Buying a home when a predicted crisis is expected to hit

[CreditOCDinCali]

I would really like to purchase a home within a year, but I'm reading about HELOCS and how it's going to cause another housing crisis within the next 2-4 years. Can anyone provide more insight on HELOCS and how it'll effect the hosing market. I'm located in California.

[Anonymous]

---

@CreditOCDinCali wrote:
I would really like to purchase a home within a year, but I'm reading about HELOCS and how it's going to cause another housing crisis within the next 2-4 years. Can anyone provide more insight on HELOCS and how it'll effect the hosing market. I'm located in California.

---

I've been following the HELOC situation myself. My sister has one that's going to reset next year and it's looking more and more like she's going to wind up in default when it does. She's not in a position to refinance and even if she was it wouldn't help since she's still underwater. I know the Feds are encouraging banks to be proactive in helping their HELOC clients avoid default, but my faith in the banking industry is at an all-time low at this point, and I don't see them making much of an effort to do anything about the situation.

I doubt it's going to have much impact on the housing market overall, other than perhaps a few more foreclosures on the market; but for an individual with an upcoming HELOC reset who is underwater and/or has bad credit who cannot afford the new payments, it's going to be a personal crisis for sure.

Are you planning to purchase this year and then sell/refinance within the next 2-4 years? Is that what is worrying you?

[CreditOCDinCali]

Thanks for your feedback and to answer your question, I'm worried that of I buy my values of homes might drop. Is that possible? I'm new to this whole idea and I don't know what to make of HELOCS and if there will be an ambush of foreclosures, if you will, when HELOCS become due in the next 2-4 years

[ezdriver]

Housing prices go up and they go down. No one can tell you which way it will be going in the future. The only way that you know for sure is after it has happened. If you will be unhappy and worried after you buy, then don't buy.

[Gunnar419]

---

@ezdriver wrote:

Housing prices go up and they go down. No one can tell you which way it will be going in the future. The only way that you know for sure is after it has happened. If you will be unhappy and worried after you buy, then don't buy.

---

Agreed.

Circa 2006, people generally felt very secure about buying houses. How wrong they turned out to be! Now, there are a lot of reasons for insecurity, not only the looming HELOC crisis but signs of a general economic downturn, evidence of bubbles in the stock market, fears of a massive student loan default, etc. It appears that uncertaintanty (and worse) may be with us for a long time.

Just buy a house because it suits your needs and makes economic sense for you. Don't worry about anything else, or if you are that worried, stay out of the market. Bottom line though, is does a house, at a certain price, and on certain purchase/loan terms make sense for you or not?

[joshall]

Do you have the original article on HELOCS?

It is interesting, and worrying that mortgage interest rates keep on rising despite all these signs of weak economy.

[CreditOCDinCali]

http://nationalmortgageprofessional.com/news/54240/study-reveals-heloc-repayment-stress-horizon

[Anonymous]

---

@Gunnar419 wrote:

---

@ezdriver wrote:

Housing prices go up and they go down. No one can tell you which way it will be going in the future. The only way that you know for sure is after it has happened. If you will be unhappy and worried after you buy, then don't buy.

---

Agreed.

Circa 2006, people generally felt very secure about buying houses. How wrong they turned out to be! Now, there are a lot of reasons for insecurity, not only the looming HELOC crisis but signs of a general economic downturn, evidence of bubbles in the stock market, fears of a massive student loan default, etc. It appears that uncertaintanty (and worse) may be with us for a long time.

Just buy a house because it suits your needs and makes economic sense for you. Don't worry about anything else, or if you are that worried, stay out of the market. Bottom line though, is does a house, at a certain price, and on certain purchase/loan terms make sense for you or not?

---

Great advice. It's all about finding home that you feel gives you what you need at a price you can afford and are willing to pay for an extended period of time.

If we all speculated and waited to buy until the next bubble burst, all we'd be doing is chasing our tails for months/years/decades/forever (who knows?).

[Revelate]

---

@CreditOCDinCali wrote:
http://nationalmortgageprofessional.com/news/54240/study-reveals-heloc-repayment-stress-horizon

---

There were dozens of articles via Google when I quickly did a search, apparently stretching back several years long before the market moved as it has.

Personally I'm not going to sit on the sidelines as a result of it even though I do think for much of the market we're likely going to see a contraction (raising rates will decrease consumer buying power, prices nearly have to fall when supply dwindles); HELOC defaults are likely going to be a personal problem rather than a societal one I think: the banks managed to hold inventory for a WHILE and came out OK of the prior mortgage crisis without dumping it on the market (and dropping house prices like a rock) so that's solvable, and I know in California our tax revenues came in way higher than expected... and yet consumer spending has been a little tepid.

That money's going somewhere, and given the market keeps going up and consumer spending is flat, I don't think it's getting driven down the highway unlike the HELOC craze before.  I think we'll be OK, people are still nervous, and if they have assets to cover it, I'm not worried about a major collapse.

This is still the 7th largest economy in the world (Calfornia) or so, don't think this will be a massive issue and if it is, if I'm underwater by 100-200k even at the 3-5 year mark, if I'm not struggling with the payments and I like where I'm living, I'll be OK.  Actually I even factored that in with my most recent offer I made, slightly larger with a 3rd "bedroom" (yeah it sucks but it is partitionable space) is just more defensible depending how my life moves.

[CreditOCDinCali]

Thank you for the above information. I feel a little more secure after reading it. I think I'll just on ahead, without over analyzing and delving myself into all these news reports about a looming crisis. I'm working with a loan officer now on cleaning up my credit and I was told I could purchase in about 8 - 12 months.