Considering pulling the trigger

[CA renter]

[quote=EconProf]Mercedes7 you say you can put 2/3 of the purchase price as a down payment. This suggests you are getting pretty tired of getting 1 – 3% on your savings, right? This is budging you into the category of possible buyers.
I mention this because it strikes me that the puny interest rate that high-liquidity investors are getting on thier money may be pushing a lot more people onto the buy side–both for residential and commercial real estate.
We are seeing more cash buyers out there, who do the pro forma numbers on a possible purchase and discover they can, even with reduced rental income, make a relatively decent rate of return on a purchase. This applies to apartments, and especially CRE for the more adventuresome. Adds up to one more factor suggesting we are at the bottom of the cycle.[/quote]

Absolutely right, IMHO.

The paltry returns on cash over the past decade (and especially over the past couple of years) is pushing highly liquid entities into buying anything that gives a better return than 0-2%. At this point, almost anything is better than cash, and this is precisely what the Fed/govt/PTB want. They are trying to squeeze people out of their cash positions and into other asset classes, no question about it.

Low interest rates affect demand in two ways. It makes a mortgaged purchase more affordable at a higher price, AND it forces cash into the housing market because investors (especially fixed-income investors who like “safer” investments) can get a better return on an all-cash purchase (then renting it out or flipping it) than in any kind of liquid savings/investment **at this point in time.**

Like SDR said, it’s all about the interest rates/bond market. Everyone is speculating now.

[(former)FormerSanDiegan]

[quote=socrattt]

I had a meeting with some bankers at Chase on Friday and we discussed the issue of inventory. Chase alone currently has over 350,000 homes off the market. Sounds like anyone trying to predict the market could be off by a large margin if you ask me.

[/quote]

350,000 shadow inventory certainly sounds large, but what does it mean ?

Where (geographically) are these distributed ? How many are in Vegas and Florida? How many are in Souther CA coastal regions ?

How large is this number with respect to home building ? (Both are potential future inventory)

Consider that housing starts have been at a rate of 1 to 1.7 Million units per year from around 1992 through 2006. In 2008-2009 we averaged about 700,000 units per year.

Even if we consider circa 1994 levels of 1.2 Million units, we have already underbuilt by 1 Million units.

Now this is by no means a complete analysis. Plenty of holes. But, the recycled housing available from shadow inventory may or may not be large, relative to the deficit of new homes built.

Ultimately, the impact of the shadow will depend on the location distribution of the shadow inventory and the timeframe over which it is released.

[(former)FormerSanDiegan]

[quote=socrattt]

I had a meeting with some bankers at Chase on Friday and we discussed the issue of inventory. Chase alone currently has over 350,000 homes off the market. Sounds like anyone trying to predict the market could be off by a large margin if you ask me.

[/quote]

350,000 shadow inventory certainly sounds large, but what does it mean ?

Where (geographically) are these distributed ? How many are in Vegas and Florida? How many are in Souther CA coastal regions ?

How large is this number with respect to home building ? (Both are potential future inventory)

Consider that housing starts have been at a rate of 1 to 1.7 Million units per year from around 1992 through 2006. In 2008-2009 we averaged about 700,000 units per year.

Even if we consider circa 1994 levels of 1.2 Million units, we have already underbuilt by 1 Million units.

Now this is by no means a complete analysis. Plenty of holes. But, the recycled housing available from shadow inventory may or may not be large, relative to the deficit of new homes built.

Ultimately, the impact of the shadow will depend on the location distribution of the shadow inventory and the timeframe over which it is released.

[(former)FormerSanDiegan]

[quote=socrattt]

I had a meeting with some bankers at Chase on Friday and we discussed the issue of inventory. Chase alone currently has over 350,000 homes off the market. Sounds like anyone trying to predict the market could be off by a large margin if you ask me.

[/quote]

350,000 shadow inventory certainly sounds large, but what does it mean ?

Where (geographically) are these distributed ? How many are in Vegas and Florida? How many are in Souther CA coastal regions ?

How large is this number with respect to home building ? (Both are potential future inventory)

Consider that housing starts have been at a rate of 1 to 1.7 Million units per year from around 1992 through 2006. In 2008-2009 we averaged about 700,000 units per year.

Even if we consider circa 1994 levels of 1.2 Million units, we have already underbuilt by 1 Million units.

Now this is by no means a complete analysis. Plenty of holes. But, the recycled housing available from shadow inventory may or may not be large, relative to the deficit of new homes built.

Ultimately, the impact of the shadow will depend on the location distribution of the shadow inventory and the timeframe over which it is released.

[(former)FormerSanDiegan]

[quote=socrattt]

I had a meeting with some bankers at Chase on Friday and we discussed the issue of inventory. Chase alone currently has over 350,000 homes off the market. Sounds like anyone trying to predict the market could be off by a large margin if you ask me.

[/quote]

350,000 shadow inventory certainly sounds large, but what does it mean ?

Where (geographically) are these distributed ? How many are in Vegas and Florida? How many are in Souther CA coastal regions ?

How large is this number with respect to home building ? (Both are potential future inventory)

Consider that housing starts have been at a rate of 1 to 1.7 Million units per year from around 1992 through 2006. In 2008-2009 we averaged about 700,000 units per year.

Even if we consider circa 1994 levels of 1.2 Million units, we have already underbuilt by 1 Million units.

Now this is by no means a complete analysis. Plenty of holes. But, the recycled housing available from shadow inventory may or may not be large, relative to the deficit of new homes built.

Ultimately, the impact of the shadow will depend on the location distribution of the shadow inventory and the timeframe over which it is released.

[(former)FormerSanDiegan]

[quote=socrattt]

I had a meeting with some bankers at Chase on Friday and we discussed the issue of inventory. Chase alone currently has over 350,000 homes off the market. Sounds like anyone trying to predict the market could be off by a large margin if you ask me.

[/quote]

350,000 shadow inventory certainly sounds large, but what does it mean ?

Where (geographically) are these distributed ? How many are in Vegas and Florida? How many are in Souther CA coastal regions ?

How large is this number with respect to home building ? (Both are potential future inventory)

Consider that housing starts have been at a rate of 1 to 1.7 Million units per year from around 1992 through 2006. In 2008-2009 we averaged about 700,000 units per year.

Even if we consider circa 1994 levels of 1.2 Million units, we have already underbuilt by 1 Million units.

Now this is by no means a complete analysis. Plenty of holes. But, the recycled housing available from shadow inventory may or may not be large, relative to the deficit of new homes built.

Ultimately, the impact of the shadow will depend on the location distribution of the shadow inventory and the timeframe over which it is released.

[Anonymous]

Timing the market is an impossible task. I’d like to suggest a couple of other considerations to take into account.

It sounds as though you are putting a large sum down. Does this lower your monthly ownership costs to the point where they could be covered if you needed to rent the place out? If so, then you aren’t a prisoner to the house, and a 10-20% drop in prices may not matter much. (Sure, there’s a link between rents and property prices, but it can be weak or even upside-down.)

We bought a home in San Diego back in 1995–not exactly at the bottom, but in the trough. (And, as today, no one knew where the bottom was.) When we had to move a few years later, we refinanced it, putting in a little more equity, moving it to a 15-year mortgage, and getting our payments to the size where we could rent it out to cover payments, HOA fees, and property management.

That house will pay off in the next few years, courtesy of our various renters. And it has nearly tripled in value from our purchase price, even in today’s market. So look at the numbers and decide if it can pay fo itself as a long-term investment, even if you aren’t living there.

When we moved up to Huntington Beach, we rented–even though we owned the San Diego house. Why liquidate an investment that is paying for itself? But by 2001, our rent was rsising so fast that we looked into buying another house up here.

We were nervous, as I thought the market was overvalued, but we scraped together another down payment and moved into the house I am writing this from in August, 2001–expecting that the house would probably go down 10-20% and only recover full value over five years or so. (As it turned out, I had no idea how silly the market could get. Even with the recent slump, this house is up 40% from the price we bought it at.)

My point is, if the numbers work out as an investment, you don’t need perfect timing and you don’t need to be able to forsee the future in detail. And it souds as if your down is large enough that your numbers might work.

And, just as a PS–even though I can’t predict the future of prices, I sure don’t see any way that we can avoid increased inflation some time in the coming decade (especially when policymakers realize that some of our problems could be inflated away). At that time I’d rather be sitting on rela estate than on cash…

[Anonymous]

Timing the market is an impossible task. I’d like to suggest a couple of other considerations to take into account.

It sounds as though you are putting a large sum down. Does this lower your monthly ownership costs to the point where they could be covered if you needed to rent the place out? If so, then you aren’t a prisoner to the house, and a 10-20% drop in prices may not matter much. (Sure, there’s a link between rents and property prices, but it can be weak or even upside-down.)

We bought a home in San Diego back in 1995–not exactly at the bottom, but in the trough. (And, as today, no one knew where the bottom was.) When we had to move a few years later, we refinanced it, putting in a little more equity, moving it to a 15-year mortgage, and getting our payments to the size where we could rent it out to cover payments, HOA fees, and property management.

That house will pay off in the next few years, courtesy of our various renters. And it has nearly tripled in value from our purchase price, even in today’s market. So look at the numbers and decide if it can pay fo itself as a long-term investment, even if you aren’t living there.

When we moved up to Huntington Beach, we rented–even though we owned the San Diego house. Why liquidate an investment that is paying for itself? But by 2001, our rent was rsising so fast that we looked into buying another house up here.

We were nervous, as I thought the market was overvalued, but we scraped together another down payment and moved into the house I am writing this from in August, 2001–expecting that the house would probably go down 10-20% and only recover full value over five years or so. (As it turned out, I had no idea how silly the market could get. Even with the recent slump, this house is up 40% from the price we bought it at.)

My point is, if the numbers work out as an investment, you don’t need perfect timing and you don’t need to be able to forsee the future in detail. And it souds as if your down is large enough that your numbers might work.

And, just as a PS–even though I can’t predict the future of prices, I sure don’t see any way that we can avoid increased inflation some time in the coming decade (especially when policymakers realize that some of our problems could be inflated away). At that time I’d rather be sitting on rela estate than on cash…

[Anonymous]

Timing the market is an impossible task. I’d like to suggest a couple of other considerations to take into account.

It sounds as though you are putting a large sum down. Does this lower your monthly ownership costs to the point where they could be covered if you needed to rent the place out? If so, then you aren’t a prisoner to the house, and a 10-20% drop in prices may not matter much. (Sure, there’s a link between rents and property prices, but it can be weak or even upside-down.)

We bought a home in San Diego back in 1995–not exactly at the bottom, but in the trough. (And, as today, no one knew where the bottom was.) When we had to move a few years later, we refinanced it, putting in a little more equity, moving it to a 15-year mortgage, and getting our payments to the size where we could rent it out to cover payments, HOA fees, and property management.

That house will pay off in the next few years, courtesy of our various renters. And it has nearly tripled in value from our purchase price, even in today’s market. So look at the numbers and decide if it can pay fo itself as a long-term investment, even if you aren’t living there.

When we moved up to Huntington Beach, we rented–even though we owned the San Diego house. Why liquidate an investment that is paying for itself? But by 2001, our rent was rsising so fast that we looked into buying another house up here.

We were nervous, as I thought the market was overvalued, but we scraped together another down payment and moved into the house I am writing this from in August, 2001–expecting that the house would probably go down 10-20% and only recover full value over five years or so. (As it turned out, I had no idea how silly the market could get. Even with the recent slump, this house is up 40% from the price we bought it at.)

My point is, if the numbers work out as an investment, you don’t need perfect timing and you don’t need to be able to forsee the future in detail. And it souds as if your down is large enough that your numbers might work.

And, just as a PS–even though I can’t predict the future of prices, I sure don’t see any way that we can avoid increased inflation some time in the coming decade (especially when policymakers realize that some of our problems could be inflated away). At that time I’d rather be sitting on rela estate than on cash…

[Anonymous]

Timing the market is an impossible task. I’d like to suggest a couple of other considerations to take into account.

It sounds as though you are putting a large sum down. Does this lower your monthly ownership costs to the point where they could be covered if you needed to rent the place out? If so, then you aren’t a prisoner to the house, and a 10-20% drop in prices may not matter much. (Sure, there’s a link between rents and property prices, but it can be weak or even upside-down.)

We bought a home in San Diego back in 1995–not exactly at the bottom, but in the trough. (And, as today, no one knew where the bottom was.) When we had to move a few years later, we refinanced it, putting in a little more equity, moving it to a 15-year mortgage, and getting our payments to the size where we could rent it out to cover payments, HOA fees, and property management.

That house will pay off in the next few years, courtesy of our various renters. And it has nearly tripled in value from our purchase price, even in today’s market. So look at the numbers and decide if it can pay fo itself as a long-term investment, even if you aren’t living there.

When we moved up to Huntington Beach, we rented–even though we owned the San Diego house. Why liquidate an investment that is paying for itself? But by 2001, our rent was rsising so fast that we looked into buying another house up here.

We were nervous, as I thought the market was overvalued, but we scraped together another down payment and moved into the house I am writing this from in August, 2001–expecting that the house would probably go down 10-20% and only recover full value over five years or so. (As it turned out, I had no idea how silly the market could get. Even with the recent slump, this house is up 40% from the price we bought it at.)

My point is, if the numbers work out as an investment, you don’t need perfect timing and you don’t need to be able to forsee the future in detail. And it souds as if your down is large enough that your numbers might work.

And, just as a PS–even though I can’t predict the future of prices, I sure don’t see any way that we can avoid increased inflation some time in the coming decade (especially when policymakers realize that some of our problems could be inflated away). At that time I’d rather be sitting on rela estate than on cash…

[Anonymous]

Timing the market is an impossible task. I’d like to suggest a couple of other considerations to take into account.

It sounds as though you are putting a large sum down. Does this lower your monthly ownership costs to the point where they could be covered if you needed to rent the place out? If so, then you aren’t a prisoner to the house, and a 10-20% drop in prices may not matter much. (Sure, there’s a link between rents and property prices, but it can be weak or even upside-down.)

We bought a home in San Diego back in 1995–not exactly at the bottom, but in the trough. (And, as today, no one knew where the bottom was.) When we had to move a few years later, we refinanced it, putting in a little more equity, moving it to a 15-year mortgage, and getting our payments to the size where we could rent it out to cover payments, HOA fees, and property management.

That house will pay off in the next few years, courtesy of our various renters. And it has nearly tripled in value from our purchase price, even in today’s market. So look at the numbers and decide if it can pay fo itself as a long-term investment, even if you aren’t living there.

When we moved up to Huntington Beach, we rented–even though we owned the San Diego house. Why liquidate an investment that is paying for itself? But by 2001, our rent was rsising so fast that we looked into buying another house up here.

We were nervous, as I thought the market was overvalued, but we scraped together another down payment and moved into the house I am writing this from in August, 2001–expecting that the house would probably go down 10-20% and only recover full value over five years or so. (As it turned out, I had no idea how silly the market could get. Even with the recent slump, this house is up 40% from the price we bought it at.)

My point is, if the numbers work out as an investment, you don’t need perfect timing and you don’t need to be able to forsee the future in detail. And it souds as if your down is large enough that your numbers might work.

And, just as a PS–even though I can’t predict the future of prices, I sure don’t see any way that we can avoid increased inflation some time in the coming decade (especially when policymakers realize that some of our problems could be inflated away). At that time I’d rather be sitting on rela estate than on cash…

[Author]

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