NY Housing Article: Any thoughts? (Wantagh: sale, subletting, renting)

[56 Fighter]

Originally Posted by propain

My advice is buy now.

[propain]

Originally Posted by 56 Fighter

Excellent rebuttal.

[Burb]

Originally Posted by MiddleIslander

I agree, however what you said has different implications. Interest rates are at record lows, even after the 1% jump in the last two weeks. You can fully expect interest rates to go back up to 6.5-7% or more. This won't happen immediately, but it is guaranteed to occur over the next few years.

This will have a devastating effect on the housing market. People who bought won't be able sell or refinance. Home prices will fall. Foreclosures will be everywhere. People with cash will win. And all the while, people will be paying similar monthly payments for their mortgages.

The current low interest rates are a result of manipulation on the part of the government to allow home prices to fall at a more gradual rate. The Federal Reserve is printing hundreds of billions of dollars to buy mortgage backed securities and treasuries, for example. The Fed cannot continue to dilute our currency much further, or the foreign governments that sustain our massive federal budget deficits will decide we're not the best place for their money. With the downturn of securitization, the federal government has become the reluctant counterparty to nearly all mortgages originating today. Very little of it is private funding anymore. This again, is not sustainable.

Low interest rates will not last. Home prices will fall. Our fate is already sealed.

If you buy today and find a good deal, you should be prepared to stay at least 7 years before breaking even. Or you can buy next year and get even more house for the money.

You're missing one very imprtant facet. Inflation. I completely agree with your premise highlighted in bold, then I jump off. When the fed eventually turns off the printing presses and the smoke clears, we'll have a diluted dollar not worth nearly what it is today. The US is going so far in debt the only way out is to pay it off with highly depreciated dollars. Just my prediction, not my reccomendation as this opens up a much nastier can of worms.

When a loaf of bread is $5 and a Toyota costs close to 6 figures, a 500K ranch in Wantagh is pretty reasonable, no? I'll agree that inflation adjusted prices will continue to fall, the question that we should be asking is not just what my house will be worth next year, but what will a dollar be worth.

[56 Fighter]

Originally Posted by propain

Excellent rebuttal.

No rebuttal necessary - you "feel" interest rate increases keep home prices stable. Your feeling and what actually happens are 2 different things. However those with an agenda tend to ignore reality and facts. So instead of rebutting you, I'll listen to what Moody's and other reputable business analysis firms have to say. We all know what your opinion is and why you have it.

[dman72]

Originally Posted by propain

This is the way LI has been since the late 80's. You either can make it on LI or you move. That’s the way its been, that’s the way it will always be. Don’t forget we have a huge money making city right next door. This alone keeps the money on LI the closer to the city the more expensive the home prices.

My advice is buy now. If you cant good luck next year. Interest rates will be about 1 point higher buy prices will stay the same or very little movement down.

A lot of those high paying jobs in NYC were lost in the last year. It's still better than most places in the country, but it's nothing like it was 5 years ago. The stock market boom is part of the boom to the overvalued real estate market. Thinking that the same money is flowing form Wall St to LI is ..wishful thinking, again.

Let's look at 2 case scenarios. A couple has 30K in savings to put down on a house. The house they are looking at is 430K. Their payment at 400K for a 5.5% mortgage is 2271.16.

Same house now drops 10% to 387K...it's a year later now and they've save 15K more. So, they get a mortgage at $342K for 6.5%.

They're monthly payment is 2161.67. Now they are paying 100 dollars per month less, and that is 10% less in house price that they can appreciate later if things get rosey again. Even if they don't save up a penny more, their mortgage will be slightly less than it would be for the higher priced house.

Your scenario hedges its bets on that those who can afford house will continue to pay 2005 prices for house even when interest rate go up to 6.5%. You hedge that bet, and we'll have to see what happens.

[MiddleIslander]

Originally Posted by propain

The points are already down ½ since last week. We are in a state of flux right now. We will go higher though you are right. Let me address your points.

So? If your on a variable rate or locked in a high interest rate that’s the cards you delt yourself. you act as if refinance is a good thing. Its not. Refinance is a new thing based on the last 10 year of low interest rates and has cost more bad than good. It’s the reason we are where we are today. If you have a decent rate 5.75 + 1 point you have no reason to spend 20K getting a lower interest rate. If you cant afford your home at your current interest rate you have no business buying it. Counting on lower interest rates to sustain your home is a bad decision and you will most likely go under.

Yes, however a large proportion (I've heard reports between 40 and 70%) of recent loans during the boom are NOT conventional mortgages. Not subprime either - they were Option ARMs.

See here: Real Estate Blog - Option ARM Mortgage Defaults Hitting Long Island In 2009

Originally Posted by propain

Higher rates statistically freeze housing prices. Not make them fall.

Yeah, they will freeze housing prices after they fall. They haven't fallen enough yet. We're still in the middle innings.

Originally Posted by propain

Foreclosures will be everywhere.

They are now. You just don’t see them because the banks are selling them to home flippers. We are at the peak if not close to peak of foreclosures right now.

I have a paid realtytrac account. There are hundreds of foreclosures appearing weekly and the rate is increasing. Once we start seeing option ARM foreclosures, and they have only just started in earnest, banks will have to unload these onto the open market. Don't you remember walking into a bank and seeing flyers and banners for Option ARMs everywhere? Those things sold like hotcakes back in the boom years, with the peak during 2007, when there was virtually no other way for the average family to afford the average property. The average family *still* cannot afford the average property.

Originally Posted by propain

A bit doom and gloom. Low interest rates will not last. This is why im saying if you cant afford a home today you most certainly cant afford a home next year. Our fate is not sealed. We will see frozen house prices or very slow gains over the next couple of years.

Affordability will improve, especially if you're the hardworking, saving type. If you have cash on hand you will be buying with more equity and less principal. Home prices next year will be very much lower. Bottom callers call the bottom every year until the actual bottom. We'll only know when the bottom truly occured well after the fact.

Higher interest rates have an immediate impact on home prices - it just takes capitulation of the seller to grease things along. And then there are always those who have no choice but to sell. Add this to the wave of foreclosures that is approaching, and suddenly it appears the writing is on the wall.

[dman72]

Originally Posted by MiddleIslander

Yes, however a large proportion (I've heard reports between 40 and 70%) of recent loans during the boom are NOT conventional mortgages. Not subprime either - they were Option ARMs.

See here: Real Estate Blog - Option ARM Mortgage Defaults Hitting Long Island In 2009

Yep, those re-setting loans are going to be the second wave of the disaster.

[56 Fighter]

Originally Posted by MiddleIslander

Yes, however a large proportion (I've heard reports between 40 and 70%) of recent loans during the boom are NOT conventional mortgages. Not subprime either - they were Option ARMs.

See here: Real Estate Blog - Option ARM Mortgage Defaults Hitting Long Island In 2009



Yeah, they will freeze housing prices after they fall. They haven't fallen enough yet. We're still in the middle innings.



I have a paid realtytrac account. There are hundreds of foreclosures appearing weekly and the rate is increasing. Once we start seeing option ARM foreclosures, and they have only just started in earnest, banks will have to unload these onto the open market. Don't you remember walking into a bank and seeing flyers and banners for Option ARMs everywhere? Those things sold like hotcakes back in the boom years, with the peak during 2007, when there was virtually no other way for the average family to afford the average property. The average family *still* cannot afford the average property.



Affordability will improve, especially if you're the hardworking, saving type. If you have cash on hand you will be buying with more equity and less principal. Home prices next year will be very much lower. Bottom callers call the bottom every year until the actual bottom. We'll only know when the bottom truly occured well after the fact.

Higher interest rates have an immediate impact on home prices - it just takes capitulation of the seller to grease things along. And then there are always those who have no choice but to sell. Add this to the wave of foreclosures that is approaching, and suddenly it appears the writing is on the wall.

You make excellent points that are echoed by market experts. I wouldn't waste my time debating with trolls on this forum though. Some people are selling or looking to sell their homes and they don't want other sellers to think that prices will have downward pressure on them. That will cause sellers to adjust their prices downward, negatively affecting the price a troll can get for his cave these days.

[propain]

Originally Posted by dman72

Yep, those re-setting loans are going to be the second wave of the disaster.

Most are refinancing right now into low interest FHA's. People have smartened up. They aren’t just waiting for those ARMS to come to bear. They are refinanced their way out right now and have even had their mortgages re-adjusted based on value.

This second coming you are all hoping for is not going to happen.

But you can wait if you like. Best of luck. I just would hate to see you all price yourself out of the market. Don’t doubt the will of Liers to hold on prices. Some will fall due to job loss, divorce etc. Most will just close the hatches and ride it out. Most have already re-adjusted their mortgages to 5% rates and will now ride out the storm as interest rates surge.

[dman72]

Originally Posted by propain

Heh. The troll can never stay in his cage for long.

Take a look a housing price trends over the past 15 years. Stable prices with normal increased until......... The end of 2002 to now... and would ya look at that! Prices have been on a significant rise since that date almost doubling in value.

A person of limited intelligence could easily assimilate this data and form a conclusion. You keep listening and waiting though..

I agree you don’t buy at the peak of the market with low interest rates. That’s just silly. That’s not where were at right now. We close to the bottom with historically low interest rates. It can only go up from here in both interest and home price.

Or you could hold off and wait until rates go back to 8%. That’s fine also, prices will fall over time buy the affordability wont change. Like I said 1000000 times. If you cant afford a house today, you wont be able to afford one next year. If you want to wait for more house next year with a higher interest rate than chances are you can afford the house today but are willing to wait for the opposite scenario we have today.

Prices on LI will only drop so much. But interest rates have no limits. You will eventually price yourself out of the market unless you can afford to buy in today. Personally, and I know it goes against some home experts, Id rather pay more for a home than pay more interest to the bank. At least I know where most of my money is going and im not counting on lower interest rate that may never come at a later date. Trends show we wont see these interest rates again anytime soon if they go up.

I have to hand it to you, this is pure comic genius...I mean, it has to be, because you cant' be serious.

" I would rather you perspective home buyers pay ME the homeowner a truck load more money than a bank!!"

The difference is, with the same monthly payment, early payments effectively shorten the mortgage term much more with a high interest rate/lower house price than the opposite.