Housing Market opinions

[SilverStone05]

Considering the attractive financing and rather softened home prices I'm currently looking at purchasing another home.

We've found something we both like but of course, it is out of the realm we were wanting to pay. We can afford it without a problem, i'm just skeptical about plunking down a sizable amount of money into an asset that can't really be valued very accurately in the current market.

From the onset, it looks like a good value, as I saw this house when it originally went up for sale 2.5 years ago. I found the current owner online and they have purchased it for about 20% less than the original asking price. Now, they (current owner's) asking price is about 12% less than what they paid for it according to our auditor's website...and I'm suspecting that I can shave an additional 10% off that.

It isn't the most expensive home in the neighborhood according to the sales data, but it is up there. But the comps really aren't relevant now since most of them were sold back in 07'.

That being said, the house is nice. It's a luxury home, with all the goodies. I don't have to do anything when I move in.

I just want prime's opinion on what they think the housing market will do in the next couple years. I'm thinking at the price I'd pay, I'd be okay, but educated opinions are always welcome.

 

[docjohn]

No specific insight other than to say if the fundamentals of the area are strong..meaning people want to live in that neighborhood,good schools,average taxes ect..then base it on condition/comps....that said I don't think the banks and lenders are going to be as loose with the finances going forward...so from the money side the whole idea of houses being piggybanks and flipping for gains will affect the housing market at least for the next 10 years

 

[EdinKali]

I don't think the market has hit bottom yet. I think I saw something like housing prices for pre-owned homes dropped another 12 or 13% last month.
Inventories are starting to climb so I would suspect the prices will continue to drop. Might be a good time to re-fi though. Been thinking of that or paying off the house completely and saving the money I would have spent on interest seeing as my investments are yielding less than what my interest rate is.

 

[sahtt]

If it's primarily an investment or financial decision, I couldn't recommend it without more information. But if it's a house you really like and you'd derive substantial utility from living there, you should probably move anyways. What's your risk with this trade? Sounds like even if the market continues to slide and you hit a snag and have to sell it at a bad time, you are out ~10%+closing costs. That might be 25k, could be 75k. I look at a home as about half way between a car and a truely defined "investment".

 

[eddiensx]

It is estimated that $42 trillion dollars worth of mortgages, (residential and commercial) will be resetting next year. A majority of these mortgages will go into default. This will further exacerbate the price decline in real estate prices.

People don't buy houses, they buy house payments. That has always been the case. The problem is that the banks don't want to lend, because they know what is comming next year, as does the Fed.

Rates probably won't go down, they may even rise a little, but if the price of the house reduces, your mortgage payment will be less, even with a higher interest rate loan

If you can, you may want to hold off buying anything right now.

When you do purchase something, put 20% down, avoid M. I.

If real estate were to continue to fall, you will only lose your 20%, instead of the additional dollars you intended to put down.

Having said all of that, if you are looking for a new primary residence, have 2 or 3 neighborhoods picked out, so you can turn your current house into a rental,and then purchase the house that you "just have to get". After 3 years, sell your old primary, and take whatever equity you earn tax free.

 

[steveny]

If I had known where the bottom of the market was I would have bought F at a buck and aapl at 75, but at that point everyone thought the market would go to zero. The same will be said for RE the bottom may be now, it could have been a year ago it might be 10 years from now. If it's a house you are gonna live in and not sell soon I wouldn't worry about what it is or may be worth.

As for the house itself, I like the ones that need work because then I can personalize them AND add value at the same time.

 

[sahtt]

If I had known where the bottom of the market was I would have bought F at a buck and aapl at 75, but at that point everyone thought the market would go to zero. The same will be said for RE the bottom may be now, it could have been a year ago it might be 10 years from now. If it's a house you are gonna live in and not sell soon I wouldn't worry about what it is or may be worth.

As for the house itself, I like the ones that need work because then I can personalize them AND add value at the same time.

2nd steveny. Unlike stocks, you can live in and enjoy the house; even if you end up suffering a little depreciation. I had some good buys during the crisis and held them for the most part ever since. My problem is I had the capital and was too conservative.

General Margin 10/16/2008 10/21/2008 101406 NA2KR 037833100 AAPL APPLE COMPUTER B 92.75000 (still long)

General Margin 03/02/2009 03/05/2009 111522 NA2H1 494550106 KMP #KINDER MORG B 43.87000 (check the two year chart, still long from there)

General Margin 02/24/2009 02/27/2009 093102 N1040 29273R109 ETP ENERGY TRANSFER B 32.10000 (check the two year chart, still long from there)

 

[jond]

Look at the housing chart(adjusted for inflation) from 1895-1920.
That's what I expect to happen. An overcorrection past the trendline to ~$70,000 national average 2 story home.

I think the chart below is wrong. No way we're coming to a "soft" landing on the trendline when the government is out of bullets(interest rates already at 0%).

I could be 100% wrong, and probably am. But personally I would be in the smallest house you're comfortable in, and not have second homes unless they're generating enough income to offset 3-5% loss/year.

IMO, don't try to catch a falling knife, but then again, I'm just a cautions person in general.

This is American home prices over the last 100+ years adjusted for inflation.
Note, homes should only grow with inflation. Not more...

And Japan has already gone through this.
Homes went from $220,000 to $85,000 over a 15 year period.
I can think of no reason why we're better and would escape this. I can think of reasons why we're worse...

 

[kookoo4nsx]

Home prices will be 15% less in 6 months and mortgages will be lower interest.
PM me for more details. I've been in Finance for 19 years.

 

[DOCMORGY]

Considering the attractive financing and rather softened home prices I'm currently looking at purchasing another home.

We've found something we both like but of course, it is out of the realm we were wanting to pay. We can afford it without a problem, i'm just skeptical about plunking down a sizable amount of money into an asset that can't really be valued very accurately in the current market.

From the onset, it looks like a good value, as I saw this house when it originally went up for sale 2.5 years ago. I found the current owner online and they have purchased it for about 20% less than the original asking price. Now, they (current owner's) asking price is about 12% less than what they paid for it according to our auditor's website...and I'm suspecting that I can shave an additional 10% off that.

It isn't the most expensive home in the neighborhood according to the sales data, but it is up there. But the comps really aren't relevant now since most of them were sold back in 07'.

That being said, the house is nice. It's a luxury home, with all the goodies. I don't have to do anything when I move in.

I just want prime's opinion on what they think the housing market will do in the next couple years. I'm thinking at the price I'd pay, I'd be okay, but educated opinions are always welcome.

It highly depends on what area you are in. It depends on whether this is second-home or are you selling your other house & living here - big differences in taxes. Highly depends on whether Obama follows through on one of his thoughts of removing the mortgage interest deduction for high earners - that alone will markedly increase your costs if you are in the high-earner category.

I personally do not think the bottom has hit yet. Also, if you are concerned enough about the possible purchase to question it here, likely you should pass. The costs associated with a larger/nicer home are surprisingly higher once you are actually living there.

As for 'educated' opinions, trust me. Been there, done that. Watched my San Diego condo that I bought when I lived/worked there that I held onto for a retirement place triple in value & subsequently drop to less then I paid for it. 2 other houses that I owned while stationed in the areas took forever to sell as other houses were foreclosed in the same area which depressed the price of my own homes. I think I figured out that I worked an entire year of my life to pay off the lost income from the losses on these properties, and I was NOT a flipper. Simply listened to the old wisdom that it is better to be an owner then a renter (no longer the truth always)....

Just some thoughts but good luck on your decision

 

[SilverStone05]

Thanks for the feedback guys. Can always count on prime for some valuable insight. :biggrin:

 

[kookoo4nsx]

You quote " I was not a flipper"


NEVER FORGET EVERYTHING IS ALWAYS FOR SALE!

It highly depends on what area you are in. It depends on whether this is second-home or are you selling your other house & living here - big differences in taxes. Highly depends on whether Obama follows through on one of his thoughts of removing the mortgage interest deduction for high earners - that alone will markedly increase your costs if you are in the high-earner category.

I personally do not think the bottom has hit yet. Also, if you are concerned enough about the possible purchase to question it here, likely you should pass. The costs associated with a larger/nicer home are surprisingly higher once you are actually living there.

As for 'educated' opinions, trust me. Been there, done that. Watched my San Diego condo that I bought when I lived/worked there that I held onto for a retirement place triple in value & subsequently drop to less then I paid for it. 2 other houses that I owned while stationed in the areas took forever to sell as other houses were foreclosed in the same area which depressed the price of my own homes. I think I figured out that I worked an entire year of my life to pay off the lost income from the losses on these properties, and I was NOT a flipper. Simply listened to the old wisdom that it is better to be an owner then a renter (no longer the truth always)....

Just some thoughts but good luck on your decision

 

[robr]

You quote " I was not a flipper"


NEVER FORGET EVERYTHING IS ALWAYS FOR SALE!

How much did that avatar cost?

 

[DOCMORGY]

You quote " I was not a flipper"


NEVER FORGET EVERYTHING IS ALWAYS FOR SALE!

Actually, a pretty shitty comment to make. You don't know me, you know nothing of my situation. Actually, just because these houses didn't sell doesn't mean squat. THEY WERE FOR SALE, they just did not sell, though there is zero reason I need to justify myself to you.

I am simply amazed at the moronic comments that I see in so many threads on here, this comment in particular. My motivation to post or visit this forum anymore is pretty much zero

 

[robr]

Doc, don't let kookoo him run you off. There is no better forum on the net. I am a member of dozens and the knowledge and willingness to help by the people of this forum is unequaled. While I may no longer own my NSX, I have made friends here that I will have for life, and that's why I'm still around and I know that I am not even close to unique in this regard. TBH, I've been here now almost a decade and I don't even know who kookoo is, his name doesn't even ring a bell.

 

[Joshs]

There's a lot of interesting information here, I suggest you read it:

http://patrick.net/housing/crash.html

No one's mentioned shadow inventory yet - that could be a major factor in the continuing downtrend.

Also, lower interest rates mean higher prices. When rates go up, prices should fall (unless there are other factors driving prices up).

-Josh

 

[queenlives]

There's a lot of interesting information here, I suggest you read it: http://patrick.net/housing/crash.html

No one's mentioned shadow inventory yet - that could be a major factor in the continuing downtrend.-Josh

thx for that, josh. seems to me there's a lot of downdraft left in the housing market.

 

[SilverStone05]

There's a lot of interesting information here, I suggest you read it:

http://patrick.net/housing/crash.html

No one's mentioned shadow inventory yet - that could be a major factor in the continuing downtrend.

Also, lower interest rates mean higher prices. When rates go up, prices should fall (unless there are other factors driving prices up).

-Josh

Thanks. This is the kind of stuff i'm looking for. Hard driving opinions.

 

[jond]

No one's mentioned shadow inventory yet - that could be a major factor in the continuing downtrend.

The scary thing is I think I read the shadow inventory is still increasing.
If we double dip and unemployment doesn't come down off 10% or whatever, it's going to KEEP increasing.
The question is how many years will it take banks to dump all their inventory once they stop getting new ones?
2 years? 5 years?
As long as there's that extra supply, prices have to keep falling IMO.

 

[SilverStone05]

The question is how many years will it take banks to dump all their inventory once they stop getting new ones?
2 years? 5 years?
As long as there's that extra supply, prices have to keep falling IMO.

+1

They won't as long as the .gov (read - us, the taxpayers) is propping up the banks.

Let the banks fail and kick the folks who can't afford their mortgages out already.

We're delaying the inevitable and exacerbating the pain.

 

[RYU]

so what's the good news??

 

[SilverStone05]

so what's the good news??

The good news is that i'm too impatient to wait until all this financial market crap shakes out.

Bottom line is that while its possible for the market value to fall somewhat- the intrinsic and utilitarian value as my home that I happily live in will not. I can't sleep, cook, entertain family, have parties and walk around naked in my stock portfolio.

We've been researching the neighborhood pretty good. We went and took a walk there last week and met a few folks. Just last night went and toured a couple folks' homes who had invited us back. Also snuck into some of the homesites that are nearly completed. We liked what we saw and the people we met all were very gracious. Tomorrow night I'm heading back over to the house to figure out how to work the a/v equipment and home automation setup.

We'll be at the lake during the long weekend, so no business until we get back next week. I'll let you know how the negotiations turn out. :biggrin:

 

[SilverStone05]

Negotiations went favorably. :biggrin:

I went in without a buyer's agent, so I was able to shave a hefty double digit margin off the list price.

Inspection is tonight! We close next Wednesday.

Thanks prime. :smile:

 

[tosugrad]

The only thing that concerned me about your original post was:

"It isn't the most expensive home in the neighborhood according to the sales data, but it is up there."

I have never thought that was a good idea. In fact, I think the opposite is better.

 

[SilverStone05]

The only thing that concerned me about your original post was:

"It isn't the most expensive home in the neighborhood according to the sales data, but it is up there."

I have never thought that was a good idea. In fact, I think the opposite is better.

One of the top things that concerned me as well. I was basing this observation initially off the list price when I first posted.

The actual sales price places it in the bottom 50% currently. :biggrin: