O.T.> Bubble burst

[2nd Mustang]

What is your take on the housing bubble? Looks like the market is slowing down. I personally think prices will dip way down eventually. The average college grad can't afford to buy a house these days, much less a high school grad. Yes, I know there are success stories of people making tons of money, but it doesn't look good for the average worker.

 

[jikelly]

It depends on where you live. Houses aren't extremely expensive here in west Texas. My Fiancé bought a 1400 sqft, 3 bedrooms, and 2 baths house in November. It cost 84,000. She makes around 34,000 a year. Of course with myself and our roommate living in the house helps make things affordable. It is way cheaper than renting an apartment or houses that size, and there is a garage.

It works out to 400 bucks a month for each of us. Just don't tell the city of Lubbock because they have a law against 3 unrelated people living together in a home. I think it's a pretty stupid law, but I'm a college student and that is who the law is directly aimed at controlling. It would be in a group of student’s best interests to purchase a house since it is cheaper than renting and you are sort of a homeowner. Well you know the man, always trying to keep a brother down.

 

[StangDreamin']

It depends on where you live. Houses aren't extremely expensive here in west Texas. My Fiancé bought a 1400 sqft, 3 bedrooms, and 2 baths house in November. It cost 84,000.......

Wow! How old is your house, that you got it so cheap???

Seriously; out here in what even Marines call Bum-F***-Egypt (just ask sywalker), housing prices are waaaaaay past that. Trust me, we just re-fi'd our 1300 SF 3br, 2bath house and the appraisal came in at $130,000; with the notes that it would bring in much more with a new roof, new back fence and landscaping work; and this is a 50-yr-old-house on a dinky lot!

(Of course its relative value amongst those for sale in Yuma may have risen somewhat in the last 24 hours; inasmuch as it's about 4-1/2 miles northwest of a subdivision with 1800-2100 SF houses and an AV-8B Scarier in the ground)

 

[2nd Mustang]

Just don't tell the city of Lubbock because...

Okay, I won't tell anyone in Texas. (Inside joke about the Texans that own the company I work for)

 

[t_chelle16]

We got our house back in '95. When we moved in, it was livable, but needed a lot of updating & remodeling (which we are currently doing). It was built in the 50's, was around 1300 sq ft, 3 bed, 1 1/2 bath and a fairly large, unlandscaped yard. We got it for $55,000 which was about $5,000 under appraisal.

Now, 10 years later, houses in similar shape to what ours was are going for the mid 70's. By the time we get done remodeling (new wiring, sheetrock, redone floors, completely new kitchen & bath, added rooms, the works) & landscaping (very nice goldfish pond, lots of flowerbeds with low maintenance plants, terracing the lot so it's more usable, flagstone patios - better than some of the "professional" jobs I've seen around here), I expect it to go for the mid 90's easy, maybe even 100's (definitely 100's if they start moving more people to the base).

Of couse the same thing in the suburbs of KC would go for about $200,000 - $300,000.

-Chelle

 

[SadbutTrue]

well, what seems to happen in past trends is that housing prices will cease to climb as fast, but probably won't actually drop. what you'll probably see is prices sort of fix relative to locale a little bit. ie - a 2 br 1.5 bath house in socal will cost less than a 6 br house in the midwest, as opposed to now where both go for 600,000 bucks. But will it the prices ever truly be reversed and evened? Probably not.

 

[2nd Mustang]

well, what seems to happen in past trends is that housing prices will cease to climb as fast, but probably won't actually drop.

I think housing prices will drop, due to the fact that income really isn't keeping up with inflation, and that younger home buyers really can't afford the housing prices of single family homes. I know of married couples with 6 figure incomes (combined) that have to settle for a condo and even have to use creative financing at that. Here in the So Cal area, I work in some really nice areas, $500,000 to $600,000 will buy an AVERAGE old three bedroom home. I see lot of foreign money buying these homes.

It used to be that about 25% of your gross income per month went to a mortgage, but now I hear of people using 40-50% of their gross income for mortgages. Unless income rises dramatically, the only home owners will be foreigners bringing in money into this economy.

Just my opinion.

 

[mustangdave]

I don't think house prices will ever drop. To own a house you will have to have a larger downpayment to decrease your monthly installments. OR buy a $21,000 piece of crap that is falling down. When it is paid for in five years, I will probably tear it down and build a nice house or haul in a modular on this nice 1 acre lot. I couldn't rent as cheap as my house payments ($350 per month). In the meantime I try to save money for the new house.
I have rewired myself, redone some walls and carpeted to make it liveable. I also do some landscaping when I can afford it so the lot will be like I want it. I found renting large equipment and doing the work yourself gives better results at the same or less cost than a pro.

 

[Platonic Solid]

After the market crash, I stopped investing in stocks and put most of my investments into real estate. My primary residence, purchased in 2000, has more than doubled in value over the last 5 years. Most of this unrealistic growth can be attributed to falling mortgage rates. When I purchased this house my rate was almost 9%. I’ve refinanced a couple times to my current rate of 5.75%.

Though purchase price is important as far as equity is concerned, most people buy a house based on monthly payments. Principle & Interest payments on $100,000 for 30yrs. @ 9% fixed = $805 / Mth, compared to 5.75% = $584 / Mth. That’s a significant difference ($221 / Mth). Today, that same $805 monthly payment permits you to borrow approximately $140,000.

As mortgage rates start to climb, you’ll see the market flatten (first in locations that have seen the most dramatic increases). If rates dip, the madness will continue.

The biggest equity gains will be realized by buying a house during high interest rate years, thus housing prices are forced down. Conversely, the biggest losses occur when purchases are made during low interest rate years, thus housing prices are forced up. There are exceptions to every rule, but this one is very basic and important to understand.

 

[2nd Mustang]

I was actually living more comfortably when I was paying a 9 1/2% interest mortgage. I had three cars, wife didn't work, a pool, went on vacations every other year, etc.

 

[jikelly]

Our house was built in 79. It's really nice, but we almost bought a bigger one for about 20,000 less. That house was 10 years older and unfortunatly had some problems with the roof that made us look elsewhere. Hooters is hot BTW. Lubbock is a much better place since we got one opened here. our house is only 5 blocks from Hooters. Hum, I wonder if that will raise the value of our house?

Yeah housing prices in Cali are crazy. I don't think that we could even afford the rent on a closet if we were out there. Texas is trying to fix housing apprasials in an effort to prevent houses from gaining value.

The 24 hours of Le Mans is on right now!

 

[Max Power]

Housing prices are directly tied to mortgage rates. Pretty much everything Platonic says above is true.

I paid 113,000 for a 1000 sq foot house in December 01 and refinanced 14 months later with an appraised value of 157,000. I couldn't even touch a livable house here for under $100,000.

What tells me a correction is near is the number of ARMs and Zero Principle loans are being written. 25% of homes are now being purchased by investors instead of residents, and over 30% of loans are not fixed rates. That is a lot of stupid activity and there is a correction just around the corner.

 

[86sebring]

For $550'000 you can buy the tiny, 80yr old 2 bdrm townhouse( attached on both sides) that we are renting. Landlord wants to sell it soon. Crazy thing is, he will actually get that amount. Its all about location. The closer to the city, the higher the price.

 

[hungrymonkey]

housing prices in this part of Oregon are very high. 1300 sf on a smaller lot will go for an easy $150,000.

My parents house is valued around $450,000. They paid $125,000 for it back in 1987.

Its a sellers market right now. Houses are being bought the same day they are put on the market at higher than valued price.
Which really sucks for my wife and I right now. we are looking to buy next year.

 

[StangDreamin']

Same thing here. I already mentioned what our house just appraised at for this last re-fi. ($130k, and it needs a new roof). What I didn't mention was that it had appraised not 8 months ago at $82k. Actually, I wish I had done the roof back then.... housing prices in our late-1950's subdivision have increased on average 88.9% in the last year

 

[2nd Mustang]

Its a sellers market right now. Houses are being bought the same day they are put on the market at higher than valued price.
Which really sucks for my wife and I right now. we are looking to buy next year.

The housing market used to be like that here last year, BUT now houses are up for sale a little longer and open houses have started again. My son just got a new job which will allow him to buy something at the bottom end of the market now, but he's going to wait and roll the dice that the values are going to drop here in So Cal. One indicator that high paying jobs are scarce now is that computer programmers that commanded 6 figure incomes, now are settling for 5 digit incomes just to get work. Another one is the company I work for as a technician. We used to hire in bunches every 10-15 years, but now the least senior tech in our group has 22 years of seniority. I myself have 33 years and am not at the top of the seniority list.

 

[DarkBuddha]

Though purchase price is important as far as equity is concerned, most people buy a house based on monthly payments. Principle & Interest payments on $100,000 for 30yrs. @ 9% fixed = $805 / Mth, compared to 5.75% = $584 / Mth. That’s a significant difference ($221 / Mth). Today, that same $805 monthly payment permits you to borrow approximately $140,000.

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...

 

[1320stang]

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.

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...

Actually, he's right. My house appraised for just under $140k when we refinanced recently and with PMI, insurance and taxes our payment is about $830. It's all about location. Oh, and my house was built in '98 and is 1760sf on 1 1/2 acres of land in the country in a home owners association that has 90 lots that are all 1 1/2 acres.

I hope the housing market stays viable, I'm getting ready to parter up with a money man and I'll be building houses on the side. Our first house is going to be in the $250k-$350k range in a gated neighborhood with community pool and parks. Haven't picked out a plan, but it shouldn't be over 3500sf as most homes around here sell for $75-$120/sf depending on location, amenities, and comps.

We find lots of people moving in from the coasts that lived in 1500 sf homes that now live in 3500 sf homes and think they're royalty, LOL!!!

 

[DarkBuddha]

Actually, he's right. My house appraised for just under $140k when we refinanced recently and with PMI, insurance and taxes our payment is about $830. It's all about location.

Really???? You actually re-fi'd at $140K, and got payments that cheap??? Damn earthquakes and hurricanes must really drive up PMI, and I already knew that coastal living drove up property taxes. I need to move to West Virginia or something... Nothing ever happens there and I hear you can still by 4 bedroom "mansions" for under $80k.

 

[1320stang]

My PMI is like $36 or $42. All we gots to worry about around here is 'naders and psycho militants, but as long as you don't live near a gov't building, I think you'd be alright. Cool thing about Oklahoma is the low cost of living and your halfway to just about anyplace in the lower 48.

You can pick up 20 year old 3 or 4 bedroom homes for $75k-$85k depending on the area around here.