Mortgage rates are going up.

[AndrewR]

I'm certainly not an expert in real estate or finance, but I'll weigh in just the same -- it's the internet after all.

Anyway, I think the point about local markets is valid. For instance, we're looking at buying here, northern Maryland, and would like to buy sooner rather than later because the market WILL change starting next year. For those who are unfamiliar, the latest round of BRAC (Base Realignment And Closure) is moving a net gain of about 7,000 civilian federal government positions to Aberdeen Proving Ground, MD, plus numerous other positions (contractors and off-post jobs [restaurants, hotels, etc.]).

I don't think anyone in their right mind would argue that such an influx in people would NOT cause a significant rise in demand with a consummate increase in price in the absence of a significant increase in supply (anyone see a lot of building going on now?). So, in our case in this market, it makes sense to buy before the influx of people, which will take off considerably starting next year (only a couple hundred have arrived so far).

Would I buy if we were still in Dayton, OH? HELL NO. That market is in shambles and recently the area took another hit with the closing of the GM plant in Moraine.

I might be wrong, but I'm entitled to it.

 

[sactoking]

Originally posted by: LegendKiller

Originally posted by: sactoking
My rent payment = $1175/mo.

My potential mortgage payment, including insurance and PMI (if applicable) = $1200/mo.

In MY market, a smart buy is ALWAYS better than renting.

Also, expect the housing market to recover quickly. Supplies are no longer expanding and homebuilders are going bankrupt as municipalities begin calling their bonds. By the time other economic factors push housing into normalcy, the current and upcoming subdivision bond crisis will artificially inflate prices again.

Supplies aren't expanding currently because this is the annual seasonal increase for purchasing. Seasonally adjusted supplies are expanding at historically unprecedented rates (excluding 1929). Foreclosures are skyrocketing.

According to all data I read, which, to say lightly, is voluminous (rating agency reports, surety reports, economic reports from my bank's chief economist who is regularily featured on Bloombergtv and cnbc), securitization industry reports. Not to mention trust-level default and delinquency data put out by various industry players.

Right now, my own bank won't even touch RMBS, nor will we even touch any kind of consumer credit. That is similar to most other banks. There isn't one bank out there (except for a few japanese and euro banks) actively originating securitizations. Conduit facilities are rolling, but not originating to any great extent.

Right now, securitization is largely stagnant. 2008 volumes are far below 2007.

Without funding, mortgages won't get originated and pricing support won't exist.

Trust me, sureties haven't entered the "puckered sphincter" stage yet when it comes to subdivision bonds. When they do, the typical down cycle is about 5 years. Housing will be coming around right at the trough of new housing starts and subdivision availability.

 

[mshan]

"typical down cycle"

LOL


Legend can correct me, but I think that a lot of these investments banks that securitize these mortgages have essentially been bankrupted, and are in the process of recapitalizing.

Some areas of the country have been highly overbuilt, others not. But all across the country people will probably continue to find that it's hard, if not impossible, to get financing at reasonable rates for their home purchases.

Business Pundit's Explanation of the Subprime Crisis in Cartoons

 

[sactoking]

"Typical down cycle" refers to the subject(s) of the previous sentence: sureties and subdivision bonds. "Housing" was not mentioned until the next sentence, thus "typical down cycle" could not be referring to that.

I'm not talking mortgages or banking or housing here, I'm talking CONSTRUCTION. Miller Act + Little Miller Acts- know them, live them, love them


Edited b/c sometimes I need to learn to type

 

[Yreka]

In my Market ( not too far from Sac King ), the rentals are going up up up, and the housing prices have been falling..

We actually just bought a couple months ago, as our rent was raised within a couple hundred of what our house payment ended up being.. I would certainly not want to debate LK on how wise of an investment it was, but it seems like we made the right call for our situation. As dumb as it sounds out loud, we bought it because we wanted a place to live, it being an investment was secondary.

We had an easier decision than most I think. I mean, I am just over 30.. We rented for a good 10-12 years before we could get into something. I completely understand renting has its time and place. This is also why I have very little sympathy for people getting screwed over on these BS loans. I am pretty ignorant when it comes to the financial stuff, yet even I knew those deals were too good to be true. I could have jumped in with the rest of them years ago, but I didnt.. I kept renting.. Anyway, getting off on a tangent here, that's for another thread..

In our situation, consider:

Rents are going up *I presume* because of the people who have been forclosed on. Our landlord had a variable rate loan. This was one of 3 investment houses he had in the area.. He could not refinance it to a fixed ( again I presume based on when he bought) because he was negative on it. Not only did our rent go up quite a bit, we had no idea if/when he was going to get forclosed on.. We were basically at the will of his financial responsibility.

Everyone who came to look at the rental either was just forclosed on, or was renting a place from someone who "walked away" from the property. Even if we moved into another rental, chances looked pretty good the situation would be the same. Who wants to move over and over and over.. Especially hard when considering kids, school districts, etc.

We dont plan on going anywhere for awhile, young kids in school etc.

Our monthly housing payment is fixed.. No need to worry about rent increases etc.. ( well there are still tax increases, but what are ya gonna do ? )

We both like to tinker in the yard, have a garden, and generally set things up our way. For instance, we just did up our 5 yr olds room in a spongebob theme as a surprise, complete with paint, decals etc. We could never do that in a rental.

Oh yeah, I now have a 3 car garage too

There are other small reasons I wont go into, but these were things that were significant to us yet very hard to quantify when looking at it solely from an investment perspective.

Things are a bit tighter, I mean it would be somewhat cheaper to rent even now, but for us the benefits outweigh the added cost.

 

[sactoking]

To add to what Yreka said:

Out west, rents have been (anecdotally) rising considerably. People who got into 3/1 ARMs or 5/1 ARMs lost their homes. Banks are now sitting on more than 1,000,000 REOs and short-sale properties, the vast majority of which are in CA and NV. They can't sell those homes to ANYONE. The people who USED to own them now can only afford to rent. They're downgrading from $5000+ mortgage payments to $1500 rent payments. That's drying up the rental market, and competition is pushing rental rates ever higher.

Many of the places hardest hit by the housing market (Stockton, Sacramento, Las Vegas, Henderson, Modesto, Manteca, etc.) have no rent control, unlike Manhattan.

 

[alkemyst]

one of the biggest problems we are facing is people not worried about letting a property go and scheming to bite off more than they chew 'knowing' someone will bail them out.

The latest wave making headlines (for those that get MBA Today, this was in today's news) is the buy and bail people. They are in a bad place with their current home and instead of trying to make it work...get a bank to finance a second home/vacation home for them. Once this is done they stop payment on the first and let it sink.

People have gotten the entitlement thing down pat now and it's only going to screw them and us all.