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Old 12-18-2008, 05:10 PM   #41
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Seems what the country needed was a smack in the face by reality. ("What? House values aren't supposed to increase by double digit percentages every year? How am I going to get my free money?")

I'm interested in those loan modification programs you mention; got any links? I haven't found anything that has been decided yet.
Here's a few.The first link is hot off the press..This is what "the experts" on 60 Minutes didn't tell you.Will it work?If it does,I doubt you'll hear about it on the news.


Streamlined Loan Modification Program Rolls Out : HousingWire || financial news for the mortgage market

Mortgage rates and foreclosure help

Holiday surprise from Fannie and Freddie: Foreclosures suspended until January | mycentraljersey.com | MyCentralJersey.com
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Old 12-20-2008, 08:52 PM   #42
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How could I have forgotten one of the biggest money traps of owning an expensive, big house....FURNITURE! Your old furniture will look shabby inside an expensive house so, just to keep up with the neighbors, you will need to buy expensive new furniture too. And more of it since your house is bigger.

In fact, that goes with everything you own - your cars might look shabby in a new neighborhood, you will need new or extra tools to maintain your yard (maybe a riding lawn mower?). The list is endless. A big house is one big money drain.

It's really tough to play the role of being a successful middle age family and, at the same time, earn enough money for your ER.

That's why you need to convince your family that you lost most of your money gambling and through alcohol abuse, then move into a studio apartment with one bowl and a sack of rice as a bed/food source.

You can tell everyone at work that the lawyers from some girl you impregnated in highschool finally found out your real identity and just sued you for 20 years of back child support that;s why you have to drive the rust bucket and only own 2 filthy suits.

Then a couple years down the road you can come clean and tell them all you weren't really a letcherous alcoholic gambler but just incredibly frugal. and then celebrate by retiring and moving from your studio apartment into an even smaller RV and kicking your kids out.
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Old 12-21-2008, 02:46 AM   #43
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The 60 minutes piece has a sensationalist slant, but it's still true. There are years of mortgage adjustments in the pipeline that will push more homeowners over the edge. Sure, the government is trying to restructure loans to avoid price discovery, but even if they refinance everyone's loans to 0% that doesn't solve the problem that loans are higher than the home values in many cases, and many of the people who took these loans have no intention of paying them back.

The bottom will happen when the frenetic efforts to prop up the housing values burn out, the bad loans are foreclosed, and price discovery finally occurs.

For now if you have to move, look at renting.
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Old 12-21-2008, 09:03 AM   #44
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The 60 minutes piece has a sensationalist slant, but it's still true. There are years of mortgage adjustments in the pipeline that will push more homeowners over the edge. Sure, the government is trying to restructure loans to avoid price discovery, but even if they refinance everyone's loans to 0% that doesn't solve the problem that loans are higher than the home values in many cases, and many of the people who took these loans have no intention of paying them back.

The bottom will happen when the frenetic efforts to prop up the housing values burn out, the bad loans are foreclosed, and price discovery finally occurs.

For now if you have to move, look at renting.
Good point... real estate takes a long time to climb and a long time to recover. San Diego, California inflation-adjusted housing prices
is a good web site to see the real estate bubble of 1990 in the San Diego area - a place noted for its boom and bust cycles. You can see it took almost 7 years from 1990 to 1997 to finally hit bottom and then it started the cycle all over again. The current housing bubble started to pop in 2006.

It will take years before the housing market finally goes through the process you mentioned of clearing up all bad loans, excess inventory, and price discovery. Right now prices haven't begun to stabilize - they are still falling. If you are looking for a good deal in real estate, now is not the time.

I especially agree with your point that all of the pressure the government is putting on the market to halt the fall of real estate prices will only drag out the time lag before we finally hit bottom.
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Old 12-23-2008, 08:46 PM   #45
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Between the uncertain job market and the still high housing prices, looks like we're going to hold off until things settle down at a later point.
Thanks to everyone for sharing their opinions and suggestions.

Salaryman
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Old 12-24-2008, 02:51 PM   #46
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Salaryman,

I'm still seeing some steady downward pressure, which hasn't quite hit the north shore yet but which is spreading. Even if things don't fall further, you don't have to worry about them going up anytime soon.
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Old 12-24-2008, 10:05 PM   #47
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Salaryman,

I'm still seeing some steady downward pressure, which hasn't quite hit the north shore yet but which is spreading. Even if things don't fall further, you don't have to worry about them going up anytime soon.
My sentiments exactly. I don't need to be a hero and catch a falling knife.
Waiting until prices moderate at a later point will be beneficial for us.

Also, I want to see what the state government will do in response to their revenue shortfall. They will need to raise a lot of taxes to make up for the loss of Wall Street taxes that will not come back for a long time to come.

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Old 12-25-2008, 01:48 PM   #48
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The 60 minutes piece has a sensationalist slant, but it's still true. There are years of mortgage adjustments in the pipeline that will push more homeowners over the edge. Sure, the government is trying to restructure loans to avoid price discovery, but even if they refinance everyone's loans to 0% that doesn't solve the problem that loans are higher than the home values in many cases, and many of the people who took these loans have no intention of paying them back.

The bottom will happen when the frenetic efforts to prop up the housing values burn out, the bad loans are foreclosed, and price discovery finally occurs.

For now if you have to move, look at renting.

I've come to the opposite conclusion. I'm 32 and looking to buy my first home next year. I just passed the bar and I have years of income appreciation to look forward to.

My plan is to buy a house or a two flat that I can easily afford on my income today. I will stay in the house for a decade or so. I plan on getting a fixed rate mortgage.

I think that we are going to see some serious inflation in about 2-4 years. When the inflation does hit I will be sitting pretty with a low interest rate mortgage, and on top of that income appreciation and inflation will make the mortgage easier to pay.

Am I missing anything?
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Old 12-25-2008, 04:01 PM   #49
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"Also, I want to see what the state government will do in response to their revenue shortfall. They will need to raise a lot of taxes to make up for the loss of Wall Street taxes that will not come back for a long time to come."

That's particularly important on LI. Since buyers do, and will continue to, buy the payment rather than the house, the large property tax bills on Li will provide additional downside pressure on house prices. Patterson is cutting school aid (2/3 of the total LI property tax bill) and even though Great Neck recieves little state reimbusement due to it high income, I can't see tax rates remaining the same. Downstate NY - especially LI - is not known for reducing payments for those at the public trough. In an atmosphere of decreasing revenues, they will try to squeeze those who can still pay.

I saw something similar 15 years ago. Those who could wait out the bloodbath could pick and choose at bargain basement prices. FWIW, we can look to SC for advance guidance. In some zip codes, prices are down 81% from the peak.
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Old 12-25-2008, 11:39 PM   #50
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I've come to the opposite conclusion. I'm 32 and looking to buy my first home next year. I just passed the bar and I have years of income appreciation to look forward to.

My plan is to buy a house or a two flat that I can easily afford on my income today. I will stay in the house for a decade or so. I plan on getting a fixed rate mortgage.

I think that we are going to see some serious inflation in about 2-4 years. When the inflation does hit I will be sitting pretty with a low interest rate mortgage, and on top of that income appreciation and inflation will make the mortgage easier to pay.

Am I missing anything?
Nothing wrong with your logic, Drago. Since this is ultimately a personal decision, your choice may be perfectly valid for your situation.

It's just my opinion, but prices still have some ways to fall still from a number of perspectives. We'll buy ultimately but for now, we're picking our spot to jump in.

Salaryman
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Old 12-25-2008, 11:56 PM   #51
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That's particularly important on LI. Since buyers do, and will continue to, buy the payment rather than the house, the large property tax bills on Li will provide additional downside pressure on house prices. Patterson is cutting school aid (2/3 of the total LI property tax bill) and even though Great Neck recieves little state reimbusement due to it high income, I can't see tax rates remaining the same. Downstate NY - especially LI - is not known for reducing payments for those at the public trough. In an atmosphere of decreasing revenues, they will try to squeeze those who can still pay.

I saw something similar 15 years ago. Those who could wait out the bloodbath could pick and choose at bargain basement prices. FWIW, we can look to SC for advance guidance. In some zip codes, prices are down 81% from the peak.
During my 32 years in the NY Metro area, I've not seen too many times when the taxes on income/sales/property went down. Also the decreasing tax revenues will ultimately spell reduced gov't spending and tax hikes.

I totally agree with you that a bloodbath could be in the making for the real estate market in the area. But if I'm wrong, I can't see the prices moving higher in the intermediate term so it won't hurt us to wait and see.

Salaryman
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Old 12-26-2008, 08:35 AM   #52
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I've come to the opposite conclusion. I'm 32 and looking to buy my first home next year. I just passed the bar and I have years of income appreciation to look forward to.

My plan is to buy a house or a two flat that I can easily afford on my income today. I will stay in the house for a decade or so. I plan on getting a fixed rate mortgage.

I think that we are going to see some serious inflation in about 2-4 years. When the inflation does hit I will be sitting pretty with a low interest rate mortgage, and on top of that income appreciation and inflation will make the mortgage easier to pay.

Am I missing anything?
I think your plan is reasonable. I especially like the idea of the two flat unit. During my life I owned four different houses. The first one I bought to fix up (since I am handy with building skills). The other three turned a garage or some other building into a little rental unit - and they all pay off like a slot machine. The price of rent climbs every year, but the mortgage stays the same. Plus, a nice rental unit adds to the selling price.

You're a young man and can afford to take some chances. Even if you pay a little extra by buying quickly, the low interest rate will pay benefits in the future, plus you you can use the tax deduction once you start pulling in a steady salary.

My only word of caution is that you consider this as a bit of a splurge. When it comes to other items, such as cars, clothes, furniture, etc... I hope you max out your Roth IRA and start building up your a savings account before you splurge again. Keep the credit card low, and pay for things with cash.

Life can throw you a lot of curve balls - and it's nice if you have a cash cushion.

I also agree about inflation in the future. A lot of money being pumped into the system by the government and the Federal Reserve is just printing money right now. When consumers start to regain confidence there will be a lot of pent up demand.
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Old 01-03-2009, 04:32 PM   #53
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Can't speak for Nassau County in NYC, but as for LA County we're looking at a downside of another 20-25% in many local markets before a bottom. There is a glut of housing inventory out there and many option ARMs and Alt-A mortgages set to reset (to rates 50-60% higher due to negative amortization) and peak by 2010-11. The problem with reFI'ing these loans is that the borrowers are under water, with negative equity, or high LTV value, etc. so banks don't want to listen.

This all being said, there are some local neighborhoods, which have weathered the crash quite well. San Marino, La Canada Flintridge, west side, etc. has had limited downside since 2007. As for me, my goal is to have about 75K towards the purchase of a 300K home. 20% down and some cushion for emergencies. However, realistically speaking it will be another year before I get serious about purchasing.
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Old 01-04-2009, 01:01 AM   #54
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"This all being said, there are some local neighborhoods, which have weathered the crash quite well. San Marino, La Canada Flintridge, west side, etc. has had limited downside since 2007."

The question begs to be asked, "Why did some areas weather the crash better than others"? Obvious answers might be that 1)the area didn't have a large turnover in the past - so not many new, troubled mortgages were written, 2) the neighborhoods were primed and ready for a price upturn, so the raise in housing prices reflected true consumer sentiment, not a rush for profit, or 3) maybe the downturn has not yet hit - the owners are using other assets to pay the mortgage.

Another point you may wish to consider is what will happen after the economy starts to recover. Real estate prices tend to lag after an economic recovery because it takes a long time for people to save up a down payment and finally qualify to buy a house again. While $300,000 may be the "proper" price for a house, the housing bubble will likely turn into a a "housing crater" in a year or two. Don't discount the idea that you might be able to pick up a real bargain if you stay close to the market.
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Old 01-04-2009, 02:16 AM   #55
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"This all being said, there are some local neighborhoods, which have weathered the crash quite well. San Marino, La Canada Flintridge, west side, etc. has had limited downside since 2007."

The question begs to be asked, "Why did some areas weather the crash better than others"? Obvious answers might be that 1)the area didn't have a large turnover in the past - so not many new, troubled mortgages were written, 2) the neighborhoods were primed and ready for a price upturn, so the raise in housing prices reflected true consumer sentiment, not a rush for profit, or 3) maybe the downturn has not yet hit - the owners are using other assets to pay the mortgage.

Another point you may wish to consider is what will happen after the economy starts to recover. Real estate prices tend to lag after an economic recovery because it takes a long time for people to save up a down payment and finally qualify to buy a house again. While $300,000 may be the "proper" price for a house, the housing bubble will likely turn into a a "housing crater" in a year or two. Don't discount the idea that you might be able to pick up a real bargain if you stay close to the market.
Agreed. I tend to think RE will 'crater' out like you say instead of a V-shaped recovery. 300K is just my benchmark, however I am flexible with a lower price but relatively inflexible when it comes to neighborhoods. Hope that makes sense. I've rented in quote 'up and coming neighborhoods' for too long, I want to be somewhere where I know my personal property is safe and I can live in for 5+ years.

As for the areas in SoCal not very affected by the downturn, there was little if any speculation in those areas. I've also noticed one of the biggest factors for longterm value is quality of schools. San Marino, La Canada, Arcadia have some of the best school districts in the state and in turn, resilient property value. Younger families will often pay a bit of a premium to 'move up' into these public schools. Just my observation.
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Old 01-05-2009, 12:14 PM   #56
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I've come to the opposite conclusion. I'm 32 and looking to buy my first home next year. I just passed the bar and I have years of income appreciation to look forward to.

My plan is to buy a house or a two flat that I can easily afford on my income today. I will stay in the house for a decade or so. I plan on getting a fixed rate mortgage.

I think that we are going to see some serious inflation in about 2-4 years. When the inflation does hit I will be sitting pretty with a low interest rate mortgage, and on top of that income appreciation and inflation will make the mortgage easier to pay.

Am I missing anything?
Well inflation is certainly something to consider, but you might be missing the fact that you could pay 500K with a 5% mortgage for your two-flat today instead of 250K with a 10% mortgage in two years. At least with the latter option you have the ability to refinance a few years down the road, with a much lower debt obligation.

Furthermore, don't bank too heavily on the years of income appreciation you're looking forward to. You might find that you detest the work that comes with a high-paying legal salary. Or you might find yourself unemployed as many attorneys are these days.

A year ago, the stuff that happened in 2008 would have seemed unlikely and unbelievable; try to anticipate more of such changes in the near future - we're not out of the woods yet.
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Old 01-05-2009, 12:18 PM   #57
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But if I'm wrong, I can't see the prices moving higher in the intermediate term so it won't hurt us to wait and see.
Yeah - the way I've heard it put is that, by waiting until the housing collapse is clearly behind us, you might pay a little more, but you will avoid potentially losing a lot more through sinking home values.

Best-case scenario for the housing market is that it will sink just a little more and then remain flat for a long, long time.
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