Realestate Boom or Bomb-How to benefit?

[DaveH]

Whats up with Home Values in MD?????How should I plan for the future?????

I work in the realestate industry and have noticed many of the values accross maryland have dropped some and the market is steadily slowing. I've also noticed that the starter homes (Town Homes and Smaller SFR) have held up stronger than larger or more expensive homes. I live in Harford Co...Northern Maryland, and the values have gone down slightly on avg. but seem to want to hold thier ground.

There is a statistic that says 1.2 Trillion Adjustable Rate mortgages are due for first adjustment this year. Many of those include Intrest Only loans.

This is a hot topic, and I wanted to get some opinions about where/how/what changes we will see going forward!

I'm considering selling and renting for a few years...........Use the equity to consolidate and keep for a down payment. I could use the break on monthly payments right now.

I hope to get a good response here.....Real-estate markets have driven our lives it seems for the last 3-4 years

 

[Chasey_Lane]

I don't think the real estate market is bombing. While a homeowner may not see a 20% increase in the value of their home, they're not seeing a decrease, either. The market usually does something weird about every 7 years. 1999 was one of those years then an unexpected two years later (09/11).

 

[aps45819]

I'm considering selling and renting for a few years...........Use the equity to consolidate and keep for a down payment. I could use the break on monthly payments right now.

Don't you have to use any profit from a home sale within a year to prevent it from becoming taxable income?

 

[Chasey_Lane]

Don't you have to use any profit from a home sale within a year to prevent it from becoming taxable income?

You can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes. http://www.bankrate.com/brm/news/real-estate/20041018a1.asp

 

[punjabigyrl]

DaveH I would not sell to rent. The first wave of Brac is going to happen in 2008 i believe the prices will go up. Also, with owning a home you do get a tax break verses renting. I would look at the pros and cons. My bet is keep the house. I am looking at rentals in Harford and they have jumped up significantly. The $70,000 Townhomes are now going for $170-180 and the $80-90 are going for $190-210 and these are in ok shape.

 

[DaveH]

Chasey_Lane:
If you sold your house 1year ago, what would you list it for?
If you sell right now, how much would you get?
What was the last appraisal value on your home?

Does anyone have access to MERS so we can really look into some hard facts and select properties to see where the comps where vs are?

Capital gains tax mostly applies to investment properties, I believe. And you can avoid that by re-investing in realestate and filling out a form from the IRS.

QUESTION: If a townhouse used to cost 90K 3 years ago. A familly with a total houshold income of 65000.00/year would pay.....
539.60 Principal & Interest
66.67 Taxes @ 800yr
45.00 Hazard Ins.
37.50 FHA Mortgage Insurance
688.77Total Monthly payment

65000/yr = 5416.67-30%Taxes=3791.67-Healthcare(700)=3091.67-Mtg(688.77)=2402.90-BGE, cable, phone, internet, car insurance ect.(500)=1909.90-2 Car pymts(700)=1209.90 If they had a child @ 500/mos they would have 709.00 left each month for food and gas entertainment and savings.

Now that townhouse is 180K and that familly might have increased salaries to 70,850.00 gaining 6% each year. This familly would pay
1079.19 Principal & Interest
133.33 Taxes X2 1600yr
45.00 Hazard Insurance
75.00 FHA Mortgage Insurance
1332.52Total Monthly payment

70,850.00/yr = an additional 341.25 Net income without doing all the above calculations all over again. This same couple 3yrs later buying the same house only has 406.50 each month for food, gas, entertainment and savings.

Notice no Credit Card payments!!!!
Lender's realize this....So they introduce Interest Only - 40-50year terms to help median and below famillies cope with quickly rising increase in housing expense. The only problem is these loans don't help 1st time homebuyers because the rates are considerably higher than FHA loans for instance. These loans were introduced to help homeowners refinance - Not purchase.

IF PRICES REMAIN THE SAME....WHO WILL AFFORD THEM AT CURRENT PRICES WHILE RATES TRICKLE UPWARDS TO 7% When I got married 5 years ago, rent at 900/month was very hard for us to afford!

 

[itsbob]

But the family taht bought the townhouse 3 - 5 years ago for 90,000, even though the house was worth 270K last year, and is now worth 250k, did they actually lose 20K in the last year? NO, they have gained 160k in the last 3 - 5 years.. or almost 36% a year in interest. Where's the bad news?

 

[czygvtwkr]

But the family taht bought the townhouse 3 - 5 years ago for 90,000, even though the house was worth 270K last year, and is now worth 250k, did they actually lose 20K in the last year? NO, they have gained 160k in the last 3 - 5 years.. or almost 36% a year in interest. Where's the bad news?

Actually they haven't lost or gained anything since they did not move out.

 

[punjabigyrl]

well, unfortunately, that is the hard reality of it. Prices will go up. I trully feel sorry for the folks that have the no interest loans. I hate that mortgage lenders even offer that. I understand the need to own a home. And yes, there are those that will always struggle to make ends meet. I encounter that all the time when I have to rental available. I will get people that can't afford rent yet they'll talk about owning a house. Virginia is even worse. My realtor told me they are getting ready to pass or have padssed a bill that will give housing assitance to people making $90,000 a year. I wish they could offer that here.

 

[Ponytail]

Actually they haven't lost or gained anything since they did not move out.

That depends on whether or not they took equity out of the house, based on appraisals, for re-investment into the house or to buy cars, pay off debt or other things.

I didn't do that, but I know a few that did, and they now owe what their houses are appraised at. they can only HOPE that when it comes time for them to sell, they can break even.

 

[punjabigyrl]

Thats another thing I don't understand WHY do people take out equity on the house to pay thier debts? That is the most stupid thing anyone can do. When I bought my house in Leonardtown people scoffed at me when I told them I want to pay my house in 10-12 years rather than the 30 years. Not to mention those very people are now in sooo much debt they don't know where to begin to get rid of it. Price to pay when you try to keep up with the jones'. And another thing why does a person making $20,000 after taxes think they can afford to buy a $50,000 car???? I heard my sisters college friend say that...I just about choked. Then he has the audacity to say he doesn't have money for books.

 

[refugee44]

Lender's realize this....So they introduce Interest Only - 40-50year terms to help median and below famillies cope with quickly rising increase in housing expense. The only problem is these loans don't help 1st time homebuyers because the rates are considerably higher than FHA loans for instance. These loans were introduced to help homeowners refinance - Not purchase.QUOTE]

That's not true! As a first time homebuyer I just closed on a 40 year mortgage, 100% financing, $310K at 6.15%. Now, I'm not sure what standard FHA rates are right now, but I'm more than happy with mine. Are you sure you know what you're doing?

 

[Chasey_Lane]

well, unfortunately, that is the hard reality of it. Prices will go up. I trully feel sorry for the folks that have the no interest loans. I hate that mortgage lenders even offer that.

I think interest-only loans are great! They allow you to purchase a "bigger" home w/out the "bigger" mortgage payment. I like ARMS, too. How many people actually have a mortgage for 7-10 years? If you refinanced that "mortgage" doesn't count. I'm talking the same payment/terms/financing for a period of 7-10 years. Hopefully by then McMansion Homeowner can refinance at a good rate and get rid of the interest-only or ARM.

 

[Chasey_Lane]

Chasey_Lane:
If you sold your house 1year ago, what would you list it for?
If you sell right now, how much would you get?
What was the last appraisal value on your home?

More than what it was purchased for. :shrug:

 

[Chasey_Lane]

That's not true! As a first time homebuyer I just closed on a 40 year mortgage, 100% financing, $310K at 6.15%. Now, I'm not sure what standard FHA rates are right now, but I'm more than happy with mine. Are you sure you know what you're doing?

Why did you choose 40 years over 30?

 

[Chasey_Lane]

Thats another thing I don't understand WHY do people take out equity on the house to pay thier debts? That is the most stupid thing anyone can do.

Say someone has $1500 in credit cards each month, plus their vehicles, along with utilities, groceries, gas, etc. Refinancing and pulling out money to pay those credit cards off has increased their mortgage by $300 bucks a month, thus reducing their monthly cost by $1200. However, they have now stretched that "savings" into a 30-year loan!

 

[PrepH4U]

Say someone has $1500 in credit cards each month, plus their vehicles, along with utilities, groceries, gas, etc. Refinancing and pulling out money to pay those credit cards off has increased their mortgage by $300 bucks a month, thus reducing their monthly cost by $1200. However, they have now stretched that "savings" into a 30-year loan!

But on the other hand, now their vehicles and credit card debt (avg 12% interest) is paid off and rolled into their mortgage making it a tax deduction and hopefully those people are using the extra money to put into a savings plan.

 

[Chasey_Lane]

But on the other hand, now their vehicles and credit card debt (avg 12% interest) is paid off and rolled into their mortgage making it a tax deduction and hopefully those people are using the extra money to put into a savings plan.

I wonder what the advantages/disadvantages are to refinancing to pay off debts. I'd be interested to see some stats.

 

[refugee44]

Why did you choose 40 years over 30?

It was just a bit more comfortable monthly payment for me. Like you said in one of your posts, who really lives in their houses for 30 or 40 years anymore, particularly as a firstime homebuyer? I can see myself here for at least 5, but after that I'll probably be looking again. Never know, and for now, this gives me a comfort able cushion so I don't become "house poor".

 

[punjabigyrl]

What happened to living below your means. I see credit card usage as only in an emergency. not buying things left,right and center to satisfy your id and ego. There are certain things in life that you have to buy that is basic necessities. To me a owning a house is a liability in that, you have to put money in to maintain it, taking care of the house etc. yes you make up the money when you sell but you spend quite abit in maintaining it.