I refuse to play the house bubble game! Wont buy overpriced house! (5%, commissions)
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Does anyone else feel the same way as me? I am buying a house for up to $50k which is what houses should be worth(a little more in highly desirable locations) but not hundreds of thousands! My dad paid something like $65k for his first house in south Florida and it was a nice 3/2 starter house too. If houses appreciated at the rate of inflation, there would be many south Florida houses below $100k which is what a middle class, first time buyer can afford. But nooooooooooo, you wont find anything good for less than a quarter million. Ok if you are rich, good for you. But what about all those making $30k, $40k, even $50k a year? They are priced out because speculators drove prices to unsustainable levels!
What can those people do? Some resort to renting which is not fair because they are missing out on the American dream of ownership because of speculators inflating them out of reach so they must suffer! Others live 2 or 3 families to a shack, again not fair and way too cramped! Still others are forced to relocate, not always fair because its stressful to relocate and they may have family and a good job there and have to start all over. Nothing is fair in life! I wish I could find a nice south Florida house for under $100k so I can enjoy that desirable location and be near family as well as lots of good shopping and also its a familiar place to me, I lived there all my life and know that place inside out. But I refuse to buy those way inflated houses(cant afford them and wont even if I could) and will relocate to where speculation has been largely absent and nice houses can be had for $50k. If others refuse to play the game, there will be affordable houses for everyone(except in the most desirable upscale neighboorhoods and locations of course)
Last edited by Bo; 12-20-2008 at 08:46 AM..
Reason: Moved from General US
I can see your point NAH. I know I've considered buying in a less expensive place. It does limit the choices though.
Just because you could afford to pay more doesn't mean that you should.
My husband and I are in our mid 50's so we are considering a lot of things for a retirement destination. We just haven't decided anything yet. Every place has it's good and bad things. We've got to decide sometime or else just stay where we are which is not bad by any means.
Don't pay more than 3X household income PERIOD! Why would anyone be stupid enough to go beyond this??If you want to buy a more expensive home just earn more money, doesn't that make more sense? If everyone thought this way we would not be suffering under a housing bubble now.
In respect to your post, read what Tallrick said. What is your definition of middle class? I consider someone making the median income for his city/state to be middle class. Median means middle half so it makes sense to consider one making more than half the people, less than half the people to be smack in the middle, hence middle class. Those making less than median income are lower middle class and those making very little are lower class. Ditto for upper middle class and upper class. The median salary per person in Florida is between $30k and $45k depending on the city. A $100k house would be pushing it for many middle class people.
Waterlily,
The choices arent really limited much if you can easily afford a $100k house. They do become somewhat limited at $50k and very limited at $25k and less. I will try to find a house costing less than the maximum I can afford, its best not to push things to the limit, too bad many people do.
Tallrick, great post! The house bubble is plain old human greed. I believe very low interest rates started it then speculators bought and as prices went up, everyone jumped into the bubble thinking they could get rich. Some did but many are now stuck with a house they bought at the peak and are losing money, serves them right. A correction is underway, also millions are relocating to cheaper places where houses are a good deal and not way overinflated. The 3x rule is great and im sticking to that. I know too many that dont and they get in trouble in the future
The interesting thing about the house bubble is that it's been self-sustaining as it's not the buyers money that's at stake here. They have to borrow the money and lenders eager to get their piles of capital working for them, made borrowing even easier. Oceans of money sloshed around, draining into a real estate market eager to soak it up. In places like Miami the bubble was hyperinflated by fools from latin America, who had to put their money in a safe place from the newly communist government. In places like California and the New York metro area, the tech boom and stock market bubble got the real estate market out of control earlier. Now some bubbleheads from these areas are moving out to take their "equity" and inflate new bubbles in pockets around the country. Yet I see on this message board that those western and northeast bubbles have been losing the good paying jobs, so who's going to buy their overpriced tract homes? Bubble fueled taxes have inflated government spending, so who's going to tell them they can't spend the money they won't get after the market crashes? While residential development slows down, commercial development plows ahead. What I don't understand is why we need more office space in a world of high speed internet where many can work from home, and why do we need more retail space when much of it is sitting empty at he moment? And if incomes are flat and credit tightens who will buy the goods and services needed to keep these places open? With nothing being produced in America anymore, who needs factory space, and with fewer consumers warehouse space will not be needed either.
Bottom line, there's no way this can continue, no matter what your local positive thinking self help real estate guru says.
The interesting thing about the house bubble is that it's been self-sustaining as it's not the buyers money that's at stake here. They have to borrow the money and lenders eager to get their piles of capital working for them, made borrowing even easier. Oceans of money sloshed around, draining into a real estate market eager to soak it up. In places like Miami the bubble was hyperinflated by fools from latin America, who had to put their money in a safe place from the newly communist government. In places like California and the New York metro area, the tech boom and stock market bubble got the real estate market out of control earlier. Now some bubbleheads from these areas are moving out to take their "equity" and inflate new bubbles in pockets around the country. Yet I see on this message board that those western and northeast bubbles have been losing the good paying jobs, so who's going to buy their overpriced tract homes? Bubble fueled taxes have inflated government spending, so who's going to tell them they can't spend the money they won't get after the market crashes? While residential development slows down, commercial development plows ahead. What I don't understand is why we need more office space in a world of high speed internet where many can work from home, and why do we need more retail space when much of it is sitting empty at he moment? And if incomes are flat and credit tightens who will buy the goods and services needed to keep these places open? With nothing being produced in America anymore, who needs factory space, and with fewer consumers warehouse space will not be needed either.
Bottom line, there's no way this can continue, no matter what your local positive thinking self help real estate guru says.
I agree and you can only draw so much from the well before it goes dry.
Hubby and I live in Boston, where housing has gone from Horrendously Overpriced to Extremely Overpriced. Right now, we're renting a 1-bedroom apartment (with an office!) for a little under $900.
The problem with affordable housing is that it tends to be in areas that are either dangerous or in the middle of nowhere. Housing is cheaper in my hometown, but it would also mean a 2-1/2 commute on the train and a $275 commuter rail pass. We're stuck here because of family issues and school, but once I graduate (in 2 years), we're looking to leave for somewhere more affordable.
One thing I don't want to do is commute more than 30 minutes from work. Right now, my commute is a little over a hour on 2 busses (no car). When I lived back home, I rode the commuter rail for about 2 weeks (it was a temp job), and it was Hell. I was working 40 hours a week and commuting for another 20.
In places like California and the New York metro area, the tech boom and stock market bubble got the real estate market out of control earlier. Now some bubbleheads from these areas are moving out to take their "equity" and inflate new bubbles in pockets around the country. Yet I see on this message board that those western and northeast bubbles have been losing the good paying jobs, so who's going to buy their overpriced tract homes?
The newly rich. People who made a killing in the tech bubble or with their equity.
Someone asked how anyone can afford a house in California. I have some relatives in LA (a cop and a libarian, with 1 kid) who have lived in the same house for 20 years. They'd like to move somewhere bigger, but they can't afford it. Instead, they built an addition, gutted the inside, and completely remodeled.
Tallrick, I completely agree with you. Here's my observation-
Thirty years ago you could buy a similar house anywhere in the US within a range of 5% of value, basically just a few bucks more. I know because I lived in Silicon Valley, Hollywood, Northern NYS, NYC, and LI within that time frame. I started to see prices go up in San Jose with high paying tech jobs, then it moved on to LA, and finally to the east coast in the Boston to NYC to DC corridor. Now it's practically everywhere.
There are several factors involved- 1) Is that where there are people moving in and out frequently people don't want to lose money on a sale and they want to recapture sales commission costs. If there is not a stable population base who will fight this mindset, real estate people can get away with encouraging new buyers to pay it. 2) Those who caused a bubble in tech in the stock market thought real estate was a safer bet but brought their thinking with them. 3) Get rich quick schemers touted this as a road to riches as a way to sell their books and seminars getting rich themselves by that means. 4) Our money has devaluated to some degree. 5) Those moving to another area with a lot of equity have been less than careful in paying realisitic prices, again encouraged by real estate people who make commissions.
I could have bought a great three story gated house in the Hollywood Hills or my entire NYC 40 apt building for $40,000 at that time. Now they're asking $400,000 for a two bedroom teardown in questionable neighborhoods in LA. It's all about perception as influenced by others, being gullible, and that fact that there are always those who will contribute to something going in the wrong direction. Just look at the stock market. How many get in when it's going up and panic and sell when it's going down? It's human nature.
If you have profited from real estate don't go pushing prices up elsewhere. Use the extra money as a retirement fund or better yet start a business to provide others with jobs. If you're stuck in an overpriced house and can afford it stay and enjoy the place. If you're on the wrong end of an increasing mortgage cut your losses as soon as possible and buy something cheaper, renegotiate, or walk away if you must, and good luck to you.
I think buying something and fixing it up is a good thing, but for heaven's sake stay there. Flipping does have real risks as does overpaying. If the average income in an area can't buy the average house, prices are overinflated!
Wow, NAH I can't believe there are even properties for sale under $65k. That is a fantasy for any of my friends living on the west coast. I'd be in heaven to find a nice home for $100k or less. Seattle Metro is pushing $400,000 and will continue to climb with no end in site. But, in terms of the housing bubble for the rest of the country, it is definitely deflating and should continue to slowdown for the next 4-5 years. That means it's a buyers' market, but your price range seems pretty limited IMO. Good luck.
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