TheOtter Posted May 16, 2006 Posted May 16, 2006 Do you think I otter do it? What do you financial wizards think? Quote
TrogdortheBurninator Posted May 16, 2006 Posted May 16, 2006 I bought a house last week. IT basically comes down to how long you plan to stay there and how low an interest rate you can get. Prices in general are really high right now, but apparently seattle is not one of the main bubble markets (ie SF) and it is unlikely prices will fall here (although there is the possibility that appreciation will slow down). Inventory is way down right now, so depending on your price range, you may have limited options. We were buying in the lower price range, and really couldn't afford any of the N. Seattle Neighborhoods that we really liked. We ended up finding a very nice townhouse in an OK part of lake city. Quote
archenemy Posted May 16, 2006 Posted May 16, 2006 Do you think I otter do it? What do you financial wizards think? I think you otter consider buying my house. I am ready to downsize. PM me. Quote
JayB Posted May 16, 2006 Posted May 16, 2006 It really depends on your goals, finances, and time horizon. It's probably a really, really bad time to take out a loan with negative amortization, interest-only, payment option, or adjustable rate features unless you are certain that you will either have built up a considerable equity cushion before the first rate reset hits (wouldn't count on this) or will be certain to have sufficient income/assets to either refinance or handle the higher payments. The odds are quite high that this is an even worse time to take out a loan with any of the above features if you expect to own the home for less than 5-10 years for any reason. If you are looking at the home as a place to live rather than an investment, have enough cash set-aside for a 10-20% downpayment, and the mortgage will consume no more than 1/3 of your gross income with 30 year fixed financing - it's probably a good time to buy, and the fact that real estate values relative to all of the conventional metrics (the amount it costs to service a mortgage vs the amount you can rent the property out for, price to income ratios, etc) are at all time highs shouldn't bother you because you've got a long time horizon to ride out any ups and downs and your primary motivation is not short term financial gain. There are quite a few people who were able to ignore these rules and get away with it for the past few years - but things have changed, so don't expect to be as lucky as the guy who risked it all to shoehorn his way into a property in 99-04 and made a killing, because things may not work out that way for you. The only other suggestion I would make is that you do some reading on your own. This: (http://www.mtgprofessor.com/) is a Website run by a Professor at the Wharton School of Finance that has quite a bit of useful information about determining how much house you can afford, what kind of mortgage would be best, etc. One of the few other sources that I've come across that's any good is a book called "The Truth About Money." I worked at a big investment company for 3.5 years, and the main thing I learned is that small investors usually take a pounding in the markets through a combination of poor decision making, bad advice, and high fees. Most books on investing seemed to offer more of the same. This is the first book on personal finance that I ever came across that offered something more substantial than various "beat the market" gimmicks or get-rich-quick schemes, and it has good sections on home-ownership, insurance etc. My only other observation along these lines is that I was constantly amazed by people who would spend 20-30 hours online educating themselves about digital cameras (for example), and scouring the internet for the best price - but would dedicate less than a 10th of that time to making major financial decisions that would probably affect them for the rest of their lives. If you haven't already done so, I'd dedicate a few months to studying this stuff - pretend like it's a college course - so that you'll never have to seek advice from people who may or may not know what the hell they are talking about. There you go - worth what you paid for it. Quote
JayB Posted May 16, 2006 Posted May 16, 2006 This section might be especially useful: http://www.mtgprofessor.com/purchasing_a_house.htm Quote
olyclimber Posted May 16, 2006 Posted May 16, 2006 you've had it with Seattle, and are moving to Alaska? Quote
Recycled Posted May 16, 2006 Posted May 16, 2006 JayB's got some good points. I've bought and sold a lot of houses over the past 20 years and have a few more points. I'm of two minds... (Mind #1) Houses are at the peak of a cycle and it is not improbably that they might drop 20-30% in value if we hit some rocky times. Bush is heading us in that direction and any number of things could pull the plug on house values and non of them are under out individual control. If we're lucky, prices might hold steady. I think the huge capital gains that people have seen over the past few years are played out or about to be played out, and there's a BIG potential downside. (2) The other point is that maybe we are in the middle of a structure shift in housing. In the past, houses have been cheap due to a number of factors, but the bottom line has been that buying a house in the US has been relatively painless compared to people in the rest of the world. Maybe prices will keep going up and we'll see new products (50 year loans) and new attitudes (more of a multi-generational approach to gaining property)that will support higher prices. The old multiples that determined what % of income the loan guidelines will let you allocate to housing may be defunct if people value housing more and are willing to put more money into their home. The contrarian side of me favors view #1, which gets back to the advice that you should only buy a house in this market if you are thinking about a 10-15 year time horizon. That way, you won't care if your 80% LTV house drops to 70% of its purchase price. You will just ride it out and wait for the up side. I've been through two severe house price crashes: Seattle in the early 70s when the Boeing SST fell through and Bellingham around the 80s. Many people just had to walk away from their homes - they couldn't make payments and they couldn't sell because they would have to put cash in at closing. The foreclosure sales depressed prices further and the psychological value that supports property sales collapsed. It was ugly and I fully expect it to happen again. The other issue is a lifestyle issue. Working on houses really sucks when the whether is good and the mountains are calling. If you are not in nesting mode with a family, I'd give it a hard thinking through, particularly since you will be unlikely to repeat the gains experienced in the past few years. Renting is a pretty good deal at the moment. Rents have not kept pace with property values either in Bellingham or Seattle. Good luck with the decision! Quote
JayB Posted May 17, 2006 Posted May 17, 2006 Recycled seems to be one of those rare souls who's perspective has been shaped by market experience that extends beyond the last 10 year cycle. Thanks for sharing. Speaking of sharing, check out this gem: Montlake Ranchero Yours for only $300K + remodeling, insurance, closing, interest, and the annual tax assesment. A steal at twice the price. Don't worry about filling up the garage with a bunch of your own crap- that's included in the price! Check out that kitchen! Can't quite come up with the cash to service the mortgage - never fear - the property comes with its very own meth-hut in the back yard. You can be cash-flow positive from day-one! And couches - let's not forget about couches! This baby's got it all: There's even some toys for the kids! $300K! Quote
ashw_justin Posted May 17, 2006 Posted May 17, 2006 Liking the kidnapper van out in the yard. Sweeeet. Quote
EWolfe Posted May 17, 2006 Posted May 17, 2006 The unpainted drywall look is so hot right now. Best Feng Shui ever! Quote
olyclimber Posted May 17, 2006 Posted May 17, 2006 that is some crazy shit. its got to be some sort of joke. Quote
Chad_A Posted May 17, 2006 Posted May 17, 2006 The other issue is a lifestyle issue. Working on houses really sucks when the whether is good and the mountains are calling. If you are not in nesting mode with a family, I'd give it a hard thinking through, particularly since you will be unlikely to repeat the gains experienced in the past few years. Renting is a pretty good deal at the moment. Rents have not kept pace with property values either in Bellingham or Seattle. Good luck with the decision! This is what I'm suffering with these days. With respect to Otter, and not to get too far off topic, if not real estate, then what's a good way to invest? I know the stock/bond option, but you really have to know what you're doing; real estate, from what I'm told, is a much more reliable return. Quote
archenemy Posted May 17, 2006 Posted May 17, 2006 First, be sure you are maxing out your retirement savings in every way possible. Then, read The Motley Fools Guide to Investing--it's a fun introduction to investing that has some sound advice and is actually interesting to read. Then, invest and take your lumps and celebrate your wins like everyone else. Quote
Chad_A Posted May 17, 2006 Posted May 17, 2006 Whoa, cool, I'll look that up. I'm sure that's a lot cheaper than hiring an advisor. Quote
olyclimber Posted May 17, 2006 Posted May 17, 2006 buy under valued small cap stocks that are at record lows, but have potential for turn around (writing off lawsuit, one time losses, etc) and then wait a year to sell to avoid capital gains. it really simple and you'll soon be rich. Quote
G-spotter Posted May 17, 2006 Posted May 17, 2006 pretty soon you will be able to invest directly in patents without having to invest in the company that owns them, then you can speculate on infringment cases easily! Quote
archenemy Posted May 17, 2006 Posted May 17, 2006 Whoa, cool, I'll look that up. I'm sure that's a lot cheaper than hiring an advisor. They have a series of books, all very sound. Of course, they have a web site too but I've not been to it. Good luck to you. Quote
klenke Posted May 17, 2006 Posted May 17, 2006 that has some sound advice and is actually interesting to read. Then, invest and take your lumps...like everyone else. Damn, you got that right. I'm taking a beating today...and there are still 100 minutes of trading left. The Gods of Investitude are mincing my fundament with the inflation paddle. Quote
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