O.T.> Bubble burst

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Don't know about Albuquerque, but you can get a new home in the area around Phoenix for a little over $200k. The wife and I went there a month or so ago to look at "investment" property. The builders won't sell to us because we already own a home in SoCal and don't have a job in the Phoenix area. Basically, they want to keep "speculators" out.

Ended up buying a duplex in Prescott Valley Arizona for about $290k ( 3bd, 2ba, 1 car garage, 1280sf)

Oh yeah, our 1600sf home on a tiny 3200sf lot is worth about $675k.
 
GNN60GT500 said:
Another So Cal home owner here-

this is crazy- I had a condo- just made the leap and bought a house 6 months ago-

3 bed, 2.5 bath, built in 88, 2 car garage- 1550 sq feet- $615,000-

Leaving CA can get very tempting everytime I get my mortgage bill-


That's why I haven't seen you around lately...working extra hours at Magnaflow to help pay down that mortgage? There's an article in the OC Register today saying that FOR SURE the housing bubble is ready to burst!
 
Yep- read that article- research done by Chapman University-

Im not too worried though- I plan on staying here for a good 15 years- maybe longer- so even though the market might fall by 15%- in 15 years it will be back up and then some-

still makes me sick though every time I travel to the midwest and see home prices out there

Actually I have been working extra hours, but because we have been so busy over here.....
 
I wouldn't look for house prices to drop anytime soon. A friend of mine is a real estate agent and he's told me that it's now common for banks to loan 103% of the house price to cover closing costs and such so you can now own a home with no money down at all. He also tells me that saving money for a down payment is foolish, since it's impossible to save money fast enough to come up with a decent down payment anyway. He says if your lucky, you may save a couple grand a year (I can't) and by that time the house value has increased 10k since you started saving. He also says that banks will soon offer 40 year loans, since working people have a hard time making a $2,000 payment with only a $2,200 monthly income for some reason. BTW, I feel lucky, we paid $75k for our home in '92 and added a shop for me, and last year it appraised at $257k. My buddy the real estate guru says it's now likely worth $300k+. Now if I could only talk my wife into living in a tent, I could sell the house and buy a new Ford GT with enough left over for a '66 Shelby to drive to work!
 
DarkBuddha said:
That is both true and a lie. It's the kind of stuff that mortgage brokers and investors tout, but the reality is something else. You're right about lower interest rates can have a huge impact on monthly payment amounts, but saying you can buy a $140K house for $805 monthly is just crack-addict talk. Once you add home owners insurance (unless you can actually come up with the $28K plus realtor fees) and factor in your property taxes, you're more likely looking at closer to $1300-$1400 a month.

And what does $140K actually get you these days? The 3 places I'm most familiar with are Seattle, Central Florida, and South Florida. $140K in Seattle will get you an older 750 sqft. condo in Seattle proper, or an uninhabbitable 1 (maybe 2) bedroom pre-mid-century hovel in need of everything. Or you might be able to score a place in one of the rougher areas in south Seattle... the kind of place where you need a 6 foot chainlink fence, guard dogs, and bars on your windows.

Central and south Florida? You've got a better chance of finding an older home in a mediocre neighborhood, maybe 3 bedrooms 1 bath. New "starter" homes in Tampa and Ft. Lauderdale (and any surrounding suburbs for 30 miles) start from the "low $200K" area, which really means $240K on up, and the construction just plain frightens me.

My wife and I make decent coin (ok, I'm a student, but she makes decent coin as a nurse practitioner), but there ain't no way we can see being able to budget more than $1100/mo for rent/mortgage for a good while yet. What will $1100 get us? $120K home including homeowners insurance and property taxes. $120k just don't buy what it used to... :(
I never said you could buy a house for $140,000. I’m simply using round numbers to illustrate how dropping interest rates impact housing prices. In other words, an interest rate drop from 9% to 5.75%, results in a $40,000 increase in housing prices per $100,000 (appraisal at 9%). So a house that would sell for $200,000 at 9% will sell for $280,000 at 5.75% due to identical principle and interest payments.

There are obviously many other factors that effect housing prices and monthly payments, which vary greatly with location. PMI, Property Taxes, Insurance, and basic supply and demand principles for your area.

What I was trying to get across in my previous post is that buying real-estate right now, during what may be the bottom of the down turn of interest rates, is very risky. It’s very easy to look back at the last 5 years in envy and say, “look at all the money people have been making in real-estate”, which is mostly attributable to falling interest rates. To make this scenario even scarier is that historically mortgage interest rates rise much quicker than they fall. Thus, the big profits made today from flipping houses (quick purchase and re-sale) can easily become huge losses. It’s gambling, and in a low interest rate market, the odds are against you.
 
Platonic Solid said:
I never said you could buy a house for $140,000. I’m simply using round numbers to illustrate how dropping interest rates impact housing prices. In other words, an interest rate drop from 9% to 5.75%, results in a $40,000 increase in housing prices per $100,000 (appraisal at 9%). So a house that would sell for $200,000 at 9% will sell for $280,000 at 5.75% due to identical principle and interest payments.

There are obviously many other factors that effect housing prices and monthly payments, which vary greatly with location. PMI, Property Taxes, Insurance, and basic supply and demand principles for your area.

What I was trying to get across in my previous post is that buying real-estate right now, during what may be the bottom of the down turn of interest rates, is very risky. It’s very easy to look back at the last 5 years in envy and say, “look at all the money people have been making in real-estate”, which is mostly attributable to falling interest rates. To make this scenario even scarier is that historically mortgage interest rates rise much quicker than they fall. Thus, the big profits made today from flipping houses (quick purchase and re-sale) can easily become huge losses. It’s gambling, and in a low interest rate market, the odds are against you.
First, you're exactly right! Which is why I said it's true... I hope you didn't take offense at my little rant. I was just trying make the point that when investors and mortgage folks (i.e. people with "extra" money... personally I've never had "extra" money) talk about these numbers, they make these rate numbers sound so great, with their "you can buy $140k house for $840/mo" and all that. But when regular folks go to actually buy a house and realize they've gotta come up with a down payment, pay PMI and property tax, and 3%-5% in realtor commisions, then reality sets in. Don't have any equity? Payments go up. No down payment? Payments go up. Less than the "perfect" credit rating? Payments go up. Wrong income to debt ratio? Payments go up. Don't know the secret credit rating handshake? Payments go up. Etc., etc., etc.

I personally do hope the bubble bursts, and then I hope there is a heavy market correction on top of that. Then maybe we can afford to live somewhere other than another apartment/condo/townhouse. What I really hope is that all the folks that bought way beyond their means using a non-fixed rate because of the irresistable rates and super low payments don't lose their homes and their lifestyles the way I think a lot of folks are going to... Remember the early '80s? But then again, that may finally put my family in our first home at a decent deal. :shrug:
 
2nd Mustang said:
Remember the very early 90's, like January 1990, when I sold my house (divorce issue) at a peak price, then bought a condo at the peak prices, then the housing prices took a big dump the following month. :bang:
It always hurts someone to get caught at those times, and as I recall, we were in a nasty recession then too. :(
 
2nd Mustang said:
Remember the very early 90's, like January 1990, when I sold my house (divorce issue) at a peak price, then bought a condo at the peak prices, then the housing prices took a big dump the following month. :bang:
I purchased my first house (no money down, 100%+ financed) in 1986 for $85,000. I remember the insanity at that time very well. The mood in the market was: "If you don't buy a house now, you'll never be able to". My housing debt to income ratio was over 50%! I was young and didn't know any better. I just wanted a home for my family and the banks made it possible. I assumed the banks wouldn't let me borrow that much if it wasn't realistic (WRONG!!). The primary cause of the real-estate crash in 1990 was bad lending practices. 4 Years later (1990)(also divorce issue) selling for anywhere near the purchase price was impossible. The house ended up in foreclosure and I ended up in bankruptcy. Personal bankruptcy as a result of defaulted real-estate loans sky-rocketed in the early 90s. Now the real-estate fever is back, and I believe the bankruptcy laws have changed.
 
For anyone interested, here is a simple Excel spreadsheet I made a while back for myself. It's only for 30 year fixed rate mortgages. You can edit any of the fields in green. You must type the "%" after the number (where applicable) or 6% will appear as 600% :rolleyes:

Disclaimer: Use at your own risk.

Mortgage Calc.xls
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