OK, go ahead read my opinion below and LAUGH as you’re all probably thinking about year 2012-2014 for your next home purchase.
Here is why my wife and I plan to buy a home within nine months.
1a) In Silicon Valley home prices are dropping so fast and rents rising so fast that MANY properties are now cash flow positive for renting (based on say 20% down with 30-year fixed)
If your renter is paying off your mortgage, what difference does it make if the value of the home drops a bit more in the few years following your purchase?
1b) We are currently sending our landlord $31,000/year in rent, which I prefer to be using to pay off a mortgage. I also prefer to be getting those tax benefits of paying mortgage interest.
2) This recession and its deflationary forces will push the CPI down near zero, or into negative territory within 9-12 months. With recession going deeper the Fed will again and again lower rates. CONCLUSION: the coming year will offer great opportunity to get much lower mortgage rates.
3) Housing lobby will be successful in passing bill loaded with bonuses for anyone who buys home. We’re talking $15,000 tax credits…etc.
4) As we move out of this recession/depression, inflation and mortgage rates will skyrocket above 10% (yes, actually getting to 10% could take a few years). So buy your home with a fixed rate and then pay the banker back in ever more worthless dollars. We are not buying cash-only so we gotta think about housing bottoms more in terms of actual mortgage payment.
5) Within nine months, housing price declines will be reaching the point of diminishing declines. My theory is that the next nine months will show home prices declining another big step down as unemployment soars (Roubini predicts unemployment rates MIN 8% countrywide and at least 10% in CA). Yet, beyond nine months the additional home price decline will be moderate (5%?)
However, for those able to make their next home purchase as cash-only, then I agree you should wait until the bottom which I expect in 2012-2014
