Quote:
Originally Posted by Rochard
It was getting silly. I bought a house in Phoenix in 2002 for $220. Average house. Two years later on paper it's worth $500k. That's stupid that an average house doubles in two years.
And I understood why. It was simple. Bank makes loan to buy for someone to buy house. The fact that they didn't qualify didn't matter. They make the payments for a year, default, and then the bank turns around and sells the house to someone else - at a profit. It was win win for them. Right up to the point where the value of the houses started to drop.
I've never understood why the value of a house goes up, while cars go down. They can build my exact house anywhere in the country with the blueprints. In the mean time, my house gets abused, beat up, is missing tiles from the roof, worn, has nicks in the walls, carpet needs replacing, etc etc etc etc.... And yet it's worth more? Meanwhile, try building yourself a brand new 1965 Ford Mustang? You can't.
It makes no sense. An old house that they can build next week brand new goes up in value, while a car that they will never ever make again goes down in value? That's backwards.
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A lot of this is right on point. We are (or at least were a few years ago before the housing market collapse) at the first time in the history of this country where the average wage earner could not afford to buy the average home. The average wage in the US is $16 per hour. The average home price (again from a few years ago, I'm not sure what it is now) is $183K. This means after taxes the average person brings in around $1900 per month. But the payment on the average house depending on how much you put down and your property tax rate is around $1,100. So people would have to spend 60% of their income just on their house.
If we are gong to have long term economic stability that needs to change. I think that houses are going to continue to drop in value for the next few years. We had about 5-6 years where banks ran wild with sub-prime mortgages. We are only about 3 years into the collapse of them so I would expect at least another 2 years of foreclosures. This should continue to bring the values down. I have a feeling they will stay there for a while as well. I have a feeling the massive buying and selling we saw for a while won't return for at least several years and that should keep the prices down. It sucks if you bought your house at the top of the bubble, but if you are in the market now, it is a good time to buy.