housing prices in NOVA outlook... Leesburg

[Moman1]

I'm just wanted to throw in a couple of thoughts to ponder. First, I'm not opposed to renting while the market is rough. As a matter of fact, that's exactly what we did for 3 years out here in CA. However, I know many people that have rented a house and had to move when they foreclosed on the home. There is an inherent risk involved with renting too. One guy had to move 3 times in one year because he keeps getting into homes that end in foreclosure. Each time you move that's money out of your pocket not to mention the pain in the backside of changing addresses and services with everyone.

The second point to ponder is that people tend to change homes way too often these days. The average duration of home occupancy has dwindled over the years. Why buy a house and sell it again within 5 years? I know you can't always control life. But if you keep a house for at least 7 or 8 years, you can ride out most up and down trends in any market.

I plan to buy a house near the Manassas area sometime within the next 3 to 4 months, possibly sooner. We are moving to VA with the military and I leave next week. I can't wait! The difference though is that we intend to be there for at least 10 years and probably longer as it will be our last assignment before we retire. I can't wait for that either!

[mojo_1979]

Originally Posted by VRE332

Will there will be a whole lot of difference if you spread out the short term losses over 30 years? Factoring in the rent, increase in rent, possible Fed interest rate hike, tax deductions?

My landlord has raised rent only once in three years, and that was by $20. Throw in the fact that the A/C was serviced, the refrigerator was repaired, the washing machine was repaired, a plumbing leak was fixed... the list goes on and on - All his expneses of course, not mine.

Anyways, back on topic, what losses are you referring to? I'm not losing money by renting, I'm coming out way ahead. My rent is cheaper than what just the interest on a home loan would be for a similar home... that doesn't even factor in the principle, insurance, and taxes. All that extra money is being invested (foreign stocks and currencies, not domestic, but thats for a different bulletin board).

I'll say it again, I'm renting for the short term. I plan to buy in 1-3 years unless the economy gets really bad, in which case I'll wait a little longer. And because I'm renting, my net worth is increasing much more than it would be if I purchased a home now or at any point in the last two years. In fact, if I purchased a home last year or the year before, I would bet that my net worth would have been reduced by now.

To answer your question (if I understand what you're asking), there will be a tremendous difference 30 years from now. The thousands of Dollars that I've been able to invest, by renting and saving money, will be a very nice nest egg 30 years from now.

[Moman1]

[quote=mojo_1979;4317924]Anyways, back on topic, what losses are you referring to? I'm not losing money by renting, I'm coming out way ahead. quote]

I have a hard time seeing that someone is coming out way ahead by renting. I also can't say you are doing anything wrong by renting either. I look at it 3 different ways: Buying for long term, buying for short term, and renting. Buying long term is stable, I don't care what the market or economy is doing. Buying short term is risky. It can be good or it can be bad. Renting is more like treading water. You're not sinking, but you also not going anywhere. Renting can be a smart move for people looking to hold out during a bad economy like right now, or for people who don't like to take a risk buying short term. But, renting for more than 3 or 4 years at a time is probably wasting (future) money.

[car54]

I think one day school kids will learn about the Great Housing Bubble of '04-'06 in history books. I only hope that the final chapter doesn't say the era ended in world-wide financial collapse!

But there were lots of "winners" too. When homes in my 'hood started going for over a million, my neighbor and I marveled at the craziness of it all. He decided to "cash-out" and sold his house....for $1.15 million....a house he paid $90K for many years earlier! He's still around and rents a very nice house that his invested profit pays the rent, utilities, etc on (with plenty left over). They were retiring out-of-the-area in a few years anyway, so they made out like bandits.

I thought about doing the same thing, but I inherited my house (a unique property) and my parents expressed a desire that it remain in the family in perpetuity. I don't know if that will happen, but when my daughter marries and starts a family the place will be hers free and clear. I'll rent an apartment or move onto the boat.

I did unload a rental property during the boom for about twice what it was worth, so I can't say I missed out completely on the insanity!


I just hope the bubble doesn't end up bringing down the house of cards that is our US economy....when the only thing that will matter is "rice and ammo".

[scimitar12]

[quote=Moman1;4318072]

Originally Posted by mojo_1979

Anyways, back on topic, what losses are you referring to? I'm not losing money by renting, I'm coming out way ahead. quote]

I have a hard time seeing that someone is coming out way ahead by renting. I also can't say you are doing anything wrong by renting either. I look at it 3 different ways: Buying for long term, buying for short term, and renting. Buying long term is stable, I don't care what the market or economy is doing. Buying short term is risky. It can be good or it can be bad. Renting is more like treading water. You're not sinking, but you also not going anywhere. Renting can be a smart move for people looking to hold out during a bad economy like right now, or for people who don't like to take a risk buying short term. But, renting for more than 3 or 4 years at a time is probably wasting (future) money.

Actually, the only way anyone comes out ahead financially buying real estate is if the vlaue of the property goes up over a period of time. In a depreciating time as we are now in, makaing payments on property you own is less financially attractive than renting. Granted, over the long term (over seven years or so), owning property will begin to come out ahead over renting.

[Solo904]

You're right that nobody knew when it would happen. I just knew that in 2005, the very ordinary townhomes that my wife and I looked at in Loudoun County were not worth over half a million dollars! I had to bite my tongue to keep from laughing when they told me the price of this townhome was $525k. That same townhome would rent for no more than $1500 per month yet mortgage payments would have been nearly $3000 per month. It was clear to me then that eventually balance would be restored and that I would be better off by waiting this one out.Today, there are several of these townhomes listed on the MLS as short-sales and foreclosures. The lowest of which was built in 2005 and is listed for $250k. That's $275k cheaper than the 2005 price.In hindsight, it's clear that 2005 was the peak of the bubble. I certainly didn't know that at the time. But, I knew I wasn't going to pay that kind of price for a very ordinary townhome and that one day the mania and hype would be exposed for what it really was.... just a bubble.

We are getting ready to move from Japan to NOVA. I know the economics are not exactly the same but real estate bubble Japan experienced in the late 80's is still playing out. Homes here bottomed in the last few years but they haven't budged much at all from that bottom.Point is: The bubble was predicted. The next likelihood (prediction) is home prices will continue to fall and when they bottom, they'll sit at the bottom until wages can support a rise. That leaves me and others in a interesting spot. We are looking to buy a home in the Lake Ridge area but if what we lived through in Japan is any indication, we should rent if the monthly payment is around $1000 a month less than the estimated monthly mortgage.Excellent thread, BTW.

[scimitar12]

Originally Posted by Solo904

We are getting ready to move from Japan to NOVA. I know the economics are not exactly the same but real estate bubble Japan experienced in the late 80's is still playing out. Homes here bottomed in the last few years but they haven't budged much at all from that bottom.Point is: The bubble was predicted. The next likelihood (prediction) is home prices will continue to fall and when they bottom, they'll sit at the bottom until wages can support a rise. That leaves me and others in a interesting spot. We are looking to buy a home in the Lake Ridge area but if what we lived through in Japan is any indication, we should rent if the monthly payment is around $1000 a month less than the estimated monthly mortgage.Excellent thread, BTW.

Interesting point. I think most people here expect real estate prices to at least bottom out sometime early next year if not this year. And, prices will remain flat for a year after that, then begin to match the rate of inflation, IMO. Regardless of what actually happens, I don't think anyone believes we will see the crazy, hyped inflationary housing prices in anyone's lifetime again.

[mojo_1979]

Originally Posted by scimitar12

Interesting point. I think most people here expect real estate prices to at least bottom out sometime early next year if not this year. And, prices will remain flat for a year after that, then begin to match the rate of inflation, IMO. Regardless of what actually happens, I don't think anyone believes we will see the crazy, hyped inflationary housing prices in anyone's lifetime again.

I don't expect housing prices to bottom in 2008. Probably 2010, although I might buy in 2009 if they fall enough between now and then.

IMO, we will NEVER see prices (inflation adjusted) as high as they were in 2005 and 2006.

[ISOnewplace]

Hi Mojo et al

This is a very interesting thread and I just wanted to add my opinion. I am on this thread because we are thinking about returning to NOVA after a few years in Miami. NOW...you want to see a bursting bubble just read what is going on here in Florida. I owned a home in NOVA. I bought in 1995 and sold in 2000 so I missed the peak but made out okay. It was a smart move then because the mortgage payment was less then renting. I put down a large downpayment and I was building up equity in a market where prices were slowly but steadily increasing. When we first moved to Miami in 2004, we rented as we did not know the area. It didn't take a genious to immediately figure out that home prices here were seriously over valued (I would say even more than NOVA if you factor in size, quality, land, schools and services). Add to that the out of control property tax and astronomical insurance due to hurricanes and it just does not make sense to buy here. We saw the writing on the wall too and have been saving and investing that money. Most people I know are living paycheck to paycheck to own their homes which they couldn't afford in the first place and when they sell, they will have lost perhaps $200 or more and then still have to pay off the bank. The tax break they receive for owning a home does not even come close to covering the property tax and insurance so we are MUCH better off stil renting a 3BDR/2BA home. We could afford to buy one of those homes and make those payments but that would be INSANE. We will just call the landlord and tell them we are moving and then take the 100K we have saved (in addition to the 401K) and put a deposit on a nice home in NOVA when the prices level out. I think there is a time to buy and a time to rent. You just have to be smart (and realistic) about the market and what you are really saving. I'm not a macro-economist but I do know what I can afford and that a 2 BDR/1BA house with no closets or yard in a crappy school district should not cost 600K, no matter what the market conditions are. This is just my story--no jabs intentded at anyone who rents or owns. Best to everyone on this thread! PS: If I had a crystal ball, I would have held on to my colonial in Arlington until 2005 and made a cool half a million but hey, I would not have been as free to travel then and would not have met my wonderful husband

[barryhussein]

Using simple ratios can make the rent/buy decision much easier. You should buy at 8-12 times annual rent. For example, the 1500 per month TH, as mentioned above. Annual rent is 18000. Multiply 18000 by 8 and you get 144,000. Multiply it by 12 and you get 216,000. When these places were selling for 540,000--that was 30 times annual rent! If you really like the place, and it's in a stable neighborhood, 220K or so, would be a good investment. Also, consider what rent will be in 5 years.