Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I haven't read the whole thread so someone may have already mentioned this.
With Mortgage rates rising and the whole Freddy Fanny re-structuring thing in the near future
the result will be that mortgages are going to be harder to get and cost more.
So when you take a look at the whole picture factoring in everything, this might be the best place on the value curve to buy a house.
Prices have dropped significantly, and even tho its probably not the absolute bottom, Its probably close.
But with rising financing costs we may be nearing the end of the sweet spot.
Im afraid Sellers who are holding their homes off the market thinking the turn-around is going to be next year are in for a rude awakening. As rates rise the amount any buyer can afford to spend on a home decreases. And rising down payment requirements will have the same impact.
Don't think that anyone is holding onto their homes waiting and wishing the market will turnaround. Maybe I'm wrong but think people realize that double digit home value increases is a thing of the pass. If you can't sell your home for what you paid for it then people are walking away.
Don't think that anyone is holding onto their homes waiting and wishing the market will turnaround. Maybe I'm wrong but think people realize that double digit home value increases is a thing of the pass. If you can't sell your home for what you paid for it then people are walking away.
Seriously this is just illogical thinking. And the big problem with American's attitude with housing.
If u sell your house for what you paid (say you live there for 5-10 years) you really made a "profit" when you factor in tax deductions (and subtract that from homeownership costs such as repairs and property taxes).
Even if you sale for a 10% loss and have live there for at least 5-7 years you are basically at a wash when comparing rents you would have paid.
In Washington DC proper, it costs $3000/month to rent even a townhouse. Mortgages for a $500-600k townhouse run around $3500 Mortgage (principal property taxes etc) (assuming 10% down).
Just run the math and factor in 5-7 years of rents you pay at that rental price vs home ownership (paying into principal and tax deductions). Even if you lose money on the house, you end up almost even with renting.
As that BAC CEO said last month. Housing should be a place to live not an investment.
Now if you are more than 20% underwater than walking away makes sense.
Don't think that anyone is holding onto their homes waiting and wishing the market will turnaround. Maybe I'm wrong but think people realize that double digit home value increases is a thing of the pass. If you can't sell your home for what you paid for it then people are walking away.
aneftp, When you add in interest payments, insurance, and the repairs one will have to eventually make on their home it is not cheaper to own. If you pay cash for a home and pay out right and or have a shorter loan/larger down payment there is savings there.
Within 10 years you haven't even paid all the interest back to the bank yet. Don't think lenders are allowing 10% down (not in my area, minimum is 20%). With renting you will save money, homes are money pits. But who wants to rent for the rest of their lives?
Brandon, so you really believe houses will appreciate 10-20% year after year? If a home value appreciates it will be gradual as it was before.
Maybe people are holding onto their homes waiting for things to blow over, I just don't see it. If people bought during the height of the bubble I doubt those folks will hold on especially if the home they purchased was $750k+ but sells for $100k+. If people bought before the bubble and didn't use their home as an ATM I can see them holding onto their home but doubt they are waiting on getting 3 to 4 times what they paid for it.
People who bought $1M+ properties are not trying to hold onto them. They aren't expecting to get what they paid for it. Unless they live in Beverly Hills and or some highend area where the market doesn't affect them.
Seriously this is just illogical thinking. And the big problem with American's attitude with housing.
If u sell your house for what you paid (say you live there for 5-10 years) you really made a "profit" when you factor in tax deductions (and subtract that from homeownership costs such as repairs and property taxes).
Even if you sale for a 10% loss and have live there for at least 5-7 years you are basically at a wash when comparing rents you would have paid.
In Washington DC proper, it costs $3000/month to rent even a townhouse. Mortgages for a $500-600k townhouse run around $3500 Mortgage (principal property taxes etc) (assuming 10% down).
Just run the math and factor in 5-7 years of rents you pay at that rental price vs home ownership (paying into principal and tax deductions). Even if you lose money on the house, you end up almost even with renting.
As that BAC CEO said last month. Housing should be a place to live not an investment.
Now if you are more than 20% underwater than walking away makes sense.
Here's some math (using rounded numbers and estimated averages):
$500,000 home price, put 20% down at 5% on a 30 year fixed, 10 years later you sell.
Using a mortgage calculator, amortization tables and tax deduction tables, you get this:
Here's what you paid out:
-$100,000 down payment
-$75,000 principal payments
-$184,000 interest payments
-$75,000 in property taxes
-$50,000 in maintenance
-$30,000 in fees to real estate agents
-$4,000 to movers, lawyers, title, etc, etc, etc, etc.
Here's what you still owe to the bank after 10 years:
-$325,000
That comes to a grand total of....(drumroll please):
-$843,000
You sell for what you paid, $500,000, so now you're only down:
-$343,000
Good news! Your mortgage interest deduction (in a 28% tax bracket, which you should be in for a $500,000 house) for 10 years totals:
+$51,000
So in the end, after 10 years, you're only out:
-$292,000
Not quite "a profit," but I know guys on Wall Street who could restructure this on paper to make it look like one (illogical Americans with bad attitudes notwithstanding.)
If you want to check the calculations, here are sources, calculators, etc:
Brandon, so you really believe houses will appreciate 10-20% year after year? If a home value appreciates it will be gradual as it was before.
I was making an argument that not everyone feels the way you posted although some do. 1-Many people are holding onto their home and waiting for market to turn around. 2-Some think the market will appreciate in double digits again. 3-Most people who have a home worth less than they paid are not walking away. (97% I think was the most recent numbers I saw are not in foreclosure)
Since you asked my personal opinion - I agree when it turns it will be gradual appreciation but one day at some point in the future there will be double digit appreciation.
Houses cost what they cost. If you buy when the going rate is higher, they cost more.
If you buy when the going rate is lower, you pay less.
If all these people who bought when prices were higher (and, I am someone who did) decide to pretend they weren't okay with what they paid 5 years ago, that doesn't make them any more or less responsible for paying their mortgages anyway.
It's a certainty that if they'd bought while the market was low and sold while it was on the rise, they'd not be refusing the money they made selling.
Brandon, where are you getting your forclosure information from? Just since 2008, there were more than 3.1 million foreclosure filings issued during 2008, which means that one of every 54 households received a notice. Just take a look at the the following CNN article published 1/09 below. It doesn't even go into prior years and or 2010 to current date. Also, please remember that there is a lot of shadow inventory.
I would have published the video on 60 minutes about where the Fed in their own words feel the housing market is going. But while I am realistic I'm trying to be optimistic. There are articles that say there are 25%+ foreclosures year after year. I'm sure the # of foreclosures are MUCH more than what we are being told. Can't pay the mortgage? Maybe the bank will pay you to leave : On The Block: SFGate
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
