House-buying thread - Why is everyone involved in this process so deeply stupid?

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > House-buying thread - Why is everyone involved in this process so deeply stupid?

«‹›24 »

Dik Hz: Feb 22, 2004; Fun with Science

Cheesemaster200 posted:

http://en.wikipedia.org/wiki/Savings_and_Loan_crisis

How long did it take tech stocks to rebound after that bubble popped a decade ago? Like I said, just because something took a hit, doesn't mean that said industry is doomed for the next quarter century. We pick ourselves up and get on with it. People still want to own houses, banks still want to make oodles of money with bad mortgages.

How can you possibly make such a prediction? I might as well say we will never see those high prices again because we are all going to die in 2012 anyway. Yeah, I can predict we will not see a return to 2006 prices next year with a loud "poof", but making assumptions on where the real estate market will be 10-20 years from now is nothing more than a blind guess.

Yes, but as interest rates go up, theoretically lending done by the bank will increase. Interest rates are low now because banks are hurting and they need loans (admittedly that don't suck) to make money. Once the recession lifts and lending goes back to "normal", interest rates will go up because banks do not need to give out that "discount" to attract business. However, this also means that more people are taking out loans and buying houses at higher prices.

You are absolutely dead wrong on every single statement in your post.

# ¿ May 12, 2009 04:38

Adbot: ADBOT LOVES YOU

# ¿ May 2, 2024 03:45

Dik Hz: Feb 22, 2004; Fun with Science

Cheesemaster200 posted:

Well I guess I can't argue with that!

You are wrong on so many levels, its quite impossible to even start. Read what other posters have posted in this thread and think critically about your own positions. Then stop posting in this thread.

# ¿ May 12, 2009 16:12

Dik Hz: Feb 22, 2004; Fun with Science

moana posted:

Dik Hz, if you're going to take the time to read this thread and post twice with absolutely no content, you can take the time to actually make an argument, or just let other people argue against Cheesemaster. Cheese, you don't need to respond to anything that isn't an argument. None of this internet posturing is helping people who want to buy a house, which is what this thread is about, thanks.

On the contrary, Cheesemaster being ridiculed for being stupid will help people buying houses, lest they think like him and wind up upside down on a spiffy new condo. He's arguing that tech stocks rebounded from their highs at the start of the decade. That kind of delusion could harm naive individuals if they latch onto his beliefs. And he surely doesn't need a cheerleader in this thread.

Pretty much everything posted in this thread refutes what he advocates. What good is another person pointing out the fallacies in his arguments going to do?

# ¿ May 12, 2009 19:39

Dik Hz: Feb 22, 2004; Fun with Science

mlmp08 posted:

I get $1050/month tax free for housing. That doesn't depend on a rental/mortgage contract, I could live in a van and collect the $1050. I also get about $300/month tax free for food.

Then of course there's my basic pay of $3483/month. Right now I have all sorts of deployment bonuses and whatnot going on in addition to my basic pay.

My current rent is $760 before utilities. More like $900+ with utilities. Renting a house that has what I want (GARAGE, decent room, garage.. garage...) is about $900 before utilities. Buying here costs about as much as renting ASIDE from the obvious and potentially very large costs associated with homes, like repairs and landscaping, and insurance etc.

edit: regarding renting out a property, I dont' expect that the rent will result in a free mortgage payment. I expect to be paying a couple-a few hundred/month toward owning the home instead of several hundred-1,000 per month for owning the home.

Why not rent a full sized house from one landlords that you planned to emulate? You could probably sign a two-year contract, treat it like your own house, enjoy the use of the yard and garage. And then walk away after two years and enjoy the flexibility of renting. You'll come out way ahead renting, unless housing prices go up significantly. Housing prices might go up, or they might go down. If there's a guaranteed base expansion, it might already be priced into the market.

Then, take the money you will save by renting, plus the money you have saved already, plus the interest it accrues over 2 years, and buy a nicer house someplace you actually want to live and settle down.

# ¿ May 17, 2009 18:23

Dik Hz: Feb 22, 2004; Fun with Science

Just out of curiosity, what % is the student loan at? You'll probably come out ahead saving for a more substantial down payment in lieu of trying to pay the student loan off as fast as possible.

# ¿ Jun 3, 2009 15:10

Dik Hz: Feb 22, 2004; Fun with Science

dukeofurl posted:

Appreciation in real estate isn't all its cracked up to be taking all these factors into account.

Yeah, classic example there of how houses pretty much match inflation over time.

I know you don't intend it that way, but you make it sound like your parents got hosed on the house. To put a positive spin on it: they've maintained most of their equity after correcting for inflation, and received the associated value of owning a house at the cost of the interest (plus property tax and maintenance). While it didn't make 'em rich, I'm sure they consider it, in retrospect, a sound financial decision.

# ¿ Jun 5, 2009 15:42

Dik Hz: Feb 22, 2004; Fun with Science

xaarman posted:

- I have little interest in taking care of a lawn. Like mowing isn't a bad thing, but I'd prefer otherwise.
- Snow on the other hand, well I'm from California and have no clue on that.

Just for the record, a lawn service would cost a lot less than the $3000 in HOA fees you'd pay a year.

But seriously, if you're anything like most 24 year-old single guys, your priorities and needs will change a great deal in the next 5 years. Which is about how long it takes to see the first dollar of "profit" on the buy vs. rent dilemma. Look 5-7 years in the future. Are you reasonably confident you'll still be single and want to live in a condo, or the house you mention?

Dik Hz fucked around with this message at 16:05 on Jun 9, 2009

# ¿ Jun 9, 2009 03:22

Dik Hz: Feb 22, 2004; Fun with Science

FidgetyRat posted:

Ok, let me rephrase. In most areas prices are low, but they could possibly go lower.

In most areas, prices are still high compared to historical trends and the fundamental drivers behind housing prices are all weak.

Of course housing prices look low compared to the biggest housing bubble in modern times. Its like a guy who's house got completely inundated in a flood saying "The water's low now; I can see my roof."

One anecdotal story on the internet carries very little weight.

# ¿ Jun 11, 2009 00:10

Dik Hz: Feb 22, 2004; Fun with Science

PIPBoy 2000 posted:

To clarify a little, I live in central Iowa. We never really had a "housing boom" in the first place, save maybe for West Des Moines so housing prices haven't really fallen much because they weren't all that high to begin with. According to Zillow we are down less than .5% on average in the last year. We both really enjoy our jobs and living where we live. All of my fiance's family lives around this area and we see ourselves here for a long time.

That's not to say we won't hate each other in five years, but hey, you never know right?

As long as you realize that its not an investment, you should be fine. You're cutting it a little close on the savings part, but you can afford the house. You also seem to be pretty stable. I'd say go ahead and buy a house.

# ¿ Jun 11, 2009 14:06

Dik Hz: Feb 22, 2004; Fun with Science

FidgetyRat posted:

Honest opinion is that if you are even discussing hourly rates don't even bother thinking about a house.

I know you didn't mean it this way, but that sounds somewhat elitist.

There are some careers, such as skilled factory workers and tradesmen, that keep the hourly rate mentality throughout their entire careers and can easily afford nice houses.

Chajara's situation does not appear to be one of those cases, though.

# ¿ Jun 15, 2009 12:56

Dik Hz: Feb 22, 2004; Fun with Science

Dead Man's Ham posted:

Does anyone have any tangible evidence of home prices being jacked up 8000 due to the rebate? Ive been keeping an eye on the prices in my area and haven't seen any pronounced changes in the momentum of house prices.
This is just a curiosity since I bought when it was just a 7k loan (which is still bad rear end), but the whole "The 8k isnt really being money saved, houses just went up in price by that much" seems to have taken root here as cold hard fact when ive only seen a bit of empirical evidence and theory thrown around as a basis for it

First result on google for "average house price"

http://www.realestateabc.com/outlook/overall.htm

Edit: The spike is much more than 8K, because $8k up front yields the same mortgage monthly payment of ~$20k off the price of the house.

Dik Hz fucked around with this message at 14:43 on Jul 7, 2009

# ¿ Jul 7, 2009 14:17

Dik Hz: Feb 22, 2004; Fun with Science

Strict 9 posted:

I'm not sure this proves anything. What about the spike last month? Unless you're attributing the entire rise in house prices to this act, which seems pretty generous. I'd say that rise is more due to the decline in mortgage rates....

The prime rate dropped steadily through all of 2008, and has held steady all of 2009.

It doesn't really prove anything, but its impossible to prove anything due to lack of controls.

Also the spike last month could be anything. There is noise in the baseline. Or it could be that the FED let people use the $8K as part of the down payment in May. :iiam:

Strict 9 posted:

...and more of a feeling that housing prices have bottomed and the economy is turning positive (as seen in the stock market).

On what do you base this? The fundamentals of employment and income are still falling precipitously.

# ¿ Jul 7, 2009 22:09

Dik Hz: Feb 22, 2004; Fun with Science

Strict 9 posted:

They did drop below 5 though in early 2009 though, which is a psychological trigger for people.

But I agree, it can't really be proven either way.

And I was just basing those feelings solely on the first strong performance of the stock market since late 2008, as well as sales volumes of existing homes remaining steady and the average sale price at least declining slower than in previous months.

Which is a bigger psychological trigger, 0.25% off your interest rate or $8K cash in your pocket this year?

You're overthinking this. Home prices are still above their pre-bubble prices, the economy is in the shitter, and the fundamentals still suck. The only good things going are low interest rates and the $8K credit. The graph shows a sharp immediately turnaround that corresponds exactly with the $8K credit, and doesn't appear to correlate directly with interest rates. For similar reasons, I don't think its consumer confidence. Consumer confidence is only just now turning around.

# ¿ Jul 8, 2009 04:15

Dik Hz: Feb 22, 2004; Fun with Science

ChuckMaster posted:

I want to punch an old guy in the dick.

Its like dating. Don't get fixated on any one house. You might also try a neg/neg/kino maneuver.

# ¿ Jul 8, 2009 21:55

Dik Hz: Feb 22, 2004; Fun with Science

ChuckMaster posted:

What's a neg/neg/kino maneuver? Sounds dirty.

I don't know. I just threw together some pick-up artist catchphrases, because I was giving dating advice.

# ¿ Jul 8, 2009 22:49

Dik Hz: Feb 22, 2004; Fun with Science

Wuhao posted:

It's a tedious and time-consuming process, but I promise you, if you're willing to entertain doing fix-ups, then you're already committed to way more work than sifting through a few unenthusiastic would-be sellers will pose.

I never thought about it that way, but that's an excellent mindset.

# ¿ Jul 9, 2009 13:44

Dik Hz: Feb 22, 2004; Fun with Science

moana posted:

I find Las Vegas in general to be a terrible place - see if you can get a month to month rental there at least for the first few months because it's definitely one of those cities where if you don't like it, you hate it. And it would suck to be stuck with a house in a city you hate.

This is great advice (and what I'm currently doing). Rent for a year in your new city. It costs you a year's worth of equity, but you get to learn about the area and different neighborhoods and maintain the needed flexibility at a transitional time in your life.

# ¿ Jul 17, 2009 18:54

Dik Hz: Feb 22, 2004; Fun with Science

nouia posted:

I just had my offer accepted on a house that was built in 1890 and had a large living room added on sometime between 1950-1970. I have an inspection lined up for Monday.

My main question is, how common is it to test older homes for asbestos? None of the local places offer it, and no one I've talked to has any experience with it, but it seems like it could be a big deal. Not really worried about my health, but I can just imagine it killing my resale value when I find out a few years down the road. Any advice?

I'm in Indianapolis, IN if it makes a difference.

I'd be a lot more concerned about lead paint, to be honest.

# ¿ Jul 21, 2009 00:07

Dik Hz: Feb 22, 2004; Fun with Science

Mister Fister posted:

So based on this, the housing market won't recover until 2013 and i should not buy a house this year?

If you view it as an investment, no. If you want a place to call your own and plan to live there for the foreseeable future, go for it.

# ¿ Jul 28, 2009 12:20

Dik Hz: Feb 22, 2004; Fun with Science

dreesemonkey posted:

To be completely honest, I'm more of a psychological bill payer than mathematical. Student loans were our goal to pay off in three years after getting married, and we're going to get them done first. Mathematically, it might not make that much sense, but I never said I make much sense

I don't get this.

You're saying you're psychologically OK with losing a couple thousand bucks just you can put a little tick next to "student loans paid off"?

# ¿ Jul 29, 2009 18:37

Dik Hz: Feb 22, 2004; Fun with Science

peengers posted:

Yeah, I thought about running but the deal is just too good. I can wait, I just want to know what I'm in for with the judgment thing.

Calling Miss Cleo might be your best shot at an accurate answer. Could be tomorrow, could be years. I guess you could call each party, explain your situation and see what they tell you.

# ¿ Jul 30, 2009 15:00

Dik Hz: Feb 22, 2004; Fun with Science

Mister Fister posted:

huh, that's weird, i'd rather go through the long application/approval process first without having to do another one when i'm looking at houses

Also, keep in mind that banks won't lend you more than a house is worth, especially in today's financial climate. So, they'd prefer you to have a house in mind before they commit to a number.

# ¿ Aug 4, 2009 02:11

Dik Hz: Feb 22, 2004; Fun with Science

PainBreak posted:

I'll post this in here, as it mostly fits the topic. It's a bit of a 'what if' scenario.

I currently own a house that, at current market prices, is worth about $100,000. Values haven't fluctuated as much in my area as they have others, so even if there's a housing rebound, I don't see it increasing more than a couple of thousand in value.

Ideally, I'd like to live in a different part of the country. I'd like to purchase a house for about $200,000-$250,000.

I am debt-free aside from my mortgage. If I were to have an extra $4,000 per month to put toward something, would it be wiser to throw it in savings, or to put it toward my mortgage?

In 2 years, I could either have $100,000 in a savings account, ready to put down on a different house, or my house paid off and $25,000 ready to put down on a different house. With the first scenario, I would be looking to either renegotiate terms on my mortgage and rent the first house out, or putting the house up for sale. On the second, I wouldn't have to deal with a mortgage, so I'd be free to rent it out, which would cover a nice chunk of the new mortgage payment after insurance and tax...or I could just sell it, and put that toward the new mortgage.

Each scenario seems to have its individual upside. What makes the most sense, financially?

Assuming your house doesn't lose value (big assumption), you're going to get a better rate of return paying off the mortgage than investing in a savings account.

However, liquidity has great advantages if you're looking for a new house. If you can cover both payments for a bit, it might make the most sense to save up a 20% security deposit ($50k) and put the rest into your current mortgage.

# ¿ Aug 9, 2009 21:34

Dik Hz: Feb 22, 2004; Fun with Science

Sophia posted:

Condo

Why do you want to buy? Do you envision yourself living in a condo in Chicago for the next 10 years?

# ¿ Sep 2, 2009 16:33

Dik Hz: Feb 22, 2004; Fun with Science

Sophia posted:

Well, like I said, if she comes back, my sister will be living with me whether I stay in my one bedroom or move to a different place. I don't want to live in my one-bedroom with a roommate for another year, but if I move I want to move somewhere for the long term since I hate moving, and I don't think I'll move out of Chicago for a long time, possibly until I retire.

Buying seemed like the natural fit for the situation, and most of my single coworkers that make the same amount as me own places in the $300 to $400K range. I guess I'm a little taken aback at the responses here because of that but I'll certainly think about what you're saying. Thanks again!

Edit: And that is to say, I'll reevaluate whether or not renting something between the two of us makes more sense than trying to buy something.

How old are you? Generally you don't want to buy until you've got your life figured out.

# ¿ Sep 2, 2009 18:14

Dik Hz: Feb 22, 2004; Fun with Science

Sophia posted:

I don't use "it's what my friends do", but I do use "I'm in a different market" as a barometer for how much housing costs. Housing in Chicago is a larger part of your budget; it's just a fact. Obviously the people I know who don't live here and can get a 3 bedroom house in a nice neighborhood for 200K don't go out and get a 350K one just because they can. But here, a 3 bedroom will run you 375K in the city and a 2 bedroom is probably 300K, especially if you're a single girl who knows nothing about home repair and safety / condition is a concern. And those prices are a lot lower than when I first started looking.

I mean, if I can't buy because it will be smarter in 7 months when I have a bigger down payment, prices might be lower and know for sure I have a roommate, that's what I wanted to think through, but when I moved here I knew I'd be getting into that housing boat. When I first got here my rent was 45% of my take-home and that's what I planned for to get the type of place I wanted. I still managed to save 25% of my pay (plus do a 10% 401k contribution) by dint of being frugal in other areas.

This isn't to say that I don't appreciate the advice, because I had no idea how people in the rest of the country saw this type of monthly payment %. It's convinced me that I definitely need to hold out until next year to build up more money and to see if I have a roommate or not, since that will make the difference (and I don't have a great desire to move or buy if I don't have one). But I think it's a little ill-defined to say someone is living outside of their means when they're fully aware of the cutbacks they can / must make to get something that they want. It's the people who want something expensive without giving up anything else that they have that are "outside of their means" in my book.

Y'know, its not that we don't understand. Cities with higher costs of living generally pay more too, so that the % of your take home you should be spending on housing stays the same.

But go ahead, buy the place you can just barely afford if everything goes perfectly. There's no way the life of a 26 year-old who's been in the same spot for almost 3 years now can possibly change significantly.

# ¿ Sep 3, 2009 02:51

Dik Hz: Feb 22, 2004; Fun with Science

Buckwheat Sings posted:

Comparing an area that is so low that it can only go up

They aren't making any more real estate!

# ¿ Sep 18, 2009 02:23

Dik Hz: Feb 22, 2004; Fun with Science

Zfuut posted:

Great advise in this thread so far
Situation-My wife and I are in our young 20s looking to buy a house in AZ. We have a brand new house picked out in the neighborhood we are currently renting a house in. The house is about 220,000 and we are hoping to get a FHA with 3.5% down (making our monthly payment about 1400). I bring in 35,000 a year from my job(2000/mo + 700/mo from a trust fund) and she is a currently an unemployed teacher, who due to our terrible state of education in AZ probably won�t have a job until next year. Normally we could never afford monthly payments on this house, however my savings are about 80,000 and when she gets a job next year our income will almost double. so for the next few months we would have to dip into savings to stay afloat. My parents are set against this move which is why I�m asking, assuming I qualify for the loan, is this a terrible move?

You're best off waiting for your wife to get a job. Housing prices will most likely come down when the tax credit goes away. So there's no hurry.

# ¿ Oct 2, 2009 13:28

Dik Hz: Feb 22, 2004; Fun with Science

DailyDumSum posted:

I don't know if I should be posting here in the house buying thread or the tax thread, but I have a situation involving property.

My grandma is quite sick and she's thinking of dividing up her properties to her grandchildren. She wants to give this stuff to us (gift), but my brother and I got into this argument of if a gift of property would still have to pay for a land transfer tax (I'm from Ontario).

He's saying that if it's a gift, then no taxes needed to be paid. I stated that if it was in a will, it still would need to pay (via capital gains) and that most likely even if she says it's a gift, most likely the government would still want us to pay taxes on whoever gets the property.

Does anyone know anything about this problem?

Her estate attorney (she has one right?) would be able to answer these questions readily. One thing estate attorneys are great at is figuring out how to transfer things legally and incur the absolute minimum in taxes.

# ¿ Oct 2, 2009 20:37

Dik Hz: Feb 22, 2004; Fun with Science

Leperflesh posted:

CNN Money says "Homes: About to get much cheaper."

Fiserv, a financial information and analysis firm, is forecasting significant drops in most markets in the US between now and June of next year.

Of course, I suspect this forecast is based on the expiring tax credit not being renewed by congress. If it is, that might entice more buyers into supporting the current prices or preventing drops from being as severe, I dunno.

I'm looking to buy a house in the next year, and I honestly hope Congress gets rid of the $8k tax credit. Its just going to the sellers and taxpayers will have to pay for it. Its jacked up the average home price by much more than $8k, so everyone that bought a house under the program will soon find themselves upside-down on their mortgages.

The fact of the matter is that houses are still above their historical average, there are ton of foreclosures due to come on the market in the next 5 years, and the only thing currently propping up the housing market is an unsustainable $8k tax credit. All these things point to houses becoming much cheaper when the $8k tax credit goes away.

# ¿ Oct 22, 2009 23:03

Dik Hz: Feb 22, 2004; Fun with Science

Leperflesh posted:

I don't think that's quite correct. Yes, it's going to the sellers... which is what it was for (stimulate purchases). But, if you want a loan, your house still has to appraise for what you're paying, built-in-stimulus or not.

The house is worth exactly what people are willing to pay for it. The $8k tax credit makes people willing to spend $8k more on houses. Ergo the house is worth $8k more.

skipdogg posted:

The tax credit isn't really going to the sellers, it's going to Home Depot, handymen, Lowe's, Sears, etc. You don't get the credit until after you buy, so most people are either putting it back in savings to replace monies taken for a down payment, or using it to fix up the new house. I don't think that it's inflating existing properties by 8K either. There's been a huge crackdown on appraisals lately. There are a couple programs out there to monetize the tax credit to use as a down payment on a house, but they're mostly geared towards lower income families.

# ¿ Oct 23, 2009 14:27

Dik Hz: Feb 22, 2004; Fun with Science

Leperflesh posted:

Yay stimulus

You seem to feel very strongly about the stimulus bill. But I have two things to point out that you omitted in your extensive discussion of the stimulus:

1. housing prices historically match wages for a given market, and they're still significantly above their historic average.

2: The stimulus money comes from taxpayers.

leperflesh posted:

The house appraises based on comperable sales, which is a trailing indicator. If the $8k credit is supporting prices, then the houses are actually worth more. But low interest rates, the stock market recovery, and other factors are also supporting prices, and thus, it's incorrect to claim that the $8k is the only thing keeping prices (at least $8k) above what they "ought" to be.

If your house appraises for $X, but you can sell it for $Y, your house is worth $Y. Also, you're putting words in my mouth. The $8k tax credit isn't the only thing supporting housing prices right now. But, houses would be significantly cheaper without the $8k tax credit. There is no price that houses "ought" to be. They're worth whatever people will pay for them. But it seems silly to me to buy a house because of the $8k tax credit. The $8k is going directly to the sellers, and housing prices will most likely go down when the program ends.

# ¿ Oct 26, 2009 04:35

Dik Hz: Feb 22, 2004; Fun with Science

Arzakon posted:

If we presume that house prices are inflated by $8K then you could think of it this way, but there is more to look at. Sure the seller gets their $8K from you, you take on an additional $8K on your mortgage, but you get the $8K cash. You are, at worst, taking out a $8K home equity line of credit at the same rate as your mortgage with no additional fees (a pretty good deal).

Here's the deal: Your house will be worth $8k less after the stimulus goes away. Not only that, but you're buying into the tail-end of a still inflated market.

Arzakon posted:

No one is really losing anything unless you are "overpaying" for the home by more than $8K.

Taxpayers are losing $8k for each house sold under the program.

# ¿ Oct 26, 2009 05:37

Dik Hz: Feb 22, 2004; Fun with Science

Arzakon posted:

Tell me how this affects me any differently than any other wasteful government program.

The increased demand sent houses up more than $8k.

Let me speculate for a bit (pun intended :smugdog:

). Without the stimulus, housing prices would have continued their correction back to their historic levels. Or maybe over-corrected, as often happens in bubbles. So you could have bought the same house for much less money. Enough less to make the $8k look like walking around money.

# ¿ Oct 26, 2009 15:00

Dik Hz: Feb 22, 2004; Fun with Science

Leperflesh posted:

You're ignoring the stimulus aspect of the stimulus. Do you think that if they had not provided the $8k stimulus, and therefore a lot fewer people were shopping for houses this year, and therefore housing prices dropped a lot more... that otherwise, the US economy would be unchanged/unaffected? Because I don't.

The goal of the government is not simply to keep housing prices up. It's to ward off further disastrous economic collapse. The stimulus is attempting to keep banks solvent by decreasing the losses they're taking on foreclosed homes. It's also attempting to allow more people who are unable to make their payments to manage a short sale (which becomes increasingly hard to get your bank to agree to, the more your house's sale price drops below what you owe on it).

The point being, "you could have bought the house for much less money" is only true if, in your alternate no-stimulus scenario, he still had a job. Which is not at all a given, unless you believe that the stimulus has had no effect on the wider economy.

In order to effectively argue this position, you'd have to provide some evidence that the stimulus had some broader effect on the economy.

Remember this awesome graph that people kept touting out to get the stimulus bills passed?

What happened?

# ¿ Oct 26, 2009 19:47

Dik Hz: Feb 22, 2004; Fun with Science

Leperflesh posted:

It's impossible to prove a negative. Nobody can know what might have happened without the stimulus. I'd be a fool or an idiot to make the attempt.

If you can't say what effect not passing the stimulus would have had on the economy, you also can't say what effect the stimulus had on the economy, chief.

Stimulus money isn't free money. It comes from somewhere.

If you take $8k from one sector of the economy and give it to another sector, you haven't changed GDP or wages or employment or anything else significantly overall. However, that one particular sector that got the boost is affected signifcantly. Its like a a guy taking a cash advance on his credit card. His NAV is still exactly the same, but hey, he's got $8k more cash to spend right now. (And some pretty significant liabilities in the future.)

# ¿ Oct 26, 2009 21:22

Dik Hz: Feb 22, 2004; Fun with Science

Engineer Lenk posted:

Y'all aren't going to reach consensus here. Either deficit spending in a recession is throwing good money after bad or it's a stabilizing factor that more than pays off over the long run. No one knows, but most modern economic theory points to the latter. And the levels of interest paid on cash advances is generally higher than the interest rate of government debt.

I'm not saying deficit spending is always bad. I'm saying the $8k tax credit is a bad idea. We've already shown that it has not helped new home buyers (and has actually hurt them) Let's think long term. In the long term, housing prices will trend towards their market values. On the demand side, housing prices are supported largely by the wages earned by the people living in them. The $8k tax credit does not affect this. So, when the tax credit goes away, prices will most likely trend towards what the people living in the houses can afford. On the supply side, the $8k tax credit only affects existing homes, so it has little to no effect. So the tax credit will have no long term effect on housing prices (if you look out far enough)

Please allow me to speculate again. If what Leperflesh says is true and a significant number of people are buying houses now that were planning on buying in the next 6-36 months, we might be experiencing a mini-bubble right now. Just look at the new car sales since cash for clunkers expired. I suspect a similar thing will happen with housing sales after the tax credit goes away. The combination of houses still be above their historic averages and expected low demand will result in sharp declines post-stimulus. Meaning, I hope the people in most markets that bought a house under the program are planning on staying in their houses for the foreseeable future.

# ¿ Oct 26, 2009 22:10

Dik Hz: Feb 22, 2004; Fun with Science

Leperflesh posted:

You make an excellent argument for why the tax credit should be extended until the economic crisis is over. Thanks

Why yes, let's spend government money to prolong a speculative bubble!

Think long term again. If the stimulus is lengthened, you'll eventually reach a steady state in which the number of home buyers would be the same as if there were no stimulus in the first place. That is, the increase in demand will level off. You'll still have the correction from ending the stimulus when it ends, and you'll burn through 100's of billions of dollars of tax payer money every year the stimulus is in effect.

# ¿ Oct 26, 2009 22:30

Dik Hz: Feb 22, 2004; Fun with Science

Leperflesh posted:

Yes. Always. The idea is to have this happen when the economy is on the upswing, and therefore can absorb a hit, rather than happening while the economy is on the downswing.

It is clear to me that your objection stems mostly from the "taxpayer mooooneeeey" angle and has little to do with whether or not you think it would be effective. You object to the government taking your hard-earned dollars and giving it to people to buy things.

That is a perfectly reasonable standpoint and lots of people share it. Why don't you just be honest and stick to it, instead of trying to argue that the really pretty basic premise of stimulus is somehow blatantly, obviously impossible and only idiots could support it.

Again, you're putting words in my mouth. I think the stimulus is short-sighted and not helping new home buyers. I would prefer other types of stimuli, such as a direct-to-consumers check or a tax credit for small businesses that add jobs. Housing prices are supported by wages. Without wage growth, housing price gains are unsustainable. And, what's happened to wages in the past 2 years?

Arzakon posted:

The majority of the time in here it is a matter of the person not being in the position to buy regardless of the $8,000 and the extra money is tricking them into thinking its a good idea. For example, having $0 in the bank, borrowing $8,000 from daddy under the table for the 3.5% Down Payment and Closing Costs, and buying a home when you have $0 saved.

A thousand times this.

I know a lot of people who bought houses because of the tax credit without thinking the whole thing through. Going back to your $100k house example. If someone buys the $100k house for $108k and gets $8k in cash, what will happen if the market corrects back to its historic average?

The new home buyer will lose $8k (~8%) in equity right off the bat when the stimulus goes away. And another ~17% if the market goes back to its pre-bubble state. So unless they put >20% down, they're underwater right off the bat.

Keep in mind, I'm only talking about houses as investments. There are many great reasons to own a house. If its the right time for your family to buy a house and you plan on living there until you have significant equity, it shouldn't matter what the market is doing.

However, I'm concerned that the stimulus is encouraging a lot of people to buy houses that don't plan on living in them long-term. And its setting up the market for a sharp correction when the stimulus goes away. I speculate that this will lead to a large number of people upside-down on their mortgages and unhappy with their decision to buy a house under the $8k tax credit program.

# ¿ Oct 27, 2009 13:54

Adbot: ADBOT LOVES YOU

# ¿ May 2, 2024 03:45

Dik Hz: Feb 22, 2004; Fun with Science

Elendil004 posted:

Sort of related. I bought a house cash, and want to pull money out with a mortgage. I will 99.9% for sure be selling this house in 3-5 years. Is there any reason not to go with a low 5 year fixed variable APR mortgage that might jump up in 5 years if I'm going to be out by then? Is there a pitfall I'm not seeing?

What if you're underwater in 3-5 years due to slumping house prices? Is there any pressing reason you want to pull equity out of somewhere you plan on leaving in a couple years?

Daeus posted:

Cool, I didn't even know we had a DIY sub-forum!

I honestly thought it got deleted. It used be a subforum of Ask/Tell.

# ¿ Oct 29, 2009 18:16

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > House-buying thread - Why is everyone involved in this process so deeply stupid?

«‹›24 »