Wow, I thought I had it good but you have me beat .What state? You are right, there is no way that buying makes any sense at this differential. Here in MA higher end properties don't tend to sell for much of a discount (unless they are out in the boonies), they just stay on the market for years (so far).
Why home prices could drop 25% more on average....
- Thread starter S2007S
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Wow, I thought I had it good but you have me beat .What state? You are right, there is no way that buying makes any sense at this differential. Here in MA higher end properties don't tend to sell for much of a discount (unless they are out in the boonies), they just stay on the market for years (so far).
Renting is money down the toilet. No one ever got rich by renting.
Owning it helps reduce your monthly income from taxes. You have no tax shelters. The equity you build can be realized by you in the amounts of $250,000 - $500,000 tax free if you lived 2 out of 5 years in your home. Consult IRS publications what a sweet deal! There are other advantages of owning a home ... needless to mention....
Your logic is twisted, renting is money down the turd bowl. Has anyone got rich by being a renter? The average net worth of a renter in US is $4300 and for a homeowner $183,000. Now go tell me why is that?
An interesting fix to housing, Rx for an ailing economy:
Let's start with the fact that falling home prices are affecting wealth, confidence and thus spending of many homeowners, not just the few who are trying to sell their residence. Many others are unable to hold onto their homes because they borrowed at low interest rates, which have since moved higher.
On the investment side, many of these mortgages were turned into securities whose value has now come into question because of falling home prices. This has frozen the credit markets, thus cutting down on bank lending, since no one is sure of the value of collateral (see story on the Fed's latest senior loan officer survey).
Home prices are falling because there are at least 5 million unsold homes overhanging the market - a 10-month supply at current selling rates, and twice the usual number. Their median price is $208,000 - 10% below their peak, but still a high 3.2 times median family incomes.
Housing would be more affordable if the median home cost 2.8 times median family incomes, as it did in the 1980s when housing sold at a brisk pace. In today's dollars, this means a drop to $184,000.
Simple arithmetic tells us that this is a difference of $24,000, or about 12%.
If the government were to give sellers half of this, they would be able to lower their asking prices without losing any more money. And giving buyers the other half would enable them to pay more without having to come up with additional funds.
Make this offer good for a limited time only (say, six months) and the economy would get a jolt where it needs it the most. And the cost would be only $120 billion ($24,000 times 5 million unsold homes).
Of course, since housing prices vary all over the country, this rebate would be given as a percentage of local home prices: 6% to sellers and 6% to buyers. So people in some areas would get more dollars, but this would be balanced by giving less to those in areas where housing is cheaper.
This plan may seem more complicated than the one now under discussion, but it does have a number of advantages that make it worth considering:
It will encourage quick deals.
It will stabilize home prices, thus wealth and confidence.
It will establish a value to mortgage-backed securities.
It will help thaw out the frosty credit markets.
It will ensure that these funds will be spent domestically.
It would not be perceived as a bailout, thus creating a moral hazard.
It will help maintain homeownership.
It will minimize the need for additional easing by the Federal Reserve.
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Outside the 4 problem states, RE is not as bad as the apartment dwellers on here make it out to be.
Let's start with the fact that falling home prices are affecting wealth, confidence and thus spending of many homeowners, not just the few who are trying to sell their residence. Many others are unable to hold onto their homes because they borrowed at low interest rates, which have since moved higher.
On the investment side, many of these mortgages were turned into securities whose value has now come into question because of falling home prices. This has frozen the credit markets, thus cutting down on bank lending, since no one is sure of the value of collateral (see story on the Fed's latest senior loan officer survey).
Home prices are falling because there are at least 5 million unsold homes overhanging the market - a 10-month supply at current selling rates, and twice the usual number. Their median price is $208,000 - 10% below their peak, but still a high 3.2 times median family incomes.
Housing would be more affordable if the median home cost 2.8 times median family incomes, as it did in the 1980s when housing sold at a brisk pace. In today's dollars, this means a drop to $184,000.
Simple arithmetic tells us that this is a difference of $24,000, or about 12%.
If the government were to give sellers half of this, they would be able to lower their asking prices without losing any more money. And giving buyers the other half would enable them to pay more without having to come up with additional funds.
Make this offer good for a limited time only (say, six months) and the economy would get a jolt where it needs it the most. And the cost would be only $120 billion ($24,000 times 5 million unsold homes).
Of course, since housing prices vary all over the country, this rebate would be given as a percentage of local home prices: 6% to sellers and 6% to buyers. So people in some areas would get more dollars, but this would be balanced by giving less to those in areas where housing is cheaper.
This plan may seem more complicated than the one now under discussion, but it does have a number of advantages that make it worth considering:
It will encourage quick deals.
It will stabilize home prices, thus wealth and confidence.
It will establish a value to mortgage-backed securities.
It will help thaw out the frosty credit markets.
It will ensure that these funds will be spent domestically.
It would not be perceived as a bailout, thus creating a moral hazard.
It will help maintain homeownership.
It will minimize the need for additional easing by the Federal Reserve.
------------
Outside the 4 problem states, RE is not as bad as the apartment dwellers on here make it out to be.
Re: Comments about "renting is money down the toilet." and the one about missing out on appreciation.
In my case, owning is money down the toilet. As I mentioned:
1) I lose 80% of my itemized deductions because of my income level. Thus there is virtually no tax benefit to owning.
2) If you think my logic is twisted, consider that paying an extra 10-15k per month for the HOPE I will see rising property vales and will then save taxes on part of the gain is illogical .Nothing prevents me from buying a home when the right time arrives. I have made many offers, but I refuse to overpay. I have owned in the past and will again in the future.
What is really interetsing is that there are so few people who can afford $4700 per month to rent anything that the absentee owners roll out the red carpet just to cover part of their note.
BTW the avg net worth of a renter being well less than that of a homeowner is clearly due to home equity being the major asset of homeowners. I think that's a rather sad statement in that the average person has no control over appreciation/depreciation of his major asset. It's a good generalized argument for homeownership, but it does not apply to my situation.
In my case, owning is money down the toilet. As I mentioned:
1) I lose 80% of my itemized deductions because of my income level. Thus there is virtually no tax benefit to owning.
2) If you think my logic is twisted, consider that paying an extra 10-15k per month for the HOPE I will see rising property vales and will then save taxes on part of the gain is illogical .Nothing prevents me from buying a home when the right time arrives. I have made many offers, but I refuse to overpay. I have owned in the past and will again in the future.
What is really interetsing is that there are so few people who can afford $4700 per month to rent anything that the absentee owners roll out the red carpet just to cover part of their note.
BTW the avg net worth of a renter being well less than that of a homeowner is clearly due to home equity being the major asset of homeowners. I think that's a rather sad statement in that the average person has no control over appreciation/depreciation of his major asset. It's a good generalized argument for homeownership, but it does not apply to my situation.
The latest outlook from the National Association of Realtors shows that, by the end of this quarter, single-family home resale median prices will have declined 10% from their peak of $223,000 one year ago. (Source: NAR, U.S. Economic Outlook, January 2008)
Furthermore, resale single-family home sales will decline to a 4.9 million rate in Q1 2008, down 23% from a year ago. If price declines follow sales declines, it would compare to the 24% decline experienced during the Great Depression of 1929. It would also be similar to the 22-40% decline in Texas and other oil-producing states during the oil-price drop in the early 1980's.
Home prices probably won't fall as far, however, since most homeowners will take their homes off the market before selling at such a loss. Furthermore, mortgage rates are around 6%, only half the rate they were in the '80's. The Fed has promised to further lower rates, keeping needed liquidity in the mortgage market. This will allow mortgage holders to refinance, reducing foreclosures.
What It Means to You
Real estate contributes 10% to the economy, so GDP will suffer. In fact, NAR forecasts a negative growth rate for Q4 2007. Watch for the advance GDP Report, due January 30th. The housing bust has already caused a stock market correction. If the housing bust continues into the late spring, the correction could turn into a bear market, and the economy could suffer a recession.
Furthermore, resale single-family home sales will decline to a 4.9 million rate in Q1 2008, down 23% from a year ago. If price declines follow sales declines, it would compare to the 24% decline experienced during the Great Depression of 1929. It would also be similar to the 22-40% decline in Texas and other oil-producing states during the oil-price drop in the early 1980's.
Home prices probably won't fall as far, however, since most homeowners will take their homes off the market before selling at such a loss. Furthermore, mortgage rates are around 6%, only half the rate they were in the '80's. The Fed has promised to further lower rates, keeping needed liquidity in the mortgage market. This will allow mortgage holders to refinance, reducing foreclosures.
What It Means to You
Real estate contributes 10% to the economy, so GDP will suffer. In fact, NAR forecasts a negative growth rate for Q4 2007. Watch for the advance GDP Report, due January 30th. The housing bust has already caused a stock market correction. If the housing bust continues into the late spring, the correction could turn into a bear market, and the economy could suffer a recession.
The economy is in a recession....a very bad one.
Ask any mom and pop business owner. Ask your local
restaurant manager how things are going. Heck, ask your Dentist if business has dropped off.
Ask any mom and pop business owner. Ask your local
restaurant manager how things are going. Heck, ask your Dentist if business has dropped off.