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No you should not buy a house at the height of the market unless you can afford it and are not worried about the price dropping,
But who says we are at the height of the market. We have been at the height of the market every year that prices go up. The only way to know is if there is a crystal ball.
Buy what you can afford. By that I mean what you can afford after putting money away in savings every month. Because you will have maintenance costs, et al. Too many people push themselves on the mortgage, then have nothing left over at the end of the month for anything else. So they are one transmission failure away from financial disaster.
In 2006, my wife and I sold our first house in a gentrifying part of town for a stupidly high price, then bargain-shopped in a nice suburb with good schools. We sold our first house at 4.5x what we paid for it a decade earlier. After selling, our criterium was simple: Buy a house that was close to her job that we could afford on one salary. The underwriter on our mortgage said, "Why are you buying such a cheap house? With your household income, you could afford a house three times this amount." Our wisdom became apparent in 2008. I work for myself and saw my income slashed. Yet we sailed along without much deprivation. Today, 12 years later, we've doubled our already considerable equity, even despite the housing crash.
At the same time, we had captured lightning in a bottle. In truth, houses make terrible investments unless you personally can do a lot of the necessary home improvement to increase its value.
In terms of whether the market has peaked, I don't think it has. Part of the problem we're facing right now is a lack of inventory in a large number of markets, and the capacity to build just hasn't reached the levels we had in 2007.
Not sure this is possible. Even if you pay cash for the property, you still have to pay rent (property taxes) to the local government. Fail to make these payments and see how unencumbered your property actually is.
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You have to buy in a low tax area. Florida has Homestead exemption which gives you a break on taxes and only lets them rise a few % a year as long as it's your primary home. I have a neighbor across the street with a 4/2 2000 sq ft, I think he gets extra exemptions because he is a senior and a vet and he pays about $500 a year in property tax. He also owns 2 lots surrounding his home and pays $100 each a year for property taxes, then next to that he gave his son one on his other lots, he had an extra one and his son also only pays $100 a year in property taxes.
So, I am now 34 years old and finally in a position where I should be able to afford my first ever home this year; probably around September. I live in Jacksonville, FL. I am currently renting and my lease ends Nov 15. However, I truly believe that 2018 is the peak of the housing market, since we're in a huge housing bubble now. I believe that the market decline will begin later this year and that homes will lose up to 50% of their value by 2021. Please don't debate with me whether the housing market is at its peak. Even if it's not at its peak yet, let's just assume that it is at the peak, for purposes of this discussion.
With that said, should I buy a home if *I* believe the market is at (or near) the peak? I have been renting and living in apartments for 12 years now and spent nearly $130,000 in rent over these years. I can't stand apartment living, because I hate hearing neighbors through the walls and them hearing me. I don't like how apartments are so close to each other and there are parking issues, etc. I don't care for, and never use common areas or amenities. And I want outdoor space and don't mind devoting some of my time to maintenance.
So what are your thoughts? Can anyone speak from experience? Is this such a bad idea? Or is it okay to buy at the height of a housing bubble?
I'm leaning toward purchasing regardless. At least I'll have a house to live in and I would easily be able to afford it. But convince me otherwise?
If you were selling a house, then it makes sense to buy (since you will make 2X the sale price as compared to ~3 years from now).
Otherwise, why not wait ~3 years and get the same house for 50% off or buy a house 2X as expensive as you can afford (since the market will tank)? If you truly believe the market will tank, keep signing 6 month leases and renegotiate (with a tanking that large, you will get great deals on rentals).
Not sure this is possible. Even if you pay cash for the property, you still have to pay rent (property taxes) to the local government. Fail to make these payments and see how unencumbered your property actually is.
If you are sure that property values are going to fall 50%, just take your money and buy puts on publicly traded REIT's. Assuming you are correct, you'll be able to buy a castle in a few years.
OK. Fine. "Without mortgage encumbrance."
No one lives for free, anywhere, other than as a ward of the state or squatting in mom's basement.
Even at that, most people spring for a little sustenance and clothing.
And, BTW, for the conspiracy folks, any claim that payment of US Income Tax is voluntary would also be frivolous.
If you can afford the payment and don't plan on selling anytime soon then go for it.
This. ^^^
A house does not change value with the market, as long as you are not forced to sell. It is always a place to live and keep your stuff. Prices go up, prices go down, you are not affected. When you buy a home, you contract to pay for it at a certain rate. As time goes on, things look like a better and better deal, because the dollar does not hold its value.
We are currently at the tail end of historically low mortgage interest rates. Inflation has kicked up to 4.5% a year, a simple Treasury bond yields 3%, and the Fed will be tightening the screws on the money supply. Mortgage rates will eventually return to their historic norm of 6.5% - 7%, which will price a lot of people out of the housing market. It may price you out of the market too.
The only people who got hurt during the last housing downturn were those who were forced to sell or got foreclosed because they couldn't keep up with servicing their debt. If your job is stable, there is no reason to suppose you will have a problem. There are no guarantees in life, and nobody keeps the same job for 30 years any more, so pick the life you want to live and live it.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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You asked people not to discuss whether there is a bubble or not. In that case your op says the house will go down .
Simple answer is don't buy. You'd be foolish to buy something you are positive you will lose on.
Years ago in California people told me don't buy a house for 300k. It's peaked and going to crash. For the next several years the price went up and those same people repeatedly told me the same advice. I finally bought in at $600k. Listening to those people cost me $300k.
The house went up another 100k in one year and i sold it.
The buyer watched it drop during the downturn to about $550k.
Today that house is worth just shy of a million.
The moral is if it's for the long haul you should be ok.
Interest rates are historically low so I would be inclined to buy, but based on your mindset, I wouldn't.
So, I am now 34 years old and finally in a position where I should be able to afford my first ever home this year; probably around September. I live in Jacksonville, FL. I am currently renting and my lease ends Nov 15. However, I truly believe that 2018 is the peak of the housing market, since we're in a huge housing bubble now. I believe that the market decline will begin later this year and that homes will lose up to 50% of their value by 2021. Please don't debate with me whether the housing market is at its peak. Even if it's not at its peak yet, let's just assume that it is at the peak, for purposes of this discussion.
With that said, should I buy a home if *I* believe the market is at (or near) the peak? I have been renting and living in apartments for 12 years now and spent nearly $130,000 in rent over these years. I can't stand apartment living, because I hate hearing neighbors through the walls and them hearing me. I don't like how apartments are so close to each other and there are parking issues, etc. I don't care for, and never use common areas or amenities. And I want outdoor space and don't mind devoting some of my time to maintenance.
So what are your thoughts? Can anyone speak from experience? Is this such a bad idea? Or is it okay to buy at the height of a housing bubble?
I'm leaning toward purchasing regardless. At least I'll have a house to live in and I would easily be able to afford it. But convince me otherwise?
If you plan on staying in the house for the long-term (read: 10-15 years), then it doesn't matter if it's the peak if you put down a nice down payment and have a mortgage you can easily afford. Don't buy more house than you need.
We bought our current house at the height of the market - it crashed a year later. Fortunately, we were never underwater since we put down a hefty downpayment in order to have a very low monthly mortgage that was easily affordable even if one of us lost our job.
Also, our local market stayed relatively steady despite the national situation - prices dropped maybe 5% in our neighborhood. Our house didn't increase in value for a good 5-6 years after we purchased it. It has only been in the past couple of years that we've seen significant increases in value, and we've now owned it for 11 years. Between our equity (we had a 15 year mortgage for a while) and the increase in value, we'd clear a very tidy profit at this point, despite buying at the peak in 2006.
It was 9 years old when we bought it, and is now 20 years old. We bought in a neighborhood that was established versus a lot of new developments in the area. We still have a LOT of new developments being built, and our value has only grown. Our next door neighbors had over a dozen showings the day they listed their house, and had multiple offers within 24 hours. The new neighbors are moving in this weekend.
I think if your market is strong and didn't suffer too badly during the crash in 2006-2009, then I think you'll be fine. If you market is very volatile and DID suffer 2006-2009, then I'd keep my budget VERY reasonable on what I'm willing to buy (i.e., 2 bedroom versus 3 bedroom, 1/4 acre versus 1/2 acre, 1 1/2 baths versus 2 1/2 baths).
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