So in what way are you qualified to be so confident with your predictions on the housing market? I thought this forum was for traders,not salesman.
I think we have another 20 to 50% to go in many parts of california. If you look at the ratio of income to home prices we are still 6% over the previous housing bubble. With crazy lending practices gone and many places requiring 20-25% down now, there is no one left to buy homes. Prices are accelerating downwards and we probably have a min of 4 years of price drops to go. The previous bubble took 7 years to hit bottom. This bubble is 300% larger than the previous. Its almost impossible to be anywhere near a bottom at this point. You still need a jumbo loan to get an average house in california and those loans are a full percentage point higher. If you are planning to buy, id wait a min 2 years, and probably a min 4 to prevent getting completely slaughtered.
http://www.latimes.com/news/printedition/front/la-fi-vegas8apr08,1,6000965.story http://www.lasvegassun.com/news/2008/apr/10/vegas-recession-proof/ http://www.lvbusinesspress.com/articles/2008/04/09/news/iq_20690332.txt
But there will be all these vacant houses, which will eventually revert to rentals, so that's not supportive of the rental market either. Too much capacity in the overall housing market means rents can only go one way -- down. Hmmm. I thought an abundance of new properties in the market caused that to happen. Sure, in the long run, as eventually excess housing supply dries up as existing stock disintegrates and population perhaps grows. But this is a gradual process, and won't happen overnight, especially since theres millions of vacant homes and its still quite economic to continue construction on more at current prices. No, that would be dumb. Why? Because at 10-15% mortgage rates, the valuation of existing houses would drop like a rock, and you could pick something up for almost nothing. Any good investor knows that its best to buy interest-rate sensitive assets when interest rates are high, in anticipation of future lower rates, rather than buy interest-rate sensitive assets when rates are low, in anticipation of future higher interest rates. Exotic loans are what created much of this mess; what really matters is the return on investment that is being provided by a house purchase, and that has little to do with what the monthly payment is. People need to focus on the basics of investing, and that is, don't 'invest' into something that doesn't provide a return of less than your cost of capital. But unfortunately, too many people couldn't even get that right, aided by things such as neg-amortizating loans, teaser ARMs, option ARMs, and a belief that short-term mortgage money would remain 'cheap' forever.
If you put that into practice in the UK where interest rates are still high you'd be saying now is a time to buy there,right? They just had their weakest housing figures for 16 years and the immediate future looks bleak so I don't know how well that would work. Also with 10-15% mortgage rates it wouldn't matter how cheap you got something,the payments would offset that unless you bought in cash.Surely it would make sense to buy something with low mortgage rates as over time those exorbitent payments would negate how cheap it actually is.
You can always refinance...if rates are at 15% and housing prices drop like a rock the high mortgage rate will bring the monthly price up....but you can always just refinance in a year or two when rates come down....
Refinancing can be risky. Purchase-money mortgages are non-recourse loans in most states. You lose that small measure of protection when you refinance or take out a second.