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You wait it out as long as you need too. Anyone with a brain knew there was no way for the housing market to sustain itself. We looked at houses that were worth 250k going for 400k. We knew to stay away and rent and so did a lot of others just like us. Unfortunately, there were a lot of people who thought we were crazy.
I'm not old at all Chuck. I would venture to say I'm younger than you. I'm in my 30's. My wife and I rented for 5 years right through the boom and there were plenty of other rentals around us. it sucked to be renting when we were ready to buy a house too. That didn't matter though, we knew the importance of waiting.
We were one of those new home owners you talk about. We bought our first home last year in November after waiting a long time. Several of our friends have foreclosed and have their credit ruined and now are in the position they should have been in 5 years ago...which is renting.
People who live in bubble areas will not have to wait 10-12 years, they will just have to wait long enough for the economy to turn around. Homes have been dropping for how many month now? They should be even lower than they are now, but they are starting to become affordable.
Also, I would rather wait until my 40's to buy then to be 40, broke, and have bad credit. I don't know about you, but I don't like starting over in life. I explained many times in this thread that YOU HAVE TO MAKE SACRIFICES in life. That sacrifice might be buying a house when you are 40. Or that sacrifice might be starting a job from the ground and working your way up.
I understand your point, I just disagree with it. You weren't by any chance one of the people who bought during the boom were you?
Na, bought after the first wave of bust... end of 2007... peak came mid 2006 We're one of those so-called "knife-catchers". Ameriquest, New Century, and Country Wide already busted by the time we bought... and it was suppose to be a "contained" sub-prime issue... so we factored in an acceptable 20% loss going in (we thought our down payment would of been a suitable buffer for loses).
Little be known.... it's not only a sub-prime issue... but really, a credit and debt issue, and that America has been long heading towards this downward trail. CDSs, MBSs, hedge funds, derivatives, consumer/commercial credit, and other credit/debt problems. America has become an economy of paper shufflers vs. people that produce anything of value. There's a larger problem at heart, not just some housing bubble.
Anyhow, the end isn't even close to here yet. Based on the "bubble" predictors, and the Schiller chart... your going to get some hurt as well. What's the point of buying a house when your 40? The opportunity costs would of been huge. Your earning potential, and years left of employment also shrinks.
Furthermore, your incomes could shrink like they are now for a lot of folks (in this day and age of companies laying off people with experience and higher wages in favor of costs, who knows if your incomes will grow over time) .... so they may never be able to save up enough to buy a house. The older folks are facing a new wave of unemployment when they are in their 40s and 50s.... How are they going to manage? If I had waited to buy? I probably wouldn't have qualified anymore since my income shrank because of the craptastic economy not to mention what might of happened to investments/savings that I would of kept in investment vehicles to wait out the bust.
You may be happy that you got that "deal" now, but if things continue to sour... that "deal" that you waited 5+? years for... won't look as sweet. I hope things improve though, but I don't really see much that is changing our course.
What's the worst case scenario for US? We default... wow... big deal. When the market consists of 50+% people that have default histories... then the market adjusts to cater to the new types of buyers. It's already happening. The folks that your patronizing that foreclosed and are currently renting might be the ones that actually end up better off.
My point is. Is that no body knew how long the bubble was going to last... and No Body knows how long the collapse will last. At some point, you weigh the pros and cons
There are two ways to look at housing....maybe more, but for the purpose of this post: two ways.
One is as an investment, the other is as a consumable. If you look at housing as an investment, then watching out for bubbles and crashes is important. Recognize that you will never be able to accurately predict the tops and the bottoms--but being wary is very important. However, if you perceive housing as a consumable, the analysis should be different. For example, I bought a house at the top of the last bubble (1990)...the vaule of the house crashed from $172,000 (purchase price) to $125,000 in 1993. Fortunately for me, ... and due to my "I'm not going to risk my home" thinking patterns, I had a fixed rate mortgage. So what did I do? I just "rode it out." In 2005 or 2006 my house was "valued" at $450,000. But--it's not an investment--it's where I live. Today the house is valued at $275,000 (I think), but so what? My mortgage payment is not going to go up--it's not going to go down either--at least for another 2 or 3 years--then it will be paid off.
The point is: the right time to buy is based on your intent. If your intent is as an investment, and your reason for buying is to make money--then, you need a different set of analytics than if it is only a place to live.
The only thing though: if it is not an investment, then make sure you stay away from balloon mortages, variable rate mortgages, and every other kind EXCEPT a full term fixed rate. That way if housing prices fall you won't be caught with "your pants down."
Also, NEVER, borrow money against the value of your house, if it is a consumable. Doing so is just short sighted.
ISmart shoppers would have stayed on the sidelines, knowing that the trend was not sustainable.
Quote:
Originally Posted by ufcrules1
You wait it out as long as you need too. Anyone with a brain knew there was no way for the housing market to sustain itself
I don't know if it has to do with being a smart shopper or not having a brain. Every single one of my friends who bought during the bubble ranged from physicians, teachers, engineers, and in IT. They all bought with fixed mortgages and put down anywhere from 3% to $400,000. I think when people are ready to buy, they just think well they are ready and see what is in their price range and purchase something. They don't think about the big picture and whether there is a bubble or not. Also many had children or were planning a family so it was just time to settle down.
While all of them bought for the long term or even for good, I wonder what it will be like for them once this is all over. Or even for myself whenever I do end up purchasing something. This whole downturn is really irritating bc as chuck was saying who knows what is next that they didn't tell us, causing another 50% drop in housing. So it's like do I keep waiting or just take the plunge?
I don't know if it has to do with being a smart shopper or not having a brain. Every single one of my friends who bought during the bubble ranged from physicians, teachers, engineers, and in IT. They all bought with fixed mortgages and put down anywhere from 3% to $400,000. I think when people are ready to buy, they just think well they are ready and see what is in their price range and purchase something.
Smart can be defined many ways. Many "smart people" made the mistake of buying during the height of the boom. They were convinced by others around them that they better hurry up and buy before the rates went down, etc.
Just because they had high paying jobs does not mean necessarily they are smart.
You and your husband weren't thinking about buying or couldn't afford to at the time. You are right... that is luck & timing. However, my wife and I created our own luck and timing by purposely waiting out the bubble that we KNEW we were going through. We didn't listen to the doctors, engineers, IT, or tons of other "smart" people telling us to buy now or we will be sorry! Who is smart now? Who was smart then?
Now, we are in a house where we can afford to pay more than double the mortgage every month. We were doubling it and now refinanced at 4.3% and are saving $250 per month that will also go to the principle. On top of that, if I were to lose my job, we can still afford to pay our bills based on what my wife works. Where do we live? In a neighborhood 20 min from Dallas. It's a golf course community with homes ranging from 300k to 4 million. 5 of the Dallas Cowboys live here. I'm not bragging or anything like that, I just want you to understand we don't live in a dump or anything.
If all goes well, we will have this house paid off in about 1o years. If all doesn't go well, we will at least be able to pay the mortgage every month without worrying.
Quote:
Originally Posted by sheenie2000
This whole downturn is really irritating bc as chuck was saying who knows what is next that they didn't tell us, causing another 50% drop in housing. So it's like do I keep waiting or just take the plunge?
I'm not sure where you live Sheenie, but I would seriously doubt home prices falling 50% or anything even close to that nature. Home prices in many states are now at their pre- bubble prices. The thing is people are still having a hard time affording them because of the domino effect of the bubble. People losing their jobs etc.
This video is something I already knew. In my opinion if you work extremely hard and make the right choices you can make it out there. This kid Adam Shepard picked a city (South Carolina) and went there with only $25 in his pocket. Within 1 year he had his own apartment, car, and 5k in the bank. He did all of this with no help from family or friends. He did however make many sacrifices.
The lady in the video was very different. She wanted to complain about how impossible it was to make it out there. She made many poor choices and suffered because of them.
I would recommend this book by Adam Shepard to anyone having a hard time out there. Better yet, it would be a perfect read for one of your kids who is in high school and not far from getting out on his or her own.
I'm about to leave the middle class. My health insurance premiums, deductable, copay, EVERYTHING just doubled. So did my car insurance (without a ticket, accident or even a claim, ever) and my morgage went up too. My raise for the year will be a whole .50 an hour. And I am a government employee with a degree.
I'm about to leave the middle class. My health insurance premiums, deductable, copay, EVERYTHING just doubled. So did my car insurance (without a ticket, accident or even a claim, ever) and my morgage went up too. My raise for the year will be a whole .50 an hour. And I am a government employee with a degree.
At least I was there for a little while....
I left the middle class some time back. But please note: nobody EVER gave me anything. I am well off because I stuck to old fashoned financially conservative principles: If you don't have the money in your pocket, then don't buy it. If you borrow money to buy a house, never accept anything except a full-term fixed rate, and never take out a second on your house.
This means: If you can't afford a new car, then buy an old one. If all you can afford is a clunker, then drive a clunker and save up. If you can't afford to pay cash for a clunker, then walk...I know this is 180 degrees away from the contemporary American culture...but it works in the long run.
I left the middle class some time back. But please note: nobody EVER gave me anything. I am well off because I stuck to old fashoned financially conservative principles: If you don't have the money in your pocket, then don't buy it. If you borrow money to buy a house, never accept anything except a full-term fixed rate, and never take out a second on your house.
This means: If you can't afford a new car, then buy an old one. If all you can afford is a clunker, then drive a clunker and save up. If you can't afford to pay cash for a clunker, then walk...I know this is 180 degrees away from the contemporary American culture...but it works in the long run.
My mortgage is fixed, but my escrow account was shorted becase insurance and property taxes went up. It all boils down to an extra 100.00 a month on a payment I was already struggling to make.
Living within your means is obviously the way to be, but "me and mine" were programmed to consume since childhood and it's hard to deprogram one's self (I'm trying to...hard) . Being raised by the TV had very negative consequences; It gave me false expectations and desires that are difficult to ignore, even though I am now in my 30's and understand what has happened. It doesn't help to be cynical as hell and distrustful of any and all institutions either.
I know I'm not the only one that has been messed up by He-Man and Lucky Charms... maybe we should start a support group.
I bought in 2006. It is not in a bubble area and it is a smaller house on the block within a walking or biking distance to the train. It is a defensive house. We just need one car. I knew the crash was coming, just not when but I wanted a place to live, not invest. The mortgage is about 2/3 of a 2 week pay check with just me working. According to Zillow, I am down about 7% . However compared to rent considering the interest deduction, paying of principle and low commuting costs I am about even with rent. Only in this case I get free fire wood and should be producing a good supply of food as well this year.
If you are not in a bubble area, or some rust belt slum, buying a small house close to everything will not go down 50%. People selling 5000 square foot homes like to move into smaller homes, thus demand for smaller houses can be much better. I also find a hard time pricing what an alpine strawberry is worth, or a quite evening. I can't buy most of the things I grow. You can't buy the peas I will have in a month. Where will I find a black krim , or ground cherries? In a few years I hope to have mature Saskatoon's and Pawpaws . I suppose if you go home to a big screen TV why bother having a house?
Living within your means is obviously the way to be, but "me and mine" were programmed to consume since childhood and it's hard to deprogram one's self (I'm trying to...hard) . Being raised by the TV had very negative consequences; It gave me false expectations and desires that are difficult to ignore, even though I am now in my 30's and understand what has happened. It doesn't help to be cynical as hell and distrustful of any and all institutions either.
Yeah...I know it is hard to change....I had to go bankrupt when I was in my late 20's to learn the lesson. If you think you are screwed up--you should have seen me then. You would have said, "that guy is headed for skid row." It is very hard to chage expectations and consumption desires. BUT if you keep working at it, know this: 1) you are not alone (even if it feels like it) and 2) you will be MUCH better off in the long run.
Perhaps you will be able to raise your kids with better sense of values than what you or I were raised with. I tried that with my kids. Out of two kids, I had a 50% success rate. Not bad when you consider that as a parent I was inexperienced and lacked knowledge on how to raise kids.
My mortgage is fixed, but my escrow account was shorted becase insurance and property taxes went up. It all boils down to an extra 100.00 a month on a payment I was already struggling to make.
Living within your means is obviously the way to be, but "me and mine" were programmed to consume since childhood and it's hard to deprogram one's self (I'm trying to...hard) . Being raised by the TV had very negative consequences; It gave me false expectations and desires that are difficult to ignore, even though I am now in my 30's and understand what has happened. It doesn't help to be cynical as hell and distrustful of any and all institutions either.
I know I'm not the only one that has been messed up by He-Man and Lucky Charms... maybe we should start a support group.
Chango,
The first step is understanding what happened and what went wrong. You have that part nailed down, you understand now that you have to live within your means. Now, its all about trying to get there. We were programmed to over consume too. We deprogrammed ourselves a long time ago. As the world evolves, you have to evolve with it. There are millions like yourself, the only difference is you are not making excuses and they are. You see where you went wrong and they haven't.
Like the above poster mentioned. "Why would you wait until you are 40 to buy a house? Thats crazy" If you are in a bubble and cannot afford something when you are say... 34.. why not wait out the bubble for 5 or 6 years, save as much money as you can and then buy?
That poster was more more concerned with what people thought of him than about his own self/future. You cannot dig yourself into a big hole at 35 or 40 and expect to recover from it quickly. If you want to work until you are 70, or 80+ go for it.
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