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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Tradelite who wrote (27957)	3/10/2005 9:00:10 AM
From: BWAC	Read Replies (1) \| Respond to of 306849

Don't drink the easy credit kool-aid. You know the interest rate today does not matter, because when it changes upward the $38k in a $255,000 house debtor is cooked. And when it becomes time to refinance out of the ARM or Line of Credit or sell the house in debt despair that it won't be easily done without a complete loss of what little downpayment was made. You sound sensible. So you have to know. Or you are just fooling yourself.

To: Tradelite who wrote (27957)	3/10/2005 9:18:30 AM
From: Les H	Read Replies (2) \| Respond to of 306849

[quote]that a $255K house at today's interest rates is a heck of a lot more affordable than it used to be.[/quote] You got far more house for $ 255K five years or ten years ago. The cost of credit is less and the purchasing power of the cash is much less. I could've bought a nice single family home with about 1/2 acre in the Washington area back in the mid 90s. It's obviously a far more substantial house if you're talking about the 70s. You could've obtained a rental for about a 1/4th to 1/3rd of the monthly payment that you paid.

To: Tradelite who wrote (27957)	3/10/2005 9:39:41 AM
From: RealityNotFantasy	Read Replies (1) \| Respond to of 306849

Lower price & higher interest rate vs. Higher price & lower interest rate and Long term vs. short term IMHO... People may want to re-think that just because their monthly payments are more affordable than ever, they're primarily thinking SHORT TERM. If you do a comparison between these two scenarios below, you may come to a LONG TERM conclusion that even at a higher interest rate but a lower sale price, its less costly. You do the math and find out for yourself: California RE in the mid 1990s - $220,000 @ 7.5% = ? California RE in 2005 - $585,000 @ 5.25% = ? I know this does not take the term into account. You need to go to a web site with an amortization calculator if you wish to find out more details. From what I can see above, the home price has increased by roughly 66% BUT the interest rate has only decreased by 30%. So if 66% - 30% = 36%, it seems that home prices have increased more than the amount the interest rate can compensate for the increase. SURPRISE! You will find another surprise when you have an on-line calculator do an amortization schedule for you based on the interest you could've ended up paying 10 years ago for a home versus NOW. Imho, if you buy for the LONG TERM, it has never been more expensive to purchase a home compared to ten years ago. Of course, your monthly payments (SHORT TERM) are cheaper now but check the LONG TERM. Remember, a mortgage payment is not only made up of the Interest & Term but don't forget the PRINCIPAL. It seems everyone these days is fixated on the Interest Rate ONLY. There's more to life than interest rates you know... FYI, this is just not happening in California but appears to be happening in the largest metros around the country, Minneapolis/St. Paul, Minnesota, Portland, Oregon, Seattle, Washington, Denver, Colorado...et al. There are metros where it seems to be not happening but you will need to find out where those are... :) Think about it and do your own research... Just my two cents...