That's wonderful, you will be able to take advantage of a bargain when it comes up and it sounds like you will know one when you see it! I am also debt free, excellent credit, nice portfolio, which of course also took a hit, but I also have no mortgage so I live in my own home for what it would cost me to rent, or less, actually. It costs me less than 2,000 to live in my 3 BR, 2Ba, 20 year old house on an acre in an upscale neighborhood. Plus, I can paint it whatever color I want, knock down walls, and have as many pets as I want! I can even have a family member move in with me or stay for an extended period without getting anyone mad. I'm not bragging either, but I think owning is great, IMO, but I'm fine if you don't want to.
First some music to set the mood:
Gwen, Jamie, Sarah and Tony, you are fine Americans!
Second, here are the facts, Jack!:
The way of unemployment has been calculated has changed a lot over the years:
There are many ways unemployment is calculated:
The economic relationship between unemployment and foreclosures:
It has been empirically proven that the tax â€œbenefitsâ€ are cost neutral from renting:
From a cashflow/net after-tax benefit perspective, homeownership is not an investment:
Yes, there will be a flood of foreclosed homes hitting the market due to resets and exogenous economic factors:
â€˜Pay optionâ€™ mortgages could swell foreclosures
New wave of defaults likely as risky loans reset to sharply higher payments
A Second Mortgage Disaster On The Horizon?
Half of 'rescued' borrowers still default
Many modified mortgages in 2008 defaulted in 6 months, a top federal regulator says. A new study raises concerns over the quality of such loan adjustments.
Default NEAR YOU!:
So the rational buyer has no reason to buy because the empirical evidence proves that we are far from any potential recovery. Regardless if it was/is McCain or Obama, there is no evidence that suggests any economic stimulus package will have any immediate (if at all) effects. Remember, as Professor Eugene Fama would say, â€œEvery dollar that is spent on government programs and war is one less dollar that is available for the private sector to utilize.â€
So the reality is that an economic recovery is far and away. Those who look at the data and make rational and correct extrapolations, and have patience, stand to gain from the respective downfall.
Donâ€™t listen to the hucksters,
They get confused by facts!
Remember, that crystal ball you are looking into is the hood ornament of the bus!
So I resorted to fortune cookies instead and the current one sitting at my desk states,
â€œIt is better to be the bus driver than the recipient of the bus!â€
Things that make you go hmmmmmmmmmmmmmâ€¦
-The Bus Driver
I am so sorry for what you are going through. It is very frustrating. States like yours are a real mess. The thing that really stinks is we bailed out these banks. They now got their bailout money â€œno strings attachedâ€ and are hoarding it. They are not using the money the way they told congress they would. They were to use the money to get lending flowing again and instead they are holding onto it to either buy other banks or keep money stashed because they are sweating bullets about the bad loans from the housing market. Unfortunately, when the tilde wave of foreclosures hit in 2009, they will be sitting in their billion dollar arc. Good Luck, it sounds like you are very aware of the situation and have done your research. Remember, you are not alone. There are thousands and thousands of you out there going thru the same thing. Patience is a virtue and good things do happen to those who wait. I wish you the best.
Until then, those people who want to buy a home should do so IF they can afford it, IF they have a very good down payment, IF they do not use an A.R.M. and IF they have decent credit so they don't get slammed with high interest rates.
If you do not wish to buy a home, don't.
Unemployment rate hit 10.8% in November and December of 1982 which were the repercusions of the Carter administration and has dropped thereafter because of the Reagan policies.
"5. Home prices are not in line with incomes. Houses are still overpriced in your most sought areas."
So, what you are saying is that an offer price should be based on what you make? Or is it that the "richer folk" can't live near "poor folk"? I think the people who couldn't afford the darn homes in the first place have no business buying it.
"6. Finally, potential buyers are beginning to do research and understand reasons 1 thru 5 thus not wanting to take a loss on a new home purchase or possible lose the house due to the economy. "
Which is exactly we people should not purchase a home unless they have a very good down payment (at least 10%) and as long as they stay there for several (think 10 to 15) years.
I do not disagree that harder times are coming. Just like the weather, the financial system has it's ups and downs. I have a crystal ball, but it's just for show. It really doesn't work. I can say "Oh we'll see a rebound it the spring" but the opposite may be the case. I can also say that this market won't be fixed for another five years, but all of a sudden, Obama snaps his fingers and the flood waters recede, all of our mortages are paid off and everyone gets free cars and health insurance.
No one knows. It is that reason that I insist on people to:
- Have a very good down payment.
- Don't buy more than you can afford. REALLY afford.
- Plan to stay there for a decade or more. (Yes, I know crud happens which people can't plan. See first two items).
Final thought: If you need to buy a home, do so. There are three main words to remember. You must be READY - WILLING - ABLE. Unless you can be all three, you really shouldn't buy a home. I've turned away a lot of folks from a sale because of that. Not that I tossed them to the curb, because I would work with them to get to those three words. I even worked with someone for over two years before they purchased their first home.
Although there are a few lenders out there that are lending with sensible terms, there are also a lot of them that are asking for ridiculous terms. A 20% down-payment is somewhat reasonable; anything greater is not IMHO. A couple days ago, I learned a lender would be willing to fund a particular deal (a commercial one with strong numbers [cap rate 8.5 to 10%, DCR of 1.2 to 1.4, and a pre-tax cash-flow of at least $80K-$120K]) at 55% LTV. IMHO, that's basically a lender who doesn't want to lend. I've seen similar behavior when trying to fund residential deals too.
However, some investors (and a lesser number of other buyers) know that conventional financing isn't the only way to do deals. There's creative financing and hard money (or private financing).
Yet, none of the financing options will matter if the sellers won't sell at the current market prices. Many--not all--sellers have been quite delusional on their pricing. I've seen several posts here (and in other Forums) where delusional sellers try to seek advice about playing games with the DOM, and using other "tricks" (that won't work with the astute buyers [especially ones who have great agents]) to game the system. Unfortunately, a lot of them bought on speculation, and they're now learning a rather harsh lesson: to not do that.
Also, keep in mind that there are some delusional agents out there. They refuse to submit certain offers (judging them to be ridiculous)--only to accept them several months later. Hence, this is another reason why buyers--especially investors--wait before buying: we're waiting for sanity to re-enter the picture. One can't expect to sell unmarketable properties at market value--period. Some agents aren't very computer savvy, and that's killing them now, because most active buyers are EXTREMELY computer savvy.
Don't forget: there are delusional buyers (including ones that claim to be investors) who expect to buy multi-million dollar McMansions for $100 each (basically for a song and dance).
Finally, until sanity begins to re-enter the picture, Julie, you're going to have to remain patient, and strive to not be one of the delusional ones. Be creative, open, and honest, and the sales will follow.
I read your link that you provided and it does not convince me that I should buy a home. I am a factual person, a person who values recent trends and numbers. All your blog states is that you accept responsibility. Great! you've made it to the 7th stage of grief, acceptance. But you still need to accept that home ownership is not for everyone. You are in denial about this.
AGAIN, we "THE BUYERS" are just answering the woman's question above as to why buyers are waiting. We stated very clearly as to why we believe this. Our President just stated recently that it will take a year for the economy to turn around, possibly longer. Some economists speculate three possible four quarters for a turn around. I personally feel it will be longer. As a result, now would not be the "BEST" time to buy because home prices will continue to fall. Why, because the economy. As for a time frame, why don't you look into your crystal ball and tell us since you know all the answers.
1. 2009 is going to be a "false recovery." The Option ARMs are resetting in 2010 and 2011 and should bring a wave of foreclosures similar to the sub-prime wave.
2. Job losses continue to mount at an alarming rate.
3. Home prices are still overvalued.
4. Foreclosures are still happening which bring the prices down of neighboring homes.
5. Lending standards are becoming more strict.
6. The govt continues to artificially inflate housing prices with bailouts.
With that being said, it's best for buyers to be patient and determine their area. I might buy this year, I might not. I plan to lowball with each offer and if something comes through, great. If not, I am content riding this wave until I find a deal that is too good to pass.
I agree with the economists who say housing will start to rebound in 2012. I do not think housing will rebound to 2005 levels, just rebound as in not losing value.
Ok, so you are stuck on my comment about unemployment. Point is people are losing their jobs.
Pointing the blame solely at politicians... What a crock. Let's look at who placed homes on the market for hundreds of thousands of dollars more than what they are really worth. I find it ironic that when the mortgage rates dropped to extreme low levels ALL OF A SUDDEN home prices rose drastically. Who put those homes on the market at that price? Who told home owners they could afford those homes? You want to point fingers you better buck up and say politicians, brokers, mortgage lenders and YES REALTORS!! I have been predicting the housing crash since 2005 and I know it will last for a while. As for your comment about not losing anything on a home aren't you rich for being lose with other people's money. What if someone was to get relocated and they had to sell. Your comment about people losing $$ (if they have to sell) justifies my point that homes are depreciating. The reason for this depreciation is they were overpriced to begin with. How many times do I have to say that? Also, paying more on a home will most likely cause you to pay more in taxes, especially if an area is reassessed. If you over paid for a home that has depreciated in value, your taxes will not get lowered unless you appeal. Many homeowners are trying to do this and are unsuccessful because counties cannot afford to obtain less tax dollars especially in this economy. As for houses in PA, it took your area a year longer to actually follow the home rise in prices. Maybe your area didn't rise like others, but in areas in high demand they did. As a result, it will take a little longer for those areas to reflect price reductions. And they WILL. As for your comment on "national average", I used that figure because it is the truth. Sorry if that figure is too low, too bad. Also, why canâ€™t I use the term "national average" when I constantly see ads on TV by the NAR saying things like the "national average" of home prices have become more affordable. I have mentioned on all my posts that everything is based on location. I am very well aware of this. But most people will tell you in their townsâ€¦ homes "USE" to be affordable and now they are not.
I am not getting emotional about it. It was your words that said 10 to 11% unemployment rate was the worst "in history" and I was just correcting you on that item. If fact, the unemployment rate during the Great Depression rose as high as 27%. So 10 or 11% is not the "worst in history".
I do agree that it would not pay for purchasing a home and then "losing" thousands on it. However, you do not "lose" anything unless you sell it. But my question to you is this. When exactly, would be the best time to buy? Like I said in my previous post, no one knows exactly what is going to happen with the market.
The housing bubble was created by bad policies from the politicains (yes I will drag politics into it when it is politics that causes bad things), bad lending practices, bad borrowing practices and greed from all those involved.
The national average for housing works just like the national average temperature, it doesn't. Housing is defined by small areas, not anything on such a grand scale as the nation. A four bedroom colonial near Oil City, PA may cost $90K. Near Pittsburgh it may cost $180K. Near Willow Grove, PA $250K. On Cape Cod over $500K. National averages do not work and it's just a number.
As for the "economists", they were saying two years ago that things would be better in '08. They are just as good at predicting things as a crystal ball.
If you personally do not want to buy, don't. If you want to buy, do so. Don't let "experts" who base things on a national scale fool. You need to look a your local areas. Some areas have not been affected as much, some stayed even, and even some areas have been badly affected. I personally do not know of any areas which gained in value, but I am sure there are a couple.
Terrence Charest, e-Pro
That's Julie's opinion. I gave my opinion. In my opinion it is always better to own than rent also, but YMMV.
It isn't always better to own than rent. You have those individuals who would not be able to handle taking care of their own property, which would cause a reduction in value over the years as opposed to an increase. Some people believe that they don't pay taxes on properties they are renting. Well, of course the owner does. But the money comes out of your pocket, not theirs. Oh, and you don't even get the credit of paying those taxes to ruduce your own tax bill. The owner of the rental gets the bennies.
Some people don't what to be bothered by mowing a lawn or shoveling snow throughout the year. This is quite natural for some people to be this way. Other people, however, like to do things with their home, keep it updated, have a nice lawn. This will, naturally, increase the value of their property in the long run. They like people driving by and saying, "Wow. That's a really nice house."
My brother, who lives over in Jersey, was always told that he was trying to keep up with the Jones's. I would usually correct them and say that it is the others in the neighborhood keeping up with my brother. He bought the home for less than market value and when he finally decides to sell, it will be one of the top properties in the neighborhood.
So you are absolutely correct Jamie. Owning is not better than renting for those who can't or don't want to handle it.
I started this thread to distract myself from my child who has been in the hospital and other threads were just boring. I apologize for some broad sweeping comments that I woul have refined had I been in a better frame of mind. I'm also trying to remain optimistic and spread some optimism as well.
I have made some really good money for some clients. Also it seems that it was the mortgage LENDING industry that started the recession ball rolling.
Spending will get us out of this. I'm talking about picking up a $20k house that should be worth $80k. This type of investment may do you more good than a 401k that someone else is monitering for you.
I, too was pushed by a realtor an lender several years ago to buy bigger bus I was responsable and knew what I could afford.
Thanks again to everyone I enjoy hearing different points of view and I perhaps need to be put in my place from time to time!
Please try to stay optimisticand know that if you want to invest wisely, there is great potential in real estate!
But never the less I respect your opinion and enjoy having discusions about Real Estate.
Pleasure as always David......Thumbs up for everyone in this thread.
Being wrong, has someone here always been right?
There are and always will be a pool of people who buy in any economic enviroment. Some who did not think they could afford a home six months ago are now looking and asking. Many just have questions as they try to understand what happened and how to best get through these times. Taking advantage of someones desire to own a home by convincing them it's better to buy now with a whole bunch of Same BS that been throw about for months is shamefull and contributes even more to the distrust the RE industry already faces.
Rates will never be lower..If you said that 6 months ago, then you were wrong. Prices are at the bottom or near to it...If you've been saying that over the last six months, then you were wrong every time...What of the people who listened and bought 6 months ago, a year ago, you know the ones coming here every day to ask about refi, loan mods and how to just walk away. Were they uninformed or misinformed?
Rent VS Buy...For many it's about survival not housing
!.2 cents worth, Dunes
I am not perfect but still belive in homeownership
The reason I don't get into thae calculations is that It would take a lot of time and I could word the stats one way or the other.
By the way you are right about me making mistakes in 2006 Jamie. I have made a lot of mistakes and have learned from them. As a matter of fact I think I have made mistakes every year.
I wouldn't expect anything to change your opinion. You're a used-house salesman, your paycheck depends on people buying houses.
You promote homeownership because you are a Realtor. You need to feed your family. You need to make money. YOU ARE A SALESMAN! That's it. You're not selling someone the American Dream, you are making a living. I personally ignore advice like yours. Oh wait, I DID ignore this advice in 2005 and where did it get me??
A fat amount of liquid cash, no credit card debt and no car payment. In fact, the only debt that I have is a student loan. I could put 20% down on a house easily but WAIT a SECOND .... Why would I tie up money in a declining investment? Hmmmm.... Decisions, decisions, decisions. But I'll tell you this, I'd rather be in my shoes, the renter shoes right now.
Jamie it is not 2006 and don't try to predict the market, you can't, just like all of the agents saying buy or all the non-agents saying wait.
What I try to promote is Homeownership. It is better than renting. There is not a calculation you could make that would change my opinion on the subject. I could sit here countering all of your arguments all day. You are still wrong.
Just because the market is down or up does not matter, what matters is a persons finances and if the type home can support their lifestyle or family needs.
There is a home for everyone in today's market, all you have to do is shop. 40,000 homes in my market I can safely say that one of those homes will meet a buyers needs.
Obviously, those economists who predicted 08 would be the end were wrong. That's why I advise each buyer to conduct their own independent research. In 05, there were economists who warned of a catastrophe BUT not many people listened or wanted to listen. Today, many economists are saying things are already starting to turn around where as others are saying 2012 the earliest. It's up to the buyer to conduct their independent research and decide for themselves. Folks like myself and Gwen are trying to inform them about alternative views other than "it's a buyers market."
Secondly, I agree and disagree that all housing is local. Are lending standards local? Job losses? Mortgage rates? There are several factors beside just location and it would naive to judge in such a black and white view.
I agree with the agent who warns buyers that they must be ready, willing and able to commit to a home purchase, and to think of ownership as long term, rather than short term. If someone gets lucky enough to purchase a home for under $100,00, then they might do slightly better than paying rent. But, from my own experience, with these banks who own foreclosed properties holding out for the biggest and best offer above asking price, they're really no better than the loan sharks who helped get the market into its current mess.
Even after all our calculations, we have allowed for $300,00 per month room for error and a bumper zone. We expect to expect the unexpected, even if we're pleasantly surprised or disappointed with the total monthly outlay. Our careers and finances are secure, and we are ready, willing and able.
However, and most Unfortunately, in Florida, it seems that the only houses that are priced to reflect current market values, are bank owned homes, which have proven to be cause for a feeding frenzy among buyers. Home owners who refuse to accept the declining market and reduce their asking prices accordingly, still think they're selling in a strong market. So, if foreclosed properties are all that's left for buyer's to get a good deal on, there is no deal to be found when banks keep playing these bidding war games with multiple buyers.
So, I think more fence sitters will remain on the fence until the banks and private sellers get their acts together. Nothing is going to get better at this rate. They're clearly not hurting enough yet to let these houses go at fair market values. So, I say "let them hurt some more before we make anymore offers". Jeez, we've already bailed these banks out, and now it's time for them to start showing their appreciation to the buyers who want to bail them out some more and take these properties off their hands.
Gwen makes some very good points. No one has ever seen such economic conditions, and no one can predict what is to come. Maybe sitting on the fence is the safest seat to have on the planet right now.
P.S. I'd love to see realtors go head to head with banks and tell them to pull houses off the market when a fair offer comes in. That's how you keep buyers interested in pursuing home ownership in this market.
- David says you get a tax break when buying. This is true. BUT, it's like telling someone to spend a thousand dollars to save $100. That makes no sense. That renter could be building equity twice as fast by saving the 1k.
- Renters are being foreclosed on. This is unfortunately true in some areas. But I do know that some states have passed legislation to alleviate this. However, this still doesn't make it better to buy than rent. I'd advise someone to look at an apartment complex, where they most likely would not be foreclosed on.
Lastly, David argues that since the renter is paying the 'mortgage' than why not buy it instead? Well, there are several things that concern me about this argument. Let's say I purchase a house in 2006 valued at 250k. Fast forward to 2009 and that house is now valued at 200k (20% off of 2006 value). I am stuck paying a mortgage and taxes for a house valued at 250k. Since housing (in a good market) appreciates about 3% a year, it will take years to get back to the original price of 250k. Mind you, that buyer will be paying interest on this original inflated value. OUCH! A renter (such as myself) who didn't listen to David's advice in 2005 and 2006, sits here with a ton of equity and the ability to pay much less for my rent than I would for my mortgage. And don't forget about the repairs that an owner must pay for.
If you have a mortgage, do you really own a house? You own the headache, the interest, the taxes etc.
Now, I am not saying it's never better to rent than own or vice versa. As Gwen nicely outlined in her very informative posts, it's a good time to buy when several factors are aligned. One of them being the income levels.
In Florida you save money by owning a home on the annual taxes by way of a cap, the owner of an investment property does not get that tax break and therefore must pass along the cost.
If your rent is lower than the mortgage then it might be foreclosed on, there are plenty of renters posting comments on Trulia that have to move.
Now at this point I am supossed to go into a calculation based on rents in an area, investments renters would make because they don't have to pay taxes blah blah blah
Someone owns the house you are renting and in effect the renter is paying for the mortgage, interest, taxes, insurance.
We're frustrated and likely appear to be sitting on the fence because no one is accepting our offers.
Banks could help out a lot, as far as I'm concerned. Once an offer is received and the buyer proves by their offer that they're serious and interested, how about pulling the house off the market while a decision and/or counter negations are reached? This may be the time to buy, but with all the competition, it certainly is a frustrating time to buy.
By the time all the bidding is done, does it really end up being that great of a deal if you're bidding and bidding for the sake of "winning" it? This scenario does nothing but aid in the housing crisis....where buyer's take on more mortgage than they really want to. There are serious buyers out there ready and willing to take these bank owned properties off the bank's hands, and it has reached the point of pathetic hilarity, especially in a declining market. No problem is compounded at all when they're holding out for forty thousand above asking price. It really gets old being subjected to bidding wars...and we're starting to run out of steam.
Renting in comparison doesn't look so bad.
1. The GDP (gross domestic price) will determine the value of homes. Since the GDP is drastically decreasing, house prices are predicted to fall well into the fourth quarter in 2009 with an overall drop of 30%. This will continue well into 2010 now because of the economic crisis.
2. Peak unemployment rate. We are now looking at a possible 10% to 11% unemployment rate at the end of the yearâ€¦ highest ever in history.
3. Tighter lending practice, which should have been in place from the beginning to prevent this mess.
4. Serious financial downturn on Wall Street will make many tighten spending because of financial losses.
5. Home prices are not in line with incomes. Houses are still overpriced in your most sought areas.
6. Finally, potential buyers are beginning to do research and understand reasons 1 thru 5 thus not wanting to take a loss on a new home purchase or possible lose the house due to the economy.
You state your area is quite affordable, but pulling stats for the more sought townships are still too high. Most of these homes have been on the market for quite some time with no price reductions. Yes, you may have some affordable homes but they may not be in the areas people choose to buy. They may not be the type of home a buyer is looking for. As for your most sought areas, these homes too will fall in price this year. That is why buyers are waiting. With people losing in the finacial market, they are no longer willing to lose in the housing market. Would you? If you wouldn't want to over pay for something then why would you expect others to do so?
Oh, and to throw this in, to say that owning right now is better than renting, well that is your opinion and depends on the area. As for statistical data, most areas show that renting right now is more affordable than buying.
Believe me when I say this Julie, I am not knocking you or Real Estate agents. I have many friends who are realtors. A few of them have had to take on part time jobs because of this mess. Many of whom have 30+ years experience. They are the ones who are admitting that the market is the worst they have ever seen. It is those realtors I really respect and will consider to do business with. I know how hard they work and they realize that the housing market needs to correct itself and that it needs to happen fast. If that means serious price reductions to 2002 levels then so be it. They would rather see that happen so they can get back to work as well. As for my posts, I write on this site because I feel the need to help out potential buyers with sound advice and sound research.
There might be other circumstances that come into play but I doubt they will have a significant impact. For example, in the new stimulus bill that hasn't been passed, the Democrats are proposing that all new first time buyers receive a $7500 tax credit (instead of today's interest free loan). Some Republicans are asking for this to be $15k tax credit to all home buyers. Will this drive new buyers to purchase a home? Possibly. But I don't think it's enough to re-inflate the bubble, which so many are trying disparately to do.
If your job or the industry you work in is tentative whatsoever in this economy, then I'd advise waiting it out. There's nothing worse than NEEDING to sell. I think for a long time when people thought about real estate investing, they forgot about the definition of "investing", namely that you can win OR lose on an investment. Benjamin Graham said,"you haven't made or lost any money until you sell" therefore if you hold onto an investment long enough more often than not you will make money.
A lot of people just panic when they see values go down, kind of like the guy who lost 1/3 of his value in his 401k last year and decided he was going to stop contributing going forward
I'm kind of rambling on here but this is a subject near and dear to me and I could talk about it all day. Look, if you know you're not going anywhere then now is as good as any time to buy. You may get in at the absolute rock bottom, you may not, but you won't know until it's in hindsight anyway. Conversely, if you're job is on shaky ground or you anticipate the slightest possibility of moving in the next 5 years, then keep your money on the sideline till things shake out, and in the meantime pay off your debts and make saving a religion.
No one has a crystal ball to tell you if it's the PERFECT time, so don't sweat it. After all, there are some people that bought Microsoft when it was worth pennies only to see it worth $100 per share. But should the person who bought it for $5 per share and still enjoyed a runup feel bad?
Why is it that most Realtors are stuck on the first and second stages of grief - which is denial and anger? Let's move to the path of acceptance by understanding that things won't return to 2005 levels in a VERY long time.
My point is if you think you can't do well in this market, you're not looking in the right place or you may just be misinformed.
The buyers you said this to in the past few years probably have a few choice words for you now. They probably wished they had rented their depreciating house and let their landlord take the beating.
In my mind it's ALWAYS better to own than rent, even if you start small and have a longer commute to work. Why would you make a monthly payment into your LANDLORD'S investment rather than your own?
$200k in Schuylkill County gets you a 4BR home with several acres. Most sellers have lowered their expectations as realtors - who by the way MUST submit your written offers!
Thanks again for speaking your mind, this is a great sight.