Will there be another Real Estate crash?

[c1pher]

Just like with the stock market, real estate market has ups and downs. Honestly I think banks do not want people to own property and would rather become landlords with a steady monthly income stream vs having to deal with the real estate market variations. Wouldn’t you like to be paid regardless of what the market does and have the ability to upwardly adjust rents at least annually? That makes shareholders happy.

It’s far better to own rather than rent and hedge your bets. Just like the stock market, housing prices rebound and will still continue to be a good addition to your investment portfolio. Timing is of course important but I do not foresee a crash like we had in 2008, maybe a flattening or a slightl correction. You just have to look for the values. Plus like precious metals, it is a tangible asset. Paper money is increasingly becoming electronic and far less tangible and more likely to vanish in the case of a crisis.

[c1pher]

Originally Posted by bosstones

Most of IL still hasn't recovered. we'll probably just get f'ed again. I have my eye on this place just in case:

http://www.zillow.com/homedetails/18...61492597_zpid/

Illinois won’t recover until they fix the economy. More people are leaving than moving in, creating inventory (more supply).

[c1pher]

Originally Posted by David70

Agree. Buy as much house as you need and put the rest in stocks and you are virtually guaranteed over time to come out ahead compared to buying much more house than you need and nothing into stocks. Reality is you need a place to live but where you live generally isn't a great investment (general terms, not true of every house in the U.S.).

Paying high taxes (regardless of the asset appreciating or not), insurance, maintenance, and then high costs to buy and sell the investment all cut into the return.

To the original question, maybe there will be a crash in certain markets, and in the near future but I don't see it happening on a national level or where I live anytime soon.

Two of the middle class’ biggest tax breaks come for 401k tax deferment and mortgage interest deductions. If you look at the house as an investment in its totality, the investment is better than you think compared to renting in most cases. For example, if you rent, you are probably paying the owner’s mortgage or more for them. So not only will you pay the same or less per month with a mortgage, you can claim a deduction on your taxes on interest paid.

I have two homes which I rent. Initially wasn’t by design but I am cash flow positive by several hundred per month. I continue to pay my properties down and increase equity thanks to the renters.

[-BEASTMW-]

Originally Posted by BMW F22

Milpitas is getting super crowded now with all the new developments and Bart being built. I don't like Milpitas at all. I live right there as well and traffic is terrible.

Wife and I waited about 2yrs too long to buy, due to not being married, not having quite 20% DP, and feeling like things were expensive. Well guess what? We got priced out of Mtn View/Sunnyvale one year, then Santa Clara the next. Big mistake.

Finally got the nerve to bite the bullet last year even though we knew the market was hot (at least interest rates are low) and luckily has paid off so far. The commute is not good for her (Mtn View, about 45-50min each way to go 15mi) but good for me and we love our townhouse. The area is okay - certainly not the idyllic NorCal town but good schools, fairly safe, and good Asian food After tax advantages and principal paydowns, we're paying about the same for our new 3/3 townhouse as we were for an old 1-bd apartment in Sunnyvale.

But yeah, local traffic is bad, and I'm afraid it will get much worse. We wait 5-10min just to get onto Montague Expressway each morning, though I have a back way I can take. Hopefully we can live here long enough to see the area development happen and then bounce with a healthy gain. The problem is, anywhere we bounce to is going to cost 50%++ for the same home and worse schools.

[jaserion]

Now this is ridiculous: $782,000 over asking for a house in Sunnyvale...

http://www.mercurynews.com/2017/09/1...-in-sunnyvale/

[TXSTYLE]

Originally Posted by jaserion

Now this is ridiculous: $782,000 over asking for a house in Sunnyvale...

http://www.mercurynews.com/2017/09/1...-in-sunnyvale/

That's foking absurd.

[bosstones]

Originally Posted by MGM135is

For example, if you rent, you are probably paying the owner’s mortgage or more for them. So not only will you pay the same or less per month with a mortgage, you can claim a deduction on your taxes on interest paid.

Except for cases where people w/o much equity moved out of their property and are renting it out. There are people (not me) whose mortgages are higher than the market is bearing for rent. I think that is mostly people who bought around the peak of the last bubble but either put nothing or next to nothing down. That or they never took advantage of a program to refi to a lower rate. Sucks to be them.

I recently met a family that just moved into a house but are hoping to rent out their original property. They won't sell because they are underwater on it. Knowing that area, if there mortgage is what I think it is.....holy crap.....they'll never get that in rent. Even if they do, the property taxes are high so they'll still be eating that + the association fee + maintenance + insurance......all that in addition to the new house.

[c1pher]

Renting at least helps defray the cost, even if you’re underwater. And you can structure deprecation costs, maintenance etc depending on how you treat the property at tax time. It won’t get you to zero loss but helps close the gap vs selling and losing your ass. Plus your paying it down with someone’s money and if the market does recover you have some profit.

[zx10guy]

Call me strange but I never looked at my house where I primarily live as an investment first. To me first and foremost, it's a place to live that's "mine". Only secondarily do I look at it as an investment. I think for many people the idea of looking at their primary residence as some investment or piggy bank gets them in trouble. Don't get me wrong, I'm not condoning a foolish purchase where you severely overpay. But let's be frank here. For many Americans their home purchase is their main means of having a roof over their heads.

If you're not paying rent, you're paying a mortgage. Even if you're underwater on your house, at least your payments will build up your equity stake in your house; assuming it's not an interest only loan. If you rent, all of your money goes towards paying someone else's mortgage payment.

It's amazing many people get bent out of shape about being underwater with a house but won't flinch when buying cars where you're guaranteed to be losing money.

[BMW F22]

Bumping this. Went to look at a house in a dream area today. House is old: built in 1951, 1,400 sq ft, everything inside was pretty dated. Definitely needs to be remodeled, roof needs replacing, termite inspection and possibly replacing some parts. Thinking it’d cost $100k-150k to do all that stuff. Asking price? $1.2M. Might end up going over list.

Definitely going to need a correction because at those prices, my dream to live in that area might be out of reach (at least for now).

[Never_Enough]

Originally Posted by MGM135is

Two of the middle class’ biggest tax breaks come for 401k tax deferment and mortgage interest deductions. If you look at the house as an investment in its totality, the investment is better than you think compared to renting in most cases. For example, if you rent, you are probably paying the owner’s mortgage or more for them. So not only will you pay the same or less per month with a mortgage, you can claim a deduction on your taxes on interest paid.

I have two homes which I rent. Initially wasn’t by design but I am cash flow positive by several hundred per month. I continue to pay my properties down and increase equity thanks to the renters.

Depends on the location. Plenty of areas in the US where home prices are out of reach for most. I am back to looking for another home to buy after renting for a while after I sold my previous home. The same $ I paid last time around will not buy me near what I used to own it seems. No wonder everyone is broke or in massive debt. COL is way too high considering wages have not kept up. I want a live in gf just so I have the extra income!

[Olivo]

There might not be a crash, but a correction, no doubt. I know where I live (and subsequently did RE for a bit), prices are blown way out of the water for the houses.

Real estate, for the most part, seems to be something that usually follows inflation. If it is above inflation, there will usually be a correction down the road.

[BMW F22]

Originally Posted by Olivo

There might not be a crash, but a correction, no doubt. I know where I live (and subsequently did RE for a bit), prices are blown way out of the water for the houses.

Real estate, for the most part, seems to be something that usually follows inflation. If it is above inflation, there will usually be a correction down the road.

I sure hope there will be a correction. I agree that prices are overinflated. However, with all the foreign investors paying cash over asking price, I don’t know if there will even be a correction. I sure am hoping for one.

[Mardio]

Originally Posted by BMW F22

I sure hope there will be a correction. I agree that prices are overinflated. However, with all the foreign investors paying cash over asking price, I don’t know if there will even be a correction. I sure am hoping for one.

I think the Bay Area is an exception to the rule, even during the 2008 market crash the housing prices did not dip, at least not in the North Bay or SF. I agree a correction is absolutely necessary but the demand is constant and that doesn't provide any relief.

[BMW F22]

Originally Posted by Mardio

I think the Bay Area is an exception to the rule, even during the 2008 market crash the housing prices did not dip, at least not in the North Bay or SF. I agree a correction is absolutely necessary but the demand is constant and that doesn't provide any relief.

Prices dipped everywhere, including SF. The more expensive areas such as West San Jose/Saratoga/SF/Palo Alto/etc. didn't drop as much but there was still a big drop. Milpitas is around $1.2+ a home now (similar to West San Jose) and it was $600k during the recession (newer home, next to school, close to shopping centers and highways).

[-BEASTMW-]

Originally Posted by BMW F22

Prices dipped everywhere, including SF. The more expensive areas such as West San Jose/Saratoga/SF/Palo Alto/etc. didn't drop as much but there was still a big drop. Milpitas is around $1.2+ a home now (similar to West San Jose) and it was $600k during the recession (newer home, next to school, close to shopping centers and highways).

People like me got priced out of Mtn View, then Sunnyvale, then Santa Clara, and bought in Milpitas. Milpitas though is a lot more developed than during the recession, with the BART station coming and all the construction centered around that.

[BMW F22]

Originally Posted by -BEASTMW-

People like me got priced out of Mtn View, then Sunnyvale, then Santa Clara, and bought in Milpitas. Milpitas though is a lot more developed than during the recession, with the BART station coming and all the construction centered around that.

It's definitely has gotten a lot more congested. It will be worse with Bart and all the new development. I don't really like the Milpitas area anymore, except for maybe the area near Milpitas High School. It used to be a smaller, less congested city and now it's a bit too much. Great Mall is insane on weekends and around the holidays. The roads are super packed all the time during normal commute.

[-BEASTMW-]

Originally Posted by BMW F22

It's definitely has gotten a lot more congested. It will be worse with Bart and all the new development. I don't really like the Milpitas area anymore, except for maybe the area near Milpitas High School. It used to be a smaller, less congested city and now it's a bit too much. Great Mall is insane on weekends and around the holidays. The roads are super packed all the time during normal commute.

Yeah, I am worried about all that development. We are part of the problem, having bought a new townhouse there a year ago. I don't love Milpitas as it's all either 1970s ramblers or new townhouses (like ours, lol) and has no downtown or real walkable social/shopping area. But we bought it as a somewhat short-term home that is safe, has good schools, somewhat convenient location, and a developing area (and great Asian food!). Hopefully from here we can upgrade to a SFH in a better area, but any upgrade is a huge dollar amount to take on even with the appreciation on our current home (which has done quite well in only a year).

What really sucks is the new tax reform changing the amount of time you have to live in a home to avoid capital gains tax, from two years to five. Unfair to people like us who bought with the understanding that we could opt to move in 3-4 years without paying five figures in taxes. Now we feel like we're stuck here through the end of 2021.

[someguywithanm3]

Originally Posted by -BEASTMW-

Yeah, I am worried about all that development. We are part of the problem, having bought a new townhouse there a year ago. I don't love Milpitas as it's all either 1970s ramblers or new townhouses (like ours, lol) and has no downtown or real walkable social/shopping area. But we bought it as a somewhat short-term home that is safe, has good schools, somewhat convenient location, and a developing area (and great Asian food!). Hopefully from here we can upgrade to a SFH in a better area, but any upgrade is a huge dollar amount to take on even with the appreciation on our current home (which has done quite well in only a year).

What really sucks is the new tax reform changing the amount of time you have to live in a home to avoid capital gains tax, from two years to five. Unfair to people like us who bought with the understanding that we could opt to move in 3-4 years without paying five figures in taxes. Now we feel like we're stuck here through the end of 2021.

Wait, they're changing it from 2 to 5 years??? When does this take effect?

[BMW F22]

I headd about the mandatory law stating that you must not rent out the house in the first few years of ownership. A lot of people buy homes and leave them empty for a few years before renting them out. It’s happening all over the Bay Area.

[CreoUCLA]

Originally Posted by BMW F22

I headd about the mandatory law stating that you must not rent out the house in the first few years of ownership. A lot of people buy homes and leave them empty for a few years before renting them out. It’s happening all over the Bay Area.

I've never heard of that law. Typically if you obtain a mortgage to buy a home as a primary residence, the lender will make you sign an "Affidavit of Occupancy" (i.e. stipulating that you must move in within 60 days, and reside in the property for at least 12 months).

If you purchase a home and finance it as an investment property, there would be no issue renting it out right away. Financing the home as a "primary residence" comes with a lower interest rate (less risk) than buying it as an "investment" property (higher risk).

[-BEASTMW-]

Originally Posted by someguywithanm3

Wait, they're changing it from 2 to 5 years??? When does this take effect?

Yep. Will take effect with the new tax plan unless it is taken out, which I doubt since it was in both the House and Senate plans. And from what little I've been able to find on this, there will be no grandfathering. Really blows because we were thinking about moving out of the Bay area sometime soon but now we have to wait a lot longer.