[turtle]

Originally Posted by NosferaDrew I'd say to wait. Pay off your student loans completely before getting into a mortgage. I think we're headed for a recession. Housing prices are incredibly inflated (especially here in California), tons of ARMs resetting, forclosures way up, mortgage lenders going out of business, etc. I make over 100K and I'm having a hard time justifying the price/sq.ft. that I'm seeing out here. A majority of L.A. County residents are priced out of the market and the people who want to sell are finding it difficult to do so not to mention trying to upgrade. It's been 10 years of housing prices going straight up. That is unsustainable. And now, something has got to give.

This is one of my only concerns in my wife and I getting our home now. We noticed for the first time that Orlando area has the same home prices as we do here in Tidewater. I'm ready to own a home, just now wondering how much depreciation is going to happen. A lot of the lenders in this area aren't excepting home appraisals unless they come from one of their "accepted" list. In many cases they are refusing loans because they feel the houses are overvalued. Just about all the closing costs are getting covered by the seller now though. Major indication it's a buyers market and getting better for the buyer. To think, about three years ago my wife and I put a bid on a house and bid $10k over asking and we still were outbid!

[Banana]

Someone once said that ARM makes sense if you don't intend to live in a house for more than the fixed period (e.g. get 7 year ARM if you think you'll be around up to seven years), and lets you get a decent house for cheaper and even if you end up deciding to stay longer, you can then refinance.

Any truth to this?

[zippy]

Well one problem with that is that who knows how much your plans may change in that period - either by choice, or not.

[Ryan]

Originally Posted by NosferaDrew I make over 100K and I'm having a hard time justifying the price/sq.ft. that I'm seeing out here. A majority of L.A. County residents are priced out of the market and the people who want to sell are finding it difficult to do so not to mention trying to upgrade. It's been 10 years of housing prices going straight up. That is unsustainable. And now, something has got to give.

Definitely. Our old house in the San Francisco Bay Area was listed a little over a year ago at $749,000.

Today, it still sits on the market at $640,000, and it's been unlisted and relisted twice, IIRC.

[Windswept]

Originally Posted by zippy I think the "buy a little more than you can afford" has to do with the idea that a fixed rate mortgage will generally not change (taxes, etc can change it some), but your income will most likely go up - especially if you are just entering the workforce. Both when we bought our condo, and then when we bought our house, I'd say we were a little uncomfortable with the payment right out of the gate, but within a year, it was no biggie, and after a couple of years, a piece of cake. I think people who take this mentality are trying to avoid getting two years down the road and wishing they had purchased that one house that was just a little more expensive, but so much more of what they wanted....

I probably would also recommend buying a bit more than you can comfortably afford, BUT this decision *totally* depends on the buyer and his job security.

If he works in an industry in which his job is secure, and the likelihood of regular salary increases is pretty certain, then yes, getting a more desirable house can be worth considering.

As mentioned above, payments the first few years might eliminate the possibility of expensive vacations and weekly dinners in fancy restaurants; but down the road, the payments will seem much more manageable, and you'll be glad you decided on the better home. It'll be a better investment - for your quality of life in the house, and for future resale value.

BUT... if you feel uncomfortable with the idea of being a bit over-extended, then you should buy a house you can afford right now, with the realization that you'll probably be buying a better house down the road as your net worth improves.

A house that people can 'afford' on their beginning salary right out of college probably will be a fairly modest dwelling that they'll soon outgrow.

I recommend making a list of pros and cons wrt any important decision like this. Get your wishes *and* your fears and concerns all down on paper. What would you do in the 'worst case scenario', say, if you lost your job? Could you get reemployed quickly, or get temporary employment to be sure you could continue making mortgage payments?

All these considerations are important factors in your decision-making, and should be put on paper, not left to swirl around in your mind, causing you to feel nervous and uncertain.

I tend to examine every conceivable possibility when I'm facing a big decision, and I put everything on paper so that I can weigh what factors are more important to me. Then, when I finally decide, I have thought everything through so thoroughly that I have *no* regrets down the road. Believe me, it's really nice to have no regrets about major life decisions.

[NosferaDrew]

Originally Posted by jdcfsu Drew, so you're thinking a bubble is about to burst or do you think it's more along the lines of a plateauing of home values?

Right now, the economy is doing well. Unemployment is low, inflation seems in check and the stock market has been solid except for some volatility in the last week or so - these are the reasons why the recent housing slump hasn't affected the overall economy much.

After the 2001 recession, the delinquency and foreclosure rate of subprime adjustable rate mortgages rose to 10%. Today, we are at about 5.6%, but we also have twice the number of subprime adjustables out there.

If we go into a recession, the housing market will probably ensure one of the largest downturns in our history, IMO.

I'm kinda hoping for it.
My job is very secure, I'm saving/investing like a miser and I'll be ready to get a deal at the bottom.
Of course, as soon as I get my bitchin' little pad, we'll probably have the SuperQuake!

[Mancomb Seepgood]

*BUMP*

Thought this thread was a little interesting considering it's a year later...

[Luca]

Wow. Reading this thread is like watching the movie "Titanic," except without Leonardo DiCaprio.

[faust]

Just read this from the start and got a good laugh out of it.


View of markets and price drops over past year

[Mancomb Seepgood]

I really hope he didn't buy a house...

[turtle]

I have opted against buying a home yet. I'm still holding out for a better market and one that isn't still dropping.

So we just signed a new year lease at our current place and still look to move near the end of it. By then things should have hit bottom...I hope.

[ghoti]

Originally Posted by faust

Go Charlotte!

[Xaqtly]

Yeah, look at Las Vegas. I'm going to try to buy a house here later this year if I can. Prices are really low right now, which appeals to me as a person who is not independently wealthy.

[Boomerangmacuser]

I'm curious as to whether jdcfsu ended up buying a place or not. I don't see any indication here.

[Bryson]

Here's a question:

Assuming that you don't end up with negative equity, and that the house you bought is your only house and you main residence:*

Does it really matter if your house price goes down? Especially if your house price climbed since you bought it. Because you still have the "service" you paid for - somewhere to live. If you decide to move, the other house prices have fallen as well, so you still own the same "value" if not the same amount of money. Climbing house prices only really benefit people who own additional houses, but they considerably harm first-time buyers. So, shouldn't we be happy about falling house prices, really?

Look at it this way: for years all you hear about is people talking about how much their house has increased in value (normally very smugly...). But has it really increased in value, or just price? After all, all you're ever going to do with that money is buy another house - which have also all increased in price, by about the same proportion.

I'm genuinely interested in this, as it seems a logical fallacy that almost all people (who own houses..) cannot see.

All climbing house prices seems to achieve is to exclude the first-time buyers, and move towards a market whereby larger proportions of the population have to rent - surely not a desirable outcome, societally?

So, I move that we welcome falling house prices. They're a good thing!


* = I'm aware that these are pretty major assumptions, but still.

Note: this post is deliberately provocative...

[apple007]

Originally Posted by Bryson Here's a question: Assuming that you don't end up with negative equity, and that the house you bought is your only house and you main residence:* Does it really matter if your house price goes down? ...

With that set of assumptions, the answer is no.

As a long-term purchase, the peaks and valleys of home value aren't much different than the stock market. I've seen studies that show the difference between buying stocks on the lowest day of the year vs. the highest day of the year nets something like a 1% difference long-term. The same almost has to be true for home ownership, albeit to a lesser degree.

[ghoti]

The problem is not that the theoretical values of houses are falling for people who can easily pay for them or own their houses without any debt. It's about people who have taken on mortgages whose rates reset to something they knew they wouldn't be able to pay (or are now finding out they can't), and they were betting on being able to refinance based on the increased value/price of the house. But now that the value is sometimes significantly lower than their mortgage, and they have no other money or even a significant stake in their house ("no money down"), they're screwed.

In a healthy market, a few percent less value wouldn't be a problem. But when a large part of that market is built on the need for increasing prices and little or no actual money, the whole thing just collapses at the first signs of even a slight downturn.

[NosferaDrew]

Originally Posted by NosferaDrew Right now, the economy is doing well. Unemployment is low, inflation seems in check and the stock market has been solid except for some volatility in the last week or so - these are the reasons why the recent housing slump hasn't affected the overall economy much... ....My job is very secure, I'm saving/investing like a miser and I'll be ready to get a deal at the bottom.

My how things change in a short little year!

The economy is headed towards recession, seven months ago my department at work was liquidated except for me and two other guys and I walk up to my apartment tonight to find a rent increase of $80 per month effective May 1st!

Ah well, still love my job and, since the mass firing, I'm even more frugal.

I predict at least two more years of price drops in the market out here. The debacle is just beginning, IMO.

Foreclosures are at a record high. Home equity is at a record low. The housing market is spiraling down with no end in sight - and taking people's sense of economic security with it. For the first time since the Federal Reserve started tracking the data in 1945, the amount of debt tied up in American homes now exceeds the equity homeowners have built. The Fed reported Thursday that homeowner equity actually slipped below 50 percent in the second quarter of last year, and fell to just below 48 percent in the fourth quarter. And that was just one example in a day of dismal housing reports.

[Yontsey]

*BUMP*

Right now, it's definitely a buyers market out there. I've been actively looking at homes for the last several months and one of my really good friends works at one of the top real estate places in the area. I've hooked up with one of her best brokers and the guy has been very helpful.

To be honest, this is a very overwhelming experience. I have the money for 20% down and with the $8,000 back for first time buyers, this should put me in a good place, especially with low fixed 30yr mortgages.

Anyone have any advice for a first time buyer? I don't even know what to specifically ask. I've looked at hundreds of homes over the last 6 or so months but I don't even know what I'm looking for. All I know is that I have a price area set.

[addabox]

I just flashed on one of those movies where the rescue team is reviewing the video log that was made as the zombie/alien/sun exploding disaster unfolded. Starts with the smartly dressed captain rattling on about the mission, then moves through scenes with him increasingly unshaven and wild haired and the equipment in the background shooting out sparks, until he's just rocking back and forth going "oh God oh God oh God" and you can hear things exploding and he sees something off screen and screams and the screen goes dark.

And we're just at the "the artifact appears to be emitting some kind of energy" phase.

I fully expect this thread to be bumped in two years with some kind of "can't post for long, power's out again, christ the cannibals are starting to come out during the day ha ha at least "mortgages" are the least of our worries now, right guys OH GOD NO NOT THE IN THE NE.........."

[Yontsey]

I put in a bid on a house today!!! woooooo!!!

*Crossing fingers*

[jdcfsu]

So it's been almost three years since I started this thread and considering I didn't see the questions asked over a year ago, no, I did not get into a house at that time. After thinking about it I just didn't seem ready to jump in at the time. And, considering Drew was right, it's a good thing I didn't.

In the meantime I paid off all of my debt except my student loans, but they're so manageable that they're almost nonexistent, including buying a completely paying off a car. In the long run this probably wasn't the smartest idea as it took a good bit of cash out of the bank, but I now have virtually no debt and fantastic credit.

All this to say I've started the process again, and this time I'm in it for keeps. Home prices dropped like a rock over the last year and a half here, to the point where one of the properties I'm currently looking at sold in 2005 for $195k but is currently on the market for $89k. I figure I'm in a much better position all around now then I was when I first started this thread.

But all of the advice contained here is still extremely valid. A lot of you were talking about the "buy a little more than you can afford" theory and while I don't exactly subscribe to it, I am looking to buy what I can afford and know that when my girlfriend moves in later this year we'll be able to live comfortably in a nice place.

When I started this thread I was a little terrified at the potential process but now I'm a little more excited by it. Maybe I've grown up, maybe it's the fact that I know I can actually afford places in the area, I'm not sure, but I'm ready for it. I've gone and got pre-qualified so I don't do what all the idiots on Property Virgins do and get wowed by something way out of their price range and then do everything they can to get into it. My realtor is giving me suggestions and using realtor.com I'm sending her stuff, it's good.

So, all this to say, considering the substantial change in the market since the original advice was given, is there anything else I should know or be doing? I am looking at some Sort Sales and I know there are some risks therein, but maybe someone has suggestions or advice geared toward that area of the market as well. Thanks everyone!

[alcimedes]

One word of advice.

Don't try to save money by buying something that just needs a bit of work here and there. In this market it's completely unnecessary, and you'll end up with your first house being a crushing weight on your shoulders instead of an awesome step up in your life.

Then be sure you have enough room to grow if you need to. An extra bedroom or two is a good idea when getting a house.

[jdcfsu]

Originally Posted by alcimedes Don't try to save money by buying something that just needs a bit of work here and there. In this market it's completely unnecessary, and you'll end up with your first house being a crushing weight on your shoulders instead of an awesome step up in your life.

I found something I kind of like in a pretty good neighborhood that has recently been completely renovated, except for the kitchen. The kitchen is completely functional but they were in the process of renovating it when they ran out of cash. It's missing tile and in need of painting and one sheet of drywall. I'm tempted to go for it but try to low-ball the offer. I realize that finishing the kitchen could be a good amount of work, but given the location it could be a good investment. On the other hand I'm a little nervous about taking on a house and a project at the same time.

[turtle]

So is the kitchen usable for now? If it's usable at least you could use it in the mean time.

[jdcfsu]

Originally Posted by turtle2472 So is the kitchen usable for now? If it's usable at least you could use it in the mean time.

Yeah, it's completley functionable and all the appliances will stay, it just doesn't look very good. So while it needs to be changed, it doesn't have to be done in order to move in.

I'm meeting my realtor there tonight for a second walk through an to talk about a potential offer. It's exciting and terorifying at the same time.

[turtle]

Originally Posted by jdcfsu .... I'm meeting my realtor there tonight for a second walk through an to talk about a potential offer. It's exciting and terrifying at the same time.

This is kinda how I felt when I stopped and thought about it when getting this house. When my wife and I did get our home we really just went with the flow. It all just worked out. There were a few moments of grinding teeth and rubbing hands, but everything pretty much just worked out. It was pretty cool!

[jdcfsu]

In those of you who have already bought houses, how accurate is the "Seller Deceleration" sheet? I mean, they say to the best of their knowledge the roof is in good repair and not in need of work, but did you have any surprises in your inspections that weren't pre-triggered in the Deceleration?

[turtle]

Have you paid for a home inspector to come out and inspect your potential home? It was a well spent investment for that inspection. In our case nothing was found that would stop the sale, but at least we knew what we were getting into.

[jdcfsu]

Originally Posted by turtle2472 Have you paid for a home inspector to come out and inspect your potential home? It was a well spent investment for that inspection. In our case nothing was found that would stop the sale, but at least we knew what we were getting into.

Oh I'm going to get an inspection if the offer is accepted and the sale will be contingent on the inspection. I'm just curious as to how much trust you can put into the Sellers Declaration before the actual inspection.