Be Very Careful if you are buying a house!

Be very careful if you are a home buyer right now. The majority of purchases are going to be losing deals as the housing bottom is not here yet! That doesn't mean that every house purchase is going to be a losing one. However, the majority of them will be!

Especially if you plan on putting a house on mortgage, then this is going to increase debt even higher. The interest rates will go higher soon and this should cause problems.

If you have a lot of money and you find a property that can work very well for whatever it is that you plan on doing over the next little while, then it can be a great investment. Especially if you are paying Fiat dollars for it and not taking a mortgage. But once again, not many houses are a deal. Most house purchases will cause problems down the line for a lot of people.

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[spoonman73]

Agreed. However, that is because the housing market had already topped (July 05) when this index came out. But, if you look at the IYR,HXB they follow the same path as the stock market. Major lows 11-21-08,march-09,july-09 same as NASDAQ, DOW, SPX,NYSE etc. Using this same logic, could we not infer that housing may be bottoming as we speak? Just as it topped with housing stocks in July-05. Always trust your charts- not fundamentals.

[endlessmountain]

I disagree in not trusting the fundamentals, for mixing the two together seems the best.

With people not able to afford houses and increase foreclosures it is very obvious that housing is not bottoming. However, I use inflation adjusted to get true realities on where it is going. For if inflation goes way out of control you can get more accurate readings.

[spoonman73]

Are you referring to the XHB? Housing stocks topped in july 05 preceding the housing crash. With the stock market as a leading indicator, it looks as if the housing bottom is being put in right now. Also, William Oneill has stated that the stock market bottom is in and that we are in a recovery phase.However, even though he is a genuis I don't deny the possibility that this could be a bear market rally as the market is deviant. And the more they cheer on CNBC, the more nervous I get.

[endlessmountain]

IYR is the best ETF I know, and the homebuilders came out in 2006 and only managed to gained around 2% from its original open and fell from the outset.

[spoonman73]

What measurement or index are you using to determine a housing bottom?

[endlessmountain]

i am in need of charts to determine. Real Estate ETF is ok, but it would be based on foreclosure, buyers and all these factors. I know that it is a long way from being better, that a real economic recovery needs to happen for this to be true.

[CrackerJackLee]

a house is not an investment - it is a debt - a loser game. buy a house to live in - that you like. if you want profit, then flip houses - where you buy & sell within months. if you buy and hold, your profit is really inflation. think about it. there is no gain. and when you buy your new house, all your "profit" gets rolled into that. BUY A HOME - FLIP A HOUSE. and upon retirement, the market may be against you. real estate agents have you fooled into house-poor zombies with $ signs in your eyes

[CrackerJackLee]

that being said, some do make a profit - but it's like a crap game. you wouldn't gamble 250K on a roulette table but you spend your whole life as a wage slave to end up no further ahead.

[Riverfrog72]

Never bought or sold a home? Why are you giving advice?

[TheCashistrash]

No jobs means No real estate market. Prices will keep going down mainly due to no jobs. If hyper inflation creeps in that may help stabilize the housing prices but unlikely if there is huge amount of people unemployed. Hyperinflation is going to kill the dollar but you will see fuel costs food and other necessities rise along with inflation. Best place to put your money will be in commodities.

[mnap128]

Nice vid...too bad the majority didnt see your point of view many years ago....

[tdawgee]

so,who has cash to pay for a house ??

You ???

[rickvanman]

Canada looks just like England this time of year!

Great advice as always Derek - I think the same principals appy over here too.

Thanks for sharing.

[spoonman73]

fair enough