patrick.net

Is it going to be a stretch for you and your family to buy the home/location you want? Will you still be able to save for retirement? Rainy day? Vacation? Home repairs? Is this purchase going to cause financial stress on your marriage? Is your job stable?

These are just some things that I think about up here in Portland. Rents are dropping like a brick here, though, and prices seem to be in a holding pattern though expect a big dip this winter especially when the taxpayer paid, artificial price supporter (think about the results of the Cash for Clunkers program) 8K credit expires. God forbid it's renewed and increased!

It's really hard to predict where local markets will go outside of the more obvious bubble markets. I certainly feel for you and anyone with a family that has been and continues to be hurt by government policies which take from renters and give to home owners. These policies used to be carried out in the name of "incentivizing home ownership". Of course, that rationalization lost its last vestiges of plausibility once these policies pushed housing prices out of reach of most renters.

Now it's all about catering to lobbying interests and to the majority that own homes. To quote James Madison, ""In Republics, the great danger is, that the majority may not sufficiently respect the rights of the minority". I'd say, sadly, the tyranny of the majority has become the rule far more often than the exception lately.

looky there, a trollbot has made it in.

The trollbot has been shot. Let p@patrick.net know if others show up.

we have been outbid on offers several times and were finally having offers accepted only if we offered more than 10% above asking price.

Anytime someone notices that sort of activity, they need to seriously step back and review the situation and see whether speculation is involved. Does anybody remember "last time"--I mean circa 2004, when bidding wars were supposed to mean something? I figured this out in less than a week, and did not buy.

It appears that some people think they've sniffed out the bottom, or that flipping foreclosures is easy money--and that's driving some of these sales. I think a few more rounds of surprises are in store, but what do I know? I'm not an "expert", ie Realtor or seasoned RE investor.

...in Portland. Rents are dropping like a brick here, though, and prices seem to be in a holding pattern though expect a big dip this winter

I know several people here in Marin who thought Portland was an "untapped coastal market", and bought property up there. No doubt there's more of these tools out there, and haven't much clue about local pricing and where things are heading. I'm sure the locals will sell their homes before they do, hehe.

will do Patrick

RE: bidding wars / multiple bids. It's all BS and the REwhores are just playing a shell game to coax the highest number from some stooge. Don't be THAT GUY.

RE: Bidding wars: Yes, the REwhores are just playing a shell game, but why are there so many stupid, willing, gullible participants? What part of "you are being used" and "you are voluntarily overpaying so that the agent can fatten his commission" do these idiot buyers not understand? This is a case of pure Darwinism in action, with dumb buyers proving their genetic inferiority.

bubble are created by creating artificial affordability which is not sustainable.
no matter what the Rewhores/NAR/suze orman says, people are still going to buy when its affordable and not buy when its not affordable.
I am seeing the current bidding wars due to 3.5% 5 year ARMs. affordability skyrockets with these kind of interest rates.
lets welcome the new bubble which will pop soon.

I'm new here. What the heck is trollbot?

I think many of us potential buyers are scarred by the constant beating into our heads of the 'American Dream' falsehood. Spouse and I bought too much mortgage in '99, went through lay-offs within two years of buying, then started having kids in 2006. We had no plans for lay-offs or kids when we first purchased. Luckily we got out at the peak in 2007. As a renter watching this debacle unfold I am glad I am a renter but the urge is still there to buy even now. Luckily we're locked into a lease until next June. Even though I know it would be foolish to buy I still find myself window shopping. It is getting easier to "just say no".

It would be interesting to hear about countries with strong economies and their home ownership rates. Maybe home ownership shouldn't be pushed as much as it is. Isn't it obvious that if all your $ is going to PITI, utilities, upkeep that you have very little lefty to keep the local economy rolling?

SRLA makes very good points above.

homeowner_for ever_san jose says

bubble are created by creating artificial affordability which is not sustainable.

no matter what the Rewhores say people are still going to buy when its affordable and nto buy when its not affordable.

I am seeing the current bidding wars due to 3.5% 5 year ARMs. affordability skyrockets with these kind of interest rates.

lets welcome the new bubble which will pop soon.

No way! What do these folks think the interests rates will be in 5 years?!?!?! Up is the only direction! Are these folks being qualified under higher interest rates or is the same crap going on that got us into this mess.

Chrisborden,

I think more important than fattening the commission is the desire to create rising prices, which in turn creates a sense if urgency among buyers, leading to more transactions and therefore more commissions. I think realtwhores also compete amongst themselves as being the one that can manipulate prices upward the most, because this gets noticed an leads to more listing contracts.

Another thought...why rush in to buy? What would cause prices to go up? What caused the bubble and which of those factors are still in play, besides the 3.5% ARM as mentioned above? I think you'd be insane to get into one of those ARM's given what's happened in the recent past and the great uncertainty of the near future.

Leigh says

homeowner_for ever_san jose says

bubble are created by creating artificial affordability which is not sustainable.
no matter what the Rewhores say people are still going to buy when its affordable and nto buy when its not affordable.
I am seeing the current bidding wars due to 3.5% 5 year ARMs. affordability skyrockets with these kind of interest rates.
lets welcome the new bubble which will pop soon.

No way! What do these folks think the interests rates will be in 5 years?!?!?! Up is the only direction! Are these folks being qualified under higher interest rates or is the same crap going on that got us into this mess.

its the same craps going on again. The only difference is that banks are asking for 20% down. the interest rates are 3.5 % 5 years arm and there are many people in bay area with dual income who can easily afford 750K with 3.5 % 5 year ARM.

Justme, you don't think there will be enough commissions with all the foreclosures coming down the pipeline?!?!;O)

Leigh, one would think so. Personally I think there have been too many and too big commissions for many years.

Who was the trollbot?

I'd say the main post itself is a big troll with all the usual arguments that "now is a good time to buy".

Painting with a broad brush: I'm getting suspicious of any poster whose user name has spaces in it.
There appears to be a pattern there, so to speak. Only speaking very broadly, mind you.

"steady market watcher" would be a prime example.

Patrick, why is it that when I click on the posting history of "steady market watcher", the poster seems to go by the name of "Deep Purple" before?

The other weekend I met with friends who bought a foreclosed house in Sunnyvale less than two years ago for slightly more than 700K (previously sold for 900K). According to them, it still costs more or less the same. So if even Sunnyvale not really known for its schools or demographics holds then it looks like all the RE crash expectations are not applicable to decent parts of the Bay area. But then again, not every family I know in the area has two engineers to earn 250K+.

As for the original poster's "rents are increasing," according to this:
http://finance.yahoo.com/tech-ticker/article/349606/Dropping-Rents-Will-Drag-House-Prices-Down-with-Them

San Jose rents are down 8% this year.

Maybe the original poster is just being devious, but he referred to people as "home debtors," not usually a phrase used by trolls.

we've covered this many times. Low interest rates will not last forever. You don't want to buy when interest rates are low.

Low interest rates = high purchase price = you are locked in that price = high taxes.
High interest rates = lower purchase price (for the same monthly payment) = option to refinance when rates drop = low taxes & commission = less risk of being underwater

despite what realtors tell you, historically low rates are not good for buyers.

Is there any graph which shows historically if interest rates have gone up, house prices have come down?

Dear liveconfused: Speaking from experience and without a chart, I can tell you that when I took out my first mortgage in 1994 ($117K), it was 9% for a 30-year-fixed loan. I did and still do consider that a bargain. My payment was less than a third of my income, and I put (gasp! 32% down!). I would venture that values won't return to normalcy quickly (3X income, max) unless and until rates rise significantly. Right now, we have ridiculously low rates and still ridiculously high prices. Now, 15 years after I bought in what was a sensible market, we now have millions of fools STILL willing to drown themselves in debt in pursuit of some empty notion of "the American dream" and the false promise of unbridled appreciation, both of which seem to have wormed their way into the human genome, which seems quite odd to me. I agree with the aforementioned post that low rates are a disaster for buyers. Here's further proof: In 2000, some dumb broker came door to door and tried to persuade me to take out a new loan for $300,000 (adjustable), saying that I was a fool to not spend what had become sizable equity by then and that I was "wasting money" paying down a 15-year loan rather than extracting it to take "the vacation of your dreams" and to buy "any car you want." This is the garbage that gets stupid people into big trouble. You will lose if you buy at low rates.

justme says

Patrick, why is it that when I click on the posting history of “steady market watcher”, the poster seems to go by the name of “Deep Purple” before?

He changed his screen name, but the old name sticks with the comments. It's supposed to improve performance not to look up the new name, but it's too confusing.I have to fix that sometime.

Leigh says

I’m new here. What the heck is trollbot?

It's a program to automatically post crap comments to blogs as a kind of advertising. They always include a link, which is the ad.

Serpentor says

Low interest rates will not last forever

I have been thinking the same, but it looks like Ben is decisive on that front. Dollar is trashed in the last week and rumors are all over the place of a replace basket of currencies, gold just did a penetration through overhead resistance, everything points to a raise in interest rate, but havent heard. Very disappointed!

anyone want to comment on this:

Home Price: $562k $ 375k
Mortgage Amt.: $ 450k $ 300k
Int. Rate: 5% 8%
Monthly Pmt.: $2415 $2201
Total Pmt's.: $ 869k $ 792k
Down Pmt.: $112k $ 75k
Total Paid: $981k $867k

Home Value: $562k $ 375k
Appreciation: 2% 2%
Total Value in
30 years: $1mil $ 679k
Difference: +$20k -$188k

Even assuming you overpaid buy $100k:

Home Value: $ 462k
Appreciation: 2%
Tot. Value: $ 836k
Difference: -$145k

rblack : can you re-do the math with 981K at 0% versus 375K at 8%

this time include the property tax.

If I understand your hypo correctly, this part of your math is questionable based on faulty assumptions:

Home Value: $562k $ 375k
Appreciation: 2% 2%
Total Value in
30 years: $1mil $ 679k
Difference: +$20k -$188k

The point of debate regarding high versus low interest rates is that you are overpaying when you pay $562k simply because there is a low interest rate. Realistically, if you pay $562k for a house that has a fair market value of $375k with average mortgage rates, you are going to have negative appreciation for many years, while if you pay $375k (fair price), appreciation will generally track inflation (2-3% or whatever) from that price.

A real world example:
People spent $800k for houses in Brentwood (NorCal) in 2005. Those same houses now sell for $300k-$400k. Clearly if you bought at $800k in 2005 because mortgage rates were low, you can't assume 2% appreciation from $800k for the next 30 years. You need to first account for a huge drop in price. Places that are still highly inflated in the Bay Area risk the exact same thing happening.

Thanks Chrisborden for sharing your example. But in current US order [disorder] I don't see interest rates being pulled higher until value of dollar is deteriorated.

Dear Lived, excuse me, but I recall back then in 1994, my dollars went a lot further despite high interest rates. It was ridiculous, but as interest rates plummeted in 2000-2002, I was at home "earning" free money at the rate of $3,000 a week appreciation on my crap condo, and when I found out I could flee with a free $200,000, I ran as fast as I could to the bank. That was more than twice my weekly income. Clearly, low interest rates were fueling speculation, and if someone was stupid enough to pay me nearly triple what I paid, why would I NOT take it? Now we have stupid people STILL buying houses for way, way way more than they're worth, and for way, way more than they earn or can pay. When you give money away, people will gamble, such as the fool who bought my condo. I believe that higher interest rates are the only answer to stopping this madness. And I also believe the bankers and the corporate globalists WANT to destroy the dollar and this country, and they are doing a great job of it with the help of foolish Americans who can't resist a bad deal.

rblack, first, who stays in a house for 30 years? second, what if you bought high thanks to low interest rates but then had to sell 4-5 years later but interest rates are now high putting you maybe at a break even point. Just some thoughts.

rblack, one more thought though Serpentor already said it. You are locked into that higher purchase price but you can always refi to a lower interest rate.

I find it quite amusing to be described as a troll. I have been an observer and reader of patrick.net for years and I find it shocking to believe that people with such rational opinions on the highly inflated housing market can be so judgmental and prejudiced to someone who is truthfully describing the going-ons around them. All I did was state the plain facts about the utter stupidity I see around me when in fact all that has happened since the economy slowed was only more money being pumped in by the Fed. Why attack the messenger ?

I am a firm believer in the truth. The problem in America is not left vs right policies, it is the fact that nobody wants to play it straight and uphold the principles of truth and justice which are the true pillars for peace, prosperity and happiness

Bap33, you are an extremist. You jump to conclusions without trying to understand the gist of my original post. Let me ask you something - Are you waiting for someone to push the magic button to allow you buy the house at a price you desire ? Do you think the world revolves around you ? Nothing wrong about thinking like that, but tell me, what have you done to protest at these extremely unfair laws and policies being passed by the government ? I can bet the answer is NOTHING. You just whine and spite others, even if they are on your side. Adopt a positive philosophy - it is called LIVE and LET LIVE. First write letters to your rep in congress strongly protesting the policies and demand an explanation from them. Only then you have the right to judge others & btw you have demonstrated your impulsive rush to judgment by wrongly identifying me as a sellout. I have worked with 5 realtors over the past 18 months and they all gave up on me after racking about 40 showings in total, many REO properties, because I would not budge on offering over asking price, a fact that I am extremely proud of.

What is happening in America today is nothing short of broad daylight thievery and destruction of the currency, right under our bloody noses while we are arguing about who is to be blamed.

And btw, I am a firm believer in the fact that houses are GROSSLY overpriced!!

camping says

As for the original poster’s “rents are increasing,” according to this:

http://finance.yahoo.com/tech-ticker/article/349606/Dropping-Rents-Will-Drag-House-Prices-Down-with-Them
San Jose rents are down 8% this year.
Maybe the original poster is just being devious, but he referred to people as “home debtors,” not usually a phrase used by trolls.

My apt complex ownership changed a couple of months back and these new guys have increased the rent across the board. Looks like they are trying to push the buttons on existing residents to see how much they will put up with. ( I have 2 kids and it will take time for me to gather all of our belongings and move & before that I need to find the right location in the same school district ). I am not disagreeing that rents are dropping everywhere else but there are a few exceptions - call it taking advantage of people's tendency to avoid moving unless limits are exceeded which they think a $150 increase in rent does not.

Sure, rents can increase. But so can house payments - even for fixed mortgages. In Vegas, my home taxes started at $900 per year. After 8 years they were $1300. During the boom they rose to $2,200 and have increased during the boom. The old neighbors say that homeowner's insurance rose several hundred dollars due to house prices increasing, and after an unfortunate flood brought on by change in infrastructure they're now paying flood insurance. So, the increase was about $2,000 per year to the homeowner, or $167 per month.

Ain't no guarantees out there. But just 'cause rents are unstable and unpredictable doesn't make it the time to buy now.

Don't even get me started on why it's completely asinine to sue the govt for discrimination based on choice of housing. I'm sure you could find an attorney, tho. They'll do anything for a chunk of change.

Unless they are raising your tax rate, are the county is doing something fishy with appraisals your taxes going up generally imply your home value has increased. If my home value doubles, I would expect my taxes to double also. In most cases I would not use that as an argument for owning a home as a great expense. Unless the county tax rate has doubled complaining about having to pay more in taxes is not a bad thing. If I purchased $10k in stock and those stocks go up to $20k and sold than the stocks. Yes I would have to pay a few thousand dollars in capitol grains, but I would state that having to pay taxes on my gains put me at a lost. The only exception to this would be if you bought at the peak, had to pay taxes against that peak and now your home has lost value. In that case though your taxes "should" be going down and not up.

My management keep pushing all the utilities on me. I negotiated with other management half a mile away and got the same size unit for $150 less(This is in Socal). Rents are definitely falling at most places in Socal. Bottom line is OP must try to move out and give a 30 days move out notice to current management.

The taxes in my "new" house were about $u700/year when I moved in. They rose to $1,000 during the bubble. My house was "reappraised" this year, and I should have had a $200 decrease. However, they increased the tax rate to match the current amount paid.

They touted "transparency" in that anyone can find out what their taxes are and the rates are easily understood. But my house taxes increased during the bubble and according to the local govt, won't ever go down. It's not my fault that assholes overbuilt luxury homes on golf courses that are losing money and going into foreclosure (houses and golf courses), I wouldn't mind paying a little more to help offset the monies that aren't being collected from foreclosures & walkaways. But the majority of that money goes to schools - and I deeply resent having to pay taxes for huge mormon families with 10 kids when they're paying the same amount that I am.

We have "school trust" land all over the state, they should sell that shit and lower my taxes or at least use my taxes for my community. I feel like everyone should pay for a couple of kids, but huge families pay the same taxes as I do and that just plain sucks.

...but I'm not bitter...

Today you are saying you are not bitter, many more are bitter beyond the edge and I am wondering how long before unrest sets in for crashing dollar.

Ellie, sorry to hear about that. My county was fairly good about taxes. They automatically lowered mine this year because of the drop in value of homes.

SMW,

>>All I did was state the plain facts about the utter stupidity I see around me when in fact all that has happened since the economy slowed was only more money being pumped in by the Fed. Why attack the messenger ?

In this particular case you (the messenger) did not make it very clear that you were posting a critique of somebody else's message. Add to that the headline "Missed the bottom again?", and I would say that except the fine print, it read an awful lot like a shill or a troll.

The fine print was:

>>"Here are some of the points that were made by the newly crowned home debtors…"

One common technique of an (indirect) shill is to quote lots of other people that have the "right" message, but at the same time create an appearance of distance or objectivity. It is similar to how a journalist can claim to be objective but by prominently quoting the opinion of other people that agrees with him, still gets his preferred message across.

Your post read a lot like such as shill. If you were arguing *against* a bottom having been missed. I think you did not do a very convincing job. I suppose time will tell what your true colors are.

there are always loosers in a boom and bust cycle : people who sell in bottoms and buy at peaks.
for every loser there is a winner : people who buy at bottoms and sell at peaks.
in every instance , the winners are rational thinkers and losers are emotional.