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Don't buy nothin'
Live at home with your parents if possible.
Or, wait for someone to die and inherit a house.
You could rent for all eternity as well.
I lost the link, but somewhwere there was an article where they did a study of rent vs. own and in the long run, renting actually worked out better financially if you didn't want to be like a real estate mogul or something like that.
Best thing would be to hook with a dude or a chick with money. Marry for money! You can always cheat if you're not in love.
Or also, just keep waiting for the market to truly fall through the floor and we get down into the 5 digit range again. Hell, I'm waiting anxiously so I can buy an estate in Old Westbury for like 4/450k...it will happen! Maybe I'll buy oceanfront in the Hamptons for like 500k. We'll see what happens, but I'm ready for when the time comes.
Do what I did. I sold my house and bought a yacht.
I can live anywhere I Please and I don't have to pay property taxes anymore. Well, I guess if you wanna get real technical, I guess you could say I pay a small portion of property taxes through mooring fees...Okay, so I pay 73 cents a month in property taxes
loans are still being written to people with good credit 680-700+ fico, good income for conforming loans at 3.5% down.....so I hear. I say you want to lend me $ at 4.5% for 30 yrs for 3.5% down. I will take it.
This is the insanity that's helping the prices stay inflated. Do you really consider a 680 FICO "good"? Do you really think that people with a score like that should be put into a house with 3.5% down? Well, the banks don't - those loans are only getting written because the govt is back stopping them.
The FHA limit for LI is $729,750 - think about that.
maybe they were underpriced back then and we're just now catching up...lol.
Also have to factor in things like interest rates at the time (probably in the mid teens if I'm not mistaken).
Anyway, I'm with you on this for the most part, however it seems like the ratio you describe might be a LONG way off.
the 80's/rate point is a good one.
Since most people finance homes... the payment will drive price. So, in the early eighties, prices might have been flat, but payments on that "cheaper" house would have been a higher percentage of your income.
A small bump of a point or two in interest equals 10s of Ks in buying power. '
I sold cars in college, and the draw of the 199 or 249 dollar payment always brought customers in... it was only a question of how you got them there... a lower finance rate... more cash due up front, etc... people shopped payments. The price of the cars... the actual CASH price... became unreal and immaterial to them.
Same thing drives most house buyers... If the payments can be made... people buy the house - if the rate drives the payment down within range, people buy regardless of the selling price - which, apart from how it relates to payment, became unreal and immaterial to most.
Most people these days start their home shopping experience with a trip to the bank to determine what they can "afford" - meaning they crunch the mortgage numbers and get a range to shop in. It's all about the payment.
If a rates go up, prices will likely drop to bring the payments to an affordable range - or mortgage products will just get more "interesting" again to get people in that range.
Obviously, dream scenario would be to buy when rates are high, prices are low and refinance when the rates drop.
As to the original topic... as mentioned above - anybody buying now better be prepared to hunker down and stay a while. Can't see that changing anytime soon. So... it starts and ends with finding a great house. If I didn't... I wouldn't bother rushing to buy right now.
So... if you find a house you really like - can afford the payment comfortably (taking into account future tax increases, etc) - then it's a good time to buy it.
We bought last year and really love the house and neighborhood. We're grown adults with a good sense of what we really want out of life and bought well within our means so we can afford to ride out a "market downturn." So... having found the right house - right size, right location - affordable, it was the right time to buy.
superfly 10....thanks for the post. you mentioned that you bought well within your means. Would you be willing to indicate to us based on the house value (not loan) to income ratio what you bought vs your income....just curious to see what someone else's 'within means' scenario is as opposed to what I believe mine would be...
Just to add to the previous post and the point about home prices in the 80s related to interest rate.
Let's say you mortgage 400K at 4.5 percent today. Mortgage payment is 2026
In the 80's, I remember my sister's first mortgage was 18 percent! On the same 400K, that would be a payment of 6K a month! In fact, to bring the payment back to 2,200, you need to reduce the mortgage to 135K!
Even if we take the idea of 18 percent interest out of the equation... let's say interest climbed from the 4s to 8%... that only buys you 300K to reach a 2,200 payment.
So... my point again is... it's a good time if you love the house enough to stay ( you don't actually "lose" money unless you sell it) and can afford the payment long term.
Just to add to the previous post and the point about home prices in the 80s related to interest rate.
Let's say you mortgage 400K at 4.5 percent today. Mortgage payment is 2026
In the 80's, I remember my sister's first mortgage was 18 percent! On the same 400K, that would be a payment of 6K a month! In fact, to bring the payment back to 2,200, you need to reduce the mortgage to 135K!
Even if we take the idea of 18 percent interest out of the equation... let's say interest climbed from the 4s to 8%... that only buys you 300K to reach a 2,200 payment.
So... my point again is... it's a good time if you love the house enough to stay ( you don't actually "lose" money unless you sell it) and can afford the payment long term.
If you're paying cash... never mind.
I know the 80s make your point so it's logical to concentrate on that... But I was talking about 1995 in earlier posts. The prices were in line with incomes then and the rates were roundabout 7-8%.
I don't buy the whole shopping payment thing at all.
superfly 10....thanks for the post. you mentioned that you bought well within your means. Would you be willing to indicate to us based on the house value (not loan) to income ratio what you bought vs your income....just curious to see what someone else's 'within means' scenario is as opposed to what I believe mine would be...
Sure... we wanted a mortgage payment that was apx 20% of your yearly gross income (which amounted to a house that was aprox 2X our yearly income). We didn't put much down (less than 10%) because in this environment - I preferred to keep cash on hand in case of downturn. (Total debt load, less than 30% of Gross)
We don't have kids - not having any... so we were able to go with a smaller beach cottage in a great neighborhood.
It's not easy making it on Long Island. Both my wife and I work in Manhattan (or mtg payment is less than our Manhattan rent was) and apart from LA there is no other place I can really do my job than NY. So... I had to wait till I was 40 before it was the "right" time for me to buy. Prices and interest intersected with an affordable payment - plus a home I can see living in for a long time.
Sure... we wanted a mortgage payment that was apx 20% of your yearly gross income (which amounted to a house that was aprox 2X our yearly income). We didn't put much down (less than 10%) because in this environment - I preferred to keep cash on hand in case of downturn. (Total debt load, less than 30% of Gross)
We don't have kids - not having any... so we were able to go with a smaller beach cottage in a great neighborhood.
It's not easy making it on Long Island. Both my wife and I work in Manhattan (or mtg payment is less than our Manhattan rent was) and apart from LA there is no other place I can really do my job than NY. So... I had to wait till I was 40 before it was the "right" time for me to buy. Prices and interest intersected with an affordable payment - plus a home I can see living in for a long time.
wow - the irony here is almost beyond my comprehension!
This is exactly what pilgrim and I were saying with regards to values and what people should be buying vs. income...
I'm going to paint a circle on the wall and bash my forehead into it.
I know the 80s make your point so it's logical to concentrate on that... But I was talking about 1995 in earlier posts. The prices were in line with incomes then and the rates were roundabout 7-8%.
I don't buy the whole shopping payment thing at all.
Fair enough... but do you buy that MOST people do shop that way... and it drives the market?
I hope this link works... but it's a market affordability survey from 1995-2005
You're right... houses in NE (as in Long Island) were MORE affordable related to income in 1995... but still WAAAY off the national average. Couple that with the diff in interest rate (4.5 to 8% is an easy 100K difference in buying power - then consider rising median income and things balance out more.) Not saying they ARE balanced... but things were off then too... if you look at payment. Sure, the sticker shock isn't the same... but the payments are about as "affordable" to many. People freak over a 40K sticker price on a car... but 0% financing still sends them home driving one.
You might not buy the whole "payment shopping thing," but I don't think people lose their houses because the house cost too much... the lose it because they can't make the payment.
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