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joshuatrio
2011 Feb 9, 5:24am
See, I would argue almost the exact same thing for many of the bears on Pat.net. It seems like they spend a lot of time trying to convince the bulls that housing is going down. Maybe they are worried that they should have bought…
Dude - you're on a crash site. Not a house appreciation site. It seems to me that your comments would be more suitable on trulia.com.
joshuatrio
2011 Feb 9, 5:33am
Saying 30 year mortgages are indentured servitude is absurd to me.
That's almost your entire working career !!! Assuming you start working full time out of college at 22, and retire at 62.
What do you consider indentured servitude?
joshuatrio
2011 Feb 9, 5:36am
im in the process of buying a very nice 2006 4bd 2.5 ba 2 story 2400 sqft on .2 acre,
my mortgage will be less than renting my 1929 3 bd 1 ba 1800 sqft .25 acre POS.
I’d be stupid not to do it!
Reno is a much different market. You can buy yourself a very nice home and survive on minimum wage.
Saying 30 year mortgages are indentured servitude is absurd to me.
That’s almost your entire working career !!! Assuming you start working full time out of college at 22, and retire at 62.
What do you consider indentured servitude?
As other people said before, how is that different from renting, except renting has no time limit? Either way you have to pay for shelter. And as stated above, it doesn't have to remain for 30 years. Things can change.
edit: and renting prices aren't fixed.
why do you spend so much time on a housing crash site, trying to convince us bears that it’s going back up? It seems as if a lot of you guys are worried you made the wrong decision.
Realtors and others deeply tied down to RE market. CA with a population of 35M has nearly 1M realtors. Thats 1 Realtor for every 35 people in the state. And like many its all about selling you and convincing you to buy.
Oh what fun it is to actually talk to one... especially if you ask a couple of them if there is a RE bubble in the market. I dont think many can still utter those words.
joshuatrio
2011 Feb 9, 5:47am
As other people said before, how is that different from renting, except renting has no time limit? Either way you have to pay for shelter. And as stated above, it doesn’t have to remain for 30 years. Things can change.
Because of this:
LOL. My rent is under $20,000/yr. Prices are still falling $20,000/yr. Free rent, sucka!
Simple enough ?
FortWayne
2011 Feb 9, 5:51am
See, I would argue almost the exact same thing for many of the bears on Pat.net. It seems like they spend a lot of time trying to convince the bulls that housing is going down. Maybe they are worried that they should have bought…
Dude - you’re on a crash site. Not a house appreciation site. It seems to me that your comments would be more suitable on trulia.com.
I never understood why taputu is here exactly either. Sounds like he ended up buying at a very bad time, lost lots of money and blaming his regrets onto others here instead of where the blame is due.
Â¥
2011 Feb 9, 5:55am
That’s almost your entire working career !!! Assuming you start working full time out of college at 22, and retire at 62.
thing is, I only look at the COST of buying, and principal repayment doesn't have anything to do with it.
The bulk of the interest expense hits in the first 10 years of the loan.
And there's no denying we've been in a very inflationary environment since the 70s if not earlier.
The system seems to need to generate wage inflation to survive. $35,000 was the decent journeyman wage in the South Bay in the 80s, now its 3X that. Thirty years from now wages will probably be $300,000/yr on average, if history is any guide.
As other people said before, how is that different from renting, except renting has no time limit? Either way you have to pay for shelter. And as stated above, it doesn’t have to remain for 30 years. Things can change.
Because of this:
Troy saysLOL. My rent is under $20,000/yr. Prices are still falling $20,000/yr. Free rent, sucka!
Simple enough ?
That assumes falling prices. I don't think anyone would disagree with you that if prices continue to fall, renting is better. That has nothing to do with your point that 30 year mortgages are indentured servitude.
Â¥
2011 Feb 9, 5:59am
Thats 1 Realtor for every 35 people in the state.
getting a full broker's license does make financial sense for someone looking to buy multiple properties.
You can save 3% off the top being your own broker, plus the education required to pass the state test is useful in its own right. I had great fun in my first RE class in 2008.
tatupu70
2011 Feb 9, 5:59am
You won't see this Chris but people like you amuse me. If someone disagrees with your view, you ignore them. That's a very dangerous way to go through life...
Â¥
2011 Feb 9, 5:59am
That has nothing to do with your point that 30 year mortgages are indentured servitude.
yeah I agree that's pretty dumb, especially in a no-recourse state like Cali.
That has nothing to do with your point that 30 year mortgages are indentured servitude.
When you see people sinking in 50% of their take home pay as was the case during the bubble years and today, not saving a dime for the long term. I too would call it certainly indentured servitude. Back when I bought no one would even consider paying these prices compared to their incomes. We were still able to save and invest. But today hype and irrational behavior have sunk these people in long term financial slavery.
You look at some of these home and you know its not worth $1.2M when only a few years before it was well under $350K. People have lost their minds, and taking the rest of us with them.
You guys are funny - this is a crash site so lets all be negative and tell each other just how bad its gonna get and that we are SO happy to waste our money every month and that its the right move...its so nice to be in misery together...
And damn...now somebody comes in here and tells us how he bought a house - must be a realtor!! or worse...a mortgage broker..or BOTH!! It's a trap!!
Come on!!
You gotta be a bit more open minded like that.
I started this threat because I figured there are a lot of families like mine out there..that got priced out around 2003 and have since lived in shitty rentals in disbelief that the market went up and up and up - then finally - it crashed...yes...and it crashed more and more...and more...then you go out and look just to find out - damn, its still too pricey, I can still not afford it. You got to patrick.net - you find sympathy and other spirits that think alike...it feels good not to be alone.
But then another year goes by - you go out and look again and all of a sudden it looks like..Hey, I CAN afford to buy a nice house - Wow!! You can't believe it. You have waited for it for 8 years. You throw in a low offer and it gets accepted. Before you know it, you are in you're own home at the same price or only little more than your rent.
So you come to see your fellows at Pat.net to share that experience and then a bunch of downers call you a mortgage broker/ realtor...and throw you out because "this is a crash site dude" - how lame!
Let's not turn it into politics. It's just simple math you gotta do in your own situation. If it makes sense, go for it...if it doesn't...then keep renting. There is no wrong or right here - We don't know the future. Nobody does. So all those premises are BS. There are so many BUTS and IFS...
All I know is..that you have to rent for a whole life to live somewhere. You are at the mercy of your landlord. You cannot improve your home. Rents will go UP. So in 30 years, you will still rent and have to come up with $3000/month (or whatever its gonna be then, could be way worse) out of your retirement for rent- EVERY MONTH. I will be free and clear, pay my $7000 prop tax and thats it. I have frozen my rent and set it on a time limit. 30 years is very long but I may cut it down by putting extra money towards the principal.
That's all! Sorry for disturbing the negativity and crash site vibe with my positive message...
To me...The Glas is half full! :)
You can save 3% off the top being your own broker, plus the education required to pass the state test is useful in its own right. I had great fun in my first RE class in 2008.
Today, its makes more sense to hire an attorney and pay a few hundred dollars for 2-3 hours of work. All you you need is a good contracts attorney. At the end of the thats what matters the most.
If paying for a house for 30 years is indentured servitude, what's paying for food and clothing for the rest of life labelled as?
You guys are funny - this is a crash site so lets all be negative and tell each other just how bad its gonna get and that we are SO happy to waste our money every month and that its the right move…its so nice to be in misery together…
RE market crashs and Silicon Valley finds itself with 12% unemployment and many from tech industries. We never seen this number so high in prior decades. Wonder why so many engineers and other tech workers are unemployeed ... because of RE prices. Crazy!
If paying for a house for 30 years is indentured servitude, what’s paying for food and clothing for the rest of life labelled as?
When people overspend and overcharge on their credit cards, and have limited incomes its the same. You have heard of people charging 20-40K on CC bills, unable to pay it off?
joshuatrio
2011 Feb 9, 6:25am
That assumes falling prices. I don’t think anyone would disagree with you that if prices continue to fall, renting is better. That has nothing to do with your point that 30 year mortgages are indentured servitude.
And that's what I'm counting on. Prices will continue to fall.
Back to the 30 year debt trap: If prices are falling say $18k/yr and rent is $18k/yr - wouldn't you rather wait till what YOU WANT came on the market at a price you were willing to pay cash for? I would. Bottom line: if you can't afford a home that you would live in, unless you finance it out for 30 years, you're in over your head. Save a DP, and grab a 15 yr. note.
In a few years, you'll probably wish you'd have waited because you'll be able to buy a much nicer pad for what you paid today - or had invested your cash differently. How many people on this board purchased when they thought it was bottom? How many bottom calls have there been by so called professionals?
And that is what's happening folks, now that the tax credits expired, we're seeing price cuts/drops, still high unemployment, shadow inventory, record foreclosures in 2010... Really, you think that crap is going to magically work itself out of the system in a few short months?
Nope.
Of course if we go Zimbabwe style, I'm heavily hedged in metals - which have performed well. I don't look at mortgage rates - I look at the bottom line price. I'm a cash buyer - which is why the bottom line price is the most important number in my book - not a monthly payment. I'd rather pay rent and watch prices fall, and pay outright for what I feel is a fair number for a property.
Â¥
2011 Feb 9, 6:26am
Today, its makes more sense to hire an attorney and pay a few hundred dollars for 2-3 hours of work. All you you need is a good contracts attorney. At the end of the thats what matters the most.
Still have to deal with escrow people and stuff. Gonna be more than 2-3 billable hours . . .
tatupu70
2011 Feb 9, 6:29am
Josh--
It sounds like you believe prices will continue to fall and want to wait until you think we are at the bottom. That is a perferctly reasonable position. Again--time will tell..
bubblesitter
2011 Feb 9, 6:40am
"The time has come". So you become a homeowner means it is time for every body? LOL.
bubblesitter
2011 Feb 9, 6:43am
And if the market goes down further - so what? If I don’t buy, I still have to pay the rent,
LOL. My rent is under $20,000/yr. Prices are still falling $20,000/yr. Free rent, sucka!
Troy, you made my day! Only problem? I have a hard time to explain this to people(including my wife) who pushes me to buy.
“The time has comeâ€. So you become a homeowner means it is time for every body? LOL.
Yes, absolutely, I signal the bottom! You got it! Haha...
Â¥
2011 Feb 9, 6:54am
It sounds like you believe prices will continue to fall and want to wait until you think we are at the bottom
Josh is kinda rare, being in such a strong cash position. Given that further declines may in fact come from stricter lending regimes like the re-institution of 20% down for non-VA buyers (or even 30%), and/or conforming limits being lowered $100,000 later this year, I don't think he needs to be in any hurry to buy.
Someone with more reliance on credit may find it advantageous to buy now, but I dunno. It's always perilous to try to time bottoms, but ceteris paribus this chart:
http://research.stlouisfed.org/fred2/series/SPCS20RSA
is not exactly screaming BUY now.
bubblesitter
2011 Feb 9, 6:58am
“The time has comeâ€. So you become a homeowner means it is time for every body? LOL.
Yes, absolutely, I signal the bottom! You got it! Haha…
Wait 12 more months and you will be underwater. You should have got another rental.
Done!
2011 Feb 9, 6:59am
“(20%down 30yr loan)†- welcome to indentured servitude. 30 Years is a very very long time.
When was a 30 year mortgage not the norm?
I think the idea is to be out of a Mortgage before the loan comes to end. Either by paying down or refinancing after 10 to 15 years in. Thirty years is a long time to build and destroy equity.
joshuatrio
2011 Feb 9, 7:09am
When was a 30 year mortgage not the norm?
I don't think 30 year notes have been around for more than 50-60 years or so... I believe it would be more relevant if we knew what mortgage lengths have been historically.
That assumes falling prices. I don’t think anyone would disagree with you that if prices continue to fall, renting is better. That has nothing to do with your point that 30 year mortgages are indentured servitude.
And that’s what I’m counting on. Prices will continue to fall.
Back to the 30 year debt trap: If prices are falling say $18k/yr and rent is $18k/yr - wouldn’t you rather wait till what YOU WANT came on the market at a price you were willing to pay cash for? I would. Bottom line: if you can’t afford a home that you would live in, unless you finance it out for 30 years, you’re in over your head. Save a DP, and grab a 15 yr. note.
In a few years, you’ll probably wish you’d have waited because you’ll be able to buy a much nicer pad for what you paid today - or had invested your cash differently. How many people on this board purchased when they thought it was bottom? How many bottom calls have there been by so called professionals?
And that is what’s happening folks, now that the tax credits expired, we’re seeing price cuts/drops, still high unemployment, shadow inventory, record foreclosures in 2010… Really, you think that crap is going to magically work itself out of the system in a few short months?
Nope.
Of course if we go Zimbabwe style, I’m heavily hedged in metals - which have performed well. I don’t look at mortgage rates - I look at the bottom line price. I’m a cash buyer - which is why the bottom line price is the most important number in my book - not a monthly payment. I’d rather pay rent and watch prices fall, and pay outright for what I feel is a fair number for a property.
Your statement of someone needing a 30 year loan otherwise in over his head is either hyperbole or just factually wrong. Not really worth arguing.
The argument about where prices are going has been discussed plenty; we'll see.
If you are hedged in metals to the tune of several hundred thousands of dollars, then you are quite unique, and I don't think your situation applies to most. Similarly, if you are a cash buyer (even though earlier you said your minimum was 50% down), then you again are special. Realistically speaking, in the BA, telling people to wait until they have 50% down, could mean they never buy, which for some is the correct way to go. For others who can put 20% down and use a 30-yr mortgage, they will do just fine, and much better than those who wait if we have high inflation in the near future.
joshuatrio
2011 Feb 9, 7:47am
Similarly, if you are a cash buyer (even though earlier you said your minimum was 50% down)
This was my quote you are referencing.
My personal stance - is put at least 50% down, have at least 6 months of cash backed up in the bank, and pay your debt off as quickly as possible. Some of us are just flat out allergic to debt. In which case, when I’m ready to buy/find what I’m looking for - I won’t have a mortgage or pay interest to a bank.
Yes, I plan on paying cash for a house. My point was that if you NEED to take out a mortgage, put down 50%, hell, even 20% would be better than what most people are putting down today. Have a cash reserve. Don't be up to your eyeballs in debt. Have a plan on paying it off. 30 years is a long time to slave away to the bank.
then you again are special.
That's annoying. My wife and I've just learned to save. Do you shop sales? Clearance racks? Drive older cars? Live on a budget - and don't cheat? Use credit card points for Christmas ? It all adds up believe it or not. Do you live below your means? I do NOT make six figures, my wife works part time and yes, I have kids.
If America could get past what they want vs. what they need.... or what they need vs. what they can afford, more people would be in a better position. You'd be amazed at how much you can save if you stick to a budget.
That’s annoying. My wife and I’ve just learned to save. Do you shop sales? Clearance racks? Drive older cars? Live on a budget - and don’t cheat? Use credit card points for Christmas ? It all adds up believe it or not. Do you live below your means? I do NOT make six figures, my wife works part time and yes, I have kids.
If America could get past what they want vs. what they need…. or what they need vs. what they can afford, more people would be in a better position. You’d be amazed at how much you can save if you stick to a budget.
You being special - That's a compliment. Not sure why it's annoying. When you can do something that 90% (or whatever the number is) of the country can't do (ie buy a house with cash), you are special. It doesn't matter how you got to that position, it's still a position different from most.
I believe you said you used to own and now are renting. Did you profit on your sale? Is that how you now have a large down payment or is it really from coupon clipping? In the BA, you're gonna need a lot of coupons to be able to buy a $1M house in cash.
Â¥
2011 Feb 9, 8:24am
30 years is a long time to slave away to the bank.
I UTTERLY disagree with this idea since it is ENTIRELY counter-factual and easily falsified by looking at how borrowers have fared in the past, anytime from 1950 to now, with just a few exceptions at particularly poor times to buy (late 80s, mid-2000s).
I think looking at the ACTUAL (albeit estimated) costs over the life of the loan gives a better basis for decision than this morality play and the 'inherent nobility of thrift' crap.
On a $450,000 loan with 3.5% down, the total after-tax interest cost will be $300,000. (This includes 10 years of PMI).
So we get an average monthly cost-of-money of $800/mo over the life of the loan. Buying doesn't look to bad when we actually look at the costs like this!
Property tax will consume $300/mo, and 'other' expenses will be $400/mo, for a rough average outgo of $1500/mo over the life of the loan.
Interest and taxes for the first 10 years of the loan average out to $2000/mo, fall to $1400/mo for the next 10, and are $900/mo average for the last 10.
The "working for the bank" element is $1100/mo starting out and falls to half that after 20 years.
That's pretty good, having the interest burden fall as the loan ages, given the past history of 3-5% inflation every year.
If I take out this loan now I know my housing expense will be $1600/mo in 2026. What will rents be then? If history is any guide they will be much more than that!
So over the LONG term, buying now doesn't seem to be any worse a deal than renting.
“The time has comeâ€. So you become a homeowner means it is time for every body? LOL.
Yes, absolutely, I signal the bottom! You got it! Haha…
House got appraised (from Wells Fargo) for 11% more than my salesprice..I won't be underwater...but like I said...even if I was, it does NOT matter...because my payment is what rent would be like - if I rented a house like the one I bought, I would pay $3000/month for it...not sure how that would be better...that's the whole point!
Wait 12 more months and you will be underwater. You should have got another rental.
“The time has comeâ€. So you become a homeowner means it is time for every body? LOL.
Yes, absolutely, I signal the bottom! You got it! Haha…
Wait 12 more months and you will be underwater. You should have got another rental.
Sorry about the quote mistake above...here is the text ...
House got appraised (from Wells Fargo) for 11% more than my salesprice..I won’t be underwater…but like I said…even if I was, it does NOT matter…because my payment is what rent would be like - if I rented a house like the one I bought, I would pay $3000/month for it…not sure how that would be better…that’s the whole point!
“The time has comeâ€. So you become a homeowner means it is time for every body? LOL.
Yes, absolutely, I signal the bottom! You got it! Haha…
Wait 12 more months and you will be underwater. You should have got another rental.
Sorry about the quote mistake above…here is the text …
House got appraised (from Wells Fargo) for 11% more than my salesprice..I won’t be underwater…but like I said…even if I was, it does NOT matter…because my payment is what rent would be like - if I rented a house like the one I bought, I would pay $3000/month for it…not sure how that would be better…that’s the whole point!
Personally, I don't trust appraisals when buying. I don't like how they use your offer price to do the appraisal. Do an appraisal without knowing what you need it to be, then I'll believe it.
As far as why renting would be better...Apparently, you aren't factoring in the guaranteed price drops coming for the next 1, 3, ??? years.
joshuatrio
2011 Feb 9, 8:44am
You being special - That’s a compliment. Not sure why it’s annoying.
I thought it was a sarcastic comment - my apologies.
I believe you said you used to own and now are renting. Did you profit on your sale? Is that how you now have a large down payment or is it really from coupon clipping? In the BA, you’re gonna need a lot of coupons to be able to buy a $1M house in cash.
No, I actually lost $5k - back in the Dallas Fort Worth area (we sold before moving to CA). It was about that time I completely lost my appetite for debt - we had a low 30 yr. fixed - and after one year of payments, the balance only went down a grand because we over-payed every month.
From this point on, we really took control of our finances - bailed on the stock market - and decided to make decisions based on personal conviction, rather than what is/isn't popular. It's worked to our advantage. I drive a beater, my wife saves us $200-300 + month from our original food budget, and we lived in a very small, low end property for a a few years - it was just recently, we decided to rent a much nicer place. Small sacrifice for a few years to really sock some cash away.
I'm not in the BA - just south of Santa Cruz in Monterey. I'll consider purchasing in Marina/Seaside since you can get a 3/2 for $200-300k. But it really depends on what happens in the future - where life takes us.
joshuatrio says
30 years is a long time to slave away to the bank.
I UTTERLY disagree with this idea since it is ENTIRELY counter-factual and easily falsified by looking at how borrowers have fared in the past, anytime from 1950 to now, with just a few exceptions at particularly poor times to buy (late 80s, mid-2000s).
That's fine. Look at your lifespan.
toothfairy
2011 Feb 9, 8:44am
i think it's pretty well documented that real estate market goes in cycles.
It will be obvious once we come out of this down cycle.
It seems obvious to me that being bullish is a no brainer right now eventually I will be proven right. Whenever something is at "all time highs" or "all time lows" best odds are to be on the other side of that trade.
Done!
2011 Feb 9, 8:48am
Personally, I don’t trust appraisals when buying. I don’t like how they use your offer price to do the appraisal.
That was my take, the appraisal saved me 10K. But in this neighborhood at the time, the most houses that were being sold at the time I had it appraised. The average sell price was 45K, 2br 1000sqft foreclosed houses. The local Real Estate agents really tried to squeeze those houses out for 220K, but in the end investors got them wholesale, and it dragged the rest of the community down with them. At the time I bought, my house was the biggest house sold in my neighborhood since the crash. There wasn't any thing really comparable to compare it to.
It had recently been reduced from 199 to 170, I really expected the Appraiser to tow the line and give me some soft number in the middle.
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Every broken clock is right every 12 hours...
If you keep being a doom and gloomer...you will be right at some point, if you are bullish you will also we right.
I have been a bear on real estate ever since 2003, when we first looked into buying and got terribly frustrated here in LA, not to sound like a broken record but of course all realtors were laughing at me, CA would NEVER crash...maybe level out...yeah right, I don't call a 35% drop leveling out - I was stubbron back then and I am very happy to have waited it out...the fact is though...I have lived in a crappy rental for 6 years, landlord is a pain in the ass, I work from home and would love to setup a nice office alla new floors, cabinets, possible break down a wall and extend - all the things I cannot do in a rental. I am in escrow now on a much much nicer house (w/pool), even better neighborhood and my mortgage is going to be only slightly higher than my rent is. (20%down 30yr loan) -
I don't care what anybody says...I don't see how that is not a no brainer. And if the market goes down further - so what? If I don't buy, I still have to pay the rent, in essence I am still paying a mortgage, somebody else's mortgage because I have to live somewhere. I'd rather pay my own. Been on the sidelines way too long. We rented a really nice house for a while in 2003...then the landlord had to sell - BAM, we had to move. Totally sucks living with that uncertainty! And moving sucks anyways...
Funny Thing is...I have kept all 45 listings that we looked at in 2003 and just looked them up on zillow and guess what...that's exactly where we are now here in LA. 2003 prices. Amazing!! Of course, back then I didn't have the downpayment like now so it still helped to have rented all these years.
Don't be a bear forever! I have a few older friends that have been bearish on real estate for 30 years...I almost became one of them :)
Buy a house for the right reason - because you need a place to live. If you are waiting for the market to be at the very bottom then you are speculating just like you would with a stock. That mindset is what has caused the bubble in the first place. Don't expect to make big money with your home. Buy it so you have a place for your kids to grow up. And once its free and clear in 30 years, the kids can have it and rent it out and get a head start like some of you in this forum who were lucky enough to inherit a rental prop.
…Deals are out there!
The only person I feel bad for is the next tenant in this crappy rental house with a landlord that hates to fix anything...but there is always a sucka out there. I was that sucka for a long time...
Now, go and buy a house! The time has come.
#housing