Is now the time to buy a home or wait it out? - Page 2

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

I'm with Eric on this one. This looks to me like a typical pre election recession in a lot of ways. The sub prime thing hurt, but it's not something that will necessarily linger, the banks took their hit, and they richly deserved it. Gas prices are high, but that looks more like another bubble that could easily collapse. My guess is that once the election is over and people settle down, we'll get back to business as usual. Unfortunately, elections are periods of uncertainty, and this one more so than most, since it is likely that the country will take a different direction afterward, regardless of who wins.

This doesn't look in any way like the stagflation of the 70's, where it looked like the capitalist system was irrevocably broken for a while. Now that was a problem, and there was no known solution in sight. There's nothing going on right now that won't blow over given time.

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

The Fed rescue of Bear Sterns is a huge gigantic and extremely important difference between this and the last few recessions.

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

Well, it is ultimately just part of the subprime problem. The bailout of Chrysler in the 70's was far more significant, in my opinion.

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

Or more properly, "Bare Sterns".

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

And the bailout of the Savings & Loan industry was far more significant than that.

It's not a meteor strike, supervolcano eruption, or the plague. It's just economics, which consists entirely of abstract agreements between groups of people. If these agreements fall through or fail to hold up the economy, we'll just come up with new agreements to fix things as much as possible as we go along. I'm not saying it won't be rough, but it's not WWII, either.

With regard to bailouts, I never understood the rationale of bailing out a private industry. Whether it's Chrysler or the airline industry, what's the point? With Chrysler, the justification was to maintain US auto production so the Asians wouldn't clean our economic clock. But if Chrysler is producing crap nobody wants (which was the case -- K-Car anybody? -- which is why they needed bailing out in the first place), then propping them up won't do any good until they decide to produce a worthwhile product. All it does is needlessly reward a bad company for producing bad products nobody wants.

Bailing out the airline industry was even sillier. The justification for that was to keep intracontinental flights going (they had all but stopped because so few people were flying, making the flights unprofitable) so business wouldn't come to a halt. I understand the need to maintain a minimum travel infrastructure, but this strategy didn't work. If a flight from LA to NY can't ever sell enough tickets to be profitable, the airline will not sponsor the flight. And if you give the airline $4 billion, they still won't sponsor the flight because the flight is still unprofitable. Duh! The only difference is that now the airline has $4 billion in the bank. I honestly think it would have been better to let the airline industry falter, be forced to sell its equipment for pennies on the dollar to entrepreneuers (hopefully with some new ideas on how to do things), and have the industry rebuilt from the ground up.

Of course, I should add this disclaimer: I know less than nothing about economics.


So, with that, I think now is a good time to buy a house. But I think it's a bad time to sell one. If I were currently renting or a first-time buyer, then I would be looking very hard to buy right now. But since I'm a homeowner, I'm steadfastly determined to be perfectly happy right where I am.

But before you take my advice, see disclaimer above.

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

The major innovation to counter this argument is 1) fuel cell cars and 2) fully electric cars. We have the technology for both right now. Since both fuel cells and electric engines make use of stored energy, it doesn't solve the problem but it does give us more options. The energy to power our cars can be generated in power plants which only run on natural gas now because it's the least politically problematic. Nuclear is one solution, but (though the environmentalists don't like to hear of it) coal is another. Like oil, it's not a renewal resource and would have to be phased out eventually. But we have plenty of it here and it could take on the burden in a pinch while better technologies are developed.
The other part of the solution, which would require a significant change in lifestyle, is the restoration of national rail service. The decades long trend of pulling up track has halted and actually started to reverse. Amtrak, which was created under the Nixon administration to save national passenger rail service amid a huge public outcry, has seen year-to-year gains in ridership since the turn of the century. Ridership in FY2007 was up to 26 million. This is particularly the case in the Northeast, where rail service remains a potent travel option. All but three of the top ten Amtrak stations were in the Northeast. Despite increased passenger load, the consumption of fossil fuels has actually declined rapidly as more trains go full electric. Even as far back as 2003, before a lot of the energy efficiency initatives, passenger rail service consumed a fifth less fuel per passenger mile. The high speed electric Acela trains on the busiest Boston/New York/Washington corridor actually send the energy generated in braking back into the system. Diesel locomotives were likewise substituted with electric locomotives on the Pennsylvania corridor last year.
The more of our economy can be taken off the aging interstate system, the better off we'll be. Trucking companies already exploring developing new freight rail lines to carry the goods long distances, with the trucks used only to make deliveries within the local sphere of a given depot. A robust mass transportation system coupled with innovative cars can limit the fallout of losing fossil fuels. Driving may become less convenient, but it will still be feasible.

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

To get back to the topic, I would say buy cautiously, but buy. Right now conditions seem pretty good because:

1) low interest rates - i'm assuming you qualify since you've had some experience doing this
2) low housing prices and an extreme buyers market - not to advise you to take advantage of desperate people, but you could probably put repairs/improvements in the contract that would have been laughed at 2 years ago - now they don't look so ridiculous
3) inflation is real (with some indexes showing 7-12% real inflation, instead of the <5% that government figures give), and its probably going to increase at least in the short term - so investing in something fixed instead of liquid could pay off long term, as long as YOU CAN MAINTAIN LIQUIDITY. If your industry/job is iffy, etc probably not a good thing, but thats common sense.

I would be wary of buying in or around neighborhoods that are "renewed" but had previously been undesirable, have lax/no HoA enforcement, or have had some crime issues - in case the downturn becomes more pronounced. Places that have easy access to mass transit or are closer to city/business centers will become even more desireable.

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

I agree completely with this. With respect to the subprime mess, I also don't see why the idiot banks and the idiot homebuyers who bought into it should be bailed out. People should be held responsible for their bad decisions. Instead the philosophy is "I will buy your vote by promising to fix whatever went wrong for you, and it's irrelevant whether or not it's your own damn fault" (indeed, the philosophy seems to be that people are never responsible for their actions).

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

I owe you $20, it's my problem. If I owe you $20 Billion, then it's YOUR problem.

And so you bail me out.

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

Fortunately, by the time the bail-out legislation moves through Congress and is signed by the president, most of the banks and homeowners that were going to default will have already done so.

My biggest problem with bailouts is that, in addition to punishing those who bought houses within their means instead of the more luxurious possibilities offered by sketchy credit lines, it encourages irresponsibility down the line because the people who gambled and lost are confident they'll just get bailed out again.

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

Yup.


While I see a need for bailout on some level (not sure of the specifics, though), I also think that if your bank gets bailed out, the management should be tossed out and a new team brought in. No sense letting the same group of idiots do the same thing again later.

Plus, having that much exposure to subprime securities during an obvious bubble is almost criminally idiotic. Gotta be a breach of some duty or the other. Wouldn't bother me at all if they tossed a few of the executives in jail for a while. I always thought it was funny that if I go kill some dirtbag whose mother doesn't even miss him after he's gone, I could get the death penalty, but if I do my best to wreck the economy and cause a recession and billions of dollars of losses to people all over the world, I can retire on my bonuses.

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

And that's what happened to Bear Sterns, why they are being sold to another firm.

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

Exactly, we were pre-approved for an amount that was way above what we could afford and we did the responsible thing. Had I known we would've been bailed out, maybe I would've went for the whole nut.

We are a country of entitled, not my responsibility people.

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

the bail out really isn't for the homeowners, nor is it for the banks who originated the loans. It is mostly for the entities who bought securities thinking they were conservative investments collateralized by mortgages that had been properly underwritten which turned out to be worthless junk.

The irony in all this is - many of the 'sub prime' loans were caused by... da gubment! HUD kept reinforcing and encouraging the need to lend to low-income borrowers. They shrank down payments, shrank income requirements, etc. The whole industry followed suit and went through their own irrational exhuberence, but da gubment's role is irrefutable. (Yet we have people who not only disregard this - they tell us that da gubment is the only people who can fix it!)

The victims are the lower income borrowers who don't really understand what they got into. For some of us terms like points, ARM, rate lock and index all seem simple enough, but for many it is Greek. All they know is that a loan Officer told them they could afford a house, and three years later their mortgage payment tripled...

The solution is more stringent underwriting guidelines. Lower income borrowers may not be able to buy houses as large or at all, but they will be put in affordable mortgages.

IMHO what this country really needs is simplification. Every time the shit hits, they invent more and more disclosures and forms. Trouble is, that there are so many, soon people can't see the trees for the forest. Less can be and should be more.

On mortgages; eliminate all fees and have a single lump sum cost for a loan combined with a single rate. Eliminate negotiations; you can't negotiate for life insurance, should be the same for a mortgage. Qualify ARMS on the highest rate range. Allow recourse against the commission for loan originators of loans which default within the first 3 years. Create a firewall between appraisers and loan originators. I could go on and on...

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

Exactly. People lost (and are still losing) homes because of this. They and the banks that lent them the money are just going to have to deal with the loss, because nobody's coming to help them (loan and interest rate re-negotiations notwithstanding). In this case, if the bailout takes place, at least it's not bailing out the "culprits" who perpretrated this mess.

And also keep in mind that there is a zero-sum component in all of this. There are winners as well as losers in this mess. Investors who lose money on stocks during a downturn on Wall Street often end up selling to investors who end up making a tidy profit on those stocks. Likewise, for every one who has tragically lost a house, there will (eventually) be someone who will acquire that house at a good price. Yes, some lose out, but their loss is largely another's gain, and people like Kurt can benefit. This is, to my way of thinking, the way it should work.

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

Right on bro.

In the offer stage don't forget about concessions!!!! Price is one thing, but some people won't consider things like paying closing costs, new carpet, appliances, etc. Those sorts of things are good for counter-offers. If the buyer does not take your first offer, increase your price, but add concessions that make up for it. It is a BUYERS market - play your cards that way.

Also - seriously consider a home inspection. For $500 or so they can find all sorts of things you may miss. In my case they found a roof that was past it's lifespan and the seller ended up having to pay for a replacement. They had already agreed on a price with me, and they couldn't back our because the roof problem was now a disclosable feature (once discovered)... Got a new roof for that $500 fee.

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

(subscribing)

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

Sorry, I meant to say "Todd", not "Kurt". So, Kurt, if you went out last night and bought a house based on what I said, um... sorry about that. Didn't mean to make you do that. Hope you got the color you wanted.

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

I find this a very interesting thread—especially when I went back a few years (2005) and looked up a thread started by another HTF member who wanted to buy a home. There was a lot of good advice from many members.

I remembered this thread because there were a few who thought that a mortgage with nothing down was a good idea and when I wrote that IMO, if you could not afford to put down 10%–20%, you could not afford the house, there were two other posters who thought that was ‘old-school’ thinking.

Perhaps so, but old-school on finances is not necessarily such a bad thing. And to be accurate, most of the posters did not view zero down as a good thing—and there were several who wrote about the problems with refinancing when the housing market bubble went south.

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

D'oh!

Something I stumbled on this morning. Linking it more so I'll remember to look at it later than anything. Usual caveats about the source (and as I only very briefly skimmed it, the usual disclaimers about that, too).

Subprime mortgage crisis - Wikipedia, the free encyclopedia

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

I read this recently:

Irvine Housing Blog

Sort of humourous, sort of true. I certainly wouldn't recommend doing the stuff under "If You're Really Tough" but again, a few years ago sellers were putting exactly that kind of crazy stuff into dealings.

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

Now I'd love a link.

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

http://www.hometheaterforum.com/htf/...rst-house.html

My post is #39

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

I'm reminded of this;

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

The rental market around me has been booming thanks, probably, to the housing market (not like people are lining up to move here). Having a rental property like that is an excellent way to bootstrap yourself to wealth. I know a couple of guys who have had great success with that. One of them no longer even works, he just lives off his rentals and spends his time maintaining them.

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

So what do people think about 5%, 10%, 20% down these days? When I bought, I bought a house for which I could pay 20% up front -- I wasn't going to have any PMI.

The past year, I've been paying a bit extra towards the principal, but
I'm realizing that doesn't make much financial sense. Do people do that these days: pay ahead on their mortgage to try and help reduce the long term mortgage? Three years ago, there was no point: you made more in appreciation just waiting. Unless you live in upstate NY where housing has been almost flat for 30 years...

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

Paying a bit extra on the principal can only help the situation, i've been told an extra mortgage payment a year can reduce a 30 yr. to about 23 yrs. although we haven't been able to do that yet. We bought in 2004 at the height of the boom with a bit more than the 20 % down but taxes and insurance seem to be eating up more of the mortgage pie these days. We were adament about not paying PMI though.

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

Western New York. There's some places like Saratoga that continue to soar higher even against the market collapse.