Dansdrive, you so know you're going to get the gloom and doom label.
Work it and own it, man!
To save Vicki and Mike some time....here are all the arguments one could ever want:
# Houses always increase in value in the long run.
# As a renter, you have no opportunity to build equity.
# Renting is just throwing money away.
# There are great tax advantages to owning.
# All real estate is local, so you cannot say anything about the national market.
# OK, owning is a loss in monthly cash flow, but appreciation will make up for it.
# As soon as prices drop a little, the number of buyers on the sidelines willing to jump back in increases.
# House prices never fall (in my city).
# Houses are worth what people are paying for them, no matter what that price is.
# House prices don't fall to zero like stock prices, so it's safer to invest in real estate.
# We know it will be a soft landing, since it says so in the papers.
# The bubble prices were driven by supply and demand.
# They aren't making any more land.
# If you rent you are a buyer. You are just buying it for someone else.
# If you don't own, you'll live in a dump in a bad neighborhood.
# Owners can change their houses to suit their tastes.
# If and when the market goes south, you can walk away.
# The house down the street sold for 25% over asking, and that proves the market is still hot.
# The MLS proves things are great.
# Rich Chinese (or Europeans, or Arabs) are driving up housing prices.
# There's always someone predicting a real estate crash.
# But housing was high when interest rates were 21%, so higher interest rates don't matter.
# Local incomes justify the high prices.
# Look, housing continued to rise after the 2001 stock market crash, so it will always rise.
# Rent can go up, but a 30-year fixed mortgage payment cannot.
# You have to live somewhere.
# My appraisal proves what my house is worth.
# It's not a house,iit's a home.
# If you don't buy now, you'll never get another chance.
# Housing will be permanently higher since downpayments are now obsolete.
# House ownership is at a record high, proving things are affordable.
# Houses are worth whatever fools will pay for them.
I'm all about the numbers so here's what I say about deciding whether or not to sell or buy....
To sell:
When you take taxes and maintenance costs into account, here's a quick and dirty check on what your house is worth: take what you could rent it for per year, and divide by 0.06. So if your house would rent for $12,000 per year, it's worth about $200,000.
If yearly rents are less than 6% of the price of a house, watch out, because house prices are likely to fall.
To buy:
* a 30-year mortgage + tax + insurance + maintenance is less than 30% of your gross pay and
* the loss from interest, tax, insurance, and maintenance is less than rent on an equivalent place and
* you plan on staying put for 10 years or more
If you want the counter arguments to these statements see
Housing Crash Continues, Bubble Pops
I think ultimately I'm somewhere in between these two extremes. No black and white for me, I'm trying to live in the gray. I think this is the most even handed forecast I've seen and it's still positive for the area:
thebubblebuster.com - Dispelling fiction in every real estate market
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