I’m not advocating this approach to life by any means, but just trying to get behind the thinking of those who live this way.

Agree/Disagree?

Do you think it’s possible for prices to fall 30-40% over the next few years in nicer, newer neighborhoods in the Inland Empire, such as Rancho Cucamonga and Corona? I look at the public records for many of the homes on the market and most of the owners are already under water.

My simple calculation is based on halving peak values to get 2000 pricing and then factoring 7 years of annual appreciation at 5%, which is more in line with the long term historical rate.

BTW, waiting for prices to fall also results in a lower property tax bill.

You are doing the right thing. Shortly after your post, the stats for Southern California came out. Guess what? Sales got hammered and as we predicted, median prices jumped. Again this is because higher priced homes are still moving while lower and middle priced homes are stagnant. Save up until summer of 2008 and reevaluate at that time. No point jumping in at the peak right?

@bitterlarenter,

There was a comment how some bloggers are cutting back on their post. My guess is that many are seeing the mainstream media pick up the slack now. However, I’m not pleased with the articles because they always start out with the substance, only to end their column with a real estate bull saying “but real estate always goes up.” What message does this send to the public? Obviously they get a lot of their money from the real estate syndicate so they are biased even though they would like you to believe they aren’t.

@anon 11:29,

Again, the monthly nut mentality. It all boils down to a zero based budget mentality. Spend until you have zero each month.

@debbie,

Thanks for your comment. No, you are not a chump. In fact, the majority of Americans are not cut out to be real estate investors. That is okay. Not everyone wants to get their hands dirty with property management. You did the right thing with your husband; you live within your means and spend less than you earn. Unfortunately you are a minority.

@kevin,

Rates don’t matter in my view. It’ll break those with adjustable rates but the bubble will collapse even if the Fed becomes totally irresponsible and drops rates again. This bubble will pop.

@anon 8:18,

I appreciate your comments and you’ll see others echo your sentiments exactly. Here is the silver lining; tighter credit will make it harder for people to spend. This will cut back in this frivolous spending which we’ve been living in for nearly a decade.

@socalwatcher,

No shame in selling cars. I sold real estate. Sold real estate in SoCal. How’s that for perspective? But you can do these things ethically and within standards. However the last few years fraud and financial imprudence ran the market.
You are right about the monthly payment. Again, how many people have taken a basic finance course? Only 25% of our population has a bachelors degree. They don’t teach it in high school. So their source for knowledge? Television and the spending happy media.

@mr Vincent,

Good advice.

@anon 1:36,

You are right. If you were to put that extra $140 toward knocking down the loan, you’ll also save long term interest charges and make your loan go away in 23 years as opposed to 30. Not bad.

@don,

Everyone needs an emergency savings account of 6 months (3 months at a minimum). This means 3 months of your salary to cover basic necessities. Yet very few American’s have an emergency savings account. Could this be that we spend more than we earn?

@smashmonster,

Again I think people are slowing down because the mainstream media is printing more anti-housing articles. But the change is only occurring now. And the mainstream media isn’t completely unbiased. Guess who pays for their ads? Many real estate companies do. Have you seen the LA Times real estate section? You might as well let David Lereah be a guest writer each week.

@libubble,

You’re more than welcome to link to the article. Teaser rates are the hook for getting people into over leveraging themselves.

All;

The bubble is bursting. Is there any doubt? We just saw the new DQ numbers and they point to a very bad summer season. If summer is bad, we can easily predict a bottom falling out in Q4 or Q12008. Why? REOs, rate resets, and no more buyers. Recipe for a crash. A crash being a 15 to 20 percent drop. Might as well be technical about it right. But don’t look at the median for the crash.

Sheeple are highly attracted to the monthly payment; especially the ones that were renting previously since they are used to paying by the month. With their toxic loans at 3% for 2 or 3 years; the monthly payment seems logical to them along with the myth that they are building positive equity instead of “throwing their money away on rent”.