[EJ]

I had a similar predicament. 1st time buyer, had spent entire career (well all 3 years of it) after school saving and still living like a student. Felt that prices and bidding wars were crazy. I went to a real estate seminar and saw Rich speak, along with 2 or 3 RE cheerleaders, and decided to wait it out (Rich was the only one with data to support his hypotheses/predictions). I have been following this site, checking ziprealty and zillow ever since. From this I have learned, I should still wait longer and continue renting.

But … I decided to go ahead and spend more on my rental. I looked for 3 months and viewed about 20 properties. You have to be willing to overlap on rent a little to get a good place. I looked at many places and found the majority to be over priced. As I continued looking I also noticed these same overpriced rentals not getting rented. So this lead me to believe the good rental were getting snatched up quickly but they are out there. I found mine on craislist and viewed it the same day it was posted, submitted the application the next day. For my patience I was rewarded with a 2/1 in a duplex (approx 1000sf), 2 car garage, all appliences, small yard and 180deg ocean view from living room and patio, 5 blocks from the beach/surf in cardiff, $1800.

Keep looking … it is out there.

[EJ]

A year ago the housing bulls on this forum were saying how no one knew what they were talking about and had interpreted the housing market all wrong (i.e., no bubble).

I wouldn’t be so quick to make your call on the stock market. I think there is a lot that will unfold in the next 6-12 months that will not bid well for stocks. IMO, consumer spending will be greatly reduced by the housing slump and this will trickle down in the form of reduced profits, expectations not met, and lower stock prices. Why do you think stocks will stay hot?

There are some on this site who think banks could collapse and uninsured (or even insured) CD’s may become worthless but I don’t believe the majority of participants feel this way. That’s where my money is, so I definitely don’t feel that way.

[EJ]

I think our friend from Texas is back because no one in the area can afford a $600k home. A quick check of labor stats for Potter county show the average weekly income of $667.

http://www.bls.gov/news.release/cewqtr.t01.htm

He is thinking that someone here who had a mortgage on a $400k home that was sold last year for $1.1mil might have the equity to buy it. Unfortunately, those gains were mostly on paper and very few people cashed out. A lot of the people who did cash out hang around here, so he is targeting the right audience. The catch is: if you were smart enough to cash out last year, are you now foolish enough buy again this year (especially in a location were the economy can’t support the price)?

[EJ]

sorry if duplicate …

I think or friend from Texas is back because no one in the area can afford a $600k home. A quick check of labor stats for Potter county show the average weekly income of $667.

http://www.bls.gov/news.release/cewqtr.t01.htm

He is thinking that someone here who had a mortgage on a $400k home that was sold last year for $1.1mil might have the equity to buy it. Unfortunately, those gains were mostly on paper and very few people cashed out. A lot of the people who did cash out hang around here, so he is targeting the right audience. The catch is: if you were smart enough to cash out last year, are you now foolish enough buy again this year (especially in a location were the economy can’t support the price)?

[EJ]

deleted

[EJ]

sorry if duplicate …

I moved from an apartment after it was sold and approved for condo conversion. I did have first choice if I wanted to buy (I didn’t). Most residents moved before the 180 days was over and I was one of the last to leave. They ended up giving me $2k for moving expense (I moved myself for $500) and my complete security deposit without having to clean anything (they were gutting it anyways). If you do get the notice, it might be worth it to stick around for a while and see if you can get some freebies.

This was in SD in 2003 at the height of the craze. The people that bought are probably well underwater by now. They were listed at $420-500k for approx 1200sf 2bed/2bath directly under the flight path (had to ask people on the phone to hold when a plane passed). Rent was $1295.

[EJ]

I must agree, Karl Rove is the ultimate spin master.

[EJ]

Powayseller,
I didn’t see this thread when I started the other with questions about the positions suggested by Daniel. I think you answered all my questions. I see these are much higher risk than I originally had thought.

Daniel,
Now I see why you were half-joking about the positions.

I have a lot to learn before I start making risky investments.

[EJ]

This is a nice house, I hope it sells. Your idea is decent that someone from CA could cashout and buy your property, however most the people on this board believe that there is lots of speculative activity in many markets nationwide (myself included). Why is someone selling a big beautiful home only 2 years after custom construction? Was there high appreciation these last two years in the region? Was this appreciation driven by market fundamentals (higher wages and rents)? I believe there are similar size/priced homes in regions of southern CA far from economic centers (Victorville comes to mind).

Now to address the the location bashing: you like TX, I like SoCal. Maybe you ride horses, personally I ride waves (and it doesn’t take me long to get to the beach, I see it from my front window). I am sure each location has it’s ups and downs.

Good luck with the property!

[EJ]

Dont foget holding costs for 4-6 months, another $8-12k.

[EJ]

I think rents will rise initially and then level off as the unoccupied homes are either rented or sold. They even mention in the article that there is a lot of inventory poised to come to the rental market. This seems to be mostly condos, SFR’s may stay at a higher rent longer. I doubt rents will drop significantly at any point. There may be a high demand in SFR’s right now due to people selling homes to cash out of the market. Just my $0.02

[EJ]

I think the monthly payment would exact follow the interest rate if it were an interest only loan. For example, $2k in interest per month would be $3k in interest per month in the rate went from 4% to 6%. However, I think I/O loans also add principal payments when the rate resets so this is not a realistic example.

The 30yr fixed and the traditional ARMs include some principal payment, so if you are paying $500 towards principal and $1.5k towards interest and the rate increased from 4% to 6% this would make your interest payment $2250. So your total mortgage payment would increase from $2k to $2750.

Someone please correct me if I am misunderstanding this. Also, this made me think of a question. Towards the end of a loan the principal is the majority of the payment, would this alter (lessen) the effect of a rate increase? Or is this all factored in at the conception of the loan?

[EJ]

I though I remember reading that there was a law limiting the number of people who are not immediate family that can live in the same home, based on the number of rooms. Is it just not being enforced? I believe there was some protest about the law being biased towards minorites.

[EJ]

I agree that people who pay zero down are upside down due to depreciation as you drive off the lot. However 0% financing and a long term loan is not a bad thing. You pay no interest and as your loan term progresses, the dollar depreciates (inflation) and you are paying off the same principal with ‘cheaper’ dollars.

However, I don’t think there many 0% financing deals anymore due to rising rates (except for maybe huge SUVs that no one wants anymore).

Just my $0.02 …

[EJ]

Powayseller,

No, I am not military. I will look into bankrate.com, thanks for the tip.

I am more interested in something completely liquid, i.e., a money market account, but a short term CD might be OK.

thanks,
Eric

[Author]

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