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sex is not a weapon :twisted:
chilren are not weapons :evil:
Thanks SQT
Randy H
2006 Apr 4, 2:22am
Fewlesh,
I second your concern about 401k, 403b, SEP, SARSEP, SEPIRA, IRA, RothIRA, etc. tax status.
I have contended for years now that there is a very significant risk that the government will create a special tax mechanism to disproportionately tax returns/disbursements from these tax deferred vehicles sometime in the future. A simple demographic revenue extrapolation should be enough to convince yourself that the gov't will not be able to contain their need to get their hands on all this untaxed/undertaxed money.
Randy H
2006 Apr 4, 2:26am
George,
There is a lot of interesting stuff happening with the USD. Even as it devalues further against the EUR, it is appreciating pretty quickly against the "carry trade" currencies. Last weekend's FT had a couple articles on how Iceland, New Zealand, South Africa, and Australia are all either at or very close to entering stagflation and sinking currencies largely because of the USD. In essence, the US economy is unloading a portion of our inflation/stagnation pressure to those economies primarily through currency trades. It's all very complicated by also very interesting.
Hokies,
I'm in my 40s and pay about 40% less renting than I would if I bought a comparable property today. I'd much rather pay a cheaper price in 4-5 years and bank some of the difference in savings bonds in the meanwhile than buy at the top and watch my kids and wife suffer economic starvation as interest rates ratchet up my economic pain year after year.
By the way, I'm putting more away right now than I would be paying down in principle at the start of a 25 year amortization anyway!
Better a higher rate on a lower principal, that's my principle - all the benefit is on the downside of rates for someone smart enough to do that. Even if rates go up, the pain is less with a lower principal amount.
All the pain is on the upside of rates for someone too dumb to wait, who jumps the gun and buys at the top. Bigger principal plus rising rates equals potential default!
I happen to be at the top of my income potential with the current employer. It would be oh so stupid to worry about how old I am when I purchase a property and let that guide an investment decision.
tsusiat
http://finance.yahoo.com/columnist/article/richricher/3413
We need to wait and buy in the stage 6 of the boo/bust cycle: when the panic begins.
Amateurs now hate their asset. They start to dump it as prices fall and banks stop lending. The panic accelerates. The boom is now officially a bust. At this time, controls might be installed to slow the fall, as is often the case with the stock market. If the tumble continues, people begin looking for a lender of last resort to save us all. Often, this is the central bank.
The good news is that at this stage, the professional investors wake up from their slumber and get excited again. They're like a hibernating bear waking after a long sleep and finding a row of garbage cans, filled with expensive food and champagne from the party the night before, positioned right outside their den.
Randy H
2006 Apr 5, 2:18am
Mike,
Thanks for your perspective. I argue that your definition of rent-to-price is a bit too narrow to explain how people intrinsically value a property. I think buyer psychology does include rent as a factor; but much more so in a sort of opportunity-cost calculation (although flawed).
Therefore the theoretical, fundamental-determined price prediction for a home will inevitably be lower than the theoretical, factor-determined price prediction for the same home. Put more simply, in your example of house prices being $650K, but the theoretical price prediction being $400K, I would argue that actual support prices will almost certainly much higher than $400K (but probably lower than $650K) because of various significant factors which are not strictly fundamentals. I posited a formula for this here.
Randy H
2006 Apr 10, 3:11pm
John,
I can't speak to your specific situation. The best I can do is point you to a tool me and others created which might help you to evaluate your on situation. The tool is a spreadsheet here on my own blog.
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As the mainstream media continues to acknowledge the housing bubble for the bubble it is, we may be at, near or just past peak prices (for this cycle at least). Mounting macro data indicates the likelihood of a hard-landing for prices. Mortgage rates are almost sure to rise. The possibility of rising inflation coupled with anemic wage growth add to the mix.
But this thread is about what your own thinking is regarding timing a home purchase. "When is the right time to buy?" Whether you use financial techniques, economic theory, macro sentiment, personal values, gut instinct, or a crystal ball, how will you know when the time is right?
It doesn't matter whether you're a renter/first-time-buyer, renter/bubble-sitter, an owner thinking of an upgrade, an owner with vacation/summer/weekend property aspirations, or a landlord running a rental business. Your input will be very insightful. Note, however, that any permabull Realtor(tm) standard responses will be moderated out. We don't need any "It's ALWAYS the right time to buy" pre-packaged millionaire next door poor dad Trump responses.
What I'd like to know is:
* What signal(s) will you personally use to make the buy decision?
* What formula or logic do you follow, no matter how loose or instinctual?
(A few of us are talking about creating a dynamic model for timing the real-estate market. Your comments here may help guide our technical discussion.)
--by Randy H
#housing