patrick.net

Do not sale now, refi if you can and rent the house out. This is the best rental market and mortgage rates in 50 years. Do not listen to the idiots

ppexx says

Do not sale now, refi if you can and rent the house out. This is the best rental market and mortgage rates in 50 years. Do not listen to the idiots

yeah. don't listen to idiots like ppex.

it would be good to get some information first before saying one decision is wrong or right.

APOCALYPSEFUCK is Tony Manero says

With cannibal anarchy imminent, there are other more important questions to consider.

like: white meat? or dark meat?

Housing will not drop bigger than before inter foreseeable future. It may drop 10-15% in decent neighbothood, but that's about it. Buying make sense if the price is right. I repeat, it's always bad idea to buy more house than you can afford. Its also bad to buy overpriced houses. BUT, it's good time to buy undervalued houses, it's out there already. Just my 2 cents.

What I see is that ignorance is still big bliss in the States.

I am in the decided minority of people who believe the real-estate downturn has barely begun. I don't think real-estate prices will hit bottom till they've dropped between 80% and 90% from peak prices, on average (i.e. some homes and neighbourhoods may drop a little more, some a little less).

The private lending marking has virtually ceased to exist in the US (i.e. 90% of mortgages are funded by the government) and banks are getting squeezed ever more by tougher government scrutiny and falling prices on collateral for loans, all of which reduces their ability to lend.

The problems with non-performing private debt haven't disappeared wince the 2008/2009 financial crisis. Banks have been just sweeping the problems under the carpet. Worse, problems with run-away credit have been growing at an alarming rate in places like China, Australia and Canada where lending has increased dramatically and mal-investments (like cities which no-one lives in) are rampant.

Deflation is around the corning which will drag US real-estate prices still lower and hurt most other countries even more (proportionately). What I am not so sure about is the speed at which deflation will occur. I am torn between a scenario where deflation dribbles on for 15 or 20 years, similar to what happened to Japan since 1989. We could see prices recover for 2 or 3 years at a stretch only to have them drop to new lows before then next "recovery". Or we could see something more dramatic with huge deflation occuring over the span of a couple years.

In my view, the US dollar is pretty much the only asset that will have gained in purchasing power 5 years from now. The masses of debt (both public and private) virtually ensure this will happen. Debt is deflationary.

All that said, I don't recommend everyone rush out and sell their homes. If your income easily supports your home and you like the place you live then just enjoy it and stop worrying about what happens to the market. Who cares if their house drops 60% from today's valuations? We don't buy homes expecting to make (or even preserve) capital anyway. People don't expect to make money when they buy a new car and no one should expect to make money when they buy a home. Just as people expect the price of a new car they drive off the lot to depreciate in value every day we should all expect the same of houses we buy.

You just answered your own thought process with a valid experience.

During DOW 6000, people steered you away from buying. No one had confidence and was scared sh!tless. The right thing to do was go against the crowd.

Fast forward to today, is public opinion saying buy a house cause everything is a "bargain" now, or are they saying sell before the next big drop?

Still way too much confidence in the open markets out there. When they start screaming SELL NO MATTER WHAT, REAL ESTATE IS DEAD FOREVER... it's safe to start jumping in.

Every person, every home, every neighborhood and every mortgage is different. The only thing I agree with realtors about is that the market is indeed "local."

That said, I am considering the same thing... selling my small townhome in Austin. The problem is that I am 6 years into a 15-year mortgage. Each month I pay a considerable amount to the balance. Prices haven't dropped much here (and may not--since here, they really didn't rise much either). I could never rent a place this nice for anywhere close to my mortgage payment.

When selling, consider the 3% extortion you'll face from your potential buyer's agent, costs of moving, first- and last-month's rent, appliances you may lose in negotiations with the buyer, etc... And personally, I would tread lightly with refinancing--depending upon how much time you have left on your mortgage, the rate, etc...

Best of luck to you!

Housing is still above the long term average in price. It will need to drop an additional 15-30 % based on the specific market. All financial decisions are based on the individuals need , fear, or greed at that particular moment. Everyone gives you advise based on where they are or what they believe not what is best for you. You alone can decide that. Regardless of the political outcome, the shadow inventory(REO's), pending foreclosures and individuals underwater on their loans will continue to be a drag on sales, construction and pricing of homes well into 2013. Do what is best for you and your family.

repo4sale says

Average for 10 years=27.12% IRR per month after costs!

FV = PV * (1+i)^t
i = 27.12%
t = 120 months (10 years)
PV = 10,000 for arguments sake
FV = 3.2038052146068924e+16

Even if your starting value was $50, the FV would still be 160,190,260,730,344.62

That seems a bit high

Los Angeles Renter says

How much equity would you have to have in a home before you think it'd be worth it to ride out future price drops?

I dont think this question is relevant - you should make a rational economic decision regardless of your equity (unless you are squatting)

Los Angeles Renter says

Is the big money on wall street trying to scare the middle class out of housing now, so they can buy it up and rent to us for a profit in the future?

I don't think so.

we are thinking about selling and moving back East, but not because of the prices out here. Other personal reasons.

EMan says

we are thinking about selling and moving back East, but not because of the prices out here. Other personal reasons.

East is not exactly cheap, you know. If you priced out in LA or SF, you will find the same in NYC or DC. So, make sure everything is fine before you actually move. Whatever the personal reasons are, wish you the best.

seaside says

EMan says

we are thinking about selling and moving back East, but not because of the prices out here. Other personal reasons.

East is not exactly cheap, you know. If you priced out in LA or SF, you will find the same in NYC or DC. So, make sure everything is fine before you actually move. Whatever the personal reasons are, wish you the best.

thanks Seaside.

There's a lot of variables you haven't supplied. Is this the house you are living in or an investment property? What did you pay for it back in 2001 and what is the market price today? If this is your residence, are you willing and able to rent? Would you be happy living in an apartment for a few years? Do you plan to move or change jobs?

Although 2001 was in the bubble, the lion's share of over-appreciation occurred after 2001. Given the costs and headaches of selling and buying houses, I'd say that if this is your primary residence and you plan on living in the same area for the next five years, it makes sense to hold on to the house even if prices drop below 2001 levels.

If it is just an investment property, then bag what profits you still have left in it.

Of course, you have to plug in the specific variables and do the math to see which is better for your specific situation.

Warren Buffet always said something like,... you have no business being in any position you don't understand.

plus
I truly believe sometimes the best thing is to do nothing. but try telling that to the VA jay jay.

rentingforever says

Patrick, Stop posting the left-wing garbage from reddit and focus on real news.

if I created a site like this I'd post anything I F$%King felt like. you can always create your own site and post anything you'd like. so either do it or shut your trap.
peace.

Los Angeles Renter says

Who on this website is so sure of a 20-40% drop from current prices that they would sell... And buy later? How much equity would you have to have in a home before you think it'd be worth it to ride out future price drops?

I would have to be pretty darn convinced of an upcoming pretty darn big price drop -- and not just a drop in general, but a drop in the areas where I wanted to live -- to sell with plans to buy later. With the costs associated in buying or selling, you would have to have a substantial drop just to break even. Once you factor in the time, cost, and energy in moving twice, you're starting off in a pretty big hole.

Yes, it might be worth it to make the move, but personally, I would be nervous about making such a gamble. And personally, that's not the sort of bet I want to make. Then again, part of the reason I keep waiting to buy in the first place is that I feel like buying when prices seem out-of-line with fundamentals is a pretty big gamble, as well.

Los Angeles Renter says

Let's say you bought in 2001...

It's highly dependent on the price you paid. If you bought in 2001, there's a good chance you're not under water if you never cash-out refied, and that you're actually up a decent amount.

Sell now, bank what you can, rent for a few more years.

First, does/will the mortgage interest deduction benefit you? A huge percentage of taxpayers take the standardized deduction, so a mortgage is of zero tax benefit to them. Even if you do itemize, what is the marginal value of having that mortgage interest on your return?

Next, how many people whose judgment you trust expect prices to rise, noticeably, in the next 3-5 years? To me, rising 1,2 or even 3% is not “noticeably,” relative to the current risk of further price declines. If obtaining a cheap mortgage interest rate were to make it a good idea to buy now, then don’t forget the corollary: when interest rates rise, the selling price of houses will decline fairly proportionately because in the end, it’s all about “howmuchamonth.”

I would buy only if I were in an area where rentals are near-impossible to find (there are some, but fewer than ten years ago), or where the rent vs. buy ratio strongly favors buying (there may be some, but I’m not aware of any).

When I began following these blogs in late 2004, I thought that all this would be over by 2010. I though the ones who predicted 2012-13 were unduly pessimistic. Now I believe they weren’t.

Rich Metzger says

I though the ones who predicted 2012-13 were unduly pessimistic.

It could go well beyond that,thanks to the government's interest in keeping the bubble inflated.

I have been homeowner and renter. Let me tell you, I'd rather be a renter any day. Not only are renting costs much less, there are hugh hassels in owning. I know I will do better financially in 15 years when I rent.

First, will the mortgage interest deduction benefit you? A huge percentage of taxpayers take the standardized deduction, so a mortgage is of zero tax benefit to them. Even if you do itemize, what is the marginal value of having that mortgage interest on your return? And no matter what the lenders tell you,

Next, how many people expect prices to rise, noticeably, in the next 3-5 years? To me, rising 1,2 or 3% is not “noticeably.” If obtaining a cheap mortgage interest rate were to make it a good idea to buy now, then don’t forget the corollary: when interest rates rise, the selling price of houses will decline fairly proportionately because in the end, it’s all about “howmuchamonth.”

I would buy only if I were in an area where rentals are near-impossible to find (there are some, but fewer than ten years ago), or where the rent vs. buy ratio strongly favors buying (there may be some, but I’m not aware of any).

When I first started to follow these blogs in ‘05, I thought that all this would be over by 2010. I though the ones who predicted 2012-13 were unduly pessimistic. Now it's pretty easy to see that they weren’t.

Rent, unless there's a good reason you can't or shouldn't.

Oh I've thought this for a while now. The game is to get the American middle class thinking renting is the better deal, unless you own the home outright, in all circumstances. Eventually interest rates will rise, and saving will be the big thing. This will doom the housing market further, taking what few earnest buyers there are out of the market, and droping values, leaving more underwater. The resulting defaults will bring with them greater calls to tighten lending standards, not just in regards to reasonable down payments and higher credit scores, but to eliminate government involvement all together, etc. Meanwhile, wall street investors will begin buying dirt cheap homes in cash, starting rental empires. This will permit them to raise rents across the board. They will use this wealth to lobby for laws that put repairs and health compliance on the renter, not the landlord, as the laws exist now, raising the cost of living even higher. All this coupled with falling or stagnant wages will make buying no longer an option for many, at any point in the their lives, so these renters will be trapped paying whatever the real estate mogels demand. Think tenement living for most.

futuresmc says

Eventually interest rates will rise, and saving will be the big thing. This will doom the housing market further

never thought of this scenario.

seems reasonable. an inflow of money to savings when rates rise, will probably take away at least a small percentage of money that might have gone towards a down payment.

mlg_12 says

Still way too much confidence in the open markets out there. When they start screaming SELL NO MATTER WHAT, REAL ESTATE IS DEAD FOREVER... it's safe to start jumping in.

I have to disagree... Try googling anything postive about housing! You would be very hard pressed to find 1 postive article out of 100 negative blogs or articles... (well, as long as you avoid realtor we sites... They dont count).

It's my opinion sentiment... Especially on the internet, it is as close to "blood in the streets" as the stock market sentiment was in 2009. Given its much easier for the big boys to manipulate stock prices than it is middle class home prices.

Los Angeles Renter says

Try googling anything postive about housing! You would be very hard pressed to find 1 postive article out of 100 negative blogs or articles... (well, as long as you avoid realtor we sites... They dont count).

It's my opinion sentiment... Especially on the internet, it is as close to "blood in the streets" as the stock market sentiment was in 2009. Given its much easier for the big boys to manipulate stock prices than it is middle class home prices.

I see something quite different. Back in 2005 and 2006 my views about impending deflation with 80% to 90% drop in real-estate values were at least taken seriously by some people. These days, even most of the die hard bubble bloggers I have been friends with over the years openly challenge my predictions as being grossly pessimistic.

I have went from being someone who's oppinions were shared by at least a few people to someone who's views were completely on the fringe.

In fact, I would have to say that the bubble blogging sites that I frequent are decidely more bullish than they used to be. Heck, even my friend Tim Ellis at SeattleBubble.com has bought a house recently.

In short, I don't see any "panic". If anything, I see a prevailing belief that the worst is over and that although there may be further price declines they won't be of the same magnitude of what we've already seen.

The future is unknowable, though the Republican takeover of the House does mean there will be less upside potential this year and next since they are primarily focused on destroying the economy as part of their electioneering.

If I were you I'd move into a low 2% 5/1 ARM now but if there's no equity in the property after 10 years that gives me pause.

If the Republicans take the White House & Senate next year, there will probably be another pump & dump action, like what they did in the 2000s.

If divided government remains, there may not be much of a pump available.

If the Dems somehow retake the House, there will be a pump.

CBO is projecting 5% unemployment by 2020. That would be nice, but getting there from here is an interesting proposition.

If the forces of austerity actually win in 2012 -- Bachmann, DeMint, Cantor -- well, kiss your ass goodbye.

I dont pretend to know more about the US housing-ecosystem than the banks who seem to be even manipulating it. Very simplistically speaking, if the banks are going to insist on 20% down payment even at a time when they need to sell their inventory so badly, it tells me that they are expecting that much drop in prices at least. We are still not talking about the commercial real estate (hear about those borders stores, other empty stores?), medical bills, student loan problems, national debt, threat to dollar's value, possible end to mortgage interest deduction in taxes, etc. If prices drop that much new supply will surely add to the weight and then no body knows how bad the spiral down might be....but then elections are approaching, so things may not get really bad untill after the elections are done... so overall this summer would be a good time to sell. Kapish?

MoneySheep says

I have been homeowner and renter. Let me tell you, I'd rather be a renter any day. Not only are renting costs much less, there are hugh hassels in owning. I know I will do better financially in 15 years when I rent.

Then you bought poorly. Every friend I have who is buying now is saving at a minimum, 15-20%, at a max, almost 50% in one case.

Your broad statement is incorrect.

The government is going to keep interest rates well below 5% for mortgages for years to come... Even if it means causing inflation across the board.

Great way to pay off debt is to cause inflation right?

Los Angeles Renter says

I have to disagree... Try googling anything postive about housing! You would be very hard pressed to find 1 postive article out of 100 negative blogs or articles... (well, as long as you avoid realtor we sites... They dont count).

most of it is just people whining that their house isn't a magical box providing them infinite free money. Too many just don't understand how money is actually made, nor care as long as they get it for nothing. There is a lot of that stupidity is still around, not everyone let go of the pipe dream.

Hysteresis says

APOCALYPSEFUCK is Tony Manero says

With cannibal anarchy imminent, there are other more important questions to consider.

like: white meat? or dark meat?

I love you apocalypsfuck.

commonsense says

What I see is that ignorance is still big bliss in the States.

Say more. What do you mean?

Katy Perry says

rentingforever says

Patrick, Stop posting the left-wing garbage from reddit and focus on real news.

if I created a site like this I'd post anything I F$%King felt like. you can always create your own site and post anything you'd like. so either do it or shut your trap.
peace.

I am enjoying the posts this morning. I love Katy Perry, too :-)

I purchased a house in 2007 in a town that was started in 2003. Before the economy crashed, these houses were selling between 600k - 900k. I thought that purchasing this 3600sf house for 500k was a great deal already, but unfortunately price still keeps dropping. There are a lot of short sale and forclosure which is really bringing down the value of our house a lot. On top of this forclosures and short sale, there is an approval to build a natural gas power plant about 2 1/2 miles away from this town, which made it worse. Currently the value of my house is pretty much evens out on my loan. I have the house on the market now, but my asking price is a little on a high side to pay off the realtor fees, which in reality we walk out with nothing. It's already been almost a week on the market and doesn't seem like it's going anywhere. I'm thinking if I should consider short sale to just get out of this high mortgage, or should I just wait and see what happens?

frustrated says

I thought that purchasing this 3600sf house for 500k was a great deal already

and still frustrated?

frustrated says

natural gas power plant about 2 1/2 miles away from this town

frustrated says

I'm thinking if I should consider short sale to just get out of this high mortgage, or should I just wait and see what happens?

You just answered your own question. I'd say squat and let it foreclose, don't pay a penny to bank - live free.

frustrated says

I purchased a house in 2007 in a town that was started in 2003. Before the economy crashed, these houses were selling between 600k - 900k. I thought that purchasing this 3600sf house for 500k was a great deal already, but unfortunately price still keeps dropping. There are a lot of short sale and forclosure which is really bringing down the value of our house a lot. On top of this forclosures and short sale, there is an approval to build a natural gas power plant about 2 1/2 miles away from this town, which made it worse. Currently the value of my house is pretty much evens out on my loan. I have the house on the market now, but my asking price is a little on a high side to pay off the realtor fees, which in reality we walk out with nothing. It's already been almost a week on the market and doesn't seem like it's going anywhere. I'm thinking if I should consider short sale to just get out of this high mortgage, or should I just wait and see what happens?

Let me guess, Mountain House, CA? I would short sale and get out ASAP. Gas prices will only go up and the commute traffic over Altamont pass is projected to double in 10 years or so. Also the quiet train tracks north of town will be reopened soon (if not already). When the power plant goes live prices will probably go down more. Try to find a sucker to buy your house and take advantage of the lower prices nearer your work. I don't see anything that would lead to increased prices out there for a long long time.