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Are you serious? Yeah a great time to buy a depreciating asset. Tax credits? You mean an IRS loan. Also, just a thought if rates are low than perhaps...just perhaps inflation isn't really high? High inventory....wait doesn't that mean prices should trend down?
The drop in interest rates changes very little, the rate for a 30-year fixed is about where it was in the beginning of June, it was less earlier in the year. Was it a great time to buy in May/June? No, why is it now? Its not. Stop drinking the Kool-aid.
Also, I swear some people think that magic money is funding mortgages. Its endless! Its not, any increase in demand of mortgages in the market place (by refinancing etc) is going to be meant with increase rates. Supply and demand.
Ha! Dude, what are you smoking? If Fannie/Freddie stay under government control (Fannie use to be) that is bearish for real estate. There will be even less funny business than there was before. Even if they let them go private again, its going to be in a much different form. The systemic risk has to be removed before they can go private again, but that is again bearish on real estate.
Real estate is toast. Real estate booms hurt the country, that should be extremely obvious by now.
Wow you really said it well! Thanks for the great post.
I see the drop in rates after the takeover of Fannie and Freddie as a bandaid. As Humanoid pointed out, rates were lower earlier in the year. I refinanced a 30 year mortgage for 5.25% earlier this year.
The pool of buyers is much more limited than it once was. The govt giving you a loan to provide the down payment is just desperation and in my opinion irresponsible. So the govt loans you $7500 to put toward the down payment of your house and if the value of the house goes down and you foreclose, are we the taxpayer stuck with your bill? This is bad govt policy.
Chuck,
I wish I had your optimism. It is like I have told folks who ask me if now is a good time to buy. "It is a better time to buy than 12 months ago, but in 12 months it will be a better time to buy." I still feel this way. Even if rates go up (they can't go much lower) I feel most people will be better off buying a home in 12 months than now.
Until inventories drop below 6 months prices will continue to drop. It isn't pretty out there and will get worse before it gets better. So says a fence sitting buyer who already owns properties.
I see the drop in rates after the takeover of Fannie and Freddie as a bandaid. As Humanoid pointed out, rates were lower earlier in the year. I refinanced a 30 year mortgage for 5.25% earlier this year.
The pool of buyers is much more limited than it once was. The govt giving you a loan to provide the down payment is just desperation and in my opinion irresponsible. So the govt loans you $7500 to put toward the down payment of your house and if the value of the house goes down and you foreclose, are we the taxpayer stuck with your bill? This is bad govt policy.
Chuck,
I wish I had your optimism. It is like I have told folks who ask me if now is a good time to buy. "It is a better time to buy than 12 months ago, but in 12 months it will be a better time to buy." I still feel this way. Even if rates go up (they can't go much lower) I feel most people will be better off buying a home in 12 months than now.
Until inventories drop below 6 months prices will continue to drop. It isn't pretty out there and will get worse before it gets better. So says a fence sitting buyer who already owns properties.
No problem guys... just wondering if the fairly rapid drop in rates effected mentalities at all. Either way, lower rates will help out some people who's rates are resetting or didn't get the chance to refinance earlier in the year. Whether it's time to buy or not will highly depend on inventory levels and how well we do in the next 6 months to a year in getting ourselves on a better economic track.
According to the CAR, California has already gone down to the 6.X something months of inventory. Don't know what'll happen in the slower months... but we'll see in a few weeks. If sales continue at the current pace or higher in the slow "off-season" months... then who knows.
We always know more after the fact, the whole hindsight is 20/20 thing. Either way, it will be interesting. My prediction (and I know very little about California real estate) is that sales will not continue into the slower months and inventories will not be reduced. A realtor I have used in the past told me this winter would be a great time to buy. Of course this is the same guy who has been trying to get me to buy for the past 2 years.
I agree with you IF sales continue to be up in the slower months and inventories are reduced this could lead to a bottom in prices, but I just don't see this happening.
Humanoid,
You know way more about this market than me. Where do you see inventory levels in California in the next 6-12 months? SoCal or ViewfromthePeak, you can also provide good insights.
According to the CAR, California has already gone down to the 6.X something months of inventory
The CAR's estimates are always in favor of housing, they usually revise them months later. Regardless, the drop has been due to a drop in the raw inventory numbers and better sales (as is typical in the selling season). But the inventory that was taken off the market is largely shadow inventory that is going to make its way back to the market as a REO, short sale or whatever.
Housing in California is still not affordable. A family making a decent wage still can't afford a decent home. California still has another good 25% decline to go.
Timing the bottom of any market is as risky as timing the peak. You won't ever know when the "best" time to buy or sell is until after its past.
But that is why real estate is NOT about short term gain. If you are planning to live in a home for <2-3 years the you will likely lose money. You have to have amazing timing and some luck to do so. You should be looking at at least 5 years when you buy a home... or any other investment for that matter.
Anytime you are looking at month to month or 1 year fluctuations you are day trading. Its the same in the stock market, housing market and in Vegas... its speculation/gambling, not investing. Sure you can make money on it, but trying to time the market is a bad idea even for "professionals".
Buy a home when you can afford to. When you have decent reserves, good income, low debts, job stability and can buy a home that is right for you at a price you can afford. Then keep paying down the debt, saving for emergencies and wait 10 years. It's not exciting like 20% gains in a year, but its not as risky.
Location: central, between Pepe's Tacos and Roberto's
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Quote:
Originally Posted by Humboldt1
The pool of buyers is much more limited than it once was. The govt giving you a loan to provide the down payment is just desperation and in my opinion irresponsible. So the govt loans you $7500 to put toward the down payment of your house and if the value of the house goes down and you foreclose, are we the taxpayer stuck with your bill?
That is not how the tax credit works. You don't receive the $7500 (should you choose to take it) until tax time. It cannot be used as a downpayment. The only taxpayer stuck with the bill would be the one that takes the tax credit.
Quote:
Originally Posted by rcarrillo
Timing the bottom of any market is as risky as timing the peak. You won't ever know when the "best" time to buy or sell is until after its past.
But that is why real estate is NOT about short term gain. If you are planning to live in a home for <2-3 years the you will likely lose money. You have to have amazing timing and some luck to do so. You should be looking at at least 5 years when you buy a home... or any other investment for that matter.
Anytime you are looking at month to month or 1 year fluctuations you are day trading. Its the same in the stock market, housing market and in Vegas... its speculation/gambling, not investing. Sure you can make money on it, but trying to time the market is a bad idea even for "professionals".
Buy a home when you can afford to. When you have decent reserves, good income, low debts, job stability and can buy a home that is right for you at a price you can afford. Then keep paying down the debt, saving for emergencies and wait 10 years. It's not exciting like 20% gains in a year, but its not as risky.
Agree with everything in this post. Vegas saw a HUGE level of speculation. Ironically though, according to my sources we are now around 9 months of inventory and our volume for the past 2 months has been the most per month in 3 years at least. Not to mention that the median home price is now under $200K, somewhere in the $190K range. With median incomes at $61,000 or so we are very near the 3x's annual salary. Also, cost to rent vs. cost to own is very similar, and in some cases it is slightly less expensive to own not only due to writeoffs but monthly cash outlay as well. I have a client buying a SFR, and her house payment including taxes and insurance will be about $50 more than her APARTMENT's monthly rent. REO is moving our market though, with about 68% of all purchase transactions involving bank-owned homes.
Well, in just two days, interest rates have dropped close to .75 basis points or close to a $120 savings per month on a 200k loan. So how does this factor into increasing affordability? How bout the hundreds of thousands that will refinance and also receive the savings?
Seems to me that we're in unprecedented times... and the government is pretty much doing everything in its' power to give homes away to home buyers. A few weeks ago home buyers were waiting because the general consensus was that interest rates were going to go up, so home prices would go down. But, low and behold, interest rates went considerably down.
Are there any buyers out there? Or are they still waiting? With interest rates low, prices lower, inventory high, inflation high, tax credits and incentives, man would it be a great time to buy. I envy those looking to buy. I don't think this mix of events has ever occurred in history.
I think the key picture, is if the economy can stabilizes, and new job sources come online (energy, renewables, drilling, medical, international exports, production, technology), things would really pick up. Did the government just planted the seeds for the next RE boom?
-chuck22b
i disagree. the problem with all the bailouts is they are delaying the fall in house prices. they are delaying it because the banks are not forced to liquidate their inventories. if you don't believe me, try purchasing a bank owned home. they are sitting on huge stock and you'd be forgiven for thinking that they'd be chomping at the bit to get hold of your business.
the truth is they aren't. most of their coffers have been neatly topped up courtesy of the helicopter and they can hold out for the price they want. the problem is that while they're doing this the inventories keep rising. anyone with half a brain can see that. maybe when they stop distorting the market, the millions of fence sitters will be encouraged back into the market with cash.
the benefits of that are that they save the money, they'll get rid of the inventory and those who saved get a bargain (for the first time in many years you'll see a system which encourages saving, maybe some people would learn something)
We're in the middle of a home search and were just talking about it this morning. Incredibly lucky-- we did expect rates to be higher by now and with this move, they've gone lower.
How does it effect our decision/pace? Not much.
We have several variables (not all financial) causing us to foot drag. We were anticipating prices were going to drop more, and we still believe that based on local inventory levels and market activity.
The rate drop (which could be temporary) only makes us more comfortable waiting. Before, we were prepared to wait out prices as rates rose. Now prices are going down and rates? Well at least they're not up yet.
I honestly wonder if more buyers would be off the fence if rates were at 8% and climbing right now. Carrot or stick? Hmmmm.
Bottom line for us: We do feel lucky. If the right house/right price shows up, we'll buy it tomorrow. If any of our tricky variables resolve, we may make a move now just because rates are low-- but I'm not betting on it.
What do other people think? Are lower rates or higher rates a bigger motivator to fence sitters?
personally i think the market has a long, long way to fall. like i said in my previous post, the bailouts are delaying the correction. fence sitters like myself know that because we've tried to buy from banks and they didn't seem to be that interested one way or another to lighten the load.
personally i'm making a few ridiculous offers because that's where i think the market is headed and if was to get something really cheap and benefit from the current interest rate i score. what i'd love to see happen is for the fed to save their money to bailout depositors and banks to be allowed to fail and their assets liquidated to the highest bidder. you better believe that would coax the fence sitters into the market and would help get rid of the inventory and clean the slate
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