When should I buy a house?

[lolatency]

Quote from Port1385:

I have studied the charts and prices of houses in my area. Houses are now selling at a discount to 2006 prices, but still I feel there is a ways to go downward. The discount off of 2006 prices is about 15-20%. This is not a huge discount compared to the doubling and tripling that had occurred over the years.

Unemployment is on the rise and layoffs continue to mount.

I have been renting since 2006 and would like to get back into a house. I ask the ET community of experts. When should I buy a house?

Somehow I have this feeling that prices will eventually get back to 2000 pricing and it will take a while. If you forced me to answer when I feel housing will be a buy, I say minimum it will take another 3-5 years to see a bottom. Homeowners are too stubborn and wont sell easily.

Wow, yeah man -- I'm just like you, same timing and everything. Don't mean to ramble, but I've been thinking about this one a lot.

I agree with the guy who mentioned rent yield; however, I've been considering buying some raw land and throwing down a trailer on it and living extremely cheaply -- regardless of what goes on with the market.

I live in Manhattan these days (where the market finally had some down ticks). My rent right now is $1450/month, but I'm paying it to so I can be near both grad school and work. I've been looking into buying a trailer home ~$50,000 in upstate, NJ, or PA and taking a long train ride for my commute. My reasoning is that when you're sub-$100,000, market swings don't create losses large enough to worry about. My girlfriend and coworkers think I'm an absolute nut because I actually shop around and visit trailers.

I found one trailer in NJ that the guy was giving up for $6000 because he didn't want to pay to move it or pay for lot fees. When I called the park on the fees, I found out the guy was charging $400 a month base fees on the lot.

...

In 2004, I bought a condo in LA for $345,000. I sold it for $398,000 in 2006 because I was scared of how the market slowed down, and I didn't wait until the summer of 06 to "wait for the pick up." I ended up being the highest tick mark before the prices started collapsing. I guess the instincts were just screaming at me to get out. My friends weren't so lucky.

Now, I was only 24 at the time -- and my salary was a mere $75,000/yr. I knew the basics about interest, but I didn't know anything about stocks or real estate or anything. But the very experience of owning my condo made me start to understand finances and the value of money a lot more. It was all the reading and studying that got me out of my place at a safe time.

My whole perspective now is:

- Make the place you live so cheap that even if you lose your job, you won't lose your house.

- Make the place so cheap that even if it burned down, it wouldn't ruin your life. (Get a tent, use the well, and grow crops if need be.)

- Don't pay shit to the government by keeping your dwellings small and out of sight. The assessed value should be so small that the property taxes can be paid by an unskilled labor job.

- The market on housing doesn't matter as much if you stay very, very well within your means. The volatility on Case-Schiller indexes shouldn't affect your sleeping patterns

 

[Gringinho]

Well,

if you are into it for the investment mainly now - then look for the best deal - forget about the pricing levels, but get something that will sell and that you can make a nice profit fixing. If you are going to "play the housing market" it is not the best of times.

I have more than 600% on my house in valuation increase - but that is because I bought it at the lowest valuation of the Brazilian Real - right around the time president Lula got elected here. Now I will wait until at least 12 months - as I think the BRL will appreciate around 25-30% against some currencies. I advised some friends 14 months ago, and they now have roughly 15% better currency appreciation now.

I also bought my house in an area that I knew was going to boom - 350m from the beach and in a nice area. I got a great deal at a great location.

 

[Cutten]

Wait for a decent discount to replacement cost. I.e. wait till you can buy a house + land for about 70% of the amount it would cost to build an identical house now.

 

[Port1385]

I live in SoCal too and visited quite a few of these REO properties. Most seemed to be in some really bad shape. One of the houses I visited looked as if Charlie Manson and his family had lived there with writing all over the walls. The floor completely worn through. I honestly do not know how someone could wear the floor all the way through. ???

My buddy in San Diego said he saw one where the wall was completely torn out as if someone took a chain and pulled it out with a big truck. I guess this is the frustration of speculators gone bad.

Most of the properties I looked at that were REO needed probably 30-40k in renovations to bring up to a livable level.

Quote from scriabinop23:

Now you are giving me advice? There are deals right now, but you have to be astute. They are going for that 10% target yield.

These REO properties are moving for about a little over 1/3rd of 2005-2006 bubble top prices, or around 65% off. You don't need to wait 5 years to pick one up in certain zip codes. In nicer areas, maybe another year and we'll be there as well. It is important to realize that the alt-A/prime crowd won't collapse likely in the same manner as subprime, as people who put equity into their homes (10-20%+) are much less likely to take a loss and walk away unless they are destitute. 0% down subprime foreclosures are another story, since no risk or personal stake gave these people no incentive to stay.

 

[Port1385]

The simple and clear fact is that women are liabilities or "depreciating assets". However, there is a certain point in your life where you have to pull the trigger.

I figure another 3 years and it would be that time to pull it.

Quote from Thermactor:

Don't rush into it. A lot of women have value that trend exactly like FNM common shares.

 

[scriabinop23]

Quote from Port1385:

I live in SoCal too and visited quite a few of these REO properties. Most seemed to be in some really bad shape. One of the houses I visited looked as if Charlie Manson and his family had lived there with writing all over the walls. The floor completely worn through. I honestly do not know how someone could wear the floor all the way through. ???

While there are a few nightmares here and there, I would say your appraisal of the REOs is not the most accurate. There are plenty in decent shape that only need $5k-$10k in renovations to get back to OK status.

Although I'll never forget the REO in Mira Mesa that looked like something out of the exorcist ... beer caps on the ceiling, juvenile drawings of fire and hell of on the walls, a fridge taped shut, a foul shit like smell, and floors/atmosphere that seemed to make scenes from the Shining feel emotionally warm...

 

[SuperVolatility]

Quote from lolatency:

Wow, yeah man -- I'm just like you, same timing and everything. Don't mean to ramble, but I've been thinking about this one a lot.

I agree with the guy who mentioned rent yield; however, I've been considering buying some raw land and throwing down a trailer on it and living extremely cheaply -- regardless of what goes on with the market.

I live in Manhattan these days (where the market finally had some down ticks). My rent right now is $1450/month, but I'm paying it to so I can be near both grad school and work. I've been looking into buying a trailer home ~$50,000 in upstate, NJ, or PA and taking a long train ride for my commute. My reasoning is that when you're sub-$100,000, market swings don't create losses large enough to worry about. My girlfriend and coworkers think I'm an absolute nut because I actually shop around and visit trailers.

I found one trailer in NJ that the guy was giving up for $6000 because he didn't want to pay to move it or pay for lot fees. When I called the park on the fees, I found out the guy was charging $400 a month base fees on the lot.

...

In 2004, I bought a condo in LA for $345,000. I sold it for $398,000 in 2006 because I was scared of how the market slowed down, and I didn't wait until the summer of 06 to "wait for the pick up." I ended up being the highest tick mark before the prices started collapsing. I guess the instincts were just screaming at me to get out. My friends weren't so lucky.

Now, I was only 24 at the time -- and my salary was a mere $75,000/yr. I knew the basics about interest, but I didn't know anything about stocks or real estate or anything. But the very experience of owning my condo made me start to understand finances and the value of money a lot more. It was all the reading and studying that got me out of my place at a safe time.

My whole perspective now is:

- Make the place you live so cheap that even if you lose your job, you won't lose your house.

- Make the place so cheap that even if it burned down, it wouldn't ruin your life. (Get a tent, use the well, and grow crops if need be.)

- Don't pay shit to the government by keeping your dwellings small and out of sight. The assessed value should be so small that the property taxes can be paid by an unskilled labor job.

- The market on housing doesn't matter as much if you stay very, very well within your means. The volatility on Case-Schiller indexes shouldn't affect your sleeping patterns

Well said dude

 

[SuperVolatility]

Quote from Port1385:

I have studied the charts and prices of houses in my area. Houses are now selling at a discount to 2006 prices, but still I feel there is a ways to go downward. The discount off of 2006 prices is about 15-20%. This is not a huge discount compared to the doubling and tripling that had occurred over the years.

Unemployment is on the rise and layoffs continue to mount.

I have been renting since 2006 and would like to get back into a house. I ask the ET community of experts. When should I buy a house?

Somehow I have this feeling that prices will eventually get back to 2000 pricing and it will take a while. If you forced me to answer when I feel housing will be a buy, I say minimum it will take another 3-5 years to see a bottom. Homeowners are too stubborn and wont sell easily.

Another quick and dirty method is to calculate/compare cost of replacement. Here is a good example, where I live a house sold for $575K about 2.5 yrs ago, now another fellow picked it for $285 about 4 months ago...he could get it for low 200's if he waited few months..but regardless...house of that size cannot be build for $230-285K so in other words there is a huge shrink in potential builder mark-up or premium. Perhaps materials, permit, would cost about half value and the other half is service....so whomever paid $575 paid a huge builder premium...while he wh paid $285 got it at builder's "break-even" or loss value (tho builder is no longer involed). I hope I made point clear.

 

[rallymode]

Quote from lolatency:

Wow, yeah man -- I'm just like you, same timing and everything. Don't mean to ramble, but I've been thinking about this one a lot.

I agree with the guy who mentioned rent yield; however, I've been considering buying some raw land and throwing down a trailer on it and living extremely cheaply -- regardless of what goes on with the market.

I live in Manhattan these days (where the market finally had some down ticks). My rent right now is $1450/month, but I'm paying it to so I can be near both grad school and work. I've been looking into buying a trailer home ~$50,000 in upstate, NJ, or PA and taking a long train ride for my commute. My reasoning is that when you're sub-$100,000, market swings don't create losses large enough to worry about. My girlfriend and coworkers think I'm an absolute nut because I actually shop around and visit trailers.

I found one trailer in NJ that the guy was giving up for $6000 because he didn't want to pay to move it or pay for lot fees. When I called the park on the fees, I found out the guy was charging $400 a month base fees on the lot.

...

In 2004, I bought a condo in LA for $345,000. I sold it for $398,000 in 2006 because I was scared of how the market slowed down, and I didn't wait until the summer of 06 to "wait for the pick up." I ended up being the highest tick mark before the prices started collapsing. I guess the instincts were just screaming at me to get out. My friends weren't so lucky.

Now, I was only 24 at the time -- and my salary was a mere $75,000/yr. I knew the basics about interest, but I didn't know anything about stocks or real estate or anything. But the very experience of owning my condo made me start to understand finances and the value of money a lot more. It was all the reading and studying that got me out of my place at a safe time.

My whole perspective now is:

- Make the place you live so cheap that even if you lose your job, you won't lose your house.

- Make the place so cheap that even if it burned down, it wouldn't ruin your life. (Get a tent, use the well, and grow crops if need be.)

- Don't pay shit to the government by keeping your dwellings small and out of sight. The assessed value should be so small that the property taxes can be paid by an unskilled labor job.

- The market on housing doesn't matter as much if you stay very, very well within your means. The volatility on Case-Schiller indexes shouldn't affect your sleeping patterns

Why bother making money if you are not going to enjoy the benefits of having it? No one is saying buy a mansion and live beyond your means but a trailer on a lot? Throw your copy of "The Millionaire Next Door" in the garbage, and start enjoying life. Its too short to live it like a rat.

I sometimes wonder what kind of people post on ET. Too often as it turns out lately.

 

[lolatency]

Quote from rallymode:

Why bother making money if you are not going to enjoy the benefits of having it? No one is saying buy a mansion and live beyond your means but a trailer on a lot? Throw your copy of "The Millionaire Next Door" in the garbage, and start enjoying life. Its too short to live it like a rat.

I sometimes wonder what kind of people post on ET. Too often as it turns out lately.

The reason people say "live a little" is because it's beneficial to the economy to be a consumer and not a saver.

The pain of being a pauper and not being able to take control of your life when you -want- to take control of your life is far greater than passing up on a slightly nicer place.

One of the the biggest reasons I want a piss-poor trailer instead of a mansion is this: the god damned government is not entitled to my money via property taxes. I'm sick and tired of paying money so unskilled laborers and breeders can educate their children off of my labor. It'd be one thing if public schools cranked out scholars, but it's another thing when they keep cranking out idiots that have to be managed by the prison-industrial complex.

There should NEVER be a property tax. It just kills me how old people who bought houses in long island for $30,000 now have houses with $500,000+ values and have to pay excessive property taxes in their retirement after a long lifetime of work. And then, on top of that, there's a death tax. Totally ridiculous and not my idea of a free society.

I work on a derivatives trading desk with a bunch of quants. There's people who spend quite a bit on rent and don't save much money at all. What are they going to do if they have too much debt load and get laid off because the equities market tanks and the activity in the derivatives market goes with it?

Then I know the guys who're like "live a little" on your salary and "invest and manage your bonus." Why? Oldest trick in the book is to fire people before they're supposed to be paid out a bonus. Why count on the bonus?

This economy is only going to get harder to make an easy living.