Another reason: say you want to sell your house before prices ratchet back up to today’s levels, so within the next 15 – 20 years. If you wish to leave San Diego for your big job opportunity, you could find yourself upside down on the mortgage.
Interest rates would have to double to 12% before you reach a payment equivalent to today’s payment. Assume a $950K house at 6% today, vs. a post-bubble $475K house at 12% interest. Both have annual interest of $57,000 in the first year.
Against that, weigh the interest you’re earning on your nice savings (hey, good job on saving that much!). Do you think it’s likely that interest rates get that high, to 12%? They could, so that’s a definite consideration.
Some folks may not want to wait until the last dollars are eked out of this bubble. Perhaps you will wait 2 or 3 years to get in. You will come out ahead by waiting.
By summer, everyone will know the spring rally didn’t happen.
I spoke w/ a realtor today about his listing that shows a Trustee Sale on RealtyTrac.com. His listing is on my friend’s street, and she and I discussed taking our kids on a fieldtrip to the courthouse next week to see the auction. It turns out they just got an offer on the house, and asked the bank to withdraw the Trustee Sale and accept the offer. The realtor told me the foreclosures are just starting. He sees 100-200 every day (week?) on RealtyTrac, and knew years ago, when exotic loans were popular, that this would be the result. He told me there will be a huge wave of foreclosures later this year, as more people lose their homes because of these loans.
My husband is dreaming of buying a house near the beach. By 2010, I am sure our money will buy a house on the beach.
