Any real estate gurus?

I'm thinking about buying a different home, current one is way to small. I keep hearing to wait, wait the market is going to bust in the next 2 years.

Should I wait or go ahead with my plans and buy (probably mid-next year). I don't want to buy a 100k house and be stuck with a 80k just because the market changes.

Rates were just raised.

If you BELIEVE the rates are going to drop drastically within 2 years then I would go with an ARM.

It's all a gamble anyway.

Housing starts are way down, which I consider a bad sign. I'm putting an addition on my current place. If you keep things simple, it can be very cost effective and a lot less risky. It can also be a major pain, if you try to make many alterations in the original house at the same time. I did that once.

I'm just adding a larger garage (my Sprinter is 2 feet taller than the current one). The old garage will stay the way it is, except I'll put a bathroom in one corner and replace the main door with a wall & a double french door. It will still be the utility room, workshop and brewery.

While I'm not a real-estate guru, here's what I do know:

1. Rates: Rates are on the rise and are going to continue rising for at least another year. If current economic indicators are to be followed, it's plausible that we'll see an 8% Prime in the next year or so. However, most mortgage companies are sub-Prime lenders who are more typicallly tied to Commercial Paper, which holds a much lower APR.

2. The Fed: With Greenspan soon retiring, we're forced with a relatively unknown person who will be in charge of the world's economy. There's three paths to follow: 1. Follow Greenspan's model of a gradually increased overnight lending rate (which is tied to Prime) 2. Buck the system and revert rates to 2002 levels in an effort to stem the hemoraging of the current economy. 3. Do nothing and let Greenspan's changes stand. It's more likely that rates will go up rather than down, so now is a great time to get into a FIXED mortgage if you're looking to open a new loan rather than an ARM, considering that 2010 could yield rates potentially at mid 1980s levels of 10+%.

3. Housing Bubble: The Housing Bubble does exist and is ready to burst, but most likely not in your area. Regions set to burst are the coastal regions like San Diego, La Jolla, San Fran, Manhattan, and the other top 10 valued areas. When those bubbles burst, some areas will experience either a residual burst or a plateau effect. The later is more likely to occur. We're expecting a plateau within the next 5 years, but there's still plenty of money to be made in the real-estate market.

Now, all things considered, if I were looking to buy a new house, I'd probably buy soon. You may not get a huge return on it like you would had you bought the house 2-3 years ago, but you'll get it at a better APR. Get into a fixed mortgage now. If rates do drop (significantly) you can always do a no cash-out refinance (where you keep your equity invested instead of the tempting offer to take it out). The rates need to drop enough to cover your cost of loan, but if you know anyone in the Mortgage industry in that area who can help you out, you can probably get the loan at low-to-no cost (ie no points).

Excellent feedback, thanks a lot!

Austin's housing is crazy but I live outside in a small town called San Marcos. I didn't really think the bubble would have any effect here but just wanted to get some feedback in general.

TxBrew said:

Excellent feedback, thanks a lot!

Austin's housing is crazy but I live outside in a small town called San Marcos. I didn't really think the bubble would have any effect here but just wanted to get some feedback in general.

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I have difficulty seeing TX in the Bubble because of the amount of available land. It's not difficult to find acreage available out there, and from what i've heard, you're not overpriced.

I'd recommend an increase in property owership without a decrease om accumulated wealth. Basically, if you could potentially rent your house, now is a good time.