Real Estate Market. Thoughts?

[DFBrews]

All I want is to mow my own lawn.
When I first started looking for a house 18-24 months ago my mortgage budget was under a thousand (<20% of gross)
Found some and passed that currently would love to have another shot at. Found some that needed way to much work that resold in 6 months for 100k more than initial listing its brutal out there
I am now considering figuring out the logistics of a 1500 dollar mortgage of the same exact houses (2 bed room 1 bath Need work in the same neighborhoods)


overheard or saw this on the internet recently

when is the best time to buy a house for equity


25 years ago

[Irving]

Something to ponder over in the mean time.

http://jlcollinsnh.com/2013/05/29/wh...le-investment/

http://jlcollinsnh.com/2012/02/23/re...-some-numbers/

[NFATrustGuy]

*Can* a person concoct a scenerio where renting is less expensive than owning? Sure. Just use worst case facts... MUST buy in a hot market. MUST sell in a downturn. Gangs move into the neighborhood. Half the homes in the neighborhood sell via foreclosure. Etc. etc.

Yes, it's still anecdotal, but I've bought and sold 5 homes since 1992 and I've made money on each one of them. Also, the mortgage payment and upkeep expenses were less than renting the same home would have been in each case.

Could I rent a 1 bedroom apartment for less than my current home costs me? Sure, but that's not how I want to live, and it wouldn't be comparing apples to apples because I don't live in a 1 bedroom home.

We're all wary of experiencing another "housing bubble," but we should remember what brought about the original housing bubble and decide if a similar situation exists today. The problem wasn't just that housing prices escalated quickly, it was *why* housing prices escalated. In simple terms, it was because getting a loan was too easy.

The easy availability of mortgage loans was tantamount to giving a 15 year old girl a charge card with a zero balance and a $30k spending limit. Most teenagers in that situation would max the card out within weeks and then struggle forever to pay it off. What's more, they'd develop a sense of entitlement to the artificial lifestyle enhancement the "easy money" allowed them to enjoy. Mortgages leading up to the housing bubble were too easy. Prices were driven up as a result. People were buying houses with fake buying power.

In the current situation, lending guidelines are more traditional. While lending ratios are relaxed from 1992 levels when the mortgage PITI payment couldn't exceed 28% of total gross monthly income with total debts no more than 36%, there are still ratios that must be met (and proven/verified) today, This wasn't the case in the free lending days leading up to the bubble. When people buy a house today, they must meet guidelines that didn't exist (or weren't enforced) in the free lending years.

I'm convinced that our census numbers here on the Colorado front range will continue to rise. I'm sure builders will eventually ramp up construction to meet demand. Price will eventually settle in to a state of equilibrium,, but it'll still be at a higher level than what it is today. Costs of construction will continue to rise as a result of increased taxation, increased materials, increased labor costs, etc.

I think our biggest threat is the continually-increasing **RATE** of taxation. If a tax rate equal to 1/2% of total value was sufficient to fund the government when the house was worth $220k in 1998, that same 1/2% rate should still be sufficient to fund government when the house is worth $420 in 2016.

I close on my new house in mid-July. :-)

[Great-Kazoo]

Could I rent a 1 bedroom apartment for less than my current home costs me? Sure, but that's not how I want to live, and it wouldn't be comparing apples to apples because I don't live in a 1 bedroom home.
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Another thing to consider with the Rent vs Own scenario. Your rent is governed by the market AND whim of the landlord. Not to mention the usual "Inspection" clause a lot have in the lease. that means no matter what you do, it's not yours. You can be asked to leave at the end of lease (6-12 months later) Have unnecessary "inspections" from the landlord and times not convenient to you. OR.............. after you're back from work or vacation. If you want to live somewhere that other people have access to, legally. Rent.
Yes it cost more (up front) to buy a home. HOWEVER once the closing is done, it's yours. No more invasive landlord, having to worry if they're going to raise the rent (again) or ask you to leave at end of lease. Want pets, no problem.

[Rumline]

If you're buying a house purely as an investment, then sure, there are other investment vehicles that are better. But you also get a lot of soft benefits, of which Kazoo pointed out several.

Partway down the page that Irving linked to, the author highlighted this comment that makes two really great points:

[...] Now, here is where my post really won’t make a lot of sense. While a house is a terrible investment, I own a house and recommend other people do so as well. Why? Not because the house is a great investment, but because the mortgage is a great way to borrow money due to all the government subsidies. Having a mortgage is a great way to short the US dollar because of the long maturity and low rates you can borrow at. I make sure to constantly take all of the equity out. If there was some way to borrow $400,000 at 3% for 30 years and buy stocks with the money I would much rather do that, but because our society has decided that homes are the “chosen” asset class and distorts the market by redirecting resources into mortgages it makes sense to buy a home. I would never even consider buy a home with my own money, but hey, if the US taxpayer and a bank is dumb enough to loan me several hundred grand at 3% for 30 years and give me a tax deduction sure why the hell not.

I do think a lot of homeowners rode the wave of 30 years of falling interest rates… that dynamic is going to change as rates have not risen in a generation. The returns of housing in the future will be nowhere near what they were in a falling rate environment and a lot of speculators are going to learn that the hard way. Potential homebuyers simply won’t be able to pay anywhere near today’s housing prices if rates were to go to from 3% to a more historical average of 7%. Even at today’s ultra low rates the home ownership rate is declining rapidly.

I'm not sure I agree with the premise that rates will go back to 7% anytime soon, but it's worth considering.

[MrPrena]

Although I bought my house. I do not own a home. I don't have a deed yet.

We bought a house around late 2008 (near or at dip) because I am so sick and tired of rise in rent. We bought the house not to just hedge against inflation, but against the rent cost.
We did good. It only went up about $100/mo for ~8 years due to taxes.

[Great-Kazoo]

If you're buying a house purely as an investment, then sure, there are other investment vehicles that are better. But you also get a lot of soft benefits, of which Kazoo pointed out several.

Partway down the page that Irving linked to, the author highlighted this comment that makes two really great points:


I'm not sure I agree with the premise that rates will go back to 7% anytime soon, but it's worth considering.

Our first homes interest rate was 13%, in 80. Granted we only needed $2500 down for a $28 K home.

[Dave_L]

Bump. Just curious how the market is? Anyone buying/selling? Ive been doing a LOT of refi's at my work lately. People scrambling before the end of the year. Once these elections are over, I think we see the reality of the economy/market.

[DFBrews]

Prices are still extremely inflated. I keep waiting to look at this thread hoping to see some one in the know saying the sky is falling and it's all crashing down so I can finally buy a house

[Rumline]

My wife and I bought recently. We're in our lower 30s and this is our first house. Did we buy at a bad time? Don't care. We found a house in a great neighborhood that we love, within our budget, and we have stable careers. Knock on wood but we plan on being here for a long time.