You know, I wish it were as easy as supply and demand and "monthly payment determines overall house price".

It isn't. For example, we all thought that deflation would make prices in general go down in 2008. It didn't. What I saw was that service providers were charging MORE in order to make up in margin what they were losing in volume.

There are more things in heaven and earth, Horatio, Than are dreamt of in your philosophy.

No, the centralized manipulation of the economy enabled by the ability to print any amount of money on demand is completely corrupting all previous "economic laws" (when things are measured by the ever shrinking ruler called "dollars").

Hi Erica,

Closing tomorrow on a $155k place in Indian Harbour Beach. Best insurance I could find was $2,400 a year. Blew my mind. I can't wait to see the property tax bill. Escrow estimating $1350 per year but I doubt that will last.

With power, landscaping, taxes, 80% mortgage payment, cable, etc., I figure I pay 1% of my home value PER MONTH...

But hey I like the ocean and I really want to surf...

People here in Boston are amazed I could own a free standing home for $155k.

You're close to the beach with a premium of $2,400 and my "sample" home was inland and premium was quoted at $2,789. Hmmm.. Yours must be newer than my 1981 sample home.

Anyway, I found some homes in the north Atlanta area (Cobb County) for as low as $86,000. NOT in a bad area, $300k homes all around, just old 80's construction that 'nobody wants'. Imagine a PITI of $400 to 700. THAT's what I'm talking about. Of course, with the potential race war brewing, we're screwed in both Orlando and Atlanta. Homes around here at the $150k mark are downright scary, even in a "good" town like Winter Springs. A basic drive through the neighborhood does not fill you with confidence to say the least. I'm not going to buy into a declining neighborhood WITH a high (and going higher) HOA fee (that seems to get you nothing b/c homes will have garbage and beat up cars on the front yards).

Congrats Nutzy,

Yeah, insurance is an issue here. Only one game in town...Citizens. We are beach-side as well and pay around 4k as we are on a canal etc. We received about a 20% discount once we did hurricane preparedness improvements (shutters, new garage door). Pay off is quick. I suspect Citizens might become just another way to levy a "tax" as the funds can get co-mingled in any large accounting system...just look at Social Security. However, one has to choose SOMEWHERE to live...not just exist. We rationalized the "no state income tax" vs "huge increase in home insurance". Great place to LIVE.

Insurance is STRONGLY correlated with exactly how you're built.

Hint: The roof matters. A lot. Those "little details" can add up to a 3:1 difference in premiums -- literally.

Karl,

That is exactly what we found. Since our roof had the metal ties, we received a 10% discount...would have been 20% with different nails and bigger ties. Latest rules were updated in 2007. Our roof was replaced in 2005. Opening protection provided a 20% discount. If your home is block instead of frame, there is another discount. There are some homes beach-side that are NOT insurable due to age, roof condition etc. I suppose those folks just "self insure" and obviously don't have a loan.

You want a hip roof, not gable. The wind can lift gable easier. Think of the hip style as a pyramid sitting on top of the home.

If the roof is getting toward the end of its useful life, forget about it I guess.

Erica, that is crazy for homeowners insurance. I have flood insurance which is expensive but homeowners is reasonable.

Flood, if you're in an "X" zone, is cheap. If not, well.... bend over.

Quote:

No, a 1% increase in interest rates would mean:

$200,000 financed @4%, 30 years fixed = $951.66 payment
Same payment, financed @5%, 30 years fixed = $178,015 worth of house.

In other words your house value goes down by 11%.

Technically yes, but that's neither how J6P understands it nor is how the Real***** presents. That notion is correct from a market wide perspective but the real***** will only argue it from the personal perspective whereby the houseprice/loan principal is static in that equation.

And that my friends is why it is so difficult the penetrate the housing psychosis that exists here in SoCal. I've made the interest rates argument numerous times but the only ones who admit I'm right (begrudgingly and not publicly) are the real*****s themselves.

Exactly Jwm, that is why it will work for only a short time. Eventually the underwriters will not let the loans go out.

Karl, I'm interested in whether your calculations would be muted by a relative absence of leverage in Real Estate. For example, in Phoenix, the sub-$100,000 market is going almost entirely to cash buyers. If these are actual cash investments (rather than cash transactions that are quickly borrowed against), do you think the cash would start to form a floor in the market? It seems to me that as less "monthly payments" are being made, there would be a reduced impact from monthly-payment equivalents on asset price.

Dan, it would seem to me at least that what you're suggesting would.lead to lower price not higher.

I was outbid on a home in NJ last month. i offered asking price and someone else went 10k over asking price and got it.

somebody was willing to pay 40 bucks more per month.

Yeah, the funny part was we never had a chance to match or we might have. Oh well. Like I told my wife, the world isnt going to run out of houses for sale anytime soon.

This thread was started last February, and in hindsight I think it's spot on. This newer thread here on TF seems to confirm:
http://tickerforum.org/cgi-ticker/akcs-w....
A couple of comments there agree with the February date. I'm seeing here in SoCal too, that prices have definitely recovered some since the beginning of the year. I also have a vacation home in Las Vegas that I bought last year for $175K. Just checked with KB Homes, and the last one they just sold went for $210K. I'm not saying that this is the "true" bottom, but something is definitely afoot.

It is interesting that prices are going up, but latest info shows that wages are going down (middle class jobs replaced by McJobs). So, who the heck is buying up the houses? It sure as hell isnt the millions who are stuck in upside down homes; not the college grads with 50-100k in debt; not those bitten by the subprime fiasco; not those unemployed or underemployed.

And even though prices are going up in my area (see thread), I just don't see the houses actually selling (other than the ones investors or flippers are picking through).

Calling a "bottom" in any commodity market is beyond foolish when we still have the unexploded dynamite of rotting securities on the balance sheets of every country, business, and pension fund on the planet. When the bad debt is finally cleared, look around at prices, THEN.

Quote:

So, who the heck is buying up the houses?

From what I'm seeing, very low down payments and ultra-low interest rates are enabling people to get into these houses. I'm thinking of buying in the spring myself. 5 years of waiting is enough, and if people are going to start bidding prices up again I might as well get something now. Frustrating..

Quote:

I'm thinking of buying financing in the spring myself.

FIFY

Call it what you will. At these rates, "financing" vs. renting isn't too different anymore. If I had 600K in cash, I'd buy outright. But I don't.

Whatever you think is best. I think price appreciation is capped and downside is limited only by "zero".

I hear ya. But what I think is best doesn't matter if reality says something else. I would never have guessed 5 years ago that we'd be back to S&P 1,400+ and that there would be bidding wars again in my area. But that's the way it is. Maybe this is a short-term bounce like in 2010. Like I said, I'm "thinking" of buying in spring. I'll wait until then to re-evaluate.

Reality doesn't say anything else. You are mischaracterizing what is happening. Housing is still in the dumps.