Actually, that’s almost exactly what I did. Man did I get lucky. I bought a house for 260k a few years ago (in city, in a quiet neighborhood but near downtown, like I said I got lucky) with an 80/20. A year later I rode the bubble up to being able to refinance to 80/0 and locked in 5.5% forever.

I’m not convinced I could rent a similar house for the monthly payments I make.

I’m not going to claim that I had some sort of master plan (other than being extremely conservative with my loans and not going adjustible when loans were at all time lows) as much as lucky timing, but the bubble wasn’t bad for everyone.

median US price: 217,900

change from one year ago: + 10.3 %

change from 3mos. ago: – 3%

—————————————

What this says is that we should not be paying attention to YOY any longer.

It is the monthly and quarterly change that tells us what is really going on.

A few more quarters like this and all of ‘05 appreciation gets wiped off the top.

Oil prices. In case you haven’t noticed, the price of a barrel of oil is somewhere near an all-time high.

It’s hard to hold back inflation when the cost of powering everything is shooting through the roof.

Ya, exactly like you said, economist believe that this increase in economic grown is relying on the wrong factor, which is housing boom. So when the ballon inflates, which most of you believe will, and so will the growth in economic indicators, which will end the growth of indices.

So ya, I do believe that economy will become stagnant after the housing boom and thus the indices won’t go up. Refute my statement with some evidences that indices will continue to rise.

We are producing nothing and it’s all dependent on massive amounts of debt, a lot of which may never be repaid.

In answer to your question about what’s wrong with the economy, you’ve answered it yourself.

Here’s what you said: “Better economy and better overall numbers, especially with the housing boom.”

An economy that is dependent on a housing housing boom, with wild appreciation from one year to the next, is sealing it’s own death warrant.

At some point, either houses stop appreciating or people stop buying.

It is not a growth model that is sustainable forever. Sit down and think about it.

This economy became too dependent on an unsustainable, narrow model and product.

The importance of the housing boom to the economy is precisely why many economists are very concerned.

There are many things wrong with this assumption, but a big one is that wages are stagnant in this country. Hence, “the jobless recovery.”

Perhaps you’ve heard of it.

Where am I wrong so far?

You’re wrong because you assume that rising bond yields are necessarily the result of a growing economy. Inflation is primarily the result of monetary control mechanisms — and in case you haven’t noticed, we just went through a period of historically cheap money.

Why has MTA and libor rising? better economy with lower unemployment rate and better overall numbers, especially with the housing boom.

Where am I wrong so far?

Bzzt! Wrong!

Fixed-rate mortgages are usually indexed to the yield on the 10-year Treasury Note. Adjustable-rate mortgages are often indexed to the yield on shorter-term Treasury bills.

In case you haven’t been paying attention, our “good economy” is being scared out of its wits by the threat of inflation. As a result, investors are fleeing bonds and Treasuries, causing Treasury yields to rise.

This is econ 101 stuff. Get yourself to a library, before you start to look foolish.

That’s not exactly true. If we are entering into a stagflationary environment, which I believe we are then Bennie B. (Bernanke) is going to have to keep pressure on rates.

As Eleua said “the infiation genie is now out of its bottle.”

This has huge implications, not the least of which is having to maintain higher rates in order to protect the US Dollar.

Now, long term rates can decline, and that is what you were probably thinking. But, for that to happen, the genie would have to go back in the bottle.

I don’t see that happening. Higher food, gas, clothes, insurance, tuition, health care, industrial metals, commodities, road pavement, rubber, lumber, drug costs etc…are here and they are here to say.

Dupont came out the other day as well as (I believe it was Dupont) and said it HAS pricing power and it WILL pass along its rising costs to consumers. This is NOT good news for rates.

as far as capital gain, if I remember correctly. less than a year you pay 20% or according to your bracket, a day after a year and under $250,000 proceed is nothing, above that is the same as under a year. After two years, nadda.

When bubbles burst, it starts at the top (that’s where most homes are overpriced)

So you could get into that 650K home for 575K now while still get full price for your current home (full reasonable price).

Another thing with interest rates… they don’t always reflect a healthy economy… it just means that the FEDS are meddling less than before…

After initial period, if the rate goes up, it’s because the index has gone up. Why would the index go up? Better economy and nothing bad has happened. So if that’s the case, expect your house to sell well, and expect your employment to be making more.

If the rate went down…there’s nothing to say about that. Chances are it’s leaning that direction as well with all the bubble talk. If the bubble pops, index will very possibly go down, so you might end up with lower rate after your 5 year period.

Overall, I don’t think there’s that much risk, because for worst case scenario to happen, there has to be huge economic boom to drive up the index.

If anyone can elaborate on this please do…

‘m

When you have nothing left but hope, sell.

It is variable, and when it resets, they are in for a payment shock of a 40% increase, if not more.

Now, if the house has gone up in value, or stagnated, they could wince and pay it. This assumes that they are not in the prime “stay-at-home-and-have-kids” years (which happens in your late 20s – early 30s). If they have kids they want to see more than an hour a day, chances are they will drop to single income. This happens at the time they have a payment adjustment (and a healthy one at that).

Perhaps interest rates will have declined, or remained at historic lows when they refi. That is about as likely as the Seahawks winning the Stanley Cup. In case anyone didn’t notice…the inflation genie slipped out of the bottle on Wall Street.

This portends much more FED tightening. Cynics (that’s me) think the FED will loosen when inflation is roaring, lest they lose the economy. The bond traders will crank your mortgage up for you.

Stretching to buy a house at historic highs, while rising rates coupled with a delecate economy loom in the rear view mirror is not a particularly wise thing.

$90K isn’t bad (it’s just a whisker under the Mercer Isl median household income), but they are probably in debt on other things. $16K savings is nothing.

Someone told me: when all you have left is hope – sell.

First, let me say, you have a terrrific attitude so I expect you’ll do fine no matter what.

Yes, when prices begin to move down, they eventually move down everywhere. So you should be able to upgrade if you stay and wait it out. ie. you’ll sell lower but everything else will be cheaper too.

There are a loot of people who think the best way to go is to 1)sell now (hopefully you can still get the high price you are expecting) and then 2) bank the money for a bit and rent and then 3) wait for bottom at which point you can upgrade a lot more.

The problem with that is it could take a couple years. So you may be renting longer than you’d like.

Personally, I think prices will be quite a bit cheaper by Fall. But you need to do your own research and come to your own conclusions.

That said, do some research. Check to see what the houses in your neighborhood and the one you’d like to move to are actually selling for. I think there’s a link to the King Cty Parcel viewer here.

Make sure you price your house right. Friends who have overpriced for this weaker market have not been able to sell, going on 2 months now.

Good Luck!

We’re about to put our house on the market. There is nothing forcing us to move, we just want to upgrade our neighborhood and maybe get a slightly nicer house. We’re not going to double our SQFT or buy new or get a McMansion. Just want a nice(er) home in a nice(er) neighborhood. We’ve made a bunch of money in our existing home (Bought for $260 and expect to sell for $375 2 years later) and are in a financial position to afford more than we could 2 years ago. We’ll be putting down 15% on our new house vs the 0% we did on our existing mortgage. A bubble is going to affect all housing prices, right? So, does it matter if we are in our existing home or in a new home? Is now a horrible time to buy a new house? I understand there are lots of factors to answer the question, but generally, it seems like I could either ride our a bubble-burst in my existing home which I don’t like or ride out the bubble burst in a home that I do like?

Any thoughts would be appreciated…

That’s just my experience. My credit’s great, but I didn’t start qualifying for low rates until I started paying down some school loan debt and racking up face time at a J-O-B.

It’s funny ‘cuz it’s sad.

There are a lot of people waiting on the sidelines with cash now to pick up the pieces, at massive discounts of course. We will not make the same mistakes you did.

Next up, the Blanks should lock in the rate on as much debt as they can. Taking out a new, 30-year fixed for $304,000 (the full 80 percent of their current home value) would let them pay off their ARM, shrink their HELOC to $18,000 and start paying down equity. (Many lenders will do a lower-cost refi to keep your business, so ask.)

This proposed solution to their problem depends on a $50k rise in their property value IN ONE YEAR.

If it’s smart to lock in now, after the house has increased in value $50k in one year, wouldn’t it be even smarter to wait until the last possible moment and lock in when the house has appreciated $150k, $200k, $250k? No? Why not? I thought all houses did was appreciate.

Let’s be realistic and add property taxes and property insurance into that monthly payment okay?

Ah what the heck, these people will be just fine no matter WHAT happens- they haven’t yet tapped other solutions. Like taking in boarders or getting another family to go in on the house with them.

If you’re young, chances are you will move within 5 years. why would you pay for the highest rate on the market? Ok, so then you argue the interest-only part. If you think they’re screwed with the bubble, then paying few thousands off their principal isn’t gonna save them either.

They found a house they like with a mortgage payment they can afford, which is relative to rent after tax deduction, so what’s the problem?

But the 6.4% interest rate is really high…I assume they bought about a year a go. With a near 6 figure income, they should have been able to get a better rate (below 6%) AND it should have been fixed. I got a 6.125% 30 year fixed last April….and it would been a lot lower if I wasn’t self employed (lenders really stick it to you if you’re a small business owner.)

Although, they didn’t put much down. That probably hurt them….

My guess is that they also had a lot of credit card debt. And maybe a few luxury cars they can’t really afford…

‘m

Explain to me how interest-only is a bad loan if the monthly payment is relative to your rental income and tax deductible? In this case other than their HELOC 2nd, how is it bad?

Don’t tell me that 5 years later when they’re ready to sell the house, their house is gonna be half of what it’s worth because of the “bubble”