patrick.net

You should have bought in 2010, I thought the market was still about 20% overvalued, but I was willing to take that lost if it was ever a realization. I wasn't buying an investment property. When the official median price is $175K but most of the desirable Burbdale houses are still $275K or more and not $500K or more.

Things can get intense, so when I saw a house for $170K I took it. And ended up only paying $160K because at the time prices dropped another 20 or 30K while I was in the contract phase. So I called the realtor and canceled. The owner was desperate and told me he would take another 10K off.

http://research.stlouisfed.org/fred2/series/HOSMEDUSM052N

Just look at all of the ups and downs from Jan 09 though Feb 12, if the market dips to those levels again, just buy and shut up. Trying to time the market to go lower than that, when the price is in your comfort level will prove fruitless and frustrating.

Call it Crazy says

Move away from Denver, you might be surprised on what you can get..

Like a good, swift kick in the pants!

Colorado is sure, um, interesting. Up I-25, the rents and prices drop like a stone, the only downside being that southward drive through the knot that is the intersection of I-70 and I-25. Good grief.

If I figure my time is worth $30 an hour to me personally, then I'm eating roughly an hour extra a day, for $600 a month in lost time, above and beyond vehicle maintenance, etc.

Out I-76 or up I-25 toward Fort Collins is sure tempting. I'd have to get a good heroin/meth dealer to help with the consequences of commuting. Or pot, which is legal now.

A couple more people in real estate here just swore up and down to me that pot is the reason for the market uptick here. HA!

APOCALYPSEFUCKisShostikovitch says

If you forgot to buy in 1974, maybe you don't deserve to be living inside. Did you ever consider that?

It's painful, but I must face reality: the available evidence indicates that I am an ASSHOLE.

Helen Mirren is even farther out of reach now...

CaptainShuddup says

if the market dips to those levels again, just buy and shut up.

Yeah, but it's a lot more fun to whine!

APOCALYPSEFUCKisShostikovitch says

Helen's out of the shower now and agreed forgetting to buy a house in 1974 makes you an ASSHOLE!

If the real estate market made any sense, she'd be mine now...

HydroCarbon, you have my sympathies. On the other hand, be happy you don't live in California, like so many of us.

Speaking of hydrocarbons in general, could the recent and steep drop in oil price futures from $100+ around $80 cause the Colorado housing market to drop in a hurry?

justme says

could the recent and steep drop in oil price futures from $100+ around $80 cause the Colorado housing market to drop in a hurry?

Depends on the area of the state, but it would probably have an effect.

Denver & CO Springs are less energy-dependent than they used to be, but there's still a lot of the land-rape-extraction economy here. Out past Vale, in the Rifle & Grand Junction area, it will be a bloodbath.

Or one would think.

My take breaks down into several scenarios:

- If oil went to $15 a barrel and even white-collar unemployment in CO went past 20% here, real estate prices would continue to rise.
- If CO becomes the ebola capital of the United States, with infection rates surpassing those in Liberia, and the streets blocked by piles of the unburied dead, why, it's good news for real estate, with 10% price jumps in the downtown area and 25% increases in Highlands Ranch, Lakewood, and Aurora.
- If 30-year mortgage rates jump to 11% and banks are forced to foreclose and sell all delinquent mortgages, I see a 18% price jump throughout the Front Range.

Call it Crazy says

justme says

HydroCarbon,

justme says

Speaking of hydrocarbons

His name is NOT spelled "hydrocarbon"...

His name has 30 alphabets. "Ben" for short.

WaterGoat says

I'm in my late 40s.

I have enough spare cash for a down payment.

I am not greedy: I don't care if I lose 20% or break even. I would prefer to rent. I don't see real estate as an investment.

If you are in a position to buy a home, and you need a home, then just get that home. By not buying a home because you are trying to find the bottom, will only stress you out and make you miserable. You are essentially gambling with you home. A home is your castle, where you have the benefit of living in it and enjoying it. You ain't getting younger, and you will need a home when you eventually retire.
Don't screw it up.

WaterGoat says

Out past Vale, in the Rifle & Grand Junction area, it will be a bloodbath.

And that's a bad thing?

Ceffer says

WaterGoat says

Out past Vale, in the Rifle & Grand Junction area, it will be a bloodbath.

And that's a bad thing?

There are realtors, mortgage brokers, stripper mistresses, lottery tickets and Chevy dealers out there: all cost money.

Strategist says

By not buying a home because you are trying to find the bottom

In my case, buying would be defensive: protect myself from the high rents.

But it's sensible to believe that rents will stabilize, because this isn't Manhattan, and there are hordes of apartment complexes being built.

So I buy, which means that I'm buying a condo in a state where condo prices are hugely inflated by legal problems which may soon be corrected.

The sensible thing is to continue renting.

The problem - herein lies the whole point of my whine - is that sensible choices never work, because the market never, ever makes sense.

Nobody can protect themselves from shit. But a strip mall stripper mistress can make it feel a lot better.

Fuck it - I give up.

Everything is going to the moon!

The train is leaving the station - choo choo, motherfuckers! - and every city will soon see the valuations of Stockton.

Pass the Flavor Aid - I recently learned that no Kool-Aid was served at Jonestown.

WaterGoat says

It defies all reason. Where are people getting the money to fund this? When do the house-poor boomers downsize to apartments? How much longer can prices stay above 5x median household income?

The boomers are restricting new building to milk all they can from Millennials - who in fact live in their basements because they can't afford to move out.

Move to somewhere cheap. Just say no!

Heraclitusstudent says

The boomers are restricting new building to milk all they can from Millennials - who in fact live in their basements because they can't afford to move out.

Move to somewhere cheap. Just say no!

I wonder if these boomers have drawn up plans to make soylent green out of the rest of us, rugs from our hair, and lampshades of our skin.

Yes, I'm going to try and stay strong, although it may mean not getting laid anymore.

No sex sure beats starving due to no retirement fund.

I don't think the boomers are going to want to vacate their existing houses to relocate to apartments.

Gen Y is age 14-32 now, which means our existing housing stock is going to start having to house BOTH the boomers and their demographic echo now.

Plus us Xers, too.

Sometime next decade the boomer die-off will begin in earnest (they're age 50-68 now) which will both enrich Gen Y through asset inheritance and also free up the housing supply.

Bellingham Bill says

I don't think the boomers are going to want to vacate their existing houses to relocate to apartments.

I'm with you there, but I doubt it will be a matter of choice for many. There is a poor level of retirement savings. Many will be unable to continue mortgage and HELOC payments.

which will both enrich Gen Y through asset inheritance and also free up the housing supply.

True, assuming they have positive equity after the note and the HELOC are paid off. How many boomers fit this description?

House prices were 2-3x a years salary historically. In the past, people got 15 year loans, and interest rates were much higher.

Do you expect house prices to be the same as they were in the past when (1) loans are 30 years and interest rates are very low (2) many people have two incomes and (3) there is a much bigger population and more competition to be in close to the city centers?

I get why prospective buyers want house prices to be much lower, but I don't understand why they expect it.

House prices were around 3x annual household income (not salary). They were at that level through decades of the 30-year mortgage being popular.

When I look at home prices in a zip code and see an average of $350K against an average household (including all earners) income of $55K for that zip code, I wonder what is going on.

Population is bigger than in 1960 for sure; bigger than in 1980; but not much bigger than in 1995.

In light of the population plus limited supply near urban centers, perhaps these prices at near twice the norm of, say, 1994, are comprehensible. Frothy, maybe, but comprehensible. What's doubtful is that they will continue to rise much from here.

APOCALYPSEFUCKisShostikovitch says

If you forgot to buy in 1974, maybe you don't deserve to be living inside. Did you ever consider that?

Stupid fetuses. They never plan for retirement. And the lazy asses are usually unemployed as well and don't even bother getting dressed.

Call it Crazy says

It's almost free money!

Maybe that's part of the problem, free stuff isn't worth much. That's why it takes so much of it for rent.

WaterGoat says

House prices were around 3x annual household income (not salary). They were at that level through decades of the 30-year mortgage being popular.

When I look at home prices in a zip code and see an average of $350K against an average household (including all earners) income of $55K for that zip code, I wonder what is going on.

Population is bigger than in 1960 for sure; bigger than in 1980; but not much bigger than in 1995.

In light of the population plus limited supply near urban centers, perhaps these prices at near twice the norm of, say, 1994, are comprehensible. Frothy, maybe, but comprehensible. What's doubtful is that they will continue to rise much from here.

If houses were 3x income in 1995, that would put them at 165 (ignoring inflation). Today, they are at 350K, which is 6 times income.

In 1995, the average mortgage rate was 8%. In 2013, it was 4%. So, the interest paid in 1995 was $13K/yr. In 2013, the interest paid would have been $14K/yr. There are other costs as well, but the cost of interest is about the same in 1995 and today. There are other costs, and you could refine the math quite a bit, but the point is that affordability in terms of payments has not changed much. Why would you expect to be able to buy the same house with much less of a monthly outlay today?

Denver has 40% more people now than in 1995. That's significantly more competition for close in sites. I don't know much about growth outward from the city center, though.

I'm not arguing that housing will go up tremendously from here. It sure has turned a bit for the worse over the last half year. But, I just don't get the expectation that it will return to 3x income in the NEAR future.

Maybe in 10 years, the interest rates will be 8% and housing will be 3x income. Who knows, but it won't be in the next couple of years, and the economic climate 10 years from now is anyone's guess. Waiting 10 years to buy a house in an effort to time the market seems kind of silly to me.

As far as 30 year mortgage availability: Anecdotally, they were not as common or easy to get in the 1960s. They were much less common when inflation hit in the 1970s. After that, you never had the combination of 30 easy to get 30 year mortgages with low interest rates until 2011 or so. 2004 was pretty good, but mortgage rates were 6%, versus sub 4% in 2011/2012. That's a huge difference in interest paid.

I agree with call it crazy - #s 2 and 3 probably have a big impact.

YesYNot says

Denver has 40% more people now than in 1995. That's significantly more competition for close in sites. I don't know much about growth outward from the city center, though.

Plenty of growth in the suburbs & foothills. Certainly very little in the city center, particularly since condo development ground to a halt in 2007. So new development has little effect on prices near the city center.

YesYNot says

It sure has turned a bit for the worse over the last half year. But, I just don't get the expectation that it will return to 3x income in the NEAR future.

I wouldn't bet that it ever will, so I certainly don't expect such a development. I wouldn't be surprised either way; kind of the central point of my post, which is that nothing makes sense.

YesYNot says

Waiting 10 years to buy a house in an effort to time the market seems kind of silly to me.

My motives are purely defensive. I'm considering buying just to insulate myself from exploding rents. If I thought rents would be generally sensible in the long term, with occasional short-term insanities that I can ride out, I would rent forever. History has proven, however, that the government will shaft the renters in order to protect the landlords and in-debt homeowners.

As for interest rates, seeing the shining example of Japan, it's not hard to believe that a 25-year period of near-zero interest rates could be upon us. But what I dislike about buying is that, if mortgage interest rates do return to 8-9%, which should cut housing prices just a bit, I'll be stuck with an illiquid asset. An asset which I have no interest in renting out should I choose to move else. Sure, my own payments would be low, but it would still be a hell of a lot of my own net worth tied up in a low-performance investment which needs my time and energy.

I may just rent for the rest of my life and take my lumps if rents go through the ceiling.

BTW, whatever you or I think, if the past 30 years is any guide, at least one assumption each of us is making will be proven incredibly wrong within a few years.

WaterGoat says

Fuck it - I give up.

Everything is going to the moon!

The train is leaving the station - choo choo, motherfuckers! - and every city will soon see the valuations of Stockton.

Pass the Flavor Aid - I recently learned that no Kool-Aid was served at Jonestown.

Get some pot, it'll make you feel better. It's legal in Colorado.

WaterGoat says

Fuck it - I give up.

Everything is going to the moon!

Actually, it's the dollar that is losing its value. Currency debasement is 100% responsible for all these problems. And when currency is debased, savings and wages are effectively stolen. That's the whole point of currency debasement.

WaterGoat says

Plenty of growth in the suburbs & foothills. Certainly very little in the city center, particularly since condo development ground to a halt in 2007. So new development has little effect on prices near the city center.

It's the lack of new development in the city center with a growing population that makes it more expensive there.

WaterGoat says

But what I dislike about buying is that, if mortgage interest rates do return to 8-9%, which should cut housing prices just a bit, I'll be stuck with an illiquid asset.

My point is that it would likely take 10 years for that to happen at which point, you would have a reasonable part of your mortgage paid down. A nice thing about low rates is that the principal payoff per month is larger in the beginning of the mortgage than it is with higher rates. You might be stuck renting it out, but you would likely have a descent income stream from it by then if rates go up to 8-9%.

Another thing to consider, and I think you have from your post is that buying one house is the neutral position for the average individual/family, because you always have to own or rent one. Owning more than one house is long housing. Owning less than one is basically shorting housing.

When prices fall 90%.

heroin is not the problem, it's the solution!

HydroCABRON not hydrocarbon says

The problem - herein lies the whole point of my whine