Is this a good time to buy a house?

[Eric Coffey]

Originally Posted by turbo6bar

Can you cite a source for this data?

Federal Reserve Board (survey of consumer finances).

Originally Posted by speeder

Show you one thing that has out-performed RE as an investment? On average? That's easy. The NYSE.

Not so fast. Here is a NAR article from last year explaining the counterpoint:
http://www.realtor.org/research/commentary_real_estate_vs

Even if that was the case, you can't "live" in the NYSE, and you pay taxes on the gains. With RE, you can occupy your investment, get to write off the interest, and pay NO taxes on the gains as long as you don't sell within 2 years.

Here's a scenario for you: Lets say you put the minimum 3.5% down on a $400k home ($14k) with a nice secure 30-year fixed FHA loan. Now, at an average/modest ROR of 5%, that would put you at about $650,000 at the end of 10 years. That, minus your initial investment and mortgage payoff equals $311,000 (net) in 10 years TAX FREE. If you could afford to make payments on a 15 year mortgage, that number would jump to $469,000 (net) at the end of 10 years. Not too shabby from an initial investment of only $14k. If the market doesn't perform as expected, you are still paying down an appreciating asset.

Either way, I think the OP's question has been answered many times over. The rates are great, home prices are low, and the "affordability index" is at an all-time high. So, regardless of your reasons or opinions; if you want to buy a home at some point, now is a pretty good time to do so IMO.

[the]

In SF, now may be a good time (I don't think so, but I'll go with it for argument's sake).

But next year will be a much better time.

The year after that even better.

[turbo6bar]

Originally Posted by Eric Coffey

Federal Reserve Board (survey of consumer finances).

Too bad the last survey was 2007 (on the cusp of the housing depression). The 2010 report is one NAR will curse. The recent Flow of Funds numbers from the Federal Reserve show awful declines in net worth and are supported by the CEPR report. regards, jurgen

[turbo6bar]

Originally Posted by the

In SF, now may be a good time (I don't think so, but I'll go with it for argument's sake).

But next year will be a much better time.

The year after that even better.

inverse appreciation is still apprecation.

concur. sitting in cash is ideal until the perfect property presents. There is virtually no downside to waiting.

[Noah930]

Originally Posted by turbo6bar

There is virtually no downside to waiting.

I can think of two:

1) Rising interest rates. Home prices will likely be lower in a year (or two). But interest rates may not be in the low-5's in a year or two.

2) Inflation. A fixed rate mortgage is a great hedge against inflation. Some even think we're in for hyperinflation.

[Eric Coffey]

Originally Posted by turbo6bar

Too bad the last survey was 2007 (on the cusp of the housing depression). The 2010 report is one NAR will curse. The recent Flow of Funds numbers from the Federal Reserve show awful declines in net worth and are supported by the CEPR report. regards, jurgen

Yes, they only do them every 3 years, but the homeowner-to-renter net worth ratio is still going to heavily favor homeowners. Plus, the figure I stated was a historic average, not a snapshot from the last survey (which would have put the ratio even higher for the homeowners for 2007).

Originally Posted by turbo6bar

There is virtually no downside to waiting.

Inflation, taxes, and rising interest rates may dictate otherwise.

[911Rob]

Originally Posted by the

Does it seem like a good time to buy a house in SF to you?

Hey the,
Based on "that" graph.... NO!!!! Yikes.
Yes if you're buying in Vallejo or Stockton; soon for Oakland and Santa Rosa, but SF.... that's just crazy.

My heart truly goes out to those people that bought in that upper spike; could take some time to recover those prices.

Sorry if I offended anyone with my post; that wasnt my intention at all. Obviously geographic location has alot to do with RE advice, my bad.
Thanks the, to the point.

[911Rob]

Jurgen; I've got that report in my reading basket and I promise I'll give it a read; got too busy today. Thanks for your posts, although I'm a fan of Eric Coffey's, I appreciate the contrasting thoughts you present.

I took some time out today to think about why the "F" I come here (PPOT) and its really because I love to learn, and there's always something to learn from me peeps here, so thanks again everyone. I think we ALL learn so much here that we have an inherant instinct to give back, when we can.
TTYL,

[turbo6bar]

Originally Posted by 911Rob

Jurgen; I've got that report in my reading basket and I promise I'll give it a read; got too busy today. Thanks for your posts, although I'm a fan of Eric Coffey's, I appreciate the contrasting thoughts you present.

Most of my net worth is tied up in real estate. I want to be armed with enough info to make good decisions, even if it means shunning kool-aid from my own stock. Plan for the worst and expect the best. Seems to have worked during the biggest housing boom and bust in modern history. Besides, you know everyone and their brother was a fan of 'investing' in RE. You know I don't go with the flow, bro.

[berettafan]

The effect of borrowing/leveraging on your ROI when buying rental real estate is something people often fail to consider. I see it mentioned above but so often in these conversations it gets ignored completely.

If i put $10k into an account that earns 5% at the end of 5yrs i'll have $12,887.

If i put $10k down on a $90k house (and borrow $80k @ 7%) and rent it for $800/mo which would cover p/i, taxes and insurance and then sell it in 5yrs i may have a better deal altogether.

If the house appreciates ZERO i will get:
Sale @ $90k less commission: $85,500
Payoff of mortgage: ($69,005)
Net to me: $16,495

Lots of variables can be put into this like tax effect, repairs, closing costs, etc. etc. and the impact can be severe but this serves to illustrate that in just 5yrs time the house, with ZERO appreciation can give more than DOUBLE the return of the investment account.

Add a 2% return on the house itself and the cash out at 5yrs jumps by $9,400 (less add'l comm.) Now you're in a whole different ballpark.

And a general consideration of the assets that make up your stock portfolio can make r/e seem even more attractive. That is to say with the exception of some crazy Saudi's they aren't making any more land hence it is a depleting natural resource in demand. Your stocks however may include software companies with hard assets that will be completely outdated in 2yrs time or an energy company that is really nothing more than an idea/hope about solar energy. More potential upside maybe but a VASTLY different potential downside.

Can the home value go down? yes! and in fact if it does go down faster than you are building equity you could be trapped with it. but i would argue it can never go to zero.