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Why Now Is a Good Time to Buy a House


By mili   Follow   Thu, 12 Apr 2012, 12:53am PDT   17,040 views   123 comments   Watch (1)   Share   Quote   Permalink   Like   Dislike  

Although the economic recovery remains sluggish and some fear rising interest rates, there are growing signs that this a good time to buy a house, according to a new study.

http://www.thefiscaltimes.com/Articles/2012/04/11/Why-Now-is-a-Good-Time-to-Buy-a-House.aspx

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bubblesitter   befriend   ignore   Thu, 12 Apr 2012, 1:03pm PDT   Share   Quote   Like (1)   Dislike     Comment 44

rootvg says

Rates have to go up, and when they finally do it'll come with a vengeance.

As much as I wish,it is not going to happen any time soon due to continuing economic trouble. You are underestimating the nexus of our politicians and banks.

rootvg   befriend   ignore   Thu, 12 Apr 2012, 1:07pm PDT   Share   Quote   Like   Dislike     Comment 45

CrazyMan says

You realize if they raised rates every bank in the US would almost instantly fail right?

Eventually, they will have to.

I seem to remember something about Continental Illinois failing in 1984, after the late seventies and early eighties recessions were supposed to be long over. One would think we'll see some banks fail again in the next couple of years.

tdeloco   befriend   ignore   Thu, 12 Apr 2012, 1:15pm PDT   Share   Quote   Like   Dislike     Comment 46

rootvg says

Rates have to go up, and when they finally do it'll come with a vengeance.

Mortgage rates are based on LIBOR, which provides various bond index rates (but mainly the Bond Buyer's 20-bond index). The Fed wants the discount rate to be non-zero just so that they can claim that we're not in the ZIRP Liquidity trap. We're already paying $480B annually to service our debt. Something like a 6% increase, and we're in default.

Skyrocketing rates just can't happen. Except if we default first, then rates will skyrocket.

StoutFiles   befriend   ignore   Thu, 12 Apr 2012, 10:46pm PDT   Share   Quote   Like   Dislike     Comment 47

-Rates will not drastically rise till 2014, if at all. Japan went to 2%, so it's not like the banks are dying at 4%.

-Housing inventory is laughably low, yet driving around through neighborhoods there are plenty of foreclosed homes the banks are hiding. Keep on waiting.

Michinaga   befriend   ignore   Fri, 13 Apr 2012, 12:35am PDT   Share   Quote   Like   Dislike     Comment 48

StoutFiles says

-Rates will not drastically rise till 2014, if at all. Japan went to 2%, so it's not like the banks are dying at 4%.

I saw an advertisement for a 0.6% 1-year home loan today. It had been 0.8% until just recently.

Five-year fixed 1.18%; 10-year fixed 1.58%. (For comparison, bank CDs for such periods pay between 0.01% and 0.05%.)

I wouldn't mind seeing the US go this path if it also meant the complete eradication of inflation, which is something the Japanese have enjoyed over the last 10-15 years. Japan Railways hasn't changed their fares since 1988. Can that be said about any semi-public entity in the entire USA?

Mr Happygoluckofus   befriend   ignore   Fri, 13 Apr 2012, 12:54am PDT   Share   Quote   Like   Dislike (2)     Comment 49

Even at 2% interest rates may as well be 6% there is at least *4% in FHA fees, MIP and other various mortgage taxes, that have been added to the process since the fall of 2010.

That is why refinancing my mortgage that I bought at 4.75% would not be feasible for me to refi at even 3%. I would end up actually paying $100 more than I am now with that lower rate.

Though half of those fees could be avoided by paying a 20% down payment up front or paying ltv down to 20%, the other half is fees that are intended for the lifetime of the loan that all FHA loans will have to pay.

* on a 150K mortgage.

Goran_K   befriend   ignore   Fri, 13 Apr 2012, 1:29am PDT   Share   Quote   Like   Dislike     Comment 50

I'm glad the fees for FHA loans are going up, hopefully it prevents them from becoming the subprime lender of choice, like they are now.

Robber Baron Elite Scum   befriend   ignore   Fri, 13 Apr 2012, 1:41am PDT   Share   Quote   Like   Dislike     Comment 51

Michinaga says

I wouldn't mind seeing the US go this path if it also meant the complete eradication of inflation

Low rates never cause deflation. Japan was going to go under deflation anyway regardless of the rates.

The low rates simply caused slow gradual deflation. Without the low artificial rates, Japan would have deflation immediately within 1-3 years instead of a whole 1 & a half decade.

Philistine   befriend   ignore   Fri, 13 Apr 2012, 2:19am PDT   Share   Quote   Like   Dislike     Comment 52

Common fallacy that higher rates have a causal relationship toward inflation; it's actually the other way around 99% of the time: inflation causes higher interest rates.

David9   befriend   ignore   Fri, 13 Apr 2012, 2:22am PDT   Share   Quote   Like   Dislike     Comment 53

Smell of desperation?

I don't want this particular property, no open view. But, the bank just dropped the price 59K. Just like that. :-)

http://www.redfin.com/CA/Sherman-Oaks/5021-Tilden-Ave-91423/unit-6/home/4730036

tdeloco   befriend   ignore   Fri, 13 Apr 2012, 2:30am PDT   Share   Quote   Like   Dislike     Comment 54

Japan had a trade surplus for most of the past 2 decades:

Robber Baron Elite Scum   befriend   ignore   Fri, 13 Apr 2012, 2:32am PDT   Share   Quote   Like (1)   Dislike     Comment 55

Philistine says

inflation causes higher interest rates.

No. The low rates cause the inflation and then the resolution is to increase the rates.

Low rates will always encourage more people to borrow and to borrow more. Savings are neither encouraged. Spending is however encouraged. This is a perfect recipe for inflation.

During the RE bubble we also had low rates, why then didn't the homes prices deflate? And don't say that it's because of easy lending standards. That's nonsense. We STILL have very bad lending standards. Yet the RE market is being trashed. Why? Because it is unsustainable and any gimmicks will not be able to save it in the long run. It will prevail to go where it deserves to go.

Your logic and theory has a big fallacy.

clambo   befriend   ignore   Fri, 13 Apr 2012, 2:36am PDT   Share   Quote   Like   Dislike     Comment 56

What is unintentionally funny is that unbelievably annoying ad by the Realtors that begins with the little brat screaming "Granpaw!!!" I have heard it on "hate radio" and also seen it on hate news stations.
So, the ad is telling us what? That Realtors hope this little kid grows up to buy a house someday.
Lame, pathetic, annoying, pointless.

APOCALYPSEFUCKisShostikovitch   befriend   ignore   Fri, 13 Apr 2012, 3:46am PDT   Share   Quote   Like (3)   Dislike     Comment 57

Seriously, the USA's economy has been trashed by a crisis in underwriting quality going back to the 1980s. It's the 80000 ton gorilla in the room that no one wants to address because given the criminalized culture of Wall Street and RE, it's a hard and generations-long problem to resolve.

So.

Why don't we just start over by throwing all the fucking bankers out of helicopters over the North Atlantic?

Robber Baron Elite Scum says

We STILL have very bad lending standards.

bmwman91   befriend   ignore   Fri, 13 Apr 2012, 3:48am PDT   Share   Quote   Like (1)   Dislike     Comment 58

APOCALYPSEFUCK is Tony Manero says

Why don't we just start over by throwing all the fucking bankers out of helicopters over the North Atlantic?

Why do you hate the environment? We should be thinking more about our future. Combustion of fecal matter could provide lots of fuel, and given the amount of bullshit that those types spew, we just need to harness it.

BoomAndBustCycle   befriend   ignore   Fri, 13 Apr 2012, 4:54am PDT   Share   Quote   Like   Dislike     Comment 59

David9 says

Smell of desperation?

I don't want this particular property, no open view. But, the bank just dropped the price 59K. Just like that. :-)

http://www.redfin.com/CA/Sherman-Oaks/5021-Tilden-Ave-91423/unit-6/home/4730036

You could rent this place out for a minimum of $1700 a month. I work in this area and it's a great neighborhood to live. The little league ballpark nearby is really cool and well maintained.

On the surface this looks dirt cheap and a steal... No problem making a profit renting this place out. BUT, the big question mark is the HOA fees and how high they go.. They are at $300 a month already...and I would look into how many people bought in 2004-2007 in this complex.

The more people that default the higher your HOA will go or the more likely you won't be able to sell the place for anything but cash.

That's probably why this is listed for less than the 1988 sales prices of $123K if you factor in inflation.

I bet this condo would require an ALL CASH BUYER due to the bad situation the HOAs are in. I think the banks could just start renting these out for a profit though. I guess they'd rather take a loss and get it off their books, rather than go into property management.

THe elementary / middle schools are very solid in the area too.. the high school is pretty terrible though. So you can get at least 15 years out of the place if you don't have kids yet, before you have to move.

David9   befriend   ignore   Fri, 13 Apr 2012, 5:46am PDT   Share   Quote   Like   Dislike     Comment 60

BoomAndBustCycle says

BUT, the big question mark is the HOA fees and how high they go.. They are at $300 a month already...and I would look into how many people bought in 2004-2007 in this complex.

You hit the nail on the head. That is probably why the bank wants to get rid of it. Property Shark changed where I can only look up 5 histories a day, but the last sales are: #1 405,000, #2 500,005, #3 295,000, #4, 236,000, #5 371,003

Yes, the numbers work out to be about $500 a month profit when it is rented for $1,700. However, if the buyer ends up paying $300 for each of the 6 units or $1,800 a month in HOA fees, that would put it in the red.

Real Estate, what a game.

Rent4Ever   befriend   ignore   Fri, 13 Apr 2012, 5:48am PDT   Share   Quote   Like   Dislike     Comment 61

clambo says

You save the $200K this way.

You 1. co habitate with roommates save $300/month, $3600/year

2. brown bag your lunch, save $70/month, $850/year

3. buy balanced mutual fund and invest $800/month for several years.

4. Work saturdays and/or sundays at something not too difficult and save up an additional $5,000 per year.

How do you NOT save up money? Try to keep up with your other hipster/trustafarian/dilettantes/other guys who like showing off.

The payoff is nice after you have been a broke appearing guy for a few years. Later on you know you can do more and be more flexible and relax more knowing you have some dough to back you up.

Oh, and it still not a "good time to buy a house" at least where I live. It is a good time to buy stocks however. Why? Low interest rates.

House prices will fall some more as soon as interest rates go up. They are going to go up.

Anyone, yes anyone can save up 200k in non retirement accounts. Some additional areas that are crucial to achieving a significant savings: Car purchasing decisions, how much you choose to drive, where you choose to live, how often you go out to eat/to the bar, every vice (smoking, drinking, gambling), where and how often you shop for clothing, where and what you buy for food, your hobbies/entertainment (are they cheap like hiking or exercising or are they expensive like golf or skiing?) never purchasing something that doesn't have an immediate use and a regular use in the future, Stop hoarding things and sell your items of value before they lose all their value and then live in a smaller place because you sold all your stuff. Of course you have to be comfortable with people thinking you are poor because you won't have the BMW, designer clothes or live in the McMansion. That's the hardest part for most.

Purchasing and owning things is not a path to happiness, Freedom and time is a path to happiness and it can only be gained through $$. Doesn't matter how much you make, only how much you have.

Mick Russom   befriend   ignore   Fri, 13 Apr 2012, 5:50am PDT   Share   Quote   Like   Dislike     Comment 62

Great, now buy and be a debt slave, you 99% wage slave debt slaves!

This country is starting to suck more and more.

BoomAndBustCycle   befriend   ignore   Fri, 13 Apr 2012, 5:59am PDT   Share   Quote   Like   Dislike     Comment 63

David9 says

You hit the nail on the head. That is probably why the bank wants to get rid of it. Property Shark changed where I can only look up 5 histories a day, but the last sales are: #1 405,000, #2 500,005, #3 295,000, #4, 236,000, #5 371,003

Yes, the numbers work out to be about $500 a month profit when it is rented for $1,700. However, if the buyer ends up paying $300 for each of the 6 units or $1,800 a month in HOA fees, that would put it in the red.

Real Estate, what a game.

David,

Do you rent in Tarzana currently? I've seen condos selling at what seem like liquidation prices in that area.. vegas style price drops of 60%-70% off 2006 prices? What's the vibe of the condo communities in the area? Does it feel like things are turning the corner and bottoming out?

Goran_K   befriend   ignore   Fri, 13 Apr 2012, 6:06am PDT   Share   Quote   Like   Dislike     Comment 64

Saving $100k or $200k for a down payment isn't hard if you have a somewhat decent career and you don't blow it all on BMW leases, or $500 tabs every two weeks.

clambo   befriend   ignore   Fri, 13 Apr 2012, 6:16am PDT   Share   Quote   Like   Dislike     Comment 65

rent4ever has got it.
My problem is I grew up around prosperity but having worked a couple of years in Mexico changed my outlook. Particularly, how valuable capital is. A few thousand bucks sounds like spare change in San Francisco, but in many countries it is enough capital to start a business, start building your own house, etc. A fine used car is a fantastic thing to a guy who has none and makes just enough to feed a couple of people.
There are people who just hate saving. My friend has a successful and fairly unique business. He just keeps buying more things we can call "inventory" instead of just having enough for his use. I estimate his inventory now is going to take him 1.5 years to liquidate. He simply can't resist buying more.
My needs are not that great but luckily I have friends I can also visit who have the summer houses and whatnot.
My recollection of the most fun times I ever had never involved having money to do it. I remember swimming, snorkeling, sailing, scuba diving, and digging up clams and spearing fish. It was fun to be out and about. I relived this down in Baja years ago and this is still fun. To be able to surf you can spend under a grand for a board and a suit.
My friend in Mexico is very highly paid by the local standard. He was telling me that he wants to buy a new car because his 2001 XTerra was leaking oil somewhere and gasoline is expensive. I told him to fix the leak and not buy anything, that as I wrote my friend is fixing a 65 Volvo for his daughter. I said that the average American car is 12 years old. I think I convinced him.

BoomAndBustCycle   befriend   ignore   Fri, 13 Apr 2012, 6:24am PDT   Share   Quote   Like   Dislike     Comment 66

Rent4Ever says

Freedom and time is a path to happiness

I guess.. maybe it's because i actually enjoy my job and coworkers... but after a week of vacation I'm bored and ready to get back to work.

Maybe that will change with kids...

David9   befriend   ignore   Fri, 13 Apr 2012, 6:30am PDT   Share   Quote   Like   Dislike     Comment 67

BoomAndBustCycle says

Do you rent in Tarzana currently? I've seen condos selling at what seem like liquidation prices in that area.. vegas style price drops of 60%-70% off 2006 prices? What's the vibe of the condo communities in the area? Does it feel like things are turning the corner and bottoming out?

Yes, I do rent in Tarzana. In my opinion, from my research, Long Beach and San Diego are more at a bottom than the San Fernando Valley, from number of listings, properties sold, quality of the units available, and of course price.

Take Tarzana for example, there are 26 properties under 300K. The banks released a property 4, 16, 17, 19, and 20 days ago for the 5 most recent. This controlled drip has gone one for 3 years.

Since I don't live in a condo complex, I can't really comment on the vibe. I can say I know of one complex I like with 317 units and not a single 3rd floor unit has been available since November 2009.

RentingForHalfTheCost   befriend   ignore   Fri, 13 Apr 2012, 6:34am PDT   Share   Quote   Like   Dislike     Comment 68

Now is most likely the worst time to buy in my lifetime. I think it'll turn out to be worse than 2006 even. Rent and gain leverage.

bubblesitter   befriend   ignore   Fri, 13 Apr 2012, 6:35am PDT   Share   Quote   Like   Dislike     Comment 69

To the debt takers - good luck on being bailed out by future generations.

BoomAndBustCycle   befriend   ignore   Fri, 13 Apr 2012, 6:36am PDT   Share   Quote   Like   Dislike     Comment 70

RentingForHalfTheCost says

Now is most likely the worst time to buy in my lifetime. I think it'll turn out to be worse than 2006 even. Rent and gain leverage.

That makes NO sense.

BoomAndBustCycle   befriend   ignore   Fri, 13 Apr 2012, 6:43am PDT   Share   Quote   Like   Dislike     Comment 71

David9 says

Since I don't live in a condo complex, I can't really comment on the vibe.

I checked out home rentals in Tarzana on www.hotpads.com... Doesn't look like any decent homes rent for under $2000 a month.. and most rent for FAR more south of ventura blvd. I keep hearing people who are renting homes at amazing prices on this site, but I've never had any luck finding these amazing deals in the real world...

Rent4Ever   befriend   ignore   Fri, 13 Apr 2012, 6:50am PDT   Share   Quote   Like (1)   Dislike     Comment 72

clambo says

My needs are not that great but luckily I have friends I can also visit who have the summer houses and whatnot.
My recollection of the most fun times I ever had never involved having money to do it.

Yep. Living frugally doesn't mean living a joyless life. It just means prioritizing what actually gives you joy. Things do not, experiences and people do. I would never buy a vacation home/timeshare. Instead I would rent one and prioritize vacations with people I care about.

It is possible to live both frugally and with luxuries.
BoomAndBustCycle says

Rent4Ever says

Freedom and time is a path to happiness

I guess.. maybe it's because i actually enjoy my job and coworkers... but after a week of vacation I'm bored and ready to get back to work.

Maybe that will change with kids...

A small percentage of people, if given the choice to quit their job and do "whatever they want" with money being no object, would not quit their job. These are the Mark Zuckerbergs, the leading physicians, businessmen, lawyers, etc in the country. More power to you if you actually like what you do and the hours you work.

When I say freedom, I don't mean stop working. I mean work in something that might be less stressful, less time consuming, more rewarding or with people you actually like/care about (like your wife), or volunteering for causes that