Is this a good time to buy a house?

[MichiganMat]

I had my hopes up about capitalizing on this mortgage meltdown but Im starting to have my doubts about my own ability to survive it.

I've got a healthy 10% in cash and stock to put down on a place, and Im fairly confident in my job security, but the news, my god have you seen the news lately?

They're saying GM could close its doors. GM! Citibank is under a $1 right now, the market is well under 7K...

If you had money to put down right now, and you had recession proof employment, would you buy a house right now or would you wait 6 or 9 months?

[vash]

if i could do it over again, i would buy a fort...with a moat.

ok, honest answer. yes. buy the house. buy one you can afford easy, and see what happens. if the world implodes who the eff cares. we will be pillaging and plundering anyways.

[MichiganMat]

Yarr!

[vash]

LOL! a pirate ship would be good too!

good luck matt.

[BeyGon]

Do like Obama says, buy stocks instead.

[Burnin' oil]

I really doubt prices or mortgage rates are going up over the next six months so waiting probably will not hurt you and may even help. Where are you looking? Patterson? Tracy? Manteca? Blackhawk?



Note to self: Diary this post for weekly review and delete if prices/mortgatge rates start going up.

[onewhippedpuppy]

Do your part, BUY BUY BUY! It's your patriotic duty as an American to stimulate the economy!

Ok, seriously though, I'd start looking. With the current situation there have to be people looking to dump their house quickly. Desperation for them = good deal for you. It's callous as hell, I know. Plus mortgage rates can't get much lower. Start shopping, don't get in a big hurry, and buy when you find a great deal. I don't really see the market heating back up overnight.

[Porsche-O-Phile]

Cancelling escrow on ours (about a month ago) was one of the hardest decisions I've ever had to make. We'd cleared underwriting and could have closed, but I just thought things were too uncertain in CA and there's simply too much unknown with respect to how far the job markets are going to crash here and how long they're going to stay down. Our payment was about 1:1 with our current rent payment, but in the end I figured it was much smarter to not be weighed down with a mortgage and a house in CA if I need to make a move somewhere else for a job (looking more and more likely with each passing day, so I guess it was a smart decision).

If you are VERY sure you have no risk of losing your job and you are VERY sure that if you do, you can get another one in your area, then go for it - rates are low and pretty soon inflation is going to explode. Prices aren't too bad either, but likely will fall at least another 10%-20% before any sort of bottom is reached (something to consider).

Don't waste your time with short sales - go with REO only. That's what I did and we had very good results and didn't have to screw around for three months waiting for some bank asset manager to get his head out of his ass and make a decision. It was a pretty quick offer acceptance (under 2 days).

[Rot 911]

I can't believe housing prices would go up in the next year. If it was me, in this shaky economy, I would keep renting and hold on to the cash.

[911Rob]

There's a huge river of negative flowing, but somewhere out there is a meandering stream of positive. Get your boat on the positive stream, the negative one will not take you anywhere but over the waterfall ahead.

People just have to let go of the greed from 2007; go back to 2005 thinking and you'll have success.

I dont watch the news, I dont listen to the negative crap, instead I focus on what I want, I take in the info like data and use it for processing. My development has home prices at the 2005 rates, so I had to be smart about it, but focusing on negative is unhealthy and it surely wont get you anywhere, ever!

What I do is collect all the data, put it in front of me, take in the good and the bad, process the information and then do what feels good; follow my gut. If it feels good to you, excites you and motivates you; then do it. If it doesnt feel good, then dont. However, how you think and feel is largely to do with what you feed yourself too. Positive or Negative? What do you want? Do that. Good luck.

[Bill Douglas]

Originally Posted by Kurt V

I can't believe housing prices would go up in the next year. If it was me, in this shaky economy, I would keep renting and hold on to the cash.

I agree. I'm poised to buy another place, but I think the economic melt down is going to have a cumlative effect by getting a bit worse, then a bit more worse on top of that. Then the people who are doing OK are no longer doing OK, and so on. As Kurt said it's unlikely property prices are going to take off on a hiss and a roar and well all miss out.

My policy is to sit tight and watch all the indicators. So far not good

[KFC911]

Originally Posted by MichiganMat

...If you had money to put down right now, and you had recession proof employment, would you buy a house right now or would you wait 6 or 9 months?

One always needs a place to live. Neither prices or interest rates are likely to increase over the next year, so personally, I would begin the search, but be very picky locating the "right" for the "right" price and don't be in a hurry. I don't know how the lender's are right now, but I purchased my first house with only 5% down. You might consider limiting yourself to that amount (if possible) and keeping the rest on hand as a "reserve" for a worst case scenario. MOST importantly, buy something that is "within your means"...if that's even possible, considering your location. Good luck!

[YTNUKLR]

I heard an interesting point the other day: if stocks are at levels of the mid-1990s, then housing should more or less reflect those prices. A housing boom drives the stock boom, pricing people out of homes unless we can make money (emphasis on "make," not "earn") so people can buy houses. That's what happened, and prices of homes are unsustainable at 2007 rates. Supply, demand.

Look at the quotient of "affordability," which means a buyer roughly should have a ~20% down payment and be able to make a 30-year mortgage agreement with a *private* lender. Even if you don't spend all that on a down payment, at least have it.

Be conservative right now. I think it's got more falling to do.

[onewhippedpuppy]

Originally Posted by YTNUKLR

Be conservative right now. I think it's got more falling to do.

I would insert the caveat that this statement is 100% dependent on location. Not everyone had a bubble to burst. Areas that experienced slow and steady growth (like mine) have soldiered on relatively unchanged.

[KFC911]

Originally Posted by onewhippedpuppy

i would insert the caveat that this statement is 100% dependent on location. Not everyone had a bubble to burst. Areas that experienced slow and steady growth (like mine) have soldiered on relatively unchanged.

+1

[Axeman]

I would use the money to buy gold, silver, guns and bullets and keep renting. Oh and don't forget food and water. Home prices are not going up for the next 5-10 years in my opinion.

[m21sniper]

Originally Posted by MichiganMat

I had my hopes up about capitalizing on this mortgage meltdown but Im starting to have my doubts about my own ability to survive it.

I've got a healthy 10% in cash and stock to put down on a place, and Im fairly confident in my job security, but the news, my god have you seen the news lately?

They're saying GM could close its doors. GM! Citibank is under a $1 right now, the market is well under 7K...

If you had money to put down right now, and you had recession proof employment, would you buy a house right now or would you wait 6 or 9 months?

The main thing you have to consider is that housing prices are still dropping.

You're liable to buy a house now for $200k(just an off the top of my head number- i guess in the bay you cannot get a shack for that much, haha) and have it be worth $150,000 next year.

Me, i would wait for the market to recover first.

[Porsche-O-Phile]

Agree with most (but not all) of the above. There's really no compelling reason to rush right now. There's plenty of inventory, prices are either going to fall more or stay flat (depends on market). This will be an "L" bottom, not a "V" or "U" bottom. The only reason I can think of to rush right in is to lock in a low rate - but honestly that's not good enough of a reason by itself if prices still have 10%-20% (or more) to decline and you're not planning on staying in the house for at least 10-15 years. Do the math over 5 years/10 years/etc. and you'll see that rates would have to move up a LOT in order to offset the cost of buying & selling at a loss (or at "break-even" prices - not counting for inflation effect) in the average 5-7 years a person holds a house these days. The math just doesn't support it (I looked at buying mostly due to other, personal/family considerations but still reached the conclusion that the numbers were still a bit "against"). Then factor in the price of closing costs (which is still very high) and you'll see it's PROBABLY better to wait. Probably. Not definitely though. A way to potentially hedge against this is to consider (as I did) getting an (assumable) FHA loan. You won't be able to rent the property for at least 12 months, but the fact that you'll have an assumable fixed-rate loan at a very low rate might be a very enticing "carrot" to a potential buyer in 5-6 years when interest rates are up around 15%-20% (as I predict they will be, a la 1977). You might be able to sell your house (even at a more expensive price) while your neighbor cannot, because you can "throw in" a 5% fixed-rate loan whereas buying theirs (even at a lower price) might require the buyer to pay 18% (or more, as happened in the 1970s)...

Personally I consider the period about 6-12 months out to be the best "window" (at least in this market) factoring in price, interest rate, difficulty in obtaining financing and ease of selling (if you need to). That's the conclusion I reached about 3 months ago and it's only for this market and only if things continue on the trends they're on. And that's a trade-off. It's based on a lot of assumptions regarding rates and inventory and directions and availability of credit/financing. It could end up being completely wrong, but I think I did reasonable analysis. The things important to you (and the conclusions you reach) might be remarkably different. And even that's not perfect - precisely "timing" a market is pretty much impossible. Point is there are good opportunities now, but there are going to be plenty of good opportunities (perhaps even better ones) for the foreseeable future.

You can always consider the "if I get in trouble, I can rent it out" position too (I did). The rental market for houses is extremely tough right now and even rent prices are crashing. A newly-remodeled house down the street from me (3BR/2BA w/ 3-car garage) was renting for almost $2,800 two years ago. It's currently sitting empty with a sign on it offering it up for rental at $1,600/mo. Still empty after a month with that sign on it. Sign of the times...

RE isn't a terrible inflationary hedge - that's the primary reason I can think of to consider buying. But foreign currencies and commodities might be better ones. Just something to consider...

[MichiganMat]

I really appreciate the advice guys, thanks a ton.

This place has a good location for renting, downtown San Jose, close to the university.

The price is such that I can afford it on my current income without renting, but I plan on renting a room in it. Thats part of what makes it so compelling, I won't be dependent on a renter.

Also, its undervalued for the neighborhood (in the current market atleast) and I can see myself living there for the next 5 years, easy.

Im going to go back and take another look tomorrow, I may just put an offer on it if its as solid as I remember it to be.

[speeder]

Originally Posted by 911Rob

There's a huge river of negative flowing, but somewhere out there is a meandering stream of positive. Get your boat on the positive stream, the negative one will not take you anywhere but over the waterfall ahead.

People just have to let go of the greed from 2007; go back to 2005 thinking and you'll have success.

I dont watch the news, I dont listen to the negative crap, instead I focus on what I want, I take in the info like data and use it for processing. My development has home prices at the 2005 rates, so I had to be smart about it, but focusing on negative is unhealthy and it surely wont get you anywhere, ever!

What I do is collect all the data, put it in front of me, take in the good and the bad, process the information and then do what feels good; follow my gut. If it feels good to you, excites you and motivates you; then do it. If it doesnt feel good, then dont. However, how you think and feel is largely to do with what you feed yourself too. Positive or Negative? What do you want? Do that. Good luck.

With all due respect, this sounds like nothing but RE agent nonsense to me. What is "2005 thinking"?? Here in Los Angeles, people in 2005 were under a serious delusion that it was a good time to buy because "RE only goes up". Anyone who bought a ridiculously over-priced house here in 2005 is seriously taking it up the ass right now; upside-down, can't sell if they needed to unless they take a severe loss, etc...

People have made serious fortunes "focusing on the negative". The "negative", as you eloquently put it, is where RE is going and people who realize it and have cash will be in a position to catch the next wave of stupidity when shyt bubbles again. And it's too soon to buy anything right now, IMO, unless it's a give-away fire-sale type price. You should NEVER buy RE on either side of the top of an irrational bubble curve. That would be when it's near the top of the uphill climb or just starting to slide back to normal. This is about the 423rd RE bubble the world has seen, so it ain't rocket science. RE agents will tell you that it's "a great time to buy" under any imaginable terrible times to buy. Always remember that.