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The problem with that fact is that like many of a similar nature, they are taken out of context and used to support a specific viewpoint.
The fact does not address income levels, it merely considers that everything else remains as it is and the only fluid components are interest rates and house prices. That right there makes the fact nearly worthless and barely a metric to use in considering anything in real estate.
While the housing bubble of recent past affected the entire economy, it did not adversely affect the real estate held by the entire society, unless they tried to sell. Like any investment, unrealized gains and unrealized losses mean nothing to the person who does not sell. Most people didn't sell and most people didn't go into foreclosure. That is the other problem with these types of facts. They are designed to induce people to buy books, attend seminars and worry at night so they can run into the arms of some advisor.
The thing you can't have always stinks. Plainly put, those that miss out on low prices then complain about rising prices when they are priced out of the market. That isn't limited to real estate, it happens with stocks and just about anything else.
Much of the price increases are the result of cash buyers or those with large down payments able to get mortgages. They are unlikely to feel a retraction in the market, they aren't beholden to some artificial pressures to sell and make a profit.
So that fact is quite meaningless. Incomes took a hit like many other things but that too can't continue and if what goes up must come down, with income levels, what sank will get a lift. It might take some shaking out but there is a point at which income levels must rise in order to retain a working economy.
The idea that the big bad bubble is on the way doesn't work. Let's consider the "they". You know, the ones who supposedly are raking in all the money and not spreading it around. At some point, if "they" don't support increases in income levels, then there won't be anyone buying anything and "they" won't make any more money. It is as simple as a marble game kids play. When one kids ends up with all the marbles, the game is over and no one wants to play anymore. Watch then as the one with the most marbles starts loaning or even giving away some of his marbles so others can play. The other side of that little story is that if the kid with all the marbles wasn't too well liked, the other kids simply take his marbles away. Apply that to the "they". "They" know full well that all the houses simply can't be owned by banks or the very wealthy if no one can even afford to rent them. There is too much power in the hands of the many it is just that the many aren't properly incentivized to use it...yet. "They" want that not to happen because then "they" lose everything.
Go talk to someone who has lost money in a market, be it stocks or anything else. Ask them how they feel about the stock. You'll rarely hear praise from those who sold at the bottom and lost. The same applies here.
People underwater in the mortgages haven't lost a penny unless they sell. That is something the doomsday proponents never talk about. So long as the person can pay their mortgage and other expenses, they have no impact on their daily life and that is most people. While many lost their jobs in the bad economy, many is not most. Even if you take a 20% unemployment rate that means 80% are still working.
So pick your facts but considering them in a vacuum isn't really a good way to use them.
if mortgage rates are able to find their way back to 7-8% it means the economy is humming like a baby , the ills of the world are behind us, people are working and we all have more money in hand.
home price will more likely rise and not crumble away .
like you said rates do not rise in an isolated bubble. they rise because inflation is rising and the economy is over heating.
as i mention earlier most of our home appreciation historically has been when mortgages were in the 6-8 % range.
lower than those rates means we are not really humming in the economy and affordibility is affected. like now rates are up about 1% but the economy has not moved ahead yet.
that can be bad for home prices. the good news is we won't see much more of a rise in rates until the economy warrants it.
Last edited by mathjak107; 07-26-2013 at 04:00 AM..
there was research done that if interest rates climb up to the 42 year historical average of 8.42% then house prices will have to fall 46-50% to maintain the same affordability levels. You take whatever you figure out from that fact. The fact is that we are in a massive bubble in real estate... one is caused by the previous maniacal bubble not fully deflating to normal levels and then compounded by the re-inflation of a bubble due to ridiculously low interest rates. Both of these will deflate.
this is false. nothing stays static if rates go that high.that is one flawed study if it exists.
Last edited by mathjak107; 07-26-2013 at 03:38 AM..
The fact is that we are in a massive bubble in real estate... one is caused by the previous maniacal bubble not fully deflating to normal levels and then compounded by the re-inflation of a bubble due to ridiculously low interest rates. Both of these will deflate.
I thought that we popped that bubble and declined past normal price ranges. It is coming back to where it should have been all along. My thoughts anyway. A decade ago you could have bought my home for a little more than I paid in 2010. Six years ago you could have bought my home for more than double what I paid in 2010. Today you can buy my home for more than I paid in 2010, but far from the prices that people were paying in 2007. Maybe it is geography dependent, but what bubble?
Depending on where you live your house could be increasing or decreasing in value. My house has not changed in value in 10 years. I know what I paid for it 10 years ago and I just had it refinanced and the value is the same. The houses around mine (based on buying and selling prices) have not changed so that backs up my houses value.
Forget what anyone says about interest rates or housing bubbles. None of that maters. Look at the economy around you and ask yourself the question, is this a stable economy. If it is a stable economy in your area then your home value will not change much even if the interest rates go up. If your area is unstable and you can make a profit then sell it fast.
One of your stated goals was to help your parents get a house, and yet they can't make the payments anyway. Maybe that should not be one of your goals, unless you have them move in with you. If they on their own can not afford to pay for the home and you do not want them to live with you, i would say that the goal of getting them a home just does not work out. Do you see some other way for them to own a home?
I can understand you wanting to help them but it is up to them and their ability to make that happen. Maybe it just makes more sence for them to rent.
You are still young. I don't know if I would walk away from the house just yet. Do you have a fixed rate on the mortgage? You have to live somewhere and you allready have a home. I know of people my age that wish they had kept their first homes. I didn't have that problem. My problem was walking away from great deals. I had the chance to buy several properties from my early to late 20's that I said no to. I could have picked up a 4 unit place for $350,000 with financing from the owner of the building. Back then I just did not understand how all that worked and it scared me. This is before the prices took off and we jumped into the bubble. I had access to forclosure properties before they entered the open market and i said no to those, that was back between 1993 and 1998. Yup, even back then people lost places. I would give anything to say yes to those deals now.
All I am saying is that my age and experience is saying keep the house. That is up to you though, just saying.
MY mortgage would be too high for them. If I get them a small home, the mortgage on that would be fine for them.
My interest rate is 5.25%. I'm getting a lower rate now as I already have a pre-approved loan. I believe its 4.25% so the interest rate isn't an issue for a new home.
I want to relocate to a different county. I have a job interview Friday in San Diego, good 110 miles away from my home. I really want this job and if I get it, I might just purchase a small condo down or move in with a friend. Either way, it'd cut my expenses in cut.
The home across the street sold for 240k. Its the same exact floor plan, lot size, and home sq ft. I purchased mine in 2009 for 170k. I know I can get at least 240k, maybe 250k as the market as definitely increased since May when it was listed.
The home across the street sold for 240k. Its the same exact floor plan, lot size, and home sq ft. I purchased mine in 2009 for 170k. I know I can get at least 240k, maybe 250k as the market as definitely increased since May when it was listed.
So both homes are exactly the same? Same upgrades or lack of upgrades, same improvements on the yard, same look? I know that prices have increased. We bought in 2010 and a home sold a few months ago for $70,000 more than we paid a few months ago. Another just sold last week for $49,000 more than we paid. All these homes were built in 1962 and are similar in size. You either have a 3 bed 2 bath or a 4 bed 2 and a half bath. Both the home examples I gave were for 3 bed 2 bath units. Still the first home is much nicer than the second home.
What you can get and what someone else got are two differant things.
Sell it! Forget trying to predict the market. Home ownership is for living in something you like, not for making money. Homes are financial albatrosses. They are pits to throw money into. All of them. If you want to make money off real estate, then buy rental properties that you can own outright. Landlording is tough, but you can make good money. Know a young, single man who has purchased over 10 rentals over the past 5 years near a major Army fort. His income flow is stunning. These are rentals lower ranking enlisted people can afford. Brilliant.
So both homes are exactly the same? Same upgrades or lack of upgrades, same improvements on the yard, same look? I know that prices have increased. We bought in 2010 and a home sold a few months ago for $70,000 more than we paid a few months ago. Another just sold last week for $49,000 more than we paid. All these homes were built in 1962 and are similar in size. You either have a 3 bed 2 bath or a 4 bed 2 and a half bath. Both the home examples I gave were for 3 bed 2 bath units. Still the first home is much nicer than the second home.
What you can get and what someone else got are two differant things.
Well, thats true if one person is an idiot and the other is smart. I'm quite confident I'm a smart fellow so I'm not worried about getting less than 240k.
They made some upgrades inside but my yard is much better. I have palm trees, flowers, etc in my yard and they barely have grass. I have RV parking and they don't. I think its a push.
Well, thats true if one person is an idiot and the other is smart. I'm quite confident I'm a smart fellow so I'm not worried about getting less than 240k.
They made some upgrades inside but my yard is much better. I have palm trees, flowers, etc in my yard and they barely have grass. I have RV parking and they don't. I think its a push.
I was not really commenting on the people. I doubt that the buyers could care much about the owners. They only want the home. Speaking of homes, I don't know any that are exactly the same. One home may sell for X and a similar home may sell for Y. Also those that place offers on X may not be the same people that place offers on Y. On top of that scenarios change causing a change in price. You almost have to play this out within a close proximity from sales of X and Y.
You mention that they made some upgrades inside but you have a better yard. Both you and them have things that buyers may be looking for. Not knocking that at all, just saying that not every case is the same. Still I do think that the market is going up or has been going up. I don't understand why or how. Still good luck with what ever you choose to do.
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