question for those who bought near peak real estate 2007-2008

[Brains428]

I gather I'll receive the standard answers of "can't time the market" and all that, but here goes....

When I finally finish off paying student loans in the next few months, the next step is to save up for a house. The time to have a 20% down payment will be about 12 months from now, with potential move in by December of next year. I live in a LCOL area with home prices creeping up and new builds going for about $250/sq ft (was about 125/sq ft in 2017 when I was looking at this job).

Given that there is a potential recession predicted by late 2020, I would think that 2-2.5 years from now home prices would fall in my area. This recession was supposed to happen multiple times by now, though. Interest rates are also excellent now, and who knows what they'll be in 2 years.

So, for those who bought at the peak of the market prior to the real estate crash, was there any point where you hesitated if you had any suspicion that the housing market was "too good to be true." Or was it all lessons learned in hind sight?

Current apartment rental pricing here is great (3 bed 2 bath, 1300 sq ft, internet/cable/electricity-- $1150), so there isn't any real pressure to buy a home. These are just thoughts that creep in on my day off listening to the upstairs neighbors stomping away and watching "Too Big to Fail."

Thanks

[CordMcNally]

Brains428 wrote:

Given that there is a potential recession predicted by late 2020

Click to expand...

Who's predicting that? You can find someone to predict nearly anything at any given moment.

 

If you're going to be in the area for a while and want to buy a home, go for it. You don't primarily buy a home (or at least shouldn't) with the goal of making money on it. You buy it for shelter.

[VagabondMD]

CordMcNally wrote:

Brains428 wrote:

Given that there is a potential recession predicted by late 2020 

Click to expand…

Who’s predicting that? You can find someone to predict nearly anything at any given moment.

 

If you’re going to be in the area for a while and want to buy a home, go for it. You don’t primarily buy a home (or at least shouldn’t) with the goal of making money on it. You buy it for shelter.

Click to expand...

Yes, you buy it for shelter AND lifestyle. If you are accustomed to and comfortable listening to your neighbors stomping above you, stay where you are, by all means. You will likely come out ahead in the long run, especially if you pocket and save/invest the difference.

[White.Beard.Doc]

If you are in a LCOL area, it may not make much difference when you buy, unless you plan to build new. The cost of new construction varies more greatly with the state of the market. For resale homes in LCOL areas, the fluctuations with the economy tend to be significantly more muted.

[Brains428]

CordMcNally wrote:

Brains428 wrote:

Given that there is a potential recession predicted by late 2020 

Click to expand…

Who’s predicting that? You can find someone to predict nearly anything at any given moment.

 

Click to expand...

The whole inverted yield curve thing.

While it is my first job, I'm making "partner" (employed job with some private practice feel when it comes to how the group is run, pay is going up 50-60%), and I like the job/area.

I'm not viewing the home as an investment, but I see the point when it comes down to my concern for buying at a peak time. I plan on staying in the future home for the long haul unless I had to move jobs. I'm opposed to buying something at a higher price with the only added value being "fair market." Probably why I refuse to live on the coasts...

 

@Vagabond. All the excess money outside of baseline retirement (403b, 457b, backdoor Roth) goes to the student loans. I plan on splitting money between taxable and down payment once the student loans are gone. Given the long road of radiology, I'm probably behind some 33 year old physicians, but plan to be far ahead by 40.

[CordMcNally]

Brains428 wrote:

I’m not viewing the home as an investment, but I see the point when it comes down to my concern for buying at a peak time. I plan on staying in the future home for the long haul unless I had to move jobs. I’m opposed to buying something at a higher price with the only added value being “fair market.” Probably why I refuse to live on the coasts…

Click to expand...

If you're planning on staying in the home for a long time, then you can view the purchase like you do your portfolio. Are you investing now while the market is basically at an all-time high?

[Brains428]

CordMcNally wrote:

Brains428 wrote:

I’m not viewing the home as an investment, but I see the point when it comes down to my concern for buying at a peak time. I plan on staying in the future home for the long haul unless I had to move jobs. I’m opposed to buying something at a higher price with the only added value being “fair market.” Probably why I refuse to live on the coasts…

Click to expand…

If you’re planning on staying in the home for a long time, then you can view the purchase like you do your portfolio. Are you investing now while the market is basically at an all-time high?

Click to expand...

Haha. The voice of reason prevails. My transferred cash on a rollover into my s401k cleared today and I invested. So...

 

[nephron]

I could be wrong, but I think that it is unusual for housing prices to fall to the degree that they did in 2007-2008.  The financial crisis was largely due to the housing "bubble" at the time, I think that most other recessions, including the future ones, will be driven by some other factor that will not affect housing prices to the degree that the 2007-2008 crisis did.   I think that the tax law changes are probably bringing down the prices of the high end houses and the built up demand from the millennial is probably going to keep driving up the starter houses, but most of those changes are probably baked into the prices by now.  Anyways, I agree with not looking at housing as an investment, it usually just keeps up with inflation and when you factor in other costs (taxes, maintenance, repairs, transactional costs of selling/buying, etc), it has a poor rate of return.   You are better off looking at things like your commute, neighborhood, school district, etc rather then considering any investment value for your house.

[Bill Roentgens Beard]

I bought at the very height of the market, in November 2006. Home had lost over 60% of its value from my purchase price to the trough of the recession.
Did I have any idea this was coming? No. In fact in my HCOL the thought was that the prices would keep climbing and climbing. Back when we purchased it, people would camp out overnight when developers would release new lots and bid over asking price.
Our fear was that we would lose out on the price that we paid.

Ultimately, we are still living in the same house today, 13 yrs later. The value is 70% of what we purchased and we will likely never reached the original closing cost even if we hold to 10 more years (who knows?).
Having said that, we love our "doctor" home. I've realized that everyone will make some sort of financial mistake in the course of their career; this just happened to be ours. There's no way to know ahead of time what the market will do.

[ENT Doc]

Can’t time the market.

[FN9]

ENT Doc wrote:

Can’t time the market.

Click to expand...

You sure can, i did in 2011

 

I waited for 5 years after finishing residency, convinced that prices were in a massive bubble 2005-2010, paying off  some loans and saving for a down payment during those 5 years while everyone and their cousin bought overpriced homes in a VHCOL are, bought at a massive discount ( I got a letter from BOA a few weeks after I bought indicating a loss of 685k).

[ENT Doc]

Dr. Burry, is that you?

[CordMcNally]

FN9 wrote:

ENT Doc wrote:

Can’t time the market.

Click to expand…

You sure can, i did in 2011

 

I waited for 5 years after finishing residency, convinced that prices were in a massive bubble 2005-2010, paying off  some loans and saving for a down payment during those 5 years while everyone and their cousin bought overpriced homes in a VHCOL are, bought at a massive discount ( I got a letter from BOA a few weeks after I bought indicating a loss of 685k).

Click to expand...

That settles that. Turns out you can time the market!

[The White Coat Investor]

Brains428 wrote:

I gather I’ll receive the standard answers of “can’t time the market” and all that, but here goes….

When I finally finish off paying student loans in the next few months, the next step is to save up for a house. The time to have a 20% down payment will be about 12 months from now, with potential move in by December of next year. I live in a LCOL area with home prices creeping up and new builds going for about $250/sq ft (was about 125/sq ft in 2017 when I was looking at this job).

Given that there is a potential recession predicted by late 2020, I would think that 2-2.5 years from now home prices would fall in my area. This recession was supposed to happen multiple times by now, though. Interest rates are also excellent now, and who knows what they’ll be in 2 years.

So, for those who bought at the peak of the market prior to the real estate crash, was there any point where you hesitated if you had any suspicion that the housing market was “too good to be true.” Or was it all lessons learned in hind sight?

Current apartment rental pricing here is great (3 bed 2 bath, 1300 sq ft, internet/cable/electricity– $1150), so there isn’t any real pressure to buy a home. These are just thoughts that creep in on my day off listening to the upstairs neighbors stomping away and watching “Too Big to Fail.”

Thanks

Click to expand...

I had a high suspicion that I was buying into a real estate bubble in 2006. My response was to buy a much less expensive house than I could afford. I lost a significant percentage of it even holding for 9 years, but not a large amount of money. You might try that as a way of splitting the difference.

BTW- today's market doesn't feel NEARLY as insane.

[burritos]

Buy now. If there's a crash, buy a rental