Until I can see factual information from an unbiased source I will always assume that the truth is in middle of what is reported. I will, however, never fully believe the media reports.

From my perspective, I see this as a positive. I'll be able to get a home that was over-priced by the market at a value much closer to what it is and should be worth. Minneapolis seems to be having a rough time of it due to over-building of condos in and around the cities. I had considered a condo but I think that trying to find a house will be a safer bet.

 

Except in a few unusual markets, houses are always a better/safer buy than condos or townhomes.

Financing is always available for homes but condo townhome financing is influenced by the history or the condo project and not just your history or circumstances. Your neighbors and the HOA can kill any good financing options.

Too many renters = no financing!
Too many special assessments by the HOA = no financing!
Too cheap HOA dues (which leads to special assessments) = no financing!
Too many foreclosures or too long of a sales time = no financing!
etc., etc.

There are condos that Perot couldn't get (good) financing for.

 

[QUOTE=Wildncrazy,Oct 23 2007, 07:51 AM] I own a

 

[QUOTE=s2000raj,Oct 22 2007, 10:02 PM] I'm not saying you are wrong.

 

There is no reason why anyone should be looking to buy right now. It's almost a guarantee that the house you buy will depreciate; it's a losing proposition.

There is much inventory left to be unloaded in many parts of the country, and homebuilders continue to churn out as much as possible till the very end. Save up some real money, and you'll be surprised what you can afford in two years. Housing has been grossly overvalued and have a long ways to come down.

^To the guy who owns a mortgage company, the media has been sensationalist to some degree but it doesn't discredit them completely. Housing prices have dropped in California yes, but not by much. If you look at the areas where housing has dropped you'll realize that they weren't good neighborhoods to begin with and were driven up by speculation. Other "bubble proof" areas have yet to experience a correction.

 

not necessarily, but it depends on the market.

the rental market is way more competitive and you can really only charge what the market will bear. The rents in my neck of the woods never went up much even though housing (and insurance) went haywire. If you were to buy up property in FL and rent it you would likely never ever break even.

Lots of the condos here rent for little more than the HOA fee. After they've paid insurance and taxes from that they're cash flow negative without even touching principal and interest.

 

But that's because condos are such poor products in most markets - you can't sell them so you just try not to lose too much money until the day comes that you can finally unload the beast. IF the owners could sell them they would and stop the cash flow. You don't pay people to live in your house if you have a choice.

No, a regular rental is a positive cash flow or else you simply don't rent it. If the owner can't rent it and cover all costs plus a profit then they sell it or live in it.

I stand by my statement that if you rent you are paying all costs of homeownership including insurance, taxes, etc. AND the owner is making a profit. So as a renter you aren't coming off better than if you bought.

With that said, in 1987 I rented for a few years after the market crashed because it was cheaper than owning. But that was an unusual circumstance and that didn't last very long. I lost all the equity that I would have accrued had I bought when prices were the lowest so I didn't really come out ahead, but it was a way to hedge my bets incase the market kept falling.

As far as comparing a lender to a used car dealer, it's not a fair comparison - we aren't trying to sell you a car or a house or anything. As a lender I could care less which way the market is moving. We just facilitate the purchase when you do decide to buy. Typically we are the busiest when the prices are down and the least busy when the prices are the highest so we don't need to manipulate data to push people into buying in this type of market - we're busy - quite busy right now.

 

1. you can only rent for what the market can bear. in my area, mortgage and taxes on a house is more than twice what a comparable rental would have cost.
for example, my neighbor is trying to sell a house for $815K. My rent? 2K. How could an investor buy that $800K house and cover his mortgage, tax, insurance? I'd like you to show me how that math works.

2. no sales = no mortgage. of course you're trying to convince people to buy, even when it's a bad financial decision.

 

bingo!

That comes down to the whole 150x price:monthly rent ratio. If it's over 150x you can't make money. 130x is more desireable. That 150x ratio INCLUDES the tax advantages.

If anyone can think of how to buy a $250K house that rents for $1000 and make money let me know. A $250K morgage is a good $1800 a month. Then (in FL) you need to plan for incidental hurrican repairs (15% deductible, so figure on 5% a year based on damage every 3 years which is $12,500 a year or $1040 a month). So, lets see...

$1000 revenue
-$1800 mortgage
-$1040 planned repairs
+360 tax advantage @ 25% of year one interest (declines yearly)
=($1480)

So, I don't see how an eventual profit is made by bleeding almost $1500 a month. Not renting brings the loss to $2480 per month. Selling (if you even can) could lose you $50,000. If you're in an interest only (or an interest only ARM...EEK) you can't sell unless you cough up the extra dough. Or, you could foreclose and ruin your credit.

WildandCrazy is right if you know money. Most of the people who went haywire purchasing in FL are laypeople who know squat about money. They thought they'd invest in a house, run a rental business, and sell for big bucks later all the while ignoring reality. You see lots of ads advertising rentals for double the appropriate rent and they obviously don't get rented. Most of the condos here are unoccupied even in the winter.

RENT is the measure of the true value of a property. If the neighborhood was that good rent would reflect that. Also, rental rates are dependent on scarcity, size and quality...it's about as close to true competition as you can realistically get. A house that rents for $1200 a month is worth $180K tops. Most $1200/month houses list (ie not sell) for $300K and up. A $2000 house is worth $300K tops...not $815K (as in the above example) not by a long shot.

I know several will disagree that rent is the true value of a property. Rent is the opportunity cost of living in it (opportunity cost meaning next best alternative...sitting vacant isn't the next best!). Some will argue about the upside in prices, and while valid, the long term rate of appreciation in most markets is barely above inflation and NOT above interest (even in CA). And a true businessman will rent even if it is below the mortgage...or sell it. You can't have a house sit vacant and pay taxes and insurance on it unless you have a thing for bleeding red ink.

 

S2020 it is real simple you don't buy a house to rent it if you know you will be losing money.

Now if you are stuck with a house/condo you can't sell then renting it makes more sense than just letting it sit empty. Hence why there are so many people renting condos and losing money. As you said "How could an investor buy that $800K house and cover his mortgage, tax, insurance? I'd like you to show me how that math works."

It doesn't work!!!!!! Therefore no investors are buying those houses to rent, any that are out there are people who cannot sell for some reason.

If you happen to live in one of those markets (and there aren't very many) then you can get a deal on your rent. But then you are still living in someone else's house which isn't nearly as satisfying as owning your own.

There are SO many other benefits to owning your own home other than the financial end. Property values tend to go up in the long run and tax breaks are there, but they still aren't the main reason to own a home. They are just nice perks.

How many people willingly rent an apartment? Once you get past the binge drinking age most do it because they have no other choices or their unstable job situation demands it.