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Replies (3)
housegal81,
Shawn
Every real estate market is local in nature. Would you by a $2.5M home in Detroit right now? Definitely not, but how about a great waterfront home in Southwest Florida with 8000 sq.ft under air, a dock with electric lift for your boat, and a swimming pool? Well yes! Different locals different markets.
Other relative issues are timing and perception. If you bought here in 1996 you would be making many times over your original cost, if you bought in 2005, you may have some trouble selling for 75% of original cost.
The last issue is perception. What is an expensive home? In the Midwest it may be $250,000 here it may be $1.0M. Everything is relative. Good luck and do not believe everything you read!
Other relative issues are timing and perception. If you bought here in 1996 you would be making many times over your original cost, if you bought in 2005, you may have some trouble selling for 75% of original cost.
The last issue is perception. What is an expensive home? In the Midwest it may be $250,000 here it may be $1.0M. Everything is relative. Good luck and do not believe everything you read!
Shawn
- Dan, "the_country_hick"
- Contributions:4700
Shawn, " If you bought here in 1996 you would be making many times over your original cost, if you bought in 2005, you may have some trouble selling for 75% of original cost."
That simply shows that the real correction of the bubble popping and then the overcorrection is yet to come. Give it time. With maybe 40% inflation since 1996 house prices should reset to that level at least inflation adjusted.
That simply shows that the real correction of the bubble popping and then the overcorrection is yet to come. Give it time. With maybe 40% inflation since 1996 house prices should reset to that level at least inflation adjusted.
- Ninah Hunter, "Ninah_Hunter"
- Contributions:52
I don't think you can make a blanket statement about it being a bad time to buy an expensive house right now. First, as Shawn said, "expensive" is a relative term. Second, not all markets are equal or have experienced the same effects of the recent economic catastrophe.
In this area, the "expensive" homes and markets are generally in the Ouray County and Telluride markets. These homes have seen dramatic decreases in value because of the economy for 2 reasons: (1) Foreclosures (involuntary and voluntary, i.e., strategic foreclosures) and (2) those who haven't had to sell, don't, and those that do, either are forced to sell at substantially reduced prices or they walk and allow the foreclosure to happen).
If you ever want an example of there are always people with money who will take advantage of a down market, the expenisve market is a great example right now. In our market, we see the higher end homes that comone the market at bargain prices being swooped up for cash. Why? Because buyers know that these are the very properties that will see significant increases in appreciation in a much shorter period of time then lower end homes when the good market returns. I suspect, too, that it has made these desirable homes finally affordable for those buyers who want such a home or for emotional reasons rather than strictly investment.
My opinion may have been different 2 years ago, because expensive homes have continued to be particularly hit hard since then. But I think in my area, the market is stablizing. Yes, values may continue to fall a bit more this year and maybe into next. But we are seeing locally and nationally signs of an improving economy and housing market. If you want to live in an expensive home and arent' looking strictly for an investment or intend to sell in the next 3-5 years, investing in an expensive home to me makes sense right now--in my market, anyway. If it's strictly an investment, i.e., to be rented out or held short-term, than maybe not. Depends on the cash flow for the former.
People buy "homes" for many reasons. Whether it makes financial sense to you depends on many factors, which your financial advisor, Realtor, accountant, estate planner, and attorney all need to consider in advising you.
Ninah
In this area, the "expensive" homes and markets are generally in the Ouray County and Telluride markets. These homes have seen dramatic decreases in value because of the economy for 2 reasons: (1) Foreclosures (involuntary and voluntary, i.e., strategic foreclosures) and (2) those who haven't had to sell, don't, and those that do, either are forced to sell at substantially reduced prices or they walk and allow the foreclosure to happen).
If you ever want an example of there are always people with money who will take advantage of a down market, the expenisve market is a great example right now. In our market, we see the higher end homes that comone the market at bargain prices being swooped up for cash. Why? Because buyers know that these are the very properties that will see significant increases in appreciation in a much shorter period of time then lower end homes when the good market returns. I suspect, too, that it has made these desirable homes finally affordable for those buyers who want such a home or for emotional reasons rather than strictly investment.
My opinion may have been different 2 years ago, because expensive homes have continued to be particularly hit hard since then. But I think in my area, the market is stablizing. Yes, values may continue to fall a bit more this year and maybe into next. But we are seeing locally and nationally signs of an improving economy and housing market. If you want to live in an expensive home and arent' looking strictly for an investment or intend to sell in the next 3-5 years, investing in an expensive home to me makes sense right now--in my market, anyway. If it's strictly an investment, i.e., to be rented out or held short-term, than maybe not. Depends on the cash flow for the former.
People buy "homes" for many reasons. Whether it makes financial sense to you depends on many factors, which your financial advisor, Realtor, accountant, estate planner, and attorney all need to consider in advising you.
Ninah
Why It's A Terrible Time To Buy An Expensive House
If you are looking to buy a house right now PLEASE read this article. OMG I have not read anything so scary or enlightening about the housing market yet. Well, maybe except Reggie Middleton's Boom Bust blog. Everything this guy is saying is dead on. I am happy and sad about this because emotionally I am just ready to buy "my dream house" but I know it would be foolish especially since I am in the "expensive home" market.
I encourage you to read the article, here are just a few of the talking points:
1. House prices will keep falling in the areas where prices are still dangerously high compared to incomes and rents.
2. Anyone who bought a "bargain" in those areas last year is already sitting on a very painful loss.
3. Because it's usually still much cheaper to rent than to own the same size and quality house, in the same school district.
4. To buy an expensive house at a time of low interest rates and high prices like now is a mistake. It is far better to pay a low price with a high interest rate than a high price with a low interest rate.
5. The higher-end housing market is now set up for a huge crash in prices, since there is no more fake paper equity from the sale of a previously overvalued property and because the market for securitized jumbo loans is dead. Without that fake equity, most people don't have the money needed for a down payment on an expensive house. It takes a very long time indeed to save up for a 20% downpayment when you're still making mortgage payments on an underwater house.
6. Because there is a massive and growing backlog of latent foreclosures. Millions of owners have simply stopped paying their mortgages, and the banks are doing nothing about it, letting the owner live in the house for free.
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