Real Estate Crash thread

[liv2ski]

Kevo, if you guys want to get a house, go get one. My only advice is not to sell the farm and invest all your money in one. Nobody on here can read the future. What i can tell you is that going FHA you're not draining your accounts. Thats why I did it. It seemed like a no brainer in this nutty housing market. I'm up a shitload over 5 years, but we all have seen how my 5 years of equity can evaporate overnight. I wouldn't buy on a normal 20% down loan. No fucking way. Not yet. I could watch my house drop 75K in price and you know what, who cares? I only put 7500 down. Go buy a house, it will be the best day of your life besides the day you got married. Its one of them pretty proud moments. Its pretty awesome getting keys to YOUR place!!! Good luck on whatever decision you make!

Kevo, this actually is pretty close to good advice. Not sure I would go FHA, as you have 2 forms of mortgage insurance to deal with on a FHA loan. The Up Front MIP of 1.75% which is either added to your loan or paid cash and then the monthly expense which with less than 5% down is Loan Amt X 1.35% / 12 months to get the monthly premium. Pretty fucking expensive.
A 5% down Conv loan has no UFMIP and the monthly renewal is LA X .59-.67% / 12 mos, depending on credit scores. Many lenders will do a 1st and 2nd Trust Deed combo for you with 10% down. It is called an 80-10-10. Great news on that is there is no mortgage insurance.
If I was super worried about values tanking, I would go 5% down. Not so worried or willing to own long term to ride out a market hit, 80-10-10 or 20% down.
I hope this info helps.

[H0G]

If you want to keep your payments around $1,200, you are looking for a house in the $175-200k range. That will give you little choice in a house with a little more for condo.

If you can buy, buy. But you both need to layout a plan of what you will need/want for at least the next 5 years. (Think kids, etc as you will outgrow a condo fast with them).

The Front Range buying frenzy has slowed, and pair that with the Fall/Winter slowdown, and I sure you guys can find a great place. You just need to figure out what you both want to do.

[Deebased]

meh - Boulder is just another hippie haven that long ago sold out to soulless assholes who's main goal is strip mining whatever dubious culture remains. It just has mindshare in a bunch of middle-class and upper middle class zombies heads for people who like to act outdoorsy (see TGR).

Manhattan is a different league.

When did Boulder have a soul? Perhaps the soul of a show as it got kicked out the rest of ColoRADo

[Hugh Conway]

When did Boulder have a soul? Perhaps the soul of a show as it got kicked out the rest of ColoRADo

back when there wasn't a shitty thai place and an indian buffet in every town in the land? dunno - kevo's laid out the reasons for a short (lack of longterm career, higher education bubble - shitty overpriced properties) - the irrational homerism of brilliant minds like danno provide the counter. no point fighting that or attempting too.

[icelanticskier]

mmmmmm 3.25% fixed for 30 in December. laughing we are

knowing what the future holds is hard. seeing and playing trends isn't so hard.

be patient. don't buy cuz you can. buy if it makes cents.

rog

[cramer]

Kevo, this actually is pretty close to good advice. Not sure I would go FHA, as you have 2 forms of mortgage insurance to deal with on a FHA loan. The Up Front MIP of 1.75% which is either added to your loan or paid cash and then the monthly expense which with less than 5% down is Loan Amt X 1.35% / 12 months to get the monthly premium. Pretty fucking expensive.
A 5% down Conv loan has no UFMIP and the monthly renewal is LA X .59-.67% / 12 mos, depending on credit scores. Many lenders will do a 1st and 2nd Trust Deed combo for you with 10% down. It is called an 80-10-10. Great news on that is there is no mortgage insurance.
If I was super worried about values tanking, I would go 5% down. Not so worried or willing to own long term to ride out a market hit, 80-10-10 or 20% down.
I hope this info helps.

"A 5% down Conv loan"

You make a huge point there. I wouldn't have qualified for one of those due to credit score. Obviously the way to go is the conv loan. I didn't know you can still get one of those.

[RootSkier]

Go buy a house, it will be the best day of your life besides the day you got married.

Neither compares to the day you sell the house.

[Benny Profane]

http://www.tampabay.com/news/busines...-binge/2145419


http://www.nakedcapitalism.com/2013/...en-richer.html

[mud]

"A 5% down Conv loan"

You make a huge point there. I wouldn't have qualified for one of those due to credit score. Obviously the way to go is the conv loan. I didn't know you can still get one of those.

Basically it is lender paid mortgage insurance, which you can get with fair credit but it will cost you with a higher interest rate.

It's another option for people that do not want to pay FHA fees upfront and monthly premiums. FHA use to eliminate monthly premiums once the loan reached 78% of the appraised value but now the new rules state the monthly premium is for the life of the loan so you would need to refinance once the house has reached 80% loan to value to get rid of the monthly MI.

Here is how it looks broken down on a rate sheet. If you had a credit score of 740+ and putting 5% down on a primary home with a loan amount of $200K+ you would have an adjustment of .250% for loan to value then 2.15% for credit then .180% credit for a 30 Year fixed term, then anywhere from 1.00% to 2.00% lender compensation which would put total adjustments at 4.22%.

Take that 4.22% and subtract from the 30 Year Fixed with a 45 day lock and that get you another .155% credit to closing costs. Overall if the loan amount is small FHA is still a better deal but if you are getting a loan $350K or more lender paid MI might be better.

[liv2ski]

Mud, that is to much for these guys. Half my brokers can not read a rate sheet. On Conv PMI, the borrower can get either Borrower Paid MI, which is paid monthly or as you said, go with Lender Paid MI, which builds the monthly MI expense into the rate. Borrowers should compare both to see what works best for their situation. I only get FHA apps on borrowers under a 660 credit score. Above that, Conv loans pencil out way cheaper monthly PITI and as I said, doing an 80-10-10 with no PMI expense is FTW. Focus on paying off the 2nd early, as it has the higher rate.

[Benny Profane]

For fuck's sake, how about saving up for twenty percent down on a house you can safely afford, while keeping all other debt down, instead of this shell game?

[mcsquared]

For fuck's sake, how about saving up for twenty percent down on a house you can safely afford, while keeping all other debt down, instead of this shell game?

Because cramer said that was a bad idea. And he has bought a house, although it doesn't have a pool, so I would heed his advice.

[Hugh Conway]

Because cramer said that was a bad idea. And he has bought a house, although it doesn't have a pool, so I would heed his advice.

And Danno said you've gott to buy now because if you don't get your foot in the market now you never will. Prices aren't coming down any time soon, who wouldn't want to live in a 2bed/1bath/converted by a stoner crackshack for $424k?

[H0G]

For fuck's sake, how about saving up for twenty percent down on a house you can safely afford, while keeping all other debt down, instead of this shell game?

It's the M'eriCAN Dream!

How long do you think it would take to save up $50k+ while paying student loans, credit card, iPhone plan, TV & Internet, Obamacare, car payment, insurance, current RENT etc?

[Benny Profane]

I swear, through that whole boom before '07, I thought all of this was parents and grandparents doing the down payment and more. Had to be, right? Nope, it was this creative financing shit. And, well, mom and dad paying for the down payment.

[Danno]

For fuck's sake, how about saving up for twenty percent down on a house you can safely afford, while keeping all other debt down, instead of this shell game?

why is 20% some magic figure? Because the banks say so?

Instead, how about evaluating your finances, which includes both down payment and income/expenses, and the particulars of the local market, and making a purchase decision when circumstances deem it a smart choice, because it compares favorably to renting and provides a good opportunity for growth?

20% should still be a factor because it effects pricing and the size of the down payment in general is a factor in the overall evaluation of price, buffer against market fluctuation, etc. But sticking to some 20% figure because Benny said so is foolish.

If I stuck to a 20% plan in 2005, I would never have purchased, would still not have a 20% downpayment as that bar continues to rise with prices, and sure as hell would not have the equity I do now. :shrug: Every situation is different, and if some blowhard wants to spout off about other people's choices without actually evaluating the specifics of the market that drove that person's choices, well...

[mud]

While I disagree with the first comment, I agree with the second. The true telling sign a market top is here, is that both Benny and I have been looking to buy. In my local market there are no good deals, prices have gone way up and I think it could be a good time to sell and buy in other areas where you can still get a property for 50% of its 2007 value.

To your situation, your young and have lots of time on your side to buy, have the value tank and then to have doubled from the original price 10-15 years later. I would wait and get the 20% down as pmi sucks. Prices in that time may soften a bit too. So be patient, keep saving and look to buy once you have the 20% down.

The smart money bet the Fed would start tapering at the last meeting and lower their Bond and Treasury purchases, apparently the Fed is a bit more dovish then the markets thought.

Before the shutdown I would have said rates would be rising at the beginning of the New Year just like they always do. Now that it looks like the shutdown may continue it will bring slowdown the economy for Q4 and probably 2014 Q1 so the Fed might just keep buying.

Kevo if you really want to buy soon, historically interest rates and home prices tend to move lower over the holidays. Sellers are burnt out if they have had their house on the market for a long time or if they just put it on the market, chances are good they need to get out soon. Nobody likes to deal with this type of stuff over the holidays so there is more wiggle room in making deals.

If you are looking to stay in Boulder long term FHA would work and offer the best rate. You can write off the interest and MI on your taxes which is not something you can do with lender paid MI.
And yes despite what the haters say, Boulder home pricing will continue to rise. Within 8 to 10 years you will be happy you bought now.

[Hugh Conway]

And yes despite what the haters say, Boulder home pricing will continue to rise. Within 8 to 10 years you will be happy you bought now.

Where would this thread be without the never-ending dirt pimps.

[Benny Profane]

Basically, he's saying that 425000 piece of crap will be worth 1.5 mil in ten years. And there will be a bunch of people lining up for the privilege. Amazing. Some people never learn.

[Hugh Conway]

Basically, he's saying that 425000 piece of crap will be worth 1.5 mil in ten years. And there will be a bunch of people lining up for the privilege. Amazing. Some people never learn.

More like $850k +/-, same shit though. Jesus Danno's had the same spew since 2006:

don't believe it's negative in Boulder either, at least not city of boulder. And I do not belive a place like Boulder will ever "burst", it's simply too desirable a place to live for that to happen (snicker all you want ). Not saying it won't flatten, as it did when tech stuff crashed, but it's not going to burst.

they love Boulder and the front range and can't imagine why anyone wouldn't. Me, I'm obviously more baffled 7 years latter than I was then. It's more of a dump, the possibilities for remote work elsewhere have greatly improved. Yet people still love fucking Boulder. Baffling.

[Benny Profane]

why is 20% some magic figure? Because the banks say so?

Instead, how about evaluating your finances, which includes both down payment and income/expenses, and the particulars of the local market, and making a purchase decision when circumstances deem it a smart choice, because it compares favorably to renting and provides a good opportunity for growth?

20% should still be a factor because it effects pricing and the size of the down payment in general is a factor in the overall evaluation of price, buffer against market fluctuation, etc. But sticking to some 20% figure because Benny said so is foolish.

If I stuck to a 20% plan in 2005, I would never have purchased, would still not have a 20% downpayment as that bar continues to rise with prices, and sure as hell would not have the equity I do now. :shrug: Every situation is different, and if some blowhard wants to spout off about other people's choices without actually evaluating the specifics of the market that drove that person's choices, well...

Oy vey. Listen, do a little reading about asset bubbles in history. Usually, you can find one major ingredient in most of them, from tulips to early 21st century American homes, and that's too much borrowing, or, buying on margin. That's how the South Sea company failed, it's why the 1929 stock market crash blew up and caused so much pain, and it's why our RE crash of '08 will go down in history as one of the greatest asset bubbles and crash in history. It's still causing massive pain, and, it seems that many actors in the industry and many citizens think that there was some other reason for the crash, you know, it was only cyclical, it was people of color borrowing too much money from the government, it was the weather, something other than their own greed and stupid personal financial management. Now that Bernanke has actually succeeded in blowing the bubble back up in many markets (really, quite an amazing feat - I totally understand why Charlie Munger considers him to be such a great figure) many are just reverting back to the norms of 2004, not 1982. The financial industry, of course, in all of it's rentier pimping and parasitic behavior, has also indoctrinated the young (I assume you are fairly young, Danno) in thinking this is "normal". It isn't. Hell, the thirty year mortgage didn't even exist before the late thirties. Most either used cash, or a minimum of 50% down. Before the eighties, most mortgages were acquired at a local bank after, yes, putting 20% down and extensive credit checking.
The reason you couldn't save 20% down for your home is because the value of that home is way overpriced, because it exists in a market where money is still awfully easy to get for millions of people. Shit, there are people right now getting mortgages (5% down!) who either were foreclosed upon or walked away from loans since '08! I mean, WTF! This shit will end, sooner or later, but there's a lot of poor souls who will be in even worse shape in five to ten years, when that happens. Like the poor fool who bought that half million dollar piece of shit in Boulder.

[Danno]

Basically, he's saying that 425000 piece of crap will be worth 1.5 mil in ten years. And there will be a bunch of people lining up for the privilege. Amazing. Some people never learn.

Don't think anyone would say that. But maybe it's worth $600k, steady but unremarkable appreciation. Highly doubt it will be worth $425k or less than that. And what should someone learn? That same house was worth 300 or so 10 years ago. So, in 10 years, with a massive housing bubble burst that depressed nationwide housing markets occurring right smack in the middle of it and lasting for years, that home saw steady growth (not equal growth every year, 2008-10 were probably flat). Again, what's to learn? Oh, right, that one should make housing purchase decisions based on the local market (and of course, one's own financial circumstances), that's what's to learn.

It has nothing to do with whether you personally want to live here or live in that house. Personally, I think there are many better places to live than Boulder (and many worse). It has everything to do with the overall economic climate of the region and town, circumstances specific to the location, etc. I purchased here not because I think Boulder is the awesomest place ever. I purchased here because I had a job here and it made good financial sense to purchase vs renting.

[Hugh Conway]

It has nothing to do with whether you personally want to live here or live in that house. Personally, I think there are many better places to live than Boulder (and many worse). It has everything to do with the overall economic climate of the region and town, circumstances specific to the location, etc. I purchased here not because I think Boulder is the awesomest place ever. I purchased here because I had a job here and it made good financial sense to purchase vs renting.

First you claim it's really desirable while you bitch about the salary hit people take to work in Boulder, then claim it's all about the economics. Typical bullshit from you - even down to your hold your nose to my post while speaking out the side of your mouth BS

And yes - at base fucking level - someone has to want to stay in a house (for whatever reason - longterm home, rental, vacation rental, or redevelopment land potential) for it to be worth something. Unless it's a ponzi scheme. Those homes were being mocked because they were, well, shitty properties that'd require a fair bit of work to be desirable at what that markets evolving too.

[mcsquared]

Danno,

One thing you might want to consider is the extent to which the entire Boulder economy is subsidized. Whether it be from Mommy and Daddy back in wherever footing the bill for college expenses or government subsidized through student loans and research grants. What happens when/if that tapers off? How long do you think it will be before people realize that going away to college isn't as valuable as it used to be? I mean soon you will be able to get a degree from Harvard while still living at home where your mom does your laundry.

[Danno]

Oy vey. Listen, do a little reading about asset bubbles in history. Usually, you can find one major ingredient in most of them, from tulips to early 21st century American homes, and that's too much borrowing, or, buying on margin. That's how the South Sea company failed, it's why the 1929 stock market crash blew up and caused so much pain, and it's why our RE crash of '08 will go down in history as one of the greatest asset bubbles and crash in history. It's still causing massive pain, and, it seems that many actors in the industry and many citizens think that there was some other reason for the crash, you know, it was only cyclical, it was people of color borrowing too much money from the government, it was the weather, something other than their own greed and stupid personal financial management. Now that Bernanke has actually succeeded in blowing the bubble back up in many markets (really, quite an amazing feat - I totally understand why Charlie Munger considers him to be such a great figure) many are just reverting back to the norms of 2004, not 1982. The financial industry, of course, in all of it's rentier pimping and parasitic behavior, has also indoctrinated the young (I assume you are fairly young, Danno) in thinking this is "normal". It isn't. Hell, the thirty year mortgage didn't even exist before the late thirties. Most either used cash, or a minimum of 50% down. Before the eighties, most mortgages were acquired at a local bank after, yes, putting 20% down and extensive credit checking.
The reason you couldn't save 20% down for your home is because the value of that home is way overpriced, because it exists in a market where money is still awfully easy to get for millions of people. Shit, there are people right now getting mortgages (5% down!) who either were foreclosed upon or walked away from loans since '08! I mean, WTF! This shit will end, sooner or later, but there's a lot of poor souls who will be in even worse shape in five to ten years, when that happens. Like the poor fool who bought that half million dollar piece of shit in Boulder.

Benny, don't assume. You may be older than I am, but I am not "fairly young" by almost anyone's definition of it outside of someone in assisted living.

You see some of the forest, and some of the trees, but not the whole picture. And in so doing, you missed my entire point. Why not 50% down, based on your post? My point was simply that 20% is an arbitrary number. It is not some magic number that should drive your purchase decision. Your purchase decision should be driven on factors other than an arbitrary number. And the reason that I couldn't save 20% down for my home is not necessarily because my home is overpriced. First, you have to define "overpriced", and second, you have to look at the circumstances of the market (and of my salary). Let's look at Aspen, as an example. After 2008, homes there took a tumble. Did they ever tumble to the point where some shmoe delivering pizzas could afford to buy a condo? Will they ever tumble that low? The answer is no. Why is that? Will those properties always be "overpriced"? What does that mean, if they may fluctuate but never come down to pizza delivery guy levels? How can a property be overpriced into perpetuity? At some point, don't you just have to accept that it just is the price it is, and is only overpriced when its price is high relative to its history and its market?

This is why blanket pronouncements like the ones you make are silly. Being aware of nationwide trends and history is super important, no doubt. But being aware of local market conditions, trends, and history is likewise super important. Making a decision entirely based on just one and ignoring the other is incredibly foolish.