Is now the time to buy a home or wait it out?

Re: Is now the time to buy a home or wait it out?

the first reason to buy a house is because you need one. Whether you want to buy or rent is up to you. Factors include, payments vs. rent. Your tax situation, duration of use, customization desires, local property tax rates, insurance, etc.

Nobody can speculate what any economy will be like in five years, but I doubt it will be vastly different from today - either way.

Trying to catch the bottom of a market is like trying to catch a falling knife; so if you are buying you had better have a better reason than low prices; like the desire for your ultimate home theater room! XD

Re: Is now the time to buy a home or wait it out?

Aplogies for going off topic but I'm happy (well, maybe not happy) but glad that someone is bringing this up. My wife and I right now own a condo and we have for a while been keeping out eyes open for a suitable house. We do okay salary wise, but we do live in a very expensive area. We really like where we live and have easy commutes to work so naturally this makes it tough for us to find a halfway decent place that wouldn't put a tight squeeze on us financially. But anyway, lately, I have been harboring some real concerns about the economy. I'm only about to turn 31 so I'm still pretty young in terms of economic awareness. But it can't remember when I've oil and gas prices rise at the rate it has for the last two years or so. Prices of food as well. Oil is well over $100 a barrel and and $4 a gallon at the pump is now a reality and it we're still a month away from Memorial Day. It seems like the news just gets worse and worse. I do realize that the media thrives on perpetuating fear, but still some things you can't make up. Granted, the sky still hasn't fallen, but does anyone think it is possible that the U.S. could in the not too distant future, or is on the verge of suffering some kind of very significant financial collapse? For example, with energy the way it is, I feel that another Katrina scenario could have some very severe economic ramifications. Am I the only one who feels this way? I'm not an expert in this type of thing so I would be interested to hear some other opinions

Re: Is now the time to buy a home or wait it out?

No, you're not the only one.

Re: Is now the time to buy a home or wait it out?

If you are takling strictly about investing in a home for profit, I think that would be a hard call for anyone to make, especially with out seeing the specific house in question and with out much knowlege of the local economy. If you need a home, like Eric said, there are a lot of personal factors to consider. I built a house last year and everyone was telling me I was crazy due to the high price of copper and wire. My reply was "when do you expect it to go down - if ever?" I built a very nice house with a nice home theater.

My house foreclosed in 1995 after loosing job that moved south. In 2001, my retirement was wiped out due to the economic downturn. Yet, still here I am in a nice new house and the family is well. The high price of gas has to have a big effect on all of the economy. I don't understand why the media is not making this a really big issue this election, but thats a different story. I don't think it will be a "very significant financial collapse" though. In general I think the majority of americans will dine out less, or by fewer toys, or car pool , but our way of life will continue. The economy will always have downturns that we need to live through, but I don't live in fear of them.

Re: Is now the time to buy a home or wait it out?

I'm 36. You've never seen this before. I "saw" it when I was 2, during the 1973 oil crisis.

That said, when I graduated college, we were in a recession, and getting a job was tough for various friends. I went to grad school. Finishing grad school, the dot-com bust happened and we were teetering towards another recession -- friends were seeing the end of good times with the Telecom jobs. And now, I'm looking again at the less than optimistic time, at the five-year mark in my career.

Part of me normally concerned. Part of me is still young and invincible. Part of me thinks we're starting something new our nation hasn't quite seen before.

Oh, yeah, Todd -- buy the house if you want it. Don't otherwise. You can't time the bottom of the correction.

Re: Is now the time to buy a home or wait it out?

If you only plan to be in the same location for five years....fagetaboutit. There's more downside vs upside in the near future (IMO of course) What do you do with depreciating money in the interim? Who wants to buy a new tract house in a ghost town subdivision? What if $4 gas is the new bottom wrung?

I've lived in my house for 22 years but don't think I could afford it even at todays depressed prices...at least not when you factor in all the expenses involved in being a self landlord. I expect prices (at least in my area of the country) to go down quite a bit further just to be affordable to the average wage earner.

Mort

Re: Is now the time to buy a home or wait it out?

When the housing market was on fire the rule of thumb was to buy a house only if you were planning on living in it for five years, because that's about how long it would take to break even when taking into account the cost involved with buying a new home.
What do you base your 5-7 year timeline on? If you have kids in elementary school and don't want to move until the youngest one graduates high school in 2015 then buying a house might be the thing to do. If within the past year you graduated college and started your first real job then buying a house would not be the thing to do.

Re: Is now the time to buy a home or wait it out?

There's lots of daily newsbriefs and talk at the blog over at Housing Crash Continues, Bubble Pops . Even though it started as an SF Bay Aryan site it has stuff from all over the US and other countries now.

5 to 7 years....man that makes it a tough call. I owned my San Jose place for 25 years and became a millionaire when I sold it in May 2006. "Flipping" won't be a good thing in the future IMHO.

Re: Is now the time to buy a home or wait it out?

I never understood how this bubble was allowed to happen, especially after the internet thing. As a student of economics, the internet bubble was a classic bubble. The housing thing was exactly the same thing. Are people simply asleep at the switch? During the internet bubble, you could see tech stock picks in popular magazines like FHM. Similarly, there were shows on TV about flipping houses. Prices were irrational. I see the same thing right now in rice and oil. I almost wish I had time to pursue a Ph.D. in Economics just to really understand what is going on here, because there are clearly factors that I'm missing.

That said, if you need a house, buy one. If you want an investment, buy a rental property. Never really understood the primary home as an investment property. You always have to live somewhere. I'd hate to trade down just to make money.

Re: Is now the time to buy a home or wait it out?

This is only the most recent iteration of the end of the world. We've all heard it before; Y2K, intro of the Euro, Gulf War, 9/11, Bird Flu; Asian Currency crisis, Tech Bubble Burst, etc. etc. etc.

A wise man once said to me; "It is NEVER different this time"; Saved me from the 'New Economy' and the meltdown that followed it.

Here's a piece I've always enjoyed; It is sorta large so I'll just post a link;
Andexcharts.com - Large View of U.S. Wallchart
Andex used to have oil prices, but it looks like they took it off this year, so here;
http://www.timingcube.com/images/inf...ice_052606.gif

Contrarianism may seem like the way to go, and I do have a soft-spot in my heart for them, but trends are not always so well behaved or predictable in the short term; http://www.swapmeetdave.com/Bible/Callan.jpg

Re: Is now the time to buy a home or wait it out?

This may give you solace. But in reality bad things happen. The Great Depression happened. World War II happened. The "meltdown" of the tech economy was nothing. Y2K was nothing. The 1970s oil crises were nothing because they were caused by political factors as opposed to geological ones.

If you subscribe to Kondratiev's cyclical theory, it's very possible that we're headed down, way down, right now. And it's just starting.

This whole housing / mortgage thing is a major debacle. Many of these subprime mortgages should never have been written. The whole concept of writing a subprime mortgage, collecting various loan origination and other closing fees, then selling off that risk into securitized financial vehicles scares me. This should have never been allowed to happen. The thing that concerns me the most is not the specifics of the situation, it's the complete breakdown of all regulatory bodies to stop it from happening in the first place. It reminds me of the hands-off approach that was causational to the Great Depression.

Re: Is now the time to buy a home or wait it out?

Exactly. People have known that this sub prime thing was going to blow up for a few years now, and absolutely nothing was done to stop it. Same with the internet bubble. While I'm not a big fan of government intervention in the economy, I do think that it is necessary that they keep the playing field level, and also keep it maintained.

I don't think that this is the beginning of the end, or anything, but it is certainly eroding our position as a global economic leader. Why would people invest in our markets when we allow irresponsible BS like this to go on?

Re: Is now the time to buy a home or wait it out?

For the record, I never thought any of those overexaggerated ramifications of the above events were real and going to spell the end of the world (ok, the bird flu thing did kind of scare me a little bit, but that was a biological thing and not an "event") And many of those events did not have long term economic effects. Where we are right now seems to be more permanent. It may not be necessairly killing us now, but I do worry that the economy is in a very percarious position now and perhaps some kind of "event" could do a lot more damage then it previously could.

Re: Is now the time to buy a home or wait it out?

Another thing to remember is (again, if you subscribe to Kondratiev's cyclical thing) that catastrophic economic downturns like the Great Depression don't mean the end of the world. Lots of people didn't lose their jobs and didn't lose homes, etc. during the depression. For a lot of people it was a time of belt tightening and difficulty, but not world-ending catastrophe (that came in WWII). Just because things are going south doesn't mean it's the end of the world and start stockpiling weapons and food. Life goes on. Civilization seems to find a way to soldier on.

Of course, there could always be a major collapse of civilization in the wings on par with the fall of the Roman Empire or the Mayan civilization, but that's a bit more difficult to plan for.

Re: Is now the time to buy a home or wait it out?

I wouldn't call 100 million people being killed an "overexaggerated ramification" of WWII. In fact if the Nazis got the bomb about the time we did much of the world would have perished.


I'm generally a cheerful optimist, but I have stockpiled weapons and am starting to grow/catch more of my own food. People in dense urban areas will have fewer options going foreward.


I figured that out in 2005, quit my well-paid job, cleaned up my San Jose house, and sold it for a huge pile of cash in May 2006. To this day I can't stomach the interviews with bank and mortgage company CEOs who to a man moan that "we didn't see any of this coming".


The story of the current 254 is detailed in a list here: The Mortgage Lender Implode-O-Meter - tracking the housing finance breakdown, related to Alt-A and subprime mortgages, lending fraud, predatory lending, housing bubble, mortgage banking, foreclosures, debt, consolidation, lawyers, class-action lawsui .

Re: Is now the time to buy a home or wait it out?

Which is something I do believe is going to happen eventually. I think eventually there will be a collapse of capitalism/economy. Nothing lasts forever. May not be today and it may not be tomorrow, but eventually. However many will tell you that we could be closer to this type of scenario that we would like to believe. I think the first major test will be when the oil runs out and many will tell you it could be relatively soon. I for one am extremely skeptical we will ever find an alternative energy source that can do for us what oil does (save maybe for nuclear) at least not in the forseeable future. Sorry to be pessimistic on this, but I just don't see it (and I think there is a very lengthy thread about this somewhere in this forum)

Mankind may survive, but it will be a very different world


Of course I didn't mean to suggest that. That did really happen. I was thinking more along the lines of the doomsday scenarios churned out concenting Y2K before it actually happened and the like.

Re: Is now the time to buy a home or wait it out?

Sure, it's not the end of the world, and I am generally not one to fall prey to the pervasive culture of fear in this country.

But the food thing worries me -- and should worry anyone with strong ties to developping countries. This is the very last thing we need.

--
H

Re: Is now the time to buy a home or wait it out?

Call this a dark thought if you will, but I often wonder if I really wanted to survive a true doomsday scenario. I'll watch a movie like ID4 or War of the Worlds and think at the end it great that they defeated the aliens and all but do they realize that life as they know it is pretty much over now and bad it's probably going to suck.

Re: Is now the time to buy a home or wait it out?

People are like cockroaches - they are very resiliant and breed prodigiously.

I drive a Mazda Miata, built in Hiroshima Japan. As I recall my history, that city suffered a certain amount of damage in the war. Somehow humans even overcame that damage.

Hamburg got it as bad as Hiroshima, yet by the 1960 they had rebuilt sufficiently to host the first few gigs of a new group called "The Beatles".

Re: Is now the time to buy a home or wait it out?

I was reading that it's not just the sub-prime mortgages that are the issue. A large part of the problem is the approval of all the 'liar's loans'. These are loans given to people with very good credit where they enter their income and no follow-up is done. And they pad that income anywhere from 1.5x to 3x their actual income.

In one case they sited, the couples mortgage was $2,700/mo. and they only brought in $3,000/mo. in income. I may not be a financial genius but somehow I think that a situation like that could be a problem.

When my wife and I were looking for a house back in '96, we got pre-approved for a mortgage of $600,000. We didn't make anywhere enough to cover that at the time. I said "woo hoo, let's go shopping for some big houses" And at that time, that could buy you a 4,000+ sq ft house in CT. My wife said are you nuts? Neverless, we didn't spend anywhere near what we were approved for. If it wasn't for her I would've been in a giant house with no furniture or food in it. lol

But we did know many people that were happy to live in their supersized houses with no furniture.

Re: Is now the time to buy a home or wait it out?

Not to nitpick, but people are nowhere near cockroaches in those ablilites.

Re: Is now the time to buy a home or wait it out?

Nuclear, augmented with other renewables like solar, wind, and hydro where each makes sense, is the only possible future. No honest assessment of the energy options (and needs) available to human civilization can reach any other conclusion. Nuclear energy is abundant enough to run our civilization for easily hundreds or thousands of years. The technology is mature. It is well proven. Look up the Gen-IV projects.

The main problems are (1) you can make really big bombs with it (2) you have to manage incredibly toxic by-products (3) there is an unfortunate mining footprint (which is small relative to something like the tar sands or mountaintop removal coal mining). The toxic by-product thing is actually a plus when seen in relation to the threat of global climate change and other catastrophe from the by-products of burning stuff, which go out smokestacks and exhaust pipes. Sequestering coal waste or internal combustion waste is a major engineering project. Nuclear waste is, by it's very nature, sequestered. And it can be reprocessed and bred into even more fuel.

All it takes is political will and intelligence to transition to a nuclear future. Does humanity have the intelligence and political fortitude to do it? I hope so.

reading: ---> Environmentalists For Nuclear ™ - International home page homepage (EFN)

Whoah... talk about thread drift...

Houses, yeah. May be a good time, tough to tell when the market bottoms out. Personally I'm a big believer in the whole "New Urbanist" concept. (Congress for the New Urbanism) There are walkable neighborhoods where you can walk to the store, schools, parks, even work sometimes. They're nice.

Re: Is now the time to buy a home or wait it out?

Here's an interesting piece about this very subject from ABC News which includes an animation from none other than "Odd Todd": ABC News

And for those not familiar with "Odd Todd's" work: oddtodd.com - Laid Off - No Nothing Productions.

Re: Is now the time to buy a home or wait it out?

How about an "Eight is Enough" marathon. If that's not party material, then what is??

Re: Is now the time to buy a home or wait it out?

I think you misunderstand me - I am warning against your exact message. This recession is no different than the last nine or so. The economy will learn from it, adjust move on and grow - as usual. Contrarians know this - and they are buying like kids in a candy store.

Re: Is now the time to buy a home or wait it out?

Let's hope so, but I don't think it is.

Re: Is now the time to buy a home or wait it out?

I don't think so either, there are so many more factors that are in play here that I don't think were in play during the last "nine or so"