Experience Buying my First House (Collingswood, Haddonfield: rent, house prices, depreciation)

[Jerseyt719]

Originally Posted by NatasNJ

"few years"?

Say you buy today at $200k. You are out $5k+ for closing costs.
EVERYTHING points to 2+ more years of price declines and no one is expecting a vertical spike once we hit bottom. So after losing another 10% in value over the next two years (and 10% is being generous)
You just lost $20k in value.
Now you go to sell. 6% realtor commisions. (house worth $180k)
$11k on realtor costs and closing costs.

So you bought a 200k today.
Sell it in 3 years.
Loss of $36k in 3 years. (principal from payments for 1st 3 years is 2-3k at best)

That doesn't lose money?

Now lets say you live there for 10 years+. Sure you will probably be able to sell for closer to what you paid or even more than you paid today. But with values declining while in the house and having that CLEAR knowledge of it, you are giving up a large chunk of equity to own today. From a pure dollar standpoint it is not a smart move.

You're out at least 36K renting for 3 years too. You can take a chance and buy and besides, everyone says a home is NOT an investment. If it goes up even a little, you may lose less by owning than by renting.

Speculation isn't guaranteed and neither is nay saying. I want someone to show me their crystal ball that says if you buy now, you WILL lose money. Where's the proof? If you rent NOW you WILL lose money, that's just a fact.
Equity is never guaranteed when owning, but guaranteed NOT to have when renting.

[Lusitan]

Originally Posted by Roselvr

Has nothing to do with the data..
I don't like when people hot link to photos on someone else's web site for one.. if you must use someone else's image use a link instead of using bandwidth they pay for.. or upload it to your own photo sharing site.

Well if your concern isn't copyright (for which I've shown the use is licensed under applicable copyright law in response to your query) then don't use the straw man of questioning copyright just to pick a bone where your concern is about someone's bandwidth.

Good for you that you "don't like when people hot link". Thanks for sharing your likes and dislikes. But I don't care whether you like it or not.

[xmonger]

Originally Posted by Jerseyt719

You're out at least 36K renting for 3 years too. You can take a chance and buy and besides, everyone says a home is NOT an investment. If it goes up even a little, you may lose less by owning than by renting.

Speculation isn't guaranteed and neither is nay saying. I want someone to show me their crystal ball that says if you buy now, you WILL lose money. Where's the proof? If you rent NOW you WILL lose money, that's just a fact.
Equity is never guaranteed when owning, but guaranteed NOT to have when renting.

Hmmm...I respectfully disagree.

The house I am currently negotiating on...here are some details. (It was bought in mid 2005)

If it sells at list, the owners will take a $71k capital loss, pay $40k in comm + closing costs.

After 3.5 years of ownership they paid approx $22k in principal (equity) and $100k in interest and $35k in prop taxes.

Doing the math
cap loss $71k + $40k exp +$100k int + $35k prop tax -$22 equity = $224k total cost; now there is a tax benefit to owning; in this case because of the owner's finances the prop taxes are amt'd out so only the interest is deductible. That provides a benefit of approx $33k.

Total cost for 3.5 years of ownership = $191k or $4.5k per month
The cost to have rented this particular property = $2.5k to $3k, lets use the higher number.

How much better off would he have been renting???? +$63k ($1.5k x 42)

Okay, and here is the rub...he will not get listing price. It's been on the market 5 months. Any additional discount to list will have to added to the number above as a loss. My estimate is that is will be at least $65k more, and thats if he gets lucky. My fair max offer would have him looking at and additional $100k loss.

If you pay a fair price for a home. I.e., a value that is closely tied to the revenue stream a property can produce you can avoid the ugly numbers above. When you buy into the owning is always better argument your goose can get cooked. But that is okay, we responsible taxpayers will help you.

[Lusitan]

xmonger - you're getting into "complicated math" (i.e. reality) that the housing cheerleaders on here won't understand. It's why we're in this mess in the first place.

Let's just all put on rose-colored glasses and tell ourselves that now is a great time to buy, and why would anyone want to be one of those renters "throwing money away" on rent?

[JG183]

Originally Posted by Lusitan

Let's just all put on rose-colored glasses and tell ourselves that now is a great time to buy

you simply cannot put a price on "what I want"

i.e. my neighbor spends anywhere from $7K - $15K every winter for his skiing : plane tickets, ski's, hotel, lift pass, incidentals, etc.

to me , that is throwing away money.

but, it makes him happy.

I'm an auto enthusiast, he considers the money I spend on that as a waste.

similarly, we shouldn't discount the desire to own a home...

[NatasNJ]

Originally Posted by Jerseyt719

You're out at least 36K renting for 3 years too. You can take a chance and buy and besides, everyone says a home is NOT an investment. If it goes up even a little, you may lose less by owning than by renting.

Speculation isn't guaranteed and neither is nay saying. I want someone to show me their crystal ball that says if you buy now, you WILL lose money. Where's the proof? If you rent NOW you WILL lose money, that's just a fact.
Equity is never guaranteed when owning, but guaranteed NOT to have when renting.

haha. You missed one major point. That $36k LOSS I spoke of was not including your monthly payments.

So your mortgage + taxes + insurance + PMI if you have it = Rent check. So from that respect they are a wash at best.

My numbers mean...
Buy $200k home.
Pay (in NJ) roughly $1600/month to own * 36 months.
$57,600 - equity and tax deduction = Roughly $42000 out of pocket.
Sell in 3 years.
$36k Loss on that.
Out after 3 years = $78,000 spent. $2200/m over 3 years to Own.

RENT same house.
AT MOST for a $200k home is what $1500/m? I currently rent a $200k home for $1400 range.

And I am not factoring in any extra upkeep, bills a renter may not have to pay (water/sewer) etc... Not factoring in PMI, down payment savings if rented, difference in insurance premiums, etc...

And you can even fudge my numbers and reduce the loss from 10% to less and still not come CLOSE to making out buying vs renting.

Now you can argue prices will be up in 3 years compared to today. And well then you are just in the biggest denial ever.

And this math explains EXACTLY why prices have to drop.

[Lusitan]

Originally Posted by JG183

you simply cannot put a price on "what I want"

Millions of Americans got what they wanted, and I think the price tag at this point is about 2 TRILLION dollars.

i.e. my neighbor spends anywhere from $7K - $15K every winter for his skiing : plane tickets, ski's, hotel, lift pass, incidentals, etc.

to me , that is throwing away money.

but, it makes him happy.

I'm an auto enthusiast, he considers the money I spend on that as a waste.

similarly, we shouldn't discount the desire to own a home...

No doubt, if you are qualified you're entitled to spend your money on whatever floats your boat. The problem is that the vast majority of the people looking to buy homes today aren't qualified, and will be asking for a govt handout next year when their house is worth 30% less than their mortgage and they've lost their job and have no savings to fall back on.

If your neighbor buys his ski trip in advance, falls on hard times, and then asks you to pay for his ski trip, well, that's where you might start to counsel him not to buy that ski trip until he's financially secure enough to do so.

[sholden]

Originally Posted by NatasNJ

There will be another housing bubble. Probably not for many many years but human nature will surely cause us to repeat these same mistakes OVER AND OVER again. Inevitable. Once these recent memories fade and things are normal for awhile then something will cause people to be stupid again and repeat these same mistakes.

Yes I agree, but what I said I expected was that there won't be one in the next ten years because the people will remember the last one. And that last one was *much* bigger than any real estate in the past. Hence my expectation that in ten years time someone who buys "market price" now will have lost on the deal.

[Bill Keegan]

Originally Posted by amb1s1

Sorry for the understanding, but yes it is the initial offer to the homeowner, and that will be 10% off their asking price.

Have you already found the house? It sounds like you haven't, and that you are just planning on offering 90% of asking price on whatever you decide you want to buy. That's a bad plan. It can hurt you in several ways. First, the one you are expecting me to caution you against; your offer may just be too low for the seller to consider seriously. If the house is priced RIGHT, it's entirely possible that they will have a lot of interest at yrou offer will be lower than others. So you won't get your house. It's also possible that the house is so overpriced that 90% of ask is paying TOO MUCH. And we all know the trouble that can come of that.

Do yourself a favor. Research the price of homes, and evaluate what you are considering purchasing. Then, make an offer that is appropriate for the house you want to buy. Do not go in with a blanket plan that you think will work for any and all houses. It just doesn't work that way.

[Jerseyt719]

Originally Posted by Lusitan

xmonger - you're getting into "complicated math" (i.e. reality) that the housing cheerleaders on here won't understand. It's why we're in this mess in the first place.

Let's just all put on rose-colored glasses and tell ourselves that now is a great time to buy, and why would anyone want to be one of those renters "throwing money away" on rent?

Not being a cheerleader at all, just saying that if one wants to buy a house, they are not going to lose their money unless they are flipping in the next couple of years.

If you are looking for a big fat gain in the next couple of years, then yeah, you may lose OR you may not. No one on here has a crystal ball. They can not tell you what it is DEFINITELY going to do or not do, for that matter.

Rose colored glasses look pretty good right about now. Beats all the pessimism.

Even if one rents for only two years, that's $48k at 2k a month for a 3 br house that they've literally thrown away.