Buy a home for $500,000 in December. No down, interest only. Happy happy joy joy.
Home is now worth 5.9% less in 30 days. a nice $29,500. Plus to sell figure another 7% in costs, or $35,000. So you've just lost $64,500 in 30 days. Possibly more than you make in a year of work. In 30 days.
Great investment says Bob Toll and the NAR. Not. And it's just gonna get worse...
The median price of a new home - meaning half sold for more and half for less - fell to $154,400 in January, down 5.9 percent from December's price. A report last week showed that higher mortgage rates took a bite out of existing-home sales, pushing them down by 10.7 percent in January, the National Association of Realtors said.
March 16, 2006
Bought a house in December 2005? Bad idea.
Subscribe to:
Post Comments (Atom)
13 comments:
It's paper depreciation. Usually, someone buys a home with the intention of staying in it at least 5 to 7 years. That is commonly the break even point vs. renting. The only time something like this becomes a problem is when if this person is forced to sell the house immediately (due to big promotion to head up the Baltimore office, or some other life changing event like that)
Anon in Austin,TX
Seems to me it will take much longer than the standard 5 years for folks who bought in December to break even in the most bublicious markets (Cali, AZ, MA, FL)...
The average homeowner switches homes every 4 years, not 5 to 7.
Also, it's a mistake to include 7% closing costs as a "loss" because no matter what price you purchase a home you will incur the 7% closing cost to resell.
I like you point...nobody stays in the same place that log anymore...our brave new economy makes it unlikely that a homeowner sits tight that many years.
Sory, I can't spel todai...
"Paper Depreciation"
Tell that to the guy who bought that Toll Brothers house in December, as Bob Toll puts his houses on sale
Paper Depreciation may turn into Paper Builder Lawsuits, Paper Divorces and Paper Prescriptions for antidepressants and anti-ulcer pills.
And it's gonna get worse. So why would any sane person buy a house today, when they can buy tomorrow for less (and avoid the Paper Depreciation?)
I wish judicial reform had been passed. The courts will be clogged up with lawsuits for years to come from naive idiot investors who lost money on housing.
"Moman, Moman The Mammon Worshiper -- King of the wild frontier."
We American's do appear to have a Love Affair with SELF DESTRUCTION lately ?
"Moman, Moman The Mammon Worshiper -- King of the wild frontier."
What does that mean ANON?
So what if it doesn't get worse? ( I know all the facts and stats point to a decline but..) lets just say this sprig home prices take off again? Those people's stupid move of buying end of 05 will look like a good move. Referring to people who buy a home to be a home, thes people are buying the payment and if the payment is doable they are going to take that jump. SO if the loan is right (30yr fixed) and hte income supports the loan, who cares? Its going to be a home for 5 years (or more) and not an investment. If the market takes a dive, you ride it out.
Keith likes paper man-love in England
Is that article not from 2000? Or am I crazy? Look at the rates that they quote....
Post a Comment