Yes, I lost big when I sold my house for $140k in summer 1997, I bought that house in Nov 1988 for $200k, not include some upgrades, landscaping and other improvements. I actually had to pay $12k at close of escrow to pay off the loan, because I sold the house for less than the loan balance. This included more than 8 years of mortgage payments.

But I have bigger gain for buying another house in better area the same year I sold it. My current house is valued at more than double what I paid in summer 1997.

Where I live, the housing price is going up a little slower than previous years. But I do not see it will going down anytime soon, because there is very limited supply and the demand is still high. Only one house in my area is on market, out of about 175 houses.

 

Well I don't think the market will crash but I do see real estate prices slowly coming down. IMO, in a market like Miami, real estate is becoming so insanely expensive while salaries have remained about the same, almost no one can afford to buy a decent house these days. Combined with raising interest rates, its slowly becoming a buyer's market again.

Good for buyers but bad for sellers and even worse for investors.

 

how so?

 

If you lived in a hot market like the bay area, then you would understand.

 

He lives in Toronto, come down to the states and see the mayhem... j/k, but there really is a problem.

Signs that people can't afford the houses they are living in:

1. Interest only mortgage - hmm, don't want to own that house do ya

2. Mortgage to income ratio - now they'll let you borrow up to 45% of your monthly income, you do like rice and beans

3. Home equity loan boom - have to finance your credit cards when they get out of control too

Not that all of these are bad all the time, I can point out many scenarios where they work too, but for the general public, everyone is way over-leveraged as their income can not keep up with the price of their house and their daily spending.

 

I'm tired of these constant doomsday scenarios about the housing market . The housing market in places like the bay area, and down here in LA are inflated, for sure, but a crash? No way. There will be a correction in about 8-9 months , as interest rates go up, and the market may be recessed for a couple of years but it'll bounce right back up. It always has. Look, the dot-com crash in 2000 created panic and hysteria about a total collapse in the real estate market, but the prices right now on average are equal or higher than when we had the dot com boom, and that was only 5-6 years ago.
If you're a short-term speculator, sure you're going to lose your ass, but that can be said about any type "day-trading". If you buy and hold that property , it is almost a certainty that you'll see a return greater than any other investment vehicle, of course provided you know where to buy

 

The Bay Area has a few particulars that make it crash-resistant (not crash proof, but VERY crash-resistent).

1. Multiple colleges generating cutting-edge thought/technologies.
2. One LARGE port, one 'big-enough' port
3. Long-standing (by U.S. standards) Commodities Exchange
4. Geography. . . there's only a finite amount of usable space in the interior Bay Area, and it's been scarce for years.
5. The real estate is getting too expensive to speculate wildly (versus say, Carson City, NV or BFE Central CA). . . if you make it a rental property you want to KNOW that there's going to be tenants (and the geography versus job location often takes care of that). Moreover, with start-ups and Google-heads running around, you can be guaranteed of renting out a well-located rental.

That said, there's some F-ed up going on nationwide:

1. LOADS of construction loans. . . Las Vegas passed a moratorium where you have to live your place for some amount of time. . . no more "Hold to Sell."
2. Long-term mortgages are going up gonzo to the ARM's. This typically curbs buyers, but not investors. . .
3. Housing costs are out-pacing salaries. . . which is fine if you already have equity in a rental property, but expecting Mr. and Mrs. Wal-Mart to pay for your mortgage, tax and PMI on a rental is getting goofy. . .

The problem is, what happens when people buy into something where there's more available commodity versus demand? There will be a crash, but probably not in places where all the economists are predicting. The nationwide job situation is what eventually drives the housing market, IMHO, and the nationwide job situation is not as rosy as the real estate market.

-B

 

I would tend to agree there won't be a crash unless there is something catastrophic like a huge depression like in the 30's or Osama Bin Laden does something to triple interest rates. There will be a correction but like most I tend to agree that housing is an investment that is hard to lose in. Some do but the vast majority don't over the long run!

 

if you don't plan on staying in your home for 30 years what is the point in putting in principle? it doesnt increase the value of your home. you just get it back when you sell your home.

same thing with 30yr fixed vs arm. you'll have to refinance when you buy a new home in 5 or so years so why not get a 5/1 ARM with a lower interest rate?

 

Depends on what stage of life you are in. I am about to buy my third place in eight years, the first two I made great gains off of. This one I looked carefully for, and it has the potential to really go up in value.

But once you get older, find the house you think you can stay in or have kids you want to stay in a certain school system or something like that, the prospect of pulling up stakes to make a gain on paper becomes less attractive.

Even with a stagnating market, I think in a couple years I will have about $250k in equity from making sound decisions and only be in my mid thirties. But buying this home, which has everything I want, space, a wooded lot, nice location, blah blah blah. Unless something drastic happens with my income or job situation or the lottery I think I am done with house swapping.