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I think I will never be ready emotionally to buy. It always feels terribly risky. That said, we're expecting our third child in a 2 bedroom rental, and in my area it's cheaper to buy a 3 bedroom then to rent one.
You sound like my twin, that's exactly how we ended up buying a house.
I have three myself, 5 years, 19 months and 4 months. We had rented for 4 years after selling our first house do to me being relocated to TX only to have the company turn around and move us back to NJ one year later.
We were actually quite happy renting until the two youngest came along and my son started to approach Kindergarten age. We talked about it for a long time, but finally decided that it was best for the family to buy a house and put down "roots".
I had long been told by many people that buying was essential to financial security and that I was "throwing away my money renting". I could go on for a long time about the pros/cons of renting vs. owning, but that is OT. Through a lot of reading and discussion we determined that it is really more of an emotional thing than a financial one. We held off buying for a long time when we had the financial means until we knew it was the right choice for us.
Just remember that even if a rental costs the same as a mortgage, there are a lot of other factors you have to consider as well.
I would agree with most that it is doing little to prop up prices in most markets. If anything it is simply a carrot to get people to move a little quicker. The real thing keeping prices up is the QE and the government buying up the mortgages. When those programs end, I think we will see a significant slow down in home buying as credit gets more expensive and restrictive resulting in price drops. How far will they drop, I don't know, no one does.
I bought recently not because of the credit, but because it was the right move for my family. Home buying is as much an emotional decision as a financial one. You don't HAVE to buy and if you even for a second doubt it, you should stick to renting. People who only buy a home believing that owning is necessary to be sound financially are making a horrible decision. This is even more apparent now when values aren't guaranteed to do anything. You should buy becuase it is the right house for you and your family, not because you think you may or may not snag a deal.
There are always going to be multiple factors that lead folks to become "buyers" vs "renters". The lack of stability in both the market-based forces that influence the afford-ability of homes as well the policies/programs that the government promotes have led to some very spikey (and mostly negative) levels of consumer confidence.
My gut tells me that when the incentives for buyers expire the fall off in demand / prices will be minor SO LONG AS there is not a 'fecal matter' storm of circumstances brewing in the Congress / WH / Press...
Similarly the recent actions of the Fed Chairman suggests he is acutely aware of the fragile nature of the US (and global) economy. This clearly NOT the kind of environment where "no one will notice" that the Fed is withdrawing support for MBS or ANYTHING lack of having a firm hand on the tiller, quite the opposite, the out-sized effect of the news from Greece and similar "bad news" snow balling is likely to be the NORM for "an extended period" thus the formal plan to scale any Quantitative Easing will be tempered by the reality that "helicopeter Ben" knows that every word he says / every move he makes is worth BILLIONS of dollars to the markets.
The practical effect is that any "grand plan" he and the rest of the Fed Governors and the Treasury Department and the WH Economic Advisors to "get out as quick and cheap as we can" is OUT THE WINDOW.
I have an analogy that might be a bit stretched:
Have you ever met / known anyone that had open heart surgery? Generally they get sent home after they walk around the hospital a bit and they seems to be clot free. The surgeons tell em something "best case you do you PT and get back to some kind of normal life in month or two". They also say stuff "any lightheadedness of bleeding or anything "GET BACK TO THE HOSPITAL IMMEADIATELY". Well guess what? Plan A was to get the 'economy off the treadmill" on the fast track. That is clearly NOT happening, Why? Well, the "bloody packing" around the wound is HIGH UNEMPLOYMENT and the "lightheadedness" is the persistent negative consumer confidence (and maybe the infection is the crazy debt spending...) so there is NO WAY THAT the "surgical team" is going to let the patient go out and run a 'marathon', heck they are all kinda trying to stand around the treadmill with a charged defibrillator HOPING that the sutures hold together...
So KC, do you think it might continue to be extended?
I have no idea. I think it's going to be less and less effective over time. There's a limited number of people who are in a position to be bribed to buy a house, and once you've gone through those the program will not do much. But ineffective but good sounding programs is basically the mission statement of the government, so who knows?
There are always going to be multiple factors that lead folks to become "buyers" vs "renters". The lack of stability in both the market-based forces that influence the afford-ability of homes as well the policies/programs that the government promotes have led to some very spikey (and mostly negative) levels of consumer confidence.
My gut tells me that when the incentives for buyers expire the fall off in demand / prices will be minor SO LONG AS there is not a 'fecal matter' storm of circumstances brewing in the Congress / WH / Press...
Similarly the recent actions of the Fed Chairman suggests he is acutely aware of the fragile nature of the US (and global) economy. This clearly NOT the kind of environment where "no one will notice" that the Fed is withdrawing support for MBS or ANYTHING lack of having a firm hand on the tiller, quite the opposite, the out-sized effect of the news from Greece and similar "bad news" snow balling is likely to be the NORM for "an extended period" thus the formal plan to scale any Quantitative Easing will be tempered by the reality that "helicopeter Ben" knows that every word he says / every move he makes is worth BILLIONS of dollars to the markets.
The practical effect is that any "grand plan" he and the rest of the Fed Governors and the Treasury Department and the WH Economic Advisors to "get out as quick and cheap as we can" is OUT THE WINDOW.
I have an analogy that might be a bit stretched:
Have you ever met / known anyone that had open heart surgery? Generally they get sent home after they walk around the hospital a bit and they seems to be clot free. The surgeons tell em something "best case you do you PT and get back to some kind of normal life in month or two". They also say stuff "any lightheadedness of bleeding or anything "GET BACK TO THE HOSPITAL IMMEADIATELY". Well guess what? Plan A was to get the 'economy off the treadmill" on the fast track. That is clearly NOT happening, Why? Well, the "bloody packing" around the wound is HIGH UNEMPLOYMENT and the "lightheadedness" is the persistent negative consumer confidence (and maybe the infection is the crazy debt spending...) so there is NO WAY THAT the "surgical team" is going to let the patient go out and run a 'marathon', heck they are all kinda trying to stand around the treadmill with a charged defibrillator HOPING that the sutures hold together...
Chet-
I'll add that the news doesn't really seem to matter right now, regardless of whether it's positive or negative. All markets are acting irrational (which they always do) except for gold, and that's because any drop in prices results in the Chinese buying it up, keeping it free from being manipulated by wall street.
And to extend your analogy - they told the patient to try and take a walk around the hospital by themselves and someone found them in a hallway gasping and clinging to a railing. Sparing a longer rant, a couple very minor experiments were undertaken recently to see what would happen when support was withdrawn, and the banksters threw their toys under the pram...it didn't go well. I don't know how they get us out of this pickle.
I certainly agree with your assessment and love the analogy as well. The idea that the government could affect a rapid resolution to this economic climate was far-fetched from the beginning. The best they can hope for (and to continue your analogy) is to provide some salve to the wounds so it hurts a little less and keep the patient on life support for as long as it takes. They just have to manage the pain well (government programs) without OD'ing the patient on the morphine (added national debt). I truly wouldn't want to be any of the people needing to walk this tight rope on a daily basis...I just hope we put our faith in the right doctors.
I bought recently not because of the credit, but because it was the right move for my family. Home buying is as much an emotional decision as a financial one. You don't HAVE to buy and if you even for a second doubt it, you should stick to renting. People who only buy a home believing that owning is necessary to be sound financially are making a horrible decision. This is even more apparent now when values aren't guaranteed to do anything. You should buy becuase it is the right house for you and your family, not because you think you may or may not snag a deal.
I finally convinced my parents of this. I've been arguing with them for a few years as they are totally dead set against me renting as its "throwing money away". Of course, house prices in Los Angeles are totally out of whack with rental prices, and a mortgage(including tax, hoa, pmi, etc) will currently be about 2 1/2 times what rent on an equivalent unit is. I explained this to them. I pointed out a property I was looking at renting...a bungalow in a nice, trendy area that was listed at $1100 a month and after talking to the landlord, can be had at $950 a month.....comparables are currently $340-390K...a mortgage + tax + pmi that would cost $2700+ per month.
I also showed them the Long Beach real estate blog:
This site definitively shows how horrible the people were that advocated the past couple years as "best time to buy ever".....numberous examples of places bought in 2007-late 2008 and are currently 25-50% underwater. A mix of people who were well employed and now lost their jobs, brain dead flippers, and others thinking these places would be great investments since prices were so much lower than the peak.
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Very good insights...
