<p>I remember the rent ratio during the 70s and the 80s was between 10 and 14 times. We may be heading back to those days if the economy does not improve fast. Then again, how can the economy improve when housing is crashing?</p>
<p>The stock market will tell me when house price has bottomed.</p>
<p>The way to “reduce the credit we already have” is to walk away…;)</p>
<p>Lose the battle, if we must. Just don’t lose the war.</p>
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<p>The Economist had a cover with “housing bubble” in 2002. They were off just 6 years. LOL!</p>
<p>I googled for his age and he is 68. Amazing! Another Dick Clark, does not age.</p>
<p>That 10-14 ratio never existed where I live. :)</p>
<p>I think the ratio is about 30 to 1 now…maybe more. :eek:.</p>
<p>If it ever gets to 10 and I still have money, I’m a huge buyer. :)</p>
<p>You must be a wealthy man, dstark. </p>
<p>If the ratio gets to 10, I will use leverage to buy stocks. By that time, we will probably get P/E under 7 and dividend ratio over 9 on the Dow.</p>
<p>If things get that bad, we will probably be under martial law as well.</p>
<p>We need to be careful what we wish for. ;)</p>
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<p>Small being a relative term. Hereabouts, half an acre is a huge lot, and a 5000 sq ft house on a quarter acre is seen as having a large backyard. </p>
<p>Was this article about the Bay Area community where 90% of homes are under water already noted? <a href=“http://www.nytimes.com/2008/11/11/business/11home.html?th=&emc=th&pagewanted=print[/url]”>http://www.nytimes.com/2008/11/11/business/11home.html?th=&emc=th&pagewanted=print</a></p>
<p>I have no sympathy for those speculative homeowners. I live in California and many people used the strong housing market as a cash cow. They’d buy a place and flipped it to make big bucks. In the good days, people made a lot of money in a short time. About 5 years ago, a place next to my apartment was sold for 600K. Someone bought it and sold it for 900K two years later. Whoever bought that place then tried to flip it for 1.4 million!!! That place was only about 2000 sq ft!</p>
<p>I don’t have a problem with those who “flipped” houses to make a profit. For those who want to take the risks and trouble, that is an opportunity there for the taking. One of the risks is that something like this could happen, and such operators will then forfeit on the home and have it foreclosed. It is a business investment for such folks and most of them are quite willing to take the consequence. </p>
<p>For those who bought homes, that is a different story. Yes, they too, took the risks. But it is not just their problem when so many are in that situation. I think that whatever bailout is put in place should differentiate between investment and home properties. Those who are doing this as a business investment will not likely want to take the provisions of a bailout that is geared to home owners if the provisions are put into place to make this something to help families, neighborhoods, everyone. Such speculators will bail and take the hit on the credit. Part of the business cost.</p>
<p>That home sales are stalling and frozen is bad for everyone. Even those who bought well in their comfort zone are in trouble if they have to sell for any reason. Hard to find a buyer, for the buyer to get financing, and good luck getting financing for the next house. Here in this area, the rentals have been high in demand as jumbo mortgages are in lock down. That means virtually no activity in the high range housing market, not because there is no demand but because the financing is gone.</p>
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<p>I agree. Start with screening out the houses the owners don’t actually live in.</p>
<p>We have friends here who put off buying a house in the area because they just did not think the cost was worth it. Well, after being squeezed in a 2 bedroom town house with a daughter getting into middle school years and the younger one a special needs child, it became clear that buying a bigger house in the right school district was a priority. Especially given the family’s finances. It made no sense to put so little into such an integral part of their lives. They bought at the peak, and now are struggling to make the payments due to the type of mortgage they got, tax increases, and salary cuts. Working in banking, he will not get much of a bonus, and his pay is bonus heavy. I don’t shed tears for them, as they are not in crisis mode like so many families are, but I don’t think they are getting their just dues with the difficulties they are having.</p>
<p>Our home 1,200 sq feet with two kids and we looked at getting something bigger in 1998. I thought that the prices were crazy back then and said we’ll wait until prices come down. Well, we waited and waited and waited. We’re still way over 1998 prices. At any rates, one has left and the other will be leaving in a few years so we made it through with what’s considered a small place in the US. We may downsize further in the future. I think that we’re only getting a respite in energy prices and some of the utilities keep rising.</p>
<p>I don’t have a problem with people buying a house to live in but they do take downside risk.</p>
<p>I thought we are frugal and I still believe so, but not measured by the footage of our house. We bought a bigger house about one and half year ago. The previous house wasnt small either. Unfortunately, I love to look at houses. We bought this one because the price dropped significantly from 2006. There was this couple who signed the contract to build this house in July 2006. However, when the house was completed last May, they backed off for some reason and the house became builders spec. home. So we got discount. Since then, the market kept dropping.</p>
<p>BCE, I am humbled by your discipline. We have one kid in college and one at home. Even for my husband and me alone, we could not be squeezed into 1200 SF any more. But when we were both in graduate schools without kids nearly twenty years ago, we rented efficiency, and saved money from our stipends. Our combined stipends were about $1500 per month (less during summer, since Hs stipend was 9-month based) and we lived in a big city then. When we had our first kid, we both were still in graduate schools. Some people suggested to me that we should apply for food stamps; I was shocked and felt humiliated. I told them we did not need food stamps. During the first 4 years when we were married, mu husband and I never went to any restaurants, including fast food restaurants. We never thought that we were really poor either. We never thought that society should help us or owe us anything. Regardless how little we had then, we lived under our mean and saved. </p>
<p>My husband is more frugal than I am. However, if I did not take initiative to look for houses, we would not be in our current house or the prior house. Even the current market value of our house is probably lower than our purchasing price, we like this house anyway. We have a 5-year ARM on this house.</p>
<p>First off, no bail-out for any but owner-occupied first homes. Vacation property, condos bought pre-construction in hopes of selling at a profit when the building was done, etc. get sympathy like someone who bought stock in a start-up that failed but none of our taxpayer money.
We lived in Houston in the 80’s. Lost 30% on a house we’d had for 4 years. There were 8 foreclosures in our small neighborhood when we had to put ours on the market… don’t recall Reagan asking the rest of you to help Houston out.</p>
<p>dragonmom, we are not under water if my post misled you. No bail out on us here. </p>
<p>I was simply amazed with frugality of BCE, a quite successful engineer, a savvy investor and apparently doing well, but continue to stay in a 1200 SF house for many years without update to a bigger house. I thought I was frugal, which is in no comparison with BCE. But anyway, we did calculate conservatively when we made the purchase of our current house. We always live under our mean.</p>
<p>There are a number of amazingly frugal, disciplined posters here at CC that humble me too. We spent too much on our house, not for the income that H was making, but in terms of long term planning. Not expecting a bail out here. We are not under water. The situation, however, has caused us the problem that we are now stuck in our house that we want to downsize because availability of mortgages has dried up. By addressing the base of the problem which are those homeowners who can not pay for their homes due the the terms of the loans they foolishly took, we may be able to get things slowly moving again. That the situation occurred is hurting everyone, including those who were frugal and careful. If you have to move now due to emergency or job situations, you could have a problem as your house is just not going to sell easily at all. I doubt we will get what the house may have gone for a couple of years ago; not for a long, long time anyways. That isn’t the issue. That is always a risk when you buy a house. The problem occurs when things are so widespread with folks losing their home. Traumatic for them. That they foolishly took a sharply increasing ARM is their mistake, and the mistake of the banks for so enthusiastically offering this option. The folks are paying bigtime for it. The banks are using the bail out money right now to subsidize their losses. I would like to see some of that money going to the homeowner. As I described in a post above, I am not proposing handouts. The money will be to keep folks in their home, but there will be a price for them to pay as well. It would not be a bailout that most if anyone would want, it is a last resort thing. Just like I don’t care to stand in a line for the soup kitchen or the food pantry, though I love a bargain, and I don’t begrudge the free food for those who need it. Shelter and home is very important too.</p>
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I know a few wealthy people that are very frugal and they are not on CC. Some even own 5 houses in CA, all paid for. How frugal? They would not even think of purchasing a $300 grill, opting for a $65 grill instead. When they throw a big party, they borrow from their relatives to use the $300 grill. However, they are extremely non-frugal when it comes to college education. They have no problem spending $50k on an Ivy.
I don’t know if I want to be that frugal but there are other people out there.</p>
<p>I have a close friend who is very frugal. He is the epidemy of the “Millionaire Next Door”. Drives an old modest car that he keeps in good condition, but never buys new or luxury models. Has a small, modest house in a good, but not wealthy neighborhood. He would be the sort that would not buy a grill or any expensive extra if he could do without. This allows him to spend freely on things really important to him.</p>
<p>We bought our 1,450 sq ft house in So Cal 20 years ago and we have stayed in it raising 2 kids one that will be in college in 2 years. It has been a bit crowded for us over the years, but all in all I am happy that we stayed where we did. We are in one of the best school districts for our girls and we live close to the beach. I never worked much when the kids were little and now only work part time.</p>
<p>As a family we have travelled all over the US and the world and the girls have been very involved in owning and showing horses. These are opportunities we would never have been able to afford with a bigger house and mortgage. We are not stressed about how to pay for college for our kids as we have always lived within our means.</p>
<p>My sister is a school teacher is a small town, she and her DH now own 3 homes free & clear and are halfway through paying for a 4th. They do have rental income now that homes are paid for and one of the places is a home for a disabled family member. Of course, sister has the advantage of having bought the first two homes for less than $100 for the two of them together, which would not happen in the city. It look slike a smart way to be. Things are secure for them, but they diligently and fiercely put every spare dime towards paying off any mortgage.</p>
<p>My parents paid cash for their home, over 15 years ago, in NorCal, it has not sold for over two years. The home they were in escrow on, near me, is in a condo neighborhood with 2/3 unsold. The builders are letting my folks rent very very cheap in hopes they will buy when/if the home sells and they just rented out half the unsold ones for cash flow. Great places, good location, well built, but the market fell apart. Timing needs are rough, my parents are in their 80s and their are serious health issues. I am blessed that the builders are good people.</p>
<p>I think I have the smallest house of anyone here. 1000 sf. no master bath. twin ranch. never had more than 3 people living in it. As long as each person has a bedroom, that’s all the space I need. </p>
<p>I could barely rent an apt for what my mortgage (incl taxes and insurance) cost (under $700 month)</p>
<p>Sue, you and Garland humble me greatly. much admiration for what you have achieved in terms of financial discipline.</p>