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YesYNot


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Reston, VA
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Registered Feb 09, 2008

YesYNot's most recent comments:

  • On 16 Oct 2014 in Whiny time: When will real estate prices ever make any sense?, YesYNot said:

    WaterGoat says

    Plenty of growth in the suburbs & foothills. Certainly very little in the city center, particularly since condo development ground to a halt in 2007. So new development has little effect on prices near the city center.

    It's the lack of new development in the city center with a growing population that makes it more expensive there.

    WaterGoat says

    But what I dislike about buying is that, if mortgage interest rates do return to 8-9%, which should cut housing prices just a bit, I'll be stuck with an illiquid asset.

    My point is that it would likely take 10 years for that to happen at which point, you would have a reasonable part of your mortgage paid down. A nice thing about low rates is that the principal payoff per month is larger in the beginning of the mortgage than it is with higher rates. You might be stuck renting it out, but you would likely have a descent income stream from it by then if rates go up to 8-9%.

    Another thing to consider, and I think you have from your post is that buying one house is the neutral position for the average individual/family, because you always have to own or rent one. Owning more than one house is long housing. Owning less than one is basically shorting housing.

  • On 16 Oct 2014 in Whiny time: When will real estate prices ever make any sense?, YesYNot said:

    I agree with call it crazy - #s 2 and 3 probably have a big impact.

  • On 16 Oct 2014 in Whiny time: When will real estate prices ever make any sense?, YesYNot said:

    WaterGoat says

    House prices were around 3x annual household income (not salary). They were at that level through decades of the 30-year mortgage being popular.

    When I look at home prices in a zip code and see an average of $350K against an average household (including all earners) income of $55K for that zip code, I wonder what is going on.

    Population is bigger than in 1960 for sure; bigger than in 1980; but not much bigger than in 1995.

    In light of the population plus limited supply near urban centers, perhaps these prices at near twice the norm of, say, 1994, are comprehensible. Frothy, maybe, but comprehensible. What's doubtful is that they will continue to rise much from here.

    If houses were 3x income in 1995, that would put them at 165 (ignoring inflation). Today, they are at 350K, which is 6 times income.

    In 1995, the average mortgage rate was 8%. In 2013, it was 4%. So, the interest paid in 1995 was $13K/yr. In 2013, the interest paid would have been $14K/yr. There are other costs as well, but the cost of interest is about the same in 1995 and today. There are other costs, and you could refine the math quite a bit, but the point is that affordability in terms of payments has not changed much. Why would you expect to be able to buy the same house with much less of a monthly outlay today?

    Denver has 40% more people now than in 1995. That's significantly more competition for close in sites. I don't know much about growth outward from the city center, though.

    I'm not arguing that housing will go up tremendously from here. It sure has turned a bit for the worse over the last half year. But, I just don't get the expectation that it will return to 3x income in the NEAR future.

    Maybe in 10 years, the interest rates will be 8% and housing will be 3x income. Who knows, but it won't be in the next couple of years, and the economic climate 10 years from now is anyone's guess. Waiting 10 years to buy a house in an effort to time the market seems kind of silly to me.

    As far as 30 year mortgage availability: Anecdotally, they were not as common or easy to get in the 1960s. They were much less common when inflation hit in the 1970s. After that, you never had the combination of 30 easy to get 30 year mortgages with low interest rates until 2011 or so. 2004 was pretty good, but mortgage rates were 6%, versus sub 4% in 2011/2012. That's a huge difference in interest paid.

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