Is now the time to buy a home or wait it out? (1 Viewer)

[WillG]

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.

 

[Dennis Nicholls]

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".

 

[MarkMel]

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.

 

[WillG]

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

 

[Philip Hamm]

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.

 

[Dave Poehlman]

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.

 

[Eric Peterson]

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

 

[Eric_L]

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.

 

[Philip Hamm]

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

 

[MarkMel]

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"

 

[KurtEP]

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.

 

[Philip Hamm]

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

 

[KurtEP]

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.

 

[Dennis Nicholls]

Or more properly, "Bare Sterns".

 

[BrianW]

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.

 

[Adam Lenhardt]

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.

 

[Matt Stryker]

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

 

[RobertR]

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).

 

[DaveF]

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.

 

[Adam Lenhardt]

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.