Wasting time in the housing market

[recordsclerk]

Save for a down payment. It will put you in a better cash position in case rates go up. It’s better to buy a home at a lower price and higher interest rate then a home at a higher price with lower interest rate, even if the monthly payment is the same. If rates go down you can refi, but your purchase price will stay the same. Also only your interest payment is higher, not your principal payment. Your taxes will be lower also. It’s also better when you go to sell. You don’t want to sell a home that cost you 600K for 500K even if your montly payment is low. Your cost basis is a lot more important than your monthly obligation.

[recordsclerk]

Save for a down payment. It will put you in a better cash position in case rates go up. It’s better to buy a home at a lower price and higher interest rate then a home at a higher price with lower interest rate, even if the monthly payment is the same. If rates go down you can refi, but your purchase price will stay the same. Also only your interest payment is higher, not your principal payment. Your taxes will be lower also. It’s also better when you go to sell. You don’t want to sell a home that cost you 600K for 500K even if your montly payment is low. Your cost basis is a lot more important than your monthly obligation.

[NotCranky]

Coop,
I am just saying make your own “breaks” ,that’s all.Some people who are buying right now are probably making life tougher on themselves thus they aren’t getting the “breaks.” Someone on the sidelines has the opportunity to prepare and can say to themselves “hey owning a house isn’t everything.” I call that a “break.” I would not call being on the sidelines wasting time I would call it saving time. Because when the houses is finally gotten in a reasonable way the “waiter” won’t owe all his time to paying for the house. If it never happens,then it was better than “doing time” indentured to a unaffordable house.

[NotCranky]

Coop,
I am just saying make your own “breaks” ,that’s all.Some people who are buying right now are probably making life tougher on themselves thus they aren’t getting the “breaks.” Someone on the sidelines has the opportunity to prepare and can say to themselves “hey owning a house isn’t everything.” I call that a “break.” I would not call being on the sidelines wasting time I would call it saving time. Because when the houses is finally gotten in a reasonable way the “waiter” won’t owe all his time to paying for the house. If it never happens,then it was better than “doing time” indentured to a unaffordable house.

[liver]

I would much rather have higher rates and 20% required for down payments. Prices would come down a lot and people would be forced to save. When they actually bought a house they would have a real chance at owning it someday, rather then constantly paying the bank to rent their house.

[liver]

I would much rather have higher rates and 20% required for down payments. Prices would come down a lot and people would be forced to save. When they actually bought a house they would have a real chance at owning it someday, rather then constantly paying the bank to rent their house.

[PerryChase]

liver, the new paradigm is to “increase standards of living by giving people what they need now.” So long as you can make the monthly payments, you can have what you want, now. Computer models allow the credit industry to “grow the pie.” They just spread the cost around. It’s a form of taxation by the finance industry for those who willingly participate.

[PerryChase]

liver, the new paradigm is to “increase standards of living by giving people what they need now.” So long as you can make the monthly payments, you can have what you want, now. Computer models allow the credit industry to “grow the pie.” They just spread the cost around. It’s a form of taxation by the finance industry for those who willingly participate.

[NotCranky]

Perry,
I am probably so old school on my personal finance views,to the point of being irrelevant. You make it sound almost sustainable? Sounds like debt slavery to me, not a better standard of living at all.I can see the younger guys feeling helpless if that truly is the new paradigm.

[NotCranky]

Perry,
I am probably so old school on my personal finance views,to the point of being irrelevant. You make it sound almost sustainable? Sounds like debt slavery to me, not a better standard of living at all.I can see the younger guys feeling helpless if that truly is the new paradigm.

[one_muggle]

Perry:the new paradigm is to “increase standards of living by giving people what they need now.” So long as you can make the monthly payments, you can have what you want, now. Computer models allow the credit industry to “grow the pie.”

I agree that this is the intention, along with cheap baubles (sp?) from China to confuse the dum-masses into thinking things are great. I am sure the use of computers and models have streamlined business, but I don’t think that changes fundamentals.
Rustico:Sounds like debt slavery to me, not a better standard of living at all.I can see the younger guys feeling helpless if that truly is the new paradigm.

Again, I agree with you that people feel that this is a new paradigm, but I doubt it. Housing and credit have the heady/queezy fell of tech stocks around 1998-early1999. My bro-in-law was a bond trader back then and all these concepts were being thrown around–he would have none of it.
At the time Wallstreet was paying former aerospace workers to model the market, the internet was bringing a new paradigm, and there was nowhere to go but up. But even before the downturn, the bond traders were already pulling their own gains out of stocks. The ones I know bought vacation homes in resort locations–most have since sold then.
On these fancy models, they only work if you have control or visibility into the variables–and there are way more variables not modeled–AND models must have some second order or higher order terms to ever hope to catch quick changes in the market…etc. It is nearly as complicated as weather modeling, but with the added complications of human factors. Fundamentals will rule the day, long term, but the really smart money knows how to make money in the meantime. I think that time is well past.
Personally, I have little doubt the standard of living is droppping, but I think recent events, such as RE increases and even college tuition have far outpaced this trend. We see the RE trend turning around, and now we even see Politicians getting into the college costs act–great.

-one muggle

[one_muggle]

Perry:the new paradigm is to “increase standards of living by giving people what they need now.” So long as you can make the monthly payments, you can have what you want, now. Computer models allow the credit industry to “grow the pie.”

I agree that this is the intention, along with cheap baubles (sp?) from China to confuse the dum-masses into thinking things are great. I am sure the use of computers and models have streamlined business, but I don’t think that changes fundamentals.
Rustico:Sounds like debt slavery to me, not a better standard of living at all.I can see the younger guys feeling helpless if that truly is the new paradigm.

Again, I agree with you that people feel that this is a new paradigm, but I doubt it. Housing and credit have the heady/queezy fell of tech stocks around 1998-early1999. My bro-in-law was a bond trader back then and all these concepts were being thrown around–he would have none of it.
At the time Wallstreet was paying former aerospace workers to model the market, the internet was bringing a new paradigm, and there was nowhere to go but up. But even before the downturn, the bond traders were already pulling their own gains out of stocks. The ones I know bought vacation homes in resort locations–most have since sold then.
On these fancy models, they only work if you have control or visibility into the variables–and there are way more variables not modeled–AND models must have some second order or higher order terms to ever hope to catch quick changes in the market…etc. It is nearly as complicated as weather modeling, but with the added complications of human factors. Fundamentals will rule the day, long term, but the really smart money knows how to make money in the meantime. I think that time is well past.
Personally, I have little doubt the standard of living is droppping, but I think recent events, such as RE increases and even college tuition have far outpaced this trend. We see the RE trend turning around, and now we even see Politicians getting into the college costs act–great.

-one muggle

[SD Realtor]

Alex it is a tough dilema. The elasticity of sellers is something we have always talked about before. Sticky, SUPER sticky on the way down. Even though the rates have jumped and in the long run they will move higher, the rate at which sellers start to price lower in order to offset the rate increase is hard to predict. Many posters here want and hope for it to happen fast but the reality is that it may not. The next year or two may be particularly frustrating for wannabe buyers like you and I because the rate increase will not force the price decrease that we want. Eventually it will, maybe 08, 09, 10… who knows. All the usual factors we all talk about like inventory, foreclosures and stuff like that will have bearing.

For the next few months though, don’t expect the near term pricing to catch up to the recent rate spike we have encountered.

All things being equal, if you have downpayment money, then yeah buying a lower priced home at a higher rate makes more sense then buying a higher priced home at a lower rate. Again the caviot to that is that the home needs to be priced low enough to offset the rate hike so that the payment is roughly equal. The win for you is large, more equity instantly, a lower property tax payment, and the chance to refi when the rates go down along with a higher probability that the home will appreciate rather then depreciate.

SD Realtor

[SD Realtor]

Alex it is a tough dilema. The elasticity of sellers is something we have always talked about before. Sticky, SUPER sticky on the way down. Even though the rates have jumped and in the long run they will move higher, the rate at which sellers start to price lower in order to offset the rate increase is hard to predict. Many posters here want and hope for it to happen fast but the reality is that it may not. The next year or two may be particularly frustrating for wannabe buyers like you and I because the rate increase will not force the price decrease that we want. Eventually it will, maybe 08, 09, 10… who knows. All the usual factors we all talk about like inventory, foreclosures and stuff like that will have bearing.

For the next few months though, don’t expect the near term pricing to catch up to the recent rate spike we have encountered.

All things being equal, if you have downpayment money, then yeah buying a lower priced home at a higher rate makes more sense then buying a higher priced home at a lower rate. Again the caviot to that is that the home needs to be priced low enough to offset the rate hike so that the payment is roughly equal. The win for you is large, more equity instantly, a lower property tax payment, and the chance to refi when the rates go down along with a higher probability that the home will appreciate rather then depreciate.

SD Realtor

[JWM in SD]

Yes, but you see Mr Angel doesn’t think prices will go down that much and there in lies his perceived dilemma.

Nice try Alex, but you are not fooling anyone here…especially me. Go scare some sheeple some where else.

[Author]

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