Real Estate Market

[alarmguy]

^^^ you I can tell think things out and understand, not so much for the general public.
The biggest risk factor that I see today compared to years ago is our economy is built on a house of cards.
The last decade+ we have the government constantly pumping up the value of equities and the question will be, will that money ever run out?
How many downturns can the government possibly keep from making us uncomfortable?
Where is the fiscal responsibility?
Interest rates are low for a reason.
Www.usdebtclock.org

... and what if the next global calamity is tomorrow, we don’t even have this one beat yet ...

 

[JeffKeryk]

It's called "printing money".

 

[PandaBear]

A Gen Xer I speak to a lot would accuse you all of "Boomer Think". The reason: interest rates are so low right now it makes no sense not to borrow money for any reason you want - buy a new truck, buy a business, buy expensive houses for Abnb rentals, etc. As long as you have the cash flow and credit, borrow, borrow borrow.
It goes completely against everything I've learned my entire life, but I'm not sure I can prove him wrong. Humor me.
Every bit of training I've had tells me to minimize borrowing, only buy what you can afford, and pay cash. Trouble is, interest rates are so low right now, money is almost free. Navy Federal is offering a 30 year home mortgage for 2.3%. New cars and even $50k trucks can be had with no down and 0% interest.
If you bet wrong and real estate crashes, you can walk away in most states without even having to declare bankruptcy (no recourse on purchase money laws). If, as many think will happen, inflation takes off, you have locked in a lot of money at low rates, and the underlying real estate takes off in value.
While I don't agree with this philosophy, I can't prove it wrong. With 2.3% money available, I feel like an idiot having my house paid off, not putting that equity into the stock market where I can average 8% returns over the long term in index funds. Or buy more real estate (I'm actually downsizing there right now).

This.

The old saying of not borrowing money is different than today's financial market. Historically we do not have near 0% interest rate (or 2.5% APR fixed rate mortgage). We also do not have a fiscal policy that there is only 2-3 real fiat currencies in the world and they all work together to QE into the stratosphere.

So, when you have unlimited printing, you have inflation. The productivities are going up so much that everything but finite resources (land, minerals, maybe fossil energy) are staying the same price, so the extra money has to go somewhere and that means assets.

People used to think 10-15-30 year fix mortgage is borrowing to infinity and beyond. We are now seeing people keep refinancing their houses and just sell it at the end of their career and move, instead of paying it off in 30 years.

 

[CKN]

Don't get distracted by the railings of people who don't have the 20% down payment. I work with lots of buyers. For the most part, they have the 15-20% for a down payment. Very few actually have just the 3.5-5% down payment. And now that I think of it, those that just had the 3.5-5% down payment actually did quite well, prices are probably up at least 5-10% over the last few years when the few I had actually bought so they actually came out ahead. The trip point is basically whatever they were paying for rent. Not buying just meant they paid money for rent and never got anything back. At the high end, it's cheaper to buy than rent.

Wolf-
This is BITOG-actual facts and personal experience don't count for much on here-respectfully.

 

[CKN]

Bankruptcy does not protect you from foreclosure and walking away certainly has implications on your ability to borrow money, get insurance, the list endless.
The words "bet" is correct if you borrow money to invest.
Borrowing money on your home is betting your house and home that you will do better investing in something else. Doesnt make sense, betting that you are going to average 8% in the index funds, its a bet.
Some will win, some will fail, no one knows the future. Right now you are secure, you own a home. If you want to gamble real estate, purchase another home and rent it out, at least, if you lose it, you wont be on the street.

Very few banks come after you if you are forced in to a foreclosure...very few. BTW-there are plenty of people who have had a foreclosure and have bought another house within 5 years. They don't get the most favorable loan rates-but they can still borrow money.

 

[Dave Hess]

Quote:
People used to think 10-15-30 year fix mortgage is borrowing to infinity and beyond. We are now seeing people keep refinancing their houses and just sell it at the end of their career and move, instead of paying it off in 30 years.


Yep. A house is just a place for shelter, most people that finance for 30 years don’t ever plan on staying for the long run.

 

[Wolf359]

Wolf-
This is BITOG-actual facts and personal experience don't count for much on here-respectfully.

Yeah, I know that, most people ignore my advice to buy a Mercedes.

Everyone is busy refighting the last war. No one can actually say what's going to trigger the next foreclosure wave. It's not the same problem as last time, banks have tightened up lending standards in the last decade. I just don't see real estate tanking. At least not in the short term. I think once things get better next year the market will continue to go up. Unemployment is basically low end retail. Those are not the home buyers, they're mostly renters. White collar has been working from home and saving money that hasn't been going to retail. Anyone who has money in the market for the last couple of years saw their net asset value go up. Those are the home buyers.

 

[PandaBear]

This gets me thinking. If the new wave of RE transactions is from "work from home" and low interest rate, then the location would be the deciding factors of the next boom / bust if the lending standard is tightened up.

Most likely the place that tank would in retail properties, high unemployment factory towns, rural with no infrastructure towns (i.e. those still on dial up internet), instead of suburb of large metro. In that case, it would be some local banks / credit unions and high yield REIT of these assets that tank.

The bigger problem would be if there will be a nationwide tank or international scale tank. What would trigger that in high yield high risk high leverage products. I though it would be the unicorn bust but it seems like with all the money printing of this year, that inflated away their valuation problem and now they can afford to hire workers in low cost area to work from home.

Or NYC commercial real estates that are just money laundering and accounting fraud?

 

[alarmguy]

Very few banks come after you if you are forced in to a foreclosure...very few. BTW-there are plenty of people who have had a foreclosure and have bought another house within 5 years. They don't get the most favorable loan rates-but they can still borrow money.

Not sure of the point.
Foreclosure, your credit is ruined for some time to come. Penalties are future high risk interest rates on anything you are able to buy, high insurance costs on anything you are able to insure and rejection of new credit lines until you prove yourself worthy.
Not sure why the “not many banks come after you” statement. You just lost everything, banks will not go after something that doesn’t exist unless there is something to go after and it is cost effective for them to do.
I wouldn’t make it sound so easy and simple, people lives can be a living h**l and the future expense as a penalty nothing to take lightly, never mind the stress and self respect.

 

[Wolf359]

Not sure of the point.
Foreclosure, your credit is ruined for some time to come. Penalties are future high risk interest rates on anything you are able to buy, high insurance costs on anything you are able to insure and rejection of new credit lines until you prove yourself worthy.
Not sure why the “not many banks come after you” statement. You just lost everything, banks will not go after something that doesn’t exist unless there is something to go after and it is cost effective for them to do.
I wouldn’t make it sound so easy and simple, people lives can be a living h**l and the future expense as a penalty nothing to take lightly, never mind the stress and self respect.

It basically boils down to whether you're a recourse state or a non-recourse state. In a non-recourse state, the banks can't come after you, in a recourse state, the banks can come after you for any deficiency. But typically if you're foreclosed, they don't spend the money to go after people as that just costs more money. Banks know they can't get blood from a stone. Plus they write it off anyway.

As for bankruptcies, I believe it stays on for 10 years. It's really bad in the first two years but credit scores start to improve after that and it's actually not a bad credit risk if you get a decent score later as you can't file again for 10 years.

 

[CKN]

Not sure of the point.
Foreclosure, your credit is ruined for some time to come. Penalties are future high risk interest rates on anything you are able to buy, high insurance costs on anything you are able to insure and rejection of new credit lines until you prove yourself worthy.
Not sure why the “not many banks come after you” statement. You just lost everything, banks will not go after something that doesn’t exist unless there is something to go after and it is cost effective for them to do.
I wouldn’t make it sound so easy and simple, people lives can be a living h**l and the future expense as a penalty nothing to take lightly, never mind the stress and self respect.

The point being is your not cursed for life. I used to live in So. Cal-consequently I knew several people who walked away (during the last bubble) and they bought a house within 5 years after that. The banks didn't come after them. Did they pay more for credit and Insurance? I'm sure they did. Unfortunately-it was simple for them to move on-it really was.

Among most people (and their friends/family) there wasn't a stigma-I guess that says alot about society.

 

[JeffKeryk]

Quote:
People used to think 10-15-30 year fix mortgage is borrowing to infinity and beyond. We are now seeing people keep refinancing their houses and just sell it at the end of their career and move, instead of paying it off in 30 years.


Yep. A house is just a place for shelter, most people that finance for 30 years don’t ever plan on staying for the long run.

Again, I am surprised. I always bought the best I could, in case it had to be for the long run.
Money scares the you-know-what outta me. Prepare for the long run.
You never know what is gonna happen.

 

[Rmay635703]

This.

The old saying of not borrowing money is different than today's financial market. Historically we do not have near 0% interest rate (or 2.5% APR fixed rate mortgage). We also

Historically we didn’t have commonplace 40 year + mortgages either and they are becoming much more common

https://www.needhambank.com/personal/40-year-mortgage-744

Home ownership is a joke if you never own the property and just view it as a monthly payment you can afford

 

[alarmguy]

The point being is your not cursed for life. I used to live in So. Cal-consequently I knew several people who walked away (during the last bubble) and they bought a house within 5 years after that. The banks didn't come after them. Did they pay more for credit and Insurance? I'm sure they did. Unfortunately-it was simple for them to move on-it really was.

Among most people (and their friends/family) there wasn't a stigma-I guess that says alot about society.

I agree with you. With determination and a job of course one can overcome it. At the same time the emotional aspect of it for a lot of people can be traumatizing. Most people buy a home with their families in mind and it’s an emotional purchase to lose it can be just as devastating as elation of buying one.
I also agree in today’s world you are not stigmatized we all know with the swipe of a red pen anyone working can end up losing their job.

 

[alarmguy]

Again, I am surprised. I always bought the best I could, in case it had to be for the long run.
Money scares the you-know-what outta me. Prepare for the long run.
You never know what is gonna happen.

Yes, being self-employed for most of my life I followed my accountants advice and I think it was good. I would always take out a 30 year mortgage and pay it off like it was a 15 year mortgage using amortization sheets. If for some unknown reason things turned bad I always knew I could fall back to the 30 year payment.
In addition I never took out a second mortgage or better known nowadays as an equity line of credit against my home to buy things that I had no right to buy.

Don’t mistake these posts from me to think that I think I am perfect. I’ve learned lessons through life that I would’ve done differently but all said I’ve been fortunate. I’ve been teaching my adult children some of these things and to my surprise they are listening. One of them very much so, the other one not as much but still seeks my advice, all three self sustaining.

 

[Wolf359]

Quote:
People used to think 10-15-30 year fix mortgage is borrowing to infinity and beyond. We are now seeing people keep refinancing their houses and just sell it at the end of their career and move, instead of paying it off in 30 years.

Yep. A house is just a place for shelter, most people that finance for 30 years don’t ever plan on staying for the long run.

I'm not sure if you know but the average ownership of a property is about 7-10 years. Average for renters before they move on is 3 years. Therefore not too many people actually live in the same place for 30 year. Average time to refinance is about 3 years.

There's always things going on that will keep real estate brokers busy. Death, divorce, disease, job loss, etc are not voluntary events that can force people to sell or move.

 

[pghvolvo]

South suburbs of Pittsburgh we have a shortage of inventory and multiple offers on almost every property. BTW I'm an Agent for Keller Williams.

 

[CKN]

Yes, being self-employed for most of my life I followed my accountants advice and I think it was good. I would always take out a 30 year mortgage and pay it off like it was a 15 year mortgage using amortization sheets. If for some unknown reason things turned bad I always knew I could fall back to the 30 year payment.
In addition I never took out a second mortgage or better known nowadays as an equity line of credit against my home to buy things that I had no right to buy.

Don’t mistake these posts from me to think that I think I am perfect. I’ve learned lessons through life that I would’ve done differently but all said I’ve been fortunate. I’ve been teaching my adult children some of these things and to my surprise they are listening. One of them very much so, the other one not as much but still seeks my advice, all three self sustaining.

I was in commision sales my entire career. The upside-I was making more money (many years) than guys with engineering degrees. I always saved for a rainy day...and for me it came at 55 years of age in to basically a forced retirement (due to the technology in the print sector).

Best thing that ever happened.

 

[Dinoburner]

Property taxes are following increase in RE value, and so it goes.

 

[wpod]

A reality show following a family living within their means, going to work everyday, managing whatever debt they have accumulated with a plan to re-pay it wouldn’t last a week. Mods do your thing. Back to civility please. This sounds like pre you know what surrounded by my crazy brothers-in law.

A Reality show?