patrick.net

If you can buy a house for a monthly carrying cost less than area rents then there is no catch.

You might get a better deal in a year or three, when rates are high(er) and the purchasing power of buyers is constricted, but prices are sticky on the way down and nobody knows what's going to happen this decade.

1990-91 was the peak madness for the Japanese housing bubble. Prices were beaten down from then through 2004-2005.

Similarly, the 1989-90 bubble in the states was a beat-down from 1991 through 1996 or 1998, depending on when the dotcom / employment wave arrived.

Here's a handy table you can cut out and carry in your wallet to compare the Japanese bubble with our own:

1990 2006 <== parabolic blowoff
1991 2007 <== toppening
1992 2008 <== crash-boom
1993 2009
1994 2010
1995 2011 <== crash
1996 2012
1997 2013
1998 2014 <== boom
1999 2015
2000 2016
2001 2017 <== crunch
2002 2018
2003 2019 <== bottoming

Don't worry about the catch, at least not before you see their reponse and documents.

Foreclosure homes are usually not in great condition, but that does not mean there's no good home. The home in my neighbor I always thought was great become a foreclosure yesterday. At least that's what ziprealty email told me. About 400K, it must've been priced over 600K if it were a regular sale. And you know what? That thing is rare beauty, IMO.

In case of short sale and foreclosure, the catch usually is it takes long time to get it closed. Expect 4 to 10 months, and forget about obama credit.

First thing first, ask yourself if this is the right move, and if so, make sure you inspect the home.

Maybe "the catch" is the economy, or like James Carville told Bill Clinton,"It's the economy, xxxxxxx."

Troy says: "You might get a better deal in a year or three, when rates are high(er) and the purchasing power of buyers is constricted, but prices are sticky on the way down and nobody knows what’s going to happen this decade."

Actually, once the bubble formally popped, prices fell like a lead balloon. 30% in two years. Revealing my age: That's Incredible!

Certainly, sellers are going to be stubborn about taking a hit because they can't finance away the pain and it hits them directly in the wallet. It's the difference between a $50K check FROM the bank versus one TO the bank. On the other hand, a buyer sees that kind of difference as a few hundred dollars more per month.

What makes this bubble different than Tokyo is the ability for sellers to walk away and foreclosures to push prices down. Stubborn sellers hold onto properties, rent them out even, and suffer pain but only for a while before they reach an emotional turning point and walk away. In some ways, such "sticky" sellers are the best since they provide two things: Cheap rentals to push down prices on both rentals and sales prices AND they send money to the banks and help offset public losses.

I admit there are some good deals out there now, usually in poorer areas. By good deal, I mean prices that work out to be much cheaper than renting an equivalent place. The catch in buying one of those deals is that the whole economy could continue downward, meaning more job losses, lower rents, and even lower prices. If you can pay outright without a loan, you may not care about the economy though.

SF ace says

From this example, not only is a cheaper to own than to rent,

FWIW, on a 15-year loan I get $1400/mo cost-of-ownership on the Richmond place. Your CL rent comp is an asking not an actual rent, for RIchmond, $1400 seems a bit high.

I agree that prices may have bottomed at these rents and interest rates.

But should interest rates go to 6.5% $1400/mo gets you a $220,000 loan not a $260,000 loan.

And there is the question of rents, too. Are wages going up or down from here?

SF ace, You almost convinced me to buy a rental up there (Richmond Golf Club -- who knew?) Looking at RealtyTrac, though, I'm guessing continued downward pressure on price (and likely rents) with all those NODs. This, in turn, puts pressure on the neighboring cities and so on... 'til you reach the Fortress areas (starting to see for rent signs around here).

wish i was lucky says

In the 70’s we had inflation but we eventually got pay raises. Can you have inflation without pay raises?

It is an interesting question. I want to say no, but we do have a lot of wage inflation in our recent history, 1995 to now.

Inflation, monetary systems, foreign exchange, debt, etc. are all secondary issues. All that matters is j - o - b - s and by jobs I mean wealth creation.

The reason Japan is in the toilet is the go-go 80s are gone leaving employment severely imbalanced against the supply of willing labor. For a nation of 100M+ they also have a rather crippled higher educational system that fails to create valuable R&D output in many areas like medicine.

Half their population has dropped out of the career labor force, living at home as a young adult or as a spouse finding work as a part-time worker in the retail sector.

Their export-centered economy got exported to China, leaving wealth-creation opportunity stunted compared to the expectations of the past.

As for here, we presently have 16M people officially unemployed, most willing to take lower wages to get back into the game.

This is rather astounding given the $3.5T the Federal government spent from Oct 08 through Sep 09. 3.5T / $100,000 per job would be 35 million government-funded jobs, each with a sufficient surplus to support another 35 million secondary jobs.

THAT'S SEVENTY MILLION JOBS! WHERE DID THE MONEY GO???? That's not even counting state & local government jobs!

I don't pretend to have any understanding of what's going on now. The numbers make no sense.

I wouldn't count too much on what you see with asking rents. A lot of people are trying to rent out their places based on their monthly payment + taxes and other expenses...basically trying to pawn off their problem on someone else for awhile.

It may seem with rents that high, it's worth buying. The truth is that nobody is interested in renting or buying the house at those prices though.