[quote=DWCAP]General consensus is that the lower ranges, especially the areas you are looking in, have bottomed and rebounded. The demand levels in your areas at those prices is very high, not too far off of rental cash flow. Basically, I dont think that houses in your area/price are going to keep falling alot. Maybe +/- 5-10%, but the vast majority of the correction is prob over. If you cant take a 5% loss, on paper, I worry about your future as a homeowner.
Having said that these area are also the most sensitive to loan availablility and interest rate affordability. Perhaps I am wrong, but these are the areas I think of being affected the most when I see stories about how FHA is writing more loans than GSE’s. This is neither sustainable or advisable as public policy. (3.5% DP loans with taxcredit kickers stink just like 0% as both are imediatly underwater without appreciation).
I just dont believe we will see the end of the next decade (2020) without some serious inflation, as too many governments owe too much money. You wont see it now, and you wont see it in 2011, so you have time to buy at low interest rates, but dont expect them to last at 4.5-5.5 forever. How do you think streched loans/values are gonna fair when/if interest rates went to a measly 7%?
To make matters worse, I feel that the offical governement inflation indicatiors intentionally underreport inflation. This underreporting does three things, keeps interest rates low as long as people believe it, allows for increasing loose monitary policy (which is politically popular), and sets the stage for reduced liabilities in the world of SS and Medicare in the future. It isnt gonna stop.
So what is the point of all that? If you want to buy a house becuase it is a place for you to live with your family for years and years, then nearly all of the risk is played out and you should PATIENTLY wait for a house to show up that you find acceptable. (The beauty of slowly releasing REO inventory is that it isnt a sprint but rather a marathon and you have time.)[/quote]
I can put down 20% if needed, but it took years of driving a crappy car, living in a cheap apartment, and not eating out often to get the money saved. Anecdotal evidence would suggest that I am in the minority. Seems there are more 1st time buyers buying on a whim doing the 3.5% down FHA loans. That’s my problem. If this is the new standard, and these are the people I will have to compete against, it will change the entry level market because they have a different view on the value of money. Historically, interest rates from the depression era to present day averaged around 8%. If the government ever gets out of the way, I believe interest rates can be there again. Assuming prices adjust accordly, this would drastically change the dynamic between a buyer with 20% vs 3.5%. I do not believe the government can keep rates low forever, but it might be longer than I can stay sane.
