Jaszbo
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 You taught me something, didn't know it was twice!
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quote:
I believe historical data is on my side
. I guess Japan could have said the samething? What happened for 10 years....ouch.
I'm not exactly sure what we are disagreeing on though. You think it will never go negative and I simply think that it may, but I feel it will correct itself.
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Mon Feb 27, 2006 2:00 am |
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financialpeace
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quote:
Originally posted by timowensby
If the property values decline, then the only people who sell at those lowered prices are the ones who absolutely must sell. If you look at areas that have suffered large declines, like the rust belt, you will notice a major external factor driving the decline.
Like politics, all real estate is local.
Unless something really severe happens in the DC area, it is very unlikely that you will see the type of correction you are describing. It isn't a greater fools theory either, it's historical observation.
We need to stay focused on the original topic. It IS the greater fool's theory when done within the guides of the original poster. The theory is there in black and white, just read the post... no down, monthly budgeting woes, or lack thereof, no savings or atleast none indicated, and yes, yes, yes, you are correct, when the market declines, the only ones to sell are those that must, and with the given state of the original poster, they'll be forced to sell. When they're worried about monthly expenses, yet wanting to "capture the mystery of wealth" through risky real estate tactics, it opens the door for Murphy to set up residence in the bedroom, coming down for tea time, almost daily. That's why I believe this is a perfect example of the "greater fool's theory", not because everything indicates it, but because everything within the context of the original poster and the implied plans for homeownership indicates it.
One more thing... I'm not so sure that ALL real estate is localized... have you priced a sheet of OSB before and after Katrina?? Go ahead, it will surprise you, not to mention the fact that getting concrete is next to impossible and 4-6wk waiting lists are very common, and these items are show stoppers for RE growth both new homes sales and the fixer uppers hoping to "cash" in on those equity loans they took out to add that extra sun room to capture another $15-20k of value. I assure you, these commodities are short nationwide. Yes, you can find a "Hazard" county out there in the sticks that hasn't heard of Katrina hitting the gulf yet, but for the most part, there are localized disasters and inflation woes and high costs for borrowed money, that drive prices nationwide, to ignore them completely is to cloud a very viable risk factor.
Just my $.02...
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Mon Feb 27, 2006 10:23 pm |
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kingcalvin
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It's dangerous to make blanket assumptions on escalating real estate values. Especially if you start off with ZERO equity AND interest only payments.
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Tue Mar 14, 2006 4:14 am |
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firewalker
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Let's use your numbers of 21,000 profit in 3 years: that's 580/month.
you sure you couldn't rent that same place for $600 less than that mortgage payment? So 5% appreciation isn't enough.
keeping in mind that over the past 200 years prices have typically risen < .5%/year. less than one half of one percent after inflation. and the past few years has seen appreciation of 20-50% (ie. 40 to 100 times the average), i'm not sure that right now is a good time to be assuming 5% appreciation going forward. things tend to average out. but most of that 5% IS due to inflation.
so if you were going to stay there for 15 years and you can lock in a fixed rate with a very long interest only period, then i'd recommend an interest only. the guys on the board can jump all over me, but in the long run, inflation will far outrun your ability to pay off the loan. ie. let inflation pay it off for you.
imagine buying a house 30 years ago on an interest only. you'd be buying a VERY nice house for around 50k. Now, 30 years later, you're still making that interest only payment (50k x 6% = $3000 / 12 = $250 per month). Now your balloon comes due and you do a small refinance of the 50k or pay it off out of savings. inflation bought you the house and you paid $90k in interest + 50k and it's worth $300 today. you maximized your cash flow, bought something you could barely afford today, and you came out with 160k in today's dollars!
you MUST understand: housing prices are driven by inflation and we are in an inflating era. (likely will be hyperinflating soon)
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Sun Apr 02, 2006 1:32 am |
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financialpeace
Contributing Member
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Wow! Seems like so long ago... wonder how it all turned out. Wonder if the DC area is still growing @ 20%? Anyone know what the market is like in the DC Metro area and how this deal turned out?
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Tue May 20, 2008 11:04 pm |
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mikeb
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Location: DC metro
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I purchased the home in June of 2006, it has currently depreciated by 2% of the sales price. My arm does not adjust until 2011, so I'm hopeing the market will have turned around by then.
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Tue Jun 10, 2008 7:01 pm |
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financialpeace
Contributing Member
Cash: $ 6.20
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Joined: 21 Feb 2006
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mikeb,
Sorry to hear about the depreciation, I know the values have really plumeted and things are really way out of whack now. I hope you're still hanging on or you've sold out and into something more affordable?
Hopefully, things have turned around for you, but if it hasn't, you might want to go check out a financial peace university class taught by Dave Ramsey. It won't do you wrong, and he will never cheer you on just to pump his own ego, he only wants you to succeed. I went through the class, and now I believe in it so much, I facilitate the classes at churches and at our local college. It really works.
I hope the best for you.
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Sun Apr 05, 2009 12:14 am |
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