Posted on 12/29/2010 10:21:40 AM PST by SeekAndFind
I'm in my late 20s.
A month ago, I learned, for the very first time, that a friend my age and his fiancé were about to buy their own house.
A week later, another friend and his fiance, both just over 30, told me that they had gone house-hunting in New Jersey over the weekend.
And that was wonderful news!
And it was only possible because house prices have finally fallen to a level that people like me can afford. Specifically, house prices have finally fallen to close to their long-term average relative to rents and incomes--to a level where me and my friends can actually consider owning instead of throwing away tens of thousands of dollars every year in rent.
I'm giddy about that. And other people like me should be, too.
We got more good news on this front today: Housing guru Robert Shiller announced that the decline in October's Case-Shiller house-price index was much steeper than expected (over 10% annualized).
I sure hope they're right.
If prices keep falling, maybe my wife and I will be the next couple in our young professional peer group that will finally be able to do what our parents all did at much younger ages: Buy houses.
(Excerpt) Read more at businessinsider.com ...
I always thought that falling prices would be good for the overall buying folks. The only ones that will have problems would be the sellers. Now if you take into consideration who HAS to sell. That number is probably pretty low. Even military folks who have homes have been able to EASILY rent them out. I think the media LOVES to make things worse than they are.
If you can’t afford a house with these prices than something is going wrong. You are able to buy homes for 1/3 less than five years ago. Try and find some coins in your couch or whatever because in a few years you will kick yourself for not buying a home or two in this environment. Remember all the people who were laughing about buying Apple Stocks twenty years ago? Who is laughing now???? It would be a tragedy for your not to take advantage of this windfall right now especially if you are renting. I wish you the best of luck.
>>It is true that property taxes in NJ will pretty much replace your mortgage when it’s paid off.<<
Reminds me of this: In 1963 my parents paid $60 a month to rent a home in a middle class suburb of Fort Worth. In 2010 my friend owns a home in a middle class suburb in rural (barely) Seattle area and pays over $700 a month in PROPERTY TAXES.
Nobody owns their home any more, even if it is “paid off”.
There's one in my subdivision, I've lived here 6 tears and I've seen it turn over one or two time more than that. Each time, the real estate agent fee plus a little profit was added to the price. It was just vacated this past week in the middle of the day - moving van, no sign outside - abandoned - a walk away and now the bank owns, maybe they don't....advice to you is better pay a title searcher a king's ransom to conclusively prove who really owns that house you have in mind for such a great deal...
Housing prices will finally stabilized at or below that level and they will not stop dropping until they reach that point.
For a $250k house that means $25k down and $1400 per month for 30 year loan payment with taxes and insurance rolled in assuming interest rates stay about 5%.
That would assume a $3200 per month take home pay or $5500 per month gross pay. This comes out to family income of just under $70,000 per year to qualify for a $250,000 dollar home.
US 2010 median family income was $50,000 per year to put things into perspective.
Maybe we could get someone to blow a horn when the market bottoms.
I’ve often wished for that in the stock market....
>>Now if you take into consideration who HAS to sell. That number is probably pretty low.<<
Remember subprime and alt-a? Remember all the people that got a teaser rate or interest-only, then they lost their jobs and/o the teaser expired and they were looking at their monthly payment go from $1500 a month to $3500?
They are a large part of those that “have to sell”. And they don’t qualify for a low interest “re-fi”. Sort of a catch 22.
Most banks are asking for 20% downpayment.
It is a fine time to buy. People will give you a great deal on their homes. I guess some people will always be afraid to make that first step. When you lose your fear, jump in with both feet. You will not regret being a home owner.
I’m so sorry to say this, but don’t get too giddy. Washington(yes, and Republicans too) are already talking about instigating or a continuance of tax credits for new home buyers to cause a rise in home prices and values. When I heard this, I was sick. It seems there is actually little hope of avoiding a Depression that will make the Great Depression look like small potatoes in comparison.
It would be wonderful if the stupid politicians could just let the market follow its natural course. Great young people like you, who can actually PAY for a home for you and your family now, would finally have a chance to make your “American Dream” come true by having a chance to buy AND ACTUALLY PAY FOR a home for you and your family, therefore reversing the downward trend in home prices and helping the economy get back to a decent level over time.
But no one in Washington seems to have that many brain cells to rub together. Instead, they are planning on instigating even more “programs”, “incentives”, and tax breaks so that everyone,(and most importantly,those who can’t and won’t be able to pay for them) to buy a HOUSE. I say HOUSE because these people never intend to stay on the property they aquire for longer than it takes the free government money to run its course. Most of them consider it cheap rent and know full well they will walk away when the benefits run out. More than half of the ones who have participated in such “incentives” have done so already.
Such idiotic programs and tax incentives simply kick the awful and unavoidable consequences we are going to have to face down the road for just a few months, therefore making the catastropic times that are coming to all of us that much worse!
I most sincerely hope that I am wrong, and that people like you will be able to realize your dreams. You have worked for your money and your ability to pay for the well-being of your families is the mainstay of our country and our economy. Our very existance as a free country depends on it.
However, your ability to be the backbone of this nation is being attacked and destroyed by those who hate America’s principles of personal responsibility and hard work. Good luck to you, and may God bless.
Correct, however if you are buying a home for investment purposes (not to live in), banks now require a 20% downpayment.
My cohort... the over 50 professionals... are the ones most at risk. The value of our principle asset is declining steeply at precisely the time we should be seriously saving for retirement. The thing is I could see this crisis approaching as the "Baby Boomers" reached retirement.
The US economy has always been distorted by the sheer size of our generation and it's needs at every stage of our lives. The leading edge of our generation is already retiring and that alone puts steady downward pressure on home prices as there are far fewer buyers in the succeeding age cohorts.
Combine this with other national & international economic trends and it was pretty obvious to me that I would have a lot of trouble retiring at 65 like my father did. Not complaining. I've been preparing for it.
True. But those folks were so incredibly stupid. How can you get a 3.5 percent interest payment and think it was going to go down? You can’t get too much lower than 3.5. There is only one way to go and that is UP. They should have gotten the fixed and be done with it.
The rule is to buy low and sell high. It works all the time, but it takes guts to take advantage of it.
I recently purchased a rental in SW Washington.
We paid about $55 a foot. It was a pain dealing with HUD, and it took some cleaning. I think we will be able to get about $100 a foot in about a year or two.
I don't really have any sympathy for the housing industry because they all worked together to blow up the bubble. The bubble only got bigger in areas like Vegas because people were buying homes on speculation and lenders helped them do it. Excess inventory was a key factor in the hard landing (which hasn't happened yet) in Vegas.
Hey mtg, all depends on where you live. The house I picked up was $67,000. The payments are under $300 a month (not including taxes and insurance)The house is about 1200 sq feet, and in nice a working class area.
That sets the bar a lot higher to qualify because you need to come up with $50K cash up front which is hard these days, and the payment would stay pretty close to the same - I was conservative on the loan payment.
That a bunch different terms than the no money down with an interest only adjustable rate loan for 125% of the value of the house that some people were getting at the peak of the insanity.
What were they thinking.
The idea is to freeze in your costs. As noted you can get a house in SW Washington for under $60 a foot right now, if you are will to work with bank owned, bankrupts or HUD.
The house I just purchased costs me $421 a month for the morgage, taxes and insurance. I can rent it for $750.
(I rent it to one of my kids for $560)
Although the taxes and insurance will probably rise slowly the morgage cost is frozen in at $271 a month. If I was an owner I would not have to worry about the rent going up.
As a business deal I had to put 20k down, If I rent it at $750 I make about $200 a month, a 12% yield on my investment.
I did sell my lake house in 2008, had to, the economy destroyed my small business, took a job with a former customer to support myself. It was the far pricier of the two houses and has taken much more of a hit. I made a small profit on the sale after owning it for three years, would be upside down now if I'd have kept it.
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