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Real estate sells for market value at the point of sale. There is no such thing as over/underpaying.
Odd, when the last boom hit and some areas saw a 50% or more drop in their home values, people made the argument that they overpaid. In fact, there was even a person on this board during that time claiming they were justified for walking away from their home because it wasn't "worth" what the "market" had determined for him when he bought it.
There is some truth to what you are saying, but... it isn't an open book to any value. Market values usually are based on many things (supply, demand, product/labor availability, location, etc...). There is such a thing as "fad" markets, where the price is not representative of anything other than the frenzy of emotional buyers and sellers inflating the costs past any natural means.
Quote:
Originally Posted by middle-aged mom
It is not possible to time any market. No way to know the ceiling or floor of any market in advance.
Normal market fluctuations (as I mentioned above), yes... but bubble markets have blatant tell tale signs. I said the same thing I am now before the last bubble, there will be another burst, but this time with interest rates going up, there won't be an easy recovery as we had with the last. This one is going to hit extremely hard in some places. As I said in a previous discussion, it depends on locations as some areas weren't hit with the fad bubble too badly. For instance, the last ridiculous boom didn't hit the major cities of Texas too hard, but... it is hitting it now (imagine... all the people rush here to fad buy and boom the market). It will crash here too eventually, people can't afford home loans for the values they are now if interest rates go up. It is a simple fact. Another sign is the return of the "Flip this house" shows getting popular again. A boom is coming, but it will carry a big bust.
Prices will drop to the point where people can afford them and that means all those 400-500k homes are going to lose a heck of a lot of value. As for the places with homes above that? That is going to be funny. Even the high earning couples out there won't be able to afford that 800k home in the city. Their payments will be ridiculous.
The total number of mortgage applications filed in the U.S. last week rose 22% from the prior week, the Mortgage Bankers Association said Wednesday.
On a seasonally-adjusted basis that includes an adjustment for the July 4 holiday, the market composite index slipped 2.6% from a week earlier, according to the weekly survey covering more than three-quarters of all U.S. residential-mortgage applications. MBA also reported the refinance index slipped 4.2% from a week earlier to its lowest level in two years while the seasonally adjusted purchasing index increased 1% from the prior week.
A recent run-up in interest rates has curbed some individuals' appetite to buy a new home and reduced the appeal of mortgage refinancing, though in the latest week mortgage rates declined slightly.
The share of applications filed to refinance existing mortgages fell to 63% from the prior week's 64% and is at its lowest level since April 2011. Adjustable-rate mortgages, or ARMs, made up 7.2% of total applications. The Home Affordable Refinance Program's share of refinance applications slipped to 34% from 35% in the prior week
But who is doing the buying? Here in the bay area, there are a lot of investors buying...
The majority of people have equity in their homes and some of them are trading up or down or changing locations.
It is scary because we as a country are starting to lever up home debt again, which is how the housing bubble formed in the first place. Do you want another bubble, and especially do you want another bubble to form when the fed rates are unable to react given the 0-bound?
It is scary because we as a country are starting to lever up home debt again, which is how the housing bubble formed in the first place. Do you want another bubble, and especially do you want another bubble to form when the fed rates are unable to react given the 0-bound?
I have strong feeling that something like this is going to happen, unfortunately. If you look at cyclical data, by investigating dendrochronology, you'll find there is a major drought that affects the US ≈ 83 years.
The next drought should happen next year or the year after, as sometimes it happens every 84 years instead. Worse, the drought lasted 9 years in each instance. If this happens, the price of corn will rise exponentially, which in turn will raise the price of gas.
For those who are already maxed out, they will feel immense financial pain. Even if you are not tied up in a mortgage you can barely afford, or manage to afford on credit, your life will become painful.
Hopefully, history does not repeat itself, but based on data, I believe it may.
But who is doing the buying? Here in the bay area, there are a lot of investors buying...
Here too, but investors these days do a lot of cash purchases, and the 22% spike in mortgage application is an indicator regular people are buying homes to live in. Of course many of those in the 22% are also refis.
They can sell whenever they want. I could sell now, or in a few years, and not lose anything.
You may have the advantage of being in area that has an influx of foreign money coming in.
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