It’s been a tough market for those who bought homes circa 2005 and 2006, at the very peak of the housing real estate bubble that would eventually decimate, multiple times over, those who thought they could flip a quick profit or generate wealth through a longer term asset. Times were booming, money was cheap, prices were rising, the population was growing and land was a finite resource (unless you happened to be in Dubai, where the Sheikhs were busy building artificial islands).
From the peak through today we’ve seen prices of real estate collapse in excess of 30%, and for many analysts, the recent spate of better-than-horrible real estate numbers suggests that we may be on the mend.
The Wall Street Journal writes Why 2011 May Be the End of the Housing Crash, suggesting that we may have seen the worst of it and providing several indicators in support:
Housing is the most affordable it has been in decades, according to analysts at Moody’s Analytics. They don’t just look at house prices. They also look at incomes.
Nationally, the cost of a house is the equivalent of about 19 months of total pay for an average family, the lowest level in 35 years. Prices usually average close to two years’ pay, although that varies nationally.
Here’s another sign the market is nearing a bottom: Investors have started to buy up houses and condos, in some instances paying entirely in cash. That’s a far cry from the heady bubble days when borrowed money seemed the key to riches. The bubble-era speculators who got burned tended to buy at the peak and borrowed heavily to do so. When the crash came, they quickly saw their wealth erased.
…It’s a sign that these investors are betting on a rebound. Investors buying at current prices are looking for deals, or so-called bottom fishing. They typically like to pay entirely in cash (or with a relatively small loan) to speed up transactions. That can be vital for an investor wishing to lock in a deal fast.
While one simply can’t argue with the notion that house prices are down and compared to four years ago are more affordable today, one must include the cost of living within the analysis of house prices vs. incomes. In the microcosm of the US dollar and housing prices, the decline in housing has far outpaced that of the dollar, so your dollar today buys much more house. However, that same dollar has been absolutely destroyed since 2002, losing 35% of its value against a basket of international currencies. The ridiculousness of comparing one fiat currency to another aside, the trend overall against most global assets versus the dollar is that things are getting much more expensive. Even if housing prices were to stabilize right now, you still have the issue of food, energy, and clothing seeing significant price increases over recent years – and those don’t seem to be headed the way of real estate any time soon.
Not counting the 43 million who depend on the government for food every month and the millions who can’t find a job, those who are gainfully employed will still have a hard time pulling the trigger on a new home buy. Rising prices of essential goods is one reason for the hesitation, as is the possibility of a layoff coming out of nowhere.
Cash sales have, indeed, been a growing part of the real estate market. But is this reason to rejoice? We suspect that these cash purchases are happening on distressed homes, foreclosed homes and tax sales. The price collapse in this particular subset of real estate is likely significantly higher than what we might consider a typical home sale.
The unemployment situation in this country is deteriorating, prices are rising, and taxes can be expected to rise as governments continue to hit budget brick walls. For these reasons and a host of others which we outlined in Economy â€œStabilizedâ€ as Real Estate Prices Continue to Drop, Foreclosures Mount, we find it somewhat premature to suggest that this is the end of the real estate crash.
But is it time to buy?
“Pricing is down so much in some markets that when you analyze renting versus owning it makes much more sense to own,” says Michael Larson, a real-estate analyst at Weiss Research in Jupiter, Fla.
It is definitely bullish. But what about timing?
“Housing prices will probably bottom in 2011,” says Scott Simon, a managing director at money-management firm Pimco in Newport Beach, Calif. He foresaw the housing crash, helping his firm dodge losses that plagued Wall Street.
Mr. Simon says prices might dip another 5%. Still, in the scheme of things, that’s small. Consider this: In some markets, home prices have fallen by half or more since 2006.
Will real estate prices continue to drop? We think so. Will it stop at 5%? Maybe, but remember that we’re dealing with a very volatile currency market, which means that while prices of homes may stop declining, perhaps even start rising, that valuation must be bounced up against other assets – not just the US dollar.
For the average American, if the price of a home were to stabilize at one price for several years, but the cost of rice, gas and electricity go up 50% over the same time frame, then the effect on home purchases will be negative – simply put, fewer people would be able to purchase a home at the same price point as before the rise in other prices. This hypothetical example of valuation also fails to account for the free market effect of prices forcefully going down simply because there are no buyers of means to make the purchases.
Nonetheless, is it time to get out there and buy?
This is an issue we addressed in some detail in a recent commentary Inflation, Stock Markets, Gold, Real Estate and The End Game. It’s a value-based question. What is value to you now, what will it be several years from now, and what are your payment capabilities? We’ll repeat some key points from our previous article below:
If you are looking to flip properties as a business like many did leading up to the real estate detonation, youâ€™ll be hard pressed to generate significant revenue. But if you have other intentions and goals, it might not be a bad time to consider purchasing.
Farmland, for example, is a real estate asset that produces commodities. Unlike a suburban home with no real possibility for production unless youâ€™re willing to do the work, farmland allows a family to generate their own food, as well as their own energy â€“ essentially eliminating the necessity of the â€˜gridâ€™ on which most people depend. Not only that, but outside of major cities youâ€™ve got an extra layer of security in the event of war, economic collapse or other disaster.
Additionally, if the US dollar continues to be debased, which it will given historic trends, we can expect interest rates on homes to start rising â€“ significantly. In the 1980â€²s rates exceeded 15% in some cases. The following example demonstrates why it might not be a bad time to buy now if you expect interest rates to rise:
Home Price: $200,000
Current Rate: About 5%
Monthly Payment: $1073.00
Total Payments Over 30 Years: $386,500
or, waiting until rates rise and prices decline 30%:
Home Price: $140,000
Monthly Payment: $1228.00
Total Payment over 30 Years: $442,000
Unless you plan on paying in cash after the next leg down in real estate, it may be to your benefit to buy now and lock in a decent interest rate, even if you expect a massive decline in prices. Additionally, you may end up paying less simply because of inflation and (hopefully) a future wage adjustment or earnings increase.
For some, buying a home now makes sense. Even if you don’t plan on purchasing a home that will produce food or alternative energy, it may still make sense to buy at today’s lower interest rates rather than continuing to rent, especially when one considers what rents may cost if interest rates do exceed 10%.
We warn our readers, however, that any real estate purchases should be considered a long-term hold. Don’t plan on flipping, or even selling, for years.
Japan’s real estate boom, like ours, was predicated on cheap money and finite land. Inflation adjusted, the decline over the last 20 years has been roughly 75%. That’s a big number. Humanity’s cognitive dissonance response, especially in the Realtor community, will ensure that most analysts and experts avoid telling us how bad it can really get.
While we don’t have a crystal ball, we do have history books and if the real estate markets of today are anything like that of the Great Depression, then we have much farther to go.
According to analysis performed Martin Armstrong of Princeton Economics, during the Great Depression real estate prices in the farming sector fell from $2 per acre to 30 cents per acre. That’s a whopping 85% drop.
But Japan isn’t America and this isn’t the Great Depression, right? So, just disregard everything you’ve read above this sentence.
“is it time to get out there and buy?”
The value in real estate ultimately comes from contract law…the contract law of a stable government. That should worry all of us who own US property. I think we have vast evidence at this point that the US is not a lawful country, has no respect for law, and is becoming desperate to steal assets from citizens. Do you really want to invest in something that could easily be seized or used as leverage against you? I am not proposing that I have a 100% sure answer. But many states (not just Fedgov) are in financial stress. They could raise things like property taxes to extreme levels as to cause bankruptcy and loss of the property. Even if you don’t lose the property, it might be very hard to sell it due to the heavy taxation attached. Regardless of whether or not housing prices have bottomed, consider both the federal and state financial situation…do you really want to buy into that?
Sorry, your wrong, this is the Great Depression. I gov #’s like inflation were’nt distorted when would have neg GDP thru-out the last 2 yrs. There has been no “green shoots” except on Wall Street and that’s Feb funny money induced. All gov #’s are lies including how they count the unemployed….And if we didn’t have food stamps and SS (unlike 1929) we would have the visual effect of seeing our citizens lined up around buildings worse than 1929…..And housing has been declared at a bottom many times in the last 2 yrs…They are wrong. They will be wrong the rest of this decade….I was a builder/developer/investor in the Ca market for 40 yrs….I saw the top and got out 5 yrs ago…To be blunt, these guys doing their research don’t know crap about reality…..Buy a house if you can afford and need a home….Don’t lose any sleep if the value goes down, because it will.
Comments…..The whole idea is to buy low sell hi!
What happens in between is what the game is all about
maybe it’s time to get the o’l monopoly board out and take a couple refresher courses.
Dboy, you make a fantastic point. If one thing is clear, it’s that the rule of law in this country has deteriorated over the last century. It’s worse now than ever before. It’s been a while since I looked up the specifics, but ten years ago there were well over 200 laws/statutes by which the government could seize your land – I suspect it’s much more than that now.
When countries stop respecting the rule of law, capital flees, as do the skilled entrepreneurs and laborers who are able to generate it. It’s as simple as that. In my view, this is yet another reason why we will see a broken down dilapidated infrastructure and populace over the coming decades.
Comments…..you never really own land ,
just the right to pay the tax
I remember Mac’s articleÂ Â Â The Morgage Meltdown Wave Two shtfplanÂ Â . Also searchÂ Â the mortgage meltdown 60 minutes on youtubeÂ Â . As more people educate themselves as to what is happening to this country, the faster this next downturn will take place. It will be the unprepared who begin to panic that will move us into the next level. The proverbial Titanic hit the iceberg in Sept. 2008 and has been sinking ever since. The recent report of India’s central bank moving out of the U.S. Dollar will begin to turn more heads as well. The gradual rise in gas prices are getting people edgy too.Â Be sure to get those prep items you’ve been putting off. The clock is ticking. Gear Up & Good Luck
Here’s hoping we’re at least close tot he end.Â Buyer confidence is certainly climbing in many cities including Albuquerque.
1 in 7 American credit card holders are behind 90 days or more.Â GETTING WORSE.
Personal bankruptcies have been near record levels constantly quarter after quarter since 2002.Â GETTING WORSE.
Last year, only 4 of 10 homes for sale actually sold.Â Even with Obama free money!!Â AND 2011 IS GETTING WORSE.
Unreported unemployment IS GETTING WORSE.
People on assistance IS GETTING WORSE.
All we need now is the Fed to raise borrowing rates to 15% to stave off runaway inflation.
Wages and benefits are going down. IS GETTING WORSE.
Taxes and the cost of everything is going up.Â IS GETTING WORSE.
Yet Obama’s recession ended June 2010.
Excellent point above.
Why commit precious resources to a scheme so obviously corrupt and living on borrowed time.
Anyone with a lick of sense can see there’s a bond market meltdown ahead. That will reek havoc on just about everything.
A home owner is a sitting duck for a corrupt and desperate government to sink its hooks into.
It is very sad for those of us who did our due diligence in buying a home. We submitted toÂ credit checks, turned over our real W-2’s,Â put down our very own sweat equity of 20% andÂ truly qualified to PURCHASE a home. We did not grab or steal the free money or use our homes as a bank to buy foolish things. We did everything right, we we were honestÂ and now we are the true victims of this TRAVESTY of monumental injustice. I bought in early 2003 before the free money, speculation, lying and criminal activity began. SHAME on anyone who purchased a home who could not truly afford it because YOU ruined it for all the good people. SHAME on the lending institutions andÂ Realtors who also added to the sickness and injustice. FREE money is not free afterall. Â
With the laws coming up to allow the banks to foreclose without being able to show the papers, and the fact that some properties have been “foreclosed on” even though they were paid off, means that the real estate marketÂ is going to get really strange without rule of law.
We are about to see another wave of foreclosures… I believe they are called the “Alt A” mortgages. I wouldn’t recommend buying until after 2012, unless you are buying rural property to bug-out to.
Losing some sweat equity would be the best case of the dire crisis we are all in.Â The housing bubble was just another symptom of the terminally ill patient that is the USA.Â We are working our way down Maslow’s pyramid…at different rates.Â I fear the future will be bleaker than the past.
I saw this comment over at thehousingbubbleblog.com and it’s been on my mind since, thought others might find it illuminating:
Like Punxsutawney Phil, the US housing marketâ€™s serial bottom callers have once again made their perennial late-winter MSM appearance for something like the fifth year running (2007-2011). Why is it that they conveniently overlook the many reasons it truly is different this time? These include, but are not limited to the following:
1) The $8K tax credit which was in force from Spring 2009-Spring 2010 had the effect of accelerating home purchases by the few qualified and interested buyers still sitting on the fence. Hence qualified and interested buyers who might otherwise have bought over the 2011-2012 period already bought.
2) Interest rates wonâ€™t stay at a 50-year trough forever, and housing market fundamentals suggest that when they revert back towards historic norms, housing prices will adjust downwards in response.
3) A proposal to wind down Fannie Mae and Freddie Mac is in the works.
4) There is growing political support on both sides of the aisle for ending 90 or so years of U.S. federal housing policy to discriminate against poor renters in favor of wealthy homeowners, including reduction or elimination of subsidies such as the mortgage interest deduction.
5) The recent housing bubble, which collapsed in 2006, was historically unprecedented in the magnitude of price increases above what is supported by fundamentals, such as local incomes and rent on comparable housing; a historical-sized bubble may take a historically long time to correct, and five years is not historically long.
6) Efforts by the Federal Reserve and other federal government entities to stabilize housing prices can only temporarily offset the economic version of the law of gravity; eventually the market will find its way to an affordable bottom supported by fundamentals. Some markets are there already, but many others are not (including SD and DC).
7) Estimates vary, but there apparently is something like 5+ million homes in shadow inventory the US used home market has to digest before the market finally bottoms out.
8 ) The Case-Shiller/S&P Index has shown no sign of stopping its persistent month-after-month pattern of ongoing declines.
9) Oil prices rising above $100/barrel suggest American households will be allocating relatively more of their family budgets going forward to food and energy costs, leaving less available to make the monthly mortgage payment on an overpriced home.
10) Unemployment rates remain persistently high in many parts of the US, and the labor market remains persistently weak, suggesting this may be a very risky time to borrow hundreds of thousands of dollars to finance a home purchase.
11) Lenders have very cold feet about making loans nowadays compared to their eagerness in 2006, back when the saying was that â€œanyone who can breathe qualifies for a mortgage.â€
12) The severe hangover of state government debt coupled with talk of a federal government shutdown calls into question the future viability of government spending and employment to offset private sector weakness in keeping the recovery going.
13) The robo-signing foreclosure document processing scandal had the effect of greatly slowing the rate of foreclosure processing late last year, without necessarily slowing the rate of mortgage defaults. The adjustment will go into either a faster rate of foreclosure processing ahead, or a longer-than-anticipated period needed to work through the mountain of future foreclosures that will come back on the market over the next several years.
14) The US mortgage finance system is indefinitely FUBAR, with only government-subsidized lending propping up the housing market at this point.
If you are willing to ignore all of the above issues and any that I forgot to mention, it may seem perfectly plausible to conclude that 2011 may be the year the US housing crash will end. My impression is that the 5% further decline figure was pulled out of some serial bottom callerâ€™s arse, but if anyone has evidence to suggest there is any substantive analysis to back it up, I would be interested to see it.
Try not to catch yerself a falling knife.
7) Estimates vary, but there apparently is something like 5+ million homes in shadow inventory the US used home market has to digest before the market finally bottoms out.
That is interesting point.Â Anecdotal evidence, for sure, but I’ve noticed quite a few fairly nice ( and newer ) houses around our area that seem ‘abandoned’…..folks have clearly moved out ( yards unkept, no curtains on windows, no sign of anyone living there, etc ), yet no real estate sign in the yard.Â Once I see one of these, I tend to mentally make a note of it and look at it again every time I pass it.
The majority have gone several years now in that condition….who owns them ? Just about HAS to be a foreclosure, yet not put back out for sale ?Â ( At least not thru the standard method of a real estate company )
As a former home builder, I’ve probably been more aware of the real estate market that most, and in 30 years of observation of the local market, I’ve NEVER seen this type of thing going on.
i have one simple big rule in good times. in tricky times this rule gets expanded into a humungous rule. simply put it is
DON’T SIGN ANY GODDAM CONTRACTS (PERIOD). WALKAWAY….
think about this. if you can’t afford it don’t rent it…..
Boone: Â home ownership is exactly that. Â An investment like stocks; taking a chance every time you buy a house because eventually everyone sells. Â Is renting better? Â In many cases, yes depending on location, timing, etc. Â It’s really all a game you play to win/make a profit.
That is likely the best advice anyone has ever put on this blog.
The only law left is contracts.Â There are two types.Â Legitimate contracts you signed, and presumed contracts you are under with the government which you have never signed (thus do not exist).
If you are ever summoned into a court, make sure you obtain a copy of the contract at issue.Â If you are called into court to represent a Social Security Number, you may as well stay home.Â The court recognizes no rights for you because it OWNS the defendant you are presumed to be surety for.Â If you answer to it, you are screwed.Â If an attorney is involved in issuing the summons, it is official government business and you are not authorized or licensed to represent the defendant (government entity).
Nothing you say matters, only the contract you SIGNED.Â If a legally executed contract can not be furnished, there is no dispute the court can resolve.
Like the shroom said, DO NOT SIGN ANY CONTRACTS.
I will add, do not allow the government to PRESUME you are under any obligation to it without furnishing the contract that spells out in writing the obligations and consideration of ALL parties to it.
These are the most intelligent responses that I have seen to one of “these buy housing now” analysis.
You have to wonder if these guys are not paid to write this stuff. I smell another housing stimulus coming. They have captured all of the $8,000 people that would buy. They will now move the ante up to a new level. I used to think that it was to support the banks but more recently I think it is just wealth extraction.
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Real Estate Crash over?Â What are they smoking!Â I believe there are a lot of state and local government jobs that are going to be eliminated the next six to nine months.Â How many of them own houses?Â A lot of them.Â If they can still afford the house they are in; great, but not many of us can live on one or no income for long. This does not even take into account that employment/unemployment has a snowball effect.Â The prospect of a large portion of the population going out to buy homes with food and gas prices on the rise makes zero sense.Â I think the housing market will drop another 15-20% in the next 18 months, possibly more if the market takes a crap.Â Those dudes at WSJ are drinking the same water as the rest of the media.
Many of us that paid off our mortgages find it sickening that most dead beats are living scot-free in their houses for years before the bank finally kicks them out.
Those that played by the rules and paid their bills are always the ones that also pay for the mistakes of the irresponsible deadbeats.
I didn’t get Obama money for a clunker.
I didn’t get Obama money for weatherizing my palaces.
I didn’t get Obama money for buying a house in a depreciating market.
I didn’t get any assistance to go to school, I didn’t go.Â Being a college grad doesn’t mean you are a smarter wage slave.
Each year I have to pay the IRS extra.
I end up paying for all of you deadbeats that get free lunches and tax refunds.
You deadbeats are the same ones that insisted to stay in New Orleans even though the national weather service gave you three full days warning of landfall of Katrina.Â And then you were on TV blaming Bush for not giving you a free everything for the rest of your life.
THE TAXPAYER SHOULD TAKE TO THE STREETS AND STRIKE UNTIL THE GOVT SIGNS A NEW LAW ENDING ENTITLEMENTS.Â YOU DON’T WORK YOU DON’T EAT.
Why are we still talking about real estate? Maybe because the government wants us to all buy homes and keep this zombie economy going. I rode that real estate bubble and got out as it was crashing while the bubble heads on TV said it hit bottom in 2009. The first shock wave hit August 2007, and then we had trembles throughout the past few years thereafter. I know, I was right in the mist of it! The big one is coming and real estate will get clobbered again, worst than before. Stay away from real estate, find the new bubble. Itâ€™s not in real estate!!!
Been a lurker for a while now. Felt compelled to respond to this.
We’ve been looking at rural property now for four years. It’s been a circus. Just yesterday we had yet another house fall thru due to a banks arrogance.
It was a short sale that previous buyers walked from. We loved the house and put in a full price offer as we knew it was priced well. The bank (ING) took their sweet time giving us answers we needed to plan and move ahead to get inspections etc and as a result we could not close on time because of their lack of professionalism. We asked for a 10 day extension and gave them EVERYTHING they demanded of us to do so and they still denied our simple request of 10 days extension.
Mind you, this house has been on the market for a year. So basically they asked us for everything but our firstborn andÂ threw away a for sure thing (us, well qualified and had everything lined up including a renter for our current house) and now the house we wanted to purcahseÂ goes to auction on tomorrow. That is, unless the owner can file BK in time to stop the foreclosure. They were pissed enough to do it too – just don’t know if there is enough time.
We are a family of four. I am a prepper, but new to it. Our kids are in Elementary school and we own our current home that we can rent for a $800 a month profit. We have known since we were teenagers that there will be no SS for us to retire on – we are in our early 40’s now. We were counting on a little real estate to help pad us in our retirement and the banks have made it impossible.
They have also made it impossible for those trying to save their homes. My brother tried to save his and he was told by the banks “if your not a mexican – we can’t help you.” (We live in CA). He lost it is now a renter himself.
After four years of serious looking there have only been less than a handful of houses that meet our criteria and every one of them have been short sales because that is mostly all that is out there where we want to live. It’s been a nightmare and I would not recommend it for the faint of heart.
The banks don’t give a DAMN about us. They have our bailout money and to them we are nothing more than a bunch of taxpaying sows. They make me sick withÂ their blatant greed, hubris and coldnessÂ and I hate them. I hope they sit on those 5 million + foreclosures coming down the pike for a VERY LONG time.
Between my anger at them and the govt, I feel like Im going to pop sometimes. Things are not getting better, they are getting worse on a daily basis. Somedays I wish I could just fall asleep for a few years and wake up when this nightmare with our country is over. We are honest God fearing people who have always done things right and feel like we are over a barrel by all the greed and dishonesty going on around us. Makes one want to check out or just give up.
Moody’s Analytics; are these affiliates with the same folks that rated junk tranches AAA?
Larson and Simon say stabilized in 2011?
So no shortage of houses and building is down, where are the buyers? Perhaps there aren’t any because no one else can afford to buy. Maybe the vast majority of the families that would qualify for a old-style mortgage already own a house or (shudder, shake) a home.
Houses can be homes, but homes aren’t just a house. When you build a home, you build a dynasty.
I need some info from you if you will pleaseÂ [email protected]
I’m a real estate broker/company manager with almost 20 years’ experience. If you are thinking of buying property, I urge you to wait.
2011-2012 will see a wave of additional foreclosures, due to ARM adjustments, at least as large as the wave we’ve seen already. The huge volume of foreclosures will require processing for years beyond that. Deteriorating economic conditions and rising unemployment (yes, real unemployment is rising) will produce even more defaults. The result will be a dramatic further drop in home prices. There is no real estate business anymore, only a foreclosure business.
Additionally, the US government announced last week it will be withdrawing from the mortgage market. The times of real estate as an equity-building investment are over. The housing market will continue its collapse for many more years. Do not buy anything unless the price is very low and you plan to stay there forever. If you can buy farmland away from the cities, you are blessed. Be warned and be well.
@ NunJoBiznessÂ Â You are not alone.Â I too sometimes wantÂ to fall asleep & wake up later.Â We’ve even considered leaving the country but all our family is here plus the U.S.Â Govt chases you down for years for tax money even after you leave!!!!Â (unless you give up your citizenship)Â Plus we are American.Â We owe it to our fellow citizens to ride the wave (I guess).
We are also a family of 4 except my kids areÂ in middle & high school.Â We’ve been looking at rural property but not serious enough to buy yet.Â Â I trulyÂ feel that land is about the only thing that will help us withÂ the dreaded inflation that we all KNOW is here and we all KNOW will get worse.Â
Good luck, the right piece will come along.Â You can always mosey on over to Georgia.Â Land is something we have plenty of 🙂
When your house is paid for, who cares what the market does or doesn’t do.
My advise to customers is; If you don’t have to buy now, don’t. With everything going on in the world today and the dollar loosing its world reserve status, I’m worried.
Every month now other nations are clearing their international trades in their own currency, not dollars anymore. First it was China and Russia, now its China and India.
Our leaders are asleep at the helm and we are heading toward the rocks. When oil starts clearing in other currencies we are toast.
The world is moving away from the Dollar and the US. Now with the unrest in the Kingdoms, the Kingdoms want to be friendly to save their own asses. When the first Kingdom falls, all hell will come against us.
I know many are wondering why I’m talking about Currency, Kingdoms, China, India, Russia and oil when I’m talking housing? Because any issues involving these would collapse our economy and housing prices.
If you believe the MSMÂ thatÂ Liberty, Democracy and Peace is breaking out in the Middle East and Far East, go buy a house. If not, lay down until the feeling to buy a house goes away.
Housing is only worth what someone is willing to pay. I know everyone wants to see the bottom, but its just not there yet and may not be there till 2014 or 2015.
Let’s face it folks if America collapses, do we really have anything? Do we own anything? Do we evenÂ have private property rights?
We can play numbers games all day for and against buying real estate today vs. tomorrow. Logic and wisdom says wait.
I was going to point out a slew of reasons not to buy real estate anytime soon, but clark already put up a very good post summarizing the main points, and others have added some others as well.
What stinks (my 2nd use of this word today here on shtf) is the assertions on behalf of the Wall Street Journal amounts to nothing short of BOLD FACED LIES.
A little math will expose the lies. For instance, “the cost of a house is now the equivalent of 19 months of total pay for an average family”. Really? What does anyone suppose is the median cost of a house now? It was just over $200,000 4-5 years ago. Let’s say it’s down to $150,000, a reasonable assertion. That amount divided by 19 months gives a value just short of $7,900. This number, in turn, multiplied by 12 should give the average total pay for a family of four. Answer – almost $95,000! Really? So the “average” family is making almost $100 G’s now? Wow, I really screwed up in majoring what I did in College.
Now take the 2nd part of that bold-faced lie – “…the lowest in 35 years.” So we’re to believe that housing affordability is the lowest since 1976? Really? How is that possible given this:
1) Housing prices went up annualized 3-5% between 1976 and 2005, before the bottom fell out of the market
2) “Real” median incomes have been steadily falling since 1973, thanks to the rising cost of living mainly due to the depreciating dollar
So here we have the Wall Street Journal painting a dishonest picture by equating “housing affordability” with gross incomes as opposed to “real” incomes. Wow! Makes all the difference doesn’t it?
Please don’t be fooled by these ridiculous MSM articles. They are filled with nothing but lies.
One other thing. It’s almost spring. The timing of this article is not coincidental. Gotta get the buyers in the right mood after all!
Ok, two things. Hyperinflation will kill what’s ever left of the housing market, even after all the ALT-A resets and interest rate hikes once Berstanke starts getting serious about combating inflation. Kill it for the banks that is and anyone who is already underwater or close to being so and have to sell. If you are lucky enough to still have a home by the time hyperinflation starts and you’re in good standing with the bank, you just may be able to pay it off if you play your cards right (and you’re prepped everywhere else), if the government doesn’t do anything stupid that is. Which is a very big IF.
Fifth Third actually sent us a letter making the suggestion that we pay half our monthly mortgage every two weeks and save a bunch in interest…we are still alittle confused as to why they would be doing anything to help us???
If the Fed keeps printing money, then RE may begin going up because of all the counterfeit money in the system, but at the same that RE is going up 10% a year, GOLD will be going up 50% a year.Â Both will go up in nominal terms, but only GOLD and other PM’s will go up in real terms.
Forget RE as an investment for the forseeable future.Â Focus on precious metals, especially silver.Â If you need a house to live in or a place to bug out to, then, yes, get some RE, but not as an investment.
I also wouldn’t get too worked up about mortgage rates going up.Â The Fed, Fannie Mae, and Freedie Mac are buying about 90% of all mortgages, so they will keep mortgage rates down in order to keep the RE market from imploding even more than it would otherwise.
Remember we’re not in a free market and haven’t been for about 15 years, give or take.
Made an error in previous post.
“Now take the 2nd part of that bold-faced lie â€“ â€œâ€¦the lowest in 35 years.â€ So weâ€™re to believe that housing affordability is the lowest since 1976?”
Should have said:
Now take the 2nd part of that bold-faced lie â€“ â€œâ€¦the lowest in 35 years.â€ So weâ€™re to believe that housing affordability is the highest since 1976?
Even if the economy was stable, the elephant in the room is the numbers. No not the 69% of the homes in Arizona for example which are underwater (insert your state here); nor is it the ten million potential florclosures to come.
The demographics for real estate are OVER. Period.
Mac, can we take up a collection for OTE? Dial up? Man, how do you do it?
Where I live in rural Alaska, there is only the unorganized borough (Ak has boroughs rather than counties). No local government and no property taxes. At least a couple of times, there has been a legislative effort to force us to organize into a borough.
Each time I fought it for 1 big reason. The Trans-Alaska Pipeline (TAPS) runs N-S the length of the proposed borough. This was identified as the primary tax base.
My argument has always been, NEVER FUND LONG-TERM with a declinig asset. Government is about as long as you can get.
So what does this have to do with the article? Buying a house is a long-term project. In our declining economy, how can anyone assure a long-term funding source aka job security and wage stability?
Few realize that once you move in, moving out is financially impossible and still retain any assets of value. Remember, the homeowner lacks the financial assets to keep up the mortgage payments and therefore it is logical to assume that they lack the assets to move out and into a rental. Ergo, hard assets must be sold quickly at a substantial loss.
Do as you will. Be foolish enough to buy around here, an if I have some money, I’ll bottom feed your few assets that might be usable.
I’m telling my age. I can remember when I had a blistering 1200 baud modem and all bulletin boards were long-distance dial-ups. Dial-up today is beaucoup fast compared to the early 80’s. I can remember when every area had printed newsletters. Imagine a dialogue that takes days, weeks or months to complete. If I really need broadband, I can go to it at friend’s or the library and use wifi.
I don’t reccomend poverty*, but it has taught me frugality and thrift. I learned to fish, so no fish need be given.
*Poverty: an arbitrary income level set by some so-called authority that has no bearing on wealth accumulation. When income is > out-go, you accumulate wealth. Income level is meaningless in this case.Â
Those who assume that the so-called wealthy own “free and clear” fail to realize that these folks are just as leveraged or more and their fall will be spectacular. The higher up the ladder, the harder the fall. Now consider the lifestyle changes for them to survive compared to those who have months or years of experience at poverty levels. Homo sapien has lived at an unsustainable level too long to remember what it was like to live within their means. Survival is ALL about adaptability to the changing environment. This demands observation, analysis and avoidance of counter-productive activities. Ergo, real estate purchasing during this reset is a loser’s game. Selling prices will continue to decline and/or decline relative to income levels. It is all about inventory. Yeppers, that ole supply/demand curve. If you aren’t in the market, you are NOT demand.
Thanks GAMom, SB and everyone else. With this last house that just fell thru – I for once put it in God’s hands. Wherever the chips may fall we have to take what the good Lord gives us (or doesn’t). Im a firm believer that the reason and truth of our situatuaion will reveal itself at some point in time – might even be years down the road. Things are so crazy now, who knows what the future holds for all of us.
It’s comforting to know that there might be other oppurtunities out there for us with falling house prices. We are lucky to have an affordable home in a decent area now. I just wish it wasn’t in California and that it had more land for me to garden. Im a native of CA and I feel like a fish out of water – I no longer fit in and I am tired of the total madness that eminates out of this F’d up state. I hate it here, but was trying my best to “bloom where I am planted.”
One more thing, SB or anyone else – Can you please tell me why the bank would deny an extension to us? I hear foreclosures cost them $65 K to process. It just doesn’t make sense for them to turn down good , serious, qualified buyers only to lose money months later. We offered $303K that was accepted. I doubt they will get $365K in the coming months for the place and even if they did they’d break close to even.
Do they know something we don’t? What gives with this BS? Everyone involved with this transaction is totally dumbfounded at why ING would do this…an asnwer would be comforting so we can make a little sense of this.
amerika is 64 trillion in real debt!!! the pentagon stole 3.6 trilion from you on 9/11… the usa amerikaÂ is already bankrupt… she went belly up in 2008 folks… right now she’s surviving on printer pressÂ life support and she will die as soon as they print off all the money they can – completly destroying the value of the dollar!
china and russia are already dumping dollars, have been for a while now… they know the score!
get out of the dollar into commodities now while its cheap… guns ammo gas gold silverÂ foods water etc etc
it’s only a matter of time now… only a matter of time… it’ll happen when it happens… remember CANADIAN TROOPS AND MEXICAN TROOPS ARE NOW LEGALLY ALLOWED TO ENTER THE UNITED STATES AS PEACE KEEPERS… AS OF LAST WEEK!!! SO LEARN TO SAY F. U.!!! IN MEXICAN NOW!!!Â Â Chinga tu madre !!!
arm up stock up prepare, predator or prey the choice is yours!
Comments…..There are two types of mortgage bailouts. A) You can get a refinance at a much lower rate, However, you need A+++++++ credit and some equity in your home to get it.
B) You can get a home affordable refinance where you can get up to 125% of your current homes value, However, it has to be a FREDDIE MACÂ or FANNIE MAE loan and you have to show real hardship (be out of a job and be way behind on your mortgage – which will ruin your credit score) in order to get it.Â A bad option if you also have credit card debt. You will brobably be faxing paperwork back and forth for months with no guarantee of a resolution. A BK might be a better option
Therefore, I am creating a new system that I want to test pilot.Â It is for people like myself who is trying to do things the right way (pay bills on time and avoid BK (you can file for BK protection which will stop creditors from trying to collect, but you can get case dismissed if your situation changes).Â You have family, friends and strangers help you pay down your mortgage. It is called outrunthestagecoach.com
P.S. I don’t have governor Scotty’s money so I am Spending Pennies Advertising Man (S.P.A.M.)
Just got the new government numbers on median housing prices – $175,000. This is even worse than my previous analaysis!
In other words, the Wall Street Journal is asserting that at those prices the “average” family of four can afford to buy a home since the sale price is now equivalent to a 35-year low of 19 months salary. So, again doing the math:
$175,000 divided by 19 = $9,210 (this is the salary per month required)
$9,210 x 12 = $110,500
So, the average family of four makes $110,500 in this country! Woo-hoo! So if that’s true what am I doing wrong?
Maybe the answer lies here:
Nationally, the cost of a house is the equivalent of about 19 months of total pay for an average family, the lowest level in 35 years. Prices usually average close to two yearsâ€™ pay, although that varies nationally.
Did you catch that? Total pay was used to calculate this. What is total pay? Could it possibly be the sum total of gross pay plus your other benefits… you know, healthcare, pension, etc.
Does this even make sense? Why use the number for total pay?
I think most readers can figure that one out.
Anonymous at 2:06 pm asked, “Can you please tell me why the bank would deny an extension to us?”
Because the bank has already been paid in full. It’s likely they would make money by repossessing your home and selling it for less than you offered.
That’s another reason strategic defaults are rising and more People are opting to rent.
For more insight into housing prices and other financial shenanigans, visit thehousingbubbleblog.com
That and go see the film – Inside Job – it’s a real eye opener for some.
Do you really want to buy property?
Court case warns EPA could ‘own’ your land!
Petition to Supremes cites danger of ‘ruinous’ compliance order fines
Read more: Court case warns EPA could ‘own’ your land! http://www.wnd.com/?pageId=267893#ixzz1FbTeFs2c
Wow, just read that article linked above. That goes to my original point very well. If the EPA or the IRS or any FEDGOV thinks they are the real owners of your land, then why on earth would you put money into it? Why invest AT ALL? FEDGOV is in the process of regulating the country to oblivion. Get wealth out of USD, and get it out of the country, as soon as you can. That has been my mission for awhile now; it’s been a slow process; so better start now.