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1. $6.5K/8K is peanuts in NJ
2. Tax credit has NOT stopped prices going down
3. Houses remain unaffordable due to bubble in prices and property taxes
4. Unemployment and economy is going down the drain
5. Zero rates by fed means asset inflation-Fannie is insolvent
6. Need my savings for my retirement no buying someone else's retirement
Why should I buy a house worth 200K in 1999 and 500K in 2006 for 400K?
Right, no reason. I will wait for another 40% off...
Prices will correct eventually, but your reasoning is flawed
tax credit is leveraged
last few months, Case Shiller has leveled out.
you're ignoring the effect of cheap money on affordability. Money is ridiculously cheap now, and as a result, monthly payment to monthly income ratios are in the same ballpark as historical norms
unemployment has steadily been increasing for some time yet that 40% drop didn't happen.
GSEs have been insolvent for several months now, nothing new here. The government are bailing them out at the tax payers expense.
By all means wait, but be prepared to wait for a while.
That house will come back down to 200k in 1999 dollars -- eventually. Prices are driven by borrowing costs. If you're prepared to wait until rates go up again, and you save/invest between now and then, you could not only buy cheap, you could make a larger down payment and/or go with a shorter mortgage to reduce your financing costs. The higher rates are, the greater the reward for a good down payment.
So if you're prepared to wait 3 years or so, you can probably get a good deal. However, over the next year or so, money is going to stay cheap and that's going to prevent prices from declining too much.
But don't take my word for it -- take a look at Case Shiller futures quotes on CME. Some time back, they were trading at a drop as low as the 130s for the NY metro index. Last I checked, the market was predicting a bottoming out in the low 150s, which would be about a 10% drop from today's prices. Basically, the markets are predicting a slow bleed which is a result of the government propping up the market in the short to mid term.
Prices will correct eventually, but your reasoning is flawed
tax credit is leveraged
last few months, Case Shiller has leveled out.
you're ignoring the effect of cheap money on affordability. Money is ridiculously cheap now, and as a result, monthly payment to monthly income ratios are in the same ballpark as historical norms
Um no.
1. Tax credit is leveraged, but affordability is limited by income. You do not understand the function of tax credit which is not to let buyers borrow more but to spend more.
2. What matters in Case-shiller are YOY changes. Cut the realtor speak.
3. You make it sound as if money is free. If rates get higher prices will get lower. However affordability is low because one needs to save more as rates are lower in order to fund retirement. CDs rates are close to 0. One cannot afford to spend 40% of take home income to housing (mortgage,util,tax, etc)
But I think we agree: better bargains are down the road. Gov cannot stop the erosion of prices, they were successful in delaying it. If there is no immediate need (schooling, much bigger space, etc) it is wrong to suggest that one should buy as realtors do. There is nothing wrong in waiting until this is over. In this environment prices will not go anywhere but down. Urging people to buy is what real estate agents do.
Look what happened in Japan prices have been coming down for the last 15 years or so. If that happens here people who buy now will soon be underwater.
if i bought a property in sept and make say 100k. Will i be able to get the tax credit now that they loosened the income requirement? or will only people who bought AFTER the new extension qualify? thanks
I don't understand, if that were to happen the people that would be allowed to rent their own house aren't new to the neighborhood so why would there be a change?
Because people's mindframe changes when the property is no longer theirs. Obviously, people would not treat someone else's property the same way if such property were theirs.
if i bought a property in sept and make say 100k. Will i be able to get the tax credit now that they loosened the income requirement? or will only people who bought AFTER the new extension qualify? thanks
Um no.
1. Tax credit is leveraged, but affordability is limited by income. You do not understand the function of tax credit which is not to let buyers borrow more but to spend more.
Right, but my point wasn't that the tax credit makes housing more affordable (I agree with you that it makes it less so). Where I didn't quite agree is with the notion that this amount (8k) is "peanuts" in NJ. It's not enough to help you buy a house, but it's enough to prop the market up substantially.
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2. What matters in Case-shiller are YOY changes. Cut the realtor speak.
YOY drops are also decreasing.
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3. You make it sound as if money is free. If rates get higher prices will get lower.
This is correct. However, the government have control over when rates get lower, which supports the idea that the correction will be slow.
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However affordability is low because one needs to save more as rates are lower in order to fund retirement. CDs rates are close to 0. One cannot afford to spend 40% of take home income to housing (mortgage,util,tax, etc)
That's not going to reduce demand for housing, because most Americans aren't very responsible when it comes to saving for retirement.
You are entirely correct in your observation that low rates are an enormous wealth transfer from creditors and savers to debtors.
However, I don't think the news is all bad for savers. The recent stock market crash may have hit your retirement account, but it also should push future stock market returns back to historical norms.
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But I think we agree: better bargains are down the road. Gov cannot stop the erosion of prices, they were successful in delaying it. If there is no immediate need (schooling, much bigger space, etc) it is wrong to suggest that one should buy as realtors do.
I wouldn't go so far as to suggest (as some do) that "now is the time to buy" (it is seldom the case that a realtor argues that now is not the time to buy). I think much better deals are to be had 5 years or so from now. But it's not exactly a terrible time to buy either, with the cheap money available -- as long as you hold onto the place for a while.
I personally wouldn't recommend waiting for a year and expecting to see a huge drop in prices in that time frame. Put it this way -- someone who started waiting for the bubble to burst in 2004 is still waiting today. It's going to be a slow march to the bottom.
That's not going to reduce demand for housing, because most Americans aren't very responsible when it comes to saving for retirement.
Now you resort to stereotypes. Responsible americans will save, especially those of higher income/education. Actually it is already happening although we don't know if this is sustainable.
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Originally Posted by elflord1973
The recent stock market crash may have hit your retirement account, but it also should push future stock market returns back to historical norms.
Which norms are you talking about? Do you really believe that we will come back to 8% returns per year with 3% inflation? Then I have a bridge to sell you.
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Originally Posted by elflord1973
I wouldn't go so far as to suggest (as some do) that "now is the time to buy" (it is seldom the case that a realtor argues that now is not the time to buy). I think much better deals are to be had 5 years or so from now. But it's not exactly a terrible time to buy either, with the cheap money available -- as long as you hold onto the place for a while.
Agreed
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Originally Posted by elflord1973
I personally wouldn't recommend waiting for a year and expecting to see a huge drop in prices in that time frame. Put it this way -- someone who started waiting for the bubble to burst in 2004 is still waiting today. It's going to be a slow march to the bottom.
Again, "huge" is vague but 8-10% decrease in a year is a possibility which translates to 40-50K for a 500K house. It is not so much that one will save 40-50K but it will surely get you better house for your money especially if one plans to stay for 15-20 years. It's better to stay put for a couple of years if this gets you a more enjoyable safer house for the next 20 years.
if i bought a property in sept and make say 100k. Will i be able to get the tax credit now that they loosened the income requirement? or will only people who bought AFTER the new extension qualify? thanks
However, the government have control over when rates get lower, which supports the idea that the correction will be slow.
Not really; China will dictate when we need to raise our interest rates. It's in the mail.
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