Welcome to the bottom: Housing begins slow rebound (houses, buying)

[elflord1973]

Originally Posted by Phish Head

Buying a house is a hedge against inflation.

It's only a good hedge if the price is correlated with inflation. Given that we've recently had a period of low official inflation numbers and rapidly climbing house prices, this seems questionable.

It's true that shorting debt (for example, by borrowing as much money as you can) is a good inflation play.

The problem is that when inflation kicks in, it could knock out the real value of your house as well as the real value of your debt.

[Liz555]

elford, if one is buying with the long term investment in mind...like many of the posters are mentioning....buying "like our parents did" in good towns, best that our money can afford etc...isn't this a good idea when one plans to say "ride out" a high inflationary period? I'm truly asking the question, not attempting to be a wise a-s...

[ordinar]

Originally Posted by Liz555

elford, if one is buying with the long term investment in mind...like many of the posters are mentioning....buying "like our parents did" in good towns, best that our money can afford etc...isn't this a good idea when one plans to say "ride out" a high inflationary period? I'm truly asking the question, not attempting to be a wise a-s...

Times have changed. You can't buy like your parents because
1. when kids go to college, parents move to avoid high property taxes
2. parents move to avoid unemployment, so called mobility
3. parents don't invest in town and care less for neighborhood
4. parents can't afford the town they bought in because of taxes, utils, economy etc

[elflord1973]

Originally Posted by Liz555

elford, if one is buying with the long term investment in mind...like many of the posters are mentioning....buying "like our parents did" in good towns, best that our money can afford etc...isn't this a good idea when one plans to say "ride out" a high inflationary period? I'm truly asking the question, not attempting to be a wise a-s...

As a long term investment, housing is terrible right now, because prices are still well outside historical norms.

Now IF you expect inflation:

As far as buying "like your parents did" -- buy a place to live in, but invest in good inflation hedges -- things that go up with inflation like commodities, stocks of commodity producers, TIPs, etc. You need to live, and you need a place to live in, but that's about your personal comfort (and consumption of durable goods if you like), not investment. There is a lot of mess that needs cleaning up before housing is a good investment (in particular, the attempts to prop up the market need to be unwound to bring prices back to normal)

Also, many posters have made a good point that if you expect inflation, going short long term debt is a good play. You can do that by financing as much as possible, refinancing if you have paid off some of an existing mortgage, or shorting 10 year treasuries on a futures exchange if you're brave enough to try that.

[bababua]

Originally Posted by MoorestownResident

Nope, bears say NJ is going to decline another -25%.

Just goes to show you, if you stick your head in the sand long enough, you get out of touch with reality.

Wow this guy can forsee the future. Bears are bettin down and you are betting up, I take it? An article doesnt mean anything. Talk to me in 2 to 3 years and tell me you were right. Should we bust out articles that claim Real estate is going to drop? You know they do exist.

[mikeym81]

Originally Posted by tallguylehigh

While you make a lot of good points I highlighted one that I wanted to address. So much of the economy is dependent on what you alluded to in this sentence- confidence. The confidence of the consumer is one of the major engines that drives this economy. Unfortunately, people tend to get caught up when confidence is bolstered by the wealth effect (a byproduct of the housing bubble) to where people become too confident and overextend, which is exactly what happened. The wealth effect disappeared and as a result, consumer confidence took a major hit, which then effects consumer spending, which effects employment, and the entire system starts to break down. Personal savings went up as people started to reign in the excessive spending of the early 00s.

Now, so long as the data is valid, and not just a puff piece, this economy NEEDS good news stories in order to get going again. It needs to tell people that "everything is going to be ok" so that the people can start spending, banks and start lending and the economy can begin to grow again, with the lessons learned from this previous escapade.

I am not saying to be Pollyanna about it and be "oh everything is so amazing, la la la la la..."

But I am also saying let's not be Chicken Little and say "oh the sky is falling, the end is near, start digging coffee cans full of cash in your backyard!!"

What I am saying is follow the news, follow the numbers, follow your own expenses. Unfortunately, the media has become so much about sensationalism that rational analysis is as rare as hens teeth, or rocking horse droppings.

100% backed.

[luckyshoes]

Originally Posted by elflord1973

You need to live, and you need a place to live in, but that's about your personal comfort (and consumption of durable goods if you like), not investment.

This is exactly it. Buy a home to live in it. Forever. Not as an investment.

Remember also, many of our parents bought with double-digit interest rates in the 70s. It was what it was. It didn't stop them from buying necessarily. Most of them still did ok in the end, because they stayed in the darn house.

[NatasNJ]

Originally Posted by luckyshoes

This is exactly it. Buy a home to live in it. Forever. Not as an investment.

Remember also, many of our parents bought with double-digit interest rates in the 70s. It was what it was. It didn't stop them from buying necessarily. Most of them still did ok in the end, because they stayed in the darn house.

This logic is so bad it makes my head spin. In the 70's the cost of living was much lower than it is today. You had to spend a MUCH smaller % of your income on a mortgage payment (even with double digit interest rates) than you do today with 5% interest rates. So your point on interest rates is pointless.

2nd. People back then had the ability to stay with companies beyond 5-10 years because that was normal. Today it is MUCH MUCH harder to stay on with a company for 40 years like people used to. The corporate world has changed if you haven't noticed.

3rd. Since the corporate world has changed it not as easy to stay in the same house for 40 years like our parents may have done. It is like comparing appled to oranges the world is a different place today.

I agree with you that one should not buy a house in todays market if their is a high probabilty that you may move in the next few years because doing so will surely net you a loss. (especially after you factor in closing cost 3%, realtor fees 6%, etc...) I don't know many people who think real estate prices will be up 10% from todays numbers in a few years.
All things point to a continuing decline of 5-10% over the next year alone.

[elflord1973]

Originally Posted by luckyshoes

This is exactly it. Buy a home to live in it. Forever. Not as an investment.

Remember also, many of our parents bought with double-digit interest rates in the 70s. It was what it was. It didn't stop them from buying necessarily. Most of them still did ok in the end, because they stayed in the darn house.

Most of them did OK in the end because they bought in a high rate/low price
environment.

I think the problem with buying a place to live in it forever is, you're likely to end up buying too much house too soon. For example, if you're 25 years old, you don't have much need for a single family home. Assuming you have enough income to consider buying, it makes more sense to buy a condo. That way, your interest and property tax bill stay down, so you can save.

The right time to buy the house "to live in forever" is around or shortly after you have kids. If you don't have kids, the whole thing is much simpler.

[elflord1973]

Originally Posted by MoorestownResident

Nope, bears say NJ is going to decline another -25%.

Just goes to show you, if you stick your head in the sand long enough, you get out of touch with reality.

Who are these "bears" that make this prediction ?

I think you'd find that these people you're calling "bears" have updated their estimates of the amount of decline remaining. (We could put this to the test by doing a poll)
The so-called "bears" are actually people who form their opinions based on the facts. When the facts change, they update their opinions.

The bulls on the other hand were screaming "now is the time to buy" right through the Lehman collapse. Sound familiar ?