Please convince me that buying a house will not be my financial ruin

jansportie wrote:

No bubble? We've had interest rates so low for so many years, even during an economic expansion. Now we have mortgage forbearance and eviction moratoriums during a crisis. Perhaps your argument is that coronavirus and its economic impacts will be the primary driver of the upcoming crash, and therefore it won't be due to a bubble?

Janis, sweetie - we’ll see what impact covid has on the residential housing market, speculation about a crash due to it’s impacts is just that. Regardless of what may or may not happen, it won’t be due to a ‘bubble’ for the reasons I already mentioned. And since we’re talking about it, you sound like you may need a good bubble bath and probably one of those sangrias or other girly drinks to calm your nerves, sugar. Don’t forget to wash your see you next Tuesday. ??

That sounds great. I’d buy somewhere that you’re not overstretching so you can easily rent out if you have to move somewhere new for better job opportunity.

My mindset is always accumulate appreciating assets. In the long run, it will work out. There’s always risks involved as any asset prices can crash. But in the long run, it will come back up. It always has. If not, we’re all screwed.

Why not try to help people who do not understand taxes? Your post will continue to confuse people. I was off on the %. Only 13% now itemize. So for 87% of the population, there is no tax advantage to owning a home. Most people do not understand this because they grew up hearing their father talk about the advantage. Yes, you qualify for either the standard deductiion or itemized deductions, but not both. So once you choose the better option, you no longer qualify for the other one. If you go to buy a new car that has 2 rebates, one for $10k and one for $5k but you only get one. I woukd simplify it for people and tell them that they get a $10k rebate.

So let me get this straight - you make several inaccurate statements and I’M confusing potential home buyers?!? You obviously give both or us far too much credit.

Things happen. When you "buy for the long term", that's a great plan until circumstances change and you need to move. If you need to move during a housing downturn like the 2008/2009 bust, your options are 1) Short Sell and lose your down payment and credit for 3-5 years. or 2) Become an accidental landlord where you hemorrhage hundreds of $ per month and you still have to deal with idiot tenants who wreck the place. (It's fun to PAY $500 a month to deal with tenants!)

I actually did move in the middle of 2008.

Listed the house for sale around March at a much lower price than it was worth the year before and still had no bites.

We rented a house where we moved to and rented out the house we owned.

Then bought a house two years later, so we owned two homes.

Sold the first house last year and got a nice chunk of cash as the mortgage was being knocked down for another 10+ years through rental income.

Also, had an ARM on the house so the mortgage dropped over time as rates went down.

There can be stress renting out your house but the long term gains are pretty much locked in.

In 2006, we were a dual income family with no kids. We saw a house that originally listed for $875k but was now at like $735k. We got it for $710k and felt like we killed it in being patient in negotiations. We closed in January 2007.

Obviously, we took a theoretical beating on the home value (theoretical, because the loss was never realized). It’s probably worth now the amount that we paid for it. We were stretched thin at times during the Great Recession (when we went over to a one income family), but rather than give the house to our bank via “jingle mail” like a lot of our peers, we muddled through the lean times.

Now I expect to have the house paid off some time in early 2022. If I get a 3% growth rate on the value of my home, when I retire, I’ll have something like $900k in value to pull out of the house In theory, a big chunk of that will go to a new place (although I have a plan for that, so my situation will be a little different); but it would still be a nice chunk of money with no tax payable on the gain and I would’ve been paying for housing the entire time anyway.

In short, even if your timing is as historically perfectly bad as mine was, it doesn’t have to be a tragic error, and can still have a positive, even if not optimal, outcome.

Orinocool wrote:

Things happen. When you "buy for the long term", that's a great plan until circumstances change and you need to move. If you need to move during a housing downturn like the 2008/2009 bust, your options are 1) Short Sell and lose your down payment and credit for 3-5 years. or 2) Become an accidental landlord where you hemorrhage hundreds of $ per month and you still have to deal with idiot tenants who wreck the place. (It's fun to PAY $500 a month to deal with tenants!)

Definitely agree that you would need to plan for some bad circumstances and need to be able to survive during the bad times. So, definitely need to have plans on survival during bad times to avoid selling low.

It’s guaranteed that there will be declines, but no one know when, how much, or how long. Housing do tend to go up in the long run so if you can handle the temporary declines, risk of buying is usually worth it.

jansportie wrote:

This is a long (20 minute) video but worth it. You can skip to minute 12:25 if you'd like to see a forecast. He has already sold all of his investment/rental properties except for one.

https://www.youtube.com/watch?v=HEI3GIU5m3s

So basically this guy has no idea when it will actually crash. He’s saying that if he had to guess, housing market will crash in dec of 2020, but if fed gets involved, it may not.

It’ll be funny what he’ll do with his money if prices keep rising.

It’s like a lot of hedge funds missed out on the gains since March of this year as they sat out with bunch of cash trying to time the market.

Buy for long term wrote: So basically this guy has no idea when it will actually crash. He’s saying that if he had to guess, housing market will crash in dec of 2020, but if fed gets involved, it may not.

He thinks it will crash beginning as early as October 2020, or as late as April 2021 unless runaway inflation offsets the crash. Inflation is certainly a possibility as the world begins to lose faith in the US dollar. (Fitch Ratings just cut the U.S. credit outlook to negative). If we experience severe inflation, we're all in trouble of course, but the over-leveraged homeowners might do okay relatively speaking.

jansportie wrote:

Buy for long term wrote: So basically this guy has no idea when it will actually crash. He’s saying that if he had to guess, housing market will crash in dec of 2020, but if fed gets involved, it may not.

He thinks it will crash beginning as early as October 2020, or as late as April 2021 unless runaway inflation offsets the crash. Inflation is certainly a possibility as the world begins to lose faith in the US dollar. (Fitch Ratings just cut the U.S. credit outlook to negative). If we experience severe inflation, we're all in trouble of course, but the over-leveraged homeowners might do okay relatively speaking.

He basically has no idea. He leaves himself lots of outs . He’s saying it will crash in oct 2020 to april 2021 unless something happens like more government interventions or whatever. It’s what these crash predictors always do. Broken clock is right twice a day.

And even if you get it right once, it won’t mean you’ll get it right the next time.

For example, Peter Schiff keeps boasting that he got the 2008 recession prediction right. I don’t really think he did as he was calling for a crash for the entire time. However, after the cash, he was telling people to invest in gold and foreign dividend companies. These investments produced far lower return than just regular s&p 500.

Mohamed El-Erian gets featured on CNBC often and he supposedly predicted the coronavirus crash correctly. Then his advice was to divide your cash in fifth and invest slowly back into the market. Well, if you did that you may have called the coronavirus crash correctly but you missed out most of the gains going back.

So, all I’m saying is that especially with people who try to precisely predict the future, they will be wrong so much that it will be foolish to follow them. Even if you give this guy the benefit of the doubt that his crash prediction is correct, how would we know if his future prediction will be any accurate. Housing may bounce back right away. Or maybe it won’t. I have no idea and neither as this guy.

sub sub elite local hobby jogger wrote:

bojack wrote:

If you can't afford it, then don't do it. If your concern is about spending money then I cannot help you.

I can easily afford the monthly costs but it's the big projects that concern me and will inevitably eat into other financial goals. Don't want to have to take out more loans to cover home repairs/upkeep.

Well don’t buy a piece of crap house. Get a good home inspection and make sure that your offer includes a contingency that you can walk away based on your acceptance Or rejection of the inspection report. Most houses are not in the condition that you see on the flip it TV shows. Timelines for any big ticket items like redoing the roof or replacing major mechanicals should all be noted in your inspection report. If you insist on remodeling or adding onto the house, that’s all on you and never is required.

We have record unemployment. The virus is probably going to be around for a few more years, wreaking havoc on economies worldwide. We're still at the beginning of all this. Without people earning the same income as the beforetimes, it is impossible for home prices to sustain. US home prices were already 30-35% overpriced in January 2020 according to experts. The demand is going to dry up like we've never seen before.