and right now there is a GLUT of homes on the market...AND many more to come becuase realtors ( at least in Orlando) have been telling sellers to hold off till spring... the tax cost is a huge factor...
I believe the trend you'll see in new home sales will be a stabilzation of the prices but a faster decrease in sales, why: more comps to keep up prices and higher % of sales on the upper end as tighter lending standards are phasing out new/marginal home buyers
good point..and i think they may have to address this in the future..the guy in that example pays taxes based on 175k purchase price...the guy who may want to buy his house at 400k has to pay based on that...his taxes will be double the original and that can increase you monthly payment by 400.00 or more. if this thing really gets bad, local gov't's may have reduce taxes to spur home sales or at least make a compromise.
OK, so he bought the house for $175K in 1998. Ignoring downpayments, he paid that note down about $6K, so he owes $169K. All that time, he must have lived like a grasshopper to pay it down so little...expensive cars and vacations. In 2004, he taks on another $200K to buy an investment property and finance even more of his indulgent lifestyle. By 2007, his note is about $360K after paying it down a few more years. And, he bought an investment property which was purchased for $150K in 2004 so it probably was worth about $225K at the peak of the market and is worth about $180K now. So the guys has lead an indulgent lifestyle since 1998, and assuming he sells his house for $360K (which you would characterize as a loss?), he still owns an investment property worth about $180K free and clear? You want me to feel sorry for him? Quiz question...how much would he have to put away every month in his IRA, growing at 8% a year to build up $180K? SM
well you made a lot of assumptions again...like he made money on his investment...why? do your realize how screwed the cond market is? in Orlando there is 41 condo projects under contract but only 15 are in progress and there's talk that they may be stopping 7 of them because the people are backing out and or they cannot sell them....Look, during the internet bubble, there were plenty of guys who bot ___.com at 10.00 and sold it for 200.00 but at the end, the bubble blew up and took alot of investors down with it.
The investment property he bought was roughly half the value of his house at the time. I assumed he bought it free and clear for $150K. If he used that money to make a 50% down payment, his money was leveraged (poorly), and he bought a $300K house. At the peak of the market, it would have been worth about $450K, and now it might be worth around $400K...but lets say, $350K. So he sells for $350K, yet he owes about $146K now, so he's gained $204K in equity due to the miracle of leverage. He's actually better off! And if he's only got a $150K note, his payment is ridiculously low...so he can just weather the storm by renting it and picking up cash flow too. Guys like me went out and used our equity to buy several townhouses, and used fixed rate mortgages. I can afford to rent them for way less than market rate, and I have loads of equity like the example above. By my childhood definition, it made me "rich", and I laugh that someone said I'm suffering now because I own all these townhouses. Like any investing, you have to put in stop losses. I have no sympathy for people who contract poorly, live like grasshoppers and then want a bail out. SM