I cant' decide to buy or wait?

NEW -> Contingent Buyer Assistance Program
Having gone through an upswing market, I'm not sure which is more unpleasant - losing money in this down market or wading through multiple offer, unreasonable seller, kool-aid swilling, 'tards speaking about how you've got to buy now before prices go higher, environment. :-)



It's nice to buy in an upswinging market. I did in 2000. The appreciation I made was just as phantom as the loss I'm experiencing now. Personally speaking I don't view my home as an investment. It's a place I live and raise a family in. That may be naive, but it is what it is.



The original question remains - "should I buy or wait"? My answer is it depends if you are willing to risk losing 10 to 20 percent compared to any personal benefit of ownership. A floor in pricing is not as far off as it was before even by a bear market perspective so buying today is more of a personal choice based on circumstance than it is (IMHO) a mathmatical loss question.



My .02



SGIP
 
[quote author="IrvineRenter" date=1240395430][quote author="WaitingITOut" date=1240393159][quote author="Soylent Green Is People" date=1240381816]That $3300 figure is theoretical money. If your property loses 10% and you don't sell, you've lost 10% of theoretical cash. Try to spend that theoretical cash at a the Royal Hawaiian Resort. They'll throw you out onto your real behind!</blockquote>


Isn't 'theoretical money' what created this mess?</blockquote>


Read this post: <a href="http://www.irvinehousingblog.com/blog/comments/timing-does-matter/">Timing Does Matter</a>. It has the complete argument for waiting in one location.



Waiting may not be the best emotional decision for you, but it is clearly the best financial decision. Don't fool yourself into thinking otherwise.</blockquote>


No one can argue with you on timing. It is always better to buy low and sell high. However, timing it is difficult. If you can time it 100% succesfully - good for you. Why not wait til the uptrend to buy? The question is then - what is your indicator of an uptrend? Y/Y median prices? Monthly sequential price changes? Inventory? By the time those numbers reverse it might be too late. Also, it oculd be a head fake - which is why Graphx and others have been saying about the recent escrow data.



I am with all of you guys that housing is still overvalued. I certainly see the housing downturn taking a couple of years when looking at past experiences 70s and 90s, but no one really knows when it is going to trough. If you can time the trough - good for you. This isn't like buying stocks where you can $ cost average when it trades below your intrinsic value. There are a lot of other intangible value in a real estate purchase. No doubt we are in unprecedented times but the government is also reacting unprecedently to help home prices. Bottom line, no one knows. Housing could stabilize and not move for years with rental rates climbing up with high inflation rates and rental parity catches up. Who knows?
 
[quote author="freedomCM" date=1240454174]Miss the trough?



How long (in years) were the previous three thoughs?</blockquote>


The question is not how long - the correct question is how big of a fall in % terms were the previous three troughs.



Anyone ever did anything on rental rates versus inflation?
 
I've been playing the "Wait or Buy" game in Irvine for about 2 and 1/2 years now. Waiting for a new home that seems reasonably priced feels like waiting for the Second Coming! You know its probably coming, but you're not sure if it will be in your lifetime!



So far listening to these threads has proved most prudent as prices have only fallen. At the same time, the Irvine Company has been building nothing new for years. Wished I owned a business that could survive in today's economy producing no product whatsoever! It's a shame Irvine is a one company town!



Who knows, perhaps by waiting long enough, Newport Beach/Bluffs may become more affordable and value-laden, even as the IRC sits on their unused land. We'd like to live in Irvine, but also suffer from the "Is it Really All That?" phenomenon when looking at pricing. I know of many colleagues in the same mindset.
 
[quote author="etheran" date=1240454280][quote author="freedomCM" date=1240454174]Miss the trough?



How long (in years) were the previous three thoughs?</blockquote>


The question is not how long - the correct question is how big of a fall in % terms were the previous three troughs.



Anyone ever did anything on rental rates versus inflation?</blockquote>




What in the world are you talking about? You just said that you were going to "miss the trough"!



I said "the trough will be years long"





And now you are talking about % fall????



I suppose if anything, the length of the trough should be longer if the %reduction from peak is larger.



(and just to re-insert some facts into the discussion, the previous run-up from 87 to 90 was 70%, it stalled for a year, and the subsequent drop was 25% over 3 years, which was then level for ~3 years, '94-'97)
 
[quote author="freedomCM" date=1240464855][quote author="etheran" date=1240454280][quote author="freedomCM" date=1240454174]Miss the trough?



How long (in years) were the previous three thoughs?</blockquote>


The question is not how long - the correct question is how big of a fall in % terms were the previous three troughs.



Anyone ever did anything on rental rates versus inflation?</blockquote>




What in the world are you talking about? You just said that you were going to "miss the trough"!



I said "the trough will be years long"





And now you are talking about % fall????



I suppose if anything, the length of the trough should be longer if the %reduction from peak is larger.



(and just to re-insert some facts into the discussion, the previous run-up from 87 to 90 was 70%, it stalled for a year, and the subsequent drop was 25% over 3 years, which was then level for ~3 years, '94-'97)</blockquote>
So basically the values will bleed lower over the next few years instead of 20-30% drops ever year? I think as we see rates going up, home prices is drift down.
 
Short term: 3 - 6 months

Mortgage interest rates will stay low, and maybe even go a bit lower.

Home prices in the lower end may stabilize a bit. Home prices in Irvine may even rise a bit. Except the over $1 mil homes will continue to fall in price.







Long term: over 6 months

Mortgage interest rates will start to rise in spite of the Fed buying the long bond.

Home prices will start to decrease again, but not at the same horrendous rate they did for the last couple of years.

Except for the higher end and Irvine, in which home prices will collapse.

The cost of food and energy will increase.
 
I believe that life is divided into a series of windows of opportunity that is primarily indexed to your age. Late teens to early 20s is the best time to pursue a college education. 20s and 30s is the best time to marry and start a family. The best time to get into home ownership is when you have small children. While it is certainly possible to do such things before or after the ideal windows, the experience will either be more difficult or lacking in satisfaction. If you pursue hot cheerleaders in college, you will be admired; if you do so at age 45, you are a dirty old man. What?s the use of owing your dream home at a great price if your kids are about to move out? If your homeownership window arrives when market conditions are ideal, consider yourself fortunate. However, assuming you can afford it, I wouldn?t let the window close waiting for ideal conditions.
 
This discussion has turned out to be much more informative than I thought.



[quote author="High Gravity" date=1240470661]What?s the use of owing your dream home at a great price if your kids are about to move out? If your homeownership window arrives when market conditions are ideal, consider yourself fortunate. However, assuming you can afford it, I wouldn?t let the window close waiting for ideal conditions.</blockquote>


This is very true. I want my kids to enjoy the house as much as I do. If I am single, there is no need for me to rush into buying anything. Considering throwing away the money I spent on rent and the tax credits, it doesn't seem worth it for us to wait 2-3 years or longer.



Does the benefit of enjoying a home in a good neighborhood outweighs the calculated risks of losing value of the house if I don't anticipate to spend more than 15% of my gross income on payments? (asuuming I plan to put down about 40%)
 
[quote author="Look4house" date=1240483378] it doesn't seem worth it for us to wait 2-3 years or longer</blockquote>


People that are serious about buying a house cannot wait that long. Timing does matter, on both sides of the equation.
 
Everyone needs to decide for themselves if it is the right time for them to buy. Most of the people here are very smart financially. Maybe it doesn't make sense to buy now if you are truly concerned about losing money. I can only speak from experience. I bought my current house in 2004 and it is currently worth realistically probably 25% less than I paid for it. It will be worth even less this time next year, I know that. I purchased it with the proceeds from another house purchased in 2000 which increased 100% in four years. I'm not really sure that I would have done anything different even considering the loss. Of course, had the 50% I put down on the house not been primarily from the last house, I may think differently (even though it really doesn't matter). I guess I'm saying that if I had scrimped and saved that money, I probably would have been a bit more depressed about the loss. The reason I am not really upset about it is that it was the right house, at the right time for me. However, in my case, the house I bought was a one of a kind and nothing like it has been on the market or probably will be on the market in the area I live for a long time. I could beat myself up over the loss or just realize that I bought the right house for me and paid too much. Since I have no intentions of ever living anywhere else (unless I win the lottery, but since I don't play, it's unlikely). Those of you who just feel that you can't wait any longer, I don't think anyone here is going to beat up on you for buying, just make sure you won't beat up on yourself because you should know that it is likely that your 20% down will be gone within a few years. Take in the knowledge and make choices with your eyes open.
 
For my family, it's not a matter of waiting or not. It's a matter of affordability. We would like a single family house (not condo, townhouse, apt., etc) that has at least some curb appeal and a decent floor plan within the city of Irvine. Unfortunately, there aren't much to choose from at the given moment.
 
[quote author="usctrojanman29" date=1240465217]

So basically the values will bleed lower over the next few years instead of 20-30% drops ever year? I think as we see rates going up, home prices is drift down.</blockquote>




Why do you think this? This is what happened in the early 90s, but today's scenario is very different, since instead of a 70% bubble, we had one 3x as large.





If I had to guess, I would make the following bet for the OC median house using the CS measure (not Irvine, which has different dynamics, and not median price, as the market is going to shift upscale in housing stock sold):



I would guess another 25% drop this year (concentrated in the fall), to CS=120, followed by 10% next year (CS=110), and 5% the following year (2011, CS=~100), and then stability, but inflation adjusted loss for the following 5 years (CS bottoms around 100).



But who knows really?
 
So you are basically saying another decline of 36 percent from here. How much has it fallen already? If homes on average has fallen 30 percent already, you are saying that prices will fall a cumulative of 56% from the peak.



I guess that is extreme but fair.
 
So far, we've had a CS decline of about 33% overall (again, Irvine is "different", as IPO will tell you)





yes, for over a year my prediction has been 66%.





But....I hadn't factored in the way the economy is taking a dump. I had factored in some loss of FIRE jobs, but I can't really get a handle on the loss of the more "normal" jobs, like the upcoming loss of public servants and retail, as well as the more mundane QOL jobs like pool cleaners, etc that are probably going to happen as people really tighten down the hatches to weather the coming economic typhoon. And then there is the huge impact on B2B which is going to affect the software/hardware industry. And healthcare as more people lose job-related benefits.



I have been trying to figure out what this means for the "overshoot", but still don't have a good handle on it.
 
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