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Old 08-16-2008, 03:52 PM
 
Location: near Portland, Oregon
472 posts, read 1,706,468 times
Reputation: 304

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Quote:
Originally Posted by chuck22b View Post
My theory is that once affordability is reached, that it'll be difficult to go way bellow affodabiliy levels...

So... that is why I think when affordability is reached in good areas (areas that have potential future growth)... it'll be difficult for place to go way bellow affordability levels.

-chuck22b
When several trillion dollars of paper equity evaporates from the system, and millions of jobs are lost, there aren't enough buyers left to stem the rising panic. And if the usual debt buyers decide they don't want to play any more, most loans go away. It doesn't matter how affordable the house is, in theory, if you don't have a job and/or can't get any kind of decent loan.
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Old 08-16-2008, 04:10 PM
 
Location: Chino, CA
1,458 posts, read 3,276,238 times
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Quote:
Originally Posted by scone View Post
When several trillion dollars of paper equity evaporates from the system, and millions of jobs are lost, there aren't enough buyers left to stem the rising panic. And if the usual debt buyers decide they don't want to play any more, most loans go away. It doesn't matter how affordable the house is, in theory, if you don't have a job and/or can't get any kind of decent loan.
True, very true... if you don't have a job or can't get a loan... you won't be able to buy a house.

All I'm saying is that if prices are <= rent and there's growth potential in the area... than someone else will buy it and rent it out. Unfortunately, wealth in the US is poorly distributed. There are supposively more households in the upper middle/ upper class than there has ever been before... the rich has only gotten richer with globalization, etc. Inversely, the middle class has gotten smaller and the poor has gotten bigger.

With REIT funds, other RE investment funds, or RE management firms, individual investors don't even have to buy individual properties. They can pool it. So, all I'm saying is that even if RE is affordable, but not Available for the average Joe... if, investors find that the returns are high compared to their level of investment... than prices will be propped up at historical affordability levels by investors and can't get to the point of Super affordability.

-chuck22b
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Old 08-16-2008, 04:30 PM
 
Location: East Tennessee
3,928 posts, read 11,570,798 times
Reputation: 5259
Quote:
Originally Posted by sheri257 View Post
To be clear at $220K the mortgage payment ... including property tax and home insurance ... would be as much as I'm paying in rent now. That's with a standard 30 year mortgage at about 6.5 percent interest and no down payment (we have VA financing.)

The only thing that wouldn't be included would be the maintenance but ... I'm not paying for house maintenance with my rent now either ... just for yard work, which is a standard provision in my lease.

So the costs are pretty comparable, actually.
Hopefully in your calculations you've also included the VA required funding fee of up to 3.3% of the loan amount. If you can't pay it up front, it will be rolled into your mortgage thereby increasing your monthly payment.
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Old 08-16-2008, 04:31 PM
 
Location: Orlando
10 posts, read 31,665 times
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Keep in mind that when you buy a house, you're paying your own mortgage and building equity. When you're renting, you're paying your landlord's mortgage.
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Old 08-16-2008, 05:07 PM
 
Location: near Portland, Oregon
472 posts, read 1,706,468 times
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Default Global Recession

Quote:
Originally Posted by chuck22b View Post
than someone else will buy it and rent it out. Unfortunately, wealth in the US is poorly distributed...
-chuck22b
It's poorly distributed globally.

Here's the scenario, let's say 2010 - 2011. We're looking at a massively shrunken investor pool, with a massively increased number of equities, assets, etc. for sale. There will be some rich people, who need to park their wealth somewhere, but not enough to go around the globe. The REITS won't have enough investor money to do much good, because they are all competing for the shrunken pool, and Average Joe doesn't have any cash because he's lost his job. And he's been burned on real estate anyway, so he HATES REITS.

Then the Chinese decide they don't want treasuries anymore. The central banks in the 1st world pump in massive liquidity. Massive inflation, no jobs, asset deflation. The rich freak out and buy gold and gems. Any "safe" haven to preserve wealth. Most of the global credit, equity, and debt markets simply disappear, and paper money is carried around in wheelbarrows because it's nearly worthless.

At that point, it's game over, man. I SO want to be wrong about this.
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Old 08-16-2008, 08:54 PM
 
Location: Orlando FL
1,065 posts, read 4,136,916 times
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Quote:
Originally Posted by sheri257 View Post
To be clear at $220K the mortgage payment ... including property tax and home insurance ... would be as much as I'm paying in rent now. That's with a standard 30 year mortgage at about 6.5 percent interest and no down payment (we have VA financing.)
Why are we even discussing this anymore?!?? If your PITI + all other costs except maintenance are the same as if you were renting, pricing can't really fall to much further barring economic calamity. And I'm inclined not to listen to chicken little saying it's happening.

Are you going to live in the property for 5 years? If yes, BUY. you may loose a little paper equity in the short term but you only realize a loss if and when you sell. Like another person mentioned, when owning equals the cost of renting, investors WILL start coming into the market. They also can't even get anywhere near 100% financing so for them (going by what you told us are your numbers) they would be in the positive easily. Either way, you have 3 dogs, have a hard time finding places to rent, have a steady job, and add in their if you are planning to start a family or wish to settle down and it's a no-brainer really.

Just hire a good realtor that knows how to deal with foreclosures, and a great inspector to make sure the house doesn't have major problems you wouldn't be able to remedy quickly. If it's a foreclosure it is almost guaranteed to have things that need immediate attention. Here in FL at least if the home is owned by the bank that means the owners have been at least neglecting normal maintentenance for at least 6-12 months.
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Old 08-16-2008, 09:35 PM
 
Location: near Portland, Oregon
472 posts, read 1,706,468 times
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Quote:
Originally Posted by GregTraub View Post
... barring economic calamity. And I'm inclined not to listen to chicken little saying it's happening.
Well, you can put your fingers in your ears and say "lalala...I'm not listening." If you really think it will help.
Quote:
... investors WILL start coming into the market.
This is the BIG hidden assumption-- somehow a vast thundering herd of investors will ride to the rescue to save the day. Where they are going to come from, with Europe, Japan, and China all simultaneously slowing down, or in outright recession, is never stated.

To the OP: google 'global recession' and start reading the economic blogs discussing this. And take a look at The Economist for this week. Forewarned is forearmed.
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Old 08-17-2008, 08:31 AM
 
5,458 posts, read 6,699,886 times
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Quote:
Originally Posted by NitaS View Post
Keep in mind that when you buy a house, you're paying your own mortgage and building equity.
Actually, the complete picture is that you're building or losing your own equity, depending on the direction of the real estate market in your particular area. When you rent, the landlord takes on this particular risk/reward.
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Old 08-17-2008, 08:33 AM
 
5,458 posts, read 6,699,886 times
Reputation: 1814
Quote:
Originally Posted by GregTraub View Post
Why are we even discussing this anymore?!?? If your PITI + all other costs except maintenance are the same as if you were renting, pricing can't really fall to much further barring economic calamity. And I'm inclined not to listen to chicken little saying it's happening.
It doesn't take a disaster to cause rents to go down. Say a significant number of properties can be owned for less than rent. Some people buy them to live in them, but also some investors buy them to rent them out (obvious choice since they are cash flow positive). That increases the supply of rental houses on the market, driving down rents since supply exceeds demand.

This can continue to drive prices and rents down in lockstep until the outstanding supply of houses for sale returns to normal levels.
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Old 08-17-2008, 11:01 AM
 
Location: near Portland, Oregon
472 posts, read 1,706,468 times
Reputation: 304
Default Stay frosty...

Quote:
Originally Posted by sheri257 View Post
Ok ...we've all heard the advice. Wait for prices to drop since they will drop further. Here's my question ...

If you can get a property that you like for the same amount of rent you're paying now ... is that the time to buy?

We're willing to walk away since anything more than $220K would exceed what we're paying in rent now. However, if by chance they accept the offer ... are we making a mistake? Could prices drop further? At what point do you buy?
Just to pull this back to the original topic. It seems to me you need to ask yourself some questions that we can't answer for you. Essentially: "what is your risk tolerance in regard to the real estate market?" In other words, what sort of price drop would you be willing to take a risk on in exchange for the benefits of owning your own home? To put a number on it, could you tolerate another 5% drop? 10%? 25%?

Then you would have to make some sort of guess about where the market is headed in the short term in your area, and maybe take a stab at trying to figure out long term trends. Good luck with the latter-- no one has ever been able to figure that one out. In any case, I would advise you to discount statements that contain assumptions such as "real estate always bounces back eventually," or "it's always a good time to buy if you 'need' a house." (You need housing, but it does not automatically follow that you need to buy.)

Note I'm not saying "don't buy." I'm saying: do your homework, make your best decision based on the facts, and don't let yourself be emotionally manipulated. And make sure you and your SO are totally on the same page here. You don't want to end up blaming each other if the market does sour further. Good luck.
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