Buying property is not a good investment?? Hmmm . . .

Look, Gina . . . buying ANYTHING is a "caveat emptor" proposition. I bought a pack a gum last week since I saw an Orbit commercial. WORST tasting gum I had ever had. Maybe someone else likes the taste, but for me . . . ICKY!!

Reports are generalized. So if you want to apply the index for what is going on, that's fine. But, the index was designed for other users -- institutional, etc. who deal with real estate on a much larger (bulk) volume. A single home buyer wouldn't probably not be as affected as institutional investors by the report. Real estate is localized, and it might even be on a home-by-home basis. What ANY seller will want to net (be it a banked owned, owner occupied) is the basis.

As far as home buying is concerned, would you want to pay the mortgage . . . or the rent?

Real estate, if bought for the right reasons, will be a good investment. And, the tax write offs are helpful to some people. And with the $8000 tax credit (which is a limited time offer) it might be a good time.

Without knowing your situation, it would be hard to generalize. Perhaps renting is a better option for you at this time. But buying, IMHO and NOT because I'm a real estate agent, is a better option then renting. And in that regard, being a home owner is a good investment!

" . . . a house is never a good investment" what tripe!

I do agree that you will need to follow interest rates. When they start to creep up, it will add to the monthly PITI.

Please understand that without knowing your situation, it would be hard pressed for any professional to ascertain if buying a home would be a smart move/investment.

If you wanted to do a simple "rent vs. buyer" analysis, there's a good program I can plug in your numbers for you. No obligation . . . ;-)

Hope that helps.

Carla Muss-Jacobs, Broker/Owner
EBA Portland, LLC
Exclusive Buyers' Agency
Assisting Buyers in Metro Portland since 1999

Gina,

Unless you're a professional investor, a house is seldom a good investment. If you want to buy a house to live in, do so for that reason, not because of the investment potential.

Here's one way to look at it: What's the first thing any financial counselor advises? To diversify your investments, right? If you bought a $300,000 house, what percent of your total investment portflio would that represent? If it's more than five or ten percent, then it's not good diversification. Right now, investors are buying up foreclosures. If they do it as aggregators, they're paying 25% to 40% off the already-low asking prices. If you're interested in that kind of investing, Case-Schiller won't relate in a significant way.

Dirk Knudsen is right in saying that a lot of neighborhoods have nothing for sale. The lack of sales data has made pricing analysis very difficult, because so few comparable sales exist. A lot of people don't want to sell in the current environment. Those who do usually are pressured for one reason or another and are becoming competitive in their pricing. Overall, prices are trending down because of this and because of the distressed properties, but in some neighborhoods, prices are quite stable and good homes aren't stayng on the market for long.

Buy a house because it's the place where you want to see your shoes on the back porch, or because the schools are good for your children or because you want to paint the walls Dayglo pink and not get evicted. Unless you're an investor, forget about the Case Schiller kind of stuff because no one knows where it's going. And don't buy a house unless you're going to live in it for a few years, like five or six or more.

My two cents.

Gina;

Grace makes a great point. The rates are the bigger part of this story. Values are always on the move both up and down. For me having done this for 25 years I say the worst is over and that we may still see some more instability.

Case-Shiller does not factor in the Urban Growth Boundary which is unique to Portland. IN a market like Hillsboro, Beaverton, Bethany areas we have seen a very steep decline in the number of new homes for sale and there have certainly been no new starts of any kind for over a year.

Having said that there are neighborhoods where I show every day where there are almost no existing homes for sale. Yesterday Moody's announced that Portland was rated #5 on a list of cities that are making the fastest rebound economically.

I would expect a little more drop with a soft landing over the winter and spring. Short sales will always be the best values and I have seen many short sales that are way below what the market value is today. If you have a housing need now I would get after it before rates are at 7%. Even if you buy a home and the value slides another few percent I think your better off in a 5 year window than waiting.

That is my 25 cents worth.

Best of luck to you and I do specialize in Orenco and Hillsboro/Silicon Forest homes so let me know what you need. I just might have a gem up my sleeves.

Regards;

Dirk Knudsen
Re/Max Hall of Fame.
503-799-8383

Hi Gina and thanks for your email.

The Case-Shiller report, as you already know, made waves throughout the financial world last week, and began the downward slide in the stock market that is partially responsible for the current loss of over 300 points on the big board over the past 10 days That weak and corrected housing number coupled with slower economy growth has resulted in corrections in many market sectors--stocks, financials, commodities, oil. The only notable exception is the technology sector, which tends neither to suffer nor expand greater under these climes.

However, what you refer to as "dramatic", I would not necessarily similarly characterize. Further, as someone in the "trenches" (so to speak) in finding homes for my clients, I can say that the environment in April 2009 is not currently the environment today in July 2009. Since Case-Shiller is very "backward looking" and does take about 90 days for calculation, it is likely that by the time homeowners are told that the prices and sales were increasing in July, it will be a full-fledged and acknowledged fact. The reason C-S had such an impact this time was because, at a time when home sales are increasing, the C-S states that home sales and prices declined (in April 2009).

As for waiting, while I'm always in favor of a good savings, my worry now is that interest rates are poised to move rapidly upward. The Mortgage Backed Securities (MBSs) which influence interest rates on home loans, has steadily been increasing, and this movement portends possibly significantly higher home loan rates by year end. This would mean, of course, that based solely on the time value of money, waiting too long will mean a drastically higher cost to you both in terms of the monthly mortgage payment and overall cost on the purchase of property. Just in the past 60 days, we've seen interest rates flux up from 4.75% on a 30 year fixed rate high balance loan to over 5.50% on the same loan. On a standard home loan, of say, $729,000 (the maximum for high balance conforming loan), the 75 bases point increase amounts to an increase in monthly mortgage payments from $3802 to $4139--about $200 per month or $2400 per year. That's a fairly significant increase. If interest rates spike further, for example, to 6.25-6.50 (which is where I think we might end the year), that same $729,000 loan will cost between $4488 at 6.25% to $4608 at 6.5%, which is another increase of between $250 to $500 per month or $3000-6000 per year. Over time, that type of interest can really add up and will far exceed a small drop of 10 percent in the house price if that's what buyers are waiting for now.

So, in short, I'd be far more concerned about snagging a good interest rate than worrying necessarily about waiting for another drop in house prices. And, of course, if you couple working with a real estate facilitator instead of a full service agent and garnering savings to the buyer for this work, the $8000 government incentive and the historically low interest rates, I think I can make a very good case for buying now rather than later.

Sincerely,
Grace Morioka, SRES, e-Pro
Area Pro Realty
Sunnyvale and the Peninsula

There is no doubt the market fell hard once again from 4th quarter 2008 till now. The big question, no one can answer (unless they know the future) is what will happen once the summer selling season is over. Right now positive pending and sale numbers are keeping the market from dropping. This fall and winter... who knows? A lot of people think they do, but I know of no prophet.

I can point to history and say that American history has never seen home values decline over a ten year period. That is about the best anyone can say in the completely unstable financial market we find ourselves in. Responders of this website are motivated to encourage you to buy, quoting the best prices and rates in recent history, but only you can take the risk.