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Old 11-10-2009, 06:54 AM
 
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I know we have beat this thing around before but I've read another big round of ARMs are going to reset in 2010 with another big round of foreclosures. Thinking of renting for a year - 18 months then buying a home again (El Paso county) less tax than Springs or Fountain. Your thoughts? The fed is not going to move the prime rate for a long time. RP
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Old 11-10-2009, 09:15 AM
 
Location: Ice Station Peyton, Colorado
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Here are some charts I found that seem to indicate the next couple of years will be rough:
Chart 1
Chart 2
Chart 3
Chart 4
Chart 5
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Old 11-10-2009, 09:42 AM
 
Location: Colorado Springs
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Quote:
Originally Posted by proveick View Post
I know we have beat this thing around before but I've read another big round of ARMs are going to reset in 2010 with another big round of foreclosures. Thinking of renting for a year - 18 months then buying a home again (El Paso county) less tax than Springs or Fountain. Your thoughts? The fed is not going to move the prime rate for a long time. RP
The Fed is now supporting low mortgage rates by buying Treasuries. However, at some point, it will become increasing difficult to continue. I then expect bonds to fall and interest rates to rise. Our Chinese masters will demand higher rates to compensate them for a declining dollar.

So if you buy a house now with mortgage rates at let's say 5%, and then over time rates rise to 10%, you might think you have a good deal. However, you may have become trapped because when you need to sell, the buyer must be able to qualify at the new rate. Given the extreme loss of high paying jobs here since 2000, you might have to wait a long time to find a buyer, or, more likely, you will need to drop the price.

So I think I'd be more likely to remain a renter until this economy looks much better.
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Old 11-10-2009, 10:21 AM
 
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Yup, 2010 and 2011 are going to be much worse than what we have seen so far. Trying to talk my wife into renting till some of the dust settles. Next is the commercial meltdown. When is hyperinflation going to kick in with this mess? RP
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Old 11-10-2009, 10:37 AM
 
Location: Colorado Springs
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Quote:
Originally Posted by proveick View Post
Yup, 2010 and 2011 are going to be much worse than what we have seen so far. Trying to talk my wife into renting till some of the dust settles. Next is the commercial meltdown. When is hyperinflation going to kick in with this mess? RP
I don't think we get hyperinflation in house prices because we have no wage inflation. We have a real unemployment rate near 20% Employees have no power to demand higher wages. During the early 80s when mortgage rates went up to 15%, wages were moving up because there was a shortage of labor.

I think we stay in a deflationary cycle for a long time. In such a period, cash is king and debt is a killer. The thing to do is become debt free, rent, and develop salable skills.
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Old 11-10-2009, 07:20 PM
 
Location: Ice Station Peyton, Colorado
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First, you can not predict the "bottom" or "top" of any market. Too many variables. It's like forecasting the weather in the Pikes Peak area

But, if it were me, I would look at the trend lines to get a rough feeling for where the bottom should be. It's "rough" because, again - too many variables.






Last edited by TheBeach; 11-10-2009 at 07:24 PM.. Reason: Hey, I trend towards more graphs :-)
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Old 11-10-2009, 07:49 PM
 
Location: Colorado Springs
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Schiller's graphs are interesting, but there is no national market for housing; all residential real estate markets are local. And I agree, forecasting prices is difficult, indeed the price just represents the balance between supply and demand.

The good news for Colorado Springs is the relatively stable DOD spending which supports many jobs. Also, we never had the huge runup depicted on the chart above because we're not landlocked. We can build all the way to Kansas, the only limiter is water.

But prices will be impacted by interest rates, so I'm not expecting much housing appreciation. In fact I think it could at best be flat for quite a while.
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Old 11-10-2009, 08:06 PM
 
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Market tops, bottoms and recessions cannot be known until after they occur and the data for 1-2 quarters shows the trend.

A recession only becomes official AFTER two consecutive quarters of negative growth. Thus you are in a recession for at least six months before it's "officially" called by the NBER. It took a year for the NBER to call the current recession, though we all knew it was here.

Real Estate bottoms and tops are much the same. Only when actual sale prices are viewed, well after the fact, do you know when a bottom or top occurred. If you wait for the bottom or top to occur before buying or selling a home, you'll actually miss it. You sell "into the market" when prices are still rising and you buy when price declines are slowing down as they near a bottom. In most cases, "close" is good enough, as there are few absolutes in the matter of tops and bottoms, especially with how each how varies from the others, and "comps" are approximate, not finite to the penny.

A lot of Option A Arms are due to reset next year. Many of these mortgages have been in effect for a few years now. Resetting doesn't automatically mean default and foreclosure. If those buyers have successfully made their payments for 3-4 years now, that indicates they *should* be able to make them next year, though it's not a given.

Best advice to would-be buyers is stick close to a realtor who feeds you lots of data, know what you want, be ready to strike, and check the foreclosure sales for real bargains (bargain doesn't mean a home that's been trashed).
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Old 11-10-2009, 08:07 PM
 
Location: Ice Station Peyton, Colorado
132 posts, read 613,305 times
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... We can build all the way to Kansas, the only limiter is water...
Ain't that the truth!
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Old 11-10-2009, 08:35 PM
 
Location: Ice Station Peyton, Colorado
132 posts, read 613,305 times
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One way I use to find good Realtors was to attend the Open Houses and see this person in action. You would not believe how many Realtors failed this simple test.
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