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question for those who bought near peak real estate 2007-2008

Home Mortgages and Home Buying question for those who bought near peak real estate 2007-2008

  • q-school q-school 
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    never was worried.  if i’m worried, house is too expensive for budget.

    at that time, we had just sold a house for about 200k profit after realtor fees and moved into a house with purchase price that was less than 30% our annual gross income.  when we sold that house couple years later, we took about 30k hit, including realtor fees.

    not sure if you are considering so called ‘forever’ house

    future hard to predict.

    money comes and goes.

     

     

    #229036 Reply
    Liked by Tangler, Brains428
    Avatar Brains428 
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    I think one of the better things is that I have some colleagues who are coming into the empty nest phase of their career who are willing to talk to me about these things. Something that’s very evident is to not to buy too much house, because it’ll sell at a loss around here regardless of the market.

    Thanks for the responses.

    #229096 Reply
    Avatar rdo 
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    My husband bought a house at the peak, he had to sell it at a loss.  He sold it on the first offer, it probably went down further if he had waited.  the loss was negated since we bought our house for cheap.  As much as our house have appreciated according to zillow, we do not consider it as an investment.  It is a shelter we need.  As for timing the market, we are waiting for a housing decline to buy our vacation home.  our theory is many of the houses are owned by baby boomers, they will be retiring or may be needing offload their vacation homes.  they may be needing to sell their properties to cover their living expenses.

    #229174 Reply
    Liked by Tangler
    Avatar Infinity 
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    We bought our house in 2002. We have been through 2007-8 and downturn. An average owner stays 10+ years in the house. So, buying at the peak or bottom, or if the price goes up or down, has very little impact.

    It is the most expensive item for most people. So, do not rush, do your due diligence, buy when ready, buy only what you need to cover for the next 10 years, and choose the location carefully. These are much more important than “timing the market”.

    Primary home is not an investment. If I was still in the apartment today, I would have a lot more money. However, my wife would have left me, because our home is an important part of her American dream.

    #229176 Reply
    Hank Hank 
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    We bought our place in March 2008 after we thought the bottom had fallen out in the real estate market. Turns out the market still had further to fall and this condo would drop another 25% in value.  Fast forward 11 years and the place is worth at least 50% more than the initial purchase price.

    We bought other places well before and after the peak of the real estate bubble.  Things have gotten pricey enough that it would be tough to get 1% of purchase price per month in rent in many markets including SoCal, Phoenix, Vegas, Denver, etc.  Just the same, good cash-flowing properties and good tenants have been a pretty solid combination so far.

    #229211 Reply
    Avatar Tim 
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    •Probably why I refuse to live on the coasts…
    •I’m probably behind some 33 year old physicians, but plan to be far ahead by 40.
    •Something that’s very evident is to not to buy too much house, because it’ll sell at a loss around here regardless of the market.

    Good habits are hard to break. If your renting five years from now, would your question be the “market” or “cash or AA”? I think your decision point will be “how much in your taxable” to keep after you buy the house. You are moved by the housing or stock market, just building assets. Strong work.

    #229218 Reply
    jfoxcpacfp jfoxcpacfp 
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    Splash Refinancing Bonus

    Can’t time the market.

    Click to expand…

    You sure can, i did in 2011

    Click to expand…

    Great! Prove it wasn’t luck and do it again.

    In fact, let’s make it public this time: what are your next predictions? Very interested to see how much of your success was due to a blinding flash of insight (that 99% of the experts missed) and how much was that guess in a million that happened to be correct.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #229394 Reply
    Liked by CordMcNally
    jfoxcpacfp jfoxcpacfp 
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    Primary home is not an investment. If I was still in the apartment today, I would have a lot more money. However, my wife would have left me, because our home is an important part of her American dream.

    Click to expand…

    And, in the end, how much better could it possibly be if you die with $34M instead of $33.5?

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #229396 Reply
    Liked by Infinity
    The White Coat Investor The White Coat Investor 
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    We bought our house at the peak in 2002. We have been through 3 peaks and 2 downturns. An average owner stays 10+ years in the house. So, buying at the peak or bottom, or if the price goes up or down, has very little impact.

    It is the most expensive item for most people. So, do not rush, do your due diligence, buy when ready, buy only what you need to cover for the next 10 years, and choose the location carefully. These are much more important than “timing the market”.

    Primary home is not an investment. If I was still in the apartment today, I would have a lot more money. However, my wife would have left me, because our home is an important part of her American dream.

    Click to expand…

    Where did real estate peak in 2002? Zimbabwe? It rose all over the US from 2002 to 2006 as I recall.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #229398 Reply
    Liked by Infinity, Hank
    Avatar Infinity 
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    Where did real estate peak in 2002? Zimbabwe? It rose all over the US from 2002 to 2006 as I recall.

    Click to expand…

    You are right.  Thanks for the correction.

    #229612 Reply
    Avatar Infinity 
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    And, in the end, how much better could it possibly be if you die with $34M instead of $33.5?

    Click to expand…

    I probably will die with less than $33.5M, but I would not be able to take it (money) with me any way.  So, got the house that I could afford was the right decision for me.

    #229614 Reply
    Avatar Budgetmaestra 
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    We bought last year near what I I think was the peak in our crazy hot local market. Although things have slowed down and doesn’t seem to increase much, prices also are not falling as the local economy is still doing well so maybe we will just see some very slow growth years rather than falling prices. We bought the Doctor home after we outgrew our first home.

    What made us comfortable buying near what we thought was the peak is that (1) house is affordable at 1.5 times annual income. (2) we had paid off Student loans (3) kids got into a good school zone (4) we know and love the neighborhood and city (5) we are staying long term so house prices will go up and down many times over the years. (6) the house is a historic house in an established neighborhood that should hold the value reasonably well and is not some new construction in a field where five years later there is new construction in the next field over. (7) quickly gentrifying area close to downtown which in the long run will make sure it holds its value as commuter traffic is getting absolutely terrible these days.

    I’m also wondering if you are in LCOL. $250/sqf sounds pretty pricey to me. That’s $500k for a 2,000 sqf house. Is that going to be your long term home? If you can rent for $1,150 that is a far better deal financially.

    #229664 Reply
    Avatar Brains428 
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    We bought last year near what I I think was the peak in our crazy hot local market. Although things have slowed down and doesn’t seem to increase much, prices also are not falling as the local economy is still doing well so maybe we will just see some very slow growth years rather than falling prices. We bought the Doctor home after we outgrew our first home.

    What made us comfortable buying near what we thought was the peak is that (1) house is affordable at 1.5 times annual income. (2) we had paid off Student loans (3) kids got into a good school zone (4) we know and love the neighborhood and city (5) we are staying long term so house prices will go up and down many times over the years. (6) the house is a historic house in an established neighborhood that should hold the value reasonably well and is not some new construction in a field where five years later there is new construction in the next field over. (7) quickly gentrifying area close to downtown which in the long run will make sure it holds its value as commuter traffic is getting absolutely terrible these days.

    I’m also wondering if you are in LCOL. $250/sqf sounds pretty pricey to me. That’s $500k for a 2,000 sqf house. Is that going to be your long term home? If you can rent for $1,150 that is a far better deal financially.

    Click to expand…

    The pricing per square foot is on new builds and has been the trend over the past 18 months. There are nearby towns that you can build for cheaper, but you’re looking at a 25-30 minute commute into town (which isn’t bad, but would easily double current commute). Also, the convenience of living in a smaller town (250-300k people) is that things are all pretty close.

    Some previous builds are very reasonably priced, but homes built between 1995-2010 had a strange affection for oak (more than I’d like). Given the cost to renovate, I would prefer to either pay more for a house that has already been renovated, or buy new. There are a lot of things I’d like to improve about myself, but learning how to do DIY a house isn’t one of them.

    #229690 Reply
    Avatar Jack_Sparrow 
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    I gather I’ll receive the standard answers of “can’t time the market” and all that, but here goes….

    When I finally finish off paying student loans in the next few months, the next step is to save up for a house. The time to have a 20% down payment will be about 12 months from now, with potential move in by December of next year. I live in a LCOL area with home prices creeping up and new builds going for about $250/sq ft (was about 125/sq ft in 2017 when I was looking at this job).

    Given that there is a potential recession predicted by late 2020, I would think that 2-2.5 years from now home prices would fall in my area. This recession was supposed to happen multiple times by now, though. Interest rates are also excellent now, and who knows what they’ll be in 2 years.

    So, for those who bought at the peak of the market prior to the real estate crash, was there any point where you hesitated if you had any suspicion that the housing market was “too good to be true.” Or was it all lessons learned in hind sight?

    Current apartment rental pricing here is great (3 bed 2 bath, 1300 sq ft, internet/cable/electricity– $1150), so there isn’t any real pressure to buy a home. These are just thoughts that creep in on my day off listening to the upstairs neighbors stomping away and watching “Too Big to Fail.”

    Thanks

    Click to expand…

    We are in a similar situation. In a year from now, I’ll be in a position to buy the doctor house but we are going to choose to rent for a few years to get through the next housing decline cycle. I know some posters argue you can’t time the market, which they are arguing statistics, and long term trends more so than reality.

    Every areas of the country is different, but looking at the raw data on high income homes. From 2018 to 2019 I was reading how something like 60% of homes had “bidding wars” and now only like 17% of homes have bidding wars in the area I am looking. Every one and their mother picks up on the fact that housing prices are inflated, so people who don;t have to move aren’t moving, driving down demand, which will drive down prices.

    I don’t expect it to be like 2008, where they announce Lehmans brothers is bankrupts and then relatively quick markets crash, but i’m willing to bet (which I am making the bet) that things start to trend downwards or at least don’t increase in value over the next 1-2 years.

     

     

    #229764 Reply
    Avatar ajm184 
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    Purchased a townhome in late 2005.  Sold at a 100K loss in 2014.  In the 5 years since, prices have moved up by about 1 – 1.5 percent.   Consideration at time was being within walking distance of commuter train station, belief we would live in area long term, schools.  Two of the three came to fruition, though living in the area long term (30 years) didn’t.  I guess the lesson here is that only one ‘belief’ needs to fall short with respect to a financed home purchase.

    As for ‘knowing’ something was off, yes definitely had that feeling, though the depth and breadth was far beyond what most people envisioned.  Two specific observation points for me at the time were:

    a. In 2005 or 2006, there was a House Hunters show on featuring a young college graduate who worked for a non-profit organization in Denver.  This person ended up purchasing a home for like $350k using a 3 year I/O loan with like a 1% downpayment.  It was one of those moments I realized that mortgage firms were given money to people who were not capable of repaying and person was counting on price appreciation versus earning/cash flow to live in the home.

    b.  In 2005, there was a home building show featuring a young couple whom were building a home in Chattanooga, TN.  The couple were employed in social work (not exactly a high income profession at that age).  Yet, they were building 6k sq. foot home.  As the show progressed you realized the couple had ‘help’ in the form of payments from the show and the father of one of the couple owned a residential construction business who was building the home.  I think the couple got out whole (selling after the home was built), but it again drove home the point that the amounts people were qualifying for was out of line with what they could reasonably support from an income/CF/downpayment standpoint.

    #229810 Reply
    Liked by Brains428, Tim

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