Maybe now isn't such a good time to buy a house afterall?

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This thread prompted by an email from my Pap (in Canada) about our liklihood of buying a house in the US soon.

Houseprices

Read that. Also my father emailed me (that actually) and also said

Bear in mind that if this is a price bubble, and it bursts, you could end up owing the mortgage company/bank more money than your house is worth. This has happened up here, in Calgary. It happened bigtime in the UK. If it does happen it is a real bummer because you cannot even sell the house - since you won't get enough from the sale to pay back the mortgage.

On the other hand, if the bubble bursts, you could pick up the same type of house for much less. Of course, if it doesn't burst, prices will tend to keep going up. The article suggests that the Fed may be about to lower interest rates again and that this will sustain the bubble.

Ultimately, however, interest rates will go up - they are ludicrously low now - and then the bubble will burst because some people will be mortgaged to the hilt at low rates and will not be able to afford higher rates. This will tend to make more houses go on the market than there are buyers and - whoops! - down goes the price. Once the fall begins it will be like the stock market because anyone who can will try to get out of the market early, which will accelerate the decline. Of course, it is not as bad as the stock market because an overpriced house is still worth something. You can live in it and the price will one day go back up again, albeit not necessarily to where it was when you bought it. The last time house prices flopped in Calgary it was by about thirty percent, if memory serves. That is a lot of money.

 

[LordThing]

We will see. We just got this house last fall. Got a fixed rate on it too. We have no plans on selling or moving within the next 5 years. So, here is to a sellers market in 2008

 

[StageLeft]

Yeah I guess it's fine if you're not gonna sell for a while and we don't plan to but one never knows...

 

[bentwookie]

there's definately a bubble in the US.

 

[dirtboy]

I agree with what your dad's saying. I've been saying the same thing for a year now. I'm going to build a new house here shortly, but the other side is, I plan on being in it for 5-10 years and it is being built below (what I feel) is the market value for the area.

There's alot of variables to consider. If you plan on moving soon, then now is not the time to buy. If you aren't planning on moving, then it probably is a good time to buy.

edit

Yes, you will likely be able to buy the same house for less, but with higher interest rates, the payment will either be equal or higher than it is now. The thing is, interest rates in the US will probably gradually go up, but I doubt you're going to see 8-15% rates anytime soon.

 

[StageLeft]

Originally posted by: bentwookie
there's definately a bubble in the US.

So do you think it's a bad time for a new homeowner to buy a house? It's obviously a great time to refinance for an existing one but they have seperate issues.

 

[T2T III]

The price bubble will not burst. Prices went up 20% in my area next year. However, the future years should only yield gains in the 4% range. If anyone is holding off on buying because of fear that the bubble will burst, then expect higher prices when you do decide to buy.

When I moved into my place 11 years ago, the prices remained *flat* for the first 6 years. However, the last 5 have been increasing and I now have well over 100% equity in my house. Sure, the flat prices didn't make me too happy at first because I had felt like the place should be increasing in value. However, if I take into consideration the gains that I've made on the place, I've essentially lived here free for the past 11 years - and that's even before taking the tax benefits into consideration.

 

[T2T III]

Originally posted by: bentwookie
there's definately a bubble in the US.

Do you have a link to any facts regarding this? What's I've been reading in the printed news is that the price bubble will not burst.

 

[T2T III]

The chances are not even one in 20 that the bubble will burst: Real Estate Bubble??

Here's an aticle on the U.K. prices: Might be issues in the U.K., but not the U.S.

More Statements: No Likely R.E. Bubble

 

[StageLeft]

Thanks titles2tech I'm gonna read those links later tonight - did you read the one in my first post? I hope there won't be a burst because we definitely do want a house now.

 

[Vic]

The key line in that article is: "It was the Bank of Canada's huge rate increases that caused the downturn as much as the overvaluation in the market itself."
The Fed has already stated that they will do whatever possible and necessary until the economy recovers to keep mortgage rates at relatively low levels, including buying long bonds and possibly even (as a drastic measure) capping the yields on the long bonds.

 

[T2T III]

Originally posted by: Skoorb
Thanks titles2tech I'm gonna read those links later tonight - did you read the one in my first post? I hope there won't be a burst because we definitely do want a house now.

Yes, I read through the article that you posted. As Vic indicated, it looks like an increase in the rates in Canada fueled the bubble burst. The article that you linked does talk quite a bit about home equity loans, too. I haven't touched any of the equity in my home. Nothing is worth putting your house down as collateral unless it's a major improvement for your house iteself.

 

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Originally posted by: Tiles2Tech

Originally posted by: Skoorb
Thanks titles2tech I'm gonna read those links later tonight - did you read the one in my first post? I hope there won't be a burst because we definitely do want a house now.

Yes, I read through the article that you posted. As Vic indicated, it looks like an increase in the rates in Canada fueled the bubble burst. The article that you linked does talk quite a bit about home equity loans, too. I haven't touched any of the equity in my home. Nothing is worth putting your house down as collateral unless it's a major improvement for your house iteself.

Yeah I think a lot of people have refinanced their homes though to pay off consumer debt that they shouldn't have...and now will probably just build up more of it!

 

[Pliablemoose]

The economists are hoping that the real-estate bubble is made of strong stuff.

Rationale is that the real estate market is regional, and that there are dynamic corrections going on all the time, & that's the best argument I've heard.

Also, it pays to look carefully @ where & what you buy. My house would cost more than I paid for it if I were to build a duplicate today, so many homes are somewhat bulletproof financially, where the real costs come in is evaluating all the interest yo pay on a long term note...

Just don't overextend on a purchase, and don't expect to get rich from your home, it's just someplace to keep your crap till the next time you move

Will someone please god come mow my lawn, I spent all day trollhunting an eBay troll (& kicked his ass)....