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It will be a good time to buy a house when:

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Spleng
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Dern my polls never show up :) so...

It will be a good time to buy a house when:

1. Price to own = price to rent.

2. Prices are 3 - 5 x local yearly income.*

3. Prices return to pre bubble levels '99 - '01.

4. Any of the above!

*Wide variance to account for "special" vs "non special" areas.

October 30 2007 - US

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bobesb
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Price to own after 20% downpayment is <= 20% more than the price to rent equvalent housing

October 30 2007

caliguy
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Any except 3)...(though I guess it could easily be a side effect of the other factors) - I don't care about how low prices go, as long as they are better in line with incomes and better revert to historical price/income ratios.

October 30 2007

LongIslandBubble
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Zillow didn't like the poll probably because you left out "Right Now".

I have submitted a poll that didn't go through either.

If the median price in my town goes up 10%, this means my house:

1) Is worth10% more.
2) Is definetly worth somewhat more.
3) Is definetly worth somewhat less.
4) None of the above.

I don't understand why they rejected this one.

October 30 2007

klarek the realist
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bobesb, that is correct. The bubble bottom may be above or below that, it really doesn't matter. In terms of cost benefit differences, and assuming current tax deduction allowances, that's about the break point where I'd argue it's good to buy.

October 30 2007

klarek the realist
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" Zillow didn't like the poll probably because you left out "Right Now"."

LOL

October 30 2007

House_Hopeful
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corona, ca

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I like #2. The average household income in Orange County, CA is $70K based on 2005 figures. So, the purchase price of a home 5X the salary would be $350K. Monthly payments at 6.5% including property tax & insurance is approxiately $2500 a month. Maxing it out at 5X should be affordable. But 3X is obviously more desirable.

I would LOVE to buy a home in OC for $350K!!

October 30 2007

LongIslandBubble
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Number 4 on your list should be "All of the above".

October 30 2007

Daniel Nesemeier, "dnesemeier"
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Daniel Nesemeier, "dnesemeier"

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It will be a good time to buy a house when:

You are ready.

October 30 2007

klarek the realist
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klarek the realist

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" It will be a good time to buy a house when:

You are ready."

Thanks, Yoda.

October 30 2007

Gaya
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"It will be a good time to buy a house when: You are ready. "

Daniel and Karek, think you guys are smart. When the question is about the market conditions, you guys completely take market out of the equation.

October 30 2007

Spleng
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Ready I am!

Torpedoes be damned!

Also yes I agree #3 is quite iffy.

October 30 2007

klarek the realist
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Gaya, while I'm sure you're the expert, despite the lack of a substantive answer to the question at hand, the question was not about when the market will bottom out. That's much more speculative, but in terms of when it's a good time to buy, I'd say it's when you'd actually be saving money by doing so. Of course, that doesn't apply to these troubling times when you could lose 30% of your home's value after you purchase.

October 30 2007

K101
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#3

It may not happen, but if it does I will definitely be ready to buy! 8)

October 30 2007

klarek the realist
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I'm ready for a life of renting. No more worrying about repairs, declining home values, interest rates, upkeeps, or HUGE transaction fees. While I'm not going to be happy watching this market end up in the toilet, I'll be left with no regrets.

October 30 2007

Gaya
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Klarek, saving money is an universal answer to any buying question. The question needs to be answered in terms of current market conditions. Anybody who has money to buy the question would not be sitting in this forum asking questions.

October 30 2007

klarek the realist
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In that case, you'd want to buy after it has bottomed out. You don't want to buy something that could be worth less than you owe on it. Ever. Trying to time the bottom is very dangerous.

October 30 2007

caliguy
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mary, in case you're interested, the average OC household income now is about $75k, and the latest info has the median price at $570k. So, that's a ratio of 7.6.

BTW, to give you an indication of how fast things have turned, the median was $642,250 in August.

October 30 2007

caliguy
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klarek - you make some very good points. For me personally, after I buy I won't care too much how much further prices fall, because I am planning to buy when there is a financial advantage to buying over renting (about the same payment month-to-month, the tax break of owning is an extra bonus)

October 30 2007

Gaya
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I agree Trying to time the bottom is very dangerous and most probably we will not realise the bottom until it start going up again. At the sametime, noone wants to lose 50K on the house as soon as they buy it especially the lower/middle class buyers.

October 30 2007

DebtsNMesses
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#1 Price-20% down = Mortgage and within 10-15% of rent.

Which is NOW, if I do it right! lol

Rent in my area is 1850/mo

400K - 20% = 320K at 2022/mo

2022/1850=1.09 or 9%

October 30 2007

Roberto Ribas, "azrob"
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debts: that is a kinda weak analysis:
put in property taxes, insurance, opportunity cost of at least 5% on your 80K investment and maintenance all on the bad side!

mortgage int tax writeoff on the good side...

depending where you are (taxes vary a lot state to state) I think this is far worse then 9%!

October 30 2007

plarusa
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caliguy2699 responded:
mary, in case you're interested, the average OC household income now is about $75k, and the latest info has the median price at $570k. So, that's a ratio of 7.6.

BTW, to give you an indication of how fast things have turned, the median was $642,250 in August.>>

Hmm... The median price in OC has dropped 5% during the last year, and some of this drop was due to the credit crunch in effect during August. Here is a quote from the OC. register (10.24.07),

The state Realtors association reported Wednesday that the median price for a single-family home ? or the price at the midpoint of all sales ? was $673,770 in Orange County, down 4.6 percent from September 2006. That's the biggest percentage drop since April 1995.

This is not good news, but hardly is the end of the world, at least to me. It seems like many on this news group are hoping to capitalize from a complete collapse of the housing market. You should be careful with your wishes of doom, as you might become a casualty in ways you did not anticipate.

October 30 2007

Spleng
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Plarusa I agree there will be unpleasant unanticipated consequences from housing prices returning to sound fundamental levels, but the longer it takes the worse it will be. This I would not call a "complete collapse of the housing market", rather it will be an end to a speculative mania which has gone on far too long.

In the long run it will be better for everyone when people who want to buy a house can afford it without taking on some kind of suicide loan that makes them a house poor debt slave for the majority of the rest of their lives.

October 30 2007

caliguy
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plarusa - You make some good points. What worries me is that I haven't heard any sound argument that says there is any reason to be upbeat about things right now...if you look at history (in terms of length and breadth of previous down cycles), it says we're only getting started. Unfortunately, we're already setting records in numbers of foreclosures, and with the funky financing, the evidence says this down cycle is going to be real bad, because part of the upswing was fueled by financing that should really never been available under legitimate circumstances.

I, for one, don't want to see a "complete collapse" of the housing market, because frankly I don't intend on profiting from it and I don't want to see people suffer. I just want to enter the market when it makes better financial sense to own as opposed to rent. I'm hoping that when that point hits and I do buy that it doesn't go down much further or stay stagnant for too long, but to be honest it wouldn't really affect me at that point so I'm not too concerned.

If the real estate market tanks so bad that it sends us into recession (which is a very real possibility, interesting article here from Reuters - http://tinyurl.com/2oglnj) that's not good for anyone.

October 30 2007

mrsangie2003
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caliguy -

is'nt the case, that if #1 occurs, anyone w/ capital will benefit enormously from buying -- (i.e. they could simply buy everything in sight and rent to pay mortgage and build equity).

October 30 2007

SoCal BubbleBrain
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"the average OC household income now is about $75k,"

THAT"S IT? Now I know all the Hummers and Escalades were on the HELOC!
I live in the Inland Empire and make more than that alone, not including my wife's salary. yeah us!

October 30 2007

LinusK
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***is'nt the case, that if #1 occurs, anyone w/ capital will benefit enormously from buying -- (i.e. they could simply buy everything in sight and rent to pay mortgage and build equity).

People with capital already benefit from the ability to invest.

Housing will be a good deal for investors when its return on capital beats other opportunities. When you figure the return on capital from housing, though, you have to adjust it for -

The fact that landlording is work - you can do it yourself (which is like having a part time job), or you can hire somebody else to do it - in which case you have to deduct their salary from your profit.

That your property will not always be rented - sometimes you'll have vacancies.

That your tenants will not always pay their rent. (Sometimes because they're deadbeats, other times because they're sick or injured, or lose their jobs.)

That evictions are time consuming and expensive.

That your tenants will sometimes trash your place.

Advertising.

That there will always be maintanence and repairs - water heaters, toilets, landscaping, A/C units, leaking roofs... etc.

The transaction fees involved in buyng real estate (starting with the 6% Realtor's tax).

And then of course, there's property taxes and insurance.

If you can get five percent from a risk-free bond, you need to get well over 5% from landlording before it becomes a good investment.

As far as appreciation goes - in the long run, land doesn't appreciate much more than inflation. And the house itself depreciates - it gets less and less valuable over time.

October 30 2007

BuyEqualsRent
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Trying to time the bottom isn't dangerous at all. When bubble bust, once they bottom they stay there for years. When prices have stopped falling for one year and are up Y-O-Y about as much as inflation, it's time to buy. The only caveat would be if inventories are at an insane level, then you have a standoff between buyers and sellers. But with so few Americans having any savings, the likelihood of a 1 year + standoff is miniscule.

October 30 2007

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I would have to say #2. When the median price is 4*median income in the areas I am interested than I would be looking at 450k. This would be about 03 levels. I would love them to go down to 98 levels like many wish but really don't think that will happen. I figure they may not go much below replacement cost. It still costs about 250k to build a 2000 sq ft house plus land in north jersey it seems.

October 31 2007

2 Big 2 Fail
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Woudl someone care to explain to me what exactly the "Inland Empire" is?

October 31 2007

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