mamboking

There also the issue of interest rates. I for one have a 5% fixed interest rate right now, but in my new loan I would probably be looking at what? 6.5 or 7%...

Silver™

And if the housing market falls 10% for a sustained time, it probably means your regional or even the national economy is not doing so good, so it likely isn't the best time to make the biggest purchase of your life.

fdl

Not disagreeing here. This is the long term goal.





But in the first scenario housing prices are more likely to jump higher than %12 over a given period of time. Since real estate is largly cyclical, yet trending higher, one needs to play the dips into ones favour. So if we assume that ultimately the second house will be worth $1,000,000 when you "cash out", is it not better to buy in at $540k than $600k. The advantage seems to more than offset the loss taken in the first home. The other things to consider are savings in real estate fee's and property taxes.

Again I'm not saying its better to have real estate values fall indefinately, but a dip can be an opportunity when upgrading.

Silver™

Only if the market goes up faster due to the downturn in the market that occurred when you bought that second house. Which more often than not probably doesn't occur because if house values go down then there is usually a fundamental economic reason for that (regional recession, major industry going through bad times, etc..).

All things being equal, you are going to reach that $1 million though quicker if you are at $600K than at $540K. Plus you are going to have that equity built up if you didn't lose it during the downturn in your scenario.




Only if the market somehow appreciates at a significantly faster rate for an extended period of time due to the downturn, which doesn't seem likely.



Only if you were somehow able to sell at the peak and buy at the bottom, which most of are not luck enough/good enough to pull off

fdl

Yes, there are reasons for the downturn, but similarly there will be reasons for the upswing and IMO there will usually be greater appreciation following a downturn. I'm not sure how the market is there, but here its not a smooth trend. For whatever reason, there are booms and busts.


Anyways, I understand what you are saying Silver. I guess we are both working on certain assumptions about the general market trend that we dont agree on. I believe that long term housing will rise to point x regardless of fluctuation, but there will be dips along the way which you can "play". i.e. To me a bad market for a few years does not change the ultimate value of housing 30 years down the road.

moeronn

I think your question might have gotten overlooked between the Mega Mod discussion.

If you're lived in the house for at least 2 of the past 5 years, you are allowed upto $250k per person (so $500k per couple) as tax free gains. Anything over that would be taxed as capital gains. I'm not sure if there are even any benefits to rolling gains into new properties any more. I asked somewhere on here before, but never got an answer (at least that I saw)

Whiskers

Is profit considered selling price of house minus what is owed on the mortgage?

SpeedyV6

sale price - cost basis

Whiskers

Say it like Im an idiot.....

moeronn

- any selling related costs.

Let's say the house was $400k when you bought it, but are selling it for $950k. That would be $550k. But then deduct your listing/agent fees (say 6% of $950k) of $57k, and you're in the clear. There are other things you can deduct, also, but I can't think of them right now.

Whiskers

We got the house for 330K...We think it's worth about 650K. We probably paid off about 30K on the mortgage so far, so we should be ok?

Fibonacci

Any major home improvements will increase your cost basis. Routine maintenance does not qualify.

Fibonacci

Foreclosures up 72% nationwide in the first quarter of 2006

Virginia, Georgia - "rust belt" states??? Hardly.

http://www.nomura.com/research/s16/r...0605167410.pdf

fdl

Hardly a bubble bursting though. 72% of nothing isnt very much anyways

The slowdown should be no surprise to anyone. The jury is still out on whether its a soft landing or a hard one.

03typeS6spd

Man, I sure am glad I can still eat, especially with thousands of foreclosures out of MILLIONS of homeowners especially here in virginia

that sky sure has been falling for a long time...


07-03-2005, 10:45 AM
Post #159
Housing may sting more than dot.com bust

08-01-2005, 6:02 PM
PistonFan
Post #207
Greenspan Housing View Seen Hazardous by Wall Street Economists

08-15-2005, 7:51 PM
PistonFan
Post #278
Homeowners: Upside-down is no way to be

11-22-2005, 6:49 PM
PistonFan
machiavelli illuminati
Post #358
Real-Estate Speculators, Pulling Back, Help Fed Remove `Froth'

05-04-2006, 9:06 PM
PistonFan
Post #468
Welcome to the dead zone
--------------------------------------------------------------------------------
Real estate survival guide: The great housing bubble has finally started to deflate, and the fall will be harder in some markets than others.

zamo

^^

so true

Fibonacci

Who said homeownership is a bad thing? Not me

Just that one should be careful to assume skyrocketing asset prices will continue indefinitely and that your primary home shouldn't necessarily be viewed as a great investment, especially if you're leveraging yourself to the hilt with interest only/or other exotic forms of financing.

Paying rent to a landlord, paying rent to the bank - little difference, unless of course you find yourself underwater.

03typeS6spd

hmmm, i agree with what you just posted wholeheartedly, but that's not the tone of the articles you have been posting imo...

either way, anyone who is assuming skyrocketing prices is crazy, but interest only has its place for the adept investor, not the average consumer

i don't think any national article can apply on a nationwide scale with actual localized markets, so reading them and the large sweeping generalizations they make creeps me out, and there have been a lot of those over the past year

5o9

Presently surfing the downside in most markets.

Single family detatched homeownership at median price in good labor markets with good schools is a primary wealth accumulation device. Long term, it may be forced savings via mortgage amortization, even in a horrific labor market. Choose your metro area well.

I have seen people actually exit the housing market with cash out gains that exceed mortgage payments plus real estate taxes. Some have lived rent-free for 5 or 10 or 20 or 50 years.

Homeownership is the key to American wealth. The appreciation portion of the return is based upon when you buy, more than when you sell.

Might be some renters with huge money, but guess the percentage of owners is much higher

Silver™

The market is slowing, but it seems more like a controlled slow down versus a pop.




Sales of new homes rose unexpectedly in April to the fastest pace this year as the housing sector showed resilience in the face of rising mortgage rates. But the price of homes sold last month edged up only slightly.

http://www.msnbc.msn.com/id/12951777/

Fibonacci

http://www.businessweek.com/investor...nbc_realestate

zeroday

http://money.cnn.com/2006/06/13/real...owth/index.htm?


Housing boom 2.0
Harvard study says there may be bumps along the way, but that the long-term health of the housing market is intact.
By Les Christie, CNNMoney.com staff writer
June 13, 2006: 3:18 PM EDT

NEW YORK (CNNMoney.com) - The housing market is entering a down cycle, according to a report from Harvard's Joint Center for Housing Studies, but is unlikely to undergo a severe reversal.

The market may face risks as interest rates rise, decreasing affordability and expanding inventories, according to the study, but the market will suffer only a modest downturn unless the broader economy collapses and jobs dry up.
"There may be tough times ahead," says Nicholas Retsinas, director of the Joint Center for Housing Studies at Harvard, "but housing will emerge stronger than ever." Demographic changes and population expansion will help keep home demand - and prices - healthy. The number of homes needed to meet demand in the next 10 years will likely exceed the 18.1 million units built from 1995 to 2004.

Several factors are at work.

Booming household growth.

The nation will add 1.37 million new households this year. Part of this is natural population increase but this has also been bolstered by foreign migrants.

Graying boomers.

As boomers have aged and prospered, they have begun to buy vacation or second homes in increasing numbers. This trend will widen as they near retirement.

Changing household composition.

Social and cultural changes add to the number of households. There are more single-person households than in the past. Fewer adult children live with their parents; they establish their own homes. Increases in divorce rates result in the division of multi-person households into smaller ones. Family sizes have shrunk; a community may have about the same population but more households.
Minority gains. Ownership among formerly under-represented minorities has increased. Black and Latin home ownership has always trailed that of whites but the past 10 years has seen minorities making great progress.

Downplaying the risks

The Harvard researchers downplay the risk in mortgages with adjustable rates and easy downpayment requirements. Those loans introduce uncertainty, some worry: if interest rates rise, owners could find themselves with much higher monthly payments and that could result in a big jump in foreclosures and forced sales, adding to home inventory and hurting prices.
The Harvard researchers don't expect that to happen, though. Most owners with risky loans have already seen their home values grow substantially. "Having significant home equity is the best protection against foreclosure because homeowners can sell at a profit if they cannot cover their mortgage payments." Home equity accounted for a healthy 56 percent of the total value of primary residences in 2004, the most recent equity data available, according to the study. Ninety-four percent of homeowners had equity of 10 percent or more and 87 percent had equity of 20 percent or more. Only three percent of homeowners had equity stakes of less than five percent.
Even if home prices fall in the next few years, the drops are unlikely to erase all the equity of the great majority of homeowners, the Harvard researchers predict. And the interest rate declines that usually accompany such price drops would enable many borrowers to refinance their homes at favorable terms. All this should help prevent large price drops.

Government influence

Government regulations, by limiting supply, also make it unlikely that housing prices will fall greatly. Land use restrictions, zoning laws and building codes make building housing difficult and expensive.
As Lawrence Yun, managing director of quantitative research for the National Association of Realtors, points out, in general, places with expensive housing are often the hardest places to build. "Builders tell me that getting paper work through in places like Atlanta, Indianapolis or Dallas is a fairly easy process. In other places, such as San Francisco, it's a horrifying experience," he says. "In many areas," says Retsinas, "we see such an anti-development bias. And the trend is to more restrictions, not less, even though markets are softening."

The study's bottom line is that the U.S. economy is sound and that any softening in housing markets should firm up before long. As Retsinas says, however, it's a big country; a lot of different areas have their own characteristics and it's hard to generalize.
"Long term fundamentals are still positive," he says, "but some areas may be more susceptible to a slide."

CrockPot

the sky is falling, you know it, i know it, everyone knows it.

5o9

My only question at this point is: Will my markets be rotten for four years or ten?

It has become critical to pick the right labor markets. Some "overpriced" markets will do fine, others won't.

zeroday

everyone but those dumbasses at harvard right?

Fibonacci

Another reason the anti-immigration crowd needs to calm down a notch.

However, given the balance sheets of most boomers who are leveraged to the hilt and don't have a pot to piss in for retirement, I seriously doubt that they will be a reason the boom will continue.

Bottom line is the feeding frenzy was pumped up by speculative, easy money and those days are behind us.

zeroday

i swear so many people have been brainwashed about this whole bubble thing for so long they forgot about basic rules of supply and demand.

CrockPot

they need to get their heads our of their asses.

Fibonacci

For sure, and if the Bank is gonna give you 100% financing and easy payment terms, you'd 'invest' all your money in fancy cars, women and caviar

100% leverage, interest only, variable rate debt in a rising rate environment. Not a recipe for healthy appreciation.

zeroday

did you not read the article i posted? equity? hello?? according to the harvard study i posted most people have enough equity in their home so that this won't be a big issue.

Fibonacci

Home equity is not a fixed asset. It can decrease as well as increase. It's not like you're gonna run out and sell your home just to capture your equity. And if you take out a HELOC, guess what, you actually have to pay that money back with interest.

zeroday

again, read the article. the majority of home owners will not have this problem. it's only going to effect the big picture if it's a pervasive problem. accoriding to this study, it is not. only in a few risky areas will property values decrease.

zeroday

only a minority of housing markets will decrease in value.
http://money.cnn.com/2006/05/15/real...ices/index.htm

Fibonacci

I read the article, you don't need to restate the obvious. But if you think that 10 year treasuries are going back to 3.07% anytime soon, I'll sell you a bridge to nowhere in Alaska.

If you are a student of economics and have a passing interest in history, you'd quickly discover that the easy money days of the last few years are what fed the real estate boom, and to say that the boom will continue indefinitely is doing a great disservice to those who want to make intelligent investment decisions.

CrockPot

equity doesn't mean shit when their mortgages rise and they can't make the payments. and then what, tap into their equity to help pay their current mortgage...only to increase their monthly dues, and decrease their equity? of course they'll be forced to sell...

and, this isn't even talking about the shithole our economy is headed. we're already poorer from the last few weeks resulting for the stock market, and there won't be any ease from the bear anytime soon.

zeroday

you guys really sound like you know your stuff. where did you go to school? Yale? Princeton?....Harvard?

Fibonacci

I went to the same school as my wacky 'lil buddy M TYPE X

But really didn't know anything 'til I found Azine

zeroday

which would be...

Fibonacci

University of Pheonix !!!














j/k University of Michigan

CrockPot

don't discount that i stayed at a holiday inn express the other night.