Randy_H's Q&A

One last thing to bear in mind.  The original question was about people who make UNDER $75,000/year.  As real incomes fall, and the job market squeezes (hardest, I might add, in the cheapest major metro areas -- Ohio for example, where $75K/year is not a slam dunk by any measure) ... then the price a prudent buyer demands for a home falls.$50,000/year salary buys you about $150K worth of house.  Maybe up towards $200K, if that person is the 1-in-25 who is carrying no credit card debt, has no student loans, and keeps a very frugal lifestyle (so as to stay under 25% of their monthly income towards payment).Now, I just got back from one of the worst markets in Ohio south of the lake.  My old hometown, which has close to 20% unemployment now.  People there are lucky to make $50K/year.  But guess what?  Houses still cost way over $200K/year for anything but a knock-down.  So riddle me this?  Are those houses overpriced?

As for which markets are overpriced -- I linked the data a few days ago.  Every MSA in the country.  Even in states like Ohio and Pennsylvania, the densest MSAs are far overpriced relative to incomes.  Only Texas in your example comes close to being at parity.  Florida?  You have to be kidding me.  The part that's within 50 yards of Alabama doesn't count.  I was specifically referring to *markets*, which is what you referenced.  If you aggregate those by density of MSA, then easily 75% or more are still far overpriced relative to historical affordability metrics.And incomes are falling.  Harshly at the moment.  It's not being picked up in the lagging indicators yet, but unemployment and underemployment is going to dramatically punish real incomes in the coming 2Qs, probably much further out.  Expect that effect to become pronounced after about May of this year.  When real incomes start falling, then houses which maybe became "well priced" suddenly become *overpriced* again.  Funny how this all works, eh?

No one was holding the flippers accountable for their greed while they drove pricing up, to use your own logic why is it not logical to hold fence-sitters accountable for their greed as they wait for the market to collapse to snap up a cheap deal from some poor sap who's lost it all? Two sides of the same coin.Firstly, I was not among those who thought flippers were immoral or unethical, so long as they followed the rules and didn't expect anyone to help them if their risks got them into trouble.But your logic is flawed, nonetheless.  Actively going out an murdering someone is not the same as failing to save someone when it could reasonably present risk of harm to yourself in the process.  The analogy holds here.  Pretty basic ethics stuff, which I thought would be included in the "ethics" portion of your REA license studies.  No?

and greed, waiting for houses to get even cheaperCouldn't resist passing judgment, could you?  Soooo, waiting for homes to become more affordable is "greedy", while the seller waiting for her home to appreciate is ______?Same logic from people who think shorting is immoral but pumping is just dandy.According to the NAR, only 16 markets out of 154 currently have median prices over $300,000.Too bad those 16 markets represent something like 70% of the housing stock, eh?  You know we have 50 states, but most of us live in 1/5 of them.

Because if you make less than $75,000 per year then you should be buying a home that costs less than $225,000.  If you can find a home cheaper than that, and the payment is less than 25% of your monthly income, then go for it.

jal74 is not correct about the fraud issue.  If you plan on living in the home for 1-2 years then you will likely meet most lender's criteria for "owner occupied." Then why did a quick Google search reveal that many lenders are designating loans for anywhere from 12-36 month expected residency periods be treated as investment property loans?  A couple of those even came from VA loan sites.Bottom line, if you're only going to be there 2 years why the hassle?  You know, back before the bubble (all of 10 years ago), there was no notion of "being priced out".  You bought when you settled down.  Period.  When you graduated college you did *not* buy.  Only fools did, because they'd have to move again soon anyway.  When you were doing your early military service, you did *not* buy.  It just got in the way of all the other things you're dealing with in life.They didn't invent renting simply so smug bloggers could deride dirty, pathetic renters.  Renting represents a great value in flexibility to people with short time horizons and future uncertainty about their life plans.And it's not economically possible for house prices to ever maintain a level beyond your ability to afford them.  Despite what the NAR marketing machine wants you to believe.  Houses will always tend to cost what people can afford to pay.  Period.

The answer is HSBC did all this research years ago.  Despite even all that, they still didn't manage to entirely dodge the bullet.  But musings about whether real estate recoveries were "flat" or not are mere ruminations.  Here is the real data, which you can break down by every MSA.  You can also relate to affordability, various ratios, interest rates, etc.I don't just make this stuff up.  I actually have done quite a bit of research and analysis, some for professional endeavors.Source -- HSBCPDFExcel

If your cost of capital is 30%*, and you sell after one year for a $20K gain, net of transaction costs, on a $200K house, have you _made_ any money?*The average cost of capital for most FHA homebuyers in the sub $250K home range, due mostly to revolving credit lines.

My point wasn't that cap gains are high.  But that no one is going to warn you about them, and they add more gain you need to make if you want to clear break even in under 2 years of occupancy.  It's possible to "make" money and still lose money, all things considered.

And capital gains taxes if you are lucky enough to gain, I might add.  You have to stay 2 years to get cap gains treatment.  And no, there are no capital losses, if you lose you lose.