A Terrible Year to Buy a House?

Question

Here's a very interesting article that predicts massive job losses in 2009 will cause housing prices to continue to decline.  That will mean that 2009 is a bad year to buy a house as the buyer could be upside down soon after closing.  Here's the article:
                        
                        Home buyers advised to look before they leap

Account Closed · Answer

I talked to a title agency officer this morning to handle the closing on my sale next week. She said there's a lot of money for qualified buyers, their co is closing properties constantly.

So it's somewhat hopeful.

Mark Hu · Answer

My best guess would be forget 2009 and look towards 2010. That's how I would act. But there is one thing about the future - it will always be very much a surprise!

Don Rice · Answer

Here in East Texas, we haven't shared in the economic downturn as other parts of the country.  We had the oil and gas industry backing us.  Now with oil and gas prices down, especially natural gas,  the slow down is here.  One of my renters works for a major oil service company, and told me today that one of their customers has four of their 50 crews working.  Many of the drillers are cutting back on their new wells, and moving some of the foremen, drillers and tool pushers, to derrick hands,  and laying off the newer hands.

I have one young family in the process of buying their own home.  I have advised the young wife that getting a 30 year note right now is a bad idea,  that I'd rent a little longer,  but she's young and knows more than me.

I'm still looking for rental properties,  but being very careful.

Account Closed · Answer

Jeff & Josh, as an investor minded agent, I agree that little or no money down and buying a property at a huge discount is a great thing.  Savvy investors make this happen on a regular basis.  More power to you guys!
                                    
                                    Maybe I was leaning my original comments towards the novice, time challenged, low risk investor that just wants a place to put their money for tax benefits, cash flow, or appreciation over the long long haul.  Not everyone has access to OPM, or knows how to negotiate complex deals by themselves. When I mentioned big down payment, my thoughts were on how the credit crunch is affecting some people, requiring them to put more $$$ down.  Even then, I meant no more than 20% down, and only as a last resort.  
                                    
                                    As I am sure you are well aware there are many factors that dictate how good an investment property performs, and that alone means something different to everyone. 
                                    
                                    In 2009 the doors of opportunity are waiting to open.  Who's got the keys?

Don Levy · Answer

I've found that some properties that don't cash flow with a renter in them will when you do a lease option or rent to own. Not only will you get an upfront fee that's non taxable and you can use to help make your payments, but you can get higher than market rent and a higher than market price. To get an even higher rent you can credit them a percentage of their rent and subtract it from the sales price. It works well for both parties.
donrock

Michael Rossi · Answer

Unfortunately, I think the reporters and talking heads are FAR TOO OPTIMISTIC!  The actual doom and gloom will be far worse than what is being talked about.  The truth is that both the government and the vast majority of individuals in this country have been living a lifestyle based entirely on fantasy.  The government has promised to give everything to everyone and has ensured that no-one can fail.   It's a giant house of cards and only the first couple of cards have been removed at this point.  Soon, enough cards will be removed that the entire house of cards will collapse.

The real estate fiasco is far from over.  Option arms have yet to reset in great numbers and Alt-A will be a major event.  In addition, all the money being spent on foreclosure modifications is being thrown away.  A huge percentage of these people are re-defaulting because this is a judgment and character issue.

Too much gloom and doom?  I don't think so.  Aggressively pay off your debts and stock up on food and ammo.  This house of cards is gonna crash and burn!

Mike

Diane Menke · Answer

I am a tired of all the gloom and doom reports. After all aren't these the same 'reporters' who said there was no bubble?

RE is local. In our area the bubble was not so hi nor did it pop so loudly. In the past few weeks renters have started buying their first homes.

This being said there are many unsold homes on the market now flooding the rental market so rental prices have come down a bit. I'm hoping that is corrected this year with the buyers coming out of renting. We have had to drop rental price on one house $50.

You have to know your area and how to shop there for deals.

We do cash on cash returns as well as expected equity growth predicting. Right now the latter is a 1-5 year perspective.

For cash on cash we look for 20-30% on a rental prop purchase AFTER paying out mortgage. We have to cherry pick but we find them.

I have one low producer right now I have to get a tenant into.

Keep shopping guys.

D

Josh Green · Answer

Agree completely. Putting a large down payment has little to do with a property cash flowing as buying at a discount.

If you put down a large DP, you are still out the $$$.

Buying at a discount is the way to go!

Jon Holdman · Answer

Or do a cash-on-cash calculation after all expenses.  A rental better give me a much better return than a CD.