The Crisis Of Credit - Great Video Explaining Why Home Prices Will Continue To Plummet

[JG183]

Originally Posted by davenj08

i hope prices fall because buying at the current prices seems just too difficult.

just imagine a first time buyer who wants to buy a 3br unit for around 400k. at 20% down, he would need 80k in cash. on top add another 5k for moving, home furnishings, setup, etc. also, buying a house would mean having ample reserves. in the current market that would be at least 9 times monthly expense in cash (assuiming a single earner). at a minimum of $4500 per month in expenses (mortgage+taxes+utility+grocery+commute+healthcare +insurance, etc) that would be 40k required in reserve.

how many first time buyers have 125k in cash in this market???

it's not a matter of the home pricing, it's a matter of setting priorities.

if you know home ownership is in your future, you don't:

take 3 vacations per year
buy 2 flat panel 56" TV's
have 2 cell phones
own 2 new cars
eat out every night
hit the cinema every weekend
get a new wardrobe every 3 months
etc. etc. etc.

making sacrifices will get you that 20% faster than you'd think

[Lusitan]

Originally Posted by JG183

take 3 vacations per year
buy 2 flat panel 56" TV's
have 2 cell phones
own 2 new cars
eat out every night
hit the cinema every weekend
get a new wardrobe every 3 months
etc. etc. etc.

making sacrifices will get you that 20% faster than you'd think

Well we agree on this one - all of the above example you posted are examples of wasteful spending.

But, of course, people will reach 20% sooner than they think if they save and watch as home prices fall back to Earth. It doesn't have to be an either/or choice.

[davenj08]

Originally Posted by JG183

it's not a matter of the home pricing, it's a matter of setting priorities.

if you know home ownership is in your future, you don't:

take 3 vacations per year
buy 2 flat panel 56" TV's
have 2 cell phones
own 2 new cars
eat out every night
hit the cinema every weekend
get a new wardrobe every 3 months
etc. etc. etc.

making sacrifices will get you that 20% faster than you'd think

i agree to a certain extent but not entirely. buying a house is a priority but one does not need to stop enjoying life just to save all earnings to buy a house someday and then unfortunately see the house value decrease. i understand all the points you mentioned above were extravagant. my point was very generic. a family of three with a single earner making 120k annually. if that person had to buy a 350-400k house it would take forever to save 125k in cash. home values have to decrease to get in line with earnings.