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People tend to forget the value of the dollar is declining, and there is 0 reason to think that is a trend which will reverse anytime in the next 10 years. By historical standards, if the dollar keeps falling, interest rates stay low, home prices remain flat, you can be making the right decision by owning a home or investing in RE.
And you gotta live somewhere... The question (as always) is "at what price point?"
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If you can afford a home... and if you live in one of those metropolitan areas I mentioned... and if your employment is stable and if there are growth prospects (eg - software engineer in SF or biotech in Boston)... and if your neighborhood feed a strong public school system, why not buy a home to live in or as an investment?
The biggest why not (for most) is the ante.
The raw number buy in cost to enter these markets is prohibitively expensive...
even IF you can answer yes to all those conditional statements you made.
And you gotta live somewhere... The question (as always) is "at what price point?"
The biggest why not (for most) is the ante.
The raw number buy in cost to enter these markets is prohibitively expensive...
even IF you can answer yes to all those conditional statements you made.
I'm not sure I understand the distinction. They are prohibitively expensive, but dual income households easily can afford that price barrier. And where they cannot, there is demand from overseas buyers looking to diversify their money and take advantage of low dollar values who are picking up the slack.
In my market, it's common to have 2 100k earners in the household. There are also a ton of doctors and lawyers. Even with the people I know, it's common to have 2 lawyers or 2 doctors etc. There is no shortage of people willing to put 20% or more down on homes between 600k-1.5m in 'The Right Neighborhoods'.
And as to what price point, in those hot markets, it really doesn't matter. Cheap homes are being snapped up by investors looking to fix up and rent out. Well maintained homes are selling fast. Ugly ducklings don't sell until they are priced to reality.
And as to what price point, in those hot markets, it really doesn't matter.
It's just a number. Right?
I'll stick with 2.5-3X as the sign of healthy market.
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They are prohibitively expensive,
but dual income households easily can afford that price barrier.
Some can. But you're overly broad assertion is, well, overly broad.
On a move up basis or with family money it's easier... but for the rest (50-60%?) I'll say no.
The rest have no choice but to be there and so make it work at the cost of OTHER life factors.
This isn't good for them, their future, their kids or the community at large.
And it isn't good real estate economics.
It will get harder to get a home loan or refinance. Source
Fannie Mae, the largest source of money for U.S mortgages, told lenders that it’s tightening some of its qualification standards for people buying homes or refinancing loans.
A reduction of the maximum loan-to-value ratios for some adjustable-rate mortgages to 90 percent, from as much as 97 percent That one is going to cause problems for many consultants coming out of the recession. They will have to buy less of a house than they want. The self-employed will need to wait an additional year to prove the recession is over and their income is secure.
An increase in required credit scores for certain loans Scores will need to be at least 640, up from a previous minimum of 620. Also eliminating a policy that provided lenders the flexibility to accept scores 40 points below its normal requirements
36% percent will be the “stated maximum,” ratio for home expense though the ratio can be as high as 45 percent if the borrowers meet credit score or cash reserve thresholds. A 36% stated maximum will be huge. The benchmark was widely ignored by lenders, but now they will have to pay attention to it. People with large student loans, car loans, and credit card debts will suddenly be unable to buy homes. This will knock out many potential first-time buyers.
Demanding more tax returns from self-employed borrowers (This can knock a decent portion of borrowers out of the picture who had a rough year in business two years ago. Two years of personal and business returns will be required to verify incomes, up from one year of personal returns)
Fannie Neighbors ended. a program that also offers the aid to low-income individuals or public safety, education, military and health-care professionals.
Borrowers without traditional credit will be limited to loans for one-unit homes that they plan to live in, and the company will no longer accept “exterior-only” property appraisals for mortgages run through its computer software.
I'm in process of a short sale. Buyers cant qualify!- First time home buyers are not desired, even in a mid market, suburban area. JPMorgan just rejected a first time buyer. They had ok credit
This is fine as I have two other offers (none cash though, this aint California ).
AZ and FL and Cali are special/retirement markets/ people with more liquidity.
399083453 is correct in mentioning the suburbs and a dying market...I have owned my own properties since 1996 and have never see things this skewed.
International investors can absorb the losses in S florida or NY. East Tennessee and people owning condos here CANNOT.
MY ex just got a landscape contract with yet another family relocated to East Tenn from California and he is mystified as to why he cannot find decent tenants (people who pay on time , and hold down jobs).....
I feel sorry for him, sure he will need to be selling out in less than 5 years.
Looking at Real Estate for an investment is a thing of the past. You are paying for a place to live and lucky if you break even getting out.
Not every home or community or city offers equal investment prospects any more than buying Apple stock or Krispy Kreme stock does. The best times to invest are when people are running the other way, when people are making broad statements like this. We're just about there in housing.
The prospects for the dollar and for soft assets (currencies, bonds, stocks, derivatives) are fundamentally terrible. There's a good chance all of them will suffer unbelievable losses (like >50-75% from current levels) when the next crisis hits, which is as soon as January/February but no more than 6-18 months from now.
Be like the really wealthy. They are buying every hard asset you can imagine. Metals, especially gold, jewelry, real estate, oil, commodities, art, land. I read an article recently that something like 350 Trillion (yes trillion) of soft assets globally are chasing the 20 Trillion of hard assets in the world. These are people like your favorite billionaire dictator's children to the oligarchs of our country and western europe to the plain ol mega rich. It's not like it's happening in stealth - look at what Warren Buffet has been purchasing (things like railroads and companies which are critical to agriculture).
If you are going to invest anywhere, real estate is now on an equal footing with the other means common folk have to invest. This isn't to say RE is a good investment, it's just less bad than everything else by a big margin and probably a lot safer are current prices and interest rates.
If we have a repeat of 2008, the economy won't be able to bounce back from government stimulus. We've stimulated to the effect of what, 6T dollars since 2008 and for what? A stock market recovery, a flat housing market with a few hot markets where jobs are, and a 3% improvement in employment?
Nobody is advocating going out and overspending or buying up rental properties just because. But to own a home or to buy a rental property? Not a bad idea.
Looking at Real Estate for an investment is a thing of the past. You are paying for a place to live and lucky if you break even getting out.
This is a good example why the wealth gap widens. While you are afraid, investors are buying. Let me ask you; are the ones buying these properties the bad guys? Are the ones taking the risks today by buying real estate the villains of tomorrow? Let's say these investors end up making a lot of money. Should they be vilified even though you had the same opportunity but instead claimed "Looking at Real Estate for an investment is a thing of the past"?
...The best times to invest are when people are running the other way, when people are making broad statements like this. We're just about there in housing...
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And during the last year other forward looking investors were buying builder stocks. As Warren Buffet said, the time to buy is when there's blood in the streets.
Pulte increased from 3.29/share last year to 16.25 today. It still has negative earnings. When the public starts buying, late in the game, the smart people who bought at the right time will be happy to sell them their shares and take their profits.
Meritage is also up 70% year to date.
What's interesting is that Moody's just now changed it's outlook for builder stocks from stable to positive --after they made substantial gains
You are talking about NEW home builders; don't believe the hype as far as their stocks going up. I'm in lending and until we get PRE-EXISTING homeowners mobile and able to sell their homes without writing big checks to close, housing will not be "healed". Here in TX, new homes are still going up, so everyone brags and calls the market "healthy". Untrue. For the market to be healthy, we need a balance of new construction sellings as well as pre-existing. Now, homeowners are forced to be long-distance landlords if they want or need to move.
Also, lending is still too tight; I was not in lending during the bubble years, but it is criminal who got loans back then- most have walked away. Now, it's gone the opposite direction. Just because we are now going to print money and hope to bring interest rates down, I don't see much changing. When I look at people's applications, I need to see a good JOB and INCOME, which I'm not.
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exactly right~
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