Moody's predicts GR housing market bottom in 3rd Qtr 07

[GRDadof3]

Dave Ramsey, the financial guru who preaches saving money, cutting up credit cards, $0 debt and 15 year fixed rate mortgages, says now is a great time to buy a home in West Michigan if you are in good financial shape:

Dave Ramsey's advice on handling the Michigan economy

"If the economy is hurting and it is, it's always a good time to buy a house. As long as you're in good shape financially," Ramsey says.

The only debt Ramsey allows in his program is for a mortgage, and only a 15-year fixed-rate mortgage. If you can't afford a 15-year mortgage, Ramsey is quick to point out, "you bought too much house."

Ramsey went further in warning not to be scared of buying a home right now.

"West Michigan's economy isn't going to be down forever," he says. "Five years from now, if you bought a bunch of real estate you're going to look like a genius."

[mlc99]

Dave Ramsey, the financial guru who preaches saving money, cutting up credit cards, $0 debt and 15 year fixed rate mortgages, says now is a great time to buy a home in West Michigan if you are in good financial shape:

[DwntwnGeo]

I don't get this 15 year fixed rate idea...I really don't think most people can afford to make the 15 year mortgage payments. The banks have been offering 30 year fixed mortgages for years with the idea that you can write off part of the interest and the value of homes have generally increased over time. A home was never intended to get your rich, it was there for you to live in and make some money when you sell it.

[GRDadof3]

The money you can/will save from the 16th year to the 30th year greatly outweighs the little you can write off each year on taxes.

[jbr12]

I don't get this 15 year fixed rate idea...I really don't think most people can afford to make the 15 year mortgage payments. The banks have been offering 30 year fixed mortgages for years with the idea that you can write off part of the interest and the value of homes have generally increased over time. A home was never intended to get your rich, it was there for you to live in and make some money when you sell it.

[AlexPKeaton]

And you point about making 'some' money is a little off base. Real estate is one of the best investments a person can make. It might not seem like it now because of the current economy, but historically there are few investments that payback like real estate can.

[mlc99]

$95,000 - 15 years - $907/month

$95,000 - 30 years - $697/month

[DwntwnGeo]

Lets be honest here, $95,000 is going to get you in the country or in the inner city and I think that most people would choose to live in a house that is valued at more than $95,000. So looking at a $200,000 loan the payments are now:

$200,000 - 15 years - $1,797/month

$200,000 - 30 years - $1,330/month

Nearly $500 difference...So what is a family to do? Buy the cheaper house in the city/country or go for a fixed 30...I would go for the fixed 30 anyday. Remember, you are getting use out of your investment unlike traditional stock/IRA.

[AlexPKeaton]

Run the same numbers assuming you invested the $500 each month in something earning 8% annually. If the investment returns more than your mortgage interest rate, which is pretty likely over the long term, then it really makes sense to use a 30-year mortgage and use your improved cash flow to invest.

I don't really care for Dave Ramsey because his advice is really targeted to people who have already gotten themselves into financial trouble. Being frugal is good advice for anyone, but not using a credit card? At all? That seems targeted to people who can't handle a credit card. Many people can't. But what if I'm responsible with my money and pay my credit card off every month? In general he's a good guy to listen to, but if you're responsible and capable of making your own decisions you should do so.

Everything has an opportunity cost, including paying down mortgage debt. It all comes down to priorities and choices. Some people would just blow that extra $500/month on useless junk, and those people really may be better off putting it towards their mortgage. It's a similar deal with renting vs. owning. You can save money renting, and if you were to invest the difference you would likely do just as well as somebody who owns a house. But, how many people would actually do that?

[jbr12]

With a 30-year mortgage there's nothing preventing you from paying down principal faster. I pay an extra $100-200 each month. If I'm tight on cash for a month, however, the lower payment on the 30-year is nice. The tax benefits are nice, but you're right that it certainly doesn't make sense to pay more in interest to save a few bucks in taxes.

[GRDadof3]

Run the same numbers assuming you invested the $500 each month in something earning 8% annually. If the investment returns more than your mortgage interest rate, which is pretty likely over the long term, then it really makes sense to use a 30-year mortgage and use your improved cash flow to invest.

I don't really care for Dave Ramsey because his advice is really targeted to people who have already gotten themselves into financial trouble. Being frugal is good advice for anyone, but not using a credit card? At all? That seems targeted to people who can't handle a credit card. Many people can't. But what if I'm responsible with my money and pay my credit card off every month? In general he's a good guy to listen to, but if you're responsible and capable of making your own decisions you should do so.

Everything has an opportunity cost, including paying down mortgage debt. It all comes down to priorities and choices.

[AlexPKeaton]

Congrats for having the discipline for being able to pay your principle down faster.

[suydam]

As for Dave Ramsey's 15 year mortgage... part of the reason that works is that you're only allowed that debt... no other debts. No car payments, no credit card payment (ever...even once-a-month to pay it in full), no line of credit on your home to pay for a kitchen remodel, etc.

[jeang]

I don't really care for Dave Ramsey because his advice is really targeted to people who have already gotten themselves into financial trouble. Being frugal is good advice for anyone, but not using a credit card? At all? That seems targeted to people who can't handle a credit card. Many people can't. But what if I'm responsible with my money and pay my credit card off every month? In general he's a good guy to listen to, but if you're responsible and capable of making your own decisions you should do so.

Everything has an opportunity cost, including paying down mortgage debt. It all comes down to priorities and choices. Some people would just blow that extra $500/month on useless junk, and those people really may be better off putting it towards their mortgage. It's a similar deal with renting vs. owning. You can save money renting, and if you were to invest the difference you would likely do just as well as somebody who owns a house. But, how many people would actually do that?

[Rizzo]

WOODTV reports that a new detailed study shows a "spike" in foreclosures between 2004 and 2007.

I'd be curious to see how many of these foreclosed homes were primary residences.

http://www.cridata.org/

[GRDadof3]

Here's another article about the property tax valuations:

Property values, taxes seesaw

The assessor based these on the past year's home sales. I'm actually surprised the drops are only -2% to -3% for the most part.

http://blog.mlive.com/grpress/2008/02/HOMEVALUES.pdf

[GRDadof3]

WOODTV reports that a new detailed study shows a "spike" in foreclosures between 2004 and 2007.

I'd be curious to see how many of these foreclosed homes were primary residences.

http://www.cridata.org/

[GR Jackson]

Grand Rapids NOT on the list of Top 100 metro areas for foreclosures.

RealtyTrac rankings of metro area foreclosure rates

If you take a look at that list, there are a lot of other metro areas that are similar in size to GR, and even a lot that are smaller. Grand Rapids MSA is about #66 in population ranking.*

*Source

[GRDadof3]

I've been thinking about how much a recession in Grand Rapids is real or percieved. It seems to be faring better than most parts of the country. Any thoughts?

[grrwymg]

BTW: I just read that interest rates are really low again on 30 year fixed rate mortgages (like 5.5%), and Fifth Third Mortgage had a 350% jump in mortgages in Jan. 08 over Jan. 07.

[GRDadof3]

I posted this earlier in the West Michigan economy thread in the Coffee House:

Grand Rapids home sales pick up in December

Probably a one time thing? I went back and looked at existing home sales for the GRAR for the 3rd Qtr of 2007*:

Oct. 06 - 876 homes sold

Oct. 07 - 975

11.3% increase YOY

Nov. 06 - 765

Nov. 07 - 800

4.6% increase YOY

Dec. 06 - 697

Dec. 07 - 834

19.6% increase YOY

Did Moody's call it?

I also just read on RealtyTrac that foreclosures in Michigan are trending downward (fewer filings). Did we hit bottom before the rest of the country?

*http://www.mirealtors.com/news/housingstats.html

[NorthEnder]

I think it's safe to say that the Grand Rapids' housing market is definitely gaining traction. January 08 saw the 4th consecutive month of higher YOY sales of existing homes over Jan. 08. A rise of 18.9% over this time last year, and the highest number of sales since January 02 at 996 homes.

http://www.mibiz.com/absolutenm/templates/...3&zoneid=25

The low interest rates and availability of foreclosed homes probably didn't hurt.

[fotoman311]

I'm purchasing a house at about 25k less than appraised price.

My friend just bought a foreclosure for 55k less than it was purchased for in 2004.

I think sales are going up because prices are finally where they needed to be!