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Real Estate

Scott Maclary
Ranch Hand

Joined: May 11, 2005
Posts: 34
So what does everyone think about the current state of the real estate market? I gotta think it's about to crash. How long can prices continue to go up 20% a year while wages go up 5% a year?

Soon...everyone in the country is going to be paying 75% of their salary towards their mortgage payments...
Ben Kittrell
Greenhorn

Joined: May 20, 2005
Posts: 6
Now's the time to buy, rates are already going up, and this trend will just continue. We just refinanced our house, and got a pretty good rate. We made sure to lock it in, cause who know's how high they'll go.
fred rosenberger
lowercase baba
Bartender

Joined: Oct 02, 2003
Posts: 10911
    
  12

Soon...everyone in the country is going to be paying 75% of their salary towards their mortgage payments...

not if you lock in your rate for the life of the loan


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Roger Johnson
Ranch Hand

Joined: Feb 24, 2004
Posts: 311
Originally posted by Scott Maclary:
So what does everyone think about the current state of the real estate market? I gotta think it's about to crash. How long can prices continue to go up 20% a year while wages go up 5% a year?


The housing bubbles exist in California, the Pacific Northwest, parts of the Mountain West, all of Florida and along the East Coast from Boston to Washington D.C.


Housing Experts Wary of Bubble Fatigue
Roger Johnson
Ranch Hand

Joined: Feb 24, 2004
Posts: 311
Originally posted by Ben Kittrell:
Now's the time to buy, rates are already going up, and this trend will just continue.


rates are going up, doesn't it mean that there will be less people can afford house, so the demand is down;

on the other hand, rates are up, there will be less people can afford their current house, so their house are on the market, supply is up;

demand is down, supply is up, so price got to go down. did i miss anything?



Originally posted by Ben Kittrell:

We just refinanced our house, and got a pretty good rate. We made sure to lock it in, cause who know's how high they'll go.


it is good idea to lock in a 30 year loan, if the rates are going up. but if the rates does not go up, then you should do a short term arm, because shorter term always means better rate. once the short term is over, you should do another short term arm,......

however, no one knows for sure if the rates go up or down. so either way is at risk.
[ May 20, 2005: Message edited by: Roger Johnson ]
Kishore Dandu
Ranch Hand

Joined: Jul 10, 2001
Posts: 1934
The home prices going up is not a common place in all the cities in US. I live in the Dallas area. My home rate wentup around 15% during the whole period of 4 years I owned the house.

It all depends on the supply and demand equation. Local area available for new home growth etc also figure into the equation. That is one reason why home prices are going nuts in Washington, Boston, bay area and LA sub-urbs.


Kishore
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Thomas Paul
mister krabs
Ranch Hand

Joined: May 05, 2000
Posts: 13974
rates are going up, doesn't it mean that there will be less people can afford house, so the demand is down;

To some extent although people can sign up for variable rate mortgages and get low starter rates.

on the other hand, rates are up, there will be less people can afford their current house, so their house are on the market, supply is up;

Except it doesn't matter how high rates go up because everyone has been getting fixed rate mortgages. For those not interested in selling, it doesn't matter how high the rates go.

The reason I don't see the bubble popping in the northeast any time soon is because people don't have a lot of options. You can rent but rentals are very high. There isn't a lot of new building because there aren't a lot of places to build new houses.


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Marc Peabody
pie sneak
Sheriff

Joined: Feb 05, 2003
Posts: 4727

Originally posted by Ben Kittrell:
Now's the time to buy, rates are already going up, and this trend will just continue. We just refinanced our house, and got a pretty good rate. We made sure to lock it in, cause who know's how high they'll go.

Not necessarily (about now being the time to buy). I think people are buying houses today based more on how much they can "afford" (this is really the opinion of the financial lenders) per month. If rates go up, people can afford less house. I would guess that this would create a demand for cheaper houses. How that effects things we can only speculate. I think either existing homes would lower in value or builders would build smaller homes or maybe both.

My point is that rising rates could cause house prices to decrease, much in the same way stocks and bonds tend to balance one another.

Another thing to be aware of is that the big statistics usually quote the median house prices. Builders are making bigger homes than they used to, which naturally will cost a little more. That increases the total median price, making it appear as if all our houses are gaining xx% in value.


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Frank Silbermann
Ranch Hand

Joined: Jun 06, 2002
Posts: 1379
Originally posted by Thomas Paul:
rates are going up, doesn't it mean that there will be less people can afford house, so the demand is down;

To some extent although people can sign up for variable rate mortgages and get low starter rates.
If rates go up, variable rate mortgages will go up. To whatever extent the rise in prices was due to people getting low, variable rate interest-only loans, not only will rising rates lock such people out of the market but it will also drive current owners to sell at whatever price they can get.

Originally posted by Thomas Paul:
on the other hand, rates are up, there will be less people can afford their current house, so their house are on the market, supply is up;

Except it doesn't matter how high rates go up because everyone has been getting fixed rate mortgages. For those not interested in selling, it doesn't matter how high the rates go.
Had everyone indeed been getting fixed-rate mortgages? Even the people getting "interest-only" mortgages?

Regardless, there will be a few people who need to sell due to financial problems. When buyers cannot afford the new rates, the sellers will have to lower the prices. That will result in many people with houses in which they owe more than the market price; a few may try to walk away and let the bank re-possess. That will add a few more houses to the market to be sold at lower prices. That could lead to a slow decline, but if a significant number of people have variable rate mortgages, watch out!

Originally posted by Thomas Paul:
The reason I don't see the bubble popping in the northeast any time soon is because people don't have a lot of options. You can rent but rentals are very high. There isn't a lot of new building because there aren't a lot of places to build new houses.
Do you figure that as housing goes beyond the ability of people to pay, people will simply pay whatever they can afford and settle for less and less space? I suppose that has happened to some extent in the San Francisco Bay area.

We may also see more gentrification of marginal neighborhoods. That will add to the acceptable housing stock, thereby slowing price increases. Or you may see more middle-income people fleeing the area for cheaper states, as has been happening in the Los Angeles area.
Thomas Paul
mister krabs
Ranch Hand

Joined: May 05, 2000
Posts: 13974
If rates go up, variable rate mortgages will go up.

I'm not sure how things are in your area, but here in the NE, most banks offer intro rates on their variable rate mortgages.

Had everyone indeed been getting fixed-rate mortgages? Even the people getting "interest-only" mortgages?

Those don't seem to be popular here in the NE.

We may also see more gentrification of marginal neighborhoods. That will add to the acceptable housing stock, thereby slowing price increases. Or you may see more middle-income people fleeing the area for cheaper states, as has been happening in the Los Angeles area.

We have seen a lot of gentrification in NYC but not so much on Long Island as we don't have many neighborhoods that need to be gentrified. What seems to be driving the housing market on Long Island is immigrants. The town I live has seen an influx of Asians especially Koreans. The town next door has seen an influx of Indians.
Marc Peabody
pie sneak
Sheriff

Joined: Feb 05, 2003
Posts: 4727

Originally posted by Thomas Paul:
I'm not sure how things are in your area, but here in the NE, most banks offer intro rates on their variable rate mortgages.


Those intro rates will go up with everything else. If they didn't, there would be a very large number of foreclosures in the near future. Frank already explained the effect of foreclosures on the market.

And I don't get the "This doesn't apply to me because I have a fixed rate on my mortgage" argument. I have a fixed rate but it effects how much I get when I eventually sell.
Thomas Paul
mister krabs
Ranch Hand

Joined: May 05, 2000
Posts: 13974
Those intro rates will go up with everything else. If they didn't, there would be a very large number of foreclosures in the near future. Frank already explained the effect of foreclosures on the market.

It depends on what the rate is when the intro rate expires, doesn't it?

And I don't get the "This doesn't apply to me because I have a fixed rate on my mortgage" argument. I have a fixed rate but it effects how much I get when I eventually sell.

If you don't plan to sell in the near future then it has no effect at all. And in any case, Frank's comment was specifically about increased foreclosures because of higher rates. If you have a fixed rate mortgage then the higher rates are irrelevant.
 
 
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