Graduating in a few weeks...got a job lined up in Raleigh...going to have two roommates for the first year, probably tie the knot next summer...why not take the plunge? I see myself staying in Raleigh for at least 3-5 years.

Interest rates are low, so a fixed rate mortgage is doable. My analysis of the market is favorable buying time now, better selling market within the next 7 years. My only concern is the low IRs driving up the prices of homes, but I think that is all relative to the area.


Thoughts?

4/22/2011 1:15:11 PM

based on what my neighbor's house sold for, buy buy buy

4/22/2011 1:19:54 PM

1) Buy a house near State
2) rent it out if you ever move
3) profit.

4/22/2011 1:19:59 PM

^that's the plan

4/22/2011 1:22:32 PM

^^ I did exactly that when I graduated. One of the best decisions I made at that age.

4/22/2011 1:53:44 PM

Prices of homes here are still relatively low (in my admittedly limited knowledge of the subject) plus the rates are quite favorable. If you can put something decent down as a hedge against unexpected loss of value (don't be like the people who put 0 down 7 or 8 years ago and find themselves massively underwater) then now seems like a great time to buy.

4/22/2011 2:00:10 PM

Not to mention you can easily buy a modest house for the same you'd pay in rent, a little more would obviously get you a little more. That's money you can expect to make back if you ever sell, as opposed to throwing money down the drain on rent.

I wouldn't look at it as a money growth investment opportunity unless you're going to be in the house for the super long run. But breaking even or making a percent or two is obviously way better than losing that cash every month.

4/22/2011 3:22:34 PM

^very true


^^even if I put 0 down, I wouldn't go underwater on equity, believe me.

4/22/2011 4:06:08 PM

bttt

4/22/2011 10:08:19 PM

There is no reason to believe prices will be any higher next year. In fact, depending on your price range, prices may continue dropping more than the total amount of rent you'd pay. Say you have rent of $7-10K/year - I could easily see stuff being that much cheaper next year.

Regardless, be picky and drive a hard bargain. You're in the driver's seat at this point in time.

4/22/2011 11:09:48 PM

Take a look at this article:

http://www.usatoday.com/money/economy/housing/2011-04-20-existing-home-sales-march.htm

Also take into consideration the tax advantages. I stay out of the 28% Federal bracket thanks to my house.

4/23/2011 2:14:15 PM

Quote :

"If you can put something decent down as a hedge against unexpected loss of value (don't be like the people who put 0 down 7 or 8 years ago and find themselves massively underwater) then now seems like a great time to buy"

This is the dumbest line of reasoning in the thread so far.

It's more advantageous to actually put ZERO down if you could get the best rates doing that. In the even that you did have to walk away from the home, that is no skin off of your back and you get to make the bank eat the loss. Any actual cash you put towards the purchase is lost first in the event that it's value goes down.


I'm on my third home and I'll be honest, it really isn't all that it's cracked up to be if you are forced or just decide to sell it in the near term. Houses aren't going to appreciate much over the next 5 years so if you do have/decide to unload it then you are going to eat real estate agent fees if you have to go that route. As an owner you're on the hook for all the little shit that breaks with the home and that sucks. You could always rent but then you're still on the hook for stuff breaking, for someone tearing your shit up, and for having to eat two mortgages in any months it isn't rented.

4/23/2011 5:19:48 PM

Don't know about the Raleigh market, but looking nationally, we are no where near the bottom. There are still a massive number of foreclosures that the banks are sitting on to keep the market propped, and in places where property taxes are high, there's very little incentive to buy right now.

Unless you find a short sale or foreclosure that is in immaculate condition, 30%+ undervalued and in a great location, I wouldn't buy shit right now.

I'm started looking in Seattle a little this spring and quickly decided to continue saving and look again this fall. Home prices here are still falling 3-5% per quarter.

4/23/2011 5:28:21 PM

Citing just foreclosures they aren't moving through the system doesn't tell the entire story. Builders aren't building homes like they used to before either which will help to balance out the supply of foreclosures. Raleigh wasn't quite as retarded as the rest of the country and as far as I know people still love the area. Prices probably won't rise, but they likely don't have much to fall either.

4/23/2011 5:41:22 PM

Regarding the USA Today article, never, ever, ever listen to Fannie Mae, the NAR or anybody like them.

The NAR said the worst was behind us in 2007, and predicted prices rising again by the end of that year. Then they did the same in 2008, 2009, 2010, and 2011. These people have a vested interest in propping up expectations and raising the confidence of potential homebuyers.

And the NAR thought what Chance said....in 2008...."Where builders have cut construction sharply, and in most areas with improving affordability conditions, we’ll generally see moderately higher home prices." - http://www.realtown.com/articles/view/existing-home-sales-to-hold-in-narrow-range-begin-upward-trend

4/23/2011 6:17:57 PM

Quote :

"These people have a vested interest in propping up expectations and raising the confidence of potential homebuyers."

This. You can't blame them. It's their mission statement to believe it is so.

4/23/2011 6:28:15 PM

Quote :

"It's more advantageous to actually put ZERO down if you could get the best rates doing that. In the even that you did have to walk away from the home, that is no skin off of your back and you get to make the bank eat the loss."

If ifs and buts......

Tis going to be pretty hard to get the best when putting zero down. And for your latter comment, it's going to be a lot of skin off your back to have that on your credit report.

4/23/2011 7:28:21 PM

^Just what my retort was going to be--yes, you don't lose a lot of cash investment if you have to walk away, but your credit is completely fucked. If you actually put some money down, then the likelihood that you have to walk away becomes exponentially lower. You may lose some money on the sale if the market continues to drop and you find yourself having to move/sell but you don't come out of it a financial untouchable.

4/23/2011 8:44:43 PM

Putting money down means that if you have to sell the house for slightly lower than what it's worth just to unload it (You get laid off and simply cannot make the payments, for instance), it's a lot easier to unload it. If you buy a house for $150k and lose your job next year owing $149.5k on it...good luck selling that quickly.

And yes, it will destroy your credit. Foreclosure or short sale, it doesn't matter.

4/24/2011 12:02:32 AM

Only lasts like 7 years.

4/24/2011 1:57:01 AM

Quote :

"Regarding the USA Today article, never, ever, ever listen to Fannie Mae, the NAR or anybody like them."

Feb housing starts for Raleigh
2006 - 1259
2007 - 1118
2008 - 1083
2009 - 273
2010 - 429
2011 - 360

From: http://www.census.gov/const/www/C40/table3.html#monthly

Quote :

"Tis going to be pretty hard to get the best when putting zero dow"

Yeah, those days are gone unless by some miracle you find a property that someone has mispriced.

Quote :

"it's going to be a lot of skin off your back to have that on your credit report. "

Are you drunk? We're talking worst case scenario here. If you get in a situation where you have to just stop paying then it's WAY better to have not put anything down that you'll lose if the home is underwater. They'll still be able to rent and likely what they'll have to do anyway.

Quote :

"but your credit is completely fucked."

Well, as it should be. I'd much rater have 40,000 in my pocket and shitty credit than 0 in my pocket and good credit in a situation where I had to sell an underwater house because of bad luck.

Quote :

"If you buy a house for $150k and lose your job next year owing $149.5k on it...good luck selling that quickly. "

What in the hell does the amount you owe on it have dick to do with how much you'll get selling it?

4/24/2011 8:26:34 AM

its harder to make back your money, and pay off your remaining loan balance, if the value of your house went down. If you only took out a loan for $130,000 and paid $20,000 out of pocket, then you could technically sell your $150,000 house for $130,000 and still pay the bank/loan off. Pretty crappy way to think about it, since youre still losing that $20,000.

anyways, me and my wife are in the process of buying a house right now, when we started the process six months or so ago the interest rates were around 4.5%, I think we locked in our final rate at 4.75%. So the rates are going up a little bit, doesnt mean they wont go back down, but it seems like we are bouncing on the bottom of the market right now.

also, as I'm in the construction industry (structural engineer who does residential and commercial projects) the number of houses we are engineering has gone up substantially compared to the same time 1-2 years ago. Its nowhere close to where we were around 2007, but we are definitely seeing an upswing in new homes.

with all that said, my wife and I think its a great time to buy a house, and we were able to put a little down on the house (not much) and got the sellers to cover closing costs. good luck

4/24/2011 8:39:06 AM

Quote :

"What in the hell does the amount you owe on it have dick to do with how much you'll get selling it?"

I was with you on some of those but this one has me scratching my head.

If you owe the full value you will need money to sell it. The commission expenditure ranges from 3.4 to 6% (depending on what Realtor you hire) and then the buyer is going to want money off and closing costs.

Unless you got a steal (below market value) when purchasing it is very hard to turn around and sell...especially if you have 100% borrowed.

4/24/2011 8:55:40 AM

Quote :

"Not to mention you can easily buy a modest house for the same you'd pay in rent, a little more would obviously get you a little more. That's money you can expect to make back if you ever sell, as opposed to throwing money down the drain on rent."

yeah but keep in mind the hidden cost of a house. I bought a house and was thrilled that my $995 mortgage payment was only $20 more than rent had been. BUT ... I also pay homeowner's dues, higher utilities, yard maintenance, property taxes, and house maintenance (like powerwashing, termite treatment, furnace filters, and fixing broken stuff). Also you need to buy ALL the stuff you don't need with an apartment like curtains, ceiling fans, lawn mower, yard tools, garden hose, patio furniture, paint, etc.

Look around at thrift stores, hand me downs, and craigslist to save on a lot of that stuff. I'm coming out ahead in the end cause of the $8k tax credit, tax benefits on the mortgage, and hopefully rising value of the house. But just make sure to take all that into account when you're deciding how much house you can afford. Larger house means that EVERYTHING will be more expensive, from utilities to buying extra furniture.

4/24/2011 9:08:52 AM

Quote :

"If you owe the full value you will need money to sell it."

You aren't following the logic. Your average person buying a home doesn't go into it with the expectation that they will walk away from it. However, if someone gets into a situation where they have to sell something drastically (or even modestly) under water then it's just as likely they aren't going to be looking to purchase for their next shelter and they'll be able to rent.

4/24/2011 9:09:45 AM

didnt want to start a new thread just for this, but if anyone here is a real estate agent, im starting to look for houses in the area. shoot me a pm

4/24/2011 12:07:12 PM

Quote :

" You aren't following the logic. Your average person buying a home doesn't go into it with the expectation that they will walk away from it. However, if someone gets into a situation where they have to sell something drastically (or even modestly) under water then it's just as likely they aren't going to be looking to purchase for their next shelter and they'll be able to rent."

I'm lost.

I have friend looking for houses. The house he wants the family bought in 2007 for like $249,500. They still owe about $247,000 because they did 100% financing. That means they cannot take less than $247,000 (Theoretically, at least...unless they bring the balance difference to closing).

The problem is that in this type of housing market, you aren't going to be able to sell that house for $247,000. There's always better deals out there. The family might be in foreclosure soon because they can't make the payments, but they can't accept low ball offers.

I'm sure there might be a way you can take out a personal loan for say, $10,000 and sell it for $237,000, but it's really hard to try to get out from under a house that you have zero equity in.

Ideally, you would have about 15-20% equity and if you HAD to get rid of the house, you could just set the price much lower than market value. Someone would buy it for $225k within a month or so. Obviously an extreme circumstance, but I've learned to always expect the worst

[Edited on April 24, 2011 at 2:03 PM. Reason : ]

4/24/2011 2:01:13 PM

Quote :

"I see myself staying in Raleigh for at least 3-5 years. "

Rent. It's not worth it to buy unless you plan to stay 10+ years. Trust me.

4/24/2011 2:16:58 PM

Quote :

"Feb housing starts for Raleigh 2006 - 1259 2007 - 1118 2008 - 1083 2009 - 273 2010 - 429 2011 - 360 From: http://www.census.gov/const/www/C40/table3.html#monthly"

And?

Yes, housing starts have decreased. I don't question that. I'm saying that will not play any substantial role in stabilizing price. It's not a big enough factor. We're in a big hole, and you point out that we've slowed down our digging.

4/24/2011 2:23:13 PM

People forget the amount you have paid towards principal also goes into equity, along with anything you put down and any gain (or subtract loss) in sales price. If you are going to be in there awhile there are substantial tax benefits, and rent is overpriced relative to sales prices in the Raleigh market. If you plan to live in it for 3 years or more, I'd say now is a GREAT time to buy in Raleigh. This housing market actually has one of the better financial outlooks in the nation, especially if you are looking at houses in a moderate price range. There are significant costs tied to buying or selling (although right now you can usually negotiate closing costs if you buy from someone with any equity), but if you are fairly confident you won't be moving anytime soon, have some savings, and are responsible with your finances it is honestly a good market to buy in.

4/24/2011 7:09:10 PM

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

4/24/2011 7:47:45 PM

Most likely I would be putting nothing down. Trying to stay in the 100k-200k range.


Probably renting for one more year though and then reassess....

[Edited on April 24, 2011 at 9:29 PM. Reason : ..]

4/24/2011 9:11:44 PM

^lol, good luck buying a house with no money down in today's market.

4/24/2011 10:22:36 PM

^thanks!!!

4/24/2011 10:42:16 PM

^^SECU still does no money down loans (and lots of them)

4/24/2011 10:47:44 PM

I, too have been thinking of getting a house (not in Raleigh) but trying to figure if it would be a smart move, between how long I would be at my company/the area and the ability to offload a house by selling or renting if I did have to move. The $995 rent I have to pay now is helping me move towards buying a house instead of throwing a thousand dollars down the drain every month.

4/24/2011 10:50:15 PM

Quote :

"^lol, good luck buying a house with no money down in today's market. "

It's surprisingly easy from my research.

Lol PackBacker, unless you're talking hypothetically I think I know exactly which house you're talking about. Is it near Meredith? I took a look at it and the people that paid that much for it in 07 were high. I know things were different then but I couldn't believe they thought the house was actually worth that.

4/24/2011 11:20:12 PM

^ I don't know exactly where the house was, but I believe it was in North Raleigh, so I don't think we're talking about the same one here.

It was a married couple that are friends of mine that told me it was their 'dream house', but they wound up getting another because they got a much better deal.

4/24/2011 11:37:14 PM

Quote :

"^lol, good luck buying a house with no money down in today's market."

I just bought a place a couple months ago with no money down at that same price point as ClassicMixup. It's definitely doable.

4/25/2011 12:50:03 AM

Rent...it's a no brainer. We're not at the bottom of the housing market. Yeah, there's some low interest rates right now, but you really have to view living arrangements as an expense, not an investment. You'll spend money on upkeep that you don't have to deal with while renting.

4/25/2011 12:57:31 AM

Quote :

"I'm lost. "

Again, you aren't comprehending the most important part about what I am saying, it is this

Quote :

"doesn't go into it with the expectation that they will walk away from it."

The problem is now they can't make payments, an event they didn't intend to happen. What would be different had they put 20% down? First off, they wouldn't have gotten in the home in the first place as they'd need to be saving for years to come up with that chunk of loot. If they had 50k to put down and they only sell the house for 230 then they are out 20k plus commission, another 11.5k.

Now, what if they kept that 50k in the bank and earning interest and their income stopped coming in? Well, if they had expectations the income was going to start again then they could just make the payments out of this fund until that happened. If they didn't think the payments were going to come in, then they can just default. They keep the 50k and let the bank eat the commission on selling.

If you're in an area where foreclosure activity is high you may get the added benefit of getting to live rent free for many months (a coworker of mine strategic defaulted over 10 months ago and they still haven't moved his condo through the court system yet).

Quote :

"I'm saying that will not play any substantial role in stabilizing price. It's not a big enough factor."

It most certainly is. You've not shown any numbers or analysis to the contrary.

4/25/2011 7:09:38 AM

While I don't think it is absolutely necessary to put a big chunk of money down (we put 10%), I think it is important that you had the ability to put 10-20% down. If you don't have 10-20% of the sale value of the house sitting in your bank/in liquid assets that you don't have earmarked for other stuff you probably aren't in a good position to buy a house anyway (unless you have some extremely stable long-term job).

At that point, whether you put the money down or not kind of depends on a few different factors.

[Edited on April 25, 2011 at 8:24 AM. Reason : .]

4/25/2011 8:24:05 AM

^I have a "recession-proof" long-term job, but I'm not sure if I want to stay in it for more than a few years, hence the decision to rent.

4/25/2011 10:11:15 AM

Quote :

"they'd need to be saving for years to come up with that chunk of loot."

Not really. It took me about 18 months to save up my 20%.

In your scenario you're assuming your going to get laid off, not going to be able to make payments, AND that the bank will agree to do a short sale. Quite a lot of assumptions.

4/25/2011 11:00:17 AM

Agreed. And once again, if you are looking at buying a house and you are in a situation where you wouldn't be able to make payments within a few months of getting laid off, you're doing it wrong.

If it takes you years to save up 10-20% of the value of the house you are trying to buy, you are 1) Buying a house that is too big/outside of your means 2) See #1 + You didn't have enough money in the bank to start with.

4/25/2011 11:15:50 AM

Quote :

"Not really. It took me about 18 months to save up my 20%."

So a guy who is clearly with it financially still took 18 months. I think its a safe assumption that the average American isn't going to be saving up for a proper 20% in this time frame with homes at these prices.

Quote :

"AND that the bank will agree to do a short sale"

I think you've misread me. If Ive gotten into a situation where it is a better alternative to strategic default then I'd rather not have any skin in the game than 20%.

4/25/2011 6:36:47 PM

What about when declaring bankruptcy is the only option?

4/25/2011 6:57:46 PM

Quote :

"Agreed. And once again, if you are looking at buying a house and you are in a situation where you wouldn't be able to make payments within a few months of getting laid off, you're doing it wrong."

I dare say a majority of homeowners would fail that test. Three months with no income is more than most could handle.

A lot of folks talk about needing to stay in the home 8-10 years to make things better. But if you do a nothing-down 30 year fixed mortgage, and just pay the minimum, you really aren't even going to lower your principle by 20% in that entire decade of owning the home. That's just the way amortization tables work.

Pretty much everyone (even with 20% down) is largely at the market's mercy regarding how much equity they have. Leverage inherently brings a lot of vulnerability. Transaction costs make this even tighter.

4/25/2011 7:27:58 PM

Quote :

"I dare say a majority of homeowners would fail that test. Three months with no income is more than most could handle."

Agreed but sadly that's because most people aren't good with their money and/or take on mortgages they can't afford. Most people just want and buy houses that are more than they should be buying.

4/25/2011 9:02:16 PM

The best advice I ever heard about housing options was a friend who told me buying a house wasn't an investment, it was a lifestyle choice.

To say renting is throwing money down the drain is BS. Renting provides flexibility and ease of use, which you pay for. Buying a house means your cost to move, if you want or need to, is substantially higher. Renting means you can more easily change your lifestyle or geographic location to match changes in income, job location, or other needs.

I own a house, I purchased it a bit before the peak of the bubble, and I think I'll pocket some money when I sell this summer. It'll be hard to call it profit, because I've put a lot of money into the house. Some was personal desire (like a wonderful kitchen, to replace the tiny 1970's horror), some was routine maintenance (replacing a 20+ yr old roof). Even ignoring the things I changed because I wanted to, and not because I had to, it cost me significantly more than I anticipated it would when I started.

If you want to change things, remodel bathrooms, improve landscaping, put that awesome Viking range in, or install a wet bar in your man-cave, and you don't mind snaking out hair from the plugged shower drain, or figuring out when you should prune azaleas, or how much branch you can cut off a Yew bush (or learning the hard way how long they take to grow back), then buy a house! You'll love it.

If you want someone else to fix things when they don't work, have no desire to plan fertilizer schedules for the lawn, and really don't want to think about if the sink should be to the left or right of the cabinet in a proper work-flow arrangement, then rent. You'll be happier, and getting other people to fix the problems in your house will eat any profit margin you were expecting to find.

The rest of it is math, and those who are good at saving/investing will make good decisions in either instance.

4/25/2011 10:18:30 PM