US real estate

Adjustable rate mortgages are for 1, 3 or 5 years. After the term is complete, the interest rates adjusts to something based on the prime rate. That adjustment is largely determined by your credit score. It gives you a lower rate than fixed and should be used if you are planning to move near within the timespan of the mortgage.

The 20% down NURB wrote is more of a rule of thumb. Prior to the bust, people even with poor credit could borrow up to 110% of a home’s value. Now, with stellar credit, I could get a 100% loan if I chose.

There are 20 and 15 year fixed mortgages here in the US. Using them is a choice. You can shorten the time to pay the 4%, but you need to have a higher monthly payment. That “extra” money for the 15 year could be used to invest in another place if you go with a 30 year. If your investment is paying more than 4%, it would be better than doing the 15 year loan.

I don’t know if you can still do this, but when you see a 27 year old buying a $750,000 house, I’d guess they are sticking 5-15% and going 45-60 years on the mortgage with the idea of refinancing when they have more money.

The way it was explained to me by my mortgage broker was; if you’re not planning on staying in the same place for 30 years, don’t worry about it. You’ll make a bit on each sale, and eventually catch up.

Of course, now that is becoming quite difficult.

I don’t see how people can live in such squalor…

On Yahoo this afternoon. 22 year old student buys 6,744 Sq. Ft. flat in NYC Central Park West, $88 million USD.

http://finance.yahoo.com/news/billionaire-s-daughter-pays-record-sum-for-nyc-pad.html

I will have my loft for sale in the new year… less than $1000/sf for sure.

R

LMO brings up an interesting point. Very expensive property is still being sold. You would almost think the recession hasn’t really touched like…1% of the population. Hmmm.

FYI, the recession is over… Didn’t you get the memo? Now we are all just poor.

Is Canada the 1%?

We had hippies camping out in parks too…

R

The 1% has no nationality.

To add to Nurb, if you dont have the 20% you will have to pay for mortgage insurance (PMI). This covers the lenders if you default (having less than 20% tells them you are more ‘at risk’). It stays on until you reach the 20% in equity, which can be a long time taking in consideration the amortization table. Also, many mortgage companies will not approve you if you have less than 10% down, and at that much you probably will not get the lowest rate possible. At least some of these companies have learned that they need to be a little more strict on their lending habits.

/

Pearl?

So, in short, it’s really as bad as I thought? All US real estate is super low? Somehow I find that crazy that while salaries are pretty much comp to north of the border, housing is so much lower. I’m not sure if it’s good (so much extra money to spend on non-housing), or bad (equity is low and a loss of value compared to purchase).

R

The salaries haven’t changed much at all for a few years. In addition, cost of almost everything has increased significantly in 5 years. Gas, groceries, utilities, etc.

The housing market 5-8 years ago, was riding a huge wave of value. People were having bidding wars left and right. Demand grew, as did home prices. When the bottom fell out, the market corrected itself. Now we’re seeing home values at about where they should be. Those of us with bad enough foresight to see that we were paying too much, are getting screwed.

Living on the central coast of California, our real estate prices, in general, are somewhat insulated from the extreme downturn. The county, on the whole, is a “destination” for LA and SF dwellers as well as central valley folks. In other words, it’s a nice place to live, especially if you are retired (which I’m not). We relocated to the area in 1978, following my employer from Illinois.

In 1980 we were fortunate to be able to buy our first home; a 900 sq.ft. post-war bungalow; $61,000 (the man we bought it from paid $21,000 three years earlier). We played by the traditional rules; we had the down payment and didn’t exceed our allotted budget. Ten years later (1990 ) we sold it in to buy a newly constructed 1,800 sq.ft. two-story; $121,000. Eight years (1998) later we sold it and bought our current 3 bedroom, 2,400 sq.ft. multi-level for just south of $335,000; property taxes are a shade over $4,200 annually. Average price per sq. ft. was $1,770 at the time…

3 bedroom median home price in Pismo Beach:
As of today (12/2011): $537,500 (+11.4% in 3 months)
3 month prior: $530,000
1 year prior: $482,500
5 years prior: $787,500

A handy tool … http://www.trulia.com/

iab: Wow, great graphic. I keep telling people here that the bubble is going to bust. “no no no, we aren’t as bad as you Americans.” Really?

I dunno, I don’t see any bubble in the chart. Looks just like a US crash which was due to the horrible lending practices and consumers taking loans they couldn’t afford or understand. I think Canada will remain to do quite well and if anything even get stronger as people recognize it’s one of the few stable economies around.

R

Sounds like what I thought in 2006, R…

And then there’s Vancouver…

House prices in and around Vancouver are insane. I live in East Vancouver - traditionally the “up and coming” side of the city. Any non-fixer upper in this end of town is probably $1,000,000. On the west side it will be $2-3,000,000. It is incredibly frustrating as it is essentially impossible for a first time buyer to get into the market.

For your viewing pleasure I present Crackshack or Mansion.
See if you can tell the difference between a recent drug den and a million dollar home.