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dogma
Premium
join:2002-08-15
Boulder City, NV
| reply to nightdesigns
Re: Homeowners: Mortgage Interest, Property Tax & Uncle Sam
said by nightdesigns  :We're starting to look at the housing market for our first place... All I can say is wait. Give it 12 Months at least. | |
sholling
Premium
join:2002-02-13
Hemet, CA
| I'm going to partly agree with Dogma, but only partly. If you're looking for a short-term (less than 5 years) investment then you need to run the numbers see how the possibility of a 5% drop in value (I don't think it will be that bad), plus the 6% it will cost you to sell compares to the straight out loss of a year of a year or two of rent. I doubt they results will be pretty even after you factor in the tax advantage of owning.
But at the same time you should be looking hard for bargains. Distress sales, panic sales etc, while avoiding any temtation to explore creative financing.
--
"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."
--FREDERIC BASTIAT--
| |
Lovehound
join:2005-08-18
Northridge, CA
| said by sholling :I'm going to partly agree with Dogma, but only partly. If you're looking for a short-term (less than 5 years) investment then you need to run the numbers see how the possibility of a 5% drop in value (I don't think it will be that bad), plus the 6% it will cost you to sell compares to the straight out loss of a year of a year or two of rent. I doubt they results will be pretty even after you factor in the tax advantage of owning. But at the same time you should be looking hard for bargains. Distress sales, panic sales etc, while avoiding any temtation to explore creative financing. This is really good advice. However, I'd qualify that less than 5 years probably won't make financial sense. Considering a possible price decline, renting makes more sense in that time frame. Beyond 5 years, buying a home is probably still a good investment.
Regarding the down payment, the old (and sage) advice is to go 20 percent down. This will also give you full control of your insurance payments and property taxes, although perhaps in recent times they may have loosened those requirements. Of course you'll have to mind your business about paying the insurance and taxes, but at least you're in the catbird seat.
So look hard for bargains, plan on living there 5 years (minimum), and put 20 percent down payment. It may sound like hard advice but it's good advice. | |
sholling
Premium
join:2002-02-13
Hemet, CA
| said by Lovehound : I'd qualify that less than 5 years probably won't make financial sense. Considering a possible price decline, renting makes more sense in that time frame. Beyond 5 years, buying a home is probably still a good investment. That was my point about less than 5 year timeframes, but I think you put it more clearly. The exception is when one finds a distress or panic sale. This is where spreadsheets come in handy. Run the numbers.
Regarding the down payment, the old (and sage) advice is to go 20 percent down. This will also give you full control of your insurance payments and property taxes, although perhaps in recent times they may have loosened those requirements. Of course you'll have to mind your business about paying the insurance and taxes, but at least you're in the catbird seat. You're dating yourself my friend.  In the good old days of our youth 20% was around $20k give or take. Today 20% is $80-120k. Almost impossible for first time home buyers to save while laying out $1000/mo in rent. The only penalty for a 5% FHA or GI loan is that you pay for morgage insurance (PMI) every month, and it's not all that expensive. They also protect you from stupidly creative financing and from signing contracts with prepayment penelties.
So look hard for bargains, plan on living there 5 years (minimum), Great advice. The best part about buying a home isn't the hoped for increase in value. That just gets eaten up when one upgrades. The best part is 30 years from now when you've got it paid off - is that it's paid off.
--
"Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."
--FREDERIC BASTIAT--
| |
Kibbles
Premium
join:1999-07-31
Mission Viejo, CA
| reply to dogma
said by dogma :said by nightdesigns :We're starting to look at the housing market for our first place... All I can say is wait. Give it 12 Months at least. Hmm...have you read/seen any articles supporting that...and what do they think the house prices will be... 3-5 years from now ? | |
dogma
Premium
join:2002-08-15
Boulder City, NV
| I don't know what they will be 3-5 years from now, but I am satisfied the values will continue to decline for the next 24 Months. Look at this:
Orange County Inventory (Sales)
Tracking Orange County, California
Population 2006: 3.07 million
1/02/2006 Listing per population ratio 1:422
7/30/2006 Listing per population ratio 1:176
01/2006: 8,430 (2,868)____01/2005: (2,903)
02/2006: 10,420 (2,928)___02/2005: (2,890)
03/2006: 11,762 (4,203)___03/2005: (5,033)
04/2006: 13,268 (3,276)___04/2005: (4,547)
05/2006: 15,048 (3,113)___05/2005: (4,548)
06/2006: 16,692 (3,608)___06/2005: (4,898)
07/2006: 17,458 (2,779)___07/2005: 6,656 (4,341)
08/2006: 17,758 (3,203)___08/2005: 7,209 (4,708)
09/2006: 17,475 (2,664)___09/2005: 8,044 (4,072)
10/2006: 16,650 (2,715)___10/2005: 8,565 (3,614)
11/2006: 15,188 (2,475)___11/2005: 8,520 (3,503)
12/2006: 13,220 (2,719)___12/2005: 7,583 (3,826)
Population 2007:
01/01/2007 Listing per population ratio 1:244
01/01: 12,600
01/31: 13,302 (2,400)___01/2006: 8,430 (2,868)
02/28: 13,704 (2,449)___02/2006: 10,420 (2,928)
03/31: 15,324 (3,130)___03/2006: 11,762 (4,203)
04/30: 17,094
05/10: 17,612
-ziprealty resale inventory includes SFR/Condo/MFR/Land Parcels
-(sale figure) includes new and resale homes from Data Quick News
1.The number of new listings on the market in Orange County are more than twice what they were 17 Months ago. Plus, many of the homes listed in the interim have gone into foreclosure.(more inventory)
2. The mortgage rates are a full percentage higher now for borrowers with sterling credit. The higher the rate goes, the less potential buyers can afford to pay. (less buyers)
3. Credit quality is sneaking back in lending, so no more "exotic" loans to folks that really couldn't afford it in the first place. (Even less buyers)
4. The Default & foreclosures are steadily rising (more inventory)
5. The existing exotic loans that trigger automatic payment increases will come month after month now for at least another 5 years. Many borrowers who were hoping against hope that magically their "income" would rise, or there would be continued "appreciation" in the home market, allowing them to re-fi into yet another exotic loan will wind up in REO status as well. (more inventory and less buyers)
Law of supply and demand*.
Right now the supply of homes for sale is increasing, and the demand of people that are "qualified" to buy, and want to buy is decreasing. Therefore the prices will continue to drop IMO.
*For some unknown reason [/sarcasm], this "law" does not seem to apply to the Oil companies. | |
Kibbles
Premium
join:1999-07-31
Mission Viejo, CA
| said by dogma :I don't know what they will be 3-5 years from now, but I am satisfied the values will continue to decline for the next 24 Months. Look at this: Well next year is an election year..I wonder will that effect the market if say we get a multi-billion dollar national health care program...and/or the now defunct sub-prime lending companies still around next year get bailed out? | |
dogma
Premium
join:2002-08-15
Boulder City, NV
| said by Kibbles :Well next year is an election year..I wonder will that effect the market if say we get a multi-billion dollar national health care program...and/or the now defunct sub-prime lending companies still around next year get bailed out? Can't be much worse than the current Trillion $ Iraq oil program. | |
Kibbles
Premium
join:1999-07-31
Mission Viejo, CA
1 edit | China could sell off all their T-bills  all 200+ billion dollars worth. | |
FutureMon
OW My Eyes
Premium,ExMod 2002-05
join:2000-10-05
Colorado Springs, CO
clubs: 
1 edit | reply to dogma
The company that handles the sale of much of the real estate in my area seems to think that over the next 24 months, based on their knowledge of the local market and their recent activity, it's either going to stay about where it is, or get worse. It will not get better.
Why couldn't we have something in place that could protect homeowners that aren't in default - or at least segregate them?
For instance. I'll assume most of you know how "comps" work. The appraisal value of a home is based on a number of factors such as lot size, # bedrooms, # bathrooms, square footage, etc.
Why don't foreclosures of a particular set of properties only affect properties of similar type? So a foreclosure of a 5 bedroom home doesn't affect the 3 bedroom homes, and vice-versa. Or for that matter, have it only affect the homes that are financed by that lender. If they lend to a risky borrower it could affect their whole portfolio - so it might have the same effect as what is happening to the lending rules today - only limited to the companies who took the risks in the first place.
It wouldn't solve the problem - but it might even the spread a little bit. Why should the foreclosure of a 2 bedroom bungalow affect the price of my 5 bedroom mansion?
Just a thought. I am just throwing it out there.
- FM
--
Undisputed BBR Karaoke Champion! Care to challenge me? | |
Kibbles
Premium
join:1999-07-31
Mission Viejo, CA
4 edits | said by FutureMon :The company that handles the sale of much of the real estate in my area seems to think that over the next 24 months, based on their knowledge of the local market and their recent activity, it's either going to stay about where it is, or get worse. It will not get better. Why couldn't we have something in place that could protect homeowners that aren't in default - or at least segregate A Realtor that specializes in this area e-mailed me the same opinion that prices will stay the same or even drop...I read that the prices are expected to drop a total of 7% over the next 2 years...yikes...there goes ~ 50k.
With the amount of Foreclosures,dropping prices,..you can use those as comps and ask for a reduced property assessment...thus reducing your property taxes.
The question I have is where the rental/lease prices will go...up or down?
I was thinking that a lot of Foreclosures could be avoided by leasing the house out...the owner could be taking a small loss per month..but they could be able to keep it long enough to sell it when the prices rise.
Too bad there is no state/federal program that could help a homeowner stay out of a Foreclosure. | |
aztecnology
O Rly?
Premium
join:2003-02-12
Murrieta, CA
 ·Verizon FIOS
| said by Kibbles :said by FutureMon :The company that handles the sale of much of the real estate in my area seems to think that over the next 24 months, based on their knowledge of the local market and their recent activity, it's either going to stay about where it is, or get worse. It will not get better. Why couldn't we have something in place that could protect homeowners that aren't in default - or at least segregate A Realtor that specializes in this area e-mailed me the same opinion that prices will stay the same or even drop...I read that the prices are expected to drop a total of 7% over the next 2 years...yikes...there goes ~ 50k. With the amount of Foreclosures,dropping prices,..you can use those as comps and ask for a reduced property assessment...thus reducing your property taxes. The question I have is where the rental/lease prices will go...up or down? I was thinking that a lot of Foreclosures could be avoided by leasing the house out...the owner could be taking a small loss per month..but they could be able to keep it long enough to sell it when the prices rise. Too bad there is no state/federal program that could help a homeowner stay out of a Foreclosure. In a declining market, rents typically go down, because of the increased supply in rental units. Secondly most people don't have enough money to carry a second residence without relying on MEW, and most rentals don't cash flow above $200/sqft
I'd expect a lot of market areas to decrease 3%-7% per year for the next 3 years, or about 15%-20%. What will trigger the snowball effect will be banks and their non-performing assets.
There used to be a program that did a decent job of preventing foreclosures, they use to call it Traditional Lending Standards
You know, where you could comfortably afford a home that was 3x-4x your income - When the median income for most of SoCal is in the $50k-$75k range, it's easy to do the math.
For housing to get back to a normal equilibrium, prices have to fall further than the 15-20% I'm predicting. We'll just have to wait and see...
--
"Independent thinkers tend to ALWAYS have someone not agreeing with them. It's The non-thinkers that always come in legions." John Callari .:|:. Say no to the IRS Yes to the Fair Tax | |
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