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Old 11-14-2011, 06:13 AM   #61
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As many posters already said, predicting real estate future is no different than picking stock future.

I don't know about other areas but in parts of Brooklyn, NY real estate price went up 67% year over year while other parts of Brooklyn remained flat. Then there is part of Brooklyn that's under water for most part.

In real estate, it's all about location, location, and location. If you are in a desirable area by many, most likely it's already going up in prices. Then again, if you live in an area where people leaving by droves for whatever the reason, I think chances are good that price will go down and recovery is not likely to happen anytime soon.

Much like stocks. Even during the crash, there were some stocks that rises. If all 100% of stocks went down, I think stock market will seized to exist. Much like if 100% of national real estate can not be the same. There will be areas of boom and bust. It just that many area where it went from boom to bust is out of greed of speculation. It was an easy money buying something and then watch price double in couple years then sell and buy bigger for more profit. Much like internet bubble. Anyone could have money in the stock market.

What's important is what happens after the bubble bust. If it's sustainable area, I think price will recover within 10 years. If not, it will never recover during the 30 years life cycle unless you have long period of inflation where value is recovering due to inflation.
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Old 11-14-2011, 09:45 AM   #62
Recycles dryer sheets
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Real Estate values are very cyclic. They have been that way for 1000 years. They go up, they go down. There is one thing that is very consistent though. The next peak will be higher then the last peak and the next decline will not be as low as the last decline. In the last 100 years the average duration between peaks has been about 10 - 12 years. So a wild guesstimate would be prices will start to rise again around 2015 - 2017 and the peak will happen around 2018 - 2020, after which they will remain flat for a year or so and then decline again. The demographic locations will change during that cycle some do to things like retirements, city or suburban flight, and natural causes. However one thing that always seem to work in your favor is location. So if you have a desirable location and no real requirement to move, keep making the payments and wait. It will get better. Now would be a great time to buy rental property. You will get someone else building your equity and will see price appreciation in the next 5 - 7 years. However think location.
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Old 11-14-2011, 11:40 AM   #63
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No doubt that location is paramount. And good location for rental is different from good location for a owner occupied family home. Or at least it has been so in the past.

What I think is that what makes a "good location" for a homeowner is changing, and may well continue to change radically as time goes on.

The absolutely best homeowner residential locations will always maintain value better than outlying areas. In Seattle, very expensive and very stable areas have been the same ones for years, often since well before WW2. They are nice, they are close to employment and entertainment and quality shopping, and they cost mucho. Today, Seattle has an advantage in that it is one of the cities whose basic form was laid out prior to the automobile.

I have been through two big real estate crashes here, one in 1970-'74 or so, and the current one which began locally in 2007. In both cases, outlying commuter suburbs went through the floor, but close in popular neighborhoods suffered much less. IF/when gasoline becomes a larger part of family budgets, some of these outlying areas may never recover in real terms.

In areas where rapid transit becomes a larger part of out transportation system there will be many pressures toward concentrated housing. If a family cannot afford or does not want to live very near to their employment, the next best thing will be to be very near, as in walking distance, to rapid transit nodes.

When I read board members' accounts of how much they hated their jobs, and why they really had to leave, very often the commute is as big or even a bigger reason than the job. If we stand back from this, this is weird. We need jobs, most of us for the better part of our lives, and almost everyone else for some meaningful time. But a commute is basically elective, it can be changed, although of course it involves trade offs.

So in summary, I think betting on what might happen to inflation adjusted residential real estate prices over the next decade or so will be very tricky. I believe that some of it will greatly outdistance other places which are in fact becoming functionally obsolete.

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Old 11-14-2011, 12:31 PM   #64
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To the OP , I agree with a lot of members’ assessment, it will be a long time before the housing market recovers. According to Zillow, our house is also under water. But DW and I have been very aggressively pre-paying our mortgage since day one like maniacs, because our goal is to be debt free at my 40th birthday. It is not an easy process, but we managed it very well so far, no eat out, no cable, no mobile phone, DIY maintenance/repair on 14 years/140k car. We chose to do so not because we can not afford it, but voluntary simplicity instead. We’re also pessimists. But that doesn’t bother us at all, because as George Will said :”The nice part about being a pessimist is that you’re constantly being either proven right or pleasantly surprised.”. I would prefer to be pleasantly surprised when I ER.

There are already enough good advices given by other members, so I will not repeat. The basic principle is quite simple, increase your income or/and cut down you expense, unless you can print money. All your future/current in/exterior home improvement projects should be immediately canned unless it’s a must, not the one nice or want to have. Once you break down all your detailed daily expenses, including your monthly mortgage, against your after tax income, you and your family can make an informed decision, which might not be easy and event difficult to implement. But if you can make it in the end, you will be proud of yourself.
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Old 11-14-2011, 12:34 PM   #65
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Our last boom-bust cycle was 12 years (1987-1999) ... this is north of Boston.

I carried a few upside-downers thru that period. Deffered maintenance ... did ALL the work myself to string things along then sold when the properties went right-side-up - after 12 hard years - and wrote checks at the closing (as a SELLER) for closing costs and realtor fees. Imagine paying a mortgage for 12 years and STILL not having equity ... pretty bad.

NOT FUN ... but things do get better. What helped was buying a bunch more at the bottom to help offset the losers.
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Old 11-14-2011, 12:45 PM   #66
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you will be proud of yourself
More a sense of relief .... FWIW, we sold and start of the boom. The buyers all made a KILLING. Had my crystal ball been clear, hanging on for 5-6 more years would have been easy (with some cash out re-fi's for the defered maintenance) . But we were very tired and very motivated sellers.
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Old 11-14-2011, 12:59 PM   #67
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To the OP, moral/ethical/legal issues aside, you are seven years into a 30 year fixed mortgage, you have 23 years left, and you are on this board because, in theory, you are interested in retiring at an age that you can enjoy yourself for a while. Since your income hasn't gone down and your payment hasn't gone up, I'd expect you can find a way to make it work - just don't do any more remodeling, that's freaking expensive. If you look at the amortization tables you'll see your payments are starting to be significantly larger principle payments and smaller interest payments. You've already paid half or more of the interest at this point, pay off the house. See this through. Your alternative is a messed up credit score, no home but one you rent, and a huge setback on your ER goal. Don't underestimate how much a crappy credit score will cost you in stress and actual $$. You have to separate the emotional toll of the loss in equity/value from the debt itself. Forget the perceived value of the house, you owe ~$300k. If you've got income for renovating, use it instead to pay this down. If you put an extra $400/month on the mortgage starting now you'd have it paid off 17 years from now, and would owe less than $200k 7 years from now, by my quick math.

BTW, this site is great for playing with numbers, excel spreadsheets are my favorite for planning long term : Spreadsheets

Alternately, you can stop paying and not say a word to the bank. It's taking them at least a year to foreclose now. You can then put that "mortgage payment" into a savings account and go from there. If a car is truly on it's last legs, you'll need to pay cash for it's replacement anyway.
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Old 11-14-2011, 01:15 PM   #68
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I know a guy who bought a house for $700K and sold it for $550K. (This is bay area.) He initially put 20% down. He said he was glad he didn't have to do short sale (after all was said and done, he said he was $50 shy of having to do a short sale, so he must have lost about $130K-$140K.) He could have defaulted and stayed in the house for probably 2 years or maybe even more. But he didn't. He sold his former house and the profit became the down payement of this house, so he considers this a wash. If the payement came from all the savings he had done for 10 years by being frugal, his view might have been very different. But knowing him, he would have taken the high road anyway.

I also know a young couple who are pasture basedchicken farmers using leased land. They found a very good land (short sale) they could afford to buy, but the seller who had been living there for over a year now without paying the mortgage, refused to sign the title over. (The seller figured out that if he didn't sign the title over to them in time, the sale will fail and he would have to start the process all over again, which could buy him another year of rent-free living.) They can sue the seller, but the cost of atterney fees would make it not worth the effort.

These are two different people in two extremes. One is a man of integrity whereas the other a scammer. The man of integrity is +100K poorer, and the scammer is rewarded. But both actions are considered legal (well the 2nd one isn't quite, but there will most likely be no legal consequences.)

Bankruptcy may be considered immoral, but people do it all the time.

In a way, legality is for everyone - everyone's action is measured by the same rules. Morality, on the other hand, is just what you put on yourself. You can't expect other people to follow your moral compass.
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Old 11-14-2011, 01:42 PM   #69
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In a way, legality is for everyone - everyone's action is measured by the same rules. Morality, on the other hand, is just what you put on yourself. You can't expect other people to follow your moral compass.
Another thing is that legality and morality at times can be in conflict. Legality is defined by the society, morality is a more personal and slippery concept. The officers carrying out wartime genocide were acting legally in the terms of their own countries. In fact, if they had obstructed the process they would have been court marshalled and executed, or just summarily executed.

People who hid Jews in occupied Europe were acting morally, but their actions were defined as illegal and would have resulted in execution when/if discovered.

USA was acting legally when we stalled and obstructed immigration of refugee Jews. Was that moral? IMO, no. Furthermore it was profoundly stupid.

Laws and many mores are defined by whomever is in charge.

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Old 11-14-2011, 01:51 PM   #70
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OP, I think you need to do a bunch of number crunching to see what your best course of action might be. It does not sound like you will have a great case for a hardship loan alteration, so it is time to spreadsheet it all out and see what the best way out of the mess might be. If you start to think that walking away is attractive, be sure to pencil in some cost for the possibility of the bank chasing after you for a deficiency judgement, trashed credit, and inability to buy a house for several years. If it is stioll attractive to default (I am betting not), then I would make sure you understand all of the possible ramifications before actually doing so. I would explore all options, including renting the house out, short sale, staying put, etc.

I took it in the poop shoot when I sold my house this summer. Then again, so did the people who sold me my present house. Where will you go if you walk away? You will have to pay for housing of some sort, so make sure you are not jumping out of the frying pan and into the fire.
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Old 11-14-2011, 02:05 PM   #71
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Ah... I wasn't thinking about legality of killing people.

That makes me think about the psychological experiments they did in the 60's (or was it the 70's?). I hope I won't administer fake electric shocks to people on the other side of the wall just because some authority figure pressures me to do it, but in case of helping the jews, thinking about the possible consequences of being caught, it makes these people who hid the jews true heroes.
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Old 11-14-2011, 02:08 PM   #72
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I don't know your local rental market ... but I will guess you can not rent a renovated similar property for 2k.

Look and see ... you might be pleasantly surprised.

BTW, I had a negative net worth for 10 years (by carrying 3 upside downers) ... 60k is nothing.
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Old 11-14-2011, 02:19 PM   #73
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OP, I think you need to do a bunch of number crunching to see what your best course of action might be. It does not sound like you will have a great case for a hardship loan alteration, so it is time to spreadsheet it all out and see what the best way out of the mess might be. If you start to think that walking away is attractive, be sure to pencil in some cost for the possibility of the bank chasing after you for a deficiency judgement, trashed credit, and inability to buy a house for several years. If it is stioll attractive to default (I am betting not), then I would make sure you understand all of the possible ramifications before actually doing so. I would explore all options, including renting the house out, short sale, staying put, etc.

I took it in the poop shoot when I sold my house this summer. Then again, so did the people who sold me my present house. Where will you go if you walk away? You will have to pay for housing of some sort, so make sure you are not jumping out of the frying pan and into the fire.
Also credit history is used for many things other than determining credit risk and loan rate... it is used in employment decisions (by employers), insurance rates (underwriting and judging risk), and a growing list of situations where someone else needs to verify the persons integrity and ability to meet obligations.
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Old 11-14-2011, 02:39 PM   #74
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To the OP, moral/ethical/legal issues aside, you are seven years into a 30 year fixed mortgage, you have 23 years left, and you are on this board because, in theory, you are interested in retiring at an age that you can enjoy yourself for a while. Since your income hasn't gone down and your payment hasn't gone up, I'd expect you can find a way to make it work - just don't do any more remodeling, that's freaking expensive. If you look at the amortization tables you'll see your payments are starting to be significantly larger principle payments and smaller interest payments. You've already paid half or more of the interest at this point, pay off the house. See this through. Your alternative is a messed up credit score, no home but one you rent, and a huge setback on your ER goal. Don't underestimate how much a crappy credit score will cost you in stress and actual $$. You have to separate the emotional toll of the loss in equity/value from the debt itself. Forget the perceived value of the house, you owe ~$300k. If you've got income for renovating, use it instead to pay this down. If you put an extra $400/month on the mortgage starting now you'd have it paid off 17 years from now, and would owe less than $200k 7 years from now, by my quick math.

BTW, this site is great for playing with numbers, excel spreadsheets are my favorite for planning long term : Spreadsheets

Alternately, you can stop paying and not say a word to the bank. It's taking them at least a year to foreclose now. You can then put that "mortgage payment" into a savings account and go from there. If a car is truly on it's last legs, you'll need to pay cash for it's replacement anyway.
+1
If one looks at an amortization schedule for mortgages, one can determine the first 10 years is almost ALL interest to the lending institution. After 10 years is when you start building more equity. Of course, this assumes, one makes only 1 payment a month and no extra principle payments.

You are closer to that 10 year mark OP than not.
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Old 11-14-2011, 02:58 PM   #75
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my home is underwater and our monthly mortgage payment is getting harder and harder to pay. my wife are i trying to decide what we should do if we can' t afford our house anymore. i heard it may take ten years for homes values to recover. in your honest opinion, when do you think the home values will go back up?

thanks

That's a tough spot to be in. I personally don't think we will see prices going back up for decades. The reason I say this is because a lot of Baby Boomers are probably going to be downsizing and renting, both apts and latter on assisted living. There will probably be a lot of extra supply from summer homes and second homes also put onto the market.

The US has a growing population but I don't think a lot of that population will be able to afford high housing costs. So, I don't think there will be any price appreciation from the population growth.

I haven't read the thread yet. So maybe you have already answered this. Why is it that the house is now unaffordable? The best thing to do would probably be to stay put. The house may be underwater but if you aren't selling it, it doesn't matter.

I don't own a house yet, but I want to one day. When I do buy one, I'll be buying it with the intention of staying put for many decades.
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