patrick.net

The low mortage rates and low prices (lol, by comparison to the bubble peak) make buying attractive. At least they know they are not buying at the top.

I am sure people buying at the peak thought they were doing the right thing too.

thomas.wong1986 says

landtof says

you’re basing almost every positive on tax benefits.

Tax laws change at the whim of Congress. If anything decisions are left without tax impact.

Here's a recent history of major tax changes for non-entities. Corporate tax changes quite a bit but personal income tax have not changed that much over 30 years. 1981 Reagan tax cut. Lowered tax rate and introduced accelerated depreciation. 1986 tax reform act. lowered tax rates 1990's. tax brackets raised. Pre-tax programs started, effectively lowering tax rates. 1997. introduced earned income credit, negative tax for low income family with kids. 2001. Bush tax cuts, lowered bracket to current levels. preferential treatment to qualified dividends As you can see, our government has basically given: *Accelerated depreciation *hosts of pre-tax like 401K, 529plans, pretax health, depedant care and commute. *earned income tax credit *generally lowered tax bracket across the board *preferential treatment of certain class of income. *new credits like monster SUV (qualified by weight) then hybrids, now energy efficient window, water heater and doors. our governement over the last 30 years took: *raised the tax bracket occasionally. *let the tax bracket and phase-in and limitations lag. Based on this history, tax laws change, but they almost always change to the benefit at the federal level. I don't think we need to worry about our goverment taking away. If so, the 2001 bush tax cut is the obvious one to reverse.

I just don't see any price rise. Here's craigslist average asking price data, collected every day for about four years. OK, it's an average and it's the whole Bay Area with all kinds of housing lumped together, but there's just no real rise visible.

The gap in 2008 was when craigslist changed format and my scraper broke for a while.

Let's just hope its not a repeat of 1992 or 1993

UnitedSocialistStatesofAmerica says

Shame on YOU for trying to argue that fooling clients is an integral and acceptable part of a salesperson’s job and that the ’shame’ of being RIPPED-OFF should justifiably always fall on the innocent BUYER and NOT on the person doing the MISREPRESENTATION. No wonder your country is COLLAPSING.

Please don't put words in my mouth. I don't recall using the word integral or acceptable. It just cracks me up that so many here talk about personal responsibility--I guess that resonsibility ends when you try to buy a house.

What is clear is a large amount variability (standard deviation) starting in 2008. Any one have an opinion on that?

I would expect if I lived in Argentina I would have probably learned this as well. The government continues to extend, pretend, and lie. Unfortunately most citizens are oblivious.

If an individuals job relys upon selling something, you are likely not the most objective subject matter expert.

USSA

I agree. There are alot of folks that believe in our leaders and a collective good. They keep their nose to the grind stone and manage their own.

It's really unfortunate that those leaders place personal agendas before the good of the people.

rmm221 says
It’s the average americans that can’t afford homes… Wealthy areas will probably rebound for now.. But if you are in the market for a “starter” home you’d be pretty stupid to buy in this market.
Are their any statistics on first time home buyers… that compares their incomes to the purchase prices? That would be a more accurate representation of what’s really going on in this housing market.

I am an average American I spose. Single male, 33 years old with a $60K annual blue collar job. I am in escrow on my first house. Not really a starter house but needs some TLC. I bought in the Inland Empire reasonably close to where I work and down the street from where I grew up. My mortgage on this 3/2 will be roughly $100 more a month on a 30 year fixed then my single bedroom apartment is costing. In my eyes, that is affordable. 5 other people at my job have purchased in the last 4 months as well.
I see a problem of the "average American" not settling for the average house but rather something well above their buying power. I chose a very simple house in a good area that won't nickle and dime me to death.

@ robertoaribas

Do you see deflation as a scenario? How do you feel about guys like Prechter?

Fireballsocal says

I am an average American I spose. Single male, 33 years old with a $60K annual blue collar job. I am in escrow on my first house

Ok, maybe i was generalizing a bit too much.. But you mentioned some key things that make your purchase different than most. Firstly, you are a SINGLE 33-year-old male... You probably don't care too much about the school district you are buying a home in. It's a better deal after taxes than renting. so it makes sense for you now! Congrats!

Personally, I'm recently married and school districts play a larger role in my decision making. In los angeles, buying a home in a good school district would NEVER fly with $60K income. I've seen awesome homes in crappy school districts.. and then literally blocks away homes are hundreds of thousands more for the same sq footage and amenities... simply because they sit on the different side of a school district border.

I'll consider buying when i have $100K saved to put down on a $500K home... That's the average starter home cost in a good school district. I'm about 1/3 of the way there... If i had the 20% down payment with safety net income in the bank right now.. then my decision to continue renting would be more difficult. It's pretty easy to wait though, all things considered right now.

In my area, I have seen a lot of movement in the lower numbers for first time buyers, but almost nothing in the top and upper-mid level homes for 2nd level homes. People who own at house are not selling to buy a bigger, more expensive house. Anything over 500k is a rarity, as people who don't have to move are not moving. When 10 cheap homes are sold for every expensive one I can see how the numbers are going to go squirly when it comes to median home price. A cheap home in my town/state would be 250k so how does that effect the median home price for the nation?

I've tired of looking for a house in LA. We are looking in the upper-mid tier, which means about $700k+. 2 years ago that meant $800k. Movement, granted, but not as much as in the middle and lower end. I get the impression from our last round of tire kicking that the market has flattened and will not drop any further in our range. What we pay in rent only affords us a $500k mortgage; we'll stick with our palatial apartment with historical details and landlord-maintained gardens.

Both of our jobs are in the West LA area, so there is no way we would move to the suburbs or to Land of the Dirt People and commute 4 hours a day just to afford a bland 1980's tract home or, worse, shoddy new construction.

We're 70% on saving a downpayment. But the cost of living in LA is not worth all the nice weather in the world, so we've determined we'll keep collecting inflated LA salaries and then take our savings to another state where the exchange rate will buy us a house outright.

Philistine says

We are looking in the upper-mid tier, which means about $700k+. 2 years ago that meant $800k.

Two years ago the 30 year mortgage was over 6%. Now it's under 5%.

http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=MORTG&s[1][range]=5yrs

$800K at 6.3% is ~$4100/mo in cost-of-money terms, while $700K at 4.8% is $3100/mo. So prices have fallen 25% in cost-of-money terms.

I lived in WLA 1985-1992 so I understand its attraction. There is an immense --centripetal -- demand for housing there relative to the supply.

http://bible.cc/proverbs/26-11.htm Speaking of dogs, here is an interesting scripture in the Bible. BTW, dogs eating their vomit was considered very bad in those days.

jvolstad says

http://bible.cc/proverbs/26-11.htm Speaking of dogs, here is an interesting scripture in the Bible. BTW, dogs eating their vomit was considered very bad in those days.

Appealing to conscience, I feel like the "spend our way out" is simply another way to steal from the future. Taking on more and more debt is ALWAYS a path to disaster. Loading debt onto future generations has to be even worse! Yet, our "leaders" continue to return to their credit vomit. At this point we simply have a drawing of the lines between the immoral and the responsible. Congress has acted with unacceptable selfishness at the deteriment of the next generation. Housing cannot recover because they have stolen the piggy bank where the savings were being kept. The exodus of companies from the USA (and Silicon Valley as documented above) is no different than marauders leaving after marauding a country. Housing and the USA will recover only when the American people stand up and enact judgement on those who have assailed the USA. Cash for clunkers. Free housing for liars. And other government programs are not even thinly disguised assaults on American wealth designed to buy votes and reward lobbyists. Housing can't recover when the root cause of rot is still festering in Washington.

My dog eats pretty much anything. It is rather digusting. Regarding Maxweber's comments, I feel that people have lost their humanity. We have become nothing more than dogs willing to steal from our brothers with no remorse. Once there is no difference between us and the animals, are we worth saving?

If you cannot make the numbers to buy work in comparison to renting then rent. Its a easy decision. Renting makes you more mobile and you do not need to worry about maintenance or property taxes.

Looking back I should have been renting years ago.

I saw an interesting article on Zerohedge.

The author believes that we are headed for deflation but the Federal Reserve fears that most of all. Bernanke has implemented Quantitative easing because he knew there would be no velocity of the money infused as well as the first stimulus has been relatively ineffective because it mostly benefited government.

The author suggested that there will be a short-term push for a second stimulus and the Fed will resume other QE to combat deflation. Ultimately there will be inflation but the Fed will counteract with high interest rates.

I think this is logical because before 2009 I never expected the government to bail out the banks. These guys are going to all in.

Whatever does happen, these guys are going to lose and us with them.

inflection point says

If you cannot make the numbers to buy work in comparison to renting then rent. Its a easy decision. Renting makes you more mobile and you do not need to worry about maintenance or property taxes.
Looking back I should have been renting years ago.

I disagree with this. In the historical postwar environment, ANY home purchase paid off eventually as household incomes rose and interest rates fell, a combination that resulted in higher home prices and rents.

Buying in a decreasing interest rate environment is juicy.

http://research.stlouisfed.org/fred2/series/MORTG/

Had I understood this in 2000 I would have bought then and made out like a bandit. My friend closed on his quarter acre of Maui the week after 9/11 and was able to serially refi down from 7% to 4.5%, a 36% reduction in interest cost.

Renting makes you the buttboy of wage inflation since household income in the end is the main determinant of rents.

Now, going forward it is highly questionable whether wage inflation is still in the cards, and left to its own devices one would imagine mortgage rates would be going up and not down from here.

But I still think we're more likely to see 3% rates before 7%, which makes buying now NOT a bad tactical decision since that also offers a ~30% reduction in interest costs should Bernanke or the PTB swing a Japan-style interest rate regime.

I say all of that fancy talk don't mean Doodeley Squat!

" ``The fact is that there's probably two to three times as much inventory as what the Realtors are saying on MLS,'...

``There's been a continuous deterioration in prices,'' Zalewski said. ``If you factor in that increase in inventory, that deterioration is just going to continue to increase.''

Read more: http://www.miamiherald.com/2010/06/29/1705736/report-s-fla-homes-for-sale-on.html?story_link=patrick.net#ixzz0sNywTb7G"

I read that today and pulled my offer from a house I was in the process of putting the close together on.

I will not be Cajoled into an over priced piece of crap house. The only Real Estate moving is the Real Estate that is bought by Sanctioned Commissioned Investors, that do the banks bidding, and is a continuation of the mentality that got us here. I will not be a Proxy of that Model.

I want one of the ones in the jaws of the Greedy Beast, my self, I'll wait until I Slay a good one.

NO SALE!!!

Troy

Buy away. You will make Obama and the NAR happy.

It's a tough decision. On the one hand I see nothing but continued economic tankage from here on out, unless something unexpected happens like fusion power is perfected.

On the other, the ptb can and will throw everything they can at the situation to save it as-it-is.

It's a coin-flip really, but I do think the Japan example educates us that two or three years into the pullback is the wrong time to buy.

TEN years was about right in Japan, and even now it's just floor-scraping interest rates that are keeping prices up.

Troy.

It is not a difficult decision for me.
- I am 49, I cannot see taking another 30 year mortgage.
- I have two college age children at home for at least 3 more years.
- I can finally sleep soundly at night because my wife and I can make our expenses on one salary.

Why take risks you do not need to?

Troy says

inflection point says

If you cannot make the numbers to buy work in comparison to renting then rent. Its a easy decision. Renting makes you more mobile and you do not need to worry about maintenance or property taxes.
Looking back I should have been renting years ago.

I disagree with this. In the historical postwar environment, ANY home purchase paid off eventually as household incomes rose and interest rates fell, a combination that resulted in higher home prices and rents.

I grant your point, however interest rates "in the historical postwar environment" shot way up from mid-'70s to early-'80s, about 16% or so (maybe a tad more?), and then slid glacially to 10% by 1988. Nearly 15 years of double-digit interest rates is, as a child of the '80s, indelible. I remember my mother slaving--as a mortgage broker of all things--to pay $1200/mo on a $130k mortgage. The circumstances may not return there for a long time to come, but I will not overpay on a house just because interest rates are low.

Philistine says

I grant your point, however interest rates “in the historical postwar environment” shot way up from mid-’70s to early-’80s, about 16% or so (maybe a tad more?)

The ball-buster interest rates were policy engendered to break the wage-price spiral that separated the economies of the 1960s and 1980s. While I don't have the data, I suspect those who bought in the teeth of Volcker's tightening policy did well as rates were loosened through the 1980s. There certainly was a run-up in prices from 1985-1989.

Philistine says

but I will not overpay on a house just because interest rates are low.

And well you shouldn't. My point was buying in a DECLINING regime was good. If rates plateau or go up from here, buying now will be a mistake unless these rate rises are in response to "inflation expectations" aka wage inflation.

But if you ask 100 people whether or not buying when rates are low is good, 100 people will say "yes", when the correct answer is "depends" . . . on household after-tax incomes.

inflection point says

Troy.
It is not a difficult decision for me.

- I am 49, I cannot see taking another 30 year mortgage.

. . .

Why take risks you do not need to?

Actually, a 15 year mortgage is the OPPOSITE of taking a risk. You're locking in your housing cost for the rest of your life, especially if you live in California or another Prop 13-protected state.

15 year interest rate is 4% now, on a $250,000 property that's a holding cost of ~$1250/mo ($2300 including principal repayment).

This housing cost will decline over 15 years as the loan is repaid, and in 2025 and beyond will be on the order of $500/mo.

What will your rent be in 2025, and how many years do you plan on living past 2025?

Troy says

But if you ask 100 people whether or not buying when rates are low is good, 100 people will say “yes”, when the correct answer is “depends” . . . on household after-tax incomes.

Few people actually get this... :)

I think I will wait for the bottom on this one.

inflection point says

I think I will wait for the bottom on this one.

Easier said that done... The problem is you only know it's a bottom when you see it in the rearview mirror.

I dont need to be at the precise bottom.

Right now I rent a much nicer house than I can afford to buy so I am sure we are not there yet.

It will be more likely we are their when no one thinks housing prices are going up.

He didn't do a walk through before closing? You're kidding. If anyone would have been there, the deal would have been put on hold until they left and the locks were changed. Where is the title company in all of this?

You get what you pay for. The reality is the buyer got a great deal but that is exposure/hidden cost to short sales. A case that tenent protection is out of whack. You shouldn't have to go a long legal process to evict like this.

I hope that cash was somehow documented with an agreement. That was really dumb.

The thing is any reasonable person would know/expect that the previous owner was going to string this out as long as possible and wait to be evicted. There is no motivation not to. Your acquantance who bought the home should have known this and plan for it accordingly. Worst, giving 3K dollars in cash without proper legal consideration is just plain idiotic. Most people do negotiate the buy out in lieu of eviction but not with cash and without a contract.

folks, that is how I view our population now.

The eviction cost is part of the reason why short sales are cheap. This person has no street smart.

Nomo, it has been my experience that the first step a REwhore takes when an asset manager gives them an REO to list is to have locks changed. In a ShortSale it is different. A ShortSale listing is normally 1 of 2 types. Type 1 has a person wanting to use the ShortSale system to force the foreclosre process to stop for a while. Type 2 has a person that has taken a ton of money out of a home and is using the ShortSale offers to "prove" to a bank/gov that they should not be made to pay taxes or get a loan adjustment. It has been my experience that renter-occupied ShortSales are type 2 and are normally owned by RE type people, pocketing the cash.

I made an offer on an occupid SS. I offered the occupant cash for some of their belongings along with the offer. Just how I roll. lol

I think there's another type of short sale candidate where the person thinks they can short sale to get out of their underwater home and go buy the cheaper bigger house across the street.

If I were looking to buy I would stay clear of short sales. Even foreclosures are questionable because you know that behind each foreclosure is a disgruntled former owner. There's no telling what may happen.

E-man says

I’m not surprised at the situation. I can’t speak for your acquaintance, but I do believe in karma.

Karma - as in the buyer deserves it? Or karma as in, the occupant will eventually get his own? Sounds like this guy bought a house he currently can't live in. He's not the bad guy in this story, but is getting screwed anyway.

Why fool around with all of the hassles and pitfalls of a short sale or REO when there are so many other great deals to be had without the headaches? Just the waiting and waiting on banks to make a decision is enough for me to stay away from them. Buyer beware

This depression is much better with bankers bonuses, home buyer credits, and bridges to no where.