By Steve

November 3, 2006 10:38 PM | Link to this

Can you say desperation? This is going to get ugly.

By Mike Fink

November 4, 2006 07:34 AM | Link to this

Let me explain something to the idot NAR people. This is primarily in FL, but applies in other areas as well (just not as significant because no SOH).

Low interest rates = High home prices

Because most people don’t care about the economics, they care about “How much a month”. However, when you buy a home at a high price, your taxing base is then set at that price, and continues to increase at 3% for each year thereafter.

If you buy a home when IR are high, the home is going to cost less, and they payment will be about the same. Taxes will be lower (because the home cost less). Guess what, when IR drop, you can REFINANCE the home into a new rate (assuming you have equity) and lock in the new lower rate. Your tax base is still the lower number, and now your payments will be less they you started with.

It is NEVER a good time to overpay for a house. Interest rates are inversely proportional to home prices; so I would argue, buying when IR are low, in a place like FL (where your taxes are based off your home price) is not a good idea. Buy when they are high, and lending standards are very tight; that’s when your going to see the best deals.

By Steve

November 4, 2006 04:12 PM | Link to this

Your right Mike. Flies in the face of what the majority of people thought.

By Mike Fink

November 4, 2006 08:04 PM | Link to this

Steve,

Well, I would not say that’s a universal law (like price/rent and price/income ratios), but in S. FL, because of SOH, its always better to buy when IR are very high, because its going to set your base lower. As soon as IR drop, refi, and then hold on while the property appreciates (because of the increased affordability).

In general, you want to be buying when nobody else is; that’s when you know we have found the bottom. When there is no one left on these blogs except doomsayers; that’s when I know it’s time to buy. The herd always gets slaughtered in investments; and the minority gets rich/richer. That’s the way the market works; if your following the herd, you better be sure you can see the cliff before everyone else! Many wise investors have said (about all kinds of assets), “When my barber starts talking about RE as the way to easy riches; that’s when I know it’s time to sell”.

By TANC

November 5, 2006 10:46 AM | Link to this

MF,

I have a few problems with your logic.

First, what constitutes “high interest rates”? Is it 7%? 8%,10%, 12%,18% what?

Rates are historically low right now and may never get back to the level we had in the late 70’s and early 80’s when mortgage rates were what I consider “high”. If interest rates do not return to “high” levels, does that mean real estate in FL should never be purchased?

Interest rates are only one factor in determining the affordability of housing.

You say to purchase when rates are high and then refi when rates are low because of the “increased affordability”, well, isn’t that contrary to your reasoning as increased affordability will mean more qualified buyers, hence higher demand for housing? However, given your reasoning, as affordability increases, housing should not be purchased because interest rates are low. Huh?

If no one bought homes when rates were low, prices would fall, jobs in the industry would be lost, the economy would go into a recession at least and possibly worse eventually driving interest rates LOWER (this scenario my actually play out within the next 2 years). And, given your logic, you shouldn’t buy because interest rates are low.

It’s supply and demand only that influences when people buy and sell and that is influenced by many different factors of which the level of interest rates is only one.

By to mike fink

November 5, 2006 11:38 AM | Link to this

once again you show how stupid you are. your comments are not based in any reality. it is more like reality tv.

By Jonesy

November 7, 2006 10:26 AM | Link to this

You said it about desperate. I guess when you commission starts to shrink for the really good times, you got to do what you got to do.