[quote=bearishgurl]The way I see it, Scarlett, you can’t speculate across the board what will happen with interest rates as a whole in order to make an educated buying decision. They will fluctuate throughout your lifetime and in ALL times good opportunities exist to buy and sell RE. All you can do here is study your OWN market of interest to make an average determination of (1) WHO are the typical homeowners in your own market of interest? (2) HOW do these homeowners make their living? (3) What is the average length of time of homeownership there? (4) Why do these particular types of homeowners own in this particular area? (5) What is the ratio of homeowners to renters there? (6) What is the ratio of dual-income (or more) households to one-income households there? (7) What are the carrying costs for a homeowner in this area and what services do they include? Would I use all those services? (8) What would my daily life be like if I lived in that area (commute, etc)? (9) What could I likely get for rent on a consistent basis in any market if I had to move away for job or family reasons? (10) What is the current percentage of distressed properties in this area (“short-sales,” filed NOD’s and NOS’s, REO’s)?
If your window of ownership is intended to be long-term, ask yourself if the property would still serve your needs if you were at a different “station in life” than you currently are. If you are short on downpayment funds, ask yourself if the typical seller in this area has the ability and willingness to assist you (i.e, OCB, 2nd TD, straight note or balloon payment for 5-10 years).
IMO, a lot of distress in an area does not bode well for the stability of the typical homeowner there. Also, in tracts (NOT typically custom areas, which are a different animal) where dual income households prevail and also a predominance of households consisting of cultures where it is commonplace to have 3+ monthly incomes coming in will tend to be more stable (read: generally less distress) than areas where there are mostly single-income households, IMHO.
Even if you should purchase a “short-sale” or REO yourself, it may not end up being a “good investment” if there are many more “short-sales” or REO’s still “in the pipe” in that area.
IMO, you should really just focus on your micro-areas and again, in this economy, the most important questions to ask yourself are, WHO are these homeowners, HOW do they make their livings, and HOW long have they owned there? IOW, is the area stable :=][/quote]
FWIW, single-income families are often more stable than dual-income families if both are living at the max budget. The SAH spouse represents potential income-earning capacity, whereas the dual-income family has no additional income-earning capacity, barring someone getting a second/third job.
If you look in the “rich” neighborhoods, you’ll often find at least one person at home during “business hours.” That’s also the same for very stable communities filled with retired folk who have their houses paid off. It’s the middle class neighborhoods where both people work outside the home that are least stable during an economic downturn, IMHO.
Elizabeth Warren explains here why the dual-income household has not benefitted us nearly as much as people would like to think. As a matter of fact, the prevalence of two-income households constrains people’s options because now prices are set by those with multiple incomes per household — forcing EVERYONE to take on multiple (paying) jobs per household if they just want to keep up.
Here’s her book, The Two-Income Trap, which goes into more detail:
