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I agree for the most part. If you have a mortgage and you're going to be paying interest for 30 years then it's really not a good investment in the long run. If you buy a house for 300k and pay interest on a 30 year mortgage, you end up paying about 600k total for that house. In all likelihood the value of the house after 30 years probably is not going to be 600k if you go to sell it.
You're failing to account for two things. One is inflation, the other is utility. It only takes an inflation rate of 2.4% to result in a doubling of prices in 30 years. That means the house need only hold its value (which is typical, if you check the inflation-adjusted Case-Schiller index aside from the 'bubble') to cover the cost of the loan. And of course you've got to live somewhere, you're getting the use of the house while you're living there.
When rates increase prices will fall again. NJ will be hit hard. Prices will fall as people move to PA and even NY to avoid property taxes. Good towns and schools will decline when the state forces them to import trash. Just look at the terrible crimes happening in short hills and west orange.
When rates increase prices will fall again. NJ will be hit hard. Prices will fall as people move to PA and even NY to avoid property taxes. Good towns and schools will decline when the state forces them to import trash. Just look at the terrible crimes happening in short hills and west orange.
When rates increase prices will fall again. NJ will be hit hard. Prices will fall as people move to PA and even NY to avoid property taxes. Good towns and schools will decline when the state forces them to import trash. Just look at the terrible crimes happening in short hills and west orange.
Crime happens anywhere. I would appreciate if you could point one town that never ever has any crime.
People move because (1) they change job, (2) retire or (3) significant event in their lives, not because rates change since their mortgage is fixed for 30 yrs (mostly, though there are still people prefer ARM due to their uncertainty about job location or something else). If one works in NYC, I doubt that they will move to PA and add another hr or 2 each way for commute. Moving to NY to avoid tax? Then think about where you will send your kids for school. I am talking about normal people. If you don't plan to have kids or don't care where your kids go for school, then...
Crime happens anywhere. I would appreciate if you could point one town that never ever has any crime.
People move because (1) they change job, (2) retire or (3) significant event in their lives, not because rates change since their mortgage is fixed for 30 yrs (mostly, though there are still people prefer ARM due to their uncertainty about job location or something else). If one works in NYC, I doubt that they will move to PA and add another hr or 2 each way for commute. Moving to NY to avoid tax? Then think about where you will send your kids for school. I am talking about normal people. If you don't plan to have kids or don't care where your kids go for school, then...
I prefer 7 year ARMs because I don't see interest rates going anywhere significant any time soon. I am paying 2.75% on a Jumbo and have been paying low rates for the past 10 years on ARMs. Can inflation kick my butt? Sure, but unemployment is still a major factor and wages have been stagnant for so long that a lot of things need to happen before rates rise high enough to cause problems.
Am I suggesting that everyone does this? No. Only people who have saved up enough to pay off a significant amount of their loan in case an unlikely disaster hits, should use this strategy. But if you can do it, it is a good way to get cheap money.
I agree for the most part. If you have a mortgage and you're going to be paying interest for 30 years then it's really not a good investment in the long run. If you buy a house for 300k and pay interest on a 30 year mortgage, you end up paying about 600k total for that house. In all likelihood the value of the house after 30 years probably is not going to be 600k if you go to sell it.
If you buy a house and the value skyrockets in a short amount of time then you can make some good money. But those instances are few and far between in general.
Investment wise, if you rent for 30 years assuming your current rent is $1,500 per month and rent increase 3% every year, you will end up paying $850K over 30 years and when you retire you are still homeless. In the meantime, since you don't buy a house you can use your downpayment ($350K x 20% = 70K) and invest with an average annual return of 6% (maybe more or less, just to be conservative) and you will get $400K after 30 years. Overall you are still $450K negative. But another crises, if happens, will wipe out all your investment, not your house. House value will be impacted, but it would still retain certain of its value as people still need place to live. More people are born than house are built, especially in the tristate area.
Even if you decide to rent, you still have to face some uncertainty and may have to change your place several time at least over the course of 30 year.
Property tax is already factored in your rent. You will pay a higher rent in good town with good school system. There are so many factors to consider when deciding between buy vs. rent, as both have pros and cons. Just make one lives within their own means.
I agree for the most part. If you have a mortgage and you're going to be paying interest for 30 years then it's really not a good investment in the long run. If you buy a house for 300k and pay interest on a 30 year mortgage, you end up paying about 600k total for that house. In all likelihood the value of the house after 30 years probably is not going to be 600k if you go to sell it.
If you buy a house and the value skyrockets in a short amount of time then you can make some good money. But those instances are few and far between in general.
I bought my house 17 years ago for $70,500. I paid the mortgage off about two years ago.
Three years ago I had taken out a home equity loan (also now paid off) and the bank assessed the value of my house at $258,000!
Guess I got lucky! (which is amazing, because I've always said, if it wasn't for bad luck, I'd have no luck at all)
To the question from OP: will house prices in NJ to go up in 2015? I would say it depends. For good towns with good school system, there is always demand. On the supply side, not so much. New development in nice towns would be expensive and taxes are higher (from my own observation, old house with same market value tend to have lower taxes than new house in the same town).
I have been through the whole process and from my own experience (1) if you find the house that you love and within your budget (this is important), then go for it. Do your homework by looking at comparable houses in the same areas that recently sold to have a sense of what you should offer (and this is very subjective as the finish of the house may drive the price difference significantly). If possible, avoid emotion and getting into bidding war as you, most of the time, may end up overpay (due to supply vs. demand, and nothing with the house). After a while and you still do not find your dreamhouse then maybe it's time to lower your expectation or take out some of the features in your wish list.
Last edited by ntran2012; 08-20-2014 at 09:16 AM..
So I have been debating whether to purchase a house this year or should I wait till next year. Do you guys think that the housing market is recovering and the houses would cost more ?
Also wanted to find out what is the best time to purchase a house ? Is it around Spring or before the school year ? Any thoughts and ideas around this ?
I have some areas in mind, but I do not want to rush into buying a house just because the real estate agents have me thinking that the prices are going to sky rocket soon.
There are both macro and micro considerations for real estate prices. All opinions of course, but i would ignore a lot of the noises. Here are some of the key points to consider:
Macro:
- Rates at historical low = you can lock in a cheap 30 year mortgage saving money. Will not see those kind of interest rates for another decade or more once it starts raising.
- Rates at historical low = flip side of the coin, it can only go up over the years. Common convention suggests higher rates = lower house prices. But that's not always true, there are many other factors like inventory, economy etc.. It is just one of the (negative) factors in the equation.
- Economy / Jobs market are improving = despite all the doom and gloom you read, NY metro / NJ area is very strong and fully recovered from the 2008 crisis, and continues to improve.
- Current prices = unfortunately you already missed the boat, the best time to buy was around 2010-2011. The price level now is already HIGHER than the high point of pre 2008 crash(in most good areas). But this time it is supported much more by fundamentals not leveraged zero down loans. Something to consider.
Micro:
- The location is extremely important as first rule, there is no point discussing price without knowing location. For example, a house in ridgewood at 700k might still be a sound purchase as the area is well developed, easy commute and not much space left. But then same 700k house in one of those marlboro's new developments is a terrible buy in my opinion. There are vast amount of vacant land in the area, which means almost unlimited inventory in the coming years.
Also buying a house in an average/bad school district is another horrible investment. Only people with families buy houses, and 99% of them care about good schools. You will have an extremely tough time selling houses in bad school areas.
- You also need to look at the immediate neighborhood, is the average listing price of the neighborhood going for 500k? but that newly renovated house you love is listed for 700k? probably not a good idea even if it looks sparking new, it's ok to pay more for renovation but never go too much above the neighborhood average. Each neighborhood attract certain price range buyers. If your house is well above the average, the ones who can afford it wont even bother to look at the area, the ones who are looking cant afford it.
I see plenty of cases during the height of the bubble, clueless buyers spending 100-200k renovating properties in horrible locations like union city / newark etc.. all ended going to foreclosure. Who's going to pay $400k when the houses next door is selling for $200k, doesnt matter if yours have a massage tub made of gold or granite kitchens.
I went in purchasing a home using an 30yr FHA at 5.5 rate in 2009, after reading all these post I must be doing the worst thing every by refinancing in 2012 to 3.75. SMH.... In my opinion, living in essex county (nutley) was prolly not the best thing but i wanted to to be close to NYC for work and family. We are all screwed living in Northern NJ cause we all live off that big city some way or another.
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