patrick.net

little to no effect.

any first timers that have waited several years aren't going to buy a hugely overpriced house. we are waiting for fundamentals to adjust - price in-line with income. and when that does happen we're going to buy prudently. we did't wait several years just to buy foolishly.

also, there are not enough of us to push prices higher. we're a very small minority.

finally, we all have different price thresholds which means we will spread out our purchases over time. it's not like we're all going to buy on the same day. some will buy in a year, others in 2 or 3 years and some will never buy.

Exactly what Vanilla said.

One thing these heavy savers will have an advantage is the least amount of debt as compared to least savers and heavy debt takers, makes a big difference on the total payout to bank at the end of 30 years.

Yeah ... for each patient saver there is at least one seriously underwater borrower coming to grips with the reality that it is not coming back. I hate to go anecdotal, but the owners of some of the out of whack bubble purchases I have been watching are finally throwing in the towel.

Maybe if anything comes of this:
http://www.calculatedriskblog.com/2011/05/housing-data-making-foreclosure-and.html
the public will actually have big enough samples to make some conclusions.

totallyscrewed123 says

Yeah … for each patient saver there is at least one seriously underwater borrower coming to grips with the reality that it is not coming back. I hate to go anecdotal, but the owners of some of the out of whack bubble purchases I have been watching are finally throwing in the towel.
Maybe if anything comes of this:

http://www.calculatedriskblog.com/2011/05/housing-data-making-foreclosure-and.html

the public will actually have big enough samples to make some conclusions.

Thats interesting to see all that data go public.

"One thing these heavy savers will have an advantage is the least amount of debt as compared to least savers and heavy debt takers, makes a big difference on the total payout to bank at the end of 30 years."

Not really. Those who saved larger down payments will usually not have a smaller mortage, as they will generally just buy a more expensive house.

And do not assume that fence sitters waiting for prices to come down are somehow smart, because they are not. If they were smart, they would not have jumped when the govt. dangled $8,000 in front of them last year.

Our rent is on the higher end in this expensive county, so we have not saved as much as you might think.

I don't want to buy this summer, but we do want to live in a home of our own ASAP, so we will probably buy this summer. I wish the govt and bankers had let the market clear already.

HousingWatcher says

If they were smart, they would not have jumped when the govt. dangled $8,000 in front of them last year.

the ones still waiting didn't buy because of the $8k credit.

Imho, whether the "fence sitters" will impact the market in the future depends a huge amount upon how the economic picture plays out on both the macro and local front.

If you are in a locale with an inherently weak economy that is losing jobs to other areas, then it seems likely to me that the fence sitters might well have all of the time in the world.

If you live in a locale that is pretty much built out with a potential for well paying jobs and an influx of future residents, then I think it could be a different story. If inflation ratchets up to 5-6% as a result of our loose money policy (a not entirely remote possibility at least as predicted by TIPS yields which near term are selling at a premium to par value) then you will have the fence sitters getting hit with 5-6% rent increases at the same time that they are watching interest rates tick up .5-1% per quarter. Some of those folks that were previously commited to being perma-renters will reconsider at that point, which will come as a shock to those who think that higher interest rates will automatically equal lower prices.

I'm not saying that's going to happen for sure, but perusing this board seems like it is dominated by those that have discounted even the possibility of significant future inflation to darn near zero, which is not really the way that financial markets see the situation.

I do feel for those fence sitters that are hoping for lower prices in the premium markets of Silicon Valley. With facebook and linkedin, etc IPO'ing, those liquidity events pretty much guarantee that those markets are only going to be harder to buy into in the future with literally hundreds of new local multi-millionaires hitting the street at the same time....

HousingWatcher says

And do not assume that fence sitters waiting for prices to come down are somehow smart, because they are not. If they were smart, they would not have jumped when the govt. dangled $8,000 in front of them last year.

If they are waiting,it means they didnt buy.People who already bought because of $8K are no longer waiting to buy,I'd asusme

Or they did not buy because the credit expired before they could find a house or they did not qualify for it.

I have over $100k saved, and the median price in my community is about $290k. But my business has slowed to where I would probably not even qualify for a $200k loan.

The local mobile home park is looking better every day.

I want to follow this topic.
I am in South Florida,where every available space and somemore is already built.Decent jobs are hard to find and unemployment pretty high
Realtors here show the 2006-2007 price and try to make us believe everything is a good buy as if the peak price was the par price and now is a bargain.
Did dabble with idea of buying an apt where renting would bring in cashflow..but with the prohibitive HOA fee,I am second guessing.
We are young family in early 30s with 1 year old kid.Me and wife making $75k each and have $50k in savings
Should we save up and buy house with cash or forget abt buying for some years and stay as renters?
Also my money is in Bofa checking..any better places to park?

^
1. do you plan to live in the house for 10 years or more? do you like the house, neighborhood and schools?
2. after contributing to your retirement funds, kids college fund, daily expenses and entertainment/vacations, can you afford the mortgage and down payment? have you saved 6-12 months of rainy day money?
3. are home prices close to rent?

if you answered yes to all the questions, then buying may be reasonable.

Rethug says

1 year old kid making $75k

Have more kids.

Profit.

Los Angeles Renter says

The world is suppose to end May 21st… Whatcha waiting for? ...

Well after the Rapture, think of all the vacant houses, it could have a real impact on the value of the houses of the damned. Could very well ignite yet another firestorm of rapidly deprecating housing markets!

Rethug says

I want to follow this topic.

I am in South Florida,where every available space and somemore is already built.Decent jobs are hard to find and unemployment pretty high

Realtors here show the 2006-2007 price and try to make us believe everything is a good buy as if the peak price was the par price and now is a bargain.

Did dabble with idea of buying an apt where renting would bring in cashflow..but with the prohibitive HOA fee,I am second guessing.

We are young family in early 30s with 1 year old kid making $75k each and have $50k in savings

Should we save up and buy house with cash or forget abt buying for some years and stay as renters?

Also my money is in Bofa checking..any better places to park?

For just savings the best rate is either ING Direct or Ally Bank. Both lately offer 1%, although ING is more stable. It's 2 to 3 times BoFA.

If you are renting, find a really cheap rental and stay there. At times of instability jobs can go, and this gives you freedom to move. And if prices spike up you'll be still renting at an old rate saving even more until you can buy whatever you want with cash.

Of course discuss that with your wife, there is nothing more difficult in life than when a spouse disagrees with the direction family is taking. And if you find a bargain that makes sense, no reason you shouldn't get it if you are interested in it.

HousingWatcher says

“One thing these heavy savers will have an advantage is the least amount of debt as compared to least savers and heavy debt takers, makes a big difference on the total payout to bank at the end of 30 years.”
Not really. Those who saved larger down payments will usually not have a smaller mortage, as they will generally just buy a more expensive house.

There are some of us saving money with the goal of having less, or no, debt. People who enjoy more debt are the ones constantly trying to make more money, not save more.

Sean7593 says

Rethug says

1 year old kid making $75k

Have more kids.
Profit.

Thanks..fixed it, :)
meant- we have 1 year old kid and each of us(wife and husband) make $75k per annum

ChrisLA says

For just savings the best rate is either ING Direct or Ally Bank. Both lately offer 1%, although ING is more stable. It’s 2 to 3 times BoFA.

If you are renting, find a really cheap rental and stay there. At times of instability jobs can go, and this gives you freedom to move. And if prices spike up you’ll be still renting at an old rate saving even more until you can buy whatever you want with cash.

Of course discuss that with your wife, there is nothing more difficult in life than when a spouse disagrees with the direction family is taking. And if you find a bargain that makes sense, no reason you shouldn’t get it if you are interested in it

Thanks ChrisLA.Wife is all for buying and shopping all the time :)
I had to take some stuff in my stride so that we didnt take a foolish decision regd home
Will try ING or Amex sometime this week.Thanks again

HousingWatcher says

“One thing these heavy savers will have an advantage is the least amount of debt as compared to least savers and heavy debt takers, makes a big difference on the total payout to bank at the end of 30 years.”
Not really. Those who saved larger down payments will usually not have a smaller mortage, as they will generally just buy a more expensive house.
And do not assume that fence sitters waiting for prices to come down are somehow smart, because they are not. If they were smart, they would not have jumped when the govt. dangled $8,000 in front of them last year.

Duh. Who said that whoever bought to take 8000 credit were smart? There are different level of fence sitters. I am sitting here since 2004 and see the rewards now. All I know is that I could have been upside down on my mortgage had I bought it then. Now I am sitting on shit load of cash that I can even buy that same 2004 prices house at Cash. Go figure..No mortgage at all. Sounds sweet? At any given day I'll keep a $ in my hand(earning 0.5% interest) compared to negative equity scenario.

Your proud of earning 0.5 interest?

"There are some of us saving money with the goal of having less, or no, debt."

And at the end of the day, those same peopel are going to buy the most expensive hosue they can afford. NOBODY pockets the money they save. They end up spending it. When I go to the supermarket and somethign is on sale, I buy more of that product. Always. I don't pocket the savings

"If you are renting, find a really cheap rental and stay there."

So your recommending people live in the ghetto?

HousingWatcher says

those same peopel are going to buy the most expensive hosue they can afford. NOBODY pockets the money they save. They end up spending it. When I go to the supermarket and somethign is on sale, I buy more of that product. Always. I don’t pocket the savings

Are you open to the idea that some people would pocket the savings?
Also, the word "afford" has many connotations. Afford might mean "only what I can pay for with cash today." Or it might mean "as much as the bank and every other lending body will loan me in my lifetime."

I strongly believe that most people will use the money they save to buy a more expensive house. That is what Americans have a history of doing, and that is what they will continue doing.

HousingWatcher says

Your proud of earning 0.5 interest?

And you are proud of negative equity? Are you that blind that you can't see what a negative equity or being upside down on a mortgage is? Forget about 0.5%. Holding the dollar as is earning 0% is better then negative equity on any given day. You need to know some basic economics to understand what I am talking about. :)

bubblesitter says

HousingWatcher says

Your proud of earning 0.5 interest?

And you are proud of negative equity? Are you that blind that you can’t see what a negative equity or being upside down on a mortgage is? Forget about 0.5%. Holding the dollar as is earning 0% is better then negative equity on any given day. You need to know some basic economics to understand what I am talking about.

He has to be cause he said this:

HousingWatcher says

“If you are renting, find a really cheap rental and stay there.”
So your recommending people live in the ghetto?

Implying that there are not relative bargains to be found in any neighborhood esp if one is a "fence sitter" who saved up loads of money, has great credit, and likely a good job.

Rethug says

Me and wife making $75k each and have $50k in savings

Is that not including retirement savings? If not, you need to start saving now! Especially if you plan on having another kid.

You are back in rare form these days AF...

What's your secret? Exercise and clean living? Borsch enemas? Perhaps you've tapped the power of positive thinking?

APOCALYPSEFUCK says

Squat in abandoned and/or foreclosed properties until the suicide rate for Realtors has eliminated the species and you can buy a house for the price of a carload of returnable bottles.
Buy cash or be fucked by a bankster.
Imagine the glory of seeing one freezing to death on a sidewalk in front of a house you own free and clear and live for the day you can enjoy strolling out to comfort and warm him by taking a long piss on his face.
DIE NAR DIE!
DIE BANKSTERS DIE!

Thanks for the 5 minutes long laugh. LOL.

HousingWatcher says

I strongly believe that most people will use the money they save to buy a more expensive house. That is what Americans have a history of doing, and that is what they will continue doing.

I think you might be looking at this the wrong way. People who want to buy expensive houses save more because 20% of a high price is a lot more to save than 20% of a normal price. So of course if you look at all the down payments in the world, higher down payments will correlate with higher home prices.

But that doesn't imply that any given individual saver will increase their desired home's price as they save more money. It's perfectly possible that they'll save money, reach their goal, and then buy a home in the price range that they had been aiming for all along.

HousingWatcher says
I strongly believe that most people will use the money they save to buy a more expensive house. That is what Americans have a history of doing, and that is what they will continue doing.

LOL!... last 10 years hardly was an indication of prior decades. If anything we certainly see that kind of behavior a few times over 100 year period. It certainly isnt the norm. Once home prices dive down, there will be harsh backlash against future bubble makers.

I guess my point is that there are a certain number (such as myself, and many others on this board) who have been saving for so long that, once prices get close to pre bubble levels we'll all be trying to outbid each other.

And, if that never happens and prices continue to trend downward slowly, or stagnant and we bump along the bottom for years will we all become cash buyers? In other words if you've been saving for years now how much do you have, and how much so you think you'll need?

Myself. 20% down plus closing plus reserve for contingencies I'd need at least $100k in savings (given current prices) . With a 10% drop it'd be tight, nut I'd probably have enough to pull the trigger.

EastCoastBubbleBoy says

how much do you think you’ll need?

the max i'm looking to pay is:
- 20% of my net worth for a down payment.
- 20% of my after-tax paycheck towards mortgage payment+insurance+taxes
these are very safe numbers, easily affordable and realistic for today's housing market.

i tend to think 20% of my income towards a home is way too much even if it is building equity. i'd really like the number to be 10% of my net worth on a down payment and 10% of my after tax paycheck for mortage/insuranance/taxes.

i don't think you're understanding me.

i have net worth of X dollars. so my down payment is 0.2 *X.
i have after tax income of Y dollars/month. so my mortgage payment+tax+insurance is 0.2*Y.

let's use nice round numbers (instead of using my own numbers).
X=$100k; 20% means down payment = $20k
Y=$5k/month after tax. 20% means mortgage+tax+insurance is $1000/month.
$1000/month is very roughly (off the top of my head) around a $200k house.
the down payment is $40k. so i need to save another $100k to make up the extra $20k before i can buy.

the end result is that i am spending 20% of my net worth and 20% of my (after-tax) pay check on a house. which is not unreasonable; although i'd like it to be lowered to 10% as i mentioned earlier.

i don't believe i should spend more than 20% on a house. some people spend way more than 50%. that's their prerogative.

I'll bite.

My wife and I live in Silicon Valley and have saved up approximately $650K for a house (this is in addition to retirement and short term savings). We're both professionals with a combined gross income in the mid six figures. In other words we could buy a house if we wanted to. And yet we haven't, because housing still seems overpriced. So the only effect we'll have on housing prices is to help define a floor, because we're not going to overpay.

So...France?

Same story here. We are in Florida and have been saving for quite a while. I am in finance, so the 2004-2006 "lending" made me think it was criminal and a huge crash was coming. Should have shorted some stocks, but it's beyond the point. From my own local market analysis, it would take a few more years for the prices to reflect the new regulations, the increased down payment requirement, and the high inventory levels. When all of it is priced in then we will spend our hard earned cash and buy. I also wish the interest rates went up. So I am thinking 2015 not earlier.

I keep seeing all of these comparison between buy and rent which include the idea that rent will explode upwards with inflation. Did someone create a sub-prime rent payment product that I don't know about? I thought that rent is constrained by the incomes on the area as you can only write the rent check from the money that you take home.

I had an apartment right across the river from Manhattan that the landlord only increased the rent one time in 10 years by $50. I heard the same arguments from people that I was throwing money away on rent and that I was crazy not to buy. This was being said by people who were taking out interest only loans to take part in the flipoarama RE game that was being played so they were renting money from the bank and building NO EQUITY. So their argument held no water with me.