Need suggestions

I

idrnkurmlkshk_IHB

New member
Ok, let me just say that I am a loyal lurker around here and eternally grateful for the IHB.

So now I need your advice and suggestions.



I bought a 2b2b condo in Talega back in 2001 for $300k. w/ a 30yr fixed @ 5.75%.



I think the Kool-Aid was flowing the highest around $490k for this plan.

Now they are selling for around $400.



Now my dilemma is; should we sell and get out before the prices go below $300k? or...

Pay off the thing..(which could be done with in a couple of years?



I'm one of those rare families in the OC who's mortgage is less than 1/3 of our income. We live way with in our means. (lets just say I like seeing my bank account grow instead of staying stagnant)



Our mortgage btw is a little less than the average rent for a place like ours.



The reason I'm considering holding on is the threat of INFLATION. I'm afraid rent in OC will go through the roof soon.

But if it goes down into the high$200's then it will be a loss.



Any suggestions or further questions welcome :)



Thanks
 
Speaking of inflation..does anyone here think that this will level off the prices dropping any further in the coming years?

At this rate..inflation may go up to 7% next year.
 
Look, I'm not from there, but I think rents are headed downward since there

are too many houses, and eventually that is going to translate into decreasing

rents.



If you like your residence, stay there. If you don't, sell.



I am soooo worried about the banking system, I'd prefer to have stuff, namely

my pile of cinderblocks and sticks, than money in the bank.
 
Why? You think people are going to rush their banks and with draw all their cash like 1929?

I don't think so. We will more likely have mass inflation due to the Fed printing so much cash.
 
There may be a few runs, but I don't see how the banks can continue

indefinitely to take these hits of 100 200 300 thousand dollars per house.

I don't know that the fed can stuff money down their throats fast enough

to keep even.



Banks are making hardly any real estate loans, so far as I can see.

They have all these REOs that they are busy not selling, and not caring

for.



We are in uncharted territory here.



As I say, I prefer my paid for house. Yeah, it's gone down 200 grand or

more but so what? That 200 grand was pixy dust, unless I had chosen

to sell at the top. Which I actually wanted to do, because that was the year

after the 2 years with 8 hurricanes, and I feared if we got hit, the insurance

company would find a reason not to pay. The hub refused.



I'm not upset about it, I like the house. Still, if we'd sold, we could have

bought something even more fabulous for the same money.
 
"We are in uncharted territory here."

The way the banks and our nation deal with these huge losses is through devaluing the dollar.

I heard that our country's biggest GDP is our debt.

So if we produce debt as our main GDP, what is going to happen when the world decides we have to pay up?





Print more $$, create inflation to pay down the old debt and then the dollar will be worthless.



:long:
 
What are your plans for the next couple of years? If you want to move up to something larger I would try and sell now and rent for 18 months. If you plan on staying put for the next couple of years it probably isn't worth the hassle of moving.
 
[quote author="idrnkurmlkshk" date=1213566480]Ok, let me just say that I am a loyal lurker around here and eternally grateful for the IHB.





The reason I'm considering holding on is the threat of INFLATION. I'm afraid rent in OC will go through the roof soon.

But if it goes down into the high$200's then it will be a loss.



Any suggestions or further questions welcome :)



Thanks</blockquote>




take a look at craiglist for irvine apt. Nobody knows irvine rental better then IAC and they are dropping their price. You can get a 2 bedroom apt for 1680 (985sqft) now. i am paying 1560 (724) for a 1 bedroom apt.
 
"We can default.



Inflation is a slower politer method of default.

We can all pretend it isn?t really a default. "





LOL!

We seem to pretend a lot in this country.



Maybe it would work? LOL.
 
Condo,



Currently, our mortgage payments(w/ HOA, taxes) are only $1900/mo for a 2b 2b 1200sq/ft condo with a 2 car attached garage.

I don't see any rentals with those stats on Craig's L.



We would like to move up to a bigger place in a few years, but if we sell..would making approx50-70k be worth it? (2-3yrs rent) ... (window is shrinking.)
 
I say get out while you can. If you are planning on moving anyway, might as well try to maximize your current equity in expectation of those dollars going farther then next time you buy in.



For full disclosure, I recently sold my place closed in early Q208. I sold for 25% off peak pricing, in anticipation of another 25% to go. Obviously I am biased, but I can't see too many scenarios where we don't endure a protracted period of home price declines because of: too much inventory (the highest vacancy rate in the history of the country), ARM resets yet to come (the 2,3 and 5 years arms from the peak of the bubble in 2005/06 are just now starting, rates are rising (I was firmly in the lower rates camp, but for now inflation led by gas prices is leading the inflationary charge, so higher rates will be a factor), rising unemployment (though the recent spike was largely the result of college grads enter the ranks of the unemployed, aggregate payrolls are falling, and that is never a good sign for asset prices), etc. etc.



Talega is a fringe development, and unless you are employed in the immediate vicinity bound to become more Hellish over time. Ranch Mission Viejo and it additional 14,000 homes/condos are set to be built in the next few years. That will place additional strain on the already overburdened I-5 making Talega even less desirable than is is now.
 
"might as well try to maximize your current equity in expectation of those dollars going farther then next time you buy in."



See, this is my problem, I'm not quite sure about that. I mean, the next time we buy rates won't be as low as what I've got. Inflation will be a lot higher too making those dollars less.



So is my only option to hold on to it and pay it off? (making it a true asset) Time is on our side here. As inflation goes up, that loan will look smaller and smaller. Rents will eventually go back up again too. I mean, with all the people destroying their credit, losing their homes and add inflation, won't there be more renters?



If we pay this thing off in the next 2-3 years that will add an additional 1k to our monthly income.



Decision, decisions, decisions,...



CRAP!



Help.
 
Where rates go does not really matter since it is the carrying cost which determines pricing. So you can ignore rates.



The decision tree is based whether you want to stay in your place or need to move. If you need to move then there are three choices sell now, sell in the future (when you have to move), rent-out rather than sell. If you can afford to move without selling, I say keep the place indefinitely. I guessed that you were probably not in the position to put 20% down on your next purchase without selling your current place.



So, using this simply model, you apply values and probabilities to each scenario.



Additionally, the inflationary impact on housing prices is somewhat irrelevant in the current environment (this was pointed out to me by several posters on this board when I made the same assertion). Housing is DEFLATING as opposed to inflating. Moreover insofar that we are seeing inflation in other areas (food and energy) without the upward pressure on wages (wages are flat), we could rationally expect housing prices to fall further (I think Schiller made this point in a recent piece).
 
Cap,



Good points.

Thankfully we can afford to put down 20%. But we are not looking to buy anything until this market bottoms out (which I will be waiting for IR word).



So I think we will just hold onto this place forever. Plan on paying it off in the near future and possibly renting it out or even better...

do a house swap with someone in europe. LOL.



I miss traveling.
 
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