Prescott Real Estate - Signs of Recovery (bank owned, sale)

[Snort]

If the value of the dollar is going to go down (and it is) and inflation will hit, isn't it a good time to buy a house with a minimum downpayment because the 80% left on the mortgage will be paid off with "cheaper bucks" in the future?

[DellNec]

Originally Posted by Snort

If the value of the dollar is going to go down (and it is) and inflation will hit, isn't it a good time to buy a house with a minimum downpayment because the 80% left on the mortgage will be paid off with "cheaper bucks" in the future?

Most economists say "NO". The reasons are many, but the main issue is that unless you have a lot of money on hand, you will need an extra cash reserve to survive the coming inflation. Remember, your pay rate will not go up, maybe it will even go down. Yet, your expenses will rise because the dollar you hold in your hand is worth less.


It's a high risk move. Whether you are willing to take it, is up to you.

[DellNec]

Originally Posted by Esenjay

The only portion of the home that is a factor is the actual mortgage -- all the other items such as HOA, etc., are things you'd pay for regardless of whether the market is up or down, so listing all those items as negatives to buying is misleading.

Nothing misleading here. We are talking about a home purchase. If you currently rent, then you don't pay HOA fees or property taxes.

HOA Fee's ($650 yr. avg)
Property Taxes ($2,500 yr. avg)
Improvements ($2,100 yr avg)
Upkeep ($2,000 yr avg)
Homeowners Insurance ($900 yr avg)
and a host of other expenses that come with owning a home...

That's over $8,000 a year, now factor in your mortgage payments on top of that. And if the home is older, you can have major breakdowns (roof, plumbing, etc) that can add thousands of dollars very quickly.

Renting is a not a bad word. Especially in this market.

[Esenjay]

Your numbers are still misleading, as I mentioned, because if you're going to buy a home, now or later, you still are faced with exactly the same expenses. I'm saying that if you're going to buy a home, the additional expenses are there regardless, while you are advocating renting over ownership to cut down expenses, while completely disregarding the benefits of owning a home vs renting, in an argument that suggests the money is just being thrown away. It really is a misleading statement, regardless of the state of the economy. It's the classic argument of ownership vs renting and I think that most economists (as you are wont to say) would advocate buying a home vs renting, for reasons of equity and taxes, if you are in a position to purchase a residence.

[DellNec]

Many economists actually favor renting in today's market. Talk to the hundreds of thousands of people who bought a $400K home, two years ago, that is worth $180K today. Nothing like losing $220K in equity in 2 years.

If you bought a home, congrats, but it was a high risk in today's market. Unless you are really wealthy, then it was not.

I didn't even mention the RE commission fee's when you sell a home. A 5% commission on a $200K home will cost you, out of pocket, $10K.

A 30-mortgage, which is amortized, your payments end up going to the interest and the principal is barely touched. It takes the 15 year mark before it reaches a 60% principal - 40% interest ratio, typically.

For example, in a 30 year mortgage @ 6.5% APR, on a $150K loan, you will end up paying $191,316 in interest payment! plus the $150K you owe, for a grand total of $341,316.

The base mortgage is just the beginning of housing costs. On average you need to add another 40%-45% to get a more realistic total monthly cost. So if your mortgage payment is $1,079, the true total cost is about $1,519 per month.

Renting is not a bad decision and can be a better decision in the long run when you consider the market and the direction its heading. If you got a lot of money, then buy a home, cash, if you can.

[smilinpretty]

Real Estate goes in cycles. I believe real estate prices are where they are suppose to be. Building materials haven't come down much. The interest rates are low making home ownership appealing. In our development, houses are selling at $170K. If someone were to put down a 20 percent downpayment, the payments at 5 % would be approx $700. With house payment and insurance and p.t. would be under $1000 and houses are renting for that in our area.

Actually, Prescott Valley and Chino Valley, are good buys right now, compared to other areas in the country.

[smilinpretty]

Ooops, Thank You Brian for the information, it is so appreciated. I sure enjoy your posts.

[Esenjay]

Dell, what you describe is the standard economics of purchasing a home and not an argument against buying a home.

Now, buying just before the bubble burst is a very unfortunate thing and hurt a lot of borrowers. Buying at the bottom of the market before it goes back up--be it next year or in 2 or 3, if you plan on living in your home for a few years--is not a bad economic decision. I'd much rather be investing my monthly living expenses than handing it to a landowner who reaps the benefit of ownership at my expense. But if you prefer renting over buying, when the home values are virtually bottomed out (or close enough, let's not nitpick, OK?) and the interest rate is about as low as it will go--then that's your decision.

Put aside employment/income considerations because those are not relevant to the discussion of buying vs renting. Everyone should stay within their means, that is a given.

[checkthecodes]

I think if your a young couple you should wait and buy at the lowest bump which IMO hasn't hit yet.. You still don't have jobs in the area, no jobs..no home buying... On the other hand I was in California 2 weeks ago (Redondo Beach, Torrance and Cypress) and had at least 30 people at each car event come up to me and ask about the area... 75% were interested in Chino Valley and didn't want the high prices of Prescott and didn't like P.V. due to the red light cameras and photo radar, people don't like big goverment controling them when they retire which both Prescott and P V have.. These people were looking to retire here.. By the time I returned home there were already 15 emails asking for realtor info... When I sold my house in 2006 the homes in that area have now dropped 50%... So I tell people the prices everywhere have dropped 50% so it just balances out on the selling and buying end...

[DellNec]

Originally Posted by checkthecodes

On the other hand I was in California 2 weeks ago (Redondo Beach, Torrance and Cypress) and had at least 30 people at each car event come up to me and ask about the area... 75% were interested in Chino Valley and didn't want the high prices of Prescott and didn't like P.V. due to the red light cameras and photo radar, people don't like big goverment controling them when they retire which both Prescott and P V have.. These people were looking to retire here.. By the time I returned home there were already 15 emails asking for realtor info... When I sold my house in 2006 the homes in that area have now dropped 50%... So I tell people the prices everywhere have dropped 50% so it just balances out on the selling and buying end...

The key factor is "retirement". Chino Valley does not offer anything in the area of jobs. Services are limited also, 99% of people who reside in CV, drive to Prescott or PV for services & entertainment.

The town that will have the greatest growth is PV, hands down. The town that is the most expensive to live in is Prescott, hands down. CV is the PV of the 1980's. Whatever PV does, CV will follow suit, only it will take 10-20 years. It is not immune to the growth.

IMHO, the best of the best, is Williamson Valley (just north of Prescott and west of CV). It is the Prescott of the pre-development era, open land, hundreds of acres of ranch land, limited development (99.9% housing - only 1 gas station). Pronghorn, deer, black bears, elk, foxes, mountain lions, bobcats, and the rest, all roam freely out there. It is the Prescott BEFORE it was developed. Sure, it takes 30 minutes just to get into town, but that's the price you pay. Getting a gallon of milk will take 75 minutes, round trip.