest that it is cheaper to buy than rent (and I believe it is generally cheaper to buy something you use all the time than rent it). Then I will get a house.

I just object to the idea that real estate is some kind of eternal store of wealth. It is a relatively illiquid category of investment that generates no stream of income and is highly subject to being messed with by government policy and regulation. Especially in such turbulent times, I'd rather not be tied to one particular plot of ground when it is so unclear where the best place to live is going to be once the smoke begins to clear.