Housing Market

are you an elephant?

 

The sub-prim mortgage industry was a disaster waiting to happen. It was almost as dumb as buying on margins.
I know from people in real estate in other parts of the country that it's definitely a buyers market right now.
Where I live, though, if I had money, I'd put it all in real estate. There's fortunes to be made here in the next 1-5 years.

 

The housing market in my area is still strong... the downturn hasn't had that much of an effect - yet.

 

Some numbers from a letter about the market volitility from a letter from the company my financial advisor works for:

The Federal Reserve noted in their Monetary Policy Report to Congress on July 18, the riskiest mortgages — subprime variable rate mortgages — are about 9% of mortgages outstanding, and they have a delinquency rate that had risen to about 12%. Not a default rate of 12%, just 12% behind on payments. The delinquency rate on subprime fixed rate mortgages was steady at about 5%, while prime rate mortgage delinquency rate was steady at about 1%.

 

I was talking to a family member yesterday who just bought a house.

She didn't get a good faith estimate of closing costs when applying for a loan and when they went to closing, her loan was for 12.9 percent interest and she would have paid $7,000 in closing costs.

So she didn't close that day, found a new mortgage company and ended up getting her loan at 7 percent with like $4,000 in closing costs.

 

I know it would probably make the situation worse, but I hope Countrywide goes under. Those bunch of blood-sucking bastards fucked me over about five times (and it had nothing to do with an ARM).
I'm so glad to have gotten away from those guys.

 

You don't have to play closing costs here. Most sellers are offering to pay them for the buyer. Homebuilders are offering to pay closing costs in addition to providing some cash for furnishing the new home. Of course, it probably reflects a slightly higher purchase price.

What's most confusing is that people are selling their homes at what they say are prices below appraisal. Of course, if the house was appraised six months ago, it's probably only worth 75 percent of that appraisal price anyway. It's my understanding that the bank will make sure to do another appraisal before offering the loan. But who wants to get that far into the process only to discover that the sellers are twisting reality.

I've read there is some backlash against credit rating companies. It's just a jumbled mess. The bottom line is that I found a house for sale at a price that I can afford. It's nicer and newer than my current rental home, and it will be about $100 cheaper than what I'm paying now per month. But that's before taxes and insurance. Insurance rates here have tripled in the past few years. I believe you can expect to pay $500 a month for taxes and insurance.

 

Joe mentioned the insanity of the SoCal market, which is probably in some ways comparable to the DC market. There's no question prices are inflated here, and they have dropped some. The problem is that there's still a huge demand to live here - hell, at Ft. Belvoir alone, they're adding thousands of jobs from various places.

We haven't looked at home prices in some time, but I imagine they're still pretty damn high. If we could find a good deal with someone who was trying to flip or a foreclosure, we'd be OK, but we're also kind of happy with our apartment.

 

Same here. Prices keep going up, though not quite as fast as they were before.

 

Wife and I only used about 75 percent of what we were approved for mortgage-wise. It scares me to think what our lives would have been like if we used all 100 percent.

HM, this is not a terrible time to buy if you think you will be in an area for over 10 years. Homes will continue to rise in price. Sure, they are sliding right now, but it will rebound. It might take 4-5 years for this to happen, though. Homes will always appreciate over time.

Buying is 100 times better than renting. No matter what the real estate climate is at the time.

If you pay a $1,000 mortgage or a $1,000 rent, you are giving away $12,000 a year. $24,000 a year if you financed more.

If you rent, you will NEVER see that money again.

If you own, probably $1,000 or so went against the deed of the house and was not intrest. You will see that money again someday. The remaining $11,000 can be a tax write off which means you will be getting about $2,000 more in taxes back. So if you own instead of renting, you will have "earned" about $3,000 indirectly from owning the home.

 

Not always true. If renting is significantly cheaper, and you can do something worthwhile with the extra cash every month, there can be an absolute economic advantage to renting:

http://www.nytimes.com/2005/09/25/realestate/25cov.html?ex=1285300800&en=64f665177066bc85&ei=5090

 

Mrs. CI and I purchased our home in the meat of the housing boom, yet we stayed smart. We bought a modest, three-bedroom home for $108K, at a pretty darn good rate on an 80/20 loan. I will never understand spending so large a percentage of your salary on a home. Foolish.