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I find it interesting how so many people accused Texan of preaching "doom and gloom." On the contrary, I found her/him to be the bearer of good news--heck, awsome, sublime, giddy-with-joy type news. With rising rates, I'll be one of the people to swoop in with cash several years down the line while the people who made fun of me for not being a grown-up homeowner in the early 2000s will be selling their antiques and family heirlooms at their garage sales. They played grown-up and bought what they couldn't afford, while I paid attention, THOUGHT FOR MYSELF (radical concept, I know), rented and stashed cash. I personally thank you, Texan, for your good news. It's only "doom and gloom" to those who played the "grown-up" home owner investor game and rolled their eyes at me while they did it. Other renters: Have you noticed how deep your homedebtor friends' denial is? Do they still ask you why the heck you haven't bought, even as their home values plummet before their eyes? I have a SoCal friend who bought a $650,000 two-bedroom condo in the summer of 2005. Every time she visits me in Texas she chides me for not buying a place now. I tell her that prices are flat in much ot Texas too, and that neighborhoods I'm interested in saw a 100% increase between 2003-2006 (yet San Antonio real estate folks still insist that we didn't see a "bubble," RIGHT). Knowing this, my friend shakes her head at my renting, even as she herself has lost 75,000 in the last couple of years (that she's admitting to anyway). I'm telling you, human psychology is nuts!
HUH?!?! You're not making any sense or perhaps I am just misunderstanding. So how long will it take you to save to buy a home that's 500,000? You must be making quite a living, be living waaayyyyy below your means and in a dump of a rental to be saving "cash" to by a home that amounts to anything. Most people save for a sizeable down payment and even that takes a while. And by the way, most homeownersalso have savings portofolios, retirement portfolios, and are saving probably the same amount of "cash" as you are. Not all homeowners financed @ 100% and are living pay check to pay check. Here we go again, another very distorted generalization!!!
What your friend is telling you is correct. And she hasn't "lost money" unless she's trying to sell right now. She's paying towards her "own" asset and chances are, is saving in other ways as well. But who knows, maybe she is the rare exception you speak of- living pay check to pay check and "house poor". Just don't assume you are "one up" by renting. It's very irresponsible to pay "cash" for big ticket items in life. Because then you are correct, you'll lose money in the end, if it's used to buy a depreciating asset. Homes are not in this catagory.
A mortgage with a decent down payment (30%) allows you to pay yourself that "rent" and MANY, MANY will tell you how wrong I am but.... figure it out with your own numbers. Think of how much more money you'd have from the rent you've been paying if it was going to you, not a landlord. You'll always need a place to live and if you can afford for that place to be yours, then no need to pay cash for it. Most homeowners NEVER pay the life of their loan (average 30 yr. fixed gets paid an average of 8 years to it- hence- no early pay-off penalties on loans for this reason), but pay a portion of it for X amount of years and then "move on to bigger and better". TO put it in simple terms with #'s attached to it:
Home price was 390,000. Owned for 9 years. paid a total of 160,000-P&I(all loans were a 30 yr. fixed rate and original loan @7.5%, by 3rd re-fi @5.65%-monthly payments averaged 1,600/mo.), another 45,000 in taxes and ins. Total paid towards the home (let's call it rent) was actually 205,000. Sold home 9 years later for 530,000. Huge chunck of equity (had about 35% down when purchased). Add 205,000 to the 140,000 put down and still paid 345,000 for a home with purchase price of 390,000. Soooooo, hope this helps explain it and how it "REALLY" works. 530,000 minus the mortg. balance left of 148,000, leaves roughly 380,000 cash after closing and on to the next bigger better home with a nice down payment! Highly unlikely that given the 140,000 down, one could have saved another 140,000 in 9 years so you could pay "cash" for a house that's 380,000 today. Oh well, enough said.
All the insults from the doomers and their insistance on renting being the "only way" is absurd! And believe me, they'll find a way to twist my numbers until it fits their arguement! They are the ones who are in severe denial. If you can't buy, you can't buy, respected. But if you can't by, then stop being jealous of those that can and did or are. It's really unbecoming of all of you. As a NON realtor who is not trying to "plug a profession as you all accuse", shame on you for not buying if you can, especially in this "buyers market" of opportunity. Renting has it's purpose in life and we have all been there in our lives. But stop trying to discredit those that bought/buying, in past, present, and for gods sake, future.
Hahaha, I love how all the Realtors have to come out with their same tired line. Its local c'mon now! Magically all the Realtors on city data happen to be from areas with good local real estate markets. C'mon, one of you come out and say the real estate market in your area is doing horrible!
Anyhow, real estate is only local to a certain degree. Prices aren't going to hold up in IL if they crash 50% in say Ohio and NY. The problems (in terms of declining prices) started in the extreme bubble markets and are moving there way threw markets that were relatively healthy just a year ago. In another year almost the whole country will see a weak real estate market. This doesn't mean every area is going to decline 50%, but almost every area will have a weak real estate market.
How much time have you spent at a factory, construction site etc? I use to work in a metal shop in Los Angeles in an area heavy with such industry when I was a teen, nobody was getting a "family wage" and that was some time ago, I doubt they are today. Most of these jobs are fairly low skill and the market is flooded with cheap (illegal) Mexican labor. I worked with many people that were obviously illegal. Although at the company I worked for they were from Russia/ex soviet bloc countries. This is not to mention half the crap is made in China now anyways.
A lot of the people losing their jobs were over paid loafers so its a bit hard to feel sorry for them. The vast majority of job loses at least in Southern California are directly related to real estate (Construction, lending, realtors etc).
Hey, I am not a realtor (but am working on getting my license) but even I have always known real estate IS local. I currently live in virginia where there was a boom and now prices are down. (The home we purchased was bought in 2005 for $550K and is currently valued at about $500K...Personally I don't think that is bad...and it has been holding at that price for some time now) ANyway, my parents live in central PA. There the real estate market has not been affected AT ALL. Homes are selling and for asking price or close to. This is b/c that area never saw a boom. It is very local.
I don't buy for the short term...I buy for the long term. I am not worried about my home value. If I just break even, then fine. I am not in my home to make money. I am in it to live and enjoy. As long as I get the downpayment back it doesn't matter to me much how it appreciates or lack thereof.
Exactly. The majority of homeowners bought a home to live in - not to make a fortune on. Every home I have owned has made a profit - nothing to get excited about - but enough to know that purchase was the right decision at the time. My home IS NOT my largest investment, but it is an investment.
We have relocated due to jobs a few times, and have always purchased a home - never rented. Purchasing a home, rather than renting, suits our financial situation best.
If someone needs and wants to buy now , I say go for it. I have no doubt there are rocky times ahead, but NOT to the degree of what others want to so happily predict.
I don't buy for the short term...I buy for the long term. I am not worried about my home value. If I just break even, then fine. I am not in my home to make money. I am in it to live and enjoy. As long as I get the downpayment back it doesn't matter to me much how it appreciates or lack thereof.
Exactly. I have never bought a home with making a profit in mind. We are living in our house now and doing things to it that WE want to do. Things that make our lifestyle work, not for profit. The more we do, the more we want to stay...it's OUR home.
There the real estate market has not been affected AT ALL. Homes are selling and for asking price or close to. This is b/c that area never saw a boom. It is very local.
You aren't getting the point. Certainly different areas have different characteristics, but all areas are going to be effected by the tightening in the credit markets/lend standards etc. The fact that it didn't have a boom doesn't change the fact that demand for housing in the area will be reduced.
Not only that, all areas are connected in many ways. Your local real estate market is not isolated in any sense from the rest of the country. So, like dropping dye in water the problems start in a particular region and then move to other areas over time. This time last year we were mainly seeing problems in the extreme bubble markets. Now a lot more areas are seeing problems.
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As long as I get the downpayment back it doesn't matter to me much how it appreciates or lack thereof.
Your down payment is going to be worth much less in 10, 20 etc years than it is now so you should care.
Also, ignoring the financial side of purchasing a home is a good way to lose hundreds of thousands of dollars that could've otherwise funded your retirement. Buying an overpriced home has dramatic effects on your long term wealth, especially if you finance your home.
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I have a SoCal friend who bought a $650,000 two-bedroom condo in the summer of 2005
I hope it had golden toilets!
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And believe me, they'll find a way to twist my numbers until it fits their arguement! They are the ones who are in severe denial. If you can't buy, you can't buy, respected. But if you can't by, then stop being jealous of those that can and did or are. It's really unbecoming of all of you.
Oh this is great. We are jealous of people that purchased overpriced real estate at the peak of one of the biggest asset bubbles in history. Hahaha! Also, why would we try to twist your numbers? What do your "numbers" have to do with us living in Southern California, Nevada, Florida etc etc? Although, you type endlessly about real estate being local you in the same breath pretend your example is some how a representation of how things not only work in all historic periods but in all locations! Its crazy really... Here is the reality for me, I pay $1,500/month in rent. If I was to buy a similar property in the same location it would cost me around $350k. Even if I put down a 20% down payment my PITI would be around $2,300/month! I save $800 a month by renting and not only that prices keep declining. Buying a house for me right now makes absolutely no sense whatsoever.
How much time have you spent at a factory, construction site etc? I use to work in a metal shop in Los Angeles in an area heavy with such industry when I was a teen, nobody was getting a "family wage" and that was some time ago, I doubt they are today. Most of these jobs are fairly low skill and the market is flooded with cheap (illegal) Mexican labor. I worked with many people that were obviously illegal. Although at the company I worked for they were from Russia/ex soviet bloc countries. This is not to mention half the crap is made in China now anyways.
I've worked on and off in construction for 30 years. I've renovated many homes as a sideline, and just finished designing and building my own home from scratch. The 'family wage jobs' I'm talking about are plumbers, electricians, cabinetmakers, floor mechanics, etc. In my area, these are not 'illegal Mexican' jobs. Most of them are union. The Mexicans generally work in agriculture, landscaping, and horticulture.
I find it interesting how so many people accused Texan of preaching "doom and gloom." On the contrary, I found her/him to be the bearer of good news--heck, awsome, sublime, giddy-with-joy type news. With rising rates, I'll be one of the people to swoop in with cash several years down the line while the people who made fun of me for not being a grown-up homeowner in the early 2000s will be selling their antiques and family heirlooms at their garage sales. They played grown-up and bought what they couldn't afford, while I paid attention, THOUGHT FOR MYSELF (radical concept, I know), rented and stashed cash. I personally thank you, Texan, for your good news. It's only "doom and gloom" to those who played the "grown-up" home owner investor game and rolled their eyes at me while they did it. Other renters: Have you noticed how deep your homedebtor friends' denial is? Do they still ask you why the heck you haven't bought, even as their home values plummet before their eyes? I have a SoCal friend who bought a $650,000 two-bedroom condo in the summer of 2005. Every time she visits me in Texas she chides me for not buying a place now. I tell her that prices are flat in much ot Texas too, and that neighborhoods I'm interested in saw a 100% increase between 2003-2006 (yet San Antonio real estate folks still insist that we didn't see a "bubble," RIGHT). Knowing this, my friend shakes her head at my renting, even as she herself has lost 75,000 in the last couple of years (that she's admitting to anyway). I'm telling you, human psychology is nuts!
AMEN. Don't put yourself in debt for 15-30 years. Cash is king (until Bernanke starts raining it from the sky) and debt is slavery. Owe no man a single cent. Free yourself from this world of consuming and start living prudently.
I'm talking about are plumbers, electricians, cabinetmakers, floor mechanics
A lot of this is low skill, the wages in your area may be inflated by unions I have no idea. But with the possible exception of electricians you can get a Mexican crew out here that will do the work for almost half. Regardless, in many cases the only people in these industries that are making a "family wage" are the ones at the top.
We never bought a home as an investment - except as an investment in our quality of life. We now own two homes - one in the city, one in the country. The one in the city is paid off (we leased it out when we moved to the country, rather than selling, as we'll never be able to get that particular location again), and it has increased in value several times purchase price since we bought in back in the late 1980's. It's now a source of income. The house in the country should be paid off in a few years, and we could never rent what we have - a 3/1 farmhouse on 55 acres with barn, etc. - for our mortgage payment. It, too, has appreciated in value well over 100% since we bought it. We seem to have a knack for finding locations.
Trick is, we never purchased beyond our means. We pay cash for cars, for example (and I prefer to buy used so that someone else can find all the bugs for me). When we found the house we wanted, we bought it (first one we lucked into, the second took 2 years to find). We refinanced when interest rates went down. We didn't go for the balloon payment schemes. We didn't try to time the market (doesn't work real well in stocks or in real estate, it seems to me, for most folks).
We bought a home, in other words. So far, it's paid off, not only in quality of life, but financially.
Yes, the economy impacts all markets. But HOW it impacts them and how much is very, very local. In our market, for example, the last statistics available show that we appear to be about the same as 2004, less than 2005-2007, but not a crash and burn scenario. Weirdly, for a while there, sales were down, but prices were up. That's for the area as a whole, not for individual neighborhoods.
Again, if you're going to be looking at this as an investment, rather than a home, you need a heck of a lot more than national, or even state, statistics. Making financial decisions based on the newspaper headlines is foolish.
A lot of this is low skill, the wages in your area may be inflated by unions I have no idea. But with the possible exception of electricians you can get a Mexican crew out here that will do the work for almost half. Regardless, in many cases the only people in these industries that are making a "family wage" are the ones at the top.
Yes you can hire Mexican crews, it you don't care about safety, codes, licensing, insurances, workmen comp, warrenties ect ect. As to low skills, that is just a bunch of B.S., but if you want a half arse job then yes you can hire folks off the street who have no training, or knowledge to slap your place together, good luck.
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