The landlord threats of moving back to the house is not an excuse to jump at purchasing. Of course, nobody here knows your landlord’s asking price.

It’s never time to buy if you are having money problems.

Just read, read, read. After you put your kids to bed, go on the web and read money news from MSN Money, CNN, Yahoo Finance, etc. Information is power. And “Dancing with the Stars” will not help you make this important decision.

“Stress
Lack of Money
Moving Anxiety
Moving decision-making
Lack of Money
Changing daycares
Lack of Money
Want for a nice home for the kids to grow up in
LACK OF MONEY

Do you see a theme here?

Email me to send a donation through paypal.”

Yeah…I see a theme.

Lack of money.

Yet you want to buy a house…go figure.

Same old B.S.

My kids will grow up deformed in a rental.

The house I’m looking at is the ONLY one I like.

If I don’t buy it my LL will kick me out on the streets.

blah blah blah.

new one every week.

50% price drops seem unrealistic to me

I am not saying that 50% price drops are inevitable, but they is a statistically significant chance they could happen. I would give a 50% drop a 20% chance, which is more than enough of a likelihood to give home buyers pause to consider if that would be a problem for them.

As Alan pointed out there are plenty of examples where prices have already dropped by 50% in the US. There are also many examples internationally where prices have dropped by large amounts, such as Japan and Hong Kong in the ’90s (neither of which have recovered peak prices yet, and still have under-water home-owners).

This downturn is unlike any we’ve seen before, with the global nature of the credit contraction, and I think bears a higher risk of significant damage than our local historical record might indicate. Lending was far looser at our peak than it EVER was in this region, making past comparisons innacurate.

50% price drops seem unrealistic to me

80% increases also feel unrealistic to me, but it happened. It may be unrealistic in your area, but I know in my area 50% off would just barely bring the monthly carrying cost of buying in line with comparable rents.

Six months after purchase, one of the couple lost their job and they couldn’t keep up on the loan payment. They tried to sell if but found that the market had softened and they could only get $650k. The bank agreed to a short sale, but the woman vetoed the short sale because she was going to lose all of her investment.

Several months later the house was foreclosed and sold at auction for $430k.

50% price drop right there. Granted, AZ isn’t as special as WA, but is is very possible to see a 50% price drop.

Prices doubled in a few years. Why would anyone think they couldn’t drop by half in a few years too.

How many people though Microsoft stock would drop by half in early 2000?

There is not a single person here who can see the future. I can’t say that prices will drop 50%, but neither can anyone else say they won’t.

I’ve also been thinking of ways to wait a few months and then try to buy it. Our lease is up 4/30. Our landlord has given us two rental options. Either go month to month at $1500/month (that’s if we want to keep house hunting now, so we have flexibility to leave when we want), or sign a lease through August at the current rate. The lease through August is appealing, other than the fact that we’re stuck until then. And at that point if prices have fallen much farther I’d worry he’d decide not to sell. He’s planning on returning to live in the house in August, unless he sells it to us.

Did I mention how much we love that house?

I do appreciate all the feedback. Some times it’s hard to say “wait” when everything in me says “buy!!!”

I’m sure my agent will be calling me if he reads this!

Why are families that want some stability wrong?

Zillow has a new set of chats out, which try to give a visual indicator of what’s happening in different market sections.

Here’s the one with Seattle

From their blog, located here

I like the way they’ve presented the data, and suggest it might be a good one to look at adding in the future to SB….

You’ve lost me….did I say something wrong?

“I have no crystal ball!”

“We have little kids. I don’t want to move them around every couple years when our leases end, so buying is appealing.”

“we love the area and the schools, daughter starts kindergarten next year… it sure seems like the right time to buy……….”

Where have I heard quotes like this before?

if you believe that there’s a decent chance that home prices will fall 50%, you probably shouldn’t even consider buying right now, even if you can pay all cash for your home

People buy cars knowing full well they will have massive depreciation the minute they drive them off the lot, so I don’t see why it would be any different to buy a house that one expects could face significant depreciation. There is a lot off personal satisfaction, and benefit, to owning one’s own home that might well offset possible deprecation (just like the joy some people feel in having a new car).

If your life-style, and/or savings, won’t be significantly impacted by a possible 50% deprecation of a home you want to buy, then I think it is perfectly fine to go ahead and buy. Again, this is why I keep coming back to the mantra of just never over-extending yourself with debt that can’t easily be paid off. So long as your debt is low, possible significant depreciation shouldn’t bother you.

When buying is again comparable to renting, it becomes safe to buy again IMO.

It is absolutely better to buy when rents are comparable to owning. However, it is still far more important to make sure you don’t wind up with a large debt-load that could turn your home into a prison with declining prices.

As I said earlier, if you can’t stomach a 50% price drop on a home you are considering purchasing, then don’t do it. It’s that simple, regardless of what the rent/own ratios are, or how far prices have declined from peak values, etc. It’s all about avoiding over-extending yourself.

But if you find a place that you really like, and it’s priced lower than comparable homes for sale, and you can afford the payments without any problems, and you intend on staying there for years and years, then maybe

While this isn’t altogether bad advice, I think it is far more important to make sure you could easily pay off the house in a few years time if necessary. This is why I keep harping on keeping your debt loads to within 2 times your annual income. Even if you follow Ira’s advice and buy a home that is priced less than comparable properties, and are able to easily make the payments, you don’t want to wind up in a situation where your house becomes a prison you can’t get out of if prices should drop dramatically lower.

Ask yourself this before buying any house: would a 50% price drop from what I am paying now cause me to face any serious financial, or mental, issues? If you feel that a 50% price drop from your purchase price wouldn’t be too big a deal (i.e. because your debt load was low, etc), then go ahead and buy.

When home prices are falling, and you want to buy up, then things are working in your favor. Something that you plan to buy is becoming cheaper for you to buy every time that prices fall more. Obviously, to capitalize on this you need to time things well. I agree that the best time to buy is at the beginning of the upswing of the next bubble, but that would be a very difficult thing to time. Watching for fundamentals is what I plan to do.

Most of the people I see on SB follow this philosophy. They are renting, and plan to buy later. House prices falling gives them a benefit, because the price of what they plan to do goes down constantly.

When buying is again comparable to renting, it becomes safe to buy again IMO.

Our thought is this: if it’s the right house for the right price, it’s a good time to us to buy.

This is great advice. Buy a home when you can afford to put down a significant down-payment, with a debt load that absolutely does not exceed 2 times your annual income. You can learn a lot by looking at Japan’s housing bust in the ’90s. Too many Japanese people jumped into buying homes they couldn’t really afford and found themselves trapped as prices kept falling. Many people jumped into the market after prices had dropped 40% in value, only to see them drop another 40%. This would have been fine if their debt was low, but the vast majority of Japanese buyers had less than 80% equity in their homes, and had mortgages that far exceeded their annual incomes, making them virtual prisoners to this day (i.e. they cannot sell since they owe more on their homes than they can sell them for).

As long as you make sure you could easily pay off the debt in your home with a couple’s year’s income, then buying shouldn’t be too big of a problem.

Honestly though, it’s obviously essentially a rigged poll, framing the question like this, but I did it that way on purpose to point out the ridiculousness of people that constantly refer to falling prices as “doom and gloom.” It’s something of a parody, I guess.

I like parody. Maybe I should start a whole website dedicated to it…

I’m going to go rake my zen rock garden now.

I think there is an easy answer to when to buy: when months of supply starts decreasing

Maybe. However, I think that just a couple months of inventory decline aren’t enough to make a complete trend. Bull and bear markets alike rarely move in a straight line. If anything, we should expect brief upticks in real-estate to keep convincing bulls to jump back in. Just the fact that there are still efforts under way to raise capital for “vulture” funds is evidence that we are FAR from a bottom. We will hit a bottom when almost no one is licking their chops for the opportunity to get a bargain. I find it interesting that some investors have already lost their shirts in trying to buy distressed mortgage securities earlier this year. How could mortgage securities fall anymore after they’ve already lost 50% of value? A lot, apparently, since some securities have now fallen 90% or more.

Falling home prices are good for people who want to purchase more real estate

Really? I would have thought that falling prices would be a terrible thing for people looking to invest in real-estate. Who wants to buy an asset that will be declining in value, year-on-year, for many years? Isn’t it better to buy a home when prices are in an upward trajectory, so you can enjoy appreciation?

I have read stories of Japanese home buyers who bought after prices dropped 40%, only to find themselves under-water (and unable to move again) as prices dropped another 40%.

No, the time to buy is when prices are going up.

They are bad for people wanting to sell more real estate (like people who want to move from owning to renting, or people wanting to trade down to a smaller house).

I recall reading some cases where home-owners in some Colorado hamlet were saddled with $80K bills when their town defaulted. I wonder if there are situations where home-owners find themselves liable for the pensions, or bonds, of their municipality or state that goes belly up? I gather that legislation makes it tough for creditors to sieze municipal assets, but a default certainly wouldn’t make it easy to raise additional funds.

How sad it would be to see prudent home-owners, with clear title, become victims of bankrupted governments looking to extract every last bit of cash they can from residents. It’s not like you can just pack up and move your house when your become upset with how the local government is run, and who would want to sell in the midst of a crashed economy?

If you’re not planning on selling your home anytime soon, why would falling home prices be bad for existing homeowners?

Well, it could be bad for existing home owners if they wind up losing their jobs when the local aircraft manufacturer closed due to a collapse of orders as Chinese airlines went bust when their exporters could no longer sell goods to Americans making HELOC withdrawals.

It also doesn’t help the existing home-owner to find out that they have negative equity, and are unable to do a cash-out refi to help pay for their kid’s college.

Oh, and let’s not forget that the city and state an existing home-owner lives in might start cutting services dramatically, and raising taxes, because of a short-fall in real-estate revenue.

Unfortunately, a massive decline in house prices will impact everyone…

At a higher level, I would have to say that significantly falling prices will be bad for the world’s economy as a whole for the short term (i.e. the next few years). A crash in housing prices will lead to bank failures, and massive losses for pension funds, municipalities, etc. People with money in a money market fund that goes bust certainly won’t feel as if falling house prices were good for them.

Further, when unemployment grows due to contracting credit, and the inability of businesses to get financing, then many people will find themselves out of work. I doubt very much the unemployed will think that crashing home prices are good for them either.

In the LONG run, however, a thumping correction in house prices will be good for everyone, and finally clear out mal-investment and set the global economy on a firmer foundation.