some rates have nothing to do with Greenspan and the Fed...some rates are tied into different markets and even in variable situations they give you "vision" going forward....like the 12mo MTA for example

 

Most of the rates are based on the FED, not all. Most of them are, simply because the FED rate is the rate at which the regional banks can borrow money. Unless the private bank has a HUGE client base, they need to borrow $ from the Regional branches, at the Prime rate. That is where you get the "Prime + %" lingo.

Yes, some rates are based on secondary market activity. If the market is highly active, those rates will be a bit higher (banks know they can unload them fast to a secondary servicer). If they are slower, you can expect lower interest rates on these loans, as they will have to work harder to unload them.

Check out Fannie Mae or Freddie Mac.....one of the two is a government subsidized mortgage program (Fannie Mae, i think), which gives preferential treatment to first time home buyers. My cousin is in the Air Force and got a 1% loan through fannie mae on her first home. The only restriction is that it is only good to a certain amount of $.....basically you can't buy a house over $150,000 or something like that.

If you know that you are only going to be in the home for a few years...get an ARM, or adjustible rate mortgage. They offer lower short term rates and adjust to prime + % after a set period of time (mine is 5 years). I know I will be outta this house in under 5 years, so it is worth it to me.

Also, if you sell your house, and you have lived in it for 2 consecutive of the past 7 consecutive years (i think those are the #'s), all capital gains are TAX FREE up to $250,000 for a single person and $500,000 for a couple. This can be douplicated every 7 years (as long as you meet the requirements).

John

 

If you are the west coast, northeast and southeast, and you are buying real estate NOW with ARM or interest only loan, I will be waiting to jump in and scoop up your house when your dream turns into your nightmare. J/K! Be very careful now. Real estate is all about timing as someone else has mentioned.

If you must buy now, plan to stay in it for the long terms. Otherwise, you can walk away upside down, loss of your initial investment and the lender coming after you. If you think you'll have a tax benefit, see your tax preparer to crunch some numbers for you. In CA, your tax benefits are far outweighed by the huge property bill and the interest on the note.

 

Everyone, first and foremost, before i say my opinion, i must say that HwangTKD is the reason i still own an s2000...in the past few months i got the Evo "bug" and was actively searching for one to replace my s with. However, i stumbled over his writeup about the evo's reliability and upkeep issues on an evo forum...ur words honestly made me change my mind completely. An article written by a former s2000 owner, about the car i was looking for...suffice to say, i took your word and gave up on the evo...thanks buddy

anywho, with that aside, i say get the house...a much bigger decision and beneficial (at least in societys eyes) one than a car...

Dewey

 

A house? In SoCal? The median price is $508K right now, and condos go for more then $450K. You need to be making at least 100K/yr just to afford one.

How they are being snapped up like they are when the median family income in Los Angeles is between $50-60K?

Interest-only loans and ARMs with 3-5 year fixed rates. And these people can barely afford them. Guess what happens after 3-5 years? They have to flip the house before then or if the market drops 5-10% they are taking it in the pooper.

I absolutely refuse to believe the market here is sustainable. Too many damn speculators.

Why am I bitter? I have a Master's in Computer Science, make damn good money and cannot afford even a starter home in a crappy neighborhood.

 

I live in Bay Area, CA in an apartment. I like to buy an S2000 and also would like to buy a house... definitely a house a lot more, but I just can't afford it here though I am also a MS in Comp Sci and earn well.
Recently I gave an offer on a condo only later to find out in the HOA docs, that there was court case going on and every resident had to pay $30,000 to fix issues with the complex. Luckily, I had signed an offer that allowed me to get out within the first 10 days without any penalty. Getting a house here is so difficult and definitely do your research well.

 

Sucks man I bought my house 5 years ago and that was just about perfect. $235K for 4 bedrooms and 3 car garage. I just refi'd and it was appraised at $580. My house has a bigger income than I do!!

Seriously, a house is always good but now is not the time to speculate or go in for funky wonder deals. Remember if it sounds too good to be true...

At this stage of the real estate game you need to make sure you can carry the place for at least 5 years IMO. Things are going to flatten out for a while but will then go up again. Real estate always trails the stock market and if you notice the DIA is at 10000, right where it was 5 years ago. The best time to buy real estate is on a rising stock market.

Your buying at the top of the market IMHO but since you can never really know where the top is it could still rise more before it flattens out. Prices can't continue to go up indefinitely (think bubble).

If you've never signed a mortgage before brace yourself. You will be presented with STACKS of contracts all sugar coated with something called "fair lending act" just to make you feel better. An escrow agent will sit across from you and tell you what your signing and then asking you to sign. This will go on for over an hour. There is so much paper involved you will never possibly be able to read it all. You'll think you have a pretty normal loan at 1% and your just paying the interest but you won't have any real idea about what you in fact signed until you get a chance to actually sit down and read it later. This is why I'd personally be cautious of super special deals. Be very very conservative and very diligent about reading every single clause. Most of it you won't understand. Get a lawyer to answer your questions and don't ask someone who's got an interest in your signing it (broker, loan officer, escrow agent). There is a lot of pressure involved so make sure you aren't rushed and sign something stupid because "you really love the house".

 

I'm with you rworne...average single family house in Orange County is $682K, if you throw in condos it brings it down to only $550K....me and my wife make decent money and still can't afford a house! I hope greenspan is right when he talks about localized bubbles that can't sustain themselves and OC crashes and I can snatch up a foreclosure cheap

 

So how many of you guys work for ameriquest?

 

Yeah... So Cal is sort of a phenomenon....prices have risen like 100+% in the past few years. That kinda growth IS not sustainable. I think the prices there will eventually dip quite a bit, to level out with surrounding areas. Miami / Ft. lauderdale went through that in the early 90's.

I would look in the suburbs of the area (within 1-1.5 hours commute). You should find something for a decent price. The good thing about these "bedroom communities" is that when the market dives, those values tend to shoot up, becuase those who cannot afford the in town locations anymore tend to move outside the city to more managable price ranges.

I live in Tallahassee, FL. Here a $1,000,000 house is a rarity. Only maybe 2 dozen in the area. The average house here is like $150,000-200,000. People making decent money can still afford these. The rental locations are still under $100k.

California is NUTS. We own a house in Grass Valley (northern Cali), it was built in 1970 for $30,000 (1.5 acres on a mountain golf course included). A few months ago, it appraised at over $600k.

Speculation is good, only if you can afford it, and the market permits it. So Cal would NOT be a good location, because the prices seem to be based on supply / demand alone, rather than other pertinent factors (size, location, etc.). New construction, at least here in north FL is around $110-125 / square foot (land not included). I can't imagine materials being MUCH higher elsewhere (usually contractors just jack up their fees in hot areas).

If you are to buy, buy new, because it allows you to get in on the ground floor (if you can hassle the contractor's price).

John