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I am trying to figure out how resale is in Bay village, OH. I am thinking about buying a new home for 432k in West bay village, OH. However, I will probably be moving on in 5 years. IT is has been hard getting an objective opinion on resale. I just dont want to lost my shirt. As long as I get what I pay for it then fine. It will be 3100 square feet - 5 bedroom/4 bath with a basement on a big lot. with all neutral classic interiors.
Where do you think I should go? Keep asking real estate agents in the area? suggestions?
Real estate is local. You're not going to get any advice that I would describe as "good" on a national website. I would maybe post your question in the Ohio forum and you mgiht get some advice from people/real estate agents more local to you.
Generally speaking though, no one has a crystal ball and can tell you with any certainty what direction the market will take in 5 years. Anyone who tells you they can definitely tell you where will be in 5 years is likely not someone you should trust.
If you ask a real estate agent they will only say one thing. "Its never been a better time to buy" They really dont know what's going to happen in 5 years or care what happens to you.
No one knows where real estate is going. No one. Could your $432k house be worth $250 in 5 years, its possible. Have you compared it to renting? Since mortgage interest is front loaded, you will be paying mostly interest for those first 5 years and very little on the principal. So estimating you will pay $122,000 in loan payments for those 5 years and $80,000 of that will be interest. You will have only reduced your principal by $42k. So you will need sell for $390k to break even.
At $390k, your pool of potential buyers in 5 years is small so you may have to put it on the market for years, or it may sell right away. Its a gamble. Choose wisely.
Last edited by 399083453; 09-21-2012 at 10:51 AM..
If you ask a real estate agent they will only say one thing. "Its never been a better time to buy"
I would disagree that this is a statement that agents would make any day of the week regardless of market conditions. I'm always honest with my clients about market conditions. This being said, I can only judge the market in context meaning I can only compare the current market against past market conditions and I don't have a crystal ball so I can't tell anyone where the market is headed in the far future with 100% certainty. Hind sight is 20/20 and it's eay to see now that there were times in recent years where it was not a good idea to buy a house and at the time it looked like a good time to buy.
How is it not a great time to buy now though? Interest rates have set record lows on several recent occassions and prices in most markets are lower than they've been in many years. Can prices go lower? They haven't reached ZERO yet, so yes there's room to go lower. Can interest rates go lower? They aren't at ZERO yet either so yes again. Can home prices and interest rates just as easily go in the other direction? Plenty of room to move that way as well.
One of the most basic principals of investing is that it's impossible to time the market. You'll never be able to absolutely predict the top/bottom even in the RE market which moves slower than the stock market.
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Originally Posted by 399083453
They really dont know what's going to happen in 5 years
However, you can tell which markets are hot. I am moving to ohio from Decatur, GA. I just built a home in decatur (11months ago) - everyone is moving to this small city because of its school system so every home is appreciating. I am making a very good profit selling it 11months later. That is what I want to know about bay village - how do I go about finding that info out?
Interest rates have set record lows on several recent occassions and prices in most markets are lower than they've been in many years. Can prices go lower?
Low interest rates is bad, in a way. Right now, the money goes to the seller instead of the bank. As interest rates rise, housing affordability will fall and those who bought at high prices will not be able to sell for what they paid and will be even more underwater because more of that money will goto the bank, as interest.
However, you can tell which markets are hot. I am moving to ohio from Decatur, GA. I just built a home in decatur (11months ago) - everyone is moving to this small city because of its school system so every home is appreciating. I am making a very good profit selling it 11months later. That is what I want to know about bay village - how do I go about finding that info out?
The best way to find out this type of information is to talk to locals and local real estate agents. They will be able to tell you what the "hot" markets are. However, today's hot market can just as easily become tomorrow's ice cold market. My advice would be to look for a location that has been considered desirable over a long period of time. Pursuing what's merely a trend could cost you money in the long run.
Quote:
Originally Posted by 399083453
Low interest rates is bad, in a way. Right now, the money goes to the seller instead of the bank. As interest rates rise, housing affordability will fall and those who bought at high prices will not be able to sell for what they paid and will be even more underwater because more of that money will goto the bank, as interest.
I understand what you're saying. I'm going to illustrate this with an example for those who might not get it and also to disagree with you.
Let's say the average person in your state has $2K available from their salary every month for their mortgage payment. If interest rates are low then $300 goes to the bank for mortgage interest and $1700 goes toward the principal balance (the amount financed in order to complete the purchase). If interest rates go up suddenly that same $2K payment is now made up of $600 of interest and $1400 of principal. This means the same person has a 17% lower loan balance and therefore quit a bit less money available for a home purchase from their lender. I would agree with you 100% if these were the only factors at play, but there are more factors here that are important.
The BIG factor you've left out is the health of the economy. I have no doubt that interest rates aren't moving significantly until the economy improves. When that happens more people will have jobs and more people will be getting raises. So, what happens when that $2K available per month for mortgage payment becomes $2200 or $2500 because that same person got a raise or moved to a higher paying job? Higher salaries offset the effect that higher interest rates have. This is the entire reason interest rates are so low now, because the average American income is so much lower. So really there are three factors at play here (interest rates, home values, and household income). If you only consider two, you're not getting an accurate picture.
When that happens more people will have jobs and more people will be getting raises.
I'm glad you brought that up. The middle class is shrinking at an unprecedented rate. This means while some people are getting raises, etc, as a country the majority of people are earning less each year. For the young, delinquent student debt is now reaching record levels and defaults are spiking. With the bubble costs of student loans, kids are leaving school with debt the size of a home mortgage, and low paying jobs, but they still have no house. This greatly lowers their buying power.
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Originally Posted by MikePRU
So really there are three factors at play here (interest rates, home values, and household income). If you only consider two, you're not getting an accurate picture.
There are far more factors, and if you only consider three, you get the mess we are in right now.
The government cant continue to buy home loans long term. So the interest rate needs to be higher in order for banks to get interested again. And while interest rates lower slowly, they climb quickly.
So lets put it in even simpler terms.
$105,000 annual income @ 3% APR can afford a $433,000 house.
$105,000 annual income @ 5% APR can afford a $340,000 house.
$105,000 annual income @ 8% APR can afford a $248,000 house.
So as interest rates go up the affordability goes down. Just a jump from 3% to 5% interest rate, that person would need a 22% raise. I dont know anyone getting raises that big.
So, if interest rates climb to 8% in the next 5 years, this guy might need to find someone with a $163,000 annual income instead of a $105,000 income.
People fail to see the problem of interest rates going back up because it hasn't happened yet. The pain will be enormous. Its going to bring new meaning to the word "underwater mortgage" as buyers will not qualify for a mortgage equal to what the seller owes.
Last edited by 399083453; 09-22-2012 at 08:17 AM..
There are far more factors, and if you only consider three, you get the mess we are in right now.
I couldn't agree with you more. There are so many factors at play and many of them are unpredictable and uncontrollable. People out there can predict but in the end it's nothing more than a somewhat educated guess. Let's agree to leave it at "no one has a crystal ball" and we'll see where things go from here.
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