WatchWell, so its about a year now that I bought and here is my current status:
Unlike the patrick.net predictions, I am not underwater, my house is not worthless or worth less and I am not hating life but loving it. Best decision ever. It feels good not to pay rent to somebody and making their retirement plan come true. This summer we did so many updates and improvements, would have never done that in a rental. And the best part - we refinanced our house at 4% and now our payment is actually not what our rent used to be but $280/m less. (and thats for a much bigger house) - Who could have know that interest rates would go even further from where we locked in and that my payment is now way less than rent used to be is definitely an xmas gift.
When I was talking about it last time, everybody jumped the gun on me and told me how I will regret my decision come xmas 2011. How I will be in total financial distress and will regret that I bought and eating ramin noodles. - Quite the contrary.
Well, folks?
The doom and gloom as predicted just didn't kick in, did it now?
I'll be back next year and repost - till then, keep up the good gloom and doom work, post the graphs that prove it and happy thanksgiving and merry xmas!!
:)
(Rumbling sound of an earthquake...)
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prices are still falling where i'm looking. don't really care where you are.
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San Bruno, CA
Same here. Extremely happy with my home. It's amazing to have my own place and cheaper than rent. Ha ha. Love it.
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Alexandria, VA
It's good to hear that everything turned out to be nice for you.
Two questions.
- Let's say the peak bubble price is 100. What your number would be?
- What's wrong w/ ramen noodles? :)
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San Bruno, CA
Seaside,
Don't you know that some people can actually do well? I don't eat ramen noodle, nor being house poor. My house payment is about 20% of my income only. So, it's fairly cheap, really.
If peak is at 100, I am at 105-106. Positive. :-)
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If your mortgage is cheaper than your rent, than your purchase decision would be inline with everything Patrick says. You might have noticed that his main headline changed from "Why It's A Terrible Time To Buy A House" to "Why It's A Terrible Time To Buy An Expensive House" several months back. Much of the low end of the market is at or near bottom. Chances are you can buy in places like Fresno, Sacramento or Orange County and not take a big hit going forward.
If you paid over $500k for your house (and I am pretty sure you didn't) you may not be so lucky. The high end of the market probably still has a lot of pain coming its way.
I am not defending Patrick. I am just saying what I have read here. There are lots of people who make ridiculous statements on this site. One from Los Angeles immediately comes to mind.
Biff
P.S. How hot is Clara? Mama Mia.
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Bellingham, WA
Here's what *I* said:
"So over the LONG term, buying now doesn't seem to be any worse a deal than renting."
http://patrick.net/forum/?p=623908#comment-716565
"we refinanced our house at 4% and now our payment is actually not what our rent used to be but $280/m less."
yeah, I've been saying for years that buying before rates go down more is a smooth move.
And rates can go down a lot more from here, if Japan is any guide!
Still, as long as the house I want is declining $20,000/yr, I don't mind renting.
And it is.
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SubOink says
Congrats.. as always its not when you buy but how much to pay. There are certainly deals that can be made. Its all about being educated buyer and driving the price negotiations, and not being taken for a drive. Bargain hard...
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Santa Cruz, CA
Some of us may wonder exactly where you are that prices are not falling? Another bubble area perhaps?
Either way, no one should have said you would regret buying something you wanted to buy. It's exactly like buying anything else, some will have buyer's remorse, some won't.
It will always work out OK if you later decide to reverse-mortgage it.
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Los Angeles, CA
Well done.
I hope that I'm in the same situation someday....a home I can reasonably afford in a neighborhood I like with retirement in mind.
But prices in middle class suburbs of Los Angeles with a 45 minute or less rush hour commute....namely Burbank and Lakewood at the moment...will need to drop another 15% or so before that is the case.
clambo says
Theres portions of the country, and California even, where IF you mortgage, the whole price vs rent thing makes even fairly large price declines rather irrelevant.
The easiest example is Las Vegas where a low end home might rent in the $950-1100/mo range in a safe neighborhood with subpar schools. Mortgage on the same home with 3.5% down and a cost of $100K might be as little as $500/mo or something around that amount. Here buying may be cheaper overall even with price drops, you'd still be paying that amount as rent. Note that its still better to rent if you are going to live there some fixed time less than 10-15 years.
So prices may still be dropping, but in sub ~$150K markets, the price drops may not be substantial enough to keep potential buyers renting.
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Why in the world would anyone predict gloom and doom if you buy a house you can afford, you have stable work, and you plan to live there long term. That's silly. Even if it were under water why would you care? Your payments won't change and sooner or later it will come back up in value. You have to live somewhere.
I've own a rental property I bought in the last 2 years that's probably worth less than what I paid for it. So what? The rent comes in every month, it covers the mortgage, and I plan to hold it till I die.
The only gloom and doom is if you plan to flip or get in over your head.
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San Leandro, CA
SubOink says
Some see negative, some positive. It is difficult to find any unbiased TRUTH in the popular media. (they can't sell soap being negative). I guess SubOink finally took the positive media route and decided "NOW IS THE BEST TIME TO BUY". After all, we all want to get in right at the bottom, right before prices skyrocket once again, snagging all that equity before the next generation gets any.
How long has it been since any real estate PRO has advised DON'T BUY, DON'T BUY ? (sarcasm)
Good for you SubOink. How might we get ahold of you a year from now if (when) the bubble is not finished ? If the Euro fails ? China ? The Fed ?
The majority of authors of Patrick.Net intend to provide both sides of the story. The TRUTH,,,, THE WHOLE TRUTH,,,, AND NOTHING BUT ,,, somebody help me here !
I keep fantasizing gubmint will get out of the way. If/when that happens, values should SNAP back to reality, or after a little pendulum swingin.
Hopefully a little innocent GREED doesn't put you too far under water.
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where is the purchasing power going to come from to fuel the next economic growth? in the past fifty years we have had the war rebuild effort in the '50's, baby boomers being born in the 60's ((and viet nam), computers/real estate in the '80's, the internet in the '90's and the derivative scam in the '00's. what idea or innovation will drive the next economic expansion? clara...are you married?
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Saint George, UT
elliemae's website
CONGRATS!!!!
So far as improvements, 'sup to you! If you like 'em, that's cool. Improvements should always be made because you want them and are happy with them...
If you're not underwater,good for you. Many aren't - but many are. Since this is a housing bust site, it's only to be expected that you'll get responses telling you you'll regret the sale.
Again, congrats. I'm glad that you're happy. That's all that matters.
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Great News On Your Home Purchase!
Home ownership, if you can afford it, is great for the soul.
1) Housing prices are falling in the US overall - but there are many places where things have bottomed out.
2) Prices for distressed priorities (REOs, Shorts) are rising in many places (even though overall prices are declining).
- So if you buy a distressed property today (or get a good deal) you may not be underwater in the future. Some buyers are savvy and some will pay too much.
I buy places all the time. I live in them a short time and then sell them (I move around A LOT). But I buy at a discount. I am not too particular on what I buy. I pay cash. I am very flexible. And I buy slightly distressed properties (paint, carpet and a bit of handy work needed). I hire cheaper contractors, too. I do some of the work myself - the things I am qualified to do - cleaning, light bulbs, etc.
So yes, now is a good time to buy, if:
1) You know how to buy at a good discount.
2) You are in an area (and segment) where prices have stabilized
- Remember that overall price statistics are misleading. You have to break them down into segments - regular sales vs distressed, high priced vs mid vs low, newer neighborhoods vs established, etc.
3) You don't plan on moving anytime soon.
Example: I bought many houses in some newer neighborhoods around the Phoenix area. Since there were so few 'regular sale' properties on the market it was very easy to buy a slightly distressed property, clean it up and resell it. 99% of the buyers can't buy a property off auction (must pay cash, can't see property before buying). And 80% of the buyers can't buy an REO or Short.
Now things are changing. There are more regular sales available and more investors buying from the auction (and fewer properties hitting the auction because banks cannot robo-sign anymore). Prices for distressed properties have risen substantially. Prices for regular sales are not rising.
Good luck with your new home.
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See, this is the problem with the "catching a falling knife" metaphor. In real estate, you won't really know until later if you caught the handle or the blade.
Also BTW this is a weird time to take a victory lap. Last I heard the market was in about as artificial a place as it could be--and with low volume at that. I'm still waiting for FHA loan practices to stop or at least get real, for banks to mark to market, and in general for the return of an actual market--right now it feels like a street corner game of 3-card monte.
The beauty of online archives is we can all look back a few years from now and see what actually happened. How many times has a bottom been called so far?
My gut still says that if you're paying much more than 3 times median income, for the type of people who live in that area, then you're probably overpaying.
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Oh, the bottom isn't here yet. But if you buy at a good enough discount you won't be underwater (too much at least) when the bottom does come.
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i believe this aggregate trend is similar to what we're seeing and will see in the bay area:
September Case-Shiller Composite-20 Expected to Show 3.2% Decline from One Year Ago
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So 29 years more to go?
I remember when you first joined the forum you were the most bitter person about the drop in housing prices. Today you are very bitter, and I'm not sure why you are bitter at people at this forum either. Not like anyone here affects your life in any way.
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mukatsuku says
That is one way of looking at it, at the time of purchase. Another way of looking at it, is on an ongoing basis, as long as one lives in the residence, the overall cost either in rent or ownership, ought not to exceed a certain percentage of the household income.
For lotsa folks, this implies, continuous un-interrupted employment, at a certain pay grade. So if your housing cost is locked-in, with fixed mortgage & prop-13 or with rental control or whatever, if the income goes down, it means you are paying too much.
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Los Angeles, CA
B.A.C.A.H. says
I think the issue with this line of thought is that most people move often enough that they are basically counting on the price of their home appreciating.
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Los Angeles, CA
FortWayne says
Really? Then your memory is pretty bad.
I was the most frustrated person about the overinflated prices of homes. Just click on my name and read the posts - they speak for themselves.
29 years? That's better than paying a lot more in rent for the rest of your life :) And rents will go up. My payment won't.
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Los Angeles, CA
SubOink says
The reason you know that rents will go up is?
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Suboink - that's what everyone was saying in 2005. You know what happened next. ;)
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Los Angeles, CA
dodgerfanjohn says
No real reason other than the last 200 years of rent history...but other than that - just a feeling I got..
Pumpkin pie is ready!!
:)
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ANYONE who thinks home prices are close to bottoming haven't done their homework. Prices are still being propped up by gov't support and record low rates. SubOink appears to be taunting the fact that prices are going down very slowly (even with record low rates) and that homeowners are safe. Wait until rates start to rise, foreclosures continue to escalate, unemployment rises again and when they release the shadow inventory into the market. Numbers don't lie and it will take a miracle for the housing market to be saved. I guess there is always a chance of that happening! NOT!!
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Olalla, WA
SubOink:
We've all watched people in 2008, 2009, and 2010 say all the same things you are saying only to end up regretting it a few short years later. Most likely your house depreciated $25K last year, and you are simply in denial.
IMO opinion, the most important advantage of home ownership is owning the home mortgage free. Since I'm in that camp, I can tell you, it's wonderful to save or invest the $3K/mo as opposed to handing it over to the super-rich bankers.
How did I become mortgage free? Well, I never inherited the money, and sure as heck was not uninformed enough to overpay for a house just so I could leverage myself into a cheap 30-year loan. I worked, lived frugally, and saved up a big down payment. Then, from the point of purchase, it only took me 10-years to pay off my home. This is called "the old fashioned way," and I highly recommend it.
We are currently living in unprecedented times where people can save a down payment without house prices appreciating against their savings. The fact that prices are actually falling while they save is icing on the cake. Thanksgiving is nothing. Those currently living frugally and saving a down payment are seeing the best Christmas ever, day after endless day. Because the key to home ownership is just that, "ownership" as opposed to paying huge sums of money to rent it from the bank.
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It's CASH or FUCK YOU, America!
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Bellingham, WA
moldhaven says
This is a VERY good point.
When I moved to the bay area in 2000 the 20% DP of home prices was appreciating faster than my savings!
Here's monthly gains x 20% for C-S's low high-end in CY2000:
$914.76
$2503.12
$3417.88
$4291.06
$3343.04
$2885.65
$898.13
$141.37
$640.33
$1264.03
$1954.26
$2652.81
Between 3/2003 and 9/2005, a 20% DP on a low high-end home increased from $110,000 to $150,000, or ~$1500/mo!
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Astoria, NY
Let's be frank folks, Patrick's analysis was right on. The Federal Reserve instituted QE (quantitative easing) 1 & 2 and used our tax dollars to buy up lots of the bad mortgages. In essence all that they have done is kick the can down the road by increasing our debt. The real estate bubble took place from 1998 through 2005. Real estate values tripled in lots of places. This was an unnatural increase in real estate as compared to the history of real estate in the USA. That bubble has yet to burst. All bubbles burst and this one will also burst in my humble opinion. Our economy is tied to the problems in Europe. Our subprime fiasco was sold as AAA rated bonds to banks throughpout Europe in cluding Greece, Italy, Spain...the PIIGS. Now that they are suffering and at the brink, with China's economy cooling down (with Americans and Europeans not spending as much that's no surprise), the US economy is about ready to fall back into a recession. That's no surprise either because the Fed continues to print dollars and do things that will ultimately cause inflation and interest rates to rise. When the interest rates rise and they will because you can't triple the money supply without interest rates going up. Watch what happens to your house values when that happens! The real estate bubble will burst, it's inevitable and then you'll wish that you had waited. The bank will own you and you had better hope that you took out a fixed interest loan and not an ARM. Bad news on the horizon...the debt bubble will cause all of the other bubbles to burst.
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Napa, CA
moldhaven says
I'd much rather have prices rising at historic norms while I save than have to wait on the sidelines watching the government do back flips to keep an overpriced asset class from dropping back to reality.
BD
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Zachary says
Um--have you been living under a rock? The bubble burst.
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San Leandro, CA
tatupu70 says
Tatupu, I know what you mean, but Define "BURST"
hypothetic; IT IS NOW 2020 ( 8yrs from now )
The Euro restructured and wrote off 20 to 30 %. Chinese are convinced of the lack of R.O.I. in Condo ownership & bubble burst. Locally, Due to public awareness, our own gubmint STOPS THROWING OUR MONEY AT OVERPRICED ASSETTS. Attitudes of strategic default have now influenced all those who purchased or refinanced during the bubble.
America's median sales prices settles about ???? $160K ? $180K ? Providing employment does not get worse. Down from $204K today.
I don't know about you but I still consider a 20 to 30% value loss a POP !
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TMAC54 says
Bubbles are a very special case. Just because prices go up, it's not a bubble. And the converse is also true--just because prices fall, it doesn't mean the a bubble is popping.
If prices fall because of external factors like Euro collapse or another recession, it's not a bubble bursting--it's a normal reaction.
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Olalla, WA
bulletdodger says
I'm pretty sure there aren't many here that are happy about the insane policies of our government. But, I'm left wondering why 95% of them have repeatedly voted either republican or democrat and will do so again in 2012?
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Olalla, WA
tatupu70 says
But if prices are 25% higher than historical relationships to incomes, and then we have a European shock, the sound you hear is air continuing to rush out of a bubble.
On another note, the yield curve inverted in Italy today. 2-year notes are at 7.8%.
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moldhaven says
People will believe what they want to believe. Those who think home prices are stable also believe that the economy is recovering and the US gov't is trying to spread "freedom" in the middle east. There is a sucker born every day.
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HousingBoom says
lol--I like it. Anyone who disagrees with your line of thinking is a sucker?
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63 male
Las Vegas, NV
bgamall4's website
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Sunset houses are off 60k in value. If those houses can't hold their value then the only ones that are are peninsula houses, in selected cities. Right?
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tatupu70 says
If you believe everything you are told, then yes, I think you are a sucker!!
But, nothing personal of course ;)
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46 male
Menlo Park, CA
SubOink says
My whole point is that it's dumb to throw away more money to own than you would pay in rent for the same thing over the typical 6 or 7 year ownship period.
If you're owning for less than it would cost to rent the same thing, more power to you!
But did you take into account all the costs of buying, owning, and selling, like commissions? Check my calculator:
http://patrick.net/housing/calculator.php