About The Buyer Psychology
Readers suggested a topic on who is buying. “I propose the following weekend topic: With all the bad news from the housing market, you’d have to be an idiot to buy now, right? Yet people are still buying. Are they deluded homeowners, or knife-catching ‘vulture investors’ who are going to be creamed when prices crater? If you know of a friend or rellie who made the mistake of purchasing recently, ask them ‘what were they thinking?’ and post the results back here. I’d be interested in reading about the buyer psychology.”
One replied, “My new (Maine) landlord closed on this house just a month ago. He is a retiring Federal employee, maybe he got a lump-sum distribution. He thinks he got a good deal here, because the price he paid is 30% below the original 2005 asking price of $650K. Shorefront, 2000+ s.f.”
“When he told me he had done very well with the purchase, I ‘yessed’ him - why ask for trouble? I am paying him $1,000 a month to rent his $450,000 alligator, and during the winter, when I am not here, the young couple of housemates with local parents will pay me $420/mo, most of which will go on heat.”
“You might say that it is I who am spending foolishly, and there is some truth in that; my point really is that the landlord is fortunate to collect even $1000/mo from a creditworthy customer. He thinks he will sell his inland NH house within a year. Stay tuned.”
Another said, “I’m considering buying soon. In central Aarkansas, we tend to lag national trends. The bubble lagged and the burst seems to be lagging.”
“I want to get out of the neighborhood scene, get some more room in the house, get a piece of land (5 acres? 25 acres?). So, is now a good time to buy? Probably not the best.”
“I expect to buy some time next year. I figure something in the neighborhood of 170k, I should be able to get a decent house with a couple acres for that. I am also not in a hurry at all, so I expect to make a purchase that is a ‘good deal’ at the time of the purchase. Of course, a ‘good deal’ now is just ‘fair market’ in six months. If I lived in a huge bubble area, I wouldn’t consider it.”
One looked back, “They are thinking in exactly the same way investors in the tech bubble thought. That is, ‘It can’t drop much more can it?’”
“Only if you have been through (and experienced the financial pain) of a bubble bursting, do you NOT reach out and catch a falling knife. Almost all who were invested in the tech bubble had very little experience with the stock market (myself being one of them) and thought the prices would bounce back. I myself was invested very heavily in the QQQQ’s (then the QQQ’s).”
“As it happens, I was away in europe and I got out of the market before I left because I couldn’t watch it on a daily basis. As in the property bubble, the buying and selling was fast and furious at the height. Bubbles are ALWAYS the same. I was following an ‘expert’ who advised his news letter subscribers to buy the QQQQ’s (long) at $84.00. They had already dropped from $120.00 at that point and the newsletter said they were a bargain. (Gee, where have I heard that before?).”
“However, and here’s the lesson and the irony, when I got back from europe, the QQQQ’s had dropped to $65.00! I read the newsletter and he had made no mention to his readers that they should sell. ‘Wow!,’ I thought, ‘How can I go wrong!?’ I plowed big bucks into the QQQQ’s at $63.00, thinking, ‘If an expert like him thought the QQQQ’s were a bargain at $85.00, what must they be at $64.00!’”
“Well folks, what is going to happen with property is what happened with the QQQ’s. I and others (the mirror images of todays FB’s and speculators ) hung in. It had to bounce back. Right? Wrong. Thousands of ‘hot companies’ tanked and many went bust. Just like some of the builders, banks and realtors and brokers are going to go bust.”
“Where I was concerned, the QQQQ’s dropped to $55.00. (That’s okay they will bounce back soon). Then $45.00. (That’s okay they will bounce back soon). Then $35.00. (That’s okay they will bounce back soon). Then $25.00. (Jeez, I wish I’d sold at $60.00 but it’s okay they will bounce back soon).”
“Of course there were the odd mini-rallies as the ‘falling knife catchers’ jumped in and bought but the bubble continued to deflate. As it always does until capitulation day arrives. The QQQ’s finally hit a $20.00 low after falling from $120.00.”
“THAT is exactly what is going to happen to property values. Other forces could come into play which might affect, one way or the other, the eventual outcome. However, it will make no difference. This problem is worldwide. I fully expect prices to drop at least 50% from the highs. Possibly much more. A property worth $700,000 at the height will drop to $350,000. THAT is the path ALL bubbles have taken. I’ve now read volumes on the outcome of bubbles and it’s amazing how the pattern repeats time and time again for hundreds of years.”
“THUS: Now is NOT a good time to buy. Now is a good time to sell if you own property.”
A response, “The amazing part (IMO) is how predictable this is, yet how unbelievable it seems while it plays out.”
The Economist. “The S&P/Case-Shiller national index, the best gauge of American house prices, peaked last year after rising by 134% in the previous decade. France, Sweden and Denmark have all had booms of similar size.”
“In Britain, Australia, Spain and Ireland, the ten-year increase in house prices has been even larger. If America is staring at a nasty housing crash, what does this say about the fate of frothy markets elsewhere?”
“What sets America apart is the time-bomb laid by subprime mortgage lending in the late stages of the housing boom…In short, dangerously loose lending standards fuelled America’s housing boom and now the fallout from increasing defaults is exacerbating the bust.”
“The Federal Deposit Insurance Corp reckons over 1.5m households will eventually be unable to meet their mortgage payments. Prices are falling and more forced sales will add to the already swollen stocks of unsold homes.”
“What might this presage for Europe’s overpriced markets? Robert Shiller, a seasoned bubble-hunter at Yale University, has stressed the role of news reporting in influencing price expectations. If America’s slump deepens, it might trigger a reassessment in Europe’s property hotspots, particularly as tighter credit markets start to price out the more speculative investor.”
“No one knows for sure how markets in Europe might respond to events in America. But one thing is certain: when it comes to asset bubbles, bigger is not better.”
NetBank closes! Of course, this didn’t get much attention in the media, but we just had a bank closure on Friday in USA. Why? Bad subprime debt of course.
http://tinyurl.com/27tckr
Every night I go to bed hoping the $36.84 I have in the bank is safe. “Dear lord, bless my meager assets from these bottom-feeders on Wall Street, Amen.”
Too funny. I had about $9k left over there. I finally transferred it….to ING…last Friday. I guess it’s a wash
I’m confused by that article. Are the depositors with monies over $100,000 SOL?
What does ING get out of assuming deposits? So they can make more loans? Er…
During the Dutch tulip bulb bubble of the 1630’s, the most prized, sought after bulb was a Black Tulip…
Which country will garner the dubious distinction of having the housing version of this?
What i’m looking for, is maximum increase in the past 10 years, on average.
Which country “wins”?
I think NHZ would say that the Dutch are the kings of the bubble once again.
a few days ago, nhz made a telling statement of the dutch commitment to maintain inflated housing prices even if means “bulldozing entire communities of perfectly good housing to keep inventory in check.” [paraphrasing]
i would not be surprised to see the same sort of excess supply destruction occurring in many new, geographically senseless mccommunities in the u.s.a.
and it seems to be par for the course that a few good, well-placed hurricanes always signal the end of every florida bubble. it happened in 1926 in the first big florida r/e mania; it’s almost inevitable where you have large swaths of empty houses, totally unprotected from serious wind and rain. not to mention the entirely entropic and remarkably rapid deterioration following epidemic shoddy construction, and the normal rot and mold that, without constant a/c, are prevalent in the sunshine state.
i would not be surprised to see the same sort of excess supply destruction occurring in many new, geographically senseless mccommunities in the u.s.a.
Won’t happen. Just who is going to buy this stuff so they can tear it down? The government? NFW. That stuff will sell - once the price gets low enough. Price anything right and it will sell.
My nomination for bubble capital is Ukraine. Declining population, weak economy, no oil, corruption, political instability, and 3rd world incomes. But West European prices.
‘who is going to buy this stuff?’
don’t be too sure it can’t happen in the USA. The houses I’m talking about in the Netherlands are owned by private corporations (housing corporations, ex-government). They demolish the homes because they can replace them with newer, far more expensive homes (= more income for them) and the government subsidizes the former renters of the home (at least for some years) so they can live in the new homes. A lot of what I have been reading in the last two weeks suggests to me that there are many politicians in the US willing to make similar arrangements there with taxpayer money.
“Won’t happen.”
i’m reassured to hear that. i hate it when bulldozers interfere with the free market!
Nederland doesn’t have $9 trillion in debt and a declining currency. There is no taxpayer money in America, only taxpayer debt.
Not to mention all the homeless activists will file all kinds of lawsuits to prevent destruction of any housing “as long as people are living on the streets”.
It’s already happening here in California, in a way. I live outside of Travis AFB in the SF Bay Area. Travis has a huge amount of on-base housing. Before the troop cuts of the early 90s, it had enough to house a very large proportion of the base personnel. That got even better with troop cuts. These houses range in age from 10 to 50 years old.
Over the past couple of months they have started to tear these houses down. At first I thought it was just a few houses. But within the past couple weeks they have been gating a HUGE number of them. Neighborhoods and neighborhoods. I asked around and found out that they’re going to tear down almost ALL of the base housing and build new ones. Hundreds of homes!!! I’ve been quite literally sick since.
The sheer waste of materials and tax money is disgusting. These are, for the most part in excellent shape. And, having been built, on average, 30 years ago, the material and workmanship is far better than anything we’re going to get today. Also, until the current administration, they had been assiduously maintained. Not to mention that we’re in the midst of one hell of an expensive adventure overseas. Someone’s getting their pockets lined.
The people I asked about it said the reason the Air Force gave is that the houses don’t meet the standards that today’s military families deserve. Are these the same military families of which a disturbing proportion DEPEND on the local food bank? Even, in some cases, when their housing is supposedly subsidized? Are these the same military families that have to drive to Sacramento or similar distances to see medical specialists because the Air Force can’t or, more likely, won’t fill that specialist’s position at the local Medical Center? Are these the same families that, because of this housing upgrade, are forced to find housing off-base? Off base, where they either pay ridiculously inflated rents or buy ridiculously priced homes which they have to use exotic loans because they don’t make as much as the average civilian? And those who did buy and are now stuck because the local real estate market is freezing up?
Yesterday I learned that this is not just happening at Travis AFB. It’s also happening at Beale AFB north of Sacramento and I wouldn’t be surprised if it’s happening at most other bases. I learned this from an in-law who got a demolition job up at Beale. He said these houses are in excellent shape. No black mold, which was floated as an excuse in these parts, minimal asbestos, excellent structural integrity, etc. He described how the Air Force is throwing away brand new items such as refrigerators and air conditioners that were purchased just last year! It makes me so mad!!! And I hope it makes you mad, too. Please complain to your congressperson!!
tulip bubble: AFAIK the highest price was paid for the Semper Augustus tulip, price 6000 florins (more than enough to buy a beautiful estate outside Amsterdam). A famous story is how a hungry worker ate such a bulb for lunch one time, assuming it was an onion or something similar, and thereby ruining the owner of the bulb. I’m not sure if the Black Tulip is a historical fact, it is the subject of a related book by Dumas.
The Netherlands must be in the top three worldwide for RE bubbles, at least among the first world countries. But my guess is that it might be worse in Ireland. Problem is that the statistics are often very misleading, e.g. in Netherlands the biggest realtor organisation NVM says prices have increased about 250%, the Kadaster (more official and reliable) says about 400%, but the actual value for ‘repeat sales’ is 600-1100%. Over the last 15 years the mix of homes that were sold has changed enormously, and in many ways this has decreased the average price (e.g. big monumental buildings are split into small appartments; more and more very cheap (ex-rental) homes were sold to their owners in the later stage of the bubble and for a long time every home that sold for more than 1 million Hfl (450K euro) was excluded from the statistics because it was assumed by the realtors that a home with such a high price was purchased ’strictly for commercial purposes’. It is now difficult to find a nice home below this 450K euro limit …
New Zealand wins!!!
Seriously, SFR prices are up 2 - 3 x in local currency, which has itself appreciated. For international buyers, New Zealand residential real estate has at least quadrupled over the past decade. Farm prices are even worse. Grazing land in areas being converted to vineyards has gone up 20 fold due to the global wine bubble. In the US, the coasts might be bubbly, but there is always North Dakota, Detroit, Clevland, Erie, Buffalo… In New Zealand, the whole damn country is a bubble. Even the south Auckland drug gang areas (think Compton) are bubblicious. And some of the rural dwellings are little more than tin roofed sheds, think Mississippi sharecropper housing circa 1930s. Plus you get the lovely aroma of the dairy farms. Those shithouses are 300 K as well.
Sorry, not trying to start a new screen name. I’m still the incredibly frustrated New Zealand renter. - JS
Seconded. I’m at Black Tulip ground zero in Central Wellington, and to say quadrupled is putting it conservatively. Granted, there is a genuine land shortage in the central city because it’s harbour on one side, unbuildable hills on the other, and only one barely-adequate motorway in, but prices of close to a million for 4-room shacks with minimal land, originally built for 19th century factory workers, is beyond absurd. I think that NZ has an unfortunate combination of global bubble+national culture where buying a house has always been the No1 life goal. The real estate-fixated buyer psychology was in place long before the bubble. Also, like NZ Renter says, there is a lot of methamphetamine money in the hands of people who lack the sophistication to launder it in any other way.
We are renting a new (but uninsulated and unheated!) 4/2 in a soulless new suburb of Hamilton for $410 a week. As a renter, I can’t even install a heat pump and double pane glass in this drafty icebox. Having inefficient plug in electrical resistance room heaters in a country with expensive electricity is asinine.
But buying would be madness. Using the 10 years of rent rule, this tract box it should be worth $213K. But the comps are selling for over 2.5 X that. Rabobank is paying 8.5% on CDs. If one had the purchase price in cash, and put it in the bank, the annual interest income would be nearly $50K, more than enough to pay the $21K rent.
Aren’t newly-built places required to be insulated by law? I’d be happy to continue renting, having absolutely no interest in taking responsibility for leaking roofs and blocked drains, but because of the boom so much rental stock is in the hands of clueless amateur ‘investors’ with no idea of what’s required from a landlord beyond taking the money. I think it’ll be a rough time for renters over the next few years as we’re messed around by greedy and desperate rental owners. Flip-side of that gotta-buy-a-house NZ mentality is that landlords often regard tenants as low-life scum who can’t be trusted not to crap in the oven, and don’t realise that for their real estate investor tycoon fantasies to work out, they need renters to hold our end up, and it isn’t in their interests to piss us off. Hope the owner of your place realises this, and sees the benefits of installing that heat pump.
I’m out of the market for at least a few years, because of quitting my job to go back to university, and returning to shared-house flatting, so picking the next NZ bubble that I can take advantage of as a short-term investor is a puzzle. Have invited quite a few baby-boomer acquaintances out for coffee to see what their new acquisition preoccupations are, but they’re still obsessed with real estate.
NZ has a serious RE bubble and bubble psychology (very noticeable when I was there in 2004) but 2-4x price gain is not that much compared to the Netherlands … In the city where I live (in Old Zealand) you cannot find any decent home costing less than 6x the price of 15 years ago, and the better homes are 10-12x their former price (in US currency that is probably 15x former price …). Wages have gone up only 50% or so over the same 15 year time period.
But it’s interesting to see a serious bubble in NZ on the other side of the globe, where many factors involved are very different (like plenty of land outside ACK, relatively high mortgage rates, no government subsidies for most buyers and renters). And still the result is very similar. I vote for easy money (in NZ that includes the carry trade) and worldwide bubble psychology as the major factors.
We bought a house in 2006 because of wife’s nesting instinct. I refused in the Bay area suicide finance. Hence we moved to a more reasonable locale (Albuquerque NM). We love the house. Neighborhood is great. Convenient for everything. Nice quality of life. Never plan to move again. We can afford the house. So I guess we are here for good. I am so glad to be out of CA. It was so shocking to read the 50% haircuts in Manteca CA (an area we could have wound up in if had fallen for the NAR crap) to make a former $600K house now same as mine $300K. But Albuquerque is 100X better to live in than “The Lard”. Much better quality of life in everyway (and I lived in Bay area 12 yrs).
I’m jealous! But at least I moved my TX wife to SoCal three years ago - thank god we spent the $500 we made on our house in Flower Mound on a nice dinner and started renting…! Can’t wait to move somewhere without the brutal commutes.
Yesterdays Yahoo business poll asked “Are we going to have a Recession” only 30% of us think so and 12% were “No Way”. Still a lot of uninformed people who are hoping for the best out there.
My guess is that among this 12% is where we will find our Greatest Fools.
Pavlov & Skinner would have loved to have diagnosed this decade…
Observers couched in the behavioral school salivate at every shocking twist and responding turn.
Somebody asked for brief stories. I am mid 40’s, married, one daughter 5 yrs, wife pregnant due in Jan. After going to CA, got hired at a telecom firm. Toxic work environment. Chose bad business partner. Lost my A$$ in everyway. Missed out on purchasing multiple homes during runup from 97 forward (actually had started with my dentist who had the $$$). When I was left on the floor, nobody bailed me out financially (did have the friends help with not alone stuff of course). Sucked it up, worked hard, lived frugal, saved money, got back up OK. Eventually get married. Work place toxic again and now on a medical disability. Doing freelance work, but financially sound.
When we bought this house, first loan wouldn’t consider disability income. I argue with top manager how had gall to call me a credit risk. My answer back, I could pay cash for this house (but would be a dumb tax move to drain out a lot of retirement). My income is more secure than an employment verification where someone could be laid off next day and I have deep savings IF income was cut. He said was protecting shareholder value, I counter back - what about part of corp that is giving loans to the undocumented folks (this was a division of Citicorp). In retrospect, that conversation was hilarious and showing how screwed up the industry got. An A person gets declined in division A, and division B is handing out jumbos through suicide that are now the foreclosures. I am the one that hasn’t missed a payment yet, plenty of money to make payments, etc.
“wife pregnant due in Jan. ”
Congratulations. Have you determined the father of the baby?
Seriously, good luck in the future.
Being bored last night, I compared rent vs buy on the UWS of Manhattan. It’s tricky, of course, because subways, food stores, and views count for a lot, but..
8k/mo rent gets you in a 2mil place, give or take (I was looking at decent classic 7s.) After maint/CC and taxes, you need to see a 5% yoy appreciation to make owning worthwhile. That’s possible, given these sales are driven largely by Wall St comp, but given the bulk of buyers are on WS, why would you want to lever yourself like this? A bad year or two, and a lot of people will be in pain (though not foreclosure pain - the coop boards are no dummies, and want to see 50%+ of the purchase price cash on hand.)
8000/month rent !!! i doubt our west-of-the-hudson bubblemates can barely wrap their brains around that sum. and yet, your decision to rent v. buy was most probably precisely the right move in this market.
even relative optimists like myself know that not even in the best nabes of manhattan is the market headed anywhere but down. that’s for sure. it’s just a question of how much down (at least 25%), and for how long (probably a decade, by which time we could all be back in the stone age).
and you now have the freedom to move. anywhere. any time (within the limits of your presumably 1-year lease). just imagine being consumed by an $8000/mo. alligator should a life/job change force you to high-tail it out of town.
smart move!
Thanks for the support - wish my inlaws could grok this. I’ve been renting in Manhattan for 15 years now. I know how much my income can change based on the WS economy and just can’t see myself levering at 4-1 in a real estate market that is highly correlated with my pay.
Plus, with two kids in the last five years, moving to bigger digs cost $5k, not $60k a pop!
15 years ago would have been a great time to buy. but hindsight is always 20/20.
tell your in-laws to trade in their rosy rearview mirrors for a new set of forward looking lenses.
p.s. because of the high downpayments and cash requirements of manhattan co-op boards, the market may appear to be ’stabilized’ for the next few years, or ‘down slightly’ when actually it is more likely to be seized solid. sales will plummet, and the few desparation/foreclosure bargains will be diverted to insiders. true capitulation may not come for 3-5+ years.
but asking prices will become more and more inflated and out of touch with prevailing bids.
anyone who pays ‘asking’ price now or in the near future will probably be stuck for a long, long time, regardless of the inflated asking prices you’re likely to continue seeing listed in the nytimes, even after much of the national housing bubble has clearly burst.
Yep.
Manhattanite,
Yeah, I watched the co-op markjet in the 90s: absolutely dead - boards wouldn’t let anyone list below last sale. Whole thing made the condo market credible because that was all that was moving. Then again, who really wants to live in Lincoln Towers?
“Then again, who really wants to live in Lincoln Towers?”
i would think plenty of people — at least until trump city blocked the river view!
“…boards wouldn’t let anyone list below last sale.”
my board had no problem with bottom feeders. there just weren’t even many of them! when
new buyers finally started to bite, in 1995, at about 40% below 1988 values, the board was happy to welcome them.
i think lincoln towers is a co-op, not a condo. (an old girlfriend lived there.)
Lincoln Towers is a coop–friend was living there when it converted. Sold a year later and bought on 86th. Not a bad building, but a weird, soulless development. But Trump’s development is worse…the retail places are still empty, can’t buy a newspaper or cup of coffee without hiking to Broadway, the wind is brutal, and they have that highway off ramp right in front of multimillion dollar apts.
I stand corrected. It’s a co-op. I just assumed it was condo, cos, as spike says, it’s a soulless development in the middle of nowhere. Give me Broadway anyday - my kids love 15-foot wide sidewalks full of stuff (people and pets and book vendors and cat rescuers and god knows what else.) My 5yro knows half the people in the nabe - as my dad said, it’s like living in a village, a very cool village.
i agree. broadway is the heart & soul of the uws.
How long will it take to change buyer psychology on what is affordable house prices? Sure some houses now look affordable because they are 30% of the high - but those high prices were achieved with “lending exotica”. Without the crutch of $0 down, low teaser rates/i/o’s/neg am lending how long will it take people realize that houses are not affordable until they are in line with median incomes using conservative loan programs?
About another year before people realize house prices are not in line with income. By that time every other house in America will have a for sale sign in front of it and zero showings for 6 months.
Maybe then sellers will knock another $10K off their sales price.
Went to Open house today, 3/1.75 409k gated comm, needs minor upg, gay r.e selling, Gays buying.
Across street, 3/2 sold for 375k + 100k reno, gay with money.
My small gated comm is an aberration, and the other unit,totally reno =owner took the sign down after over 1yr on market for 435k.
Unitnot worth over 200k but they have a market.Gay.
Not prejudiced, just noticing who is going to open houses AND buying, here.
Other areas developments are in serious Emptiness, lots of foreclosures but not in FOO FOO( chi chi ) neighborhoods/gated etc.
I don’t know how long it will take to change buyer psychology on what is affordable housing prices. The real turning point is going to be interest rates. That is the elephant in the room that few people are talking about.
We are at historically low interest rates. They will not stay there forever. When they revert to the mean, and then move above it, housing prices will plummet.
The housing market is in a slow decline. The subprime meltdown has increased foreclosures. Wall Street’s refusal to buy loans has tightened credit. These two factors been a gentle awakening to overpriced homes.
However, when interest rates rise to 10, 11, 12 percent, the bubble will crash. San Diego and So. Florida will have over 50% drops. Other bubble areas will see 30 or 40 %. The housing market will revert to 2002 pricing or worse.
Then, I will do Elaine’s full body dry heave dance in front many Century 21 offices!
A close friend of mine owns a 2nd house in San Jose that her and her sister inherited from parents…….along with incredibly low property taxes! Anyhoo, she is planning on selling said home to bolster her retirement income.
Her Broker/Financial Planner actually told her not to put the house on the market for another 2-3 years!! (Evidently the same broker who failed to get rid of her stocks in a timely manner during the bust.)
She won’t listen to me, I’ve tried! Unfortunately I am one of those people who say ‘I told you so’
She’ll be fine though, she’s planning on taking out a reverse mortgage on her current home…………….:-)
I got a call from someone yesterday congratulating me on my housing predictions after seeing Jim Cramer on the Today show.
She ignored my warnings for 3 years. She later asked for advice. She didn’t know if her payment shocking ARM was from Countrywide or GAMC (it’s GMAC btw, the husband controls finances). She is utterly clueless.
I said it was too late. You’re f@cked! I’ve got better things to do with my time. If you can’t pay, walk away. I don’t care anymore, Phil:
http://www.youtube.com/watch?v=C6KMYms8is0
The one friend in el lay I convinced to sell their house and move on to greener pastures, listed it for too much a year and a half ago and wouldn’t entertain and counter offer, please.
It’s a hot market, dontcha know?
No Sale
She’ll be fine though, she’s planning on taking out a reverse mortgage on her current home………
Ahh - the reverse mortgage. I wonder if banks will keep writing these. Reverse mortgages work great if you assume house prices stay the same (and thus real price increase with inflation) or in a rising market. How popular will these be when we see year after year real price decreases?
I think a bank guaranteeing to buy a house a person dies is just insane. (Although good for the old person in question.)
Okay - did I just screw up nomial vs. real price? I meant the one not adjusted for inflation. *sigh*
If they raise the limits at Fannie and Freddie (850k). Momma and I are going for the max reverse mtg (house worth 2.3k today).Monthly $ non-taxable. Kids will have to do with low seven figure estate ,excluding house. Not to brag but I did. hehehehehehe
I like to say ‘I told you so’, too. I get to say it lots, is the good thing, because my evolved ape brain can do this thing I call ‘take stock of current data points and thereby predict likely outcome(s)’. I bet many HBB bloggers can also perform this valuable trick.
I like to say it, and I like to say it more than once, and I have sometimes improvised little dances that go along with that ‘I told you so’, with snotty bum wiggles and tragic-comic facial expressions. I recommend you try that, because it’s fun, although be alert to projectiles, because some people are just not that evolved and will throw things.
“I like to say ‘I told you so’, too. I get to say it lots….I like to say it, and I like to say it more than once”
I grew tired of saying that over and over. So, I had that phrase tattooed on my butt. It is great. The “o” in “you” is actually provided by a special part of my anatomy. The people I have spoken to about this subject often make me think of a butthole, so I returned the favor.
The “I-told-you-so boogie” is always entertaining, unless one is on the wrong side of the equation …
Stop puuuuleez…eye leaking laughter makes it hard to read!
Talk me down from the ledge! My husband and I live and work in southern california. as teachers, we cannot afford to buy here. we rent a great place and are happy with that. we’ve been looking to buy in cape cod so as to get a tax break retire to in 10-15 years and, in the meantime, enjoy during our 3+ months off every year. it’s near family and we abso love the cape. we came This Close to buying a painfully picturesque (albeit tiny) lakeside cottage in june. we backed out at the 11th hour, bcz my brother, a carpenter in the area, went to the home inspection and told me flat out we were paying too much and should wait. “i’m in the thick of it,” he said. “And it’s not pretty. nothing is moving. buy this house and you’ll lose $20k maybe more inside of 6 months as it depreciates.” we loved the place but took his advice. now we’re really glad we did, as last week i checked the reg. of deeds and saw a $224k quitclaim deed filed on the property. We were into it for $244k. yikes!
we’re still looking. we feel like our formula for making offers — 20 percent off 2007 tax assessment — is a good one and that we’re safe casting low balls and waiting for a desperate seller to bite. but we’re still worried. what if our low ball figure isn’t low enough? what if rates go up? we’ve got A credit, zero debt, a hefty nest egg, 2 tenured incomes and 2 lifelong pensions and we are saving, but the fed (those backscratching meddlers. free market my *ss) isn’t rewarding people like us. we’re afraid of rising interest rates, though that might be good, in that we will pay lower sticker price and get more write off on taxes. What say you, bloggers?
We’re going back for 3 weeks at christmastime. we’ve got a few places in which we’re seriously interested. should we make a move using our low ball formula or wait until some undefined period in the far off future? It’s so hard to wait. we’ve been doing so for 5 years! We’re eager. the money is burning a hole… Help!
Standing by…
I have a co-worker whose uncle is selling a cottage on Cape Code. It is 250 square feet and they are getting $135,000. It comes with no land. They are part of an association. I have never been to Cape Cod but WTF? That makes no sense to me at all and I live in Manhattan.
“It is 250 square feet…”
and no wheels??? it sounds like one of those new portable mini-cottages. there was an article about them in the nytimes a few months ago. just like a real house, but much, much, MUCH smaller. and with wheels. very cute! and a lot cheaper than $135k.
DON’T do it!!! The tax breaks are for people who live in the property (unless you’re forming a business), and fifteen years of maintenance and property taxes before you move in will just drain you. There’s a recession coming and asset deflation will be the norm. Wait two quarters for rising prices and then ask the group again… because we’re about to see years of falling prices, and you’ll find a LOT of bargains around the Cape over the next few years. There are far more homes in this country than we need, and declining incomes will just cause people to part with their rentals and summer homes. Look - if Cramer is finally screaming “Don’t Buy” please listen!!!
I rent in Long Beach and wouldn’t buy again ANYWHERE in the US. Put your spare cash in metal (off the grid and saves you from a dollar decline) or in T-bonds (it’s almost immune to default - muni’s will dive since States and Counties can’t print money)…
If you need charts just ask…we’ll come up with them!
thanks for your input, nightowlsix. it’s my underrstanding that primary residence or no, we get the write off for both mtg. interest and prop. tax. Am i wrong on that?
I know in my brain you’re right. Now if I could only stick a silver stake in my heart which is screaming BUY! BUY! ugh.
Re: Cramer. Used to love him, but after his ridiculous recent on-screen screeching, when he begged the fed to lower rates for him and his wall street buddies, i got off the Cramer wagon. Rat b*stard. I’m trying to be strong…
I’m trying to be strong…
Or you can go broke and join the hordes of debt serfs. Up to you. Nobody here is going to hold a gun to your head and suggest you behave intelligently.
Ha! yeah, the condo cottages are everywhere on the cape. best as i can tell, they’re for investment purposes only. You can rent them for $100/night to travelers. Though with the relatively short vaca season up there, can you turn a profit? maybe they’re good for people who need a loss?
Maybe it would help to visualize your post-purchase mentality. Let’s see….
1. Honey, look at this place for sale down the street. It is bigger than ours, has a nicer kitchen, and has a bigger lot. And it is $20k cheaper too.
2. Honey, I got let go today from my job. I did get a decent offer a while back from Joe. But we will need to sell this place and the market is horrible. What do we do now?
3. Honey, we really should have waited. Look how far prices have dropped since we bought. And the higher interest rates seem to be forcing prices down even faster. Those people that said you could always change the rate, but not the loan balance, were right.
4. Honey? What do you mean you found a newer, younger model? How could you do that to me? What do we do about the house? We cannot sell it and get our money back now.
Buyer’s remorse can be a bitch.
“Buyer’s remorse can be a bitch.”
so can the nesting instinct!
hahahahaah, joe mama. thanks. i needed that.
buyer’s remorse is a big, fat b*tch indeed. but i’m not as worried about the hubby trading me in for a younger model. he’s already got 17 years on me. anything younger than me and it’d be illegal. plus we were married in can-you-say-HALF, no-fault california. he can’t afford to trade up.
but your advice is well taken. helplessly watching your $$$ swirl down the porcelin bowl has got to hurt. ouch. we’ll likely wait…
You can change the loan balance…pay extra principle! Throw an extra $10K every couple of months at it…!
very funny. but oh so accurate.
missed one… Honey, big accident, can’t work, disability isn’t as much as my income was…medical bills through the wazoo.
Now how do we sell the house that is overpriced, and no one is buying?
Incidentally, nothing about the Fed is representative of a “free market”. In a free market, people tend to gravitate toward things with some inherent value (gold, silver, salt) as a means of currency. What we have with the Fed, is a government-backed currency monopoly.
Hi, We lived on the cape from 2000 to 2001. We are both doctors and worked at Cape Cod Hospital. We rented in Barnstable at about 1/4 the cost of owning the house. The boom was bad then. There was even an article in the local paper about a doctor who had to buy a fixer because of high prices. I would wait until price go below 2001 levels unless you want waterfront. The year round people vastly overextended themselves for houses. Many of the waterfront houses have been in the same family for generations. They don’t need to sell. However, the Cape is vastly overvalued. We now live in California. We recognized the same effect here. Rent a midtown 1900’s house in Sacramento for 1/3 cost of owning. Save your money. Rent on the Cape. You will get a great deal as so many houses are vacant much of the year. Let the owner pay the full cost of owing while you enjoy the lifestyle.
thanks for the great advice. it makes absolute sense; however, every april 15 when we make out a giant check to uncle sam, it hurts. real bad. plus when we retire in 10 - 15 we’ll be starting from zero. i worked my whole life to get where i am now, and it seems more curse than blessing, damn this bubble.
Wait until you’re writing a big fat check to the incompetent cronies in your local gov’t, AND a big check to Uncle Sam with a piddling 15% discount … AND a nice big alligator payment every month …
Renting rocks.
Hi msprompt,
I’m almost in your shoes too. I’m really not as qualified to advise as many other on this board, but I’ll offer my thoughts as to what hubby and I will do.
WHEN we find what we want, it will be the last move we intend to make (until the maker calls that is!) We are very firm in our vision. That’s my advise–be very firm in what you want and do not settle for anything less!
Best,
Leigh
thank you, leighsong. we never thought of your “clear vision” approach before you mentioned it. it’s a sound strategy that seems to eliminate a lot of the gut-wrenching iffy stuff we’re wrestling with.
msprompt, please keep waiting. Things are coming a little bit unraveled here in Maine, and I’m sure Cape Cod will fall further in due time. Remember the tax breaks for 2nd homes are going away, and Cape Cod is still largely vacation homes, though it does attract retirees. I have acquaintances in P’town, Truro, and Wellfleet; they were all SO sure the Outer Cape was “different” but they are not singing that tune so confidently now. Sit tight, in a year you will at least not have missed any great opportunity.
az_lender: you said “Sit tight, in a year you will at least not have missed any great opportunity.”
that’s the truth. you’re so right. gotta remember cost/benefit. it costs us nothing to wait. but we’ll prob. realize a geat benefit.
this purchase we’re considering wouldn’t technically be a second home, since we’re renting in california. i understand that we’ll still get the interest/prop tax write off. am i wrong?
MSPrompt -
Buying property by “justifying” it with the tax deduction is a really bad idea.
Yes, writing checks out to the IRS is painful - but at least to goes things to schools, big bombs, and the widow down the street. Interest lines the pocket of the already wealthy.
The mortgage tax decution is only worth it if you can itemize other items. The standard deduction for those married filing jointly is slightly over $10K. Unless you have other itemized deductions you have to spend $10K on interest just to make it to the standard deduction. On top of that, in terms of a tax credit, you only get your tax bracket’s reduction on the interest.
So, for the “average” person you are looking at saving 25 cents on their tax bill for every dollar of interest you spend *over* the standard deduction. (You would have gotten the standard deduction anyway.) You still lose 75 cents, no matter which way you slice it.
So what’s less painful? Writing out a yearly $2K check at tax time or spending $2k per month on interest you’ll never see in an over priced market to save maybe $6k in taxes? (Remember - you had to spend $24K to get that break.)
In over priced market I can almost guarantee that you’ll come ahead with renting if you actually run the numbers instead of assuming that you are coming out ahead a reduced tax liability.
It’s pretty easy to figure. Assume that you had this dream house last year and calculate your taxes based on the interest you would have paid. Look at your tax savings and compare it to both the opportunity cost of your downpayment and the interest you threw away. I’m thinking that the tax savings aren’t going to look so hot compared with the money you will have to spend.
cape was first in the tank in late 04
last time I don’t think it reached par till 2000 from a decline starting in 1987 !!!!!!!
Just left bruch with some family and friends. Friend is looking to buy a SFH with his wife. Planning to buy the house and then try to sell their town house. Want to do it before their international adoption happens (even though their home study was approved in the town house). I didn’t even try to say anything.
Fortunately, they are clever enought not to over extend themselves, and the townhouse is not a recent purchase, so it could probably rent for enough to cover its carrying costs.
I think it is a nesting thing because of having a kid on the way.
We did international adoption.. with a nice hefty surprise $10K extra fee added in at the end. It ain’t cheap. Wouldn’t do it.
When I say “wouldn’t do it”… I mean wouldn’t buy the house.. of course!
You mean … you can’t return the child with full refund after 30 days?
“What might this presage for Europe’s overpriced markets? Robert Shiller, a seasoned bubble-hunter at Yale University, has stressed the role of news reporting in influencing price expectations. If America’s slump deepens, it might trigger a reassessment in Europe’s property hotspots, particularly as tighter credit markets start to price out the more speculative investor.”
Shiller has such a gentle, cautious way of saying the European property bubble is toast.
but the market has been toast for more than 6 years in some EU countries, and despite the fact it keeps growing …
You should be surprised (or maybe not) to see how the US housing slump news is spun in Europe to make the EU housing market seem even more invincible. Of course, that only happens in the US with their stupid subprime buyers, we don’t have that in Europe, EU RE prices are strictly based on fundamentals etc.
Oh yes, they also mentioned the rising euro today on the TV news (no, not the falling dollar). It’s a disaster for the Dutch exporters because (how fitting!!) Americans now pay $7 instead of $5 for some tulip bulbs. But look at the bright side, those Hummers where never more affordable! With that they include a full minute of free Humvee advertising (of course according to the sales guy they are flying of the shelves with the current price). The US housing bust is exporting the US energy inefficiency and megalomaniac thinking to the EU; fortunately, if you use these cars in our old inner cities they will get stuck somewhere, so it will be a nuisance only for a limited time.
hummers in europe? at $8+/gallon?? maneuvering through narrow alleyways???
unfrickenbelievable!!!
Haha, you ate our fatty Mcburgers and french fries, and now you are trying to drive our fugly cars!
I’m glad Toyota has some competition in the “oversized pig car” category in “Old Europe.”
Oink! Oink! I believe that’s the sound of metal scraping and denting when you attempt to park in between a city car and a metal post.
Think of all the Tour Buses that squeeze and turn those tiny little streets.
But you are right about the cost of gas. However they do have Health coverage, no worries there.
It’s not only buyer psychology, it’s also investor psychology. Nobody wants to believe the market is deflating. I had a case last month were developer stiffed an investor in one of his projects for $250, 000. I thought the investor was astute finance guy, but he no idea about the mortage market melt down. The developer’s other projects had been financed by New Century and Option One. I told the investor the reason he went to you is both of these outfits are out of business. The Investor didn’t know that. The developer can’t sell all the townhouses he had built and is trying to stay afloat by pyramiding debt. My advise was to get some property out this guy to cover your loses and get out. But the investor decided to invest more money in this guy to finish the project, because, “I can see what he see’s” I just told him “I hope you right”.
I can see what he sees
Really? Because he sees a chump.
I think the biggest chumps around here (Bozeman Mt.) are the banks. They keep guys like this afloat by refinancing them, even as the market slows down. The developer in this case, has loan from a bank in Absarokee Mt. which is a small mining town southwest of Billings Mt., far away from Bozeman. Plus he has note from The Bank of Bozeman. When I see Bank of Bozeman in the wood pile I know there is trouble. It’s the bank of last resort, when no other bank will finance you.
Comment by NYCityBoy
2007-09-29 10:34:24
Every night I go to bed hoping the $36.84 I have in the bank is safe. “Dear lord, bless my meager assets from these bottom-feeders on Wall Street, Amen.”
Me too! I mean, I don’t pray that your $36.84 will be safe, because I wouldn’t presume to discuss your possessions with Baby Jeebus, but I pray that mine will be safe, and then of course I add other requests, such as that I will find super pretty shoes on sale this weekend, with some pretty sparkling decorations, ON SALE, mind, and that I won’t chop anything off whilst building a table out of pallets for the garden, and that the head of the Masters Builders will be whisked off to Hell, transformed into the shape of an ugly yam, stuff like that. So far, so good.
Additionally, I imagine I leave a trail of prayers behind me on the freeway when I drive, which may or may not rise up to enter the sweet Baby Jeebus’ ears, depending on how many profanities are in those prayers. I shan’t hazard a guess. I disapprove of crazy speculation of that sort.
LOL - you all have way too much fun in the Pacific Northwest!!
hahahahaah lol hahahaha. may holy jeebus bless you and multiply your $36.84.
Most of the best learning opportunities for me, came with making mistakes…
The mistakes made in this bubble weren’t the kind that smarted a little, and something could be salvaged from the wreckage, no siree bob.
Mistakes made in buying overvalued houses, will haunt many the rest of their lives~
Theses day we hear the term ,”Greedy Buyers” quite often.
I think the sellers and RE agents need to understand a little about many of the buyers that are on the side lines.
(1)They didn’t buy into the “get rich quick scheme” of RE and don’t have any desire to pay too much now, just to bail those out who did.
(2)They generally have a sizable down payment that is most often in a bank CD earning 5%
If/When they buy a house they will lose the interest on the down payment money and therefore lose money regardless of the selling price.
(3) They live within their means to be able to save money. They are not going to take out a loan for more than they can comfortably afford to repay.
(4)They realize they are taking a risk and may lose some of their down payment equity if prices continue to slide.
They also know that home prices may not start to increase again for a decade or more.
(5) If something happens such as a job relocation they may find it very difficult to sell.
With all of these negatives facing potential buyers , derogatory comments such as “Greedy Buyers” certainly don’t improve the chances that they will buy anytime soon.
Some of the RE agents and sellers have never dealt with buyers who are not gullible.
Who said ,”Buy in Haste repent in leisure “?
“sizable down payment … in a bank CD earning 5%”
Sure, or a 100% down payment sitting in Icelandic&Brazilian currency earning 9% guaranteed by those governments, plus the currency play, whichever way it goes. You may not think much of Brazil, but it seems more reliable than US housing market!!!
AZ,
Not to pry, but is this where you have the majority of your “liquid” funds? That’s quite a sum for a 100% dp.
I hadn’t considered Brazil, but recently am giving it another look after reading somewhere that they are 100% energy independent - oil, sugar cane.
Also, where did you purchase those currencies? Everbank?
Something wrong with Everbank??
just askin.
I used to tell my friends this is not the right time to buy since mid 2005(that was the first time TIME magazine published the article “Home $weet Home” then I realized that this bubble and this is the time to get out if you are a owner, time to stay out (rent) if you r looking to buy your first house. we sold our house after 6 months early 2006 and moved to a appartment. every one started saying its bad move bcos house price always goes up no body listened to me. i used to tell them wait for 2 years prices will come down 10% (that was my guess ) . that time 10% drop looked like huge drop. i am still renting i dont know when i will be buying my next home.
We sold our house in L.A. at the peak and left town, and rent. We saw a huge net gain - it’s like we won a small lottery. I imagined that the correction would happen very quickly, and we could buy a rural place and get on with our lives, but it hasn’t worked that way. Sellers in our new location have clung to their “boom” prices for over a year now, even as inventory has skyrocketed. The few sellers I have spoken to describe themselves as “patient,” as if it’s just a matter of time until someone comes along to pay their 2005 price. It’s a little sad.
We’ve seen quite a number of price drops, but most are in increments of 10-15K when they need 100-150K cuts just to get back to 2004 prices. As much as we’d like to get back in our own home — we just sigh, sign another lease, and wait.
I can’t predict the future, but I still have hope that this bubble will play out a little faster than past ones. With the new speed of information dissemination (blogoshpere, cable news, etc) we might reach the “tipping point” sooner, even see some seller panic. That’s sounds predatory, I know, but what can I do ? We’ve been careful with our money, worked hard, saved, made some good decisions, and were a bit lucky. It’s not for us to bail out others who were overly ambitious, greedy, foolish, or just plain unlucky.
Talking of rural. Just saw a $200K price drop. 3000sq ft house (1997 bulit and nice) on almost 2 acres, dropped from $650K to county.$450K in tha last 72 hours. On market 3-5 months. Humboldt
Good luck to seller. Is the best deal out there right now.
Here is URL:
http://tinyurl.com/2plvjv
Sill expensive, but, hey, rural California asking prices are HIGHER than Sacramento, right now. For a worse house. Go figure?!?
“It’s a little sad”
What ??? You sell at peak prices but it’s a little sad when other want the same ???
What a piece of work . You got yours going and now you want it coming . Greedy bastrrd .
It’s sad when people desperately cling to irrational hope.
Don’t know where you got that from the GP, Just Say No.
They were smart and sold to a willing GF. Most of these people who can’t sell, can’t sell because they took out HELOCs or borrowed for more than the house is worth. Many who wish to buy have not saved and therefore are getting their loan apps denied.
Sure, many of us are suffering from the circumstances of EZ lending. TPTB should have nipped it in the bud, but they were too busy skimming a little of the froth off the top. So here we are. No sense in paying for other’s greed.
Listening to Dave Ramsey streaming from Friday. He grilled a woman who took out a loan on house based on 155K appraisal but it was only worth 130K. “Where did the money go?”
Hmm, new truck maybe? No sympathy.
My thought process was at first determined by price, but now that I am experiencing subtle nuances of certain neighborhoods… I am thankful to be renting so I can fine-tune my target house and neighborhood.
For example, I have now lived in 3 different types of housing in 3 different areas of Pinellas County. I’ve learned that:
- 2+ floor Townhouses suck for efficiency. Your ground level will be nice and cool while you’re sweating your face off in bed.
- You don’t want to live near any type of stormwater run-off.
- You don’t want to live on any type of through road (litter in your lawn); boom cars, prostitutes on bikes etc.
- For the love of all things sacred, never live in a duplex.
- Think twice about “beach communities.”
- Lakefront means gators, snakes, bugs and weird people fishing at all hours.
- A nice shade tree will make a HUGE difference in August.
- Don’t live between 2 destinations (like Publix and a neighborhood).
These are just some of the things that I’ve learned while renting over the past 2 years. Previously I might have overlooked any one of these issues to “get in.” I’ve made a list of must-haves and must-avoids so my buying decision is not just influenced by price, but what I am actually getting into. I think nearly 100% of all Florida bubble-buyers didn’t really consider some of these environmental factors during the past 5 years. I can also now spot crappy handyman (Flooreeduh-style) work a mile away.
Oh yeah, a fenced in backyard means burglars can break into your house without being seen. I’ve noticed many of the worst ‘hoods are entirely cordoned off. I think this results in the opposite of the desired effect.
Yeah, there’s no warmer neighborhood then where everyone has 10 foot high fences. However, it does make skinny dipping more of an option (get a pool first, though).
In general, homebuying is determined by lifecycle — get married, have kids, decide you want to stay in a community, buy a house. Those who are unfortunate enough to be at that phase during the bubble are unfortunate. Any buying a house as a home is normally a sensible move, absent a bubble.
Let’s say there is a house you like in a community you like and you can afford it. How many years will you have to wait for the market to actually bottom? Five years? And then you kids are 8 and 9 instead of 3 and 4, and that means moving them to another school.
I told my sister not to buy, but she did anyway. She wanted to get her kids in the school. She knows she will lose money unless she stays a long time, and will lose in real dollars. But you only live once.
I suggested to friends that they wait in 2003. They would have waited for the past four years and the next five. Their oldest kids would have been getting ready for college, and they would have been living in a two bedroom apartment with two kids, if they had followed my advice. In the end they would have been better off financially. But so what?
As I said, those in the home buying phase of life during the bubble have been very unfortunate. They’ll buy when they can. That’s why the big nominal drop (next year?) followed by a long period of no increases (but real declines) is the most likely scenario.
This is precisely why I intend to buy in the next year (I’m the one quoted in the article about buying a house in the 170k range). Financially, it would be better to wait, but this is not about investing, it’s about living. So, I’ll buy something reasonably affordable, 20% down fixed loan and all that. I’ll shop hard and make the best financial deal I feel I can make. It may not be the best decision financially, but I can’t live my life only considering financial factors and ignore all other costs/benefits.
In the next 5-10 years, I’ll be watching and waiting to buy more land at the bottom of the cycle. That will be more investing oriented. In the mean time, I have a life to live.
Honestly don’t understand how “a life to live” precludes renting. My wife and I are renting a great place for cheap and buying wouldn’t significantly improve our lives nor lifestyles. We’re in no hurry. Maybe you just need to find a better rental.
I think it’s just what you want to do with your life. For me, a rental means “roof over my head”, which is fine. Sure, you might plant a small garden or something, but there are a lot of activities I think most people wouldn’t engage in a rental.
I would like to keep some chickens, pigs, cows, goats maybe stock some fish in a pond. Might be able to do some of that in a rental, but are you willing to risk the money/time/effort into the infrastructure only to move two years later and leave it all behind, or have the landlord decide he wants to sell right after that work is finished? I’m not willing to risk that.
I’d like to build a shop/barn in the back, plant some muscadine vines (they take either 2 or 3 years before they start to produce fruit), plant fruit trees, have a greenhouse we can benefit from for years…
There are other things, and these are things are things I want to do with my life. To me, I just can’t turn a rental into a “home.” It will be a place I’m staying until I move to the next one, maybe in a few months, maybe in a few years, not really up to me at all and always putting off things I want to experience before I die.
Ive given some thought to this. I liv ein the DC area, and have given up hope for the next 3 years or so of buying a place. Ive aready seen places on cragslist in hte last 6 moths i would have bought in a heartbeat, except for blogs like this. THanks Ben, you saved my ass.
So instead, i think i may buy a boat to live on. No appreciation, no nothing, fees and whatnot, but certain amount of freedom. I figure in another year, the market will have shat itself enough that a 40 foot boat will be dirt cheap. If I can get that for a cheap price, vs dc condos, i amy be able to do both, and get some kind of rental. Either way, Im sititng on the sidelines untill things make some more sense.
I agree with bluprint, no matter now nice the rental, it’s not exactly like owning. Whatever time and you invest in setting up a rental the way you want it, that’s all potentially forfeit at the end of the lease.
I’d like to set up a woodworking shop, and bring my (very heavy) printing press out of storage, but I’m not going to bother if it’s only for 6 months to a year. These are things that I enjoyed using when I owned, but I must do without while I rent.
I suspect some of the people here are too young to bother counting their remaining years (good for you!), but the formula can change around 40 or 50. By the time I’m 70, I expect I might be “overpaying” for a few luxuries and not giving a damn.
Do you really ever own a house? Anyone every hear of the “bundle of rights” theory? HOA Dues are a good example. Even if you pay cash, you still pay the HOA fees. What about taxes….try not paying your taxes and see how fast you loose your property.
You can’t just decide to change what you do with your piece of land. Zoning restrictions apply. Put some chickens in your Subdivision home zoned RD5. Good luck!
How about mining or drilling for oil? Put up an oil rig on your land and see what happens. Somewhere in history a previous owner reserved the mineral rights to your land.
What about riparian rights? Got a creek running thru your land or a river near by? Think you can get water from it? Think again, if you don’t have water (riparian) rights too bad.
every = “ever”
Above point is you never really own land. You just have the right to use it in a certain way. As long as the powers that be say you can and as long as you keep paying the bank, government, and everyone else with their hand in your pocket.
Interesting. So you saying that because there are some limits on your property, you have no meaningful rights at all?
By extension, you would argue that because society has laws that limit your behavior (i.e., forbid you from walking through a schoolyard naked), you have no true freedoms.
It’s a “Black and White” fallacy, AKA “fallacy of the excluded middle”. It doesn’t fly.
Not sure my comment conveyed the proper message. Oh well, there’s always wikipedia.
http://en.wikipedia.org/wiki/Bundle_of_Rights
“Honestly don’t understand how “a life to live” precludes renting”
4 cats… that’s how. Tired of hiding and lying to landlords to keep my babies.
Another good point. We’d have a pet right now, but the landlord would want more deposit and extra fees.
I’ve signed a lease and I’ll follow the rules, but you get tired of “treading lightly” because you’re in someone else’s house.
Let’s say there is a house you like in a community you like and you can afford it. How many years will you have to wait for the market to actually bottom? Five years? And then you kids are 8 and 9 instead of 3 and 4, and that means moving them to another school.
Why not rent in the same ‘hood (unless it’s totally impossible?) Then it’s just an address change, not a school change.
just imagine how it is in Europe, where some people have been one the sidelines for more than 10 years already, because they were priced out. For most low income people in the wealthier EU countries, not being able to buy is not a real problem because they can get cheap (heavily subsidized) rental properties, but for many others (e.g. if you are self-employed and/or have significant savings) that is not an option.
In Europe a whole generation is suffering because of the stupidity and greed of the politicians and the previous generation (our ‘boomers’ who are profiting beyond belief from the EU housing bubble). Young people have to live with their parents for many more years, or live in very bad conditions, or get stuck with a super mortgage that they will never be able to pay off.
And even when the EU bubble bursts (no sign of that yet!!) it might take 10-20 years to bottom, because of all the government interference that prevents the housing market from functioning.
Talk about lost generation …
This fits — all my Gen Y European friends are living with their parents, although my one friend who is over 30 lives in a flat with her husband.
One friend is in France, did well in school so she is a teacher (sucky job, btw, but she works about half the hours I do AND eats French food every day). I guess she is lucky to have a job because so many French are on welfare. She was living with her dad last year in her family’s owned flat, but I think is renting now in Paris.
My Czech friends, like all Czechs, are surviving as best they can. Job market is tough (just like for me).
The problem is that young people like ourselves have to compete with older people with more years of experience.
I think I’m better at the job, but it’s hard to get a chance to prove it.
I think in Europe young people currently have no problem at all competing for jobs with the older generation (45+ is too old for most companies, and many 55+ workers are already enjoying their pension). Problem is that a good job doesn’t help much with the current home prices, only those who already own a home can buy, plus ta few who can get in thanks to the government (that pays everything for them and assumes all the downside risk).
Exactly. Life can only partly be driven by economics. It also involves family, living, and moving on with things. While I would have loved to wait another 3 years or more, the wife and I hit the age of 35, kids were nearing elementary school age, wife received a relocation package that meant real money (moving expenses, 2 points, closing costs, etc.) now instead of out of pocket money later — sometimes you just need to make the best of a bad situation. I’m sure we’re nominally down 5 - 10% in value since moving six months ago and it is lousy….but life is life….10 years waiting for a bubble unwind is a long time….we’ve lost several people to cancer, auto wrecks, etc. over the past few years — tomorrow is promised to nobody….i guess you just have to do the best you can in sub-optimal circumstances
As a housing bear myself, I see a good buying opportunity for a specific class of persons: People with a lot of cash who want to protect their wealth from the coming brutal $ devaluation in the next 10-20 years. In real purchasing power, $ may have to go down 50%-75% in the next 10-20 years to eliminate our hunger for foreign capital for consumption. That will devastate cash & cash equivalent holders. They should buy prime real estate in international gateway cities like NY, LA,SF, SEA, BOS etc., International demand with a worth less $, will prop these values up.
LOL. Sure.
International demand with a worth less $, will prop these values up
…unless the euro and yen follow the same path as the dollar, which seems almost sure to me.
I foresee strong demand from China, South America, Russia, Korea, Eastern Europe after $ free fall.
i think both bsr and nhz present valid arguments for another level of debate:
1) whether the creme de la creme of internationally desirable american r/e will maintain its value, and 2) whether there will be an international clientele who still finds such r/e valuable in an uncertain future.
I guess these buyers would be wise to buy in Oz, New Zealand and other first world countries that are much closer - not even considering the question if the US is still a first world country after the current $ fall has run its course
Many of our countrymen delude themselves with “Everybody would jump through hoops to come to the USA” gibberish…
When in reality, only the 3rd world wants in.
3rd world man’s wallet is a little on the empty side~
So true. Ive traveled a lot, and most of Europe and 1st world asia make the US look bad. This includes canada.
A few years ago, there was some agreement on this board that if you could put 20% down, get a fixed loan, and can make payments (don’t need to sell) for at least 15 years to go for it.
I can agree with that somewhat, but every time I see a sold sign it just prolongs an inflated level of comps. $400K+ homes here are still selling in what were $180K neighborhoods about 7 years ago.
My first comments above aside, I’m very surprised (and angered) that people actually want to spend that kind of money, even if they can afford it.
Disclaimer: I can’t remember the last time I bought a shirt from anyplace but the “clearance” rack.
Heh, you must be like me. I get pissed at stores when I see $15, or $20, or $30 for tshirts when I know I can get them in the ‘hood, unmarked and good quality cotton cloth, for $4.
Paying 300% markups is morally wrong!
There was a very interesting 20/20 TV show hour
last night about the state of those attempting to sell
into this market.
One segment was about a couple who created a 1 day auction.
The didn’t accept any of the bids. (max was $400k)
Wife said that the house was worth $470k and wouldn’t
sell for less because the apprasier said so.
Just amazing how stubborn the sellers are right now.
Anyone else view? Comments
They have about $470k into it, so they think that’s what it’s worth. People are holding onto the delusion that you can’t lose money in real estate.
I caught some of that show. The wife pulled out the standard “we’re not going to sell below market value” line. Honey, the buyer determines the value, not the seller!
i’m boycotting housing purchase unless we get a total meltdown in prices. I have to see severe capulation on the buyers side and we are not even close. i will rent forever if housing recovers quickly. my bet is there is much worst ahead, and maybe deals will be found when some builders go bankrupt and they selloff the houses at firesales. europe and the UK will be next. I probably will not retire and live in the USA. I know of a nice place in Hungary where you can still get a small house and vineyard for cheap….
Is it under looking Vard’s castle by chance? Good location, but stay inside when the full moon. Wear a cross or garlic.
must be a very remote location, because most of the countryside in Hungary etc. is being bought up by the Brits and the Dutch. They even have regular shows on TV here to assist in purchasing in those countries …
I’m planning to buy next year, maybe late Spring or Summer, depending on how things shake out. I’ve got money for a decent down payment and the wife and I have more than enough income to make payments on modest home in the little village we rent an apartment in now.
From a pure financial standpoint, we’d probably be better waiting a couple years for things to settle out, but buying a house is more than a financial decision. I’m getting a little tired of renting. I’ve been doing the apartment thing for over two years. I’m getting fed up with jockeying for parking places with the other tenants, the super coming in for inspections as such with little notice, having only one bathroom and not enough room for all my books and such.
I suppose I could look to rent a house, but there’s not much in the way of rental housing stock where I want to live. On top of that, I’m tired of moving and when I move next I want it to be for good. Also, the wife and I make a nice living and with both of our incomes combined we’re in a pretty high tax bracket. The tax advantages of buying a house are pretty significant for us.