[patientrenter]

No one has a crystal ball, so it’s a question of odds. With that, here are my thoughts.

If you want to give yourself the best odds of the best financial outcome, then you should wait. All the negative factors that hit the lower end of the SD market haven’t percolated through to the high end yet. (A few people here think they never will but, as I said, it’s a question of judging the odds…)

Psychologically, it’s a completely different story. Most people who bought houses in the last few years paid with what I will call “Monopoly money”. That’s why they could bring themselves to write a check for $1 million for a dumpy place. For every 100 people who wrote that check, there were only a few who had actually saved most of that money by spending that much less than their net earnings stripped of capital gains. Most of the others borrowed most of the money, expecting to pay the loans back painlessly from a higher future sale price, or they used prior gains from previous home price appreciation (“equity”). It was therefore easy money, and they spent it more freely.

Based on your comments, I am guessing that you have a large pot of money for this next home purchase, and a lot of that money came for substantial prior home price appreciation. Each $1 of your housing pot didn’t come from a $1 saved by scouring the supermarket shelves for good deals, or taking cheap vacations, or some other self-denial. It came from high previous asset price appreciation, which was pretty painless, so it “feels” OK to spend a lot of it without counting the pennies.

With that (cheap, and worth every every penny) psycholgical profile, I’d say that you should just find a place you like, and make sure that a loss of 30% of the price would not exceed your prior gains.

[patientrenter]

No one has a crystal ball, so it’s a question of odds. With that, here are my thoughts.

If you want to give yourself the best odds of the best financial outcome, then you should wait. All the negative factors that hit the lower end of the SD market haven’t percolated through to the high end yet. (A few people here think they never will but, as I said, it’s a question of judging the odds…)

Psychologically, it’s a completely different story. Most people who bought houses in the last few years paid with what I will call “Monopoly money”. That’s why they could bring themselves to write a check for $1 million for a dumpy place. For every 100 people who wrote that check, there were only a few who had actually saved most of that money by spending that much less than their net earnings stripped of capital gains. Most of the others borrowed most of the money, expecting to pay the loans back painlessly from a higher future sale price, or they used prior gains from previous home price appreciation (“equity”). It was therefore easy money, and they spent it more freely.

Based on your comments, I am guessing that you have a large pot of money for this next home purchase, and a lot of that money came for substantial prior home price appreciation. Each $1 of your housing pot didn’t come from a $1 saved by scouring the supermarket shelves for good deals, or taking cheap vacations, or some other self-denial. It came from high previous asset price appreciation, which was pretty painless, so it “feels” OK to spend a lot of it without counting the pennies.

With that (cheap, and worth every every penny) psycholgical profile, I’d say that you should just find a place you like, and make sure that a loss of 30% of the price would not exceed your prior gains.

[patientrenter]

No one has a crystal ball, so it’s a question of odds. With that, here are my thoughts.

If you want to give yourself the best odds of the best financial outcome, then you should wait. All the negative factors that hit the lower end of the SD market haven’t percolated through to the high end yet. (A few people here think they never will but, as I said, it’s a question of judging the odds…)

Psychologically, it’s a completely different story. Most people who bought houses in the last few years paid with what I will call “Monopoly money”. That’s why they could bring themselves to write a check for $1 million for a dumpy place. For every 100 people who wrote that check, there were only a few who had actually saved most of that money by spending that much less than their net earnings stripped of capital gains. Most of the others borrowed most of the money, expecting to pay the loans back painlessly from a higher future sale price, or they used prior gains from previous home price appreciation (“equity”). It was therefore easy money, and they spent it more freely.

Based on your comments, I am guessing that you have a large pot of money for this next home purchase, and a lot of that money came for substantial prior home price appreciation. Each $1 of your housing pot didn’t come from a $1 saved by scouring the supermarket shelves for good deals, or taking cheap vacations, or some other self-denial. It came from high previous asset price appreciation, which was pretty painless, so it “feels” OK to spend a lot of it without counting the pennies.

With that (cheap, and worth every every penny) psycholgical profile, I’d say that you should just find a place you like, and make sure that a loss of 30% of the price would not exceed your prior gains.

[patientrenter]

No one has a crystal ball, so it’s a question of odds. With that, here are my thoughts.

If you want to give yourself the best odds of the best financial outcome, then you should wait. All the negative factors that hit the lower end of the SD market haven’t percolated through to the high end yet. (A few people here think they never will but, as I said, it’s a question of judging the odds…)

Psychologically, it’s a completely different story. Most people who bought houses in the last few years paid with what I will call “Monopoly money”. That’s why they could bring themselves to write a check for $1 million for a dumpy place. For every 100 people who wrote that check, there were only a few who had actually saved most of that money by spending that much less than their net earnings stripped of capital gains. Most of the others borrowed most of the money, expecting to pay the loans back painlessly from a higher future sale price, or they used prior gains from previous home price appreciation (“equity”). It was therefore easy money, and they spent it more freely.

Based on your comments, I am guessing that you have a large pot of money for this next home purchase, and a lot of that money came for substantial prior home price appreciation. Each $1 of your housing pot didn’t come from a $1 saved by scouring the supermarket shelves for good deals, or taking cheap vacations, or some other self-denial. It came from high previous asset price appreciation, which was pretty painless, so it “feels” OK to spend a lot of it without counting the pennies.

With that (cheap, and worth every every penny) psycholgical profile, I’d say that you should just find a place you like, and make sure that a loss of 30% of the price would not exceed your prior gains.

[patientrenter]

[quote=peterb]If one was to act strictly within the letter of the law….getting a very low down payment loan that has a mortgage payment below comparable rents would make sense. You can write-off the interest payments and if the house doesnt hold it’s value, you can stop paying the mortgage. The only downside is ruining your FICO score for a while, losing your downpayment and having the IRS come after you for the portion of the debt that will be forgiven upon default.Could be an ok deal. Low down payment coupled with non-recourse loans is good upside wieghted risk, IMO. But I wouldnt take it in this market.

Our brilliant govt at work. Incenting, and in a way rewarding, risk.
But it’s still not “owning” the house. Just an investment vehicle that the govt has been nice enough to let the little guy still enjoy. To some extent.[/quote]

If you buy a stock, peterb, then you gain if it appreciates when you sell it, and you lose if it depreciates, and in the time before you sell it, you get to keep any benefits (e.g. dividends) it provides. You have to give up the use of the entire purchase price until you get it back (maybe) at sale, and you have to risk losing up to the entire purchase price.

If you “buy” a house using our modern system of govt-guaranteed low money-down loans, then you get to keep most of the gain if the price goes up when you sell it, and you don’t have to lose much if it goes down. And you get unencumbered use of the house until then. And you don’t have to give up alternative uses of the money until then, because you put down nothing or just a small fraction of the purchase price. And you can get all this by paying very low fully tax deductible interest and property taxes and nondeductible maintenance expenses instead of rent. I’d say that package is at least as good, overall, as the deal buyers of stocks get, or the buyers of almost any other assets. So I’d be hesitant to call the current govt-controlled way that people get to control housing assets less than “buying”. If anything, it’s better for the controlling parties (or “buyers”) than normal buying of other assets.

[patientrenter]

[quote=peterb]If one was to act strictly within the letter of the law….getting a very low down payment loan that has a mortgage payment below comparable rents would make sense. You can write-off the interest payments and if the house doesnt hold it’s value, you can stop paying the mortgage. The only downside is ruining your FICO score for a while, losing your downpayment and having the IRS come after you for the portion of the debt that will be forgiven upon default.Could be an ok deal. Low down payment coupled with non-recourse loans is good upside wieghted risk, IMO. But I wouldnt take it in this market.

Our brilliant govt at work. Incenting, and in a way rewarding, risk.
But it’s still not “owning” the house. Just an investment vehicle that the govt has been nice enough to let the little guy still enjoy. To some extent.[/quote]

If you buy a stock, peterb, then you gain if it appreciates when you sell it, and you lose if it depreciates, and in the time before you sell it, you get to keep any benefits (e.g. dividends) it provides. You have to give up the use of the entire purchase price until you get it back (maybe) at sale, and you have to risk losing up to the entire purchase price.

If you “buy” a house using our modern system of govt-guaranteed low money-down loans, then you get to keep most of the gain if the price goes up when you sell it, and you don’t have to lose much if it goes down. And you get unencumbered use of the house until then. And you don’t have to give up alternative uses of the money until then, because you put down nothing or just a small fraction of the purchase price. And you can get all this by paying very low fully tax deductible interest and property taxes and nondeductible maintenance expenses instead of rent. I’d say that package is at least as good, overall, as the deal buyers of stocks get, or the buyers of almost any other assets. So I’d be hesitant to call the current govt-controlled way that people get to control housing assets less than “buying”. If anything, it’s better for the controlling parties (or “buyers”) than normal buying of other assets.

[patientrenter]

[quote=peterb]If one was to act strictly within the letter of the law….getting a very low down payment loan that has a mortgage payment below comparable rents would make sense. You can write-off the interest payments and if the house doesnt hold it’s value, you can stop paying the mortgage. The only downside is ruining your FICO score for a while, losing your downpayment and having the IRS come after you for the portion of the debt that will be forgiven upon default.Could be an ok deal. Low down payment coupled with non-recourse loans is good upside wieghted risk, IMO. But I wouldnt take it in this market.

Our brilliant govt at work. Incenting, and in a way rewarding, risk.
But it’s still not “owning” the house. Just an investment vehicle that the govt has been nice enough to let the little guy still enjoy. To some extent.[/quote]

If you buy a stock, peterb, then you gain if it appreciates when you sell it, and you lose if it depreciates, and in the time before you sell it, you get to keep any benefits (e.g. dividends) it provides. You have to give up the use of the entire purchase price until you get it back (maybe) at sale, and you have to risk losing up to the entire purchase price.

If you “buy” a house using our modern system of govt-guaranteed low money-down loans, then you get to keep most of the gain if the price goes up when you sell it, and you don’t have to lose much if it goes down. And you get unencumbered use of the house until then. And you don’t have to give up alternative uses of the money until then, because you put down nothing or just a small fraction of the purchase price. And you can get all this by paying very low fully tax deductible interest and property taxes and nondeductible maintenance expenses instead of rent. I’d say that package is at least as good, overall, as the deal buyers of stocks get, or the buyers of almost any other assets. So I’d be hesitant to call the current govt-controlled way that people get to control housing assets less than “buying”. If anything, it’s better for the controlling parties (or “buyers”) than normal buying of other assets.

[patientrenter]

[quote=peterb]If one was to act strictly within the letter of the law….getting a very low down payment loan that has a mortgage payment below comparable rents would make sense. You can write-off the interest payments and if the house doesnt hold it’s value, you can stop paying the mortgage. The only downside is ruining your FICO score for a while, losing your downpayment and having the IRS come after you for the portion of the debt that will be forgiven upon default.Could be an ok deal. Low down payment coupled with non-recourse loans is good upside wieghted risk, IMO. But I wouldnt take it in this market.

Our brilliant govt at work. Incenting, and in a way rewarding, risk.
But it’s still not “owning” the house. Just an investment vehicle that the govt has been nice enough to let the little guy still enjoy. To some extent.[/quote]

If you buy a stock, peterb, then you gain if it appreciates when you sell it, and you lose if it depreciates, and in the time before you sell it, you get to keep any benefits (e.g. dividends) it provides. You have to give up the use of the entire purchase price until you get it back (maybe) at sale, and you have to risk losing up to the entire purchase price.

If you “buy” a house using our modern system of govt-guaranteed low money-down loans, then you get to keep most of the gain if the price goes up when you sell it, and you don’t have to lose much if it goes down. And you get unencumbered use of the house until then. And you don’t have to give up alternative uses of the money until then, because you put down nothing or just a small fraction of the purchase price. And you can get all this by paying very low fully tax deductible interest and property taxes and nondeductible maintenance expenses instead of rent. I’d say that package is at least as good, overall, as the deal buyers of stocks get, or the buyers of almost any other assets. So I’d be hesitant to call the current govt-controlled way that people get to control housing assets less than “buying”. If anything, it’s better for the controlling parties (or “buyers”) than normal buying of other assets.

[patientrenter]

[quote=peterb]If one was to act strictly within the letter of the law….getting a very low down payment loan that has a mortgage payment below comparable rents would make sense. You can write-off the interest payments and if the house doesnt hold it’s value, you can stop paying the mortgage. The only downside is ruining your FICO score for a while, losing your downpayment and having the IRS come after you for the portion of the debt that will be forgiven upon default.Could be an ok deal. Low down payment coupled with non-recourse loans is good upside wieghted risk, IMO. But I wouldnt take it in this market.

Our brilliant govt at work. Incenting, and in a way rewarding, risk.
But it’s still not “owning” the house. Just an investment vehicle that the govt has been nice enough to let the little guy still enjoy. To some extent.[/quote]

If you buy a stock, peterb, then you gain if it appreciates when you sell it, and you lose if it depreciates, and in the time before you sell it, you get to keep any benefits (e.g. dividends) it provides. You have to give up the use of the entire purchase price until you get it back (maybe) at sale, and you have to risk losing up to the entire purchase price.

If you “buy” a house using our modern system of govt-guaranteed low money-down loans, then you get to keep most of the gain if the price goes up when you sell it, and you don’t have to lose much if it goes down. And you get unencumbered use of the house until then. And you don’t have to give up alternative uses of the money until then, because you put down nothing or just a small fraction of the purchase price. And you can get all this by paying very low fully tax deductible interest and property taxes and nondeductible maintenance expenses instead of rent. I’d say that package is at least as good, overall, as the deal buyers of stocks get, or the buyers of almost any other assets. So I’d be hesitant to call the current govt-controlled way that people get to control housing assets less than “buying”. If anything, it’s better for the controlling parties (or “buyers”) than normal buying of other assets.

[patientrenter]

[quote=4plexowner]all about risk / reward – already rich – don’t need to take stupid risks

I’m just killing time on an anonymous blog and I write about things that interest me – not sure why you think everything I write is about making money

if I didn’t know better I’d think you were trying to get a dig in at me because you ARE a sucker and your 401K is now a 201K
[/quote]

Haha, yes, my 401k is definitely a 201k, 4plex! And you are right that my tweaking you about your opinions on CC interest rates is driven by an agenda. What is the agenda? That savers – the people who are the ultimate lenders – usually don’t get a very good deal compared to borrowers. And that’s a consequence of our culture and political system. So when I read comments about how borrowers are getting shafted, I am immediately skeptical and I make enquiries. It is, of course, possible for some borrowers to come off worse than the savers who made them the loans, but it’s not the norm, and it’s often not even true when you dig down a little.

[patientrenter]

[quote=4plexowner]all about risk / reward – already rich – don’t need to take stupid risks

I’m just killing time on an anonymous blog and I write about things that interest me – not sure why you think everything I write is about making money

if I didn’t know better I’d think you were trying to get a dig in at me because you ARE a sucker and your 401K is now a 201K
[/quote]

Haha, yes, my 401k is definitely a 201k, 4plex! And you are right that my tweaking you about your opinions on CC interest rates is driven by an agenda. What is the agenda? That savers – the people who are the ultimate lenders – usually don’t get a very good deal compared to borrowers. And that’s a consequence of our culture and political system. So when I read comments about how borrowers are getting shafted, I am immediately skeptical and I make enquiries. It is, of course, possible for some borrowers to come off worse than the savers who made them the loans, but it’s not the norm, and it’s often not even true when you dig down a little.

[patientrenter]

[quote=4plexowner]all about risk / reward – already rich – don’t need to take stupid risks

I’m just killing time on an anonymous blog and I write about things that interest me – not sure why you think everything I write is about making money

if I didn’t know better I’d think you were trying to get a dig in at me because you ARE a sucker and your 401K is now a 201K
[/quote]

Haha, yes, my 401k is definitely a 201k, 4plex! And you are right that my tweaking you about your opinions on CC interest rates is driven by an agenda. What is the agenda? That savers – the people who are the ultimate lenders – usually don’t get a very good deal compared to borrowers. And that’s a consequence of our culture and political system. So when I read comments about how borrowers are getting shafted, I am immediately skeptical and I make enquiries. It is, of course, possible for some borrowers to come off worse than the savers who made them the loans, but it’s not the norm, and it’s often not even true when you dig down a little.

[patientrenter]

[quote=4plexowner]all about risk / reward – already rich – don’t need to take stupid risks

I’m just killing time on an anonymous blog and I write about things that interest me – not sure why you think everything I write is about making money

if I didn’t know better I’d think you were trying to get a dig in at me because you ARE a sucker and your 401K is now a 201K
[/quote]

Haha, yes, my 401k is definitely a 201k, 4plex! And you are right that my tweaking you about your opinions on CC interest rates is driven by an agenda. What is the agenda? That savers – the people who are the ultimate lenders – usually don’t get a very good deal compared to borrowers. And that’s a consequence of our culture and political system. So when I read comments about how borrowers are getting shafted, I am immediately skeptical and I make enquiries. It is, of course, possible for some borrowers to come off worse than the savers who made them the loans, but it’s not the norm, and it’s often not even true when you dig down a little.

[patientrenter]

[quote=4plexowner]all about risk / reward – already rich – don’t need to take stupid risks

I’m just killing time on an anonymous blog and I write about things that interest me – not sure why you think everything I write is about making money

if I didn’t know better I’d think you were trying to get a dig in at me because you ARE a sucker and your 401K is now a 201K
[/quote]

Haha, yes, my 401k is definitely a 201k, 4plex! And you are right that my tweaking you about your opinions on CC interest rates is driven by an agenda. What is the agenda? That savers – the people who are the ultimate lenders – usually don’t get a very good deal compared to borrowers. And that’s a consequence of our culture and political system. So when I read comments about how borrowers are getting shafted, I am immediately skeptical and I make enquiries. It is, of course, possible for some borrowers to come off worse than the savers who made them the loans, but it’s not the norm, and it’s often not even true when you dig down a little.

[patientrenter]

[quote=4plexowner]stocks are for suckers and I’m not a sucker …[/quote]

If you are right about CC debt, then you are turning down an opportunity to personally benefit – maybe by enough to transform your life – from your economic insights. Is your conviction about being right a little weaker than you’re expressing here?

[Author]

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