Re: Real Estate

[Earth_First]

I've been told that you'd be a 'fool' to purchase a home right now. Can anyone really explain to me the whole nine on why in an easy to understand way? Our family is on the verge of looking at homeownership, however I do not want to make any critical mistakes on such an important investment.

THANKS in advance DU!

[pitohui]

1. whoever told you that, ignore their ignorant a$$

home ownership is one of the best things you can do for your financial future, and no i am not a real estate agent nor do i play one on tv

the hysteria abt the "bubble" and "the last train out" has been in play since the 1970s

it is sour grapes propaganda to placate those who can't afford homes anyway

ask people in manhattan or london how many decades they've been waiting for the "bubble" to burst, there is no bubble, a home in a desirable area is a valuable commodity and will continue to be a valuable commodity, since home value is rising faster than wages, if you wait too long to buy, you may never be able to buy

plenty of folks in california will never own a home because they thought the price too high in 1992

[Jersey Devil]

6. That is, if you are going to own long term

There have been bubbles before, most recently in the late 80s (for maybe 5 years) when home prices went DOWN substantially in many areas. Sure, if you hang in there long term you will overcome any such downturn. However, short term, if you should have to move or for any reason must sell your home when prices are lower, you may wind up selling for less than you paid and have to bring cash to the closing just to sell your home.

I am a lawyer who has done quite a bit of real estate and saw quite a few instances of that happening in the early 90s.

Overall, you are right. But short term there is indeed a risk for loss.

[cally]

12. Happened to me

We bought a home in Long Beach, Calif years ago. It had devalued about 15 percent in the last year so we thought the devaluation had occured already. We lost our jobs and had to sell and move for new jobs a year later. We lost 25 percent of the value of the home and had to bring much money to closing. I followed prices for about 5 more years and the prices hadn't returned to our purchase value. I'm sure they have now, though.

We went on to buy in the new location. How we got the loan is still somewhat of a mystery. This home has appreciated greatly so we have a net gain.

Still, take bubbles seriously.

I assume you are looking in Rochester, NY. I would ask realtors in the area how much appreciation has occured and if they think houses are too high. I think some markets will decrease in value like San Diego, LA, SF Bay Area, NY, Boston, and others. I personally don't think all markets will devalue, though.

[cliss]

2. It depends on where you are, Earth.

Some areas of the US are red-hot right now, and should be avoided for the time being.

'Hottest' areas
1) Phoenix
2) Many areas in California
3) Las Vegas
Oregon is pretty ugly, I believe Washington is the same way.

I just read a recent issue of Fortune Magazine, and the feature article was about the "Lunatic Speculators". These speculators are pushing the real estate market into the stratosphere, from their own back-and-forth speculating. It's ridiculous. The article warns that "the market will surely fall, and the Last guy will get hurt."

Also, it depends on what type of financing you're getting. I would RUN from an ARM rate right now (think of the financing company taking your ARM off). Get a fixed rate, for maybe 15 or 20 years.

Here's a really good real estate investor, who says "this is not a good time to get in". He advises to wait.

http://wwwldolfderoos.com/

Good luck!

[louis-t]

3. First of all, what state are you in?

Makes a difference right now. Home ownership is always a good idea if you buy right. Also depends on your price range. Certain price ranges are not going up right now. My state, over 400k is not gaining ground. 800k to 1 mil+ are actually losing value. I sold a home in the spring that was valued at just over a million for 740k. Corporate buyout. But 100k to 200k homes are increasing. Very wierd.

[librechik]

4. in general Real Estate is overvalued right now

so it's not a good deal. But that is a very general trend, with very bad extremes, like California and the WEst coast and resort or sunbelt areas, where real estate is not valued reasonably, and you would be paying far more for the property than it is worth--you are paying a big premium for the location location location.

Nevertheless there are bargains to be found. If you are not tied to a certain area (for example, if you can telecommute or are self-employed, you could move to a cheap area in the country or in your area. Some people manage to do the research and so on necessary to buy houses for back taxes. Usually there is one day a year in a county where bids are accepted for properties. There is usually a newspaper listing of these properties for a few weeks before the sale day, so you can check them out. Details vary from place to place, though, so call the county tax assessor or look it up online. Talk to local real estate agents, they are well aware of buyers such as yourself, and know where to look.

Distressed owners are still a great opportunity. We just bought a small property which was assessed for 75,000, but we bought it for 30,000, just becuz the guy wanted to get rid of the obligation. He's a young single guy and the economy is too iffy for him to keep up the paymentson the place and pay rent elsewhere as well.

Goode luck! Owning a home is a great adventure, IMO.

[Shoeempress]

5. Lived through the 90's when the bubble burst. Was doing divorce

work and the issue in divorces was who took the house because neither could afford to pay for it and you couldn't sell it for the mortgage amount. In addition, interest rates were insane, 16% was not unusual. While the value of the home you buy may drop, it won't be such a big deal if you don't have to sell. If, however you wait for the bubble to burst, the interest rates may be crazy again, but the cost of the house would be lower. It's pretty much all a crap shoot.

[Jersey Devil]

8. I think you have your decades mixed up

16% and more around 1980-82, not in the 90's.

The bubble did bust in the late 80s, early 90s but at that time interest rates were well under 10%

[Shoeempress]

10. This was the folks getting divorced trying to sell the property bought

in the 80's I was doing divorce in the early 90s. So no, my decades are not mixed up.

[SW FL Dem]

11. I agree with your timing but disagree with your rates.

We bought our first home in 1986 and got a teaser rate of 7.25%, the 30 year fixed rate was much higher. Our second mortgage in 1989 was a 7 year fixed at 10%. Our mortgages were jumbo, but we got the best rates available since our credit was perfect and we had 20% or more down on both purchases. We made a killing on our first home and lost it all, plus some, on the second. The bubble burst in our area in the fall of 1989.

[Jamison]

7. I work in real estate part-time...

so I will explain.

First of all, home prices are overinflated right now IMO. Will they drop soon? Who knows, but they can't keep going up b/c inventory around the country is starting to increase which indicates potential buyers are unwilling to pay for these overinflated homes.

Second, mortgage rates have been low, and are still relatively low. However, Greenspan & the Fed have already stated they will be raising interest rates by at least .25 point in at least the next three sessions that they meet. Some people fear we could see the 16% mortgage rates that we saw around 1981-82 if Greenspan has his way.

Third, It's just simply cheaper to rent right now.

Some here may disagree with my points, so take my advice with a grain of salt & just do some research on the topic.

[Jersey Devil]

9. That's not true everywhere of course

I live in north Jersey. There is no increase in inventory because there is no place left to build houses.