scary article (Chicago, Mark: fit in, real estate, lease)

[veronica1002]

I found this article extremely informing so just wanted to share with you guys.


15 Signs The U.S. Housing Market Is Headed For Complete And Total Collapse

[Chi-town Native]

Originally Posted by veronica1002;

15 Signs The U.S. Housing Market Is Headed For Complete And Total Collapse[/url]

to bring back an old phrase "it's about the jobs, stupid" (not addressing you personally!).

as long as people can afford their mortgages (ie, don't lose their jobs), and those mortgages are fixed rate, fluctuations in the market prices are irrelevant. my house provides my family shelter regardless of what someone would pay for it.

a correction was long overdue for the knuckleheads who thought that a home was primarily an appreciating asset. Homes depreciate, like automobiles.

The idea that flipping for a profit in the short term- ie, someone essentially paying you for the privilege of living in that brand new condo or SFH - was always ridiculous, and always unsustainable.

the only "complete and total collapse" I might be worried about would be my roof.

[jamaicabound60565]

I agree with Chi-Town, just like the wise Joe Biden said, its alla bout that three letter word...J-O-B-S

lol

[Gunner0325]

Originally Posted by Chi-town Native

a correction was long overdue for the knuckleheads who thought that a home was primarily an appreciating asset. Homes depreciate, like automobiles.

The idea that flipping for a profit in the short term- ie, someone essentially paying you for the privilege of living in that brand new condo or SFH - was always ridiculous, and always unsustainable.

I agree you should treat your home like a "home" instead of an investment, which is exactly what we did when we bought our condo 5 years ago as a starting property. But now we want to move on because we out grew our place and buy a house but we can't sell. We even dropped our price to $10,000 less then what we bought for and still nothing. So if you say you should treat home buying like buying a car that loses value, how would anyone be able to ever afford anything bigger then the first place they bought as a "starter" home? I don't want to make much money off our place, just enough to be able to buy a house which was our goal to begin with but could not afford it at the time because we had no equity. Now we have equity but we are going to lose our a** on our condo IF we can even sell that is.

[Avengerfire]

Who creates a new account just to "share" an article. Strange.

[Chi-town Native]

Originally Posted by Gunner0325

I agree you should treat your home like a "home" instead of an investment, which is exactly what we did when we bought our condo 5 years ago as a starting property. But now we want to move on because we out grew our place and buy a house but we can't sell. We even dropped our price to $10,000 less then what we bought for and still nothing. So if you say you should treat home buying like buying a car that loses value, how would anyone be able to ever afford anything bigger then the first place they bought as a "starter" home? I don't want to make much money off our place, just enough to be able to buy a house which was our goal to begin with but could not afford it at the time because we had no equity. Now we have equity but we are going to lose our a** on our condo IF we can even sell that is.

I'm not saying you should treat a house exactly like a car - a house is a much more serious investment, obviously. But when you drive a new car off the lot, it immediately loses value as it's no longer a "new" car. It never goes up in price (unless it's some rare collectible, I suppose).

The problem is 5 years is not really a long-term investment as far as real estate is concerned - 7 is really the minimum, and barely at that.

The second problem is related to the first, in that the idea of a "starter home" is an artificial construct we've been sold, society-wide.

Ideally (and historically) you'd use your equity & improved credit for a larger down payment to get the larger home, but this is where your timeframe breaks down - you've been paying largely interest, not principal if you're only 5 years in.

Much of Chicago's housing growth is suffering similar pains. The depreciation angle is important because traditionally, people increased the value of their homes and property by improving them, or at the very least countering the physical depreciation (ie, "wear and tear") by having repairs and other maintenance done.

Old housing is somewhat different as there isn't that premium for "new", and again boils down to maintenance, improvements, etc.

Believe me, I feel for you because this is a much larger problem than any one person's decisions resulted in & many of my friends are in a similar boat.

But at the same time, it was only bubble economics that fooled people into thinking they could sell for more than what they paid for a property they depreciated by living in.

The only way what many were hoping for worked was continued speculation, as what you are describing isn't a growth in the value of the property itself, but a growth in the value of the land. adding to the condo market problem, condos don't really have much land anyway.

This mess is still due to jobs, but it was unsustainable anyway - the banking industry's complete and utter recklessness as far as subprimes, tranched assets, relaxed lending standards, etc., they killed the goose that was laying the golden egg.

In the long term prices will go up, but it's definitely not going to happen before the job climate improves.

[Gunner0325]

Originally Posted by Chi-town Native

I'm not saying you should treat a house exactly like a car - a house is a much more serious investment, obviously. But when you drive a new car off the lot, it immediately loses value as it's no longer a "new" car. It never goes up in price (unless it's some rare collectible, I suppose).

The problem is 5 years is not really a long-term investment as far as real estate is concerned - 7 is really the minimum, and barely at that.

The second problem is related to the first, in that the idea of a "starter home" is an artificial construct we've been sold, society-wide.

Ideally (and historically) you'd use your equity & improved credit for a larger down payment to get the larger home, but this is where your timeframe breaks down - you've been paying largely interest, not principal if you're only 5 years in.

Much of Chicago's housing growth is suffering similar pains. The depreciation angle is important because traditionally, people increased the value of their homes and property by improving them, or at the very least countering the physical depreciation (ie, "wear and tear") by having repairs and other maintenance done.

Old housing is somewhat different as there isn't that premium for "new", and again boils down to maintenance, improvements, etc.

Believe me, I feel for you because this is a much larger problem than any one person's decisions resulted in & many of my friends are in a similar boat.

But at the same time, it was only bubble economics that fooled people into thinking they could sell for more than what they paid for a property they depreciated by living in.

The only way what many were hoping for worked was continued speculation, as what you are describing isn't a growth in the value of the property itself, but a growth in the value of the land. adding to the condo market problem, condos don't really have much land anyway.

This mess is still due to jobs, but it was unsustainable anyway - the banking industry's complete and utter recklessness as far as subprimes, tranched assets, relaxed lending standards, etc., they killed the goose that was laying the golden egg.

In the long term prices will go up, but it's definitely not going to happen before the job climate improves.

Yep, agree with all of this. Nicely written. "Ideally (and historically) you'd use your equity & improved credit for a larger down payment to get the larger home, but this is where your timeframe breaks down - you've been paying largely interest, not principal if you're only 5 years in." We actually have intentionally paid down our principal quite a bit in 5 years, as I looked at it as our investment, instead of just paying off the interest. In fact we are almost at 30% loan to value. BUT since we are now listed $10,000 less then what we bought for (and I doubt we can even sell at that price) and then you add the realtor costs, closing costs, that instantly knocks out almost all the equity we built up. So we would basically need to start over....We are not even trying to make money off of our place at this point, I would be so happy just to sell for what we purchased for. I know a ton of people are in this situation, it just sucks for people like us that did it right and bought a place that we could afford, paid down our principal balance quite a bit, and are stuck because we can't even sell for what we bought for 5 years later. I know people are worse off then us in this crazy time , but just venting I guess....

[Chi-town Native]

Originally Posted by Gunner0325

We actually have intentionally paid down our principal quite a bit in 5 years, as I looked at it as our investment, instead of just paying off the interest. In fact we are almost at 30% loan to value. BUT since we are now listed $10,000 less then what we bought for (and I doubt we can even sell at that price) and then you add the realtor costs, closing costs, that instantly knocks out almost all the equity we built up. So we would basically need to start over....We are not even trying to make money off of our place at this point, I would be so happy just to sell for what we purchased for.

ugh, so sorry to hear it, that is obviously not how it is supposed to work... is it possible to rent it out instead of selling it?

[Gunner0325]

Originally Posted by Chi-town Native

ugh, so sorry to hear it, that is obviously not how it is supposed to work... is it possible to rent it out instead of selling it?

Yes I guess it is an option to rent it out once we actually get to that 30% loan to value point. We have thought of that, but then you have to have a signed lease to prove to the mortgage lender that this is income coming in from the renting, in order to get another loan if you want to buy another house...BUT that means you have to rent your place out first. So where do we live while all of this is taking place? (we would have to move out, find a renter, get approved to buy another house, find a house to buy..etc..etc..) Which could take months and months...I'm not sure how other people do it?

[Avengerfire]

This thread should be moved to the general U.S. forum-the article and topic are not Chicago specific.