patrick.net

I'm waiting to buy, but I'm terrified of buying premature. Obviously, if the shoe fits, wear it. However, prices are continuing to drop and that damn shadow inventory keeps growing and they're not releasing it yet.

I'm thinking that, until they release some of the shadow inventory that now looks the way that last crate did in Raiders of the Lost Arc when the Arc of the Covenant was stored in that huge infinitely large warehouse.

Supply and demand should dictate everything, that is if they don't tear them all down first. If they do that, then I'll be hard pressed to just buy a piece of depreciated land to build on instead. Better to get what you want as opposed to getting someone else's nightmare, especially on a 30 year note.

solver says

I'm waiting to buy, but I'm terrified of buying premature.

would you rather buy early or buy late?

i'd rather buy after i'm fairly certain prices have bottomed.
1) more time to save
2) no further decline
3) probably flat prices, very unlikely to see prices soar
4) economy will be better
5) if prices do rise, that probably means income also increased. so you won't "be priced out forever"

we'll probably be fairly certain of the bottom 3-5 years after it happens.

The standard argument is to buy early because available inventory will be greatest. The standard argues that there will only be garbage homes available once the market starts turning around because sellers will see a rising market and will hold out for greater gains.

That standard argument does not apply this time around due to all the foreclosures, and the manner in which the banks have largely been releasing the trash first.

I wouldn't wait once prices hit a range thats affordable to you. By that I do not mean for you to drink Realtor Kool Aid and just jump in and buy when payments will be 40% of your take home. But if things are truly affordable to you, in the neighborhood you want to live in, and its the home you actually want, you really shouldn't care too much if we've actually hit bottom.

But I can almost guarantee at this point that you would be compromising on quality of home OR neighborhood OR have a payment you're uncomfortable with...at least in the Bay area, LA, OC, etc. And in that case, you ought not buy at the moment.

I kind of hope so. Which is mean, I'm sure, or offensive to someone. So, sorry. But I still kind of hope so.

I've just bought - a short sale at 56% of the 2006 sale price. A well built home on a golf course with a tremendous view, 1.2 acres and 2800 sq ft. I'm retired; at a certain point, there's too little time left to just keep waiting for things to improve.

Now have to sell my upscale condo, where I may take a 15-20% loss but my overall cash flow won't change that much. I've lived below my means for my entire career and now have enough savings to weather the "current" crisis.

RCharles

In my opinion, if one needs to ask if it's a good time to buy property they likely already know in their gut it is NOT.

Questions are often pleas for confirmation of what one already knows.

KILLERJANE says

When prices are 25% of previously sold and rent return equals 18% or better let's buy dammit.

In my view, not for me. No way when prices artificially rose 100% in some areas. I am not touching the stuff.

Then go hide under a rock and rent from someone who did.

KILLERJANE says

Oops sorry i get grumpy without my coffee.

No worries.

But about hiding under a rock? Why would I? I don't have real estate headaches. I'm not one of those who owe over 700K on a house that isn't going to bring 250. I am a happy camper with ZERO mortgage debt.

SP500 falling knief hurts housing markets? I hope it does.

One year ago I said here that I was waiting for house prices to drop another 25%, now I only have to wait for the remaining 10%. Yes!

Hey guys,

Peter Schiff is still saying we'll have a great depression.. But then hyperinflation soon after... So we are all screwed... Your money in the bank will be worthless in the end. The only way to make out will be two options.. Live in a home you can afford now and RIDE OUT this downturn until hyperinflation kicks in and owning property is far better than owning worthless dollars.

Or time things perfectly as to buy tons of property at the absolute bottom.. (which will probably prove alot harder than many on here think). All kinds of crazy laws and restrictions will be passed... A great depression would be a chaotic situation... THen hyperfi

Los Angeles Renter says

hyperinflation kicks in and owning property is far better than owning worthless dollars.

Have thought of changing your name to "Los Angeles Owner"?

Does anyone really know what the hell happens to property owners in a scenario of hyperinflation? It isn't pretty.

From the article:

For the S&P 500, a measure called the forward price-to-earnings ratio has fallen to about 12, well below its long-term average of 16. That means that investors who buy now are paying less for each dollar in profits.

Wrong. A low Price-to-Earnings ratio means investors pay less for each dollar in profits, by definition. A "forward" PE ratio is the PE ratio using bullshit numbers instead of the real ones you can look up.

There is no law in nature stating that what you expect things to cost in the future will be accurate. In fact, what you expect isn't necessary what other people expect.

bubblesitter says

E-man says

BUY, BUY, BUY!!!

That's was I was told in 2006. LOL.

thats what a lot of people did in 2006.

FYI, the real PE ratio for the S&P500 as of last year was 20.70 according to multpl.com.

From that site:
Current S&P 500 PE Ratio: 20.70 -0.01 (-0.06%)
Mean: 16.42
Median: 15.80
Min: 4.78 (Dec 1920)
Max: 44.20 (Dec 1999)

From Gold Eagle "The historic rule of thumb is that the S&P500 is correctly valued with a price/earnings or PE ratio of 14."

commonsense says

Does anyone really know what the hell happens to property owners in a scenario of hyperinflation? It isn't pretty.

What are you saying happens?

Property owners will be hit with a windfall tax in hyperinflation scenario.

It can't help.

NJ says

commonsense says

Does anyone really know what the hell happens to property owners in a scenario of hyperinflation? It isn't pretty.

What are you saying happens?

Hyperinflation.. ? I dont see anyone getting raises anytime soon or unions going on strike demanding higher wages.

Shadow inventory will remain in the millions until the holders fail (IF the taxpayers stop their bailouts). ONLY because values are too high. DUH ? (now that so many of those highpaid techies are gone, the rest of us are left to reset real property values) America's bad credit report added with inflation and quantative easing should cause interest rates to rise. The monthly payment on a $400k mortgage at 5% is $2150. the same amount at 9% is $3200 pr mo. Housing values will continue to retreat until they find their PHENOMENAL balance of 2.5 times the buyers annual income.

thomas.wong1986 says

Hyperinflation.. ? I dont see anyone getting raises anytime soon or unions going on strike demanding higher wages.

If the government manipulates the market and pushes interest rates lower somehow... Even with the credit rating downgrade. What will happen? The US govt is bashing Moodys and credit rating agencies now... They are basically attempting to discredit credit rating agencies in general.... If home prices drop much further... I would guess 50% of home buyers in the last 10 years would squat and default... People with 800+ credit scores would realize having good credit isnt worth losing all their wealth... Credit scoring systems will continue to be discredited and maybe regulated by the us govt... Another 30% drop... 70% from thr peak would lead to 80% of the population having undesirable credit scores... Lets me realistic... The majority of renters have crappy credit... Only a select few renters on here maintain a high credit score. A depression will just make things worse... If home prices drop to 2.5x incomes what is to stop all FHA buyers in the last 10 years from squatting... Saving enough cash to practically buy a new house with cash! Maybe a smaller 1-2 bedroom condo... But still i know a lot of homeowners with 500k houses who if it dropped to 250k... Which is 2.5x incomes..could squat and save up enough to buy a nearby smaller condo with cash in a matter of a few years.

As the products of US treasury are downgraded, the Federal Reserve will have no choice but to increase the interest rates. This will plunge the already battered house market into oblivion, shrink the buyers pool who depend on bank loans to afford a house and finally provide a good opportunity for the "real" buyers who have cash in hand.
However, I am truly afraid of a complete bankrupcy for our country because we were not responsible with our spending for so long.

More pain due to today's market collapse. How is this going to help housing market. Any bulls?

E-man says

It's time to refinance to lower my mortgage payments and put more money in my pocket.

I see, so you get a break on the payment but the very same break is wiped out very next year due to decline in value. Good math. Keep it up. :)

Buy.........i did as an investment. Look back at history. What goes up must come down but also vice versa.....I have purchased a REO property in florida right on the beach. I intend to rent until things improve.....trust me...in 10 years you will be kicking yourselves for not jumping in. Don't wait for rock bottom because once that happens there will be heavy competition with those investors who decide they better get a piece.

faith says

I have purchased a REO property in florida right on the beach. I intend to rent until things improve.....trust me...in 10 years you will be kicking yourselves for not jumping in.

I am in the best part of South Florida, and in all honesty in ten years I don't want to touch down here again, either body or investment.

Why?

Los Angeles Renter says

Peter Schiff is still saying we'll have a great depression.. But then hyperinflation soon after... So we are all screwed... Your money in the bank will be worthless in the end.

I feel like I have read some interesting stuff from LA renter before, but not I am afraid I must click 'Ignore'.

My Mother in lawn owned southern coastal real estate and sold it. Why? The insurance on the thing was ridiculous. You couldn't pay me to own land anywhere near the Southern coast.

My insurance is only $450/yr and that includes flood.....that's less than internet per month.....do you consider that expensive?

commonsense says

Does anyone really know what the hell happens to property owners in a scenario of hyperinflation? It isn't pretty.

What isn't pretty? I've been an owner during multiple periods of inflation. With a fixed rate mortgage, my housing payments stayed stable, while income went up. Rents go up during times of inflation. Obviously other expenses go up as well. But those costs go up whether someone rents or owns. Inflationary periods are the most advantageous time to be an owner.
Or is there something I'm not understanding about this comment?

Exactly....that's what I intend to do on florida. Rent and wait. I'm almost fully booked for winter/spring of 2012.....thank you!!

faith says

My insurance is only $450/yr and that includes flood.....that's less than internet per month.....do you consider that expensive?

Her's was $4,500 a year. But that aside, I helped her maintain the house for 3-4 years. The salt air accelerated corrosion of everything 5-fold. Light fixtures, air conditioners, paint, wooden decking, nails, hardware, and even interior metal components just rusted away. It was an absolute nightmare of a house to keep care of. After you've been there enough times the allure of being on the ocean gets old too: There was NOTHING to do there except sit around and watch old farts from NY and MA bumble around.

Anyway, she sold the thing at the peak of the market after having owned it for 30 years. She bought it back when getting to the area was difficult thus the land was cheap. She did quite well for herself. But after that experience there's no way I would buy a house on the Southern coast.

E-man says

Don't be a loser and buy now.

Thanks for the tip.

E-man says

All I know is someone like you will be paying off my mortgages.

But I am free and not a debt slave. I don't have few middle guys IRS,renters to make my finances. Good luck on your endeavours. By the way this a bear site, you must be hanging around here for your post purchase rationalization. :)

E-man says

Don't be a loser and buy now.

Just how you think you are a smart investor guided by your instincts,so do I. I'll know when to buy. After all it matters who wins the race at the finish line.

Your friend got ripped off with insurance. What? How could the ocean get old? Yes, things do corrode a bit over time. But so what if you have to replace the odd faucet or doorknob? Everything is so damn cheap down there to buy....And those old farts are the ones who pay my rent...lol

I came of age in Southern California around the time Prop 13 was passed. That was not a period hyperinflation and we have yet to see hyperinflation in this country, on the levels of other parts of the world (at least not yet.)

bubblesitter says

I'll know when to buy. After all it matters who wins the race at the finish line.

I am with you there. I too know when to buy something, and what to pay.

faith says

What? How could the ocean get old? Yes, things do corrode a bit over time. But so what if you have to replace the odd faucet or doorknob? Everything is so damn cheap down there to buy....And those old farts are the ones who pay my rent...lol

Trust me. It does. I live next to the ocean now and after a few years it sort of like ho-hum, and that's out there in California where its not a bazillion degrees, humid, and always under threat of hurricanes.

We had to replace ALL of the outdoor electrical fixtures every 2 years. They basically turned into a rusted crust. We tried aluminum. No luck either. Wood dry rots and disintegrates.

The local economy was totally driven by tourism. The entire population was transient- they were usually only there on vacation. That was a tad depressing.

Anyway, to each their own I suppose. Do whatever makes ya' happy.