Timing the housing market

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Bird Beard
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Timing the housing market

Post by Bird Beard » Wed Dec 06, 2017 11:34 am

I live in a HCOL area and I am currently looking for a house. I've been reading articles about the "prohibited topic," and many are very pessimistic about what it may do to housing costs and job growth in my area. I realize much of this is speculation. However, it did spark a question in me. One of the articles I read (NY Times) suggests that home values could decline as much as 10% in my area. That may not be such a horrible thing because I do think many of the houses in my market (Long Island) are overvalued.

This topic is not meant to be a discussion regarding any proposed tax plan and its effects on the housing market. Rather, it is meant to be a discussion regarding timing the housing market in general...especially for home buyers instead of investors.

I am currently shopping for my first house because rent in my area is expensive for what I need and frankly I just want to (I posted a thread a couple of weeks ago with more specifics regarding my situation if interested...thanks for the advice). I don't have any intention to move or change jobs within the next 10 years...but then again, who knows? I understand that the house you live in should not be thought of as an investment, but it kind of is in the sense that you are paying money to gain ownership of something that has changing value and can be resold.

So what are your thoughts on timing the housing market when shopping for a home? Ideally, putting 20% down and staying put for 10 years is a hedge against declining home values, but things happen and sometimes you just have to move. If you were shopping for a house and there were potential big changes on the horizon that could affect real estate values, would you sit tight for now and see how things shake out or would you continue shopping and jump on a good value if you see one?

snowox
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Re: Timing the housing market

Post by snowox » Wed Dec 06, 2017 11:41 am

Bird Beard wrote:
Wed Dec 06, 2017 11:34 am
I live in a HCOL area and I am currently looking for a house. I've been reading articles about the "prohibited topic," and many are very pessimistic about what it may do to housing costs and job growth in my area. I realize much of this is speculation. However, it did spark a question in me. One of the articles I read (NY Times) suggests that home values could decline as much as 10% in my area. That may not be such a horrible thing because I do think many of the houses in my market (Long Island) are overvalued.

This topic is not meant to be a discussion regarding any proposed tax plan and its effects on the housing market. Rather, it is meant to be a discussion regarding timing the housing market in general...especially for home buyers instead of investors.

I am currently shopping for my first house because rent in my area is expensive for what I need and frankly I just want to (I posted a thread a couple of weeks ago with more specifics regarding my situation if interested...thanks for the advice). I don't have any intention to move or change jobs within the next 10 years...but then again, who knows? I understand that the house you live in should not be thought of as an investment, but it kind of is in the sense that you are paying money to gain ownership of something that has changing value and can be resold.

So what are your thoughts on timing the housing market when shopping for a home? Ideally, putting 20% down and staying put for 10 years is a hedge against declining home values, but things happen and sometimes you just have to move. If you were shopping for a house and there were potential big changes on the horizon that could affect real estate values, would you sit tight for now and see how things shake out or would you continue shopping and jump on a good value if you see one?

I would wait to see how things shake out for sure and learn/Study the area and markets around it. Then when this is over jump on a good value when I see one after the adjustments. A little patience might go along ways here. Based on politics and I dont know locally if there coming up with plans to offset what the current tax reform has in it being in the Midwest myself I'd wait a bit. Now the exception would be if the deal would be well below what the price drop might be.

Admiral
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Re: Timing the housing market

Post by Admiral » Wed Dec 06, 2017 11:46 am

I would ignore the headlines, just as I ignore the financial news headlines. You can't time the market, and you have no idea what any proposed changes might do, plus or minus.

Focus on finding a house that fits your budget and then locking in a mortgage rate that makes it affordable. I personally would never buy a home unless I had saved enough for 20% down...at least. More is better. This is a decision that is not independent of your job security, that is also a factor in any decision to buy.

That said, unless you've already found the perfect home and are afraid of losing it in a competitive market, don't rush a decision of this magnitude. You won't lose a lot by waiting a few months.

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Watty
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Re: Timing the housing market

Post by Watty » Wed Dec 06, 2017 11:56 am

Even in normal time you have all the same issues in deciding to buy now vs later.

In addition to the home price you also have to consider the interest rate that you might end up paying if your wait to buy later.

Your rent could also change and the 20% downpayment money that you keep invested could soar or tank too.

There are so many unknowns that I would not put any weight on predicting how things might turn out.

barnaclebob
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Re: Timing the housing market

Post by barnaclebob » Wed Dec 06, 2017 12:00 pm

A housing and stock market correction will probably happen together if they are quick movements. So in order to time the housing market to buy more house or get the house you want cheaper, you will need to be divested from the stock market.

thangngo
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Re: Timing the housing market

Post by thangngo » Wed Dec 06, 2017 12:08 pm

Bird Beard wrote:
Wed Dec 06, 2017 11:34 am
I live in a HCOL area and I am currently looking for a house. I've been reading articles about the "prohibited topic," and many are very pessimistic about what it may do to housing costs and job growth in my area. I realize much of this is speculation. However, it did spark a question in me. One of the articles I read (NY Times) suggests that home values could decline as much as 10% in my area. That may not be such a horrible thing because I do think many of the houses in my market (Long Island) are overvalued.

This topic is not meant to be a discussion regarding any proposed tax plan and its effects on the housing market. Rather, it is meant to be a discussion regarding timing the housing market in general...especially for home buyers instead of investors.

I am currently shopping for my first house because rent in my area is expensive for what I need and frankly I just want to (I posted a thread a couple of weeks ago with more specifics regarding my situation if interested...thanks for the advice). I don't have any intention to move or change jobs within the next 10 years...but then again, who knows? I understand that the house you live in should not be thought of as an investment, but it kind of is in the sense that you are paying money to gain ownership of something that has changing value and can be resold.

So what are your thoughts on timing the housing market when shopping for a home? Ideally, putting 20% down and staying put for 10 years is a hedge against declining home values, but things happen and sometimes you just have to move. If you were shopping for a house and there were potential big changes on the horizon that could affect real estate values, would you sit tight for now and see how things shake out or would you continue shopping and jump on a good value if you see one?
I believe in timing the housing market for the purpose of buying the house at the market lows. We bought our house during 2009 for dirt cheap and lowest mortgage rate possible. We were very patient during the housing market highs from 2000s to 2008s. We didn't budge when our friends and family urging us to buy house and invest in housing market. Back then, I did an analysis on the local economy, average earnings and the house price that an average Joe in my city can afford. When market price is higher than my target price, I wait. Never lock your housing expense for 15 years during market highs. Yes, buying a house is locking your housing expense over the life of the house.

Every economy has a cycle. If you don't look far enough in the future for your planning, you'd see the price keeps rising. The price bubble will burst eventually.

smitcat
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Re: Timing the housing market

Post by smitcat » Wed Dec 06, 2017 12:15 pm

thangngo wrote:
Wed Dec 06, 2017 12:08 pm
Bird Beard wrote:
Wed Dec 06, 2017 11:34 am
I live in a HCOL area and I am currently looking for a house. I've been reading articles about the "prohibited topic," and many are very pessimistic about what it may do to housing costs and job growth in my area. I realize much of this is speculation. However, it did spark a question in me. One of the articles I read (NY Times) suggests that home values could decline as much as 10% in my area. That may not be such a horrible thing because I do think many of the houses in my market (Long Island) are overvalued.

This topic is not meant to be a discussion regarding any proposed tax plan and its effects on the housing market. Rather, it is meant to be a discussion regarding timing the housing market in general...especially for home buyers instead of investors.

I am currently shopping for my first house because rent in my area is expensive for what I need and frankly I just want to (I posted a thread a couple of weeks ago with more specifics regarding my situation if interested...thanks for the advice). I don't have any intention to move or change jobs within the next 10 years...but then again, who knows? I understand that the house you live in should not be thought of as an investment, but it kind of is in the sense that you are paying money to gain ownership of something that has changing value and can be resold.

So what are your thoughts on timing the housing market when shopping for a home? Ideally, putting 20% down and staying put for 10 years is a hedge against declining home values, but things happen and sometimes you just have to move. If you were shopping for a house and there were potential big changes on the horizon that could affect real estate values, would you sit tight for now and see how things shake out or would you continue shopping and jump on a good value if you see one?
I believe in timing the housing market for the purpose of buying the house at the market lows. We bought our house during 2009 for dirt cheap and lowest mortgage rate possible. We were very patient during the housing market highs from 2000s to 2008s. We didn't budge when our friends and family urging us to buy house and invest in housing market. Back then, I did an analysis on the local economy, average earnings and the house price that an average Joe in my city can afford. When market price is higher than my target price, I wait. Never lock your housing expense for 15 years during market highs. Yes, buying a house is locking your housing expense over the life of the house.

Every economy has a cycle. If you don't look far enough in the future for your planning, you'd see the price keeps rising. The price bubble will burst eventually.
We are on LI and have been in this housing market for over 35 years - very difficult to time and usually does not coincide with life goals.
I would spend more time with the rent/buy calculators than trying to time the market itself.
With that said even if the 'unmentionable' issue happen it should not affect the lower or middle market of homes around here.
It may measurably affect the higher end homes which will change the median and average reported numbers leaving many folks thinking that it affects the entire market range - but it will not.

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Sandtrap
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Re: Timing the housing market

Post by Sandtrap » Wed Dec 06, 2017 12:20 pm

SFH prices are not entirely correlated to the "market" per se. Within one area, for example: Phoenix, there will be smaller zones IE: Scottsdale, Tempe, etc, and areas within those zones, IE: Scottsdale micro regions.
Prices are driven by supply and demand, inventory available, outside money flooding in . . or out, rental inventory and prices (correlates to R/E demand), and so forth.
Be encouraged by the fact that there are always, "good buys" and "low hanging fruit" no matter the economy, no matter the R/E climate. At times there will be more inventory and favorable prices than others, but, again, that doesn't mean that one can't find a reasonable price within one's budget for an outstanding home in your area of choice.
You just have to be very patient, ready to buy at any time (cash helps), and be very very familiar with what is on the market, what is coming on to the market, etc, at all times. Know what listings are new, which one's are relistings, price drops, etc.
Stay on Zillow and other sites constantly as well as having agents working "for you" vs "selling you". In the process, develop good buyer's instincts, know what is a good deal and what is not a good deal and what is over and undervalued.
And, be ready to pounce and commit when you need to.
It does not matter what the market is or what is going on elsewhere if you can do the above.
The best timing is being aware of the opportunities yourself.
j :D

3feetpete
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Re: Timing the housing market

Post by 3feetpete » Wed Dec 06, 2017 12:36 pm

I've been through it several times and bought at highs and lows. If you stay in a place ten years you should be okay. Never listen to a realtor about timing. They always think it is a good time to buy. At this point in time I would take a wait and see attitude until the effects of tax reform are known. People who were burnt during the last bubble tend to have a long memory so I don't think you should rush anything. If the news and the guy on the street start saying that the housing market is the best investment ever and you can't lose. Don't buy, you are in a bubble

runner540
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Re: Timing the housing market

Post by runner540 » Wed Dec 06, 2017 12:38 pm

Bird Beard wrote:
Wed Dec 06, 2017 11:34 am
I live in a HCOL area and I am currently looking for a house. I've been reading articles about the "prohibited topic," and many are very pessimistic about what it may do to housing costs and job growth in my area. I realize much of this is speculation. However, it did spark a question in me. One of the articles I read (NY Times) suggests that home values could decline as much as 10% in my area. That may not be such a horrible thing because I do think many of the houses in my market (Long Island) are overvalued.

This topic is not meant to be a discussion regarding any proposed tax plan and its effects on the housing market. Rather, it is meant to be a discussion regarding timing the housing market in general...especially for home buyers instead of investors.

I am currently shopping for my first house because rent in my area is expensive for what I need and frankly I just want to (I posted a thread a couple of weeks ago with more specifics regarding my situation if interested...thanks for the advice). I don't have any intention to move or change jobs within the next 10 years...but then again, who knows? I understand that the house you live in should not be thought of as an investment, but it kind of is in the sense that you are paying money to gain ownership of something that has changing value and can be resold.

So what are your thoughts on timing the housing market when shopping for a home? Ideally, putting 20% down and staying put for 10 years is a hedge against declining home values, but things happen and sometimes you just have to move. If you were shopping for a house and there were potential big changes on the horizon that could affect real estate values, would you sit tight for now and see how things shake out or would you continue shopping and jump on a good value if you see one?
Check out this rent vs buy index
http://business.fau.edu/news-events/new ... px?nid=729
http://business.fau.edu/departments/fin ... nd-graphs/

It highlights Houston, Denver and Dallas as 3 cities where things are out of whack in favor of renting. I read their 2012 paper that details the methodology of the index, and it called the trough in the national market using that methodology.

No shame in trying to time the housing market: unlike the stock market, there's no way to dollar cost average, and it's undiversified risk with high carrying costs.

itstoomuch
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Re: Timing the housing market

Post by itstoomuch » Wed Dec 06, 2017 1:10 pm

Start looking
Pay attention to the features in the home
Take notes on 'RE pricing, time on the market, closing price.
Work with a 'RE agent.

Disclaimer. Seattle area
It does take a lot of effort. Our son did the discovery work. He is local to the area. He studies markets and buying and selling. It's he job.
Get your financial house in order and be able to supply documents.
In a competitive market, know your limits. If you really want the property, bid to win.
Hmmm, numb
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

goingup
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Re: Timing the housing market

Post by goingup » Wed Dec 06, 2017 1:19 pm

Bird Beard wrote:
Wed Dec 06, 2017 11:34 am
So what are your thoughts on timing the housing market when shopping for a home?
If it were easy to do this, everyone would do it. It's not. If you're in absolutely no hurry you can wait until the market softens. You'll know this because there will be lots of inventory and people will begin talking about a "buyer's market".

Sometimes when the housing market softens it's because the country is in recession, and if that happens you may be too worried to buy. :|

Afty
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Re: Timing the housing market

Post by Afty » Wed Dec 06, 2017 1:39 pm

There's no guarantee that when the market softens, it will soften below the current price. When I moved to the Bay Area in 2011, the prices seemed excessive and we seemed due for a correction. That correction still hasn't come, and home prices now are 70% higher than they were in 2011. It would take a heck of a correction for prices to go below where they were in 2011.

Like the stock market, home prices can stay irrational longer than you can stay solvent.

SeaToTheBay
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Re: Timing the housing market

Post by SeaToTheBay » Wed Dec 06, 2017 2:03 pm

Afty wrote:
Wed Dec 06, 2017 1:39 pm
There's no guarantee that when the market softens, it will soften below the current price. When I moved to the Bay Area in 2011, the prices seemed excessive and we seemed due for a correction. That correction still hasn't come, and home prices now are 70% higher than they were in 2011. It would take a heck of a correction for prices to go below where they were in 2011.

Like the stock market, home prices can stay irrational longer than you can stay solvent.
We are also in the Bay Area and that is why we finally bit the bullet and bought a year ago. A 20% downturn isn't so bad as long as your house appreciates 10-20%+ before then, and it has already for us. Better than being priced out more and more each year, which is how we ended up buying farther out from the geographical core than we originally could have if we had bought in 2014-15.
Admiral wrote:
Wed Dec 06, 2017 11:46 am
I would ignore the headlines, just as I ignore the financial news headlines. You can't time the market, and you have no idea what any proposed changes might do, plus or minus.
I disagree. Limiting mortgage interest and property tax deductions = more expensive to buy and less expensive to rent = fewer people buying, and those who are can afford less because home ownership has become less advantageous tax-wise. It's simple economics. Some first-time buyers may put off buying entirely, as affording one is no longer possible.

The part where I might agree is with the new requirement to live in your home 5 out of the past 8 years to avoid capital gains tax, as opposed to the 2 out of 5. This will reduce supply, which has the effect of increasing prices as available homes become even more scarce. When my wife and I bought last year, we were hoping to at least have the flexibility to move sooner than 5 years. We would have been past the old 2-year mark late next year and good to go, but now are highly incentivized to stay put for longer. Our house has appreciated (fortunately) about $200k already, so that's $30k in tax that we'd now have to pay if we sell in the next four years we have left. So that's one house off the market.
Watty wrote:
Wed Dec 06, 2017 11:56 am
Your rent could also change and the 20% downpayment money that you keep invested could soar or tank too.
Wouldn't be wise to have down payment money invested in stocks if you plan to use it anytime soon.

Bungo
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Re: Timing the housing market

Post by Bungo » Wed Dec 06, 2017 2:08 pm

Afty wrote:
Wed Dec 06, 2017 1:39 pm
There's no guarantee that when the market softens, it will soften below the current price. When I moved to the Bay Area in 2011, the prices seemed excessive and we seemed due for a correction. That correction still hasn't come, and home prices now are 70% higher than they were in 2011. It would take a heck of a correction for prices to go below where they were in 2011.

Like the stock market, home prices can stay irrational longer than you can stay solvent.
The Bay Area correction had already happened by then. 2011-2012 was the bottom of the market, with significantly lower prices than a few years earlier. I doubt we'll see those prices again, but we are probably due for the next correction, hopefully after I retire and sell my house :D

Afty
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Re: Timing the housing market

Post by Afty » Wed Dec 06, 2017 2:14 pm

Bungo wrote:
Wed Dec 06, 2017 2:08 pm
Afty wrote:
Wed Dec 06, 2017 1:39 pm
There's no guarantee that when the market softens, it will soften below the current price. When I moved to the Bay Area in 2011, the prices seemed excessive and we seemed due for a correction. That correction still hasn't come, and home prices now are 70% higher than they were in 2011. It would take a heck of a correction for prices to go below where they were in 2011.

Like the stock market, home prices can stay irrational longer than you can stay solvent.
The Bay Area correction had already happened by then. 2011-2012 was the bottom of the market, with significantly lower prices than a few years earlier. I doubt we'll see those prices again, but we are probably due for the next correction, hopefully after I retire and sell my house :D
Yes, but there was no way to know that was the bottom at the time, and at least where I lived it was already a seller's market. I distinctly remember a house for sale in my neighborhood in 2012. It was around 1500 sq ft and kind of crappy. It was listed for $970k and sold for $1.07m. Seemed crazy at the time, but Zillow estimates the value today at $1.95m.
Last edited by Afty on Wed Dec 06, 2017 2:32 pm, edited 2 times in total.

remomnyc
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Re: Timing the housing market

Post by remomnyc » Wed Dec 06, 2017 2:17 pm

The time it makes sense to buy is when you have 20% down, when you know you're staying at least 7 to 10 years, and when buying is cheaper or neutral to renting.

quantAndHold
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Re: Timing the housing market

Post by quantAndHold » Wed Dec 06, 2017 2:27 pm

Just like with the stock market, what we know about the proposed legislation is already priced into the market.

runner540
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Re: Timing the housing market

Post by runner540 » Wed Dec 06, 2017 2:47 pm

quantAndHold wrote:
Wed Dec 06, 2017 2:27 pm
Just like with the stock market, what we know about the proposed legislation is already priced into the market.
Can you explain your reasoning?

The stock market is repriced hundreds/thousands of times per day, and reacts quickly to bad news. The housing market moves slowly (transactions take days/weeks/months), and price indices showing movement are months delayed. The contracts being written now might start to reflect exected changes, but will take a month to close and another couple months to show up in indices.

DVMResident
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Re: Timing the housing market

Post by DVMResident » Wed Dec 06, 2017 2:53 pm

My non-technical thought is it's very difficult to time market gyrations. But you can time a rent:purchase price: e.g. sometimes it's cheaper to buy, sometimes cheaper to rent, and sometimes it's a wash.

My rule of thumb:
if >1%/mo rent of gross market value, buy (if staying put for at least a number of years; consider sales costs)
if 0.5-1%/mo rent of gross market value, unclear
if <0.5%/mo rent of gross market value, rent

These numbers are for quick mental math that allow me to quickly benchmark a property. Always need to dig into the details.

protagonist
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Re: Timing the housing market

Post by protagonist » Wed Dec 06, 2017 3:13 pm

I'm not sure that the housing market cannot be timed under certain circumstances.

For instance, I thought about buying a house in Portland, OR in the early 90s, noting how cheap real estate was in Portland at that time compared with cities in California (or in so many other parts of the US) and how Portland seemed like a hot place to live. It seemed ready for a boom, which it subsequently experienced.

My gf bought an apartment in Manhattan shortly after 9/11 for $200K that is worth close to $1M now.

I bought my home in a highly desirable but affordable university town with little room for new construction, and it has also appreciated very nicely as well as held its value during the crash. By contrast, the over-55 condo my mom bought in 1980 in Southern Florida has not fared well due to massive over-development as well as other factors that were pretty evident.

Maybe these were just anomalies of luck, I don't know. But I don't think they required genius guesswork. Unlike the stock market, the residential RE market may not be based as much on a hopelessly vast, complex array of multiple perceptions and speculation as much as more tangible factors such as where people want to live, housing stock, and the current job market compared with current home valuations. Some places just seem irrationally expensive while others seem irrationally undervalued.

But I could be wrong.

scifilover
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Re: Timing the housing market

Post by scifilover » Thu Dec 07, 2017 9:45 am

You need to wait to find out the final form of the tax law change re property tax deduction and mortgage interest deduction. The old rule of thumb of qualifying for a mortgage with 28% or less of your monthly income for PITI was always based on the ability to deduct tax and interest. So, after the dust settles, you can do some math and see how the changes affect what folks can afford to pay. The impact,if any, will be greater in areas with more expensive homes.

PITI= principal interest tax and insurance.

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randomizer
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Re: Timing the housing market

Post by randomizer » Thu Dec 07, 2017 10:13 am

Nobody knows nuttin'. Out of extreme caution, we bought a house when the long-term trend seemed to be good (that is, probably not a terrible time to buy, but nobody knows) and with a very large % down (over 50%). I know this is not what most people do, and not necessarily optimal, but it helps us sleep at night, and that's very important to us.

goingup
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Re: Timing the housing market

Post by goingup » Thu Dec 07, 2017 10:17 am

Afty wrote:
Wed Dec 06, 2017 1:39 pm
There's no guarantee that when the market softens, it will soften below the current price.
Like the stock market, home prices can stay irrational longer than you can stay solvent.
Excellent points!

Bird Beard
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Re: Timing the housing market

Post by Bird Beard » Thu Dec 07, 2017 10:20 am

scifilover wrote:
Thu Dec 07, 2017 9:45 am
You need to wait to find out the final form of the tax law change re property tax deduction and mortgage interest deduction. The old rule of thumb of qualifying for a mortgage with 28% or less of your monthly income for PITI was always based on the ability to deduct tax and interest. So, after the dust settles, you can do some math and see how the changes affect what folks can afford to pay. The impact,if any, will be greater in areas with more expensive homes.

PITI= principal interest tax and insurance.
The question is not one of determining how much house I can afford. I am looking at houses where the monthly costs including PITI and saving for maintenance should be around 25% of my net monthly pay. I don't think about mortgage interest or property tax deduction in my calculations. I usually pay AMT, so I am not sure it even matters. I am more concerned about what it will do to the market around me.

My concern is that barring a bursting bubble, housing prices remain fairly steady. While I don't plan to move in the next 10 years, stuff happens and sometimes you have to move. In a normal situation, if you have to sell in 3-5 years, you may lose out on some of the transactional costs of buying/selling a house, but for the most part the house value should be about what you paid for it, if not a bit more. I guess my concern is that this current moment may be the precipice of another housing bubble burst (at least in certain regions) due to proposed changes in the way housing is subsidized. Now, unless I lose my job, I should still be ok because I bought a house that I can easily afford. However, I don't want to be caught in a buy high, sell low type of situation. I guess the question should be tailored to be a bit more specific...would you buy a house you can easily afford if you knew there were changes coming that could have a big impact on housing prices in the region?

This question is applicable to all sorts of situations...like a big company planning to move headquarters. Buying a home is often a very personal decision and is a luxury item, but it is difficult not to think of it as a kind of investment.

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Sandtrap
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Re: Timing the housing market

Post by Sandtrap » Thu Dec 07, 2017 11:09 am

Bird Beard wrote:
Thu Dec 07, 2017 10:20 am
scifilover wrote:
Thu Dec 07, 2017 9:45 am
You need to wait to find out the final form of the tax law change re property tax deduction and mortgage interest deduction. The old rule of thumb of qualifying for a mortgage with 28% or less of your monthly income for PITI was always based on the ability to deduct tax and interest. So, after the dust settles, you can do some math and see how the changes affect what folks can afford to pay. The impact,if any, will be greater in areas with more expensive homes.

PITI= principal interest tax and insurance.
The question is not one of determining how much house I can afford. I am looking at houses where the monthly costs including PITI and saving for maintenance should be around 25% of my net monthly pay. I don't think about mortgage interest or property tax deduction in my calculations. I usually pay AMT, so I am not sure it even matters. I am more concerned about what it will do to the market around me.

My concern is that barring a bursting bubble, housing prices remain fairly steady. While I don't plan to move in the next 10 years, stuff happens and sometimes you have to move. In a normal situation, if you have to sell in 3-5 years, you may lose out on some of the transactional costs of buying/selling a house, but for the most part the house value should be about what you paid for it, if not a bit more. I guess my concern is that this current moment may be the precipice of another housing bubble burst (at least in certain regions) due to proposed changes in the way housing is subsidized. Now, unless I lose my job, I should still be ok because I bought a house that I can easily afford. However, I don't want to be caught in a buy high, sell low type of situation. I guess the question should be tailored to be a bit more specific...would you buy a house you can easily afford if you knew there were changes coming that could have a big impact on housing prices in the region?

This question is applicable to all sorts of situations...like a big company planning to move headquarters. Buying a home is often a very personal decision and is a luxury item, but it is difficult not to think of it as a kind of investment.
The only thing you can do is purchase the best house you can buy at the lowest price. If you look at it as a R/E investor might, then you might consider the following:'
1. Can I buy this house at "X" price and not lose money if I sold it next month, even with the 6% R/E sales commission.
2. Can I rent out this house after I buy it and over the next 3 years have my mortgage paid (if not a cash sale) and generate at least a 6-8% CAP?
3. Will the potential annual appreciative value of this home be extremely positive based on the curb value of properties around it, the general area, and history of the region, as well as local economic conditions and indicators?
4. Is the properties intrinsic value such that I would want to live there myself and enjoy being there?
5. Is my present financial position so strong that I have the "staying power" to ride out a R/E dip and still come out ahead on this property?
For myself, any property that can satisfy all 5 of the above conditions is a potential to buy.
j :D

letsgobobby
Posts: 10698
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Re: Timing the housing market

Post by letsgobobby » Thu Dec 07, 2017 11:12 am

Bird Beard wrote:
Wed Dec 06, 2017 11:34 am
I live in a HCOL area and I am currently looking for a house. I've been reading articles about the "prohibited topic," and many are very pessimistic about what it may do to housing costs and job growth in my area. I realize much of this is speculation. However, it did spark a question in me. One of the articles I read (NY Times) suggests that home values could decline as much as 10% in my area. That may not be such a horrible thing because I do think many of the houses in my market (Long Island) are overvalued.

This topic is not meant to be a discussion regarding any proposed tax plan and its effects on the housing market. Rather, it is meant to be a discussion regarding timing the housing market in general...especially for home buyers instead of investors.

I am currently shopping for my first house because rent in my area is expensive for what I need and frankly I just want to (I posted a thread a couple of weeks ago with more specifics regarding my situation if interested...thanks for the advice). I don't have any intention to move or change jobs within the next 10 years...but then again, who knows? I understand that the house you live in should not be thought of as an investment, but it kind of is in the sense that you are paying money to gain ownership of something that has changing value and can be resold.

So what are your thoughts on timing the housing market when shopping for a home? Ideally, putting 20% down and staying put for 10 years is a hedge against declining home values, but things happen and sometimes you just have to move. If you were shopping for a house and there were potential big changes on the horizon that could affect real estate values, would you sit tight for now and see how things shake out or would you continue shopping and jump on a good value if you see one?
If you are likely to stay employed and in the same house for ten years, buy the affordable house you want and don't look back or worry about changing values. Anything can happen but ten years is a long time and a good fraction of your short time on earth. Enjoy your life, responsibly.

Admiral
Posts: 912
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Re: Timing the housing market

Post by Admiral » Thu Dec 07, 2017 11:15 am

Bird Beard wrote:
Thu Dec 07, 2017 10:20 am
scifilover wrote:
Thu Dec 07, 2017 9:45 am
You need to wait to find out the final form of the tax law change re property tax deduction and mortgage interest deduction. The old rule of thumb of qualifying for a mortgage with 28% or less of your monthly income for PITI was always based on the ability to deduct tax and interest. So, after the dust settles, you can do some math and see how the changes affect what folks can afford to pay. The impact,if any, will be greater in areas with more expensive homes.

PITI= principal interest tax and insurance.
The question is not one of determining how much house I can afford. I am looking at houses where the monthly costs including PITI and saving for maintenance should be around 25% of my net monthly pay. I don't think about mortgage interest or property tax deduction in my calculations. I usually pay AMT, so I am not sure it even matters. I am more concerned about what it will do to the market around me.

My concern is that barring a bursting bubble, housing prices remain fairly steady. While I don't plan to move in the next 10 years, stuff happens and sometimes you have to move. In a normal situation, if you have to sell in 3-5 years, you may lose out on some of the transactional costs of buying/selling a house, but for the most part the house value should be about what you paid for it, if not a bit more. I guess my concern is that this current moment may be the precipice of another housing bubble burst (at least in certain regions) due to proposed changes in the way housing is subsidized. Now, unless I lose my job, I should still be ok because I bought a house that I can easily afford. However, I don't want to be caught in a buy high, sell low type of situation. I guess the question should be tailored to be a bit more specific...would you buy a house you can easily afford if you knew there were changes coming that could have a big impact on housing prices in the region?

This question is applicable to all sorts of situations...like a big company planning to move headquarters. Buying a home is often a very personal decision and is a luxury item, but it is difficult not to think of it as a kind of investment.
No one is going to be able to give you an answer to this question (or, more "concern") since one does not exist. It's all hypothetical. If you're nervous, then wait a few months. I thought when the DJIA hit 20,000, we were in a bubble and it was about to explode. It didn't. Are we still in it? Maybe. I have no idea what will happen today or tomorrow or in a year from now. I also feel the same way about the housing market. Studies by Shiller and others have shown that home prices over the long haul barely beat inflation, if this makes you feel any better (or, possibly, worse).
100-Year Inflation-Adjusted Housing Price Growth was Less Than 1%/Year
So, what's the result of over 100 years of ups and downs in the housing market? The bottom line, somewhat surprisingly, is that the average annual price increase for U.S. homes from 1900 to 2012 was only 0.1%/year after inflation!
http://observationsandnotes.blogspot.co ... -1900.html

Of course this is masked by periods of great appreciation, and then by falling prices, and nobody keeps a home for 100 years. Do the rent-vs-buy calculation and if it makes sense, and you have the money, and your job is pretty secure, then buy a house.

smitcat
Posts: 790
Joined: Mon Nov 07, 2016 10:51 am

Re: Timing the housing market

Post by smitcat » Thu Dec 07, 2017 11:26 am

Sandtrap wrote:
Thu Dec 07, 2017 11:09 am
Bird Beard wrote:
Thu Dec 07, 2017 10:20 am
scifilover wrote:
Thu Dec 07, 2017 9:45 am
You need to wait to find out the final form of the tax law change re property tax deduction and mortgage interest deduction. The old rule of thumb of qualifying for a mortgage with 28% or less of your monthly income for PITI was always based on the ability to deduct tax and interest. So, after the dust settles, you can do some math and see how the changes affect what folks can afford to pay. The impact,if any, will be greater in areas with more expensive homes.

PITI= principal interest tax and insurance.
The question is not one of determining how much house I can afford. I am looking at houses where the monthly costs including PITI and saving for maintenance should be around 25% of my net monthly pay. I don't think about mortgage interest or property tax deduction in my calculations. I usually pay AMT, so I am not sure it even matters. I am more concerned about what it will do to the market around me.

My concern is that barring a bursting bubble, housing prices remain fairly steady. While I don't plan to move in the next 10 years, stuff happens and sometimes you have to move. In a normal situation, if you have to sell in 3-5 years, you may lose out on some of the transactional costs of buying/selling a house, but for the most part the house value should be about what you paid for it, if not a bit more. I guess my concern is that this current moment may be the precipice of another housing bubble burst (at least in certain regions) due to proposed changes in the way housing is subsidized. Now, unless I lose my job, I should still be ok because I bought a house that I can easily afford. However, I don't want to be caught in a buy high, sell low type of situation. I guess the question should be tailored to be a bit more specific...would you buy a house you can easily afford if you knew there were changes coming that could have a big impact on housing prices in the region?

This question is applicable to all sorts of situations...like a big company planning to move headquarters. Buying a home is often a very personal decision and is a luxury item, but it is difficult not to think of it as a kind of investment.
The only thing you can do is purchase the best house you can buy at the lowest price. If you look at it as a R/E investor might, then you might consider the following:'
1. Can I buy this house at "X" price and not lose money if I sold it next month, even with the 6% R/E sales commission.
2. Can I rent out this house after I buy it and over the next 3 years have my mortgage paid (if not a cash sale) and generate at least a 6-8% CAP?
3. Will the potential annual appreciative value of this home be extremely positive based on the curb value of properties around it, the general area, and history of the region, as well as local economic conditions and indicators?
4. Is the properties intrinsic value such that I would want to live there myself and enjoy being there?
5. Is my present financial position so strong that I have the "staying power" to ride out a R/E dip and still come out ahead on this property?
For myself, any property that can satisfy all 5 of the above conditions is a potential to buy.
j :D

An interesting and good list.
IMHO these two items...

"1. Can I buy this house at "X" price and not lose money if I sold it next month, even with the 6% R/E sales commission.
2. Can I rent out this house after I buy it and over the next 3 years have my mortgage paid (if not a cash sale) and generate at least a 6-8% CAP?"

Are not going tp happen where and now on Long Island. The numbers will not support them in this area.

User avatar
Sandtrap
Posts: 2779
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Re: Timing the housing market

Post by Sandtrap » Thu Dec 07, 2017 11:30 am

smitcat wrote:
Thu Dec 07, 2017 11:26 am
Sandtrap wrote:
Thu Dec 07, 2017 11:09 am
. . . .
The only thing you can do is purchase the best house you can buy at the lowest price. If you look at it as a R/E investor might, then you might consider the following:'
1. Can I buy this house at "X" price and not lose money if I sold it next month, even with the 6% R/E sales commission.
2. Can I rent out this house after I buy it and over the next 3 years have my mortgage paid (if not a cash sale) and generate at least a 6-8% CAP?
3. Will the potential annual appreciative value of this home be extremely positive based on the curb value of properties around it, the general area, and history of the region, as well as local economic conditions and indicators?
4. Is the properties intrinsic value such that I would want to live there myself and enjoy being there?
5. Is my present financial position so strong that I have the "staying power" to ride out a R/E dip and still come out ahead on this property?
For myself, any property that can satisfy all 5 of the above conditions is a potential to buy.
j :D

An interesting and good list.
IMHO these two items...

"1. Can I buy this house at "X" price and not lose money if I sold it next month, even with the 6% R/E sales commission.
2. Can I rent out this house after I buy it and over the next 3 years have my mortgage paid (if not a cash sale) and generate at least a 6-8% CAP?"

Are not going tp happen where and now on Long Island. The numbers will not support them in this area.
[/quote]
Yes. Some areas are tough tough tough. More money needed to buy into the game. Or, as you say, totally locked up.
j :D

smitcat
Posts: 790
Joined: Mon Nov 07, 2016 10:51 am

Re: Timing the housing market

Post by smitcat » Thu Dec 07, 2017 11:34 am

Sandtrap wrote:
Thu Dec 07, 2017 11:30 am
smitcat wrote:
Thu Dec 07, 2017 11:26 am
Sandtrap wrote:
Thu Dec 07, 2017 11:09 am
. . . .
The only thing you can do is purchase the best house you can buy at the lowest price. If you look at it as a R/E investor might, then you might consider the following:'
1. Can I buy this house at "X" price and not lose money if I sold it next month, even with the 6% R/E sales commission.
2. Can I rent out this house after I buy it and over the next 3 years have my mortgage paid (if not a cash sale) and generate at least a 6-8% CAP?
3. Will the potential annual appreciative value of this home be extremely positive based on the curb value of properties around it, the general area, and history of the region, as well as local economic conditions and indicators?
4. Is the properties intrinsic value such that I would want to live there myself and enjoy being there?
5. Is my present financial position so strong that I have the "staying power" to ride out a R/E dip and still come out ahead on this property?
For myself, any property that can satisfy all 5 of the above conditions is a potential to buy.
j :D

An interesting and good list.
IMHO these two items...

"1. Can I buy this house at "X" price and not lose money if I sold it next month, even with the 6% R/E sales commission.
2. Can I rent out this house after I buy it and over the next 3 years have my mortgage paid (if not a cash sale) and generate at least a 6-8% CAP?"

Are not going tp happen where and now on Long Island. The numbers will not support them in this area.
Yes. Some areas are tough tough tough. More money needed to buy into the game. Or, as you say, totally locked up.
j :D
[/quote]

Yup - the costs to buy and sell are a good deal higher than the 6% real estate fees and the 'rental' he would need to charge would be in the area of $4,000/mo. before lost months and maintenance are even considered.

DrGoogle2017
Posts: 678
Joined: Mon Aug 14, 2017 12:31 pm

Re: Timing the housing market

Post by DrGoogle2017 » Thu Dec 07, 2017 11:56 am

I think these kinds of predictions are often not correct, like last year regarding the stock market if somebody was elected.

chuppi
Posts: 126
Joined: Sat Jun 16, 2012 9:47 am

Re: Timing the housing market

Post by chuppi » Thu Dec 07, 2017 12:27 pm

This is such a difficult topic. It is very hard to predict. We will never know when we will get the next 2010 -2012 buying opportunity.
I think one should focus more on buying the right house and for the long term. Even if the market tanks, You are fine as long as you can make payments and you enjoy living there.

There is so much more than house price. Interest rates, house maintenance, property taxes affects significantly. When I bought in Q1/2016, I felt that I am buying at the high (didn't have a choice) but it turns out the house price went up another 10-15% in the last 2 years.
Since I was buying at a high (my crystal ball in never right), I bought a smaller house. My plan was to buy a bigger house when the market tanked, rent the smaller house for 2-3years and then sell. Wrong strategy! Selling the house costs 6-8% of the home value. Renting is a pain in the butt and in the HCOL area often rents don't cover the expenses impacting the cash flow.
In my case, I love the house expect that it is small. There is enough backyard to add additional space and I have to painfully go through remodeling/addition now. Looking back, I would have been better off getting a house with everything I want.

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