real estate prices-personal finance questiongreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Hi, First of all: i'm not from the States where most of you come from. I'm a GI from The Netherlands. I have extensively researched Y2K (daily visitor of this forum) and although I don't think it will be teotwawki, I believe there will be a severe economic impact.
Now, I'm om the verge of buying a new home. Because of low interest rates and a thriving Dutch economy, the prices of real estate boomed in the last few years. I made a good deal of money by selling my previous home.
My question is: what is a plausible scenario concerning real estate prices in relation to Y2K? If the economy wil be severely impacted: will interest go up (result: rapidly declining real estate prices) or maybe the ECB (European Central Bank) will further lower interest rates in order to positively influence the economy (look at Japan). In the latter case, prices of real estate may well be increasing further in spite of (or shall I say because of) Y2K. In that case it may be even a good momentum to buy now.
I wish I had a crystal ball........sigh...
Your thoughts and comments will be appreciated,
-- robert (firstname.lastname@example.org), March 08, 1999
Farmland will rise in price. all else will fall. Hold off on buying the house.
-- sard (email@example.com), March 08, 1999.
Keep renting for one more year. If y2k is not the end of the world, buy a house next spring. If it is bad rents will go down, prices will go down, etc... At that point, the money you have from your house sale may be enough to pay cash for a house. Not a good time to make long term decisions.
-- Bill (firstname.lastname@example.org), March 08, 1999.
Robert, Get a smart real estate lawyer in your locale. Find out if the law of your locale does or does not allow deficiency judgments on mortgages. If no deficiency judgments are allowed, you might be able to abandon the mortgage if it becomes unmanageable. You could then factor in the scenario that even if prices go down, it may be still be advantageous to own a home because homeowners might benefit from some anti-foreclosure protection. Also, mortgages may dry up after 1- 1-00.
-- Puddintame (email@example.com), March 08, 1999.
So much depends on your specific situation, but for me:
I'd rather have "real" property than money in the bank (you said you made lots of money and its probably sitting in the bank). You need a place to live: which is better (safer), the place you're now at or your intended purchase? I would try to look at it long term, For instance if the banks DO shut down, there could well be a moratorium on foreclosures. On the other hand, if we have a recession and you lose your job, will you be able to keep the house or what?
If you look at your own question, the possible scenarios are to complex to KNOW. Turmoil is the most likely and who knows how it will turn out. So I would try to make my decision on basic common sense, standard real estate purchasing questions. Also, I have seen lengthy discussions related to your question on several sites - try Michael Hyatts.
My own guess is that we will have deflation, so almost all prices will fall - I'd still rather have real property than investments.
-- Jon Johnson (firstname.lastname@example.org), March 08, 1999.
My mother just sold her house (closes escrow in 2 weeks), and she wants to buy another house (she's 75). I hope we don't find one until we get passed January 2000 - she may find the house of her dreams - cheap!
-- bardou (email@example.com), March 08, 1999.
thanks for the replies. A few remarks/thoughts: - I now live in a rented house in a crowded area, social class of this neighborhood much below average. I have a wife and 2 young children. Rental houses in a better area are very hard to get as most houses in the better areas are not for rent but personal property. So i'm very worried about our personal safety in case of a Y2K breakdown. -I'm now in a position to buy a neat house in a not-so-crowded area (ya know The Netherlands is a very crowded country) in a more "civilized"neighborhood. -Financially it is possible to put a 100% mortgage on the house and keep most of my money liquid. Low interest rate (5%) and this can be fixed for long term (15 years or longer). -My wife is also a GI so she is also worried about our current neigborhood. -I'm worried about a real estate crash however hyper inflation is also one the possible Y2K scenario's.
You see my dilemma?
Thoughts, thoughts, thoughts...........Y2K is already deeply influencing my life.
Robert from The Netherlands
-- robert (firstname.lastname@example.org), March 08, 1999.
Hey ouwe kerel, luister nu eens naar me. If Y2K is as bad as Ed Yourdon says it is going to be...One year of disruptions and ten years of depression... Most likely there will be millions of deaths from hunger, thirst, disease, cold, killings from hungry marauding gans, enzovoort. That wii cause millions of homes to sit empty all over the world. What will that do to real estate prices???? They will go rock bottom! Convert your money to gold to preserve your wealth from your sold home, and try real hard to move to a moor civilized place and rent. If we have chaos in Y2K then the price of silver and gold will go sky high! Dan kan je een kasteel kopen!!!! Hou je maar taai!
-- Freddie the Freeloader (email@example.com), March 08, 1999.
I've been wondering about house purchases as well. a) If we get a recession (my best case), housing should be cheaper, so it would make sense to hold cash. But if interest rates go down, you could refinance.
b) If we get a depression (my worst case), deflation would seem likely, except that 1) you might not be able to get a loan, due to banks coping with customer failures and 2) if majority rules, the gov't (US anyway) will try to reinflate to spare all the indebted public (credit cards, mortgages to the max).
c) In the TEOTWAWKI scenario, get a gun and learn to use it. Previous property rights will be unenforceable.
So get a house now. You will either a) be able to refinance, b) be in the same boat as lots of other debtors or c) have a nice place to defend.
-- Michael Goodfellow (firstname.lastname@example.org), March 09, 1999.