T Nation

Should You Buy a House Now?


The pre-bubble percentage of home ownership was around 64.2%. As the chart shows, the current percentage is still above this number substantially. Until the bubble has deflated completely, prices must fall as the percentages drops. Note also that bubbles popping tend to drive prices/percentages substantially below pre-bubble levels. Look for a drop into the high 50s percentage wise, and prices to fall another 20 to 30%.

I’m glad we bought our house in '04

[quote]admbaum wrote:
I’m glad we bought our house in '04[/quote]

in 04 prices were just about to go wild. You were screwed if you bought in 05-07.

I bought my 3rd house in 09 (I don’t have 3, I have owned 3 total).

In 2005 it sold for 545k. I bought that exact same house for 299k in 09. The previous owners took a major bath on that one.

Treating the housing market as an aggregate is insane. Sure a lot of the really overbought markets(AZ, Nevada, FL, and California) are still in for a lot of pain but plenty of places that weren’t overbought haven’t seen that much of a fall and have pretty much stabilized.

[quote]JoeGood wrote:
Treating the housing market as an aggregate is insane. Sure a lot of the really overbought markets(AZ, Nevada, FL, and California) are still in for a lot of pain but plenty of places that weren’t overbought haven’t seen that much of a fall and have pretty much stabilized. [/quote]

Correct. The answer to this question is “it depends on where you are.” I think CA, NYC, and various high-end places are a disaster.

Houston, Dallas, etc. It’s time to buy.

Cash or fixed rate mortgage, no more than 1/4 your take home pay, 20% down.

Chances are good the FDIC is going to make banks put all the property they are withholding from the market, onto the market during the 4th quarter of this year. In addition to that the banks are also required to take the REO’s that have been on the market for a year, reappraise them and then re-list them for 20% under the newly appraised value. The combination of both things happening simultaneously should cause the costs of houses in most states to drop dramatically.

Mine appraised for $484k in late 2007 and $400k in late 2009! That’s close to a 25% drop in value. So there are deals to be had. If you’re sitting on some cash, now is the time to buy. Put down 30% and you can have a decent mortgage for yourself.

BG

[quote]beachguy498 wrote:
Mine appraised for $484k in late 2007 and $400k in late 2009! That’s close to a 25% drop in value. So there are deals to be had. If you’re sitting on some cash, now is the time to buy. Put down 30% and you can have a decent mortgage for yourself.

BG[/quote]

Look carefully at the chart.

We just bought a house, not really because it seems like good time to buy, but because other life circumstances kinda pushed us into it. Regardless, it seems we got a lot for the price. But whats even better is we bought a 70s house with all electric heat (a disaster) and there are all kinds of incentives to upgrade your homes HVAC to low-energy systems.

We are yanking the elec. heat and having a geothermal heating/cooling put in and 55% is paid by a combination of federal tax credit/state rebate. The pay back for my out-of-pocket is less than three years. Then the utility costs for heating/cooling is supposed average under $200/month (in New Jersey) for a 3,500 sf house. YEAH BABY!

OK, I feel like a major geek now. But seriously, get some of that Stimulus dough if you can.

stabilization has come due to the fed monetizing debt and buying trillinons in mbs to keep rates down and homebuyer incentives.

basically “stabilization” is on the back of the taxpayer and the currency.

If tax rates dont go to 100 and the dollar doesnt eat shit, home prices have a ways to go on the downside.

However, the dollar eating shit is the name of the game. Japan —> Weimar Germany.

[quote]beachguy498 wrote:
Mine appraised for $484k in late 2007 and $400k in late 2009! That’s close to a 25% drop in value. So there are deals to be had. If you’re sitting on some cash, now is the time to buy. Put down 30% and you can have a decent mortgage for yourself.

BG[/quote]

25% coupon is not enough sorry, I suggest people wait until they get a 40-60% coupon.

I am waiting for prices to fall again after the government stimulus program.

If they never would have passed that ridiculous tax credit, we would be at bottom by now.

The gov’t kept lowering the requirements to get in until anyone could. Only when a substantial downpayment is required will the bubble be gone. 20% should be the gold standard downpayment.

Mathematically, if a normal times return, the drop should be 20 or 30 percent more. If things get really bad, such as in Greece, a $400,000 house will go for 40,000…if a buyer could even be found.

[quote]Headhunter wrote:
The gov’t kept lowering the requirements to get in until anyone could. Only when a substantial downpayment is required will the bubble be gone. 20% should be the gold standard downpayment.

Mathematically, if a normal times return, the drop should be 20 or 30 percent more. If things get really bad, such as in Greece, a $400,000 house will go for 40,000…if a buyer could even be found. [/quote]

20% down a requirement? Pff, good luck for any 1st time homebuyer then.

Around here a typical starter home would be $200k, that would require $40k for a person just starting out in life.

[quote]beachguy498 wrote:
Mine appraised for $484k in late 2007 and $400k in late 2009! That’s close to a 25% drop in value. So there are deals to be had. If you’re sitting on some cash, now is the time to buy. Put down 30% and you can have a decent mortgage for yourself.

BG[/quote]

That doesn’t necessarily mean 400k is a deal. That $484k could have been $150k overpriced.

[quote]formerfatboy wrote:
I am waiting for prices to fall again after the government stimulus program.

If they never would have passed that ridiculous tax credit, we would be at bottom by now. [/quote]

True, I believe housing prices will fall again. That being said, I don’t know how far they will fall but interest rates will NEVER be lower than they are right now. So if house prices fall by another 10% it’s probably worth paying the premium to get 5% interest.

[quote]Headhunter wrote:
The gov’t kept lowering the requirements to get in until anyone could. Only when a substantial downpayment is required will the bubble be gone. 20% should be the gold standard downpayment.

Mathematically, if a normal times return, the drop should be 20 or 30 percent more. If things get really bad, such as in Greece, a $400,000 house will go for 40,000…if a buyer could even be found. [/quote]

I wouldn’t worry about that, the guberment will never let that happen. :wink:

This ALL has to do with location. Buying a home in Cali vs buying a home in Mississippi are very different. Even from city to city. Here in Cali buying a house in Los Angeles is very different then buying it in the Inland Empire. Do not wait for the bottom to hit, because there will never be a point when people declare “okay we’re here this is the bottom”. Buy a house when the area seems to have stabilized and shows sign of a recovery soon, different areas will bottom out at different times.

Buying a house is so competative these days as well, it took me 7 months and over 22 offers on different properties before I got my house, a buddy of mine has been looking and putting in offers for a year and a half. It’s very competative so plan for this when deciding when to start looking

[quote]Headhunter wrote:
The gov’t kept lowering the requirements to get in until anyone could. Only when a substantial downpayment is required will the bubble be gone. 20% should be the gold standard downpayment.

Mathematically, if a normal times return, the drop should be 20 or 30 percent more. If things get really bad, such as in Greece, a $400,000 house will go for 40,000…if a buyer could even be found. [/quote]

I’ve written a whole long fucking wall of script about this in PWI a few months ago. The Gov’t did NOT “lower the reqirements to get in”. People just got mortgages that were funded by private investors, and not backed by Fannie, Freddie, or Ginnie Mae.

These were called “Portfolio lenders” and had nothing to do with the government at all. They sold the loans on the secondary market to various hedge funds (remember Bear Stearns?)

The requirements to get an FHA loan have gotten WAY stricter. And you don’t need 20% down! The only thing that does is protect the bank in the event of a foreclosure. Why would you not leverage the most possible money via your mortgage and then invest the rest?

If I had 50,000 (and I do) I most certainly would not use it as a down payment when I could put down 3.5% on an FHA mortgage and invest the money in a better financial instrument than something as volatile at real estate. That’s just insanity!

Look at it this way: if you put 5% down or 20% down, you are still going to use the same criteria to qualify for a monthly payment. As long as you are buying a home you can afford it doesn’t matter. If your home declines in value, so what? pay your mortgage and it will eventually gain value again. “but what if I have to sell? If I don’t put as much down, I’ll have to bring money to the table”. Then bring the money to the table AT THAT TIME! You’ve still lost it anyway weather you put it down at first or if you bring it to the table later. At least you’ve been able to use the money to earn interest on in the meantime if you put it to work for you instead of trapping it in your house.

To reiterate, the only ones who benefit from a 20% down payment is the BANK. Putting more than the minimum down is just silly, IMHO. That’s what mortgage insurance is for. Or just buy the whole thing with cash. Either way, the market is unpredictable. No one has a crystal ball. Buy your home with the best terms available to you at the time. I remember times where people were happy as shit with a 10% interest rate! It’s all relative.

AC, you can’t get an FHA if you have that much cash, can you?

Seems like a good time to buy to me though. I did last month.

^ I had a lot saved up for my home purchase and I was originally going with an FHA loan, so yes you can. I actually ended up going with a VA loan instead and put nothing down. I originally planned on still putting 5% down even though I didn’t have to put any money down on a VA loan, but my loan broker talked me out of it, basically saying something similar to what AC said. Putting that much money down is good for lowering your monthly mortgage payments, but if you can afford your mortgage without putting that much down there’s better ways of making that money work for you. The money I’ve been saving is now going towards home improvements, paying off my car, and paying off my credit card debt, and paying for school.