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Even if someone who bought a house in 2006 planned on living in it for 10 years, they still made a mistake by not waiting. You are right in that you can't time the market, but how many real estate agents have ever said "now is not a good time to buy"? The fact is you are in the business of selling houses and you have a conflict of interest. You can post that you are above other real estate agents, but by simply using the phrase "stay in your home for 10 years and buy when it's right for you and you'll be fine" is still a cop out because it's creating a scenario in which you can never lose. It's sitting on the fence so that you can tell people you are an ethical real estate agent why still caveating that now may be the time to buy. Shameful indeed.
I don't sell houses for a living...
The only reason 2006/2007 was a "Bad time" to buy is because the market went down? If it went up, it would be a good time?
Sorry, I agree with Tom for the most part. don't buy based on what the market will/could/should/ do. Buy because you want to buy a house.
Tom is pointing out that a house purchase is a long term investment. The "Old and Tired" phrase of homeownership only got old because of the boom. Everything that happened the last 8 years or so was not supposed to happen and Toms way of thinking really is accurate.
Please note that I identify myself as a real estate professional on this board, and I also use my real name. Both things that most people do not do. This board is rife with people with hidden agendas. I have none. I have done nothing but provide unbiased advice here for the better part of two years.
I am guessing from your screen name that you are going to graduate NYU in 2011. That would make you about 20 years old. It would follow that you feel you will be in the housing market a few years down the line. If that is the case, you may have a vested interest of your own in this discussion. Just an observation.
Astute observation - I am an NYU graduate but the 11 doesn't stand for 2011, I graduated already. 11 stands for my favorite football player's number on the NY Giants, Phil Simms. I am a homeowner already though. I have no vested interest, I just don't believe that it's ALWAYS a time to buy. As I said, after 5 years of 20% home price increases, I could have told anybody (and did) that buy was stupid. I have a friend who was trying to decide whether to rent or buy back in 05... he decided to buy and figures that decision has cost him $30k easy. Now he has zero flexibility and unless home prices start increasing at 03-04 rates, he's going to be in the red with his home purchase.
I have a friend who was trying to decide whether to rent or buy back in 05... he decided to buy and figures that decision has cost him $30k easy. Now he has zero flexibility and unless home prices start increasing at 03-04 rates, he's going to be in the red with his home purchase.
I don't know what kind of "flexibility" anyone should think they have just a couple of years after purchasing a home. Tell your friend not to worry. If he is planning to stay in his home he will be fine.
Let me tell you my story:
I bought my home in 1988. I can tell you the exact day that the real estate market peaked in the late 80's because it was the day that I closed on my house! Anyway, in the early nineties the real estate market tanked (much like the last 2 years) and I definately could not have sold it to cover my mortgage. Did I look at this as "losing" money? No, because it was my home and I could afford it. Today, it is worth about three times what I bought it for. In the greater scheme of things, I am still way ahead.
I don't sell houses for a living...
The only reason 2006/2007 was a "Bad time" to buy is because the market went down? If it went up, it would be a good time?
Sorry, I agree with Tom for the most part. don't buy based on what the market will/could/should/ do. Buy because you want to buy a house.
Tom is pointing out that a house purchase is a long term investment. The "Old and Tired" phrase of homeownership only got old because of the boom. Everything that happened the last 8 years or so was not supposed to happen and Toms way of thinking really is accurate.
When the housing market is in an obvious bubble as it was in 2006, it's not a good time to buy. In reality, I agree that a house purchase should be one made with the intent of staying put and not making a quick buck. However purchasing at all time highs is not a wise decision no matter the circumstances. Being upside down on a mortgage is a terrible way to live, because even if you have the intention of staying, you never know what life could bring. Why put yourself in a bad position because everything will even out in 20 years? Yet you will never hear a RE agent say this.
Buying a home is different from buying a stock. You can't live in a stock. The only real similarity between the two is that those who try to time either market usually get burned.
"usually get burned". Says who?
You just hear more about them because it hurts much more to get burned then to make out and they complain more. You yourself bought at the wrong time "timed it wrong" but you would'nt say you were burned rather are fine in the long run.
Stocks and housing: The similarity is that both of them can involve significantly large amounts of money and should be thought about ... not just I am ready, lets buy something. You decide to buy a long term stock because you think they are a solid company and will go up, but if they have made massive gains in recent years and seem overvalued, you might think twice. Seems very similar to the housing situation we are in today, all the charts point to this.
If you are flexible and are ready to buy a house but don't need one, you make a timing decision right then and there and you either time the market as now a good time to buy or later a good time to buy. You gamble.
No one is arguing that the long term investment of a house is not a good one over time (good being a relative term, meaning you wont lose all your money), but you certainly would have done much better buying today than 3 years ago for 150k more. With interest, that's a big chunk of change. Some people in 06 thought the market grew too much and was overvalued and decided to wait, they did time it right. Those who didn't time it and bought got burned. Temporarily, but still lost out.
The thing is you hardly ever hear anyone involved in real estate utter the words its a bad time to buy, but you do hear the opposite. When its a "great time to buy" why dont you simply hear the "if you are ready, buy" statement. It seems like there are only two times in the world of real estate ...
(1) great times to buy, and
(2) if you are ready, time to buy
"are you missing the real estate boom?" - David Lereah
This by no means is directed at you personally, I dont know you, its a general observation that seems to be true. Nor do I see anything wrong with this, can you blame the mentality. Its like asking a keyspan rep if its a good time to convert to gas ... hmmm what might they say.
I don't know what kind of "flexibility" anyone should think they have just a couple of years after purchasing a home. Tell your friend not to worry. If he is planning to stay in his home he will be fine.
As I said to the other poster, people shouldn't put themselves in the position to have an underwater mortgage just because in 20 years things will even out. As for flexibility, you never know what life could bring - why be stuck and 50k in the red for no reason other than the fact that some real estate agent said that "so long as you intend to stay somewhere for 10 years you'll be fine"?
I say go for it. Only because I am a little leary about buying a house and using our savings on it, I originally wanted to wait & save but in reality we wouldnt really be saving since we are renting and wouldn't get tax breaks, etc. We do qualify for the tax credit (8k) and it makes me feel a little better that I can get that and whatever we paid in, plus deduct taxes and intrest. So the money we will give up now will come back to us and then some. I say do it. Life isn't living if you hold back just from being scared... the worst that can happen is you tried. Seriously try for an FHA loan (3.5% down) I even have a guy I work with who is awesome. He answers all your questions and gives you a number to a FREE realtor that will help YOU! PM me if you need the number!!
As I said to the other poster, people shouldn't put themselves in the position to have an underwater mortgage just because in 20 years things will even out. As for flexibility, you never know what life could bring - why be stuck and 50k in the red for no reason other than the fact that some real estate agent said that "so long as you intend to stay somewhere for 10 years you'll be fine"?
You should never do something just because someone says to do it or not to do it. Or not do something just because someone says not to. After all, it's your life not theirs. You should not buy because "some real estate agent" says so. You also should not fail to buy on the advice of some anonymous poster on an internet board.
I think that there is little doubt, however, that over the long term it is superior to own a home then to rent one. If you were to rent a house at a price of $2,500 per month for ten years, that's about $300,000 that you have spent and you have absolutely zero equity to show for it.
You should only rent if you are planning to do it for a short while. If you are planning to live someplace long term you should buy.
A large part of my business is rentals. I love rentals. I make a lot of money off of them. So, I don't really have an incentive to tell people to buy. In fact, I can make more money off of rentals then off of sales. If I have a landlord who comes back to me once a year to rent out his $2500 per month rental, I can make $2500 each year off of that house, as opposed to maybe $10,000 once on the sale.
Anyone who is planning to live in the same area for a long period of time is just fiscally uninformed if they think they are better off renting then buying.
Real estate is this greatest long term wealth generator for most Americans. Take a look at the people who you know. How many people who do not own a home by the time they are middle age have accumulated anything? Sure, there are some, but they are definately the exception. For most people, by the time they are older, the equity in their home is their greatest asset.
Sorry for the rant, but it annoys me when people assume that, just because someone is in the real estate business, their advice in inherently biased. That is like saying that a doctor will always suggest surgery for their own financial gain, or that you shouldn't get your brakes repaired because your mechanic says they are failing.
Here's the advice that I have given my eighteen year old son, and he is planning on following it. Buy a home to live in as soon as you can afford it. Don't pay someone elses mortgage for them. Then, buy a house to rent out. Then another. Then another. If you buy one house wisely each year for ten years, by the time you are fifty, you will be able to retire comfortably.
Those people who rent create wealth for those people who buy.
Here's the advice that I have given my eighteen year old son, and he is planning on following it. Buy a home to live in as soon as you can afford it. Don't pay someone elses mortgage for them. Then, buy a house to rent out. Then another. Then another. If you buy one house wisely each year for ten years, by the time you are fifty, you will be able to retire comfortably.
Good for you, Tom! Hope your son listens to your advice
Quote:
Originally Posted by TomMoser
Those people who rent create wealth for those people who buy.
Amen
Glad both my daughters learned that lesson early - and bought their own house(s).
Neither I nor they would ever rent voluntarily again
Anyone who is planning to live in the same area for a long period of time is just fiscally uninformed if they think they are better off renting then buying.
fiscally uniformed? not really. depends very much on the individuals situation. housing has been a relatively poor investment historically. Rent of course is not an investment at all but allows you to use the saved money to invest in other sources. From strictly a monetary and not a lifestyle standpoint, its not so black and white.
Your sentiments may have been true in the past, but times have changed. Ask someone in Japan (an island country with much more premium for space) how their real estate investments have panned out over the last 20 years.
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Anyway, in the early nineties the real estate market tanked (much like the last 2 years) and I definately could not have sold it to cover my mortgage. Did I look at this as "losing" money? No, because it was my home and I could afford it. Today, it is worth about three times what I bought it for. In the greater scheme of things, I am still way ahead.
