What to do?...any ideas?

[DvlsAdvc8]

Originally Posted by desertsun41

If interest rates were zero and I hit the lotto I would not buy a home now. I prefer to hold on to what little I have left.

There is also competing logic that says if you wait for the bottom, you've probably missed the best value. In all honesty, its not a matter of which direction the market is going... its a matter of fundementals. A good investment depends on your goals - most people aren't and shouldn't be making decisions based on market direction - THAT is part of what caused this mess... "its going up up up... buy buy buy". Most people take, or ought to take a longer perspective. Buying a home is really a simple decision: you need a place to live. You have only two choices at any standard of living: buy or rent. The folks who bought a home in 05 and 06 in most markets probably wouldn't have done so had they taken a good look at what comparable rentals were going for and not ASSUMED the blatantly absurd appreciation rates of the time would continue (much less rely on them!) - when I lived in Virginia, there was such a premium on ownership that homes were absurdly overvalued IMO (as is now obvious) and totally unsupported by incomes - amazing that so many people believed that the music would never stop.

Don't buy a home as an investment (generally a **** poor investment anyhow). Buy it as a place to live, and carefully examine it in terms of cost against similar rentals and your life plans (i.e. not stable? rent)

Most people do buy for the wrong reasons, most often with the illusion that its a good investment.

I just bought a home. I did so because #1) I have young children and am planting roots for their education, #2) my employment is stable and even in a down economy I'm very employable and #3) in my area prices have come down to a point that I literally *can't* rent anything comparable at this cost. Beyond that, I'm now sitting pretty with an absurdly low mortgage rate, while potential for inflation is extremely high in the years to come.

I do not believe the economy is turning the corner, though I believe we will hit bottom this year. In fact, I fully expect several years of sluggish growth before the next boom cycle begins and inflation returns with a vengance (in light of all this government money making).

Bottom line - buy a house or rent a house because its the best value for you to live in at the standards you desire - good investments pay dividends, they don't do just the opposite and require additional money from you to maintain (assuming we're NOT talking about buying rental properties here).

That's my 2 cents.

[vetegnc]

FYI - we have a home we are renting out, almost covers our mortgage, that we couldn't sell in another state. We may have 15% equity in it.

In trying to buy a home here, they used the rent as income (we have a contract til mid 2010), and qualified us for another home. (we can afford both if the other isn't rented....not by a lot, but we can).

Just so you know...someone was saying only if more than 30%...we didn't!

[ReneeG71]

Same here. We have no equity in our home we are renting in another state. It went down in value 200K!!! We qualified to buy another (much cheaper) home here with the rent from our old house. Unfortunately, we have to add $1,000 a month to pay the mortgage since the rent does not cover it all.

[AndrewSoss]

Originally Posted by DvlsAdvc8

There is also competing logic that says if you wait for the bottom, you've probably missed the best value. In all honesty, its not a matter of which direction the market is going... its a matter of fundementals. A good investment depends on your goals - most people aren't and shouldn't be making decisions based on market direction - THAT is part of what caused this mess... "its going up up up... buy buy buy". Most people take, or ought to take a longer perspective. Buying a home is really a simple decision: you need a place to live. You have only two choices at any standard of living: buy or rent. The folks who bought a home in 05 and 06 in most markets probably wouldn't have done so had they taken a good look at what comparable rentals were going for and not ASSUMED the blatantly absurd appreciation rates of the time would continue (much less rely on them!) - when I lived in Virginia, there was such a premium on ownership that homes were absurdly overvalued IMO (as is now obvious) and totally unsupported by incomes - amazing that so many people believed that the music would never stop.

Don't buy a home as an investment (generally a **** poor investment anyhow). Buy it as a place to live, and carefully examine it in terms of cost against similar rentals and your life plans (i.e. not stable? rent)

Most people do buy for the wrong reasons, most often with the illusion that its a good investment.

I just bought a home. I did so because #1) I have young children and am planting roots for their education, #2) my employment is stable and even in a down economy I'm very employable and #3) in my area prices have come down to a point that I literally *can't* rent anything comparable at this cost. Beyond that, I'm now sitting pretty with an absurdly low mortgage rate, while potential for inflation is extremely high in the years to come.

I do not believe the economy is turning the corner, though I believe we will hit bottom this year. In fact, I fully expect several years of sluggish growth before the next boom cycle begins and inflation returns with a vengance (in light of all this government money making).

Bottom line - buy a house or rent a house because its the best value for you to live in at the standards you desire - good investments pay dividends, they don't do just the opposite and require additional money from you to maintain (assuming we're NOT talking about buying rental properties here).

That's my 2 cents.

just stop it already...this is way too much logic for this thread ^^

[LongIslandCitizen]

If you buy another home now...you'll be underwater on that one also.

Dont let your future look like this:

[DvlsAdvc8]

I have some free time, so I thought I'd discuss my reasoning on homebuying...

There is some old wisdom that if you're staying put for at least 7 years, buy. If not, rent (and put the difference in cost into savings/investments - which is the part people actually forget to do).

Home prices in most areas are now down to 2003/2004 levels... which was really the beginning of the hyper-speculative bubble (as people realized the impressive gains seen in the late 90's, 01, 02 and the "appreciation party" went into overdrive).

If you see median home price as a line graph over time, you'll see its fairly stable with modest gains up until 2003-ish (more significant gains in the areas where the bubble later inflated the most). Sure, home prices may decline some in the next couple years, but anyone who thinks that in the long term the prices we see now are still too high is on a bubble-bursting kick (no better than the bubble inflators of yesterday - equally irrational). We are now seeing a global credit hangover and it will naturally take a few years (in which prices will likely remain stagnant) for the excess of the past few years to work itself out.

Draw the stable trend line as if the bubble never existed and you'll note median prices about where they are today. From here, any losses in value IMO are the result of irrational over-correction and bit of excess inventory (over supply). Examination of other markets gives us reason to believe over corrections are leveled out fairly quickly... they last a fraction of the time of a bubble. We've already seen dramatic cuts in construction of new homes - the inventory will work its way out.

In 7 years, you won't care in the least that your home *might* have lost value for a time in years 1 and 2 of home ownership... and fact of the matter is, with rents going up all over the country and mortgage rates at record lows... one is still likely better off buying than renting over that term. The only thing that allows renters to keep pace, is the investment or savings of the difference between their rent and would-be mortgage (which most people fail to do anyhow). Tell me, what market will give you a good return while real estate is slumping? ... exactly... few to none. So, to me, fundementals in good order - the homebuying decision today really only comes down to that age old wisdom. If you're staying 7 years - buy, if not, rent.

If this recession turns out to be like Japan's lost decade, hey, you're not going to see much investment return if you're a good renter... and your rent money is going in the crapper to the same degree as someone whose home loses value. But the homeowner still has the home when prices recover.

I'm kind of amazed I have a 4.5% rate on my mortgage (and I paid virtually no closing costs). Think about it! The long term average inflation rate is 3.4% ! So my effective interest rate given an average rate of inflation is 1.1% Now take into consideration that the Fed is printing money like mad buying up bonds and securities and tell me inflation in the coming decade is going to be less than average? Now figure in mortgage interest deduction savings. Rent will keep going up with every lease - keeping pace with inflation, but my mortgage payment will remain the same... potentially, someone renting the same house would, in a few years, be paying more than my mortgage.

It's a long shot I think for a home purchase today to come back and bite you. I recently purchased a $300k home. Over 7 years, I would have to lose more than 12% of the value of my home in today's dollars ($36k) to fail to be better off than renting even given an ambitious savings rate of 5% (ambitious in light of 10% losses in home values over 7 years! If home prices really fall 10% in that time, you'll be hard pressed to find 5% average returns).

Home prices are in line with the historical trendline, rents are up, cost of debt is down, future inflation potential is high... if you're job is secure, you have some money to put down and you aren't going anywhere for awhile... there's no rational reason not to buy.

For an annualized graph depicting over a century of inflation-adjusted U.S. housing prices based on Yale University economics professor Robert Shiller's data, click http://mysite.verizon.net/vzeqrguz/housingbubble/united_states_1890-2008.png (broken link)

[brhinehart]

Since you're in Arizona and sounds like you have the original loan (did not refi), you can walk away and not worry about the lender coming after you for the difference. However, it will mess up your credit for 7 yrs. Make sure to talk with an attorney to verify.