patrick.net

Or they did not buy because the credit expired before they could find a house or they did not qualify for it.

I have over $100k saved, and the median price in my community is about $290k. But my business has slowed to where I would probably not even qualify for a $200k loan.

The local mobile home park is looking better every day.

I want to follow this topic.
I am in South Florida,where every available space and somemore is already built.Decent jobs are hard to find and unemployment pretty high
Realtors here show the 2006-2007 price and try to make us believe everything is a good buy as if the peak price was the par price and now is a bargain.
Did dabble with idea of buying an apt where renting would bring in cashflow..but with the prohibitive HOA fee,I am second guessing.
We are young family in early 30s with 1 year old kid.Me and wife making $75k each and have $50k in savings
Should we save up and buy house with cash or forget abt buying for some years and stay as renters?
Also my money is in Bofa checking..any better places to park?

^
1. do you plan to live in the house for 10 years or more? do you like the house, neighborhood and schools?
2. after contributing to your retirement funds, kids college fund, daily expenses and entertainment/vacations, can you afford the mortgage and down payment? have you saved 6-12 months of rainy day money?
3. are home prices close to rent?

if you answered yes to all the questions, then buying may be reasonable.

Rethug says

1 year old kid making $75k

Have more kids.

Profit.

Los Angeles Renter says

The world is suppose to end May 21st… Whatcha waiting for? ...

Well after the Rapture, think of all the vacant houses, it could have a real impact on the value of the houses of the damned. Could very well ignite yet another firestorm of rapidly deprecating housing markets!

Rethug says

I want to follow this topic.

I am in South Florida,where every available space and somemore is already built.Decent jobs are hard to find and unemployment pretty high

Realtors here show the 2006-2007 price and try to make us believe everything is a good buy as if the peak price was the par price and now is a bargain.

Did dabble with idea of buying an apt where renting would bring in cashflow..but with the prohibitive HOA fee,I am second guessing.

We are young family in early 30s with 1 year old kid making $75k each and have $50k in savings

Should we save up and buy house with cash or forget abt buying for some years and stay as renters?

Also my money is in Bofa checking..any better places to park?

For just savings the best rate is either ING Direct or Ally Bank. Both lately offer 1%, although ING is more stable. It's 2 to 3 times BoFA.

If you are renting, find a really cheap rental and stay there. At times of instability jobs can go, and this gives you freedom to move. And if prices spike up you'll be still renting at an old rate saving even more until you can buy whatever you want with cash.

Of course discuss that with your wife, there is nothing more difficult in life than when a spouse disagrees with the direction family is taking. And if you find a bargain that makes sense, no reason you shouldn't get it if you are interested in it.

HousingWatcher says

“One thing these heavy savers will have an advantage is the least amount of debt as compared to least savers and heavy debt takers, makes a big difference on the total payout to bank at the end of 30 years.”
Not really. Those who saved larger down payments will usually not have a smaller mortage, as they will generally just buy a more expensive house.

There are some of us saving money with the goal of having less, or no, debt. People who enjoy more debt are the ones constantly trying to make more money, not save more.

Sean7593 says

Rethug says

1 year old kid making $75k

Have more kids.
Profit.

Thanks..fixed it, :)
meant- we have 1 year old kid and each of us(wife and husband) make $75k per annum

ChrisLA says

For just savings the best rate is either ING Direct or Ally Bank. Both lately offer 1%, although ING is more stable. It’s 2 to 3 times BoFA.

If you are renting, find a really cheap rental and stay there. At times of instability jobs can go, and this gives you freedom to move. And if prices spike up you’ll be still renting at an old rate saving even more until you can buy whatever you want with cash.

Of course discuss that with your wife, there is nothing more difficult in life than when a spouse disagrees with the direction family is taking. And if you find a bargain that makes sense, no reason you shouldn’t get it if you are interested in it

Thanks ChrisLA.Wife is all for buying and shopping all the time :)
I had to take some stuff in my stride so that we didnt take a foolish decision regd home
Will try ING or Amex sometime this week.Thanks again

HousingWatcher says

“One thing these heavy savers will have an advantage is the least amount of debt as compared to least savers and heavy debt takers, makes a big difference on the total payout to bank at the end of 30 years.”
Not really. Those who saved larger down payments will usually not have a smaller mortage, as they will generally just buy a more expensive house.
And do not assume that fence sitters waiting for prices to come down are somehow smart, because they are not. If they were smart, they would not have jumped when the govt. dangled $8,000 in front of them last year.

Duh. Who said that whoever bought to take 8000 credit were smart? There are different level of fence sitters. I am sitting here since 2004 and see the rewards now. All I know is that I could have been upside down on my mortgage had I bought it then. Now I am sitting on shit load of cash that I can even buy that same 2004 prices house at Cash. Go figure..No mortgage at all. Sounds sweet? At any given day I'll keep a $ in my hand(earning 0.5% interest) compared to negative equity scenario.

Your proud of earning 0.5 interest?

"There are some of us saving money with the goal of having less, or no, debt."

And at the end of the day, those same peopel are going to buy the most expensive hosue they can afford. NOBODY pockets the money they save. They end up spending it. When I go to the supermarket and somethign is on sale, I buy more of that product. Always. I don't pocket the savings

"If you are renting, find a really cheap rental and stay there."

So your recommending people live in the ghetto?

HousingWatcher says

those same peopel are going to buy the most expensive hosue they can afford. NOBODY pockets the money they save. They end up spending it. When I go to the supermarket and somethign is on sale, I buy more of that product. Always. I don’t pocket the savings

Are you open to the idea that some people would pocket the savings?
Also, the word "afford" has many connotations. Afford might mean "only what I can pay for with cash today." Or it might mean "as much as the bank and every other lending body will loan me in my lifetime."

I strongly believe that most people will use the money they save to buy a more expensive house. That is what Americans have a history of doing, and that is what they will continue doing.

HousingWatcher says

Your proud of earning 0.5 interest?

And you are proud of negative equity? Are you that blind that you can't see what a negative equity or being upside down on a mortgage is? Forget about 0.5%. Holding the dollar as is earning 0% is better then negative equity on any given day. You need to know some basic economics to understand what I am talking about. :)

bubblesitter says

HousingWatcher says

Your proud of earning 0.5 interest?

And you are proud of negative equity? Are you that blind that you can’t see what a negative equity or being upside down on a mortgage is? Forget about 0.5%. Holding the dollar as is earning 0% is better then negative equity on any given day. You need to know some basic economics to understand what I am talking about.

He has to be cause he said this:

HousingWatcher says

“If you are renting, find a really cheap rental and stay there.”
So your recommending people live in the ghetto?

Implying that there are not relative bargains to be found in any neighborhood esp if one is a "fence sitter" who saved up loads of money, has great credit, and likely a good job.

Rethug says

Me and wife making $75k each and have $50k in savings

Is that not including retirement savings? If not, you need to start saving now! Especially if you plan on having another kid.

You are back in rare form these days AF...

What's your secret? Exercise and clean living? Borsch enemas? Perhaps you've tapped the power of positive thinking?

APOCALYPSEFUCK says

Squat in abandoned and/or foreclosed properties until the suicide rate for Realtors has eliminated the species and you can buy a house for the price of a carload of returnable bottles.
Buy cash or be fucked by a bankster.
Imagine the glory of seeing one freezing to death on a sidewalk in front of a house you own free and clear and live for the day you can enjoy strolling out to comfort and warm him by taking a long piss on his face.
DIE NAR DIE!
DIE BANKSTERS DIE!

Thanks for the 5 minutes long laugh. LOL.

HousingWatcher says

I strongly believe that most people will use the money they save to buy a more expensive house. That is what Americans have a history of doing, and that is what they will continue doing.

I think you might be looking at this the wrong way. People who want to buy expensive houses save more because 20% of a high price is a lot more to save than 20% of a normal price. So of course if you look at all the down payments in the world, higher down payments will correlate with higher home prices.

But that doesn't imply that any given individual saver will increase their desired home's price as they save more money. It's perfectly possible that they'll save money, reach their goal, and then buy a home in the price range that they had been aiming for all along.

HousingWatcher says
I strongly believe that most people will use the money they save to buy a more expensive house. That is what Americans have a history of doing, and that is what they will continue doing.

LOL!... last 10 years hardly was an indication of prior decades. If anything we certainly see that kind of behavior a few times over 100 year period. It certainly isnt the norm. Once home prices dive down, there will be harsh backlash against future bubble makers.

I guess my point is that there are a certain number (such as myself, and many others on this board) who have been saving for so long that, once prices get close to pre bubble levels we'll all be trying to outbid each other.

And, if that never happens and prices continue to trend downward slowly, or stagnant and we bump along the bottom for years will we all become cash buyers? In other words if you've been saving for years now how much do you have, and how much so you think you'll need?

Myself. 20% down plus closing plus reserve for contingencies I'd need at least $100k in savings (given current prices) . With a 10% drop it'd be tight, nut I'd probably have enough to pull the trigger.

EastCoastBubbleBoy says

how much do you think you’ll need?

the max i'm looking to pay is:
- 20% of my net worth for a down payment.
- 20% of my after-tax paycheck towards mortgage payment+insurance+taxes
these are very safe numbers, easily affordable and realistic for today's housing market.

i tend to think 20% of my income towards a home is way too much even if it is building equity. i'd really like the number to be 10% of my net worth on a down payment and 10% of my after tax paycheck for mortage/insuranance/taxes.

i don't think you're understanding me.

i have net worth of X dollars. so my down payment is 0.2 *X.
i have after tax income of Y dollars/month. so my mortgage payment+tax+insurance is 0.2*Y.

let's use nice round numbers (instead of using my own numbers).
X=$100k; 20% means down payment = $20k
Y=$5k/month after tax. 20% means mortgage+tax+insurance is $1000/month.
$1000/month is very roughly (off the top of my head) around a $200k house.
the down payment is $40k. so i need to save another $100k to make up the extra $20k before i can buy.

the end result is that i am spending 20% of my net worth and 20% of my (after-tax) pay check on a house. which is not unreasonable; although i'd like it to be lowered to 10% as i mentioned earlier.

i don't believe i should spend more than 20% on a house. some people spend way more than 50%. that's their prerogative.

I'll bite.

My wife and I live in Silicon Valley and have saved up approximately $650K for a house (this is in addition to retirement and short term savings). We're both professionals with a combined gross income in the mid six figures. In other words we could buy a house if we wanted to. And yet we haven't, because housing still seems overpriced. So the only effect we'll have on housing prices is to help define a floor, because we're not going to overpay.

So...France?

Same story here. We are in Florida and have been saving for quite a while. I am in finance, so the 2004-2006 "lending" made me think it was criminal and a huge crash was coming. Should have shorted some stocks, but it's beyond the point. From my own local market analysis, it would take a few more years for the prices to reflect the new regulations, the increased down payment requirement, and the high inventory levels. When all of it is priced in then we will spend our hard earned cash and buy. I also wish the interest rates went up. So I am thinking 2015 not earlier.

I keep seeing all of these comparison between buy and rent which include the idea that rent will explode upwards with inflation. Did someone create a sub-prime rent payment product that I don't know about? I thought that rent is constrained by the incomes on the area as you can only write the rent check from the money that you take home.

I had an apartment right across the river from Manhattan that the landlord only increased the rent one time in 10 years by $50. I heard the same arguments from people that I was throwing money away on rent and that I was crazy not to buy. This was being said by people who were taking out interest only loans to take part in the flipoarama RE game that was being played so they were renting money from the bank and building NO EQUITY. So their argument held no water with me.

I'm a first-time "fence sitter". I have over $30K saved and possibly looking to buy this year for $90K or less (median house price is $100K). We're currently renting at $775/mo. That rent isn't bad for the area (Metro Detroit; similar houses rent for at least $900-$1000), but sale prices aren't bad either. Even with taxes and maintenance, our house payment would be similar to our rent.

What's holding me back is employment uncertainty and tying up most of our savings into a building. If I lost my job it would be bad either way, but I could at least move out of state easily if I kept renting. I imagine a lot of other people feel the same way. I'm not sure what to do.

HousingWatcher says

And do not assume that fence sitters waiting for prices to come down are somehow smart, because they are not. If they were smart, they would not have jumped when the govt. dangled $8,000 in front of them last year.

You kidding me? Avoiding that tax credit was the smartest thing you could do. All it did was temporarily inflate prices...more than 8k in most cases too.

RealisticOptimist says

HousingWatcher says

And do not assume that fence sitters waiting for prices to come down are somehow smart, because they are not. If they were smart, they would not have jumped when the govt. dangled $8,000 in front of them last year.

You kidding me? Avoiding that tax credit was the smartest thing you could do. All it did was temporarily inflate prices…more than 8k in most cases too.

HousingWatcher's quote doesn't make sense either way I'm reading it. His second sentence says those who took the credit are NOT smart, where the first sentence is talking about those who waited out the credit.

If he's saying that those who waited out the 8k credit and are still fence-sitting aren't smart, then he's just exposed himself as a fucking retard for not realizing the market is back in a free-fall, far exceeding the credit offered. It isn't even debatable at this point.

We fence sitters won't impact the market. The knife-catchers have caused a few blips in the declining prices, but those blips were temporary.

I've got enough saved to buy a house in cash right now, but I'm not going to buy today because the prices are way to high. It all comes down to the Case-Shiller index. The fair-market price, as shown in the 110-year history from 1890 to 2000, is 110 on the Case-Shiller index. We're still way above that.

Housing prices have only retreated about half-way from their bubble gains in places like South Florida. Not only do prices need to plummet to 110 on CS just to get to pre-bubble levels, but they will go below 110 because all markets overcorrect.

Given that the housing bubble was the biggest commodity bubble in the history of the world, I wouldn't be surprised if the CS Index plummets to the levels last seen in 1984, see http://tinyurl.com/3mkn9h8 . Guess it's time to break out the orange life-preserver jacket, http://tinyurl.com/y9t6tse .

The bottom line is that anyone smart enough to stay out of the bubble, not catch any knives, and save up while house prices correct isn't going to be stupid enough to buy before the market is back to historical lows (under 110 on the Case-Shiller Index).

[Note]
There's a bug in the software driving this forum. When it detects a URL, it includes punctuation like periods in the URL. Workaround: put a space between the URL and your period.

hi all - longtime reader here. my partner and i have been living in SF Bay silicon valley since 2000. combined income = 250K+. home prices were already out of control when we got here, having doubled since 1996-1997. some people seem to forget that.

we rented a great 1100sf 2b/2b apartment, gated, indoor and outdoor pool, fantastic landscaping, fitness center, across the street from bart - we love it. while up a little, rent is still 24% lower than when we moved here. i guess we definitely live below our means but want for nothing - lots of travel, eat out a lot, cash for new cars (carollas not bmws lol) etc. while it was sometimes tough resisting the pressure to buy back in the early 2000's, we could never justifying plunking 20% (from hard earned money saved) and STILL paying at least 2.5 X per month more for the privilege of living in the same square footage and having to worry about taxes, dues, appliances, maintenance etc. instead we saved the difference and more. no one will every convince me we were/are throwing money away on rent when we have more real money 'equity' saved than we would ever have had in real estate had we purchased here. still doesn't pencil out yet even with the tax bennies etc. had we been spending a fortune to rent something, obviously that would have been different.

we now have over 700k in liquid assets and another 700k in pensions, 401Ks, IRAs. and we are in no hurry to buy though would if it becomes really worth it. i should say we own a condo outright in an area we love in another state that is leased out to a wonderful retired lady. we will either move there later or use as a 2nd home. kinda thinking of maybe buying an investment property there too - much lower costs - for cash.

i will say this - having saved like we have and watched it grow, it is even more difficult to part with it for a substantial downpayment to take on mortgage DEBT. i'm an engineer so it's all about the numbers lol.

Spelunker says

have saved up approximately $650K

Tony FL says

we will spend our hard earned cash and buy

Way to go. Good job.

I was calling the buyers who took the $8k credit idiots, not the ones who did not take it.

fizbin says

With facebook and linkedin, etc IPO’ing, those liquidity events pretty much guarantee that those markets are only going to be harder to buy into in the future with literally hundreds of new local multi-millionaires hitting the street at the same time….

There are a couple of assumptions here.

1. First time buyers and the millionaires are all vying to buy in the same area. Bay Area is a huge market. A millionaire is likely to buy on the Peninsula (Atherton, Palo Alto etc.) or Danville rather than Fremont or San Ramon. Why do you assume that the first time buyer is as prudent as the linkedin fella who will get rich in 3 months time when he can sell his class of shares? The drivers for a middle class fellow are very different from those of a millionaire who is not worried about public schools, finding cheap nannies, and being with his fellow countrymen. My point is that the market is segmented into several independent parts. Think of a boom in Lamborghini market. Now argue that this will increase the price of a new Corolla. See the problem? That is how independent different markets are even though the dealerships may be right next to one another.

2. There is a lot of hiring happening here in Bay Area, that much is true. But there are not a lot of jobs for fresh people. A lot of poaching is happening among companies. Even here, only some kind of jobs (those that have something to do with software development directly, e.g.) are in vogue. The plumbers of the world are yet to see relief. How do I know there is not a lot of influx of people? I can still rent comfortably and even more so than one could 10 years ago. So there are houses to go around. The tide is not lifting everybody's boat equally.

3.There is an assumption that the millionaires will all jump in to buy a house. Did they do so in the last bubble? Why did they not? Why will they do now?

Regards
Kamesh

HousingWatcher says

I was calling the buyers who took the $8k credit idiots, not the ones who did not take it.

Gotcha. Totally agree. Thought they were idiots when they were doing it, now it's a proven fact that they were.

HousingWatcher says

I strongly believe that most people will use the money they save to buy a more expensive house. That is what Americans have a history of doing, and that is what they will continue doing.

We do own a house (mortgage) currently, but have 50k saved and are looking for a second even CHEAPER house for us to live in (we have a 3/1 with a one car garage and want a bigger lot/garage and second bathroom). The more expensive house we currently live in will be a rental for us and about break even right now rent/mortgage payment.

Not everyone buys the most expensive thing they can afford, some people really do long range financial planning.