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Good article. Funny the woman quoted doesn't want to "stumble over" the children. I thought the good old days were when the whole family HAD to be in one room to watch a tv program together.
How true.....large cavernous rooms that are void of human interaction..yeah, that's what I want outa life...I see your and raise you LOL
Last edited by Fallingwater79; 02-16-2008 at 01:53 PM..
Okay, I'll bite. How do price reductions on houses in the $750K-$1M range affect the value of my $215K house?
Price compression happens just like price appreciation.
In the last few years, prices went up across the board as people moved up to more expensive houses from cheaper homes. Entry level homes were bought by first time buyers creating demand and people who sold these homes to the entry level buyers moved to more expensive homes driving the prices up in the next category and so on and so forth.
Similarly, if there are price reduction in the 500k+ category it would put pressure on lower priced homes. For eg: there are two houses listed for sale-House A for 600K and House B for 500K. Because of oversupply and softening prices in the 500K+ market, House A price drops its price from 600K to 500K, it will put downward pressure on the price of House B as obviously it would not have the same features/amenities as the originally higher priced House A that is now selling and competing in the same price range. Why would somebody not buy the 600k house over the 500k house if they are selling for the same price? And this gets repeated across the board affecting prices in the lower price ranges tho maybe to a lesser degree as the price range goes down.
Price increases and decreases do have a domino and wide effect in the real estate market and are not generally isolated. Just the amount of price impact might not be consistent across the board!
Very true, as were many other posts on here. You would be surprised at how many subprime loans there were made in Cary, Chapel Hill and the other areas people think of as "higher end".
A lot of people jumped into the lending and real estate industries that had no business offering financial advice. They did not have the experience, education, training or lifestyle (no savings, no or bad credit) to offer sound financial advice. They jumped in it for the money, as did many people who bought homes. They saw the same media hyping 20% appreciation and decided why buy later when I may be able to afford it if I can buy now and make 20% in a year.
People got greedy and lost all sense. From the buyer, to the Realtor, lender and appraiser... to Wall Street that happily lent the money with few questions trying to make a quick buck. They used ARMs, Option ARMs, pre-payment penalties, stated income and other techniques that were designed for a specific market.... not your standard homebuyer.
Its like currency trading or investing in emerging markets or gold (which like real estate investing are sold on infomercials at 2 AM). Can you make a lot of money doing it? YES!! Should the average person on a fixed income with few assets do it? NO!!
I totally agree with you. Everyone from the buyer to the lender to the mortgage brokers to the real estate agents are guilty. It was all about greed. Plain and simple and now we all will pay in one way or another. The homeowners who will lose their house, the neighbors whose properties will likely go down due to short sales and defaults, the banks whose shares will go down due to enormous amounts of write-offs, mortgage brokers who have lost their jobs due to their companies going under, the real estate agents who will have to be more realistic about showing houses their clients can really afford, and the country as a whole whose taxes will likely go up because of this mess. Shame on them all. Money IS the root of all evil. I feel really bad for the family renting now, who thought that they just might get into their first home. It looks like it will be a whole lot tougher going forward. It you think it doesn't affect you (generally speaking) it does!
Its fine with me...normal people can't buy a house in Raleigh or Cary anymore. Let the prices come back to earth.
It is that type of blanket statement that is incorrect and is scaring people. It may be true that not all people can afford the ultimate dream home they want right now, but almost everyone can afford a home. I just did a quick search in Wake County and found 205 condominiums and townhomes (2 bedroom minimum) that are less than $110,000. $110,000 @ the current 5.5% interest rate is $625 per month. Add $90 per month in taxes, $25 per month insurance and $100 per month HOA and the grand total is $840 per month. Now subtract the average monthly tax deduction benefit of $140 and the net total is $700 per month. That is LESS than most people spend on a 2 bedroom apartment. If people can afford an apartment, they can afford a condo or townhome. If you are a first time buyer, there are many programs available to help you buy a home. The government encourages people to buy their own home, because they know it is the best way to help people gain financial independence.
I started out buying an inexpensive townhome (no, it was not my ultimate dream home, but was a place to start). I then used both the equity increase and monthly payback to myself that would have gone to a landlord and applied it to the next home, then the next and now where I currently live, IN CARY. All along the way, I built equity and have cashed out the balance above the 20% need for my downpayment. I now have a lot of equity in my new home and a bigger liquidable nest egg than I thought I would ever have. All this while being on the VERY LOW end of the payscale.
Almost anyone CAN, very easily, afford a home. It just may not the their ultimate dream at first.
Add $90 per month in taxes, $25 per month insurance and $100 per month HOA and the grand total is $840 per month. Now subtract the average monthly tax deduction benefit of $140 and the net total is $700 per month.
Who's paying for maintenance? I don't think that $100/mo for HOA is gonna cover any maintenance. I think you ought to throw in a little extra into that equation for that. By "a little" you might consider the potential high cost of replacing an AC or heater or fixing a major plumbing leak or something like that. Homes don't fix themselves, and maintenance doesn't come cheap. Especially if you yourself are not the handy type...
Also - correct me if I'm wrong on this - the tax benefits aren't realized until the next year after you do your taxes....you will be paying $840/mo (minus maintenance) as you go.
Who's paying for maintenance? I don't think that $100/mo for HOA is gonna cover any maintenance. I think you ought to throw in a little extra into that equation for that. By "a little" you might consider the potential high cost of replacing an AC or heater or fixing a major plumbing leak or something like that. Homes don't fix themselves, and maintenance doesn't come cheap. Especially if you yourself are not the handy type...
Also - correct me if I'm wrong on this - the tax benefits aren't realized until the next year after you do your taxes....you will be paying $840/mo (minus maintenance) as you go.
Talk about looking for the worst case scenariois. Why do you assume everything is going to break. In all my years of home ownership, I have never had to replace the AC or heater and my plumbing did not just start leaking everywhere. Yes, there is the possibility a repair may be needed, but your car may break down and you may sprain your ankle and be out of work. Things CAN happen, but you cannot live in fear of something happening in life.
Also, as far as the tax benefits. Yes, do you recoup your money the following year when you file, but there is an easy fix to that. If you are claiming 0 deductions on your W4 (your paycheck deduction form), then change it to 1 or 2. You will then have less taxes taken out now, so you can gain the immediate savings and not have to wait until the end of the year.
I am getting the impression that there is a large portion of the population that thinks everything should be handed to them on a silver platter and they should never have to worry about anything. If people want to get ahead in life, there will always be some sort of risk. It's a matter of weighing the risk vs reward and I am trying to show people that there is a way to take very little risk and over time build up to a big reward. It is not immediate. It is not I buy a one bedroom 250 sq ft condo today and then buy a 5000 sq ft mansion tomorrow. Life takes work. Building wealth takes some thought and some planning, but it is acheivable for each and every person in this country and the can do it on their own.
Good grief, I am getting a headache. I think I need to go outside and get some fresh air...............although I am afraid to, as people keep telling me the sky is falling.
Well, considering how much you can save owning versus renting, I figure you can fix your AC and my heater.
Lets see some real numbers with all the variables there to prove your point of view not some fuddly dudly math that you refuse to own up to a few posts later when proven wrong!
I have posted elsewhere too and people (REA) have agreed, its cheaper to rent in a RE market where prices are appreciating little or in today's case declining. And the difference is huge. Ask all those renters that bought in Charlotte that are in foreclosure because they are all upside down now on their equity.
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In agreement
