Do I buy a home now?

Buy House in Great neck, New york Near School - Fizber Real Estate Search. ID: 8454585

My favorite line in the listing: "The owner didn't leave a property description."

Didn't do any maintenance either from the looks of it. The plywood window treatments are especially delightful. (see the "street view" and rotate the picture to find this story book cottage).

Is this property worth 1/2 million dollars? The opportunity cost of that house, at $400k and giving it a likely $1k in costs a month, is $30k annually +/-. Can you rent that cozy cottage for $2.5k a month?

To value that house, I would find similar, in similar condition, and see what it rents for. If you can't pay its way for the rental (plus some out of pocket for the joy of home ownership) then I'd really ask if the market has dropped to reality or not. Or in rough terms, this would be a good buy if the house cost about 15 times its annual rent (or if you got it for that 400k, it would need to rent for about 2.2k to be an ok deal.)

At the asking price of 510k, it would demand a rent of 3.4k to be considered worthwhile.
 
deepc said:
Buy House in Great neck, New york Near School - Fizber Real Estate Search. ID: 8454585

My favorite line in the listing: "The owner didn't leave a property description."

Didn't do any maintenance either from the looks of it. The plywood window treatments are especially delightful. (see the "street view" and rotate the picture to find this story book cottage).

Is this property worth 1/2 million dollars? The opportunity cost of that house, at $400k and giving it a likely $1k in costs a month, is $30k annually +/-. Can you rent that cozy cottage for $2.5k a month?

To value that house, I would find similar, in similar condition, and see what it rents for. If you can't pay its way for the rental (plus some out of pocket for the joy of home ownership) then I'd really ask if the market has dropped to reality or not. Or in rough terms, this would be a good buy if the house cost about 15 times its annual rent (or if you got it for that 400k, it would need to rent for about 2.2k to be an ok deal.)

At the asking price of 510k, it would demand a rent of 3.4k to be considered worthwhile.
Click to expand...

I know that it's all about supply and demand, but some of these houses and the prices that they ask for just defies logic :confused:

BofAmerica/old Merrill just announced 35k layoffs...really starting to tick me off. How are we suppose to muster up courage & commit to the biggest investment in our lifetime if the world is crumbling all around us?
 
To value that house, I would find similar, in similar condition, and see what it rents for.
Click to expand...

We agree. As I said, it never hurts to low ball the bank.
 
OK, did a bit of recon & what I found was that:

-rent is cheaper than owning currently, but the rentals are limited to mostly apartments so the comparison is not exact
-there are a few foreclosures, but the money needed to bring the foreclosed property upto standards would be equal to what other non-foreclosure homes go for
-homes in the market that we like are still on the high side, like the sellers are hoping still to get last year's high prices or negotiate close to it

The difference between current market price to what I feel is closer to fair price is still substantial. I could try to haggle, but the sellers still think that they can get the prices that they want.

So, we'll continue to watch and wait.... & try to hold onto our respective jobs in the meantime. Hopefully the new year will bring better news on both fronts.

Salaryman
 
randyman65 said:
.....
NYC is anticipated to lose about 120,000 jobs - I don't think we've seen everything shake out quite yet. And the North Shore of LI is a funny place - people tend to overestimate their house's value longer than many other areas. I think you have some time before pressure comes to bear after the latest bloodbath on Wall Street.
.......
Click to expand...

Salaryman said:
Randeman, you're so right on about the sellers' attitudes in the area. But hopefully the dire current situation will bring the prices in line with reality.
Click to expand...

I wouldn't get too caught up in sellers "attitudes" about their homes in this environment - I don't think strict supply/demand thinking always applies - this economy is causing many (who are able to) to decide to just hunker down financially & sit-tight in their home if it won't sell at/above a certain already reduced price.

Houses are a very emotional "investment" for many.

You don't always know when you are looking at a house for sale if this is a "we have to sell" house or "we'd really like to sell but there's a floor at which we'll just stay" (I'm in the latter)
 
Being familiar with the Long Island market, and also having been involved in LI RE during the end of the last bubble (when the defense industry collapsed on LI) I can attest to the unreasonable beief by homeowners in LI that their house somehow defies the downwqard market forces that affect the rest of the country. I would expect a one year lag between what is happening in CA and what happens in LI. The recent and continuing financial industry meltdown hasn't really hit home yet, and I would expect a softening market for the next year or so. It may not drive prices down too much (I've seen people take houses off the market rather than drop the price) but it will increase the number of houses in inventory.
 
Here is my personal experience with home buying vs. buying rental property. With a home, your mind is fixed on a dream - wouldn't it be nice to have that extra blah, blah, blah. In time, that new house looses all the glitter and you buy up to a better neighborhood. Then, you have a life trauma (divorce, death, loss of job, etc), and you are forced to sell in an awful housing market - and loose money.

With rental property, you slowly pay off the mortgage, rents go up, and you can sell when the time is right - I made most of my money on rental real estate.

The moral of the story is don't put so many eggs in a big house - its an illusion, and it is a money trap. Most of the time you spend sitting on the couch or sleeping in a room with 4 walls. Soon your new house will feel like the one you are living in now... and you will think, "Why am I paying so much money for this?"

Big houses are for people who are already multi-millionaires. Save your money - with 3 kids, you will find a lot better, more rewarding ways to spend your money. Being strapped to a big house can really control your life.
 
Hobo said:
Big houses are for people who are already multi-millionaires.
Click to expand...

I think this qualifies as a genuine "pearl of wisdom". Simple, but so true.

A general understanding of this might have gone a long way in averting the present real estate crisis.
 
Hobo said:
The moral of the story is don't put so many eggs in a big house - its an illusion, and it is a money trap. Most of the time you spend sitting on the couch or sleeping in a room with 4 walls. Soon your new house will feel like the one you are living in now... and you will think, "Why am I paying so much money for this?"
Click to expand...
Indeed. When I see nice, big new houses around here I think to myself how nice it would be to have that much space and those amenities.

Then I remember it comes with a $3,000 mortgage for 30 years. Huge utility bills to heat and cool that much square footage. Stiff property taxes and insurance costs. And if you accept the rule of thumb of 1% of value for maintenance each year and add that in, you're talking about being hostage to a high-paying job (and no layoffs) for many, many years -- decades, in fact.

No thanks. My house is older, it's small and it lacks a few features I'd love to have. But it's paid for, and the utility bills, insurance and property taxes are all manageable. It's really hard to FIRE on a relatively middle class (even upper middle class) income with the 800 pound gorilla of massive housing-related expenses on your back.
 
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.
 
Lusitan said:
Salaryman - my apologies if this has already been posted, but if you've got 15 minutes to spare watch this clip from 60 Minutes (maybe some good viewing for your wife as well) and it might cool your heels a bit on jumping in to buy a house just yet ...

A Second Mortgage Disaster On The Horizon?, 60 Minutes: New Wave Of Mortgage Rate Adjustments Could Force More Homeowners To Default - CBS News
Click to expand...


More negative doom and gloom is just what this country needs!

What they failed to mention is the massive loan modifications that are in progress.These opportunities did not exist until just recently.Under the latest plan announced,many borrowers will have a chance to modify their loans at historically low rates,with terms up to 40 years.

Comparing the second wave of foreclosures to the first is like comparing an apple to an orange.Just my opinion of course! :D
 
liveitup said:
More negative doom and gloom is just what this country needs!

What they failed to mention is the massive loan modifications that are in progress.These opportunities did not exist until just recently.Under the latest plan announced,many borrowers will have a chance to modify their loans at historically low rates,with terms up to 40 years.

Comparing the second wave of foreclosures to the first is like comparing an apple to an orange.Just my opinion of course! :D
Click to expand...

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.
 
Lusitan said:
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.
Click to expand...

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
 
Hobo said:
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.
Click to expand...


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.
 
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.
 
free4now said:
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.
Click to expand...

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.
 
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
 
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.
 
randyman65 said:
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.
Click to expand...

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.

Salaryman
 
free4now said:
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.
Click to expand...


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?
 
"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.
 
DragoMuseveni said:
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?
Click to expand...

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
 
You must log in or register to reply here.

Similar threads

S
Buying in a rural county as an older family
2 3 4
Replies
77
Views
5K
ivinsfan
ivinsfan
D
Retired in 2017@42
Replies
10
Views
911
Koolau
Koolau
R
I "made" $65K today. Why am I having a hard time donating to charity???
2 3 4
Replies
87
Views
9K
threegoofs
T
T
Retired 10 years today!
Replies
18
Views
1K
Koolau
Koolau
S
Buying a brand new construction - what to look out for?
2
Replies
40
Views
4K
Brat
Brat

Latest posts

Back
Top Bottom