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I repeat...Prices are NOT going back down to their "historic" levels. There's no way.
Repeating yourself doesn't justify your position. There are number of issues that will cause downward pressure on Oceanside, the high number of foreclosures is just one of them. Why would the prices not go back to historic norms? That is generally what happens when there is a crash in housing, in fact it usually dips below historic norms for a few years. So far prices are still declining in Oceanside, its amazing that you think that this month that prices have bottomed despite all the inventory and foreclosures. Are you by chance purchasing a home in Oceanside?
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When I do my taxes, my taxable income decreases to around $40k. Assuming interest and (at least for now) capital gains, I can deduct nearly $24k.
If you current taxable income is $40k then you are still going to own taxes. The only way this wouldn't be the case is if are using around 70~80% of your income on your PITI or I suppose tax fraud. What you are saying here is extremely wishy washy.
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What do you end up with after 15-30 years of rent? (or 5 years as in the last mortgage I had).
This is misleading. If renting is cheaper (as is the case in many areas) then you can invest the money you would otherwise throw away on your mortgage, tax, insurance etc. In the end you'll have a considerable amount of money saved.
People have treated real estate as an investment for far too long.
Thats not really where the problem comes in at. Where the problem in real estate is no one analizes the exit strategy when going into it, and no one minds getting 30-40, I've heard up to 100 year mortgages. We are tought to get the biggest house we can afford under the misstaken belief that properties will always go up and that since its the largest purchase for the average individual, that we should not mind stretching our budgets and taking out long term mortgages.
I have never heard of anyone selling a book on property purchases where you buy the smallest home one can live with and take out short term mortgages. Then selling and upgrading after the property is paid off, using this as the down payment.
The amount of interest saved with this strategy is huge, easily amounting to hundreds of thousands on a home because of compounded interest.
While savings is always a long term goal, buying a home shouldnt be because its an expense. Yes, you build equity, but it takes far to long to begin to build decent equity taking out long term mortgages. 30 years is to long of a time for something to go wrong, go out 5 years, pay the property off, then sell at the right time to buy at others mis-fortune. (like bank repo's right now), usign the sale of the paid off home as the down payment for the next.
The whole "renting is throwing away money" mantra is a bit silly. It is true that in a normal real estate market (e.g., houses aren't highly overvalued) that buying will be more financially advantageous in the long term. But most people/families move every 7 years or so, and in that time frame ownership only benefits you slightly.
And here is where you failed to understand the true "goal" for property buyers. If the average individual moves every 7 years or so, people would be wise to buy small and take out 5-10 year mortages. In 7 years you have equity built up that you can transfer to your new home buy buying, but rent you transfer $0.
Lets not even discuss that buy buying and building up your credit, that other things like autos have lower interest rates. Its a fact that tenants usually have higher interest rates, higher car insurance, and other expenses that rely on credit because of the lack of credit over home owners that have paid their bills.
Repeating yourself doesn't justify your position. There are number of issues that will cause downward pressure on Oceanside, the high number of foreclosures is just one of them. Why would the prices not go back to historic norms? That is generally what happens when there is a crash in housing, in fact it usually dips below historic norms for a few years. So far prices are still declining in Oceanside, its amazing that you think that this month that prices have bottomed despite all the inventory and foreclosures. Are you by chance purchasing a home in Oceanside?
While I agree with a lot of what you're saying ... there's another problem. If you actually track some of these foreclosures (like I have) yeah ... prices are falling BUT ...
It's also a mixed bag. When the banks sell these foreclosures and, assuming the property is in decent shape ... they get multiple offers.
Just as an example, they might ask for a "rock bottom" price of $280K but the property actually ends up selling for $300K or $20K above asking because of multiple bids. I've seen this countless times now.
The price is still "low" compared to a year or two ago but ... if you can't get these rock bottom prices with multiple bidders ... what does this mean for the marketplace in general?
And the fundamentals don't always apply either. Average income in Carmel, CA for example is, according to this website, $77K a year. But does anybody believe that houses there will sell for 3-4 times income ... hell no.
What reality are you living in? Pick up a paper and read about all the folks who AREN'T getting their money back when they sell.
What if i buy a house today, and it's worth $50k or $100k less in a year? Isn't that throwing money away?
Some retail stores, sensitive to this concern on the part of shoppers, offer a "price protection guarantee," whereby if the shopper finds the same item within XX days of the purchase, the store will refund the difference. Unfortunately, not many sellers offer a "price protection guarantee" in case the value of the house goes down.
That's why smart buyers are sitting on the sidelines.
The reality that I know of is that people are not losing their homes due to a choice between renting or buying, they are losing their homes because they bought more home then they could afford, or they bought what they could afford and made the choice to refinance to pay off other bills.
Not one individual ever loses money in property until they sell their homes PERIOD. You can live in a home and have the value drop in half, but as long as the home owner can afford to pay their mortgage and choose not to sell now, they wont lose a dime. Remember, people need to live somewhere, and the only people losing money on their homes now are those that didnt make their payments. Dont make your rental payment and you get the same consequence as not paying your mortgage.. Your homeless..
Smart buyers, bought what they could afford 5 years ago, and are now selling to upgrade, and of course buying their new homes also at a discount. Last house I bought, I paid off in 5 years, I paid 20% of its appraised value, and now selling it to put 100% of the sales price into my pocket. I paid very little interest over that 5 year period. I just went and bought another home at 50% of its appraised value. The smart buyers are not sitting idle, they are profiting by other individuals mistakes. Thats how it works in every single business out there, and real estate is no different.
Then again there are many smart buyers that are buying.
I say they are not smart. They are fools. Those buying now are thinking: "Wow this house sold for $600K 3 years ago and now it's on the market for $300K. So I will buy it....what a great bargain".
But what that buyer failed to see is that the house they just bought for $300K that he thinks is a bargain will only be worth $250K next year. And so goes another abandonment and then another foreclosure.
I do not have any sympathy for these idiot investors who are buying right now. I just see even more foreclosures hitting the market.
prices are coming down disproportionately, in some areas you may get good buys but in others like here in South OC it's still a very bad decision to buy. I could rent a 3bd house here around Mission Viejo for $2k - $2.2k or so. Buying something similar is going to cost me $5k, that's a HUGE gap. To make a 30yr commitment I expect my PITI+HOA to be a bit less than rent (trading cost for commitment..just like you sign a lease for lower stable payments, that is how it's always been), so perhaps $1900 - $2k or so. For that prices still have to come down by about 50%.
Yes, but thats only because they bought more then the could afford or chose to refinance.. Period..
Do you really really really believe that everyone who is losing their homes are doing so because they bought more then they can afford?
That sounds like some exceptionally filthy wealthy long pointy nosed person talking and I know that ain't you. Is it?
There are many who had successfull businesses that are now dying due to the severe depression. There are many who were layed off due to the severe depression and cant find more work cause there is none. There are those who might have been injured or sick and dont qualify for disability.
The list goes on. Only the very wealthy dont feel the effects of this depression/recession depending on where you live. But dont blame normal citizens for what lenders did to this economy. To point fingers at those who earn less is a very ugly person.
I say they are not smart. They are fools. Those buying now are thinking: "Wow this house sold for $600K 3 years ago and now it's on the market for $300K. So I will buy it....what a great bargain".
But what that buyer failed to see is that the house they just bought for $300K that he thinks is a bargain will only be worth $250K next year. And so goes another abandonment and then another foreclosure.
I do not have any sympathy for these idiot investors who are buying right now. I just see even more foreclosures hitting the market.
You simply fail to understand how the "smart" buyers are buying. I consider myself a smart buyer, I just closed on a 6,000 sf home that appraised for over $200,000. I paid $125,000, put $10,000 into it, and the property appraised for $250K, Property values would have to plummet to the point that the government collapses for this home to drop that far.
Say they do they, the new home mortgage is cheaper then the last mortgage I had considering that I've consolidated several homes into one, (rented out a facility to work in), so even if the home drops to $50,000 value, I'm still ahead because I'll sell my first home that I bought 5 years ago and paid off, to pay off the new mortgage.
Truly "smart" buyers are buying now knowing that properties might drop, and that they want their equity going into it, not waiting for the resale. This is whats causing a lot of the problems now.. "smart" buyers looking for major deals, leaving the average home owner who cant afford to cut their homes to compete is stuck holding onto their homes because they cant sell.
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