1) Until it costs less to own a home than rent it
2) Until housing prices have settled back to their historical mean
3) Until there's blood in the streets, foreclosures are everywhere, and people are disgusted with housing
4) Forever - 'owning' a home is a fool's game
5) Other - fill us in on your plan
And for those sitting it out right now, what year do you see yourself buying again?
January 07, 2007
Bubble Sitters and Bitter Renters - how much longer do you plan on renting?
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62 comments:
Know how all those folks are always whining about the tax advantage of buying? What about folks on disability that don't pay income taxes anyway? Does it make sense for them to buy, or just keep renting forever?
I have three criteria for buying my next home.
1. The price has to be in my budget (obviously). I'm not going to get crazy on my next home. I have a certain amount of cash that I have set aside to buy my next home outright.
2. The price has to be within historic fundamentals for this area. On average, this means about a 40% cut from the peak.
3. It has to be exactly what I want. I'm not going to settle for something that's not 100% what I want since inventory levels are so high.
With these three criteria in mind, I'm probably going to find something in late 2007 or early 2008. NE Florida has already seen 4 months of YOY price declines, a record inventory, job stagnation (due to RE job losses) and less people moving into the area. Huge price cuts are common these days. The fall is going to come swift here when the spring glut hits the market with few buyers to be seen.
Well we'll need to buy eventually. We make too much to not have a deduction.
At 80,000 a year I can seen not buying. At 250k+ you start looking around for anything that will bring down the tax bill.
But we think houses are way over priced right now and cash will be king in the fall/winter. So we'll see. It does get frustrating at times, particularly when we're dealing with very noisy neighbors.
1-3 will be simultaneous or at least tightly temporally linked events, as banks can only lose so much on the loans at forclosure.
I will be back in the game in 1-2 years if the right deal comes along (sweetheart deals only). Otherwise it will be after the fall & before the next rise. That could take years but the bottom will also be of a long duration so timing will not be a problem.
Keith,
"Until housing prices have settled back to their historical mean" or slightly more.
Keith,
The founding father of Ramen Noodles (and starving realtors everywhere) just passed away:
http://tinyurl.com/wj47m
I think you should start a new discussion thread in honor of this great man.
Keith,
Check this out:
http://money.aol.com/cnnmoney/realestate/canvas3/_a/the-house-that-swallowed-don-and-shelly/20060627161909990001
Keith Check this out:
http://money.aol.com/cnnmoney/realestate/canvas3/_a/the-house-that-swallowed-don-and-shelly/20060627161909990001
Late 2008... I believe housing will continue to go down even after I buy but not as much as we will see during the next two years.
When possible it always makes better sense to buy a home. As long as its at the right price and with the right loan. Renting forever is the true fools game...
My girlfriend and I sold the last of our houses last July.
Between the two of us, we have enough cash in CDs to live for ten years at our present lifestyle without working. We live in LA!
For me to buy back in, prices would have to come down to 2001 levels. Until that happens, it will be much cheeper to rent.
You can't go wrong if you always go for value for money. I grant you, future value and future money is uncertain. I build scenarios like - at what point does it NOT make sense to continue X and so on.
But the picture of "Man About the House" or the US remake "Three's Company" reminds me of the downsides of renting. My experience was in the UK in the late 70s when it was rent-controlled, had hard-to-evict laws, had local govt. built and managed and subsidised housing that was alloted by "points" that single men and childless couples with no contact with the local pols or the corrupt housing officers, nor jobs with the govt. had any chance of getting. So one ended up with:
1. Nosey, intrusive landlords.
2. EXPENSIVE in terms of value for money.
3. Badly maintained and constructed, leaky, draughty flats.
4. Lacking facilities like central heating, 24-hour hot water.
5. Awful communal areas.
6. In the really poor / high crime areas of town ( Liverpool 8 anyone).
I couldn't WAIT to buy - even at the cost of "settling" down.
Your mileage on renting in 2007 in the USA will vary. Its a whole lot better I'm told.
-K
the numbers have to work. it's as simple as that. look at condo's for example. asessments and taxes alone can approach the cost of renting a like unit. i live in a small apartment with low rent, have no debt and put lots of money away each month. i am in no hurry to jump into an environment of high taxes and declining values.
With roommates like Janet and Chrisy, I'd rent forever. I'd NEVER move out.
Like Revenge of the Nerds, renters will end up ruling the world these next few years, or at least feel like it as homedebtors panic and line up for the slaughter
Yup, that Chrissy was hot. Janet, not.
honestly, until i can buy something that is comfortable/big enough to be in for 7+ years on a single income and still save 5% or so, that way my wife can either quit and we can start a family or we can continue to save her paycheck entirely. so yea, when i'm scraping blood and guts from my wheel wells.
IMO the other chick in the picture is hotter than Chrissy, Janet was cute though.
Janet was nasty. Chrissy still looks good today and she's pushing 60.
I will rent when I get married and have children - but I will not buy more than I can afford with a 30-year fixed-rate. I will likely be looking for a foreclosure REO
and the realtors come back
and the realtors come back
and the realtors come back
sixpercenter: brilliant.
"When the housing futures market turns positive. Not before."
I knew about the CME futures, but never thought of using them in this way, though it's plainly obvious now.
I was thinking about using them for either directional bets (but probably market is pretty efficient) or hedging (much too complicated).
I will buy when David Lereah says we've hit bottome for the 10th time.
So far we're at 3:
May 25th 2006
"This may be the bottom. It appears May is a little better."
September 26th 2006
"We've been anticipating a price correction and now it's here. The price drop has stopped the bleeding for housing sales. We think the housing market has now hit bottom."
December 28th 2006
"It appears we've hit bottom, the price drops are necessary to stir sales. It is working."
So if he says we've hit bottom every 3-4 months and things keep getting worse and worse, then I should be looking to buy in about 21-28 months.
Probably not too likely as long as I remian single. Like the other poster, it's going to be the dreamhouse or a close approximation. Not interested in starter home again.
p.s. - so...picking a name still makes you an "anon"?
Better to rent at this time and buy gold and gold stocks,it could be the next bubble
underdog2u said...
I will buy when it is cheaper to own than it is to rent. But with the current rate of RE taxes housing prices would have to fall considerably to make that a reality.
Sunday, January 07, 2007 2:33:02 PM
never going to happen
I will buy from a housing flipper who bought as many houses as he could get his hands on, knowing that people like me, who really need a home, will have to pay him lots more. I'll wait until he/she really needs the money.
I'm hoping he will be kind and reduce the price maybe 10%, AND ONLY MAKE $100K OFF MY HARD WORKING FAMILY. Afterall, he held onto and maintained the house for 8 months, he deserves at least $100k for getting there before me, right?
And then I'll send Greenspan and Bush a nice contribution for allowing me the opportunity to own my own home. For if it were not for their policies I would not be able to qualify for the loan ammount at 29 times my income, which I will now need.
I prefer a threesome with Mary Ann and Ginger over one with Janet and Chrissy.
Or if it's a solo choice, Daisy Duke.
I'll buy in the NW Side of Chicago when the price per square foot goes waaaaaaay down:
Looked at a tiny little 1,100 sq ft ranch in the Norwood Pk hood. they want $398,000!
That is $361/foot!!!!
For A 50 yr old mini ranch that has not been updated in 25 yrs.
REMEMBER CHICAGO IS **NOT** A BUBBLE TOWN!!!
I prefer a threesome with Mary Ann and Ginger over one with Janet and Chrissy.
Or if it's a solo choice, Daisy Duke.
------------------------
If your into vintage POA why not go Donna Reed, or Maureen O'Hara. Ginger never did it for me but Maryann did.
Ricky Martin.
If your into vintage POA why not go Donna Reed, or Maureen O'Hara. Ginger never did it for me but Maryann did.
--------
Well, at some time, you've got to draw a line or otherwise, it'll be a bubblebath with Audrey Hepburn, Sophia Loren, young Joan Collins, and the list goes on...
ginger and maryanne....nice!!
my criteria:
1: the house seems like a spiritual center, not simply a pen inside an HOA zoo;
2: the house fits my budget and, in my home, funding my retirement comes first;
I'll buy when I can afford something that I would be willing to live in long-term. I'm not falling for this 'starter home' BS - that notion just results in more RE transactions and more unearned income for the contemptible realtor 'profession'.
In the meantime I build equity the old-fashioned way - I earn it and save it.
For those of you debating Ginger v. Maryanne v. Chrissy v. Donna Reed you're sick and you need to get some therapy... the ultimate is a Paul E. Math sandwich between a slice of Natalie Wood on one side and Ingrid Bergman on the other. Now you're talking.
BARBARA EDEN AND MARYANNE
As I've mentioned on this blog before, we sold our house and live full time in our RV. Yes we made a handsome profit (sold in fall 2005). I've noticed more families with young children moving into RV parks on non-transitory basis. Just wondering if they are forclosure escapees. Anyway, we don't plan on owning a home again for about 10 more years - prices should be back to normal by then. We love this lifestyle and travel all over the country, meet lots of great people and have a good time doing it. We are also planning to purchase a small motorhome, ship it to Europe and spend summers there in our summer wheel estate. European RV's are not up to US standards (which aren't all that good to begin with - Honda please start making RV's) so we want use a small motorhome of about 24 feet. There are motorhome camping clubs in Europe and lots of RV parks near the attractions a tourist would want to see. There are several books on Amazon about RV'ing in Europe. It gives you lots of freedom and is VERY inexpensive in terms of lodging and meal preperation. If you want to know more about the full time RV lifestyle visit my blog at RVNOW.blogspot.com. Happy traveling! Jim
Well - the "renters" have to rent from someone.... I'm glad I've purchased some small condos in great locations and "break even" with the rent collected and the costs associated owning the units. I'm not concerned about the value of the units today, tomorrow, next week or next year. I'm thinking 20 - 25 years from now - the mortgages will be paid off and I will either (a) still be collecting rent or (b) selling the units and using the proceeds to suppliment my other retirement savings.
I'm not a "flipper" - I'm a "holder."
Renting forever and all the way to the bank!
God!..never had so much cash and freedom!
Yea ...anonymous trolling is back ... Whoo hooo ...
My answer is ... all of the above ...
However I have bought when 1 2 and 3 were in effect. The next move is into a rental and its going to stay that way till I ahve all 5 in my back pocket.
Cool.
Cow_tipping.
To a.creampuff, in my opinion you are not an anon. You're only an anon if your post starts with 'Anonymous said...'. And yours does not.
You don't have to link to a blog or anything (Lord knows my blog contains very little of merit anyway). Just as long as you use the same name consistently so people can easily reference you when responding to your posts. As I have just done with yours.
That's the way I see it. I'm not the authority or anything, that's just my opinion.
I just renewed my lease in Orange County, CA for two years. Renting a 1,750 s/f 3-BR, 2.5-BA with 2-car garage townhome worth about $800K for $1,950 per month.
Why would I EVER buy?
Prices are too high and on a wage of $85K there just isnt any homes available to someone in my income brackett.
They're not making any more land so I guess I'll be renting forever :(
"I just renewed my lease in Orange County, CA for two years. Renting a 1,750 s/f 3-BR, 2.5-BA with 2-car garage townhome worth about $800K for $1,950 per month."
Thats a lot of rent!
At that pace, you will have paid nearly $240,000 renting for 10 years which could have bought you a condo somewhere.
Renting is a fools game!
I'll choose #5 - When my house note (including taxes) takes up less than 23-30% of my take-home pay.
I might buy rentals. Will not another house in the OC. May buy a low price retirement house elsewhere. May also buy a new house for investment, in two years. Not timing the market. There are always good deals, somewhere.
I purchase homes at any price in any market as long as my mortgage payments, insurance, property taxs, HOA fees, and repairs are cheaper then renting.
In some parts of the country it is easier then others, in Southern California its next to impossible so that is why I do not own out here yet.
In Florida it is very possible, just save your pennies and then purchase a home for cash with no or very little mortgage...then you are a true "home owner" ... that is the key to real estate investing. Simple.
Me and my girl have no kids and have considered getting out of the rat race and traveling until we find somewhere we really want to live. By definition this area must be cheap enough that we could support the household on one salary. This means 250K-300K maximum for housing or 150K-180K if we decide to find something older and smaller (and invest the balance).
If prices in DC area dont drop soon, we will just leave. But we dont plan on renting much longer.
I encourage everyone to do what my wife are I are planning to do:
If prices dont start dropping significantly in our area, we will leave when the lease is up (about 6 months). We are tired of waiting and we know the RIGHT decision is to leave the area no matter what. Even with prices reductions, it would make more sense to find somewhere MUCH cheaper to live; also, the areas we are considering will inevitably have less traffic, lower taxes/ less regulation, reduced social alienation, and much more beautiful natural resources.
Unless your job is the greatest on earth and your salary is double the average for your qualifications, and unless your family is very close knit and close by, you should decide the same. I will miss my family but you know I could take off 6 months per year in many areas and live the way I live around here with 2 incomes. So, I will travel to see my family. Anyhow, they have all moved an hour or two away already - out to the far exurbs.
We are not going to rent forever. We want to see major prices reductions in the next few months or at least to see the bursting accelerate in our area. If not, we will force the prices down by reducing the demand in our area. FBers dont get it, its our way or the highway.
We sold 3 homes in the last years and made nice profits. I would NEVER have paid what we sold the last two homes for. We are now living in a 2/2 condo that cost us 1/3 to 1/4 of owning it. We are living WAY ...Way below our means as a strategy to save even more money. I figured out we are saving about $250,000 a year by not getting hit with depreciating RE and the cost to service the debt, taxes, ins etc. We can easily afford a $1M home but will wait for that $3M home to sell for $1M. Or that $1.5M home to sell for $500K. When prices go back to fundamentals we will buy and not before that. We have budgeted 10% of income for housing and currently only spend 1%. We have no plans on competing with fools who spend 40%, 50% and 65% of their household income for a home. Those are the fools we sold too. We have lots of cash and don't care if interest rates spike to the high teens from a dollar collapse and can buy a home anytime. The time we will buy again is when prices go back to 1997 to 1999 in FL which they are heading there fast and most do not even know it is happening. When blood is running in the streets we'll be buyers.
P.S. Banks will have to let go of homes fast because the taxes and insurance have gone 10 times more then they were in the last RE cycle
Dear 'Holder':
That's a great philosophy. I'm just curious, how many positive cashflow properties have you bought in the past two years?
until they accept pesos for homes just like they do for pizzas in dallas:
Dallas-based food chain to accept Mexican pesos
10:11 AM CST on Saturday, January 6, 2007
By KAREN ROBINSON-JACOBS / The Dallas Morning News
Starting Monday, patrons of the Dallas-based Pizza Patrón chain, which caters heavily to Latinos, will be able to purchase American pizzas with Mexican pesos.
We rent and save. That should be a new phrase. We rent and sock so much away, I'm ready for the IRS to call me looking into legitimate income verification. Everyone I know owns, except one couple. Us and the couple are the only ones with disposable income. All else is always broke. The tax returns are their only saving grace.
Well James, I'm planning to do the same. The only hitch is that I really do not want to move until I have another job waiting for me in the next location.
I will not buy until around 2011, 2012. Based on the Shiller graph:
http://patrick.net/housing/contrib/housing_projection.html
The duration of an upturn in housing usually matches the duration of a downturn. However, the rapidity of the deceleration and downturn may be increased due to the prolific usage of interest only and option ARMs.
But ultimately, I will buy when housing and rents are at more logical parity with each other, and not before.
Normally, the P/E ratio of houses hovers at around 11-12 based on the following calculation:
P/E = house price/(rent - expenses)
For my area (San Francisco Bay), that ratio is around 30. Needless to say, math seldom lies. (Unless it is being processed by a company CFO)
Ultimately though, if I do buy, it will most likely be in another part of the country. The Bay Area has been on a steady downturn for years now. The quality of the housing is dismally poor when compared to other modern urban areas. I fail to see the reason why I should purchase overpriced, less suitable property here when I could buy something far nicer and likely cheaper somewhere else.
I thought that SF's real estate was summed up by the Journey song:
"And the sun shines on the bay
I want to be there in my City
ooh, ooh
[ skip a stanza ]
I want to get back to my City by the bay
ooh, ooh"
"Ultimately though, if I do buy, it will most likely be in another part of the country."
Absolutely!
I rent an apartment front to the beach, paying $900 only + cable incl. + central air cond. incl. + pool + beach + gym + valet service, etc. I save a bundle every month, which is invested into mutual funds and allows me to live debt free and take wonderful vacations. Now, why would I be a slave of mortgage companies, insurance companies, and condo assessments, without any money left to invest or enjoy life? I will own a home when the CAP Rate is favorable, as well as the cash flow. There are a lot of homeowners highly leveraged (including expensive car leasing), who can't enjoy life because most of the money goes into the house. They are all looking good, but going broke.
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