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Where are interest rates going? What are the gurus saying? Who has the best prediction? I hear everything from "massive spike imminent" to "will stay low for a while longer. Anybody?
If it's a matter of getting in at a 30-year fixed at under 5 percent with no points now, or closer to 7 percent (or more) in a year with maybe marginally lower values, the choice seems pretty clear. That's the question that's bothering me re: the rent-or-buy question.
We can agree to disagree. I still don't think anyone should be buying (Vets included) unless they have 20% down payment. Let them rent until they can save up for the down payment. Let's face it...the American dream of owning a home turned into a nightmare for many people. I realize you're a realtor and you and your colleagues really depend on these VA/FHA and these silly 3% down payment programs. Without them your industry would have collapsed more than it has already.
But as the government phases out and correctly requires 10% to 20% down payments even on these types of mortgages, realtors will have a tougher time as the volume of people buying will diminish.
Again, we can all agree to disagree on this but most people that have an inkling of financial sense can see that these 3% down payments are a horrible idea. What is reckless was the NAR all those bubble years telling people "now is a great time to buy". "No, now is a great time to buy..we really mean it...this is the bottom". "No, No No now is the time to buy..we're sure this time".
If you don't have a 20% down payment you shouldn't be buying...More people should be renting and they have figured that out now. Not everyone should be a home owner. Just like all those years when the politicians were telling banks they needed to be loaning money to people that they knew couldn't/wouldn't pay it back. IMHO
Tags, interest rates have nowhere to go but up. Historic rates are more like 8% to 9%. Rates were artificially held down and are sure to go up. They won't skyrocket up but they will steadily go up. As they go up people will be able to afford less home. I think even the National Association of Realtors would agree that interest rates are going to go up. Of course they will tell you this is another reason "now is a great time to buy".
We can agree to disagree. I still don't think anyone should be buying (Vets included) unless they have 20% down payment. Let them rent until they can save up for the down payment. Let's face it...the American dream of owning a home turned into a nightmare for many people. I realize you're a realtor and you and your colleagues really depend on these VA/FHA and these silly 3% down payment programs. Without them your industry would have collapsed more than it has already.
But as the government phases out and correctly requires 10% to 20% down payments even on these types of mortgages, realtors will have a tougher time as the volume of people buying will diminish.
Again, we can all agree to disagree on this but most people that have an inkling of financial sense can see that these 3% down payments are a horrible idea. What is reckless was the NRA all those bubble years telling people "now is a great time to buy". "No, now is a great time to buy..we really mean it...this is the bottom". "No, No No now is the time to buy..we're sure this time".
If you don't have a 20% down payment you shouldn't be buying... IMHO.
I agree, different philosophies and IMHO, neither is right nor wrong. I actually advise my clients to rent for a while if they can in order to see how the area works for them as well as how their budget works out here, because this place is a bear to adjust to when moving from many Mainland places.
Tags,
All of the experts here believe the interest rates will remain low for at least another year. We do have that shadow inventory to deal with, and that will probably keep the rates at a reasonably low rate for a while.
I agree, different philosophies and IMHO, neither is right nor wrong. I actually advise my clients to rent for a while if they can in order to see how the area works for them as well as how their budget works out here, because this place is a bear to adjust to when moving from many Mainland places.
Tags,
All of the experts here believe the interest rates will remain low for at least another year. We do have that shadow inventory to deal with, and that will probably keep the rates at a reasonably low rate for a while.
Moving Aloha,
You sound like one of the responsible realtors out there which is great. Many realtors tell people how renting is a waste of money and how they MUST buy.... it's responsible the advice you are giving.
I'm really passionate about this issue because during the bubble years I told everyone and their brother how the market was going to collapse. Most realtors gave the opposite advice and got people into a lot of trouble. I'm not blaming only the realtors as it takes 2 to tango. But greed did many people in (buyers/realtors/banks/lenders).
I spelled out in detail to my clients and investors how and why the market was going to collapse. We started short selling the financials, bond insurers and banks. What I learned is that most people didn't want to think logically. Everyone always wanted to think of the best case scenario. When they should have been thinking worst case scenario. I always tell my clients it was a once in a lifetime opportunity to make money short selling the likes of Lehman Brothers.
I've done tremendous amounts of research ever since 2003 when I moved out of the USA. I spent thousands upon thousands of hours researching and pouring over numbers, financial statements and simple message boards. Check out past posts on sites like MYFICO.com - Mortgage Loans - FICO® Forums
It was absurd for the government to allow people with NO down payments to use the $8,000 first time home buyer's credit to use as a down payment. Totally irresponsible and the type of attitude that helped create this mess in the first place. People that don't even have a down payment shouldn't be buying a home.
You will see tons of posts from people with poor credit scores, low incomes all giving each other advice on how to score a mortgage. Spend some time going through it and you will come to the conclusion that many of these people should be renting. Many looking for some angle to get a mortgage. Again, many of these people should be renting.
I'm not saying now is a bad time to buy. Quite the contrary. I've spent 7 years on the sidelines and buying real estate in other parts of the world that were depressed and I'm ready to dip my feet back in the water investing in USA real estate. I do think it can fall another 10% to 20% in some cities. But many areas are really really depressed and I don't see it falling much more.
In some areas, I don't think those areas will EVER see peak prices again. (Miami, Phoenix, Las Vegas). The big wildcard is the pipeline of shadow inventory that has to hit the market and eventually get foreclosed on. The pace it all hits the market has a big factor on prices. Same thing with down payments and costs for buying increasing as well as interest rates that definitely will be going up in the next few years.
You sound like one of the responsible realtors out there which is great. Many realtors tell people how renting is a waste of money and how they MUST buy.... it's responsible the advice you are giving.
I'm really passionate about this issue because during the bubble years I told everyone and their brother how the market was going to collapse. Most realtors gave the opposite advice and got people into a lot of trouble. I'm not blaming only the realtors as it takes 2 to tango. But greed did many people in (buyers/realtors/banks/lenders).
I spelled out in detail to my clients and investors how and why the market was going to collapse. We started short selling the financials, bond insurers and banks. What I learned is that most people didn't want to think logically. Everyone always wanted to think of the best case scenario. When they should have been thinking worst case scenario. I always tell my clients it was a once in a lifetime opportunity to make money short selling the likes of Lehman Brothers.
I've done tremendous amounts of research ever since 2003 when I moved out of the USA. I spent thousands upon thousands of hours researching and pouring over numbers, financial statements and simple message boards. Check out past posts on sites like MYFICO.com - Mortgage Loans - FICO® Forums
You will see tons of posts from people with poor credit scores, low incomes all giving each other advice on how to score a mortgage. Spend some time going through it and you will come to the conclusion that many of these people should be renting. Many looking for some angle to get a mortgage. Again, many of these people should be renting.
I'm not saying now is a bad time to buy. Quite the contrary. I've spent 7 years on the sidelines and buying real estate in other parts of the world that were depressed and I'm ready to dip my feet back in the water investing in USA real estate. I do think it can fall another 10% to 20% in some cities. But many areas are really really depressed and I don't see it falling much more.
In some areas, I don't think those areas will EVER see peak prices again. (Miami, Phoenix, Las Vegas). The big wildcard is the pipeline of shadow inventory that has to hit the market and eventually get foreclosed on. The pace it all hits the market has a big factor on prices. Same thing with down payments and costs for buying increasing as well as interest rates that definitely will be going up in the next few years.
And those places like Las Vegas and Phoenix shouldn't get back to the prices of the mid 2000. I remember almost getting caught up in that mess back in 2004, but came to my senses and decided to keep my current home and not buy up - Boy, am I glad I didn't do it!! The people who bought too far out of their affordability range are now those folks you speak of, but some of them - who weren't my clients then but are my clients now, put quite a bit of money down on the home and still the home was way over the reasonable. In some cases I'm assisting with the Short Sale and others, I'm assisting with keeping it leased out till they can afford to sell.
I am impressed with some of the younger buyers who know the market and are determined to not follow the paths of those during the last housing bubble.
Where are interest rates going? What are the gurus saying? Who has the best prediction? I hear everything from "massive spike imminent" to "will stay low for a while longer. Anybody?
If it's a matter of getting in at a 30-year fixed at under 5 percent with no points now, or closer to 7 percent (or more) in a year with maybe marginally lower values, the choice seems pretty clear. That's the question that's bothering me re: the rent-or-buy question.
Tags,
I bought in November of 2010 and financed @ 4.25% for a 300k house. I carefully selected where I was going to live and why and for how long (approx). My decision was based on rent vs buy scenario but it wasnt like I said I NEED to buy or else something is going to happen and all the good oppts are gone. It was a pretty logical decision after researching zip codes pluses and minuses and where I found value. I couldnt be happier with my purchase and feel that I, as a homeowner am an asset to the community not the other way around.
I am well aware that 300k in SD is obviously not ocean front property in Del Mar, but that is not where I am in life to meet my current needs or what I am WILLING to pay for property here. Thats the magic bullet. What are you willing to pay after weighing all the things that are the most important. Unless you have endless sums of cash, most of us have to at some point, make compromises and live with them.
I am not going to run out and tell people that buying right now is the best decision you could ever make. I have never lived in a place like SD where literally so much emphasis is put on to real estate from every single lifestyle angle you can think of. There is so much emphasis on "when" I move to my next house or how much its going to be worth in 5 years vs 10 years. I think we as Americans got a little taste of appreciation in an asset that giving up the idea of a property appreciating at snails pace seems unimaginable.
I bought in November of 2010 and financed @ 4.25% for a 300k house. I carefully selected where I was going to live and why and for how long (approx). My decision was based on rent vs buy scenario but it wasnt like I said I NEED to buy or else something is going to happen and all the good oppts are gone. It was a pretty logical decision after researching zip codes pluses and minuses and where I found value. I couldnt be happier with my purchase and feel that I, as a homeowner am an asset to the community not the other way around.
I am well aware that 300k in SD is obviously not ocean front property in Del Mar, but that is not where I am in life to meet my current needs or what I am WILLING to pay for property here. Thats the magic bullet. What are you willing to pay after weighing all the things that are the most important. Unless you have endless sums of cash, most of us have to at some point, make compromises and live with them.
I am not going to run out and tell people that buying right now is the best decision you could ever make. I have never lived in a place like SD where literally so much emphasis is put on to real estate from every single lifestyle angle you can think of. There is so much emphasis on "when" I move to my next house or how much its going to be worth in 5 years vs 10 years. I think we as Americans got a little taste of appreciation in an asset that giving up the idea of a property appreciating at snails pace seems unimaginable.
Shmoov,
Definitely I think the end of 2010 was a fine time to buy in San Diego and you got a great interest rate locked in.
Probably if we lived in the USA we would have pulled the trigger last year for either a home or an investment property. I did make one offer on a house in Texas for an investment property. Cash offer but they refused it only to email me back a few months later for a lower price.
I agree with your rationale and thinking and only buying as much home as you could afford. Even now, that seems tough for many people and we noticed the same thing in San Diego with that mentality that you mentioned.
Too many people look at houses as "investments" rather than homes to live in and that is wrong to me. Sure, it's nice if prices go up and there is good appreciation but all of the "jingle mail" we are seeing now with people mailing in keys to their lenders is an eye opener.
I think many Americans have no patience and they are an "I want it now" society. Living abroad the past 7 years has made me more aware of that. And it's easier to see.
Some cities around the world people don't buy a property until they save up ALL the money or they get loans from their parents or family. It's refreshing. No one driving around fancy, expensive cars unless they can buy it with cash.
Our friends always laugh at us because my wife and I own many properties. We rent them out. Yet we don't live in any of the properties we own. We rent because the yields are better and it makes sense.
Ironic that we own a bunch of properties but never lived in any of them. That will be different once we move to San Diego. Just from a #'s perspective it doesn't make sense for us to rent as we know we'll be in it for the long haul.
I think the real estate market in the USA still has some hurdles to go through. The typical person still doesn't understand just how close to a systemic meltdown we had a few years ago.
i hear the statement "a home should be seen as place to live, not an investment" quite often. i'm curious what you guys think of a home as a tax shelter, especially when the alternative is investing in a volatile stock market. my wife and i have a decent amount of cash put away for a down payment on our first home. we want to buy because we need some deductions since uncle sam has been hammering us the last few years. obviously a home purchase should be much more than a tax shelter, but it's definitely high on our reasons to buy a home since we don't have kids and are w-2 employees. we could continue to rent and save money, but that looks less appealing every year as our incomes go up (albeit slowly) and rent stays relatively flat.
i hear the statement "a home should be seen as place to live, not an investment" quite often. i'm curious what you guys think of a home as a tax shelter, especially when the alternative is investing in a volatile stock market. my wife and i have a decent amount of cash put away for a down payment on our first home. we want to buy because we need some deductions since uncle sam has been hammering us the last few years. obviously a home purchase should be much more than a tax shelter, but it's definitely high on our reasons to buy a home since we don't have kids and are w-2 employees. we could continue to rent and save money, but that looks less appealing every year as our incomes go up (albeit slowly) and rent stays relatively flat.
You bring up a valid point.
For one, I dont have kids like you and your wife. Its one of the many reasons I decided to pull the trigger on the specific property and area I bought.
Although I could have financed a far more expensive property and bought in another area, or bought with cash, I chose not to and play safe.
No one knows what the future will bring with real estate values and tax impact. For example, recently the media were shining a light on Obama possibly dumping the itemized interest deductions for primary residences...well that didnt last too long.
For now, the tax deductions alone were enough for me to dip in, but not go all in. I was just fine renting.
I still dont think its time to go all in above 500k properties unless you are 110% confident in the market you are looking into or are buying all cash here in SD.
500k is a half million....I really dont think people truly understand what a half million $$$ is. They just think in terms of monthly payment. No matter how you spin it, a half million is not pocketable and for most people a decent sum of money. I also dont think people here understand what 'middle class' is. Its not a swear word or some demeaning socioeconomic view of people that only earn 'x' amount of dollars.
If you have a solid business here in SD and the both of you dont see any foreseeable changes, I would look a bit deeper into real estate right now. Just remember one thing. There is a tremendous difference between 'savings' and an 'asset'. Your house is an asset and savings are savings.
For all its worth, you are really buying a roof over your head with extra benefits. If you are not pressured into buying, then take your time knowing that you have the ammo to fire if you see something that looks good.
If you have clean credit and a down payment, explore financing options and THEN go from there. I would highly advise not to start looking and then get financing. No agent will work with you or accept a bid on a property without some proof of finances or ability to meet the payment obligations.
RIght now is a great time to be diversified in your investments and real estate is certainly worth looking into.
Last edited by shmoov_groovzsd; 02-24-2011 at 05:36 PM..
that's pretty much the route we've gone. we were pre-approved before the new year and are now looking to pull the trigger on the right place. it's nice to see that there's really no rush (except the occasional jab from my realtor friend). Properly priced units are moving, but anything asking more than 10% over market is sitting around for months. the only issue of late is that not much new has been hitting the market. also, almost everything under $500k is a short sale.
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The people who bought too far out of their affordability range are now those folks you speak of, but some of them - who weren't my clients then but are my clients now, put quite a bit of money down on the home and still the home was way over the reasonable. In some cases I'm assisting with the Short Sale and others, I'm assisting with keeping it leased out till they can afford to sell. 
