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I was just reading an article in CNN.money and Merril Lynch predicts a 30% housing price decline by the end of 2008. Here in Washington we have a pretty good local economy. However, once you drive about 30 miles from Seattle in any direction things are about average in the nation. I always keep an eye on the economy to seek up investment opportunities that may have been overlooked by others.....(which is a gamble in itself, everyone pretty much knows something but who will act on it) but I thought it was interesting how Merrill Lynch took billion dollars loses last quarter. Of course the NAR estimates a 5.3% decline and said that Merril Lynch is too pessimistic. I am torn between trying to purchase soon (April or March timeframe) or wait a year like my father and many other of my friends and family members want my wife an I to. Its easier when all own houses and some purchasing their second and third. Its all a numbers game and virtually a gamble since we can only look back on things. But like they say in finance, its always forward looking. I will pay 20k more for a house to get an interest rate in the high 4% or low 5's rather than waiting for a house to decline then get an interest rate in the 6s. I assume that if trends remain the same then unsold house prices will keep going down by an average of $8k a month in the areas we are looking. Lets be realistic with inflation at a 17 year high and recession talks and a plummeting value of the US dollar, the interest rates will only stay low for a few months. I think Seattle area housing market will remain strong but I think South King county, Pierce county and Thurston county markets are going to get hit hard.....The reason (s) is say that is the high amount of subprime loans, the substantial decrease in sales, the high amount of days on the market, and the overall wait it out factor that seems to be growing more and more. We are already preapproved and I hate living in an apartment but if my wife and I wait another year we can save thousands more from not dealing with a mortgage and pay off virtually all our remaining debt. Its the uncertainity that holds me, if we sign another lease in March we will be locked in until October. Its just unfortunate that the real impacts of the rate cuts and tax rebates wont be felt until June timeframe. Maybe we will just break our lease and jump on a good deal......I guess only time will tell
Last edited by irrational exuberance; 01-28-2008 at 10:42 AM..
Reason: mispelling
I would not take that at face value unless they said they expect a 30% decline in the Greater Seattle Area. If you buy a home you intend to live in for 5+ years,get a good fixed mortgage and are happy with the payments and the value dips 30% in 2008 but rebonds and shows a 16% appreciation by the 6th year when you are ready to trade up what have you actually lost?....
You could wait and see if they are right,but in 11 months how much can you actually add to your savings? will it be more than the tax benefits of owning for 10 months in 2008? will the interest rates actually come down by June 2008?
and most importantly Merril Lynch had great sucess in early 2007 when they bought the company with the biggest subprime exposure in the United States,only to have the blockbuster deal wipe away years of their profits by September 2007,,,so I would not take any news from them seriously.I think a better headline would have been "we expect to write off 70% of all outstanding mortgage balances owed to our company as uncollectable"(in my Opinion)...
Unless your apartment is 50% or less of your projected mortgage waiting for pie in the sky news to come to fruation might not be in your best interest....
Good luck.
In 2 weeks we are buying in the Puget Sound area and we are not rich we work hard for our middle class living...
I would not take that at face value unless they said they expect a 30% decline in the Greater Seattle Area. If you buy a home you intend to live in for 5+ years,get a good fixed mortgage and are happy with the payments and the value dips 30% in 2008 but rebonds and shows a 16% appreciation by the 6th year when you are ready to trade up what have you actually lost?....
You could wait and see if they are right,but in 11 months how much can you actually add to your savings? will it be more than the tax benefits of owning for 10 months in 2008? will the interest rates actually come down by June 2008?
and most importantly Merril Lynch had great sucess in early 2007 when they bought the company with the biggest subprime exposure in the United States,only to have the blockbuster deal wipe away years of their profits by September 2007,,,so I would not take any news from them seriously.I think a better headline would have been "we expect to write off 70% of all outstanding mortgage balances owed to our company as uncollectable"(in my Opinion)...
Unless your apartment is 50% or less of your projected mortgage waiting for pie in the sky news to come to fruation might not be in your best interest....
Good luck.
In 2 weeks we are buying in the Puget Sound area and we are not rich we work hard for our middle class living...
Yeah we actually will pay less than half of a mortgage. Whats crazy is we pay something like 12% of our income in rent. But I also thought it was interesting that Merrill Lynch would say that after they went heavy in the subprime market. But the interest rate is the most important aspect of any purchase just as rate of return is the most important aspect of any investment. So its really do we sit back and wait for rates to go down one more time Wednesday and pretty much hold steady till later this year or do take a chance on the pretty immenent threat of recession coming and see how much prices will decline in Puget sound? Either way the first half of 2007 was good then the last 6 months dropped house prices to the biggest declines on record. And the study says that buiders often overstate the true selling prices buy using buyers bonuses. paying closing cost etc. 2008 is pretty much going to be a bad year for the housing market anywhere I am just curious to know how bad. Either way there is one deal my wife and I will make in March, considering the house is still available, which it probably will be and if that dont work we are going to sit back and payoff debt and save money. I dont consider a house an investment so I really dont care about appreciation rates for the next 4 years but I do want to get the most bang for my buck
Only thing that you might take into consideration is that as the losses continue for the big banks as I expect they will when Sub-primes taken in 05-06 roll up,,even the A+ borrowers with excellent credit and a 5-20% downpayment will pay more for any loan that is a Jumbo and not less despite what the medis is saying about rates,and they might also start eliminating the possibility of buying down your interest rate....
Consider this
1.if property values decline 30% (I doubt they will get close to that in Seattle area)
2.Banks/Lenders implement a 30% minimum down payment
3.Minimum credit score of 720
4.maximum debt to income ratio of 20%(including Mortgage)
will you still qualify-if you will wait,if you won't the sidelines may be the worst place to be.
I have read that the last downturn Southern California experiences in the early 90's when the Aviation industry started massive layoffs and the SO CAL automotive manufacturing plants closed interest rates were about 9-14% on Real Estate property loans......as losses continue to mount for the banks they will turn to their A+ prime customers(myself) for income and despite what you hear in the media about rates they will CLIMB- not fall....
Only thing that you might take into consideration is that as the losses continue for the big banks as I expect they will when Sub-primes taken in 05-06 roll up,,even the A+ borrowers with excellent credit and a 5-20% downpayment will pay more for any loan that is a Jumbo and not less despite what the medis is saying about rates,and they might also start eliminating the possibility of buying down your interest rate....
Consider this
1.if property values decline 30% (I doubt they will get close to that in Seattle area)
2.Banks/Lenders implement a 30% minimum down payment
3.Minimum credit score of 720
4.maximum debt to income ratio of 20%(including Mortgage)
will you still qualify-if you will wait,if you won't the sidelines may be the worst place to be.
I have read that the last downturn Southern California experiences in the early 90's when the Aviation industry started massive layoffs and the SO CAL automotive manufacturing plants closed interest rates were about 9-14% on Real Estate property loans......as losses continue to mount for the banks they will turn to their A+ prime customers(myself) for income and despite what you hear in the media about rates they will CLIMB- not fall....
Yeah those stipulation would pretty eliminate everyone but the rich who dont need loans. But our economy is so heavily dependent on consumer spending that companies could never get away with such strict standards. At one time people were buying house 6-9 times there income and they still are. I dont think Seattle will go down 30% but 20 miles from seattle in any direction is fair game for huge price declines. I am looking in South King county and Pierce county. I agree with most economist, the housing market wont turnaround in 1 year its going to take years to undo the mess. So waiting seems pretty logical but already being preapproved and getting a deal I want motivates me to act now on low rates. I know for a fact they wont stay low for this whole year. I guess I will offer 25k under asking and see who is more desperate....that will also account for price decreases for atleast 3 months
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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just be sure you get a bargain, and not a tract home (there will always be a lot of those for sale). Try to get something with appeal, acreage, good location, and / or view. (EZ'r to sell if you have to relocate to to unexpected job loss or something...)
Shop till you find what you want. I seem to have always got the best deals and most appreciation while not intentionally looking, but keeping eyes peeled.
I don't think there will be a huge 'mark-down' on anything that is in demand in PNW, BUT you will find folks desperate to sell some desirable homes due to length of time on market, and saturation. Know what you want and how much it is worth to you and be prepared to act when you are sure you have found your spot. Don't just buy something that is mediocre, as you may be stuck with it for a very long time. As you said, this is gonna take awhile to work itself out. (I suspect more than 5 yrs)
Yeah those stipulation would pretty eliminate everyone but the rich who dont need loans.
That is exactly what I am saying...A friend in So CAl employed by Boeing at 106k per year was in escrow on a 459k home in Alamitos Beach,CA with a low credit score of 770,37 year old that also runs a small ebay business that pulls in another 20k per year...she waited to buy until she paid off all her student loans which happened in early summer 07 and has zero debt,,,not much in the way of savings as she concentrated on being debt free before buying a home,but since I have known her living in California her tax burden without much in the way of a write off has been about 30-36% of income.
Started escrow with a quoted rate of 6.95% on her Jumbo with 5% down...days before close of escrow,her bank wanted 10% down and revised the rate to 7.25%....after talking to 9 Lenders including today none have backed off teh 10% down but 3 has offered a 6.5% rate....This is a Well qualified buyer in July , 2007....fast forward to Jan 2008 she has to either save another 10% for a total of 20% down or start shopping where she can keep the note under 417k as under 417k she has been offered 5.5% with 5% down....This will get worse before it gets better you can bet on that....if you intend to spend less than 417k even without excellent credit you should be okay=for a while anyway...
That is exactly what I am saying...A friend in So CAl employed by Boeing at 106k per year was in escrow on a 459k home in Alamitos Beach,CA with a low credit score of 770,37 year old that also runs a small ebay business that pulls in another 20k per year...she waited to buy until she paid off all her student loans which happened in early summer 07 and has zero debt,,,not much in the way of savings as she concentrated on being debt free before buying a home,but since I have known her living in California her tax burden without much in the way of a write off has been about 30-36% of income.
Started escrow with a quoted rate of 6.95% on her Jumbo with 5% down...days before close of escrow,her bank wanted 10% down and revised the rate to 7.25%....after talking to 9 Lenders including today none have backed off teh 10% down but 3 has offered a 6.5% rate....This is a Well qualified buyer in July , 2007....fast forward to Jan 2008 she has to either save another 10% for a total of 20% down or start shopping where she can keep the note under 417k as under 417k she has been offered 5.5% with 5% down....This will get worse before it gets better you can bet on that....if you intend to spend less than 417k even without excellent credit you should be okay=for a while anyway...
Yeah luckily my wife and I credit is really good. What many dont understand is the more you make the more you pay in taxes. Carrying a umbo mortgage for 417k + spells a payment of 2760 a month of after tax dollars. that is 33,124 a year. Considering Principle and Interest (PI). Now to Taxes and Insurances and PMI that is most likely an extra 800 dollars a month. Property taxes in Washington is about 3600 a year for a house worth 310ish range. PMI is an extra 400 dollars a month and Insurance will probably run around 100 a month. So actually its quite possible that your friend could be paying around 42,724 after tax dollars. You figure she is in the 25% tax bracket after deductions and exemptions and has healthcare and retirement and various other expenses and it could seriously deduct income. That is why people making over a 100k dont get jumbo loans that easy anymore because the bank breaks down all those number I was briefly mentioning and determine the feasibility to pay that mortgage every month but paying over 3500 a month is equivalent to a person who makes about 45k a year. Again luckily I have good credit along with my wife. But I dont think getting credit will be a big issues, I am worried about how much interest rates will fluctuate and when they will start increasing. I read today that since inflation is high mortgage rates wont go down that much for a fed fund rate of 3% considering the fed lowers it tommorow like we all hope/expect
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