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Would you buy into the housing market now?

T

TheNinja

Lifer
Prices have come down about 15-20% in the past 1.5 years. However it still appears to be a huge bubble to me. Interest rates are extremely low yet the market continues to stumble. what happens when all these interest only people have to foreclose and/or interest rates go up? is it going to kill the market even more?

Buy a Townhome for $450,000
or
Rent a small house for $1700 per month?

10 year graph of US, California, plus my County
 
The same reason people play stocks on downward trends.... speculation of a better future, on a longer time line. Get it now at higher price/lower interest before the rates rise.
 
Originally posted by: jdoggg12
The same reason people play stocks on downward trends.... speculation of a better future, on a longer time line. Get it now at higher price/lower interest before the rates rise.
Click to expand...

What if I plan to sell/move in 3-5 years? Still a good bet?
 
Its a risk... my mom has been a broker for 30 years in Solono County, she seems to think its going to slump for a few years to adjust for the crazy growth.
 
Originally posted by: TheNinja
Originally posted by: jdoggg12
The same reason people play stocks on downward trends.... speculation of a better future, on a longer time line. Get it now at higher price/lower interest before the rates rise.
Click to expand...

What if I plan to sell/move in 3-5 years? Still a good bet?
Click to expand...

NO.

If you plan to live there long term, then the price of the house really doesnt matter.

 
Originally posted by: jdoggg12
Its a risk... my mom has been a broker for 30 years in Solono County, she seems to think its going to slump for a few years to adjust for the crazy growth.
Click to expand...

I would have to agree, which is why I'm weary to buy now. I mean there is absolutely no way the market can shoot up in the next 5 years, so the upside definitely looks limited to me. They always say it's better to own than to rent, but I'm not sure it's always the case.
 
I'd rent for a few more years and save your money. The sub-prime mortgage crap is still settling out not to mention all the people that "bought up" or took out second mortgages based on false value, which hasn't even hit yet.
 
Originally posted by: quikah
Real estate in the bay area is really screwy. The most bizarre thing to me is the relative modest increases during the .com boom days compared to the past couple of years. Bay area employment decreased 7% from 2000-2006. http://www.sfgate.com/cgi-bin/object/ar...f=/c/a/2006/12/15/BAGGOMVPLQ45.DTL&o=0 so who is buying all these houses?
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A lot of speculators and contractors were buying them up and selling them. Now that they are out of the market for the most part, things have cooled down.

I can either rent for around $1700

or put $45,000 down and make interest only payments around $2800 (includes HOA) on a nice townhouse. I guess it's realistically $2200 with the tax savings but that is still interest only on your loan.
 
Rent... no use paying interest only b/c you'll have nothing to show for it. Rent, sock the difference in high yield savings (5%+) or in investments. You'll have a better DP for later.
 
Put or keep the down payment in stock index mutual funds, and have the self-disclipline to put at least the difference between rent-vs-mortage into more fund shares. Do this in addition to maxing out your 401k and Roth IRA.
 
If you're only going to be there 3-5 years, you probably should not buy. What with it looking like prices won't go up very soon and the transaction costs involved when you sell, it's likely buying would be a chunk more expensive. I haven't run the numbers, but I'd be shocked if it made sense for you to buy given your scenario.

 
Originally posted by: jdoggg12
Rent... no use paying interest only b/c you'll have nothing to show for it. Rent, sock the difference in high yield savings (5%+) or in investments. You'll have a better DP for later.
Click to expand...

That's what I'm thinking right now. I mean I have about $50k avail to put down. but the $500 difference (even after tax savings) between rent and interest only every month seems nice to put away.

Let's say the market can sustain a 3% increase over the next 5 years. I buy for $450k, i n 5 years it's worth $521k. Selling it costs around 31k so I'm at +40k. However I wil have paid roughly $28k more in monthly payments. I guess I still could come out roughly $10k ahead. All depends on the market though.
 
Buy at $450K with $50K down, and sell for $521K:

Remember that the $50K in index mutual funds or ETFs would grow too, as would your monthly contributions. Just the $50K in an S&P 500 fund for 5 years would grow + $23K assuming 8% growth (historical range is 10-12% but that's ignoring taxes).
 
it's only a bubble if prices outstrip demand. overall demand is high. it will get higher. i would never let a momentary market correction deter me from a purchase like that. it's a long-term investment. $10,000 plus or minus will mean little when the house is worth $50 million in 2040.

but if you're moving in less than 5 years, i wouldn't buy a house period. you'll spend more on closing costs, realtor costs, and those "surprise" repairs than you'll save.
 
Originally posted by: mugs
Originally posted by: TheNinja
Originally posted by: TuxDave
Hey, where did you get that chart from? I want to check out a couple other places too.
Click to expand...

http://www.zillow.com/
Click to expand...

How do you get to that graph?
Click to expand...

type in an address that you are trying to find the value for
it will bring up a map with that home and the surrounding homes
click on the link to that home
from there you should be able to click on different checkboxes/timelines.

let me know if that doesn't make sense or doesn't work
 
Originally posted by: DaveSimmons
Buy at $450K with $50K down, and sell for $521K:

Remember that the $50K in index mutual funds or ETFs would grow too, as would your monthly contributions. Just the $50K in an S&P 500 fund for 5 years would grow + $23K assuming 8% growth (historical range is 10-12% but that's ignoring taxes).
Click to expand...


I should state that I have around $80k but only want to use about $45k to put down.
 
Dont forget to include property taxes and maintanence as well if you're buying. I wouldnt touch CA RE for another 2 years or so, but hey, it's your money.

As for buying a townhome, keep in mind that that is a low end real estate deal, the exact type of RE that is getting hammered by the sub prime fallout.

 
I don't think you'll come out ahead by much at all if you purchase something now for 3-5 years and paying interest only. Save enough for a 20% down payment so you don't waste money on PMI, and don't settle for interest only, and get a fixed rate loan. imo you buy a house to fix your cost of living, and getting a variable interest rate loan is counter to that reasoning.
 
Originally posted by: Slew Foot
Dont forget to include property taxes and maintanence as well if you're buying. I wouldnt touch CA RE for another 2 years or so, but hey, it's your money.

As for buying a townhome, keep in mind that that is a low end real estate deal, the exact type of RE that is getting hammered by the sub prime fallout.
Click to expand...

Ya, the numbers I was stating were for a 40yr Fixed / 10 year interest only. It includes all fees like interest, property taxes, and HOAs for $2850.
 
Originally posted by: everman
I don't think you'll come out ahead by much at all if you purchase something now for 3-5 years and paying interest only. Save enough for a 20% down payment so you don't waste money on PMI, and don't settle for interest only, and get a fixed rate loan. imo you buy a house to fix your cost of living, and getting a variable interest rate loan is counter to that reasoning.
Click to expand...

Actually through a special California heal for 1st time homebuyers you can get a 40yr/10yr interest only at about 6% right now. You don't need 20% down and you don't have to pay PMI. So it's a good deal.
 
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