[(former)FormerSanDiegan]

sdr –
Thanks for giving us a boots-on-the-ground perspective. It is very much appreciated.
There are plenty of reasons cited here as to why property values will continue to tank as others have stated. I too expect that prices will decline into 2009, particularly at the higher end. But I believe that your bottoms-up recovery scenario is very likely to happen.

This reminds me of back when I was a first-time homebuyer. It was late 1995 and we were preparing to buy in early 2006. I had just moved to San Diego from the midwest. All the locals were telling me that I was nuts and that house prices will decline forever, or at best flatten out. However, by my calculations buying a house in Clairemont was only slightly more expensive than the 2-BR apartment I was renting. I am glad I relied on a cold-blooded, conservative cost analysis rather than the informed opinion of the wise people who had experienced the previous 4 years of price declines.

The truth is that at the low end (less than 400K) there are plenty of cases where buying a SFH is cheaper than renting after taxes for those who fit standard affordability metrics and who have 20% down.

[(former)FormerSanDiegan]

sdr –
Thanks for giving us a boots-on-the-ground perspective. It is very much appreciated.
There are plenty of reasons cited here as to why property values will continue to tank as others have stated. I too expect that prices will decline into 2009, particularly at the higher end. But I believe that your bottoms-up recovery scenario is very likely to happen.

This reminds me of back when I was a first-time homebuyer. It was late 1995 and we were preparing to buy in early 2006. I had just moved to San Diego from the midwest. All the locals were telling me that I was nuts and that house prices will decline forever, or at best flatten out. However, by my calculations buying a house in Clairemont was only slightly more expensive than the 2-BR apartment I was renting. I am glad I relied on a cold-blooded, conservative cost analysis rather than the informed opinion of the wise people who had experienced the previous 4 years of price declines.

The truth is that at the low end (less than 400K) there are plenty of cases where buying a SFH is cheaper than renting after taxes for those who fit standard affordability metrics and who have 20% down.

[(former)FormerSanDiegan]

[quote=arraya][quote=Butleroftwo]Small percentage of US home loans given to fraudulent purchasers, sometimes referred to as the sub-prime mess.[/quote]

Ok, first you gotta lay off the Rush and Hannity, it’ll rot your brain. Second if an entire global economy can be taken down from a small percentage of home buyers defaulting, there is something wrong with the model.

This is much bigger than that.

[/quote]

I agree with the brain rot comment.

However, I would submit that a small fraction (well less than 10%) of homeowners have defaulted on their loans thus far AND the result is that the entire economy is sucking wind because of it.

[(former)FormerSanDiegan]

[quote=arraya][quote=Butleroftwo]Small percentage of US home loans given to fraudulent purchasers, sometimes referred to as the sub-prime mess.[/quote]

Ok, first you gotta lay off the Rush and Hannity, it’ll rot your brain. Second if an entire global economy can be taken down from a small percentage of home buyers defaulting, there is something wrong with the model.

This is much bigger than that.

[/quote]

I agree with the brain rot comment.

However, I would submit that a small fraction (well less than 10%) of homeowners have defaulted on their loans thus far AND the result is that the entire economy is sucking wind because of it.

[(former)FormerSanDiegan]

[quote=arraya][quote=Butleroftwo]Small percentage of US home loans given to fraudulent purchasers, sometimes referred to as the sub-prime mess.[/quote]

Ok, first you gotta lay off the Rush and Hannity, it’ll rot your brain. Second if an entire global economy can be taken down from a small percentage of home buyers defaulting, there is something wrong with the model.

This is much bigger than that.

[/quote]

I agree with the brain rot comment.

However, I would submit that a small fraction (well less than 10%) of homeowners have defaulted on their loans thus far AND the result is that the entire economy is sucking wind because of it.

[(former)FormerSanDiegan]

[quote=arraya][quote=Butleroftwo]Small percentage of US home loans given to fraudulent purchasers, sometimes referred to as the sub-prime mess.[/quote]

Ok, first you gotta lay off the Rush and Hannity, it’ll rot your brain. Second if an entire global economy can be taken down from a small percentage of home buyers defaulting, there is something wrong with the model.

This is much bigger than that.

[/quote]

I agree with the brain rot comment.

However, I would submit that a small fraction (well less than 10%) of homeowners have defaulted on their loans thus far AND the result is that the entire economy is sucking wind because of it.

[(former)FormerSanDiegan]

[quote=arraya][quote=Butleroftwo]Small percentage of US home loans given to fraudulent purchasers, sometimes referred to as the sub-prime mess.[/quote]

Ok, first you gotta lay off the Rush and Hannity, it’ll rot your brain. Second if an entire global economy can be taken down from a small percentage of home buyers defaulting, there is something wrong with the model.

This is much bigger than that.

[/quote]

I agree with the brain rot comment.

However, I would submit that a small fraction (well less than 10%) of homeowners have defaulted on their loans thus far AND the result is that the entire economy is sucking wind because of it.

[(former)FormerSanDiegan]

So, you would net $6000/year. The problem is 2 years from now, that $550k house is very likely to be worth only $450k or less.

So, you gain $12k but lose $100k in equity.

The $12k is guaranteed.
The $100k is speculation.

[(former)FormerSanDiegan]

So, you would net $6000/year. The problem is 2 years from now, that $550k house is very likely to be worth only $450k or less.

So, you gain $12k but lose $100k in equity.

The $12k is guaranteed.
The $100k is speculation.

[(former)FormerSanDiegan]

So, you would net $6000/year. The problem is 2 years from now, that $550k house is very likely to be worth only $450k or less.

So, you gain $12k but lose $100k in equity.

The $12k is guaranteed.
The $100k is speculation.

[(former)FormerSanDiegan]

So, you would net $6000/year. The problem is 2 years from now, that $550k house is very likely to be worth only $450k or less.

So, you gain $12k but lose $100k in equity.

The $12k is guaranteed.
The $100k is speculation.

[(former)FormerSanDiegan]

So, you would net $6000/year. The problem is 2 years from now, that $550k house is very likely to be worth only $450k or less.

So, you gain $12k but lose $100k in equity.

The $12k is guaranteed.
The $100k is speculation.

[(former)FormerSanDiegan]

3. Eliminate mortgage interest deductions for investment properties

When people make suggestions like this, it shows an obvious misunderstanding of business principles and taxes.

Rental real estate is a business. Business is taxed on the difference between income and expenses. A mortgage is an expense for a real estate business, along with taxes, insurance (which isn’t deductible for homeowners BTW), maintenance ((which isn’t deductible for homeowners BTW), advertising expenses, and the list goes on.

So, mortgage interest for investment property is inherently a business expense. The tax laws that apply also apply to your local restaurant owner who deducts his lease payments as business expenses. It also applies to many of our employers who deduct expenses such as the utility bills, office lease payments, and our salaries and benefits prior to computing the amounts on which they are taxed.

[(former)FormerSanDiegan]

3. Eliminate mortgage interest deductions for investment properties

When people make suggestions like this, it shows an obvious misunderstanding of business principles and taxes.

Rental real estate is a business. Business is taxed on the difference between income and expenses. A mortgage is an expense for a real estate business, along with taxes, insurance (which isn’t deductible for homeowners BTW), maintenance ((which isn’t deductible for homeowners BTW), advertising expenses, and the list goes on.

So, mortgage interest for investment property is inherently a business expense. The tax laws that apply also apply to your local restaurant owner who deducts his lease payments as business expenses. It also applies to many of our employers who deduct expenses such as the utility bills, office lease payments, and our salaries and benefits prior to computing the amounts on which they are taxed.

[(former)FormerSanDiegan]

3. Eliminate mortgage interest deductions for investment properties

When people make suggestions like this, it shows an obvious misunderstanding of business principles and taxes.

Rental real estate is a business. Business is taxed on the difference between income and expenses. A mortgage is an expense for a real estate business, along with taxes, insurance (which isn’t deductible for homeowners BTW), maintenance ((which isn’t deductible for homeowners BTW), advertising expenses, and the list goes on.

So, mortgage interest for investment property is inherently a business expense. The tax laws that apply also apply to your local restaurant owner who deducts his lease payments as business expenses. It also applies to many of our employers who deduct expenses such as the utility bills, office lease payments, and our salaries and benefits prior to computing the amounts on which they are taxed.

[Author]

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