patrick.net

tatupu70 says

does the bank have any ownership rights to the house?

Sure

I rest my case your honor.

You can select any small periods of time and argue what you like, but the general trends show that there's a lot more going on than simply stating that higher interest rates will mean lower prices. And housing started rising from a low in '81, didn't it? And yes, interest rates played a major role in the 80s, but then again they did reach up to 16% or so, and as you follow the real house prices and interest rates, there are periods where yes the correlation holds and when it doesn't (interest rates rose 83-84 as did house prices for example, and then there was a long period from 86 or so to 91 where rates were flat and house prices declined substantially).
Anyway, my point isn't that interest rates don't have a role in house prices as they obviously do, but that it is by no means the only factor in determining what house prices will be at any given time.

Don't waste your money buying something you will not be happy with. These insanely high prices can't and wont' sustain themselves forever.

I wouldn't compromise if I were you, it's a lot of money to buy something you won't love and will probably grow to hate.

It's a price repeat of DotCom. During DotCom people were buying very expensive houses because those involved were making money hand over fist. And as soon as that ended, all those insane IPO's came to the end it crashed. If I were you, I'd expect the same repeat. It's no different today.

One of my old clients used to make a lot of money during DotCom, due to IPO's and overvalued stocks. When that ended, they ended up foreclosing, and prices dropped a lot too. Amount of money went away, and prices went down.

RentingForHalfTheCost says

Perfect, thanks for the data and graph. Wow, I see it now. ;)

since another poster pasted it already, I didn't see the need to duplicate his work.

Did you not see it?

RentingForHalfTheCost says

I rest my case your honor.

Thanks for proving that the only way you can make your case is by deception.

tatupu70 says

RentingForHalfTheCost says

Perfect, thanks for the data and graph. Wow, I see it now. ;)

since another poster pasted it already, I didn't see the need to duplicate his work.

Did you not see it?

And it was debunked already. It doesn't show what you both are saying. Not even close. The best time to buy real estate is when interest rates are at the peak or heading towards the peak, not the other way around.

tatupu70 says

RentingForHalfTheCost says

Perfect, thanks for the data and graph. Wow, I see it now. ;)

since another poster pasted it already, I didn't see the need to duplicate his work.

Did you not see it?

Correlation factor is not at all obvious like you say. Here is what I see in the graph.

1902-1920: Int up, Houses flat
1922-1942: Int down, Houses flat to up
1954-1962: Int up, Houses flat
1970-1982: Int up, Houses up
1982-1988: Int down, Houses up
1988-1991: Int down, Houses flat
1991-2006: Int down, Houses up
2006-now : Int down Houses down

The only correlation I see is that when there is a runup in prices like now there will be a correction in prices no matter what happens to the interest rate. The rates are normally adjusted down in an attempt to stop the drop, but at best it keeps prices flat or the drop continues (like now). The correlation that low interest rates are the best time to buy, I just don't see. It actually looks like the worse time to buy to me in terms of future price appreciation potential.

I think both sides are correct here. It is not a good time to buy now because of low interest rates. But as rates start to rise then that might turn out to be the best time to buy. That is normally when prices of housing starts to appreciate the best. Probably because it means we have come out of the woods are things are on fire for the economy to justify the raise in interest rates. Remember, they are raised to cool the economy. So, if we start seeing interest rates rise we all should really cheer.

Anyway, my take on the graph. I'm sure others will see it differently.

tatupu70 says

RentingForHalfTheCost says

So, if the current person living in the house decided to not make the agreed upon payments then does the bank have any ownership rights to the house?

Sure-it's a condition of the loan agreement. So what?

Lets try again. I'll answer the "so what?" This means the bank owns the property until you satisfy the mortgage. That is why they hold the title. If you are the rightful owner then ask the bank for the title. Shouldn't you own the title if you are the house owner? Damn right you should. I have 4 titles on my properties in my safe and am the owner in a sense. I can still lose the homes to the city if I don't keep up on the property tax payments. So, there is a bit of pseudo ownership going on. I'll take the pseudo over the owning a mortgage any day though. Mortgages are an easy way to put and keep yourself in debt for life. Did you see the bonuses given to bank executives, Freddie and Fanny Mae executives. Guess who is paying for all these bonuses?

I never said that low interest rates were the best time to buy. I said that there wasn't an automatic correlation between high interest rates and low prices, so I'm not quite sure what you think you've debunked. Your own list above doesn't even match what you've been arguing. Trying to predict when the best time to buy is is a pretty futile exercise. There are far too many unknowns for people to truly know what is going to happen. To me, it looks a pretty good time for a lot of Americans to buy a house - prices are pretty low (in terms of multiples of salary) in many parts of the country and interest rates are at historically low levels. Now that doesn't mean everywhere makes good sense. This place seems heavily focused on the BA and prices seem quite a bit more out of whack there compared to many places. Fine, wait it out if that's what you want to do, but then people shouldn't generalize it out to the rest of the US by pretending the situation is the same everywhere. It clearly isn't.

Bigsby says

I never said that low interest rates were the best time to buy. I said that there wasn't an automatic correlation between high interest rates and low prices, so I'm not quite sure what you think you've debunked.

I was caught up in two conversation, so sorry it wasn't perfectly clear my points. I am in more agreement with you than tatu. Your reasoning is spot on to me and you are correct about over-generalizing a complicated problem (timing the market). In places undergoing intense distressed housing, now might be not a bad time to get your feet wet. However, in most areas like the BA, New York, etc. the local housing market is still in need of adjustments to match the economy.

Tatu's reasoning on the other hand lacks the data and is more about emotion and hope.

Sorry I confused the two threads

RentingForHalfTheCost says

This means the bank owns the property until you satisfy the mortgage.

No, it really doesn't. It means you are using the house as collateral until you pay off your loan. If you can't see the difference in those two scenarios, then I'm afraid I can't help you.

RentingForHalfTheCost says

Tatu's reasoning on the other hand lacks the data and is more about emotion and hope

What is my reasoning? All I said was that history disputes the false premise that there is a negative correlation between interest rates are prices.

kochevnik says

but I'm not willing to spend 20 to 40 years sitting in a cube

Dont worry, nobody will work for the same company for 20 years ever again. The rate of change is so high today, its impossible to see a future.

ThreeBays says

worth financing and keeping the rest of your money in stocks.

You mean the computer generated casino?

Took me awhile to clean out my email inbox from all of this. I too have lived through several real estate marktets, and I have never seen one quite like this. Take for example this listing which also came in my email today, it's a short sale. Someone slashed the price $40,000. Regardless of the details, I'm not interested in such a volatile market. And I don't think this property will appreciate much beyond 149K anytime soon.

http://www.redfin.com/CA/Woodland-Hills/22100-Burbank-Blvd-91367/unit-265G/home/4003440

tatupu70 says

RentingForHalfTheCost says

This means the bank owns the property until you satisfy the mortgage.

No, it really doesn't. It means you are using the house as collateral until you pay off your loan. If you can't see the difference in those two scenarios, then I'm afraid I can't help you.

I don't need help. I'm doing fine already. You see it through rose realtor glasses, whereas I see it for what it actually is. Owner of the title (legal document showing ownership) owns the home. No real debate only with people that don't understand what the word title means.

"It may also refer to a formal document that serves as evidence of ownership."

Taken from Wikipedia's definition of "title"

http://en.wikipedia.org/wiki/Title_%28property%29

Again, don't try to help if you can't really understand the definition yourself. Title=ownership. That is not open for debate with me. Go argue with your wallpaper if it makes you feel better. ;)

tatupu70 says

house as collateral

RentingForHalfTheCost says

Owner of the title (legal document showing ownership) owns the home

Exactly--the bank doesn't own the title, you do.

The bank is holding it until you pay off the loan. Then they give it back to you.

I can't tell if you're just trolling or if you really believe that there is no difference...

OK--I'm growing tired of this. How about this. What new rights do you have as an owner once you have paid off the mortgage? Or what additional rights do you have when you buy with cash vs. with financing?

You should be able to name some, right?

Like you're entitled to any appreciation in the asset. Oh wait, you get that when you have a mortgage.

Or you have the right to make any changes to the asset as you see fit. Nope--you get that either way too.

Or you are responsible for any liabilities. Sorry, that applies both ways too.

So, what are the differences again?

tatupu70 says

OK--I'm growing tired of this. How about this. What new rights do you have as an owner once you have paid off the mortgage? Or what additional rights do you have when you buy with cash vs. with financing?

You should be able to name some, right?

Sure. You now have full rights to your property that you finally own. Not just the possession rights. You cannot lose it to the previous owner (mortgage holder) because of an inability to pay the mortgage. You are not forced to carry insurance on your house to cover the mortgage in the case of theft, damage, fire, etc. Do you know that if insurance carriers refuse to issue you insurance then this will break the mortgage contract and you will have to pay in full to keep your home? Many people forget this, but it is right there in writing. I had one house that had a fire close to it in the Sierras in 2004 and I was close to having this happen to me. After contacting nearly close to 10 insurance companies I finally found one that saved me. True story and I thought I was screwed.

You can sell your home without having to involve the previous owner. If you wanted to pass it to a family member it is as simple as hiring a lawyer and change the name on the title (which you now have in your possession). If you have a gambling problem and want to throw you home into a pot that you feel you can not lose, then you can do it. It is your home now, not the banks.

I take huge pride in the fact that I have titles to property. Until I got the titles I was always aware that if I lost my job, no matter how much equity I had built into the place I could actually be at risk of losing it. Just like many people in this country are right now as I type this. It doesn't matter that you paid down your mortgage for 5 years (never missed a payment) and now all of a sudden cannot make the payment. Add to it that no one will buy your home for the cost of the remaining mortgage and that put you in a very dangerous position. The bank then exercises its right to take possession rights away from you and do what it is necessary to recoup the skin it has in the game.

Even after you have title and ownership rights you still have the obligation to the city. You still have to pay taxes and if you don't you still risk losing your home. However, that is the closest you can get in this country to actually being in the free and clear. You like mortgages, then you must also like gambling. I have a huge distaste for both. Maybe because math is my specialty as opposed to luck.

Lastly, when you buy with cash, you actually focus on the value of the asset when you negotiate. Not the monthly payment. In my experience this is a much better bargaining position. Seller hate it though, but they also realize that any form of financing these days is very risky and can fall through at a minutes notice. If we were all forced to only deal in cash this country would be in such a better place financially and I would feel so much better about what we are leaving behind to our children. Currently, I feel like I need to apologize to my children for our stupidity.

tatupu70 says

RentingForHalfTheCost says

Owner of the title (legal document showing ownership) owns the home

Exactly--the bank doesn't own the title, you do.

The bank is holding it until you pay off the loan. Then they give it back to you.

I can't tell if you're just trolling or if you really believe that there is no difference...

Lord have mercy... (I'm not even religious).

Hey, can I hold onto your retirement money? I won't own it, I'll just hold it for you. Jesus - I'm done here.

A mortgage is a loan procured by a buyer to pay off the seller of a piece of property in full. The buyer then owes the mortgage lender the total amount borrowed, plus interest and fees. As collateral or guarantee of payment, the lender of the mortgage holds the deed or ownership of said property, until the buyer pays the mortgage off. However, the buyer occupies the property as if it were already his or her own.

above paragraph was from this site

http://www.wisegeek.com/what-is-a-mortgage.htm

Once upon a time, what you could afford matched the money in hand. That proved to be an insufficient means for growing the amount of money some people wanted. So a system was devised to redefine what you could afford so that people would spend almost all of their lifetime net earnings in an instant by agreeing to occupy a house and pay that money in monthly payments.

FunTime says

So a system was devised to redefine what you could afford so that people would spend

And not to mention every 10 or so years along comes an economic downturn and these 'some people' get to reclaim their rentals.

FunTime says

Once upon a time, what you could afford matched the money in hand. That proved to be an insufficient means for growing the amount of money some people wanted. So a system was devised to redefine what you could afford so that people would spend almost all of their lifetime net earnings in an instant by agreeing to occupy a house and pay that money in monthly payments.

BINGO! God it feels good that someone gets it. Focusing on the monthly and using that as an affordability index is down right silly.

ptiemann says

sounds good, but that's a fairy tale and it's BS. People have borrowed at least as long as there was currency.

I live a fairy tale life and I'll have it my way. I'm not going to borrow money to buy a Lamborghini either. I can't afford it.

RentingForHalfTheCost says

Currently, I feel like I need to apologize to my children for our stupidity.

lol---so you came up with exactly zero differences. Well done.

RentingForHalfTheCost says

As collateral or guarantee of payment, the lender of the mortgage holds the deed or ownership of said property, until the buyer pays the mortgage off

Ding, ding, ding, ding. Do you see the word collateral in that sentence?

RentingForHalfTheCost says

BINGO! God it feels good that someone gets it. Focusing on the monthly and using that as an affordability index is down right silly.

Don't be ridiculous. You have to live somewhere so the proper accounting is to compare the cost of renting vs. the cost of buying. And this cost comparison is best done using monthly payments.

It's also useful to look at the local market and the last selling price of the house, but comparing montly payments is not silly.

Realtors Are Liars says

tatupu70 says

RentingForHalfTheCost says

As collateral or guarantee of payment, the lender of the mortgage holds the deed or ownership of said property, until the buyer pays the mortgage off

Ding, ding, ding, ding. Do you see the word collateral in that sentence?

Ding, ding, ding, ding. Do you see the sentence "lender holds the deed" in that paragraph?

Sure--I agree the lender holds the deed. You own it, but the lender holds the deed.

If buyers only look at "how much per month?", than prices are absolutely dependent on interest rates, since interest rates affect the monthly payment. Higher interest rates = higher monthly payments -> lower prices to compensate

wthrfrk80 says

If buyers only look at "how much per month?", than prices are absolutely dependent on interest rates, since interest rates affect the monthly payment. Higher interest rates = higher monthly payments -> lower prices to compensate

Yep--they are most definitely dependent on interest rates. What history has shown is that this dependence is much weaker than their dependence on unemployment, or wage inflation.

Realtors Are Liars says

If that were true, the borrower could sell it un-impinged. He cannot. Thus he does not own it.

I'm not even sure what you are trying to say there. A borrower can sell their house whenever they want--the loan balance is due upon sale, of course.

RentingForHalfTheCost says

You are not forced to carry insurance on your house to cover the mortgage in the case of theft, damage, fire, etc.

I forgot to address this. Carrying insurance is a part of the loan contract. The bank is protecting the asset that is being used as collateral in the loan. It implies no ownership.

RentingForHalfTheCost says

Lastly, when you buy with cash, you actually focus on the value of the asset when you negotiate. Not the monthly payment. In my experience this is a much better bargaining position. Seller hate it though, but they also realize that any form of financing these days is very risky and can fall through at a minutes notice. If we were all forced to only deal in cash this country would be in such a better place financially and I would feel so much better about what we are leaving behind to our children. Currently, I feel like I need to apologize to my children for our stupidity.

That sums it up quite well. Well said!

FunTime says

Once upon a time, what you could afford matched the money in hand. That proved to be an insufficient means for growing the amount of money some people wanted. So a system was devised to redefine what you could afford so that people would spend almost all of their lifetime net earnings in an instant by agreeing to occupy a house and pay that money in monthly payments.

It's amazing how eager people are to sign up for voluntary serfdom/slavery in "the land of the free" isn't it?

Even when the mortgage is paid off, you don't "own" your house. Try missing a few property tax payments and see how much you really "own."

Even when the mortgage is paid off, you're renting the land from Your Local Government.

wthrfrk80 says

Even when the mortgage is paid off, you don't "own" your house. Try missing a few property tax payments and see how much you really "own."

Even when the mortgage is paid off, you're renting the land from Your Local Government.

Well, yes, in an abstract sense, you don't own anything.

And yes, if you don't live up to your responsibilities such as property tax, income tax, or if you deal drugs out of your house, it can be confiscated.

But, if you live up to your responsibilities, you legally own your house.

But what does "ownership" even mean if you have to pay someone annually just to keep it? That's not my definition of "ownership."

wthrfrk80 says

But what does "ownership" even mean if you have to pay someone annually just to keep it? That's not my definition of "ownership."

Several things off the top of my head. The owner is entitled to any profit or loss on the sale of the asset. The owner is entitled to make any changes as he/she see fit to the asset (provided said changes aren't against any laws or codes). The owner is responsible for any liabilities due to said asset. Etc, etc.

The government taxes many things--it doesn't mean it owns them.

robertoaribas says

then don't ever own anything: Your car? nope, if you don't pay the registration and insurance, you can't drive it anyways...

Very true. You don't "own" your car. Even if you do, it rapidly depreciates. The decision to lease a car rather than own can make a lot of sense. Do whatever option is cheaper and/or more convenient.
robertoaribas says

income on your stock investments? Nope, if you don't pay the taxes you get in trouble.

I don't have to pay anyone anything to hold on to a stock. Sure, if I get dividends that's considered "income" and is subject to tax. If I sell the stock, I have to pay tax on the income from capital gains. That's not the same thing as paying someone constantly to avoid having an asset confiscated.