Lord Snooty

thingstodo wrote:
Every day you wait is giving away money for rent rather than gaining the tax deduction, paying into equity and gaining appreciation on your home - of course you need to but in an area when the prices aren't dropping. And even if they did drop, it would be part of a cycle.
Most defaults are actually from sub-prime mortgages, not equity lines. ARMs start at a low rate and then increase after one, five or ten years. Many people can't handle a 2% rate increase in one year but don't think about that in the beginning. Then, if the housing cycle is down they can't afford to sell their home.


The first line of that reply is the one most often used by desperate realtors trying to make a sale... just watch the tv real estate adverts that are now flooding our screens on since sales took a dive.

Most defaults at the moment, are indeed from sub prime loans. The home owners with tapped out equity lines of credit are next. This has all happened before. I have seen it in both the UK and here. Jumping in now to save on rent is madness when the predicted fall in house prices is estimated to be at least 30% in the next year or so (easily googled) How on earth do you determine which area is not going to suffer a decline in house prices? A slump usually hits most places, unless you are talking about prime real estate locations, in which case they will probably be too expensive to start with. As for "if they do drop, it's part of a cycle"... you bet it is.. so why should you buy an overpriced house, watch it's value plummet, and have to wait for your house value to come back up again, all the while wasting interest repayments on a house with perhaps even negative equity, when if you bought the same house at a much lower price when houses were at rock bottom, you are paying less each month in repayments, (assuming interest rates don't move) or you would able to buy a much bigger house for the money you pay now to jump into the market. The same sales panic tactic is trotted out over and over, don't wait, or you will be left behind and you'll never get on the 'property ladder' (which is fine if prices are rising but not at the beginning of a slump)
Believe me I have seen people handing back the keys to their properties because they couldn't afford the mortgage. The banks sold them for what they were owed, not what they were worth and 3 or 4 years later they were over twice what was paid for them. I know, (I bought one in London in the 80's and another one here in the 90's and both during slumps.) Property prices are cyclical, they don't keep going up, they do come down for a while every now and then to give people's salaries a chance to catch up. The trick is to jump in then, and that time is very near, about a year I would say. So don't be rushed, save as much money as you can and you'll be surprised at what you can get when everyone wants to sell...!