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The New Year’s Guide of 10 Key Charts To See Before You Buy A Home

January 1, 2010

Measure of the Affordability of Homes

debt to gdp 60 year my notes jpeg

The best research into credit bubbles says that property's value will fall until the summer of 2012 -- three years from now.

inventory of delinquent properties

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Michael David White is a mortgage broker in Chicago.

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Thanks for carrying the post to Business InsiderHuffington PostImplode, Reuters, Seeking Alpha.

94 Comments
  1. November 10, 2010 8:35 pm

    I think an important rule to remember when buying Real Estate these days is (and I always tell my Buyer Clients the same thing): now is not the time to over-extend yourself. We are in a historically unusual period of low interest rates, and there is every chance they could go up, a lot. You don’t want to be stretched past your limit should that happen when it’s time to refinance.

  2. patti permalink
    April 16, 2010 10:39 am

    i’d love to see an update to the charts and your thoughts….

  3. Steve permalink
    March 2, 2010 8:42 pm

    Thanks Mr. White!
    Terrific! Finally a Mortgage Broker who knows something about the Real Estate Market instead of only knowing how to sell a loan.
    You’re very insightful; And the Graphs make things easy to understand and interesting!
    Are there Lenders who will refinance in this Market?

  4. ali beamish permalink
    January 25, 2010 12:48 pm

    new news came out today
    supply of over 7 months
    median price is 178,300
    Does this mean that prices are too high so houses are not being sold? I am not sure.
    Suppose I am a buyer and I can afford this.
    It isn’t enough because if the price is not affordable to a large number of people then I might not be able to sell the house later. Most of us plan to stay in our houses long term, but nothing is sure, as few have guarenteed jobs and income. Suppose we need to move and can’t sell?
    There may be a problem with the figures. What about people who would like to sell but don’t put the house on the market because it is a bad time now? (someone I know has an empty house in Michigan and isn’t even trying to sell)That is sort of an extra supply of houses that will need to be sold someday.
    It might be better if the gov’t would stop trying to interfere and we could see where the real price is. Then we could buy and sell knowing the price is realistic and fair. No need to worry about expiring tax credit etc.

    • January 25, 2010 1:53 pm

      Hi Ali it sounds like a good idea to me to let the chips fall where they may. it’s important that we find the real price of real estate. thanks for your comment. mdw

  5. January 18, 2010 8:31 pm

    I would not be buying a house right now. Prices are still dropping like a Led Zep.

  6. eric langelund permalink
    January 18, 2010 8:13 pm

    Hello Michael,
    I am about to refinance because of my divorce. Any advice/recommendations?

  7. michael hinton permalink
    January 18, 2010 4:47 pm

    i am buying a house that listed at 92.500 and is down to 82.900 did i do good or bad

  8. Richard permalink
    January 17, 2010 9:03 pm

    Dear Michael David White,

    I saw the charts, liked them for their poignancy, and started to read the comments and became fascinated at how many posts you personally commented on and how you attempted to answer everyone’s comments and questions with the same consistent input. It is impressive. So much so, I read _every_ one of them. Among the posts here are considerable variety and insight…

    There are so many observations above I could comment on that resonate with me, especially the ones tying average incomes with average real-estate prices, but I’ll spare all the keystrokes.

    In my own case, I tried to buy in early 2001 or thereabouts when my landlord died. The family knew I had saved my former landlord from foreclosure some years before and wanted me to get the property but they were nervous about conducting a sale and entrusted selling the property to me to an underhanded “friend of the family” real-estate agent, who lied, never presented my offer to the family and sold the property for more money to someone else. (I later learned that the family expected him to sell it to me for a lower commission and he got the full deal with going to another buyer – had I known, I’d have offered to pay his commission myself.) I know I had a great legal case because I was smart enough to record my discussions with the family and the agent. But who has time for lawsuits, not to mention all the negative stress? I figured I’d buy later as my fortunes were rising…

    But that was before September 11, on which date, orders to my company which had been strong and rising, plummeted like a stone tossed into the Grand Canyon – even though there was exactly no correlation – and never recovered… I’m still renting the same property and have no idea what I’ll end up doing (the landlords are pretty poor at it, but I guess I tolerate them). -shrug-

    …But I didn’t decide to post to ask for advice, nor even share another pitfall with folks; I really posted to say how delightful it is to see a blogger take such time to answer all the posts that you have – not to mention compiling the main “article” in the first place.

    Regards,
    Richard

    • January 18, 2010 11:47 am

      Hi Richard, sounds like you may have gotten lucky when you got screwed out of the purchase. i hope your business has come back well or you have moved on to greener fields. thanks for your encouraging comments. mdw

  9. Matt permalink
    January 17, 2010 9:09 am

    Michael,

    Thanks for the excellent analysis. I think we can all agree that it is a complicated decision to buy a house in any market, and there will always be a lot of macro- and microeconomic factors one needs to consider when buying a home. The days of turning your home into instant profit are over. For me the time to buy is now, as I have found an apartment that meets the criteria “I see myself living here for the next 30 years” and moreover, “there will never be a place like this in such an ideal location.” I have enough cash to put down to afford a 15 year mortgage. The additional tax deduction will definitely be nice. And rents will always be ridiculously high and the quality of rentals relatively poor. Where do I live? Queens, NY. Could the market drop another 10, 20, or even 50%? Absolutely.

    But let’s consider the macro-factors. The stock market sentiment is again at historical bullish high’s while most of the gains have been driven by hedge funds and carry trades by institutional investors. Who can make the argument that buying 50,000 shares of Goldman Sachs makes more sense than buying a similarly valued apartment? At least with a home we are buying a tangible asset. What about holding onto our hard-earned cash in CD’s and Treasuries? At 1-2.5% rate of return, what will my cash be buying in 20 years? A Ford Focus perhaps? The strength of the dollar in the future remains questionable – as the dollar depreciates, foreign investors and countries will buy US real estate, ie. China will buy Manhattan. Gold, which may or may not be overvalued, is at historical highs. Should we keep hoarding more of it? Brazil and China equities are at or above pre-crisis high’s, while China clearly has a real estate bubble on their hands, yet investors are continuing to pour their cheap dollars into them. In sum, where are we to invest? We could make the argument that bubbles exist just about anywhere in today’s economy, both here and afar.

    I agree that it makes sense to wait for 2 or 3 years of price stability before buying. I also agree with you that as rates go up, home affordability goes down, so prices go down. However, the Fed is in no position to allow rates to appreciate quickly for fear of worsening a real estate collapse. So what are we to do? Ask yourself three questions: can you afford the monthly payments and can you see yourself living there for at least the next 10 years? And most importantly, can you accept the risk that your home may lose its value at some point in the future.

    Let’s keep our fingers crossed that we get this country back on the right track soon.

    Thanks again for the excellent analysis.

    Matt

    • January 17, 2010 10:30 am

      All good points, Matt. But also factor in that buying something now b/c you can afford it, that scenario may change. What if you become unemployed? What if you have a reduction in pay? With the way the job situation is, there is no guarantee. About the only guarantee is that if you can’t afford your mortgage, at least in California – not sure which other states, you can join the many other people and walk away – after living there for free for an extended period of time. That cusions the risk of buying now.

    • January 18, 2010 11:43 am

      Hi Matt, thanks for your smart summary of our bubble world. since your cash down for your purchase allows for a 15-year loan, and because you have a long time horizon, i can understand your decision to go ahead. if you love a house and you can afford it, and you plan to stay a long time, that purchase hits a lot of the “smart buy” bells. Thanks for your comment. mdw

  10. January 16, 2010 4:55 pm

    On Feb. 1, the Federal Housing Administration will place a one-year moratorium on its anti-flipping rule, which will allow buyers with FHA-backed loans to purchase homes that have been held for less than 90 days, officials said Friday.

    There is no end to what the government will do to prop up the real estate market. While I agree that there is plenty of distress, it is not showing in the market. There are people who have NODs and banks have not foreclosed in over a year. There are people not paying their mortgage for months and banks aren’t even bothering to send NODs.

    Banks are declaring they have made profits, while paying back some money to the government, giving themselves bonuses and not taking any losses on their books by not foreclosing, but merely indicating they are non-performing assests.

    I fear all these tactics and more will continue until inflation sets in.

    • January 18, 2010 8:57 am

      Hi Jo, maybe they should change the name of the accounting department at the banks to the art department? I wonder if that is what they mean by creativity in the business world? thanks for your comment. mdw

    • January 19, 2010 8:49 pm

      Jo:

      I thought you might be interested in this chart from the FDIC

      In a few words, the chart shows us that banks are putting less money aside than they did before the market collapse in 2008 (Blue line on the chart, called the “Coverage Ratio”).

      But it gets worse. The amount of non-performing loans (red line on the chart, called “Non-Current Loans & Leases”) are going through the roof. What’s happening? Banks are putting less money aside for a rainy day at precisely the time they should be putting more into their Coverage Ratio funds (again, Blue line on the chart).

      In a few words, banks are losing money, but they’re not showing as much as they should (bank charge-offs, called “loan loss reserves”; green line on the chart) because they’re holding homes that should be foreclosed on. They’re able to clear some of these home loans out with Federal Reserve and Treasury guarantees (a complicated process involving CDOs & CDSs), which run into trillions of dollars, and dwarf the much publicized bailout money on the books.

      It’s all smoke & mirrors (which I explain in greater detail here http://markmartinezshow.blogspot.com/2009/12/bofa-returning-bailout-cash-its-smoke.html). It’s one of the reasons BofA and other banks are able to pay back their TARP money, and then claim they deserve bonuses.

      – Mark

      • January 20, 2010 1:51 pm

        Mark –
        Thanks for that graph and also the details of the return of the bailout. Nice explanations. Wonder how long they can keep the charade up.

  11. January 16, 2010 9:10 am

    You seem to be indicating that no one should be buying a home right now, because the future may be uncertain and even worse than the present. While that may be true, that rationale means that you should never buy, because something may always happen in the future which makes your current investment a loser. I’m in the mid-west, and we didn’t have the unreasonable run ups in price that a lot of other cities had, and our market doesn’t seem to be in as bad of shape as a few that might be bending the curve in a few of your charts. You also state that any agent who tells their clients that now is a good time to buy must be a bad agent. What if your client has to buy? Divorce, marriage, having kids, lose of job, promotion? Isn’t there always something happening in life that mandates a move? Yes, its a bad market in most locations, but at least my clients have a chance to get a historically low interest rate. And they won’t overpay as much as other buyers did a few years ago. There’s no perfect time to buy, and much like the stock market, if you try to time it just right, you are bound to miss.

    • January 16, 2010 11:44 am

      Hi Greg, I think you make a rational argument, but not a good argument. Yes, it’s true, there are always risk factors. You have to judge the risk factors today. I believe the risk factors today are easy to see and of mammoth proportion. They are far beyond the risk tolerance of almost any ordinary purchaser. Thanks for your comment. mdw

  12. January 15, 2010 3:17 pm

    I have gained food for thought but no solid feel good I got to tell a friend. Missing : charts that justify mortgage or rent?, the mention of real estate as your home opposed to investment, missing? and the big big one look and study local, national is too broad and sad. Maybe a local chart of areas/neighborhoods in San Diego, San Francisco, Monterey, Puget Sound,Honolulu, Beverly Hills, Los Alamos and So Fork American Riverfront No. Ca. to paint a bright picture that not all real estate has gone to heck and why not? We could have a chart to be informed about valuable real estate nationally and will those areas serve as hope, examples of the saying, “under all is the land”. We will get our piece on earth, improve it, have mort.pyments, pay taxes and in time we will gain appreciation.

  13. Craig permalink
    January 15, 2010 8:08 am

    Houses are too big and expensive!

    I bought a 1800 sf house in Charlotte about 20 years ago and paid about $75,000. On my mothers advice (a former banker) I got a 15 year loan and paid it off in 8 years. My taxes are $2200/year. My house is worth from $200,000 to $250,ooo sf. depending on the real estate site. Who cares what it is worth.

    They are still building Monster houses around me. The average price of a house in South charlotte is $500,000 +- and 2-4500 sf. Can’t they see what the problem is. People are still using houses as equity banks. This has to stop. The average price of a house in South charlotte is $500,000 +_.and 2-4500 sf. Can’t the see what the problem is? Too much money chasing square feet. That has ended, I hope, otherwise the spiral will continue down.

    The Gov-Fed- Banks has to stop the money manipulation and start limiting the tax deduction on houses above 2500 sf.

    • January 15, 2010 11:59 am

      We are out of control building houses bigger and bigger with crazier and crazier payments. Thanks for your comment. mdw

  14. January 14, 2010 1:30 pm

    Terrific website and you are providing valuable thinking and information. Thanks!

    I do have this question: if I sell my San Francisco home – which is declining slowly and steadily in value – and buy another declining value home in the same market, that I am not accelerating my risk since both are declining similarly, and that I am no worse off than if I had stayed put. Do you see some flaw in this thinking?

    • January 14, 2010 2:21 pm

      If you hold an asset which is declining, it is smart to sell it. If you buy an asset which is declining, there must be a reason other than gain to buy it. Thanks for your comment. mdw

  15. NordicSkier permalink
    January 14, 2010 1:25 pm

    I’d like your input on investment properties. I sold my home in 2003 and have been “homeless” (i.e., a renter) since that time. I bought a rental house that same year and two more in the following two years. All three are professionally managed and cash flow and since I financed them with 15 year mortgages they will be free and clear by the end of the decade. Their value has taken quite a hit, but I never bought them for appreciation, just for an eventual supplement to my retirement income down the road. In a prolonged down real estate market such as this, should I even be concerned about declining to flat values if the area is stable economically? If an income property generates consistent positive cash flow, does appreciation really matter? Comments are welcome, thanks

    • January 14, 2010 2:19 pm

      If you are an owner for cash flow and not for capital gain, the trend in values doesn’t matter, or matters much less. If they are easy properties to operate, I would hold. Thanks for the comment. mdw

  16. Forrest permalink
    January 14, 2010 11:14 am

    Great info. But, does any of it matter if the intention is to buy and live in a home for 30 years or is the overvaluation still such that even a long term outlook is too uncertain. We are going to move for my job within the next 6 months from Minneapolis to Nashville.

    • January 14, 2010 11:18 am

      If you have a very long-term time horizon and if you love a house, buying it may be smart. You run a risk of changing your plans and being locked into your previous plan. Thanks for your comment. mdw

  17. beachlver permalink
    January 13, 2010 7:47 pm

    thanks for writing this. my husband wants to buy in santa rosa ca. because marin county is still way too expensive. 850k for a nice 4 br. … this would double our current expenses! the tax alone is over 10k a year.

    i feel that something has to give. with all the unemployment hitting breadwinners, and the middle class… who can buy one of these homes?

    we have waited several years in a rental … i would wait longer to live in marin instead of santa rosa.

    the sad thing is this: the govt is just placacting the banks by keeping house prices artificially high. your tax credit, homeowner, i pay for. and then, on top of that, i can’t afford a house.

    if house prices fell to where they made Economic sense, we’d have a lot of new employment but we’d need a very different govt. willing to let market forces rule.

    but market forces may rule anyway! especially if people start to WALK OUT… guess who they learned this from? corporations who want bail out money… or they’ll walk!

    great piece, here, thanks! makes me think about renting another place (i don’t like this place all that much) and waiting it out!

    • January 13, 2010 7:58 pm

      Hi Beach Lover. Generally speaking , I think it’s crazy to buy in the high-end market right now. I have read of huge over supply. Mortgages are much more difficult. I would find a new rental, but if you buy, please give me a call and let me quote you on a mortgage. thanks mdw

  18. Confused permalink
    January 13, 2010 4:38 pm

    Gee, thanks for all the neat charts. The ones I can read are interesting, and the brief explanation of each is helpful…but what the heck does it all mean together? Where’s the choesive analysis (or “observation”) that brings it all together? Is now a good or bad time to buy? Are rates/values going up or down….

    • January 13, 2010 4:44 pm

      Hello Confused, one take away from the charts is that there are too many risks to buy right now. Thanks for your comment. mdw

  19. jian permalink
    January 13, 2010 4:27 pm

    Awesome graphs! Thanks for the great work!

    I agree with majority of the analysis. However, real estate is always local, so some thoughts on that end would be great. Another factor missing is mortgage vs. rent ratio, which is a good indicator of the real market value of a property in a given area.

    My own entirely unprofessional thought is that some major urban/metropolitan areas (think NYC, DC, SF, LA, etc.) may not look as dire as national data/trend, as more people are realizing the ‘virtues’ of living in a more sustainable environment where one is closer to work, shopping, recreation, etc. So buying in one of those metro centers may not be so risky, provided you can afford it with a 30-year fixed mortgage, and will be living there for the next, say, 7-10 years at least.

    • January 13, 2010 4:43 pm

      Buying with a plan to hold for 10 years sounds reasonable to me. Thanks for your comment. mdw

  20. Patrick permalink
    January 13, 2010 3:47 pm

    I am a Realtor. I’ve seen this ALL coming for years. If the average American makes $30,000 per year then that means they could AFFORD about a $75,000 mortgage AT BEST. Where can you get that ANYWHERE?

    • Anonymous permalink
      January 13, 2010 4:52 pm

      poinicana florida

    • January 13, 2010 4:55 pm

      That sounds like a good real world that we can all afford to live in. Thanks for your comment. mdw

  21. Carrie permalink
    January 13, 2010 3:01 pm

    In my neighborhood in Denver, we have seen housing prices continue to rise by 3%. I just don’t get it. Should we still hold out to buy? Can we safely assume a drop in housing prices, even in the “hottest” neighborhoods in our city?

    • January 13, 2010 3:22 pm

      HI Carrie, you would have to study what is happening in your market to know the next step. generally speaking, i say “Rent, don’t buy” or “Sell and rent”. Thanks for your comment. mdw

  22. Carol permalink
    January 13, 2010 2:09 pm

    I would love to see this broken down by state because I believe the states vary greatly from one another– with perhaps several pathetic states greatly affecting (by lowering) the national averages. We have seen very little bubble bursting in the Puget Sound area. I do not know whether that means the worst is yet to come here, or whether we will be spared the horribleness that may occur elsewhere.

    • January 13, 2010 3:20 pm

      Hi Carol you have to look at the local data no question about it. Thanks for your comment. mdw

  23. Jennifer permalink
    January 13, 2010 2:00 pm

    Thanks for all of your work on these charts, but since I live in the Phoenix area, I know that national figures can be quite misleading. All real estate is LOCAL so having similar type charts for various different metro areas would really be a lot more helpful. Also, I am wondering about the shadow inventory, which I heard from someone in the industry is quite substantial. If these charts do not take shadow inventory into account, they are meaningless and/or misleading. Here in Phoenix, we’ve got a LONG way to go before we’ll have reached bottom. And just when you think it is safe to buy, don’t forget about all of the Option ARMs that are due to reset soon. That will hit the coasts/higher end homes, as a high percentage of those were on the Jumbo loans.

  24. Stephen Yanulis permalink
    January 13, 2010 1:50 pm

    I had a credit line that expired after ten years and had the option to refinance or live with my .04 rate balance. The new rate would be 5.4%. I checked zillow for my property value and it came in at 439k. My banker said that her figures showed 286k. She claimed it was her software. What’s the explanation?

    SJY

    • January 13, 2010 3:17 pm

      Hi Stephen i would talk to a local real estate broker if you want to know the true value of your home. Thanks for your comment. mdw

    • Patrick permalink
      January 13, 2010 3:49 pm

      Zillow just bases the pricing of homes in your area off price per sq. ft. and that’s it. It takes poor condition homes, excellent conidition homes, good areas, bad areas, etc. and gives a price. It’s not specific to your neighborhood or the specifics of your home. Don’t trust it.

  25. January 13, 2010 1:20 pm

    I can’t argue with your ststistics however I take exception to your basic premise that housing is some form of investment. This is one and perhaps the primary cause of our current economic problems. It was the lie that somehow everyone should make money on their primary residence or that their home was some kind of magical piggy bank was promoted by the industry and media to the unsophicated average homebuyer. PRIMARY HOUSING IS NOT AN INVESTMENT. The costs comparison between homeownership and renting should be analysed by anyone looking for housing but I see nothing in your 10 graphs that addresses this. On the contrary you are continuing to promote the falicy that where you live should provide some kind of return on investment. People should look at housing costs, either renting or owning, as a required cost for shelter. You make a decision on how much of your income you chose to spend on shelter and then live within that budget. Please stop trying to marry homeownership with investment, it is time these two got devorced .

    • January 13, 2010 1:26 pm

      Hi Dave, i do need to do some work on rent v own. Thanks for your comment. mdw

    • Patrick permalink
      January 13, 2010 3:52 pm

      God thank you! I was a Realtor for 5 years and I’m not sure I’d EVER buy again. The tax benefit did not = the added expense or headache.

  26. Sean permalink
    January 13, 2010 12:55 pm

    Does it not seem wise to offer a student loan forgiveness/amnesty/etc. for professionals working in the field for which they were trained? The debt is unsecured. The professionals are hamstrung human assets to their local communities. Middle-class professionals would then be able to plow the cash being pissed into the ether into elimination of debt for secured goods such as homes, cars, durable goods, etc. or investments. Why doesn’t this make sense from a macro-economic perspective?

    • January 13, 2010 1:25 pm

      Hi Sean if there is any activity we should subsidize, certainly eductaion is the one. Thanks for your comment. mdw

  27. Vida permalink
    January 13, 2010 12:54 pm

    We live in Los Angeles and bought a home back in 2002 at a really good price with a 30 year fixed jumbo at 4.95% and a healthy down payment. Unfortunately, we live on a rather busy street which will soon be busier thanks to a light rail project. We want to live on a quieter street and don’t mind downgrading our house. We’re planning on selling before construction starts but now your charts and information have me confused as to what to do. Any insight would be greatly appreciated.

    • January 13, 2010 1:23 pm

      Hi Vida if i gave a rule of thumb today to those who own, i would say “Sell and rent”. If you email some more details I can help you. Thanks for your comment. mdw

  28. Karen permalink
    January 13, 2010 12:41 pm

    Soon-to-be-former-real-estate-agent-Washington-State…..I am getting out of real estate sales for all the charts listed above. I don’t see a housing rebound. As a matter of fact, all I see is more banks REOs (bank-owned property.) I advised a couple just yesterday to NOT buy even with the $9000 housing credit. Do not buy! The housing prices have not yet reset. They will continue to fall. Do not buy until they have hit bottom.

    • January 13, 2010 1:21 pm

      Hi Karen thank you for your honest comment. mdw

    • Carol permalink
      January 13, 2010 2:29 pm

      Karen, my husband and I are retirees and prospective buyers in Olympia, WA. We have wasted far too much money renting for far too many years, and want to find a livable nest where we can live out the rest of our lives at a reasonable, fixed-price level. On the one hand, I fear the horrible rise in interest rates that is sure to come later this year. In fact, the debt and default rates are so catastrophic in so many areas and categories that I fear the 30-year fixed rate mortgage will go the way of the dinosaur. Home prices may come down, but what if the now-burned banks make fixed-rate mortgages unattainable in the future? What, if anything, can you tell me about Olympia and the Puget Sound area? I would love to hear anything that you have to say. Thank you.

    • Patrick permalink
      January 13, 2010 3:53 pm

      ESPECIALLY in the overpriced Seattle area. Your job market does NOT constitute the overpriced housing market. It’s not THAT good. I moved from WA State to Denver to find work. See San Jose a few years back..get ready Seattle, It’s coming!

  29. January 13, 2010 12:40 pm

    Wages and mortgage rates are tied together. We can only buy what we can afford to pay for. Wages have been stagnant for a decade plus, while home prices went through the roof. Therefore the math is simple. the price of the average home has to come back to what the average family can afford to pay per month for a mortgage i.e. 25% of their gross income.

    • January 13, 2010 1:21 pm

      HI Joseph i’m 100% behind your thinking. our income should define prices. Thanks for your comment. mdw

  30. Angela permalink
    January 13, 2010 12:32 pm

    ORLANDO CRAZY PRICES IN DECENT NEIGHBORHOODS! I am blown away here in Orlando. My husband has worked really hard to save money for a down payment to buy before the tax credit expires. We married in 2005 during the peak of crazy prices in Orlando. Prices have come down due to people loosing or walking away from homes but the prices were ridiculously sky high to start with. I am from Alabama and I am use to having some space around my home. Here in most subdivisions you get no space between homes and little back yard. My question to you is…even though prices have fallen here are they still too high for this area and should we wait???? We are talking Orlando

    • January 13, 2010 1:19 pm

      In almost all cases people should wait. There is enormous risk in purchasing now. If you go ahead, I would love to help you with your mortgage. Thanks for your comment. mdw

      • Angela permalink
        January 14, 2010 10:16 am

        Michael. Thanks for the article. I trust your years of experience and I will take your word when you say “I would love to help with you mortgage” if you decide to go ahead. Thank you. We are first time home buyers and we see getting nailed coming already! Thanks. I will keep in touch.
        Angela

  31. January 13, 2010 12:10 pm

    Valuable Info I put on my blog. Alerted to me by an astute reader! Thanks

  32. brian permalink
    January 13, 2010 11:51 am

    My fiance and I bought in North NJ at the end of the summer 2008. RIGHT before the shit hit the fan and Bear Stearns/Lehman Brothers bit the dust.

    I feel like a bloody fool. We can afford our payments but we clearly overpaid by at least $50,000. I read stories about people walking away from their house and it has tempted me. But I do like my house. But I also realize it’s not necessarily THIS particular house that makes me hesitate, jsut that I like living in a house that I pay the mortgage on.

    I fear that we have hobbled ourselves for the next twenty years the prime years of our lives (we are both 30). I have broached the subject with my mate but every time we get into an argument. She will not entertain a discussion about walking away, which I understand. I don’t want to deal with a landlord ever again.

    But, at the same time I can face reality. We got hosed. The seller must feel like they won the real estate jackpot as they unloaded at such a perfect time.

    Even if we live here for 30 years I doubt we will get back what we originally paid ($300,000), not to mention of course the real price of over $700,000 we will end up paying in interest, the over $200,000 in taxes we will have paid by that time, and more thousands untold on maintenance and high utility bills.

    I can’t believe this happened to me.

    • January 13, 2010 1:14 pm

      Hi Brian sorry to hear about your situation. if you email me some more numbers i might be able to provide some guidance for you. Thanks for your comment. mdw

  33. January 13, 2010 11:49 am

    Good info. I’ve been sitting out this bubble madness and renting for ten years longer than I ever expected. I guess I can hold out until summer 2012.

  34. Richard Wolfe permalink
    January 13, 2010 11:45 am

    Michael,

    Thank you so much for getting the truth out there. It’s so refreshing not to be lied to by the MSM. The stimulus was like throwing a big party to avoid a hangover. In the morning comes the mother of all hangovers, the debt we owed, the debt for the party, and interest due.

    I’m thinking of buying a house. It looks like, according to you, it is better to wait until prices go down even if interest rates go up before I buy. When would you recommend? What year/quarter? Do you think it is better to buy AFTER the down payment giveway goes away or after, because there may be a crash with no incentive? A guesstimate would be appreciated.

    Richard Wolfe

    • January 13, 2010 12:07 pm

      My personal opinion is that any buyer should wait for two or three years of price stability before getting in to home ownership. thanks for your comment. mdw

    • alibeamish permalink
      January 13, 2010 12:12 pm

      you could make a spreadsheet to count up all these factors and then try different scenarios (interest rates and prices). Remember if you have the house you have to pay to maintain it plus taxes insurance and HOA fees. Then you get a tax break.
      Then add up your rent and renters insurance. What can you save every month for a down payment?
      Add up the numbers. The whole crisis happened beause no one wanted to believe the numbers.
      Agents are doing the hard sell, saying that the tax break(and other incentives) will end but remember that when the taxbreak ends it may be extended again. If not then sellers may have to lower prices to compensate.

  35. alibeamish permalink
    January 13, 2010 11:06 am

    This is fabulous! Real numbers.
    Sometimes the news says ‘surge in house sales’, ‘50% increase’ etc, with no context (50% compared to what?)

    • January 13, 2010 11:15 am

      Hi Ali i am continually amazed at the reports we receive without the most basic numbers to provide context i.e., average inventory of existing home for sale vs current inventory of existing homes for sale. Thanks for your comment. mdw

  36. Lucy permalink
    January 13, 2010 11:00 am

    Thanks for the great info. The idea that we are at the ‘bottom’ (which seems to get called on CNBC everyday) seems hardly plausible. The shear volume of defaults that will ultimately end up foreclosures has one of two impacts on the market; a sudden massive decrease in value; or (where banks hold onto this shadow inventory-which the government incentives them to do) a long slow bleed to our real estate market and values. Either way, we are in for more declines in value and a very, very slow recovery. I guess my only question would be, how does this solve? Where will the jobs come from that will allow an sort of economic recovery.

    • January 13, 2010 11:14 am

      Hi Lucy, I don’t know where the jobs will come from, but I know The Americans are good at figuring this out. Thanks for your comment. mdw

  37. Naveen permalink
    January 13, 2010 10:59 am

    MDW:
    Excellent Info and Thank you . I’m in the market to buy a house. This is national index. If the regional indexes are raising/In par with some of the graphs, will that be a good time?

    Ex: I live in San Diego and i don’t think affordability index will ever come down

    • January 13, 2010 11:12 am

      Hi Naveen. Local markets and local data are always more important than a national index. In terms of the timing of a purchase, since any buyer today is assuming substantial risk if buying into a loss, I can’t recommend a purchase even in the most depressed markets. If it was my Mom, I would say: Wait until prices are stable for two or three years. Thanks for your comment. mdw

    • alibeamish permalink
      January 13, 2010 11:48 am

      Hard to say. Real Estate agents said that about Phoenix but prices are way down and still falling.
      There are alot of millionaires in San Diego but there are alot of ‘Joe six packs’ too. Alot of investors bought rental properties but those investments don’t pay well if rents&prices don’t increase. So maybe some investors will sell.
      If it is true you have to consider renting for many years, maybe for life. Owning is nice but an extra $1,000 a month is nice too.

  38. walt permalink
    January 6, 2010 10:20 am

    I’m new here.

    Keep up the good work. Buyers (and sellers) are beginning to be better informed than they ever have been. It is a revolution and you can be proud to be a part of it.

    The next step. Ultimately real estate is local because houses are attached to sites and they are bought and sold one at a time (eventually). Perhaps you could review how zillow et al. can help us get this local info (affordability, inventory, sales etc.).

    • January 6, 2010 9:47 pm

      There’s no question that the local is much more important than the national. Thanks for your comment. mdw

  39. Annette permalink
    January 3, 2010 11:10 pm

    Good points, I think I will definitely subscribe!🙂. I’ll go and read some more!

  40. Rachael permalink
    January 3, 2010 12:50 pm

    More great information for those wishing to buy a house. I’d love to see these charts broken down even further with your analysis and predictions.

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