BUY REAL ESTATE NOW

[an]

[quote=briansd1][quote=AN]Today, we’re at 50+ years low, do you think it’s as wise to go with ARM as the 1980s, when you were above historical average?[/quote]

I think it depends on your holding period. If you want to buy for 7 years and then move up, then I think an ARM might be the way to go.

The difference between 4% and 2.75% is huge in terms of percentage. Maybe go with the ARM and put the difference towards paying down the principal.

I think that rates will stay low for the next 5 years or so because that’s how long it will take the western economies to work out the debt overhang. By that time we would have had our own lost decade of slow economic growth.

IMO, as long as economic growth does not get stronger, central banks will work extra hard to keep rates low.

I think that 1963 to 1983, roughly a two decade stretch, was a different kind of economy. Population growth was strong. People were buying cars and new technology. The babies boomers were moving to the suburbs, installing central air, and enjoying things their parents never had growing up.

Anyway, time will tell… in 5 to 7 years, we can look back just for fun.[/quote]
I agree with you that it all depends on your desired holding period. If you plan to hold for only 7 years, getting a 7/1 ARM is almost like getting a FRM, since rate won’t change for you at all. Even if rate goes down, you won’t get the lower rate. Unless you’re talking about getting a 1/1 ARM.

You say rates will stay low for the next 5 years, but you didn’t say wether it’ll be lower than it is today or higher and what’s consider low? Considering historical average is ~8%, isn’t anything <8% considered low?

I agree that as long as economic growth doesn't get stronger, the central banks will work extra hard to keep rates low. For our sake, I hope we will get stronger economic grow soon. It would suck for a lot of people if we continue what we're seeing today for the next 5-10 years.

Kids have always and I would assume will always enjoy things their parents never had growing up. Just look at kids today, they're enjoying smartphones and tablets. Their parents never had such things growing up, even if their parents were billionaires.

BTW, serial refinancing isn't always a bad thing, especially if you get a credit back.

[an]

[quote=bearishgurl]brian, its been 25 years for me (taking out only ARM mtgs). I feel I HAVE saved a lot of money over the years since I never had a need for “serial refinancing” (for a rate reduction) OR “cash out.”

However, since I believe I have a low lifetime cap of 2.7%, I’ll never see a low of 2% with my current mtg (assuming fixed rates ever go that low).

***

Happy holidays, Piggs! I’ve been “swamped” lately :=D[/quote]
I never knew there’s a lifetime limit. Brian, how can your friend enjoy these new low rates if they got an ARM 20 years ago without refinancing?

[bearishgurl]

[quote=AN]I never knew there’s a lifetime limit. Brian, how can your friend enjoy these new low rates if they got an ARM 20 years ago without refinancing?[/quote]

AN, there are lifetime low and high caps on ARMS (especially prime and Alt-A ARMS taken out prior to 2003).

These “ARMS of yore” followed closely with whatever index they were tied to … that is, most of the programs adjusted monthly (higher or lower) to follow a particular index (with a 1.7% to 3% “margin” added). Since an ARM holders payment was usually up to .07% of (+/-) the current fixed rate being offered, it made no financial sense to refinance.

[briansd1]

I had FRM and 5/1 and 7/1. I refinanced. I regret not getting 1/1 ARM all along.

But I have one friend in particular who’s never refinanced. Maybe I’ll ask for the particulars.

Another friend last year got a VA fixed at 3.75%. His house went up in value so if rates go down, he might have enough equity to refinance into at 15-year conventional. That will free up his VA for a second home which could be turned into a rental later.

I think the decision between fixed or adjustable would be based on the spread between the two, and the holding period.

If mortgage rates go from 4% to 3% that’s a 25% drop, quite a savings.

As I pointed out before, people who bought at the peak, especially people who were “responsible” probably wish they had adjustable mortgages. They are underwater, can’t refinance so they are stuck with high rates. It sucks to be them.

[briansd1]

Thinking about rates a little more, I’m thinking that low rates are keeping people in their houses, and providing a disincentive for homeowners with ARMs to walk away (afterall, if they walk they have to pay rent).

Those with fixed rates from the peak, who can’t refinance, might be tempted to walk, unless they had made subtantial downpayments.

The foreclosure tsunami was held back by record low rates.

I’m with sdrealtor, I think that 2011-2012 is a good time to buy a house. I’d say go for it, unless Europe crashes and we end up in another financial crisis.

Of course, there’s also a potential China real estate crash that could reverberate around the world.

[Aecetia]

Those are good points Brian, especially Europe and China. Definitely a wait and see for now.

[Anonymous]

With interest rates near all time lows, now is an excellent time to lock in a low interest rat through either a new mortgage or a mortgage refinance. The difference between a good and bad interest rate could save a person hundreds of dollars per month or give them tens of thousands of dollars of extra affordability.

[barnaby33]

I’m going out on a limb and guessing, you sell mortgages.

[carlsbadworker]

It looks like FormerSanDiegan is right again:

http://piggington.com/images/apr_2012_housing_data-3.jpg

[ocrenter]

[quote=carlsbadworker]It looks like FormerSanDiegan is right again:

http://piggington.com/images/apr_2012_housing_data-3.jpg%5B/quote%5D

Well, it has been a buy signal for the last 3 years. The buyer just had to be disciplined in avoiding the “regular sale” listings. Personally it made more sense to chase after REOs and short sales over the last 3 years when most folks were still “waiting” for the bottom as opposed to fighting with 10 offers per listing at the “bottom.”

[(former)FormerSanDiegan]

… just checking in a year later… With Rich’s latest report showing median PPSF up 12-18% I’m feeling pretty good about this call.

[an]

[quote=FormerSanDiegan]… just checking in a year later… With Rich’s latest report showing median PPSF up 12-18% I’m feeling pretty good about this call.[/quote]
Nice call. Did you act on it?

[(former)FormerSanDiegan]

Not directly, but I tried to take advantage by focusing on stock/ETF investments that I thought would pan out but take less effort. Some of these, like HD worked out pretty well. Others, like REZ, not great but not bad.

Wish I could have bought another property, but at least I have kept the two houses we currently own … but my excuse last year was employment uncertainty and a significant chunk of my life was tied up in a buy-out/merger.

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