Housing: 2007 Thread.

[Vic]

Originally posted by: DrVos

Originally posted by: Vic
...On that note, anyone with an ARM should refi into a fixed this year. I strongly recommend it.

Hi Vic,

This is exactly the position I'm in. My wife and I purchased a home when I was a senior in college. We got an ARM with a year of super low payments (we wouldn't have been able to afford a regular fixed mortgage while I worked part time) and gambled that I would get a good job as soon as I graduated. Fortunately, the gamble payed off and we are doing well money-wise.

What bothers me is that our interest rate has been ticking up .25% or so every month which has me wanting to lock in a fixed 30 year loan. The question that I have is: When? Should i wait until spring/summer/fall? Should I be looking for a certain rate?

Any light you could shed would be greatly appreciated

Anytime. Right now would be good. Low 6's with minimal closing costs would be what to look for in 30 fixed, provided your credit picture is right.

 

[nullzero]

So true, I live in Southern California and its horrible all over. I travel a lot in Los Angeles County, Orange County, and Riverside County. Tons of For Sale signs flooding the neighborhoods. Its actually pretty funny, how desperate the sellers are and the real estate agents. Vic btw the boom in the northwest was the only place across the nation seeing appreciation. You want to know why? Home Builders, Investors, and Flippers were concentrating on the Sun Belt states last 6 years. Also the homebuilders have jumped on the chance to make some good margins and have already started many new projects up north. Home buyers priced out of California, Nevada, Arizona, etc. decided to move up north. All over California the real estate market is sour... From San Francisco to San Diego. For the rest of the nation that think they are immuned think again. California has the largest population and economy of any state. The effects of the real estate bust in California will spread to the rest of the nation in a follow the leader situation.

 

[BarneyFife]

Michigan is experiencing the same problem. The market is flooded with homes and the prices are dropping like crazy. One house in my area was 290k in the summer and now the owner is asking for $245k. Another house down my street has been for sale for the last 2 years. McMansions in good neighborhoods can be had for $300-375k. The thing is that the economy in Michigan is getting worse with all the layoffs from the auto companies so I expect things to get worse. It is definately a buyers market.

 

[dullard]

Originally posted by: Vic
As I've told you many times before this, most of the country is not in so bad a situation. What is going to happen in the housing market is really going to vary region by region this year. For example, you mentioned that Sac was down 10-20% last year. While a market in my area (Salem, OR) was up 24% last year. So you really can't translate what your market conditions are like and claim it's going to be like that for the whole country.
I can guarantee you, I wouldn't buy a house in CA this year.

Overall, I agree with your intent Vic. CA is an exception - and in most cases exceptions don't prove or disprove a rule. We shouldn't focus too much on CA. And yes, housing will vary region to region.

However, I think your posts are just a bit too optimistic (I also feel posts such as LegendKiller are too pessimistic). Why? Just look at the graphs. Every main statistic fell dramatically. Those falls do harm many people directly. Heck, just yesterday the NAR released their quarterly price report which showed the largest year-over-year price drop on record AND the largest % of areas showing a drop on record. That must count for something. I really wouldn't be as optimistic as you are. No, the housing market isn't going to completely tank. Houses will always have significant value (except in the rare ghost town). I just keep reading your posts and I'm getting the impression that you are trying to make people think "Housing is regional, if I'm not in CA, I'll be fine." No, you never came out and wrote that exact phrase, but putting your posts together that is the impression I get. And that is simply not true. Housing is regional and you MAY be fine. But even if you aren't in CA, you may be in one of the ~50% of markets that showed a year-over-year price decline.

 

[smack Down]

Originally posted by: Vic

Originally posted by: Slew Foot
Prices in the CA central valley (Sac included) are down between 10-20% on a median/sqft basis and inventory just took a HUGE jump as everyone who was waiting for the "Spring Boom" tries to one up everyone else in the market. I should take some pics from my neighborhood, youll find it hysterical.

Yeah well, the Sac market is an issue unto itself. I think that's something that you continually don't want to recognize. It has just been mangled by rampant fraud and overspeculation. As I've told you many times before this, most of the country is not in so bad a situation.
What is going to happen in the housing market is really going to vary region by region this year. For example, you mentioned that Sac was down 10-20% last year. While a market in my area (Salem, OR) was up 24% last year. So you really can't translate what your market conditions are like and claim it's going to be like that for the whole country.
I can guarantee you, I wouldn't buy a house in CA this year.

You say going up 24% in a year like it is a good thing, but"past performance does not predict future performance" How do you think your market increased by 24%. Did interest rates decrease alot? Incomes increase by 24%? Did the price of lumber increase?

No I'm betting it was "rampant fraud and overspeculation"

 

[Vic]

Originally posted by: dullard

Originally posted by: Vic
As I've told you many times before this, most of the country is not in so bad a situation. What is going to happen in the housing market is really going to vary region by region this year. For example, you mentioned that Sac was down 10-20% last year. While a market in my area (Salem, OR) was up 24% last year. So you really can't translate what your market conditions are like and claim it's going to be like that for the whole country.
I can guarantee you, I wouldn't buy a house in CA this year.

Overall, I agree with your intent Vic. CA is an exception - and in most cases exceptions don't prove or disprove a rule. We shouldn't focus too much on CA. And yes, housing will vary region to region.

However, I think your posts are just a bit too optimistic (I also feel posts such as LegendKiller are too pessimistic). Why? Just look at the graphs. Every main statistic fell dramatically. Those falls do harm many people directly. Heck, just yesterday the NAR released their quarterly price report which showed the largest year-over-year price drop on record AND the largest % of areas showing a drop on record. That must count for something. I really wouldn't be as optimistic as you are. No, the housing market isn't going to completely tank. Houses will always have significant value (except in the rare ghost town). I just keep reading your posts and I'm getting the impression that you are trying to make people think "Housing is regional, if I'm not in CA, I'll be fine." No, you never came out and wrote that exact phrase, but putting your posts together that is the impression I get. And that is simply not true. Housing is regional and you MAY be fine. But even if you aren't in CA, you may be in one of the ~50% of markets that showed a year-over-year price decline.

I don't think I've ever come across as that optimistic. I just don't agree with this excessive emotionalism. I didn't agree with it when the boom was going up and everyone was shouting "You can't lose with real estate!" and I don't agree with it now that the party of fools is over.
And yeah, quite a number of people are going to get burned. I feel bad for the first time homebuyers who got in at the top, while I don't feel bad at all for most of the investors (particularly the flippers) and the frauders (as I predicted 2+ years ago, it's the rampant fraud that's really bringing this ride to an end -- that's what's killing all those non-prime lenders). But most people out there bought their homes (or transferred previous equity) 3 or more years ago, and are not going to end up in a negative equity position. Plus, most of those in poor equity positions will not NEED to sell, and so they won't even as prices fall.
You see, the same bad logic persists in the bust as did in the boom. The idea that you can profit (or loss) from the ownership of your owner-occupied dwelling. No. If you buy a house to live in, prices go up, and you sell for more than you bought it, you still have to find another house to live in. Same thing when the market goes down. Etc.

 

[Vic]

Originally posted by: smack Down

Originally posted by: Vic

Originally posted by: Slew Foot
Prices in the CA central valley (Sac included) are down between 10-20% on a median/sqft basis and inventory just took a HUGE jump as everyone who was waiting for the "Spring Boom" tries to one up everyone else in the market. I should take some pics from my neighborhood, youll find it hysterical.

Yeah well, the Sac market is an issue unto itself. I think that's something that you continually don't want to recognize. It has just been mangled by rampant fraud and overspeculation. As I've told you many times before this, most of the country is not in so bad a situation.
What is going to happen in the housing market is really going to vary region by region this year. For example, you mentioned that Sac was down 10-20% last year. While a market in my area (Salem, OR) was up 24% last year. So you really can't translate what your market conditions are like and claim it's going to be like that for the whole country.
I can guarantee you, I wouldn't buy a house in CA this year.

You say going up 24% in a year like it is a good thing, but"past performance does not predict future performance" How do you think your market increased by 24%. Did interest rates decrease alot? Incomes increase by 24%? Did the price of lumber increase?

No I'm betting it was "rampant fraud and overspeculation"

No, the lower-class inner-city neighborhoods of Oregon's capitol had been underpriced for decades. You could still buy a home in certain neighborhoods for well under $100k. Within the last couple of years, gentrification finally creeped into those areas. Now, they're hip and trendy and the homes have all been remodeled, etc. Should we have left them to decay?

 

[dmcowen674]

Originally posted by: smack Down
Did the price of lumber increase?

All building materials increased with unreasonable levels except plumbing curiously.

Hopefully now that banks have stopped giving away money to developers like drunken sailors prices will come back down to earth.

 

[Slew Foot]

Originally posted by: smack Down

Originally posted by: Vic

Originally posted by: Slew Foot
Prices in the CA central valley (Sac included) are down between 10-20% on a median/sqft basis and inventory just took a HUGE jump as everyone who was waiting for the "Spring Boom" tries to one up everyone else in the market. I should take some pics from my neighborhood, youll find it hysterical.

Yeah well, the Sac market is an issue unto itself. I think that's something that you continually don't want to recognize. It has just been mangled by rampant fraud and overspeculation. As I've told you many times before this, most of the country is not in so bad a situation.
What is going to happen in the housing market is really going to vary region by region this year. For example, you mentioned that Sac was down 10-20% last year. While a market in my area (Salem, OR) was up 24% last year. So you really can't translate what your market conditions are like and claim it's going to be like that for the whole country.
I can guarantee you, I wouldn't buy a house in CA this year.

You say going up 24% in a year like it is a good thing, but"past performance does not predict future performance" How do you think your market increased by 24%. Did interest rates decrease alot? Incomes increase by 24%? Did the price of lumber increase?

No I'm betting it was "rampant fraud and overspeculation"

Most likely from people cashing out on equity from their homes in CA to buy investment properties in the NW. It was one of the most popular investments of the last few years in CA.

 

[Slew Foot]

Originally posted by: dmcowen674

Originally posted by: smack Down
Did the price of lumber increase?

All building materials increased with unreasonable levels except plumbing curiously.

Hopefully now that banks have stopped giving away money to developers like drunken sailors prices will come back down to earth.

Price of lumber has been plummeting recently. Have you seen lumber company stocks? They're in the toilet. Another reason that builders can keep pricing new homes lower and lower while flippers/bagholders will get underpriced at every step on the road to foreclosure.

 

[dullard]

Originally posted by: Vic
Plus, most of those in poor equity positions will not NEED to sell, and so they won't even as prices fall.

You see, the same bad logic persists in the bust as did in the boom. The idea that you can profit (or loss) from the ownership of your owner-occupied dwelling. No. If you buy a house to live in, prices go up, and you sell for more than you bought it, you still have to find another house to live in. Same thing when the market goes down. Etc.

If you are not that optimistic, your posts aren't reflecting your more moderate opinion. Maybe it is because you are constantly fighting the overly pessimistic that you have to write in an optimistic way. Oh well, not that it matters.

You are correct, MOST in a poor equity position will not need to sell. The problem we get are those people who got a 1-year ARM (or other short term ARM) hoping they would earn more down the line and then that didn't pan out. These people cannot really afford the house they are in. Yes, it is a small group of people. But that small group will be severely harmed.

I agree that housing fluctuations make no difference in many moves. If you sell a house that soared in price, you just move to a house that soared in price and overall the net effect is near zero. But, that is true only if you keep the similar base price. If you go from a shack to a mansion, the price drop/rise of one does not match the price drop/rise of the other. If you go from CA to the midwest, the drop/rise of one does not match the drop/rise of the other.

Back to those (semi-rare) people who stupidly got into a house they couldn't afford certainly can't afford the ARM rate increasing. They have to sell. They have to downgrade if they get back into the market. If you downgrade in a bad market, you lose even if both houses fell in price because the better house you owned fell in price more than the fall of the downgrade home. Just one more example of the poor becoming poorer. Everything is more expensive if you are poor. Too bad the housing industry (as a whole) assisted those poor people in buying a house that they couldn't afford.

 

[dmcowen674]

Originally posted by: Slew Foot

Originally posted by: dmcowen674

Originally posted by: smack Down
Did the price of lumber increase?

All building materials increased with unreasonable levels except plumbing curiously.

Hopefully now that banks have stopped giving away money to developers like drunken sailors prices will come back down to earth.

Price of lumber has been plummeting recently.

Have you seen lumber company stocks? They're in the toilet. Another reason that builders can keep pricing new homes lower and lower while flippers/bagholders will get underpriced at every step on the road to foreclosure.

Cool.

I haven't paid much attention lately but I do have to pick up some lumber to build a utility room and an office.

 

[Slew Foot]

Originally posted by: dullard


You are correct, MOST in a poor equity position will not need to sell. The problem we get are those people who got a 1-year ARM (or other short term ARM) hoping they would earn more down the line and then that didn't pan out. These people cannot really afford the house they are in. Yes, it is a small group of people. But that small group will be severely harmed.

If by "small group of people" you men 70% of CA mortgages in the last 3 years, then yeah. SD, and the central valley are already at mid-2004 prices and the hurting here is going to get worse. Your locality may vary.

 

[Vic]

Originally posted by: dullard

Originally posted by: Vic
Plus, most of those in poor equity positions will not NEED to sell, and so they won't even as prices fall.

You see, the same bad logic persists in the bust as did in the boom. The idea that you can profit (or loss) from the ownership of your owner-occupied dwelling. No. If you buy a house to live in, prices go up, and you sell for more than you bought it, you still have to find another house to live in. Same thing when the market goes down. Etc.

If you are not that optimistic, your posts aren't reflecting your more moderate opinion. Maybe it is because you are constantly fighting the overly pessimistic that you have to write in an optimistic way. Oh well, not that it matters.

You are correct, MOST in a poor equity position will not need to sell. The problem we get are those people who got a 1-year ARM (or other short term ARM) hoping they would earn more down the line and then that didn't pan out. These people cannot really afford the house they are in. Yes, it is a small group of people. But that small group will be severely harmed.

I agree that housing fluctuations make no difference in many moves. If you sell a house that soared in price, you just move to a house that soared in price and overall the net effect is near zero. But, that is true only if you keep the similar base price. If you go from a shack to a mansion, the price drop/rise of one does not match the price drop/rise of the other. If you go from CA to the midwest, the drop/rise of one does not match the drop/rise of the other.

Back to those (semi-rare) people who stupidly got into a house they couldn't afford certainly can't afford the ARM rate increasing. They have to sell. They have to downgrade if they get back into the market. If you downgrade in a bad market, you lose even if both houses fell in price because the better house you owned fell in price more than the fall of the downgrade home. Just one more example of the poor becoming poorer. Everything is more expensive if you are poor. Too bad the housing industry (as a whole) assisted those poor people in buying a house that they couldn't afford.

Yes, it is because I am constantly fighting the overly pessimistic. It was the other way around during the height of the boom when I was being moderate against the overly optimistic. Such is the way of the internets!

As for the "stupid" people, rates are still low, should continue to remain low this year, and many of them will have the perfect opportunity to refi. For the most part, it's the overspeculative investors and flippers who are going to be the most badly hurt, and (quite frankly) I feel little sympathy for them. They should have known they were playing a dangerous game of musical chairs.

 

[theeedude]

Too bad we still have a long way to go before housing prices come back in line with economic realities.
I will be ready to buy in a few years.

 

[Vic]

Originally posted by: Slew Foot

Originally posted by: dullard


You are correct, MOST in a poor equity position will not need to sell. The problem we get are those people who got a 1-year ARM (or other short term ARM) hoping they would earn more down the line and then that didn't pan out. These people cannot really afford the house they are in. Yes, it is a small group of people. But that small group will be severely harmed.

If by "small group of people" you men 70% of CA mortgages in the last 3 years, then yeah. SD, and the central valley are already at mid-2004 prices and the hurting here is going to get worse. Your locality may vary.

And first-time homebuyers/investors in the last 3 years who will absolutely/positively need to sell their house make up what percentage of the total homeownership market?
Not nearly as much as you think.

Case in point: my GF's mother bought her house in the Sac market in 1997 for $120k. It was worth $400k a year ago, and about $320k today. Rates were decent in late '97 (high 6's), so she's never refi'ed or even taken out a HELOC. Do you think she really cares about that $80k she "lost"? No. Or a couple of my best friends own a house in Seattle in '95 for $180k that was worth $600k last year and about $540k today. Do they care about that $60k? No. It was money they never had in the first place. And I work in the industry and you don't. I talk to actual real-life homeowners day in and day out. You read internet blogs. These people are far more typical of the average homeowner in today's market than the examples you give.

 

[ntdz]

It's really about time that the housing prices started to fall back down to earth, hopefully the fall is slow and relatively painless. This correction was sorely needed, I'm just hoping it doesn't hurt the overall economy too much.

 

[dmcowen674]

Originally posted by: ntdz
It's really about time that the housing prices started to fall back down to earth, hopefully the fall is slow and relatively painless. This correction was sorely needed, I'm just hoping it doesn't hurt the overall economy too much.

The house of borrowing cards the Repubs set up?

Of course the crash will all be the Dems fault since they are in control now.

 

[ntdz]

Originally posted by: dmcowen674

Originally posted by: ntdz
It's really about time that the housing prices started to fall back down to earth, hopefully the fall is slow and relatively painless. This correction was sorely needed, I'm just hoping it doesn't hurt the overall economy too much.

The house of borrowing cards the Repubs set up?

Of course the crash will all be the Dems fault since they are in control now.

It's not either party's fault. If you want to blame it on someone, blame the fed for putting interest rates at 1%. I'm not sure this crash is going to hurt the economy all that much though.

 

[Vic]

Originally posted by: senseamp
Too bad we still have a long way to go before housing prices come back in line with economic realities.
I will be ready to buy in a few years.

"Economic realities" (a most vague and unrealistically subjective term if I may say so) would IMO be best determined by comparing rents vs. mortgage payments on comparable dwellings, with the reasonable expectation that mortgage payments will be slightly higher than rents due to the privilege, prestige, tax-deductibility, and freedom of homeownership (i.e. you don't have to ask the landlord for permission to paint the walls). Plus, homeowners are protected by a number of rights that renters are not (for example, lenders don't run criminal background checks on mortgage applicants, while that is typical for renters, plus the rental market is absolutely rampant with discrimination abuses that are not tolerated on the ownership side).

Put simply though, if rents are $1500/mo for a 3 bedroom house in your area, and the mortgage payment would be $2000 for a comparable house, then housing prices are already in line with "economic realities." If rents are $1500 and the mortgages $3000, then no. But... don't expect rents to come down. They're not. Quite the opposite, they're going up and will likely continue to do so.

 

[Vic]

Originally posted by: dmcowen674

Originally posted by: ntdz
It's really about time that the housing prices started to fall back down to earth, hopefully the fall is slow and relatively painless. This correction was sorely needed, I'm just hoping it doesn't hurt the overall economy too much.

The house of borrowing cards the Repubs set up?

Of course the crash will all be the Dems fault since they are in control now.

You are a moron. The trend in rising home values has been ongoing in most markets since interest rates began to fall from double digits in the early '90s.

 

[dmcowen674]

Originally posted by: Vic

Originally posted by: dmcowen674

Originally posted by: ntdz
It's really about time that the housing prices started to fall back down to earth, hopefully the fall is slow and relatively painless. This correction was sorely needed, I'm just hoping it doesn't hurt the overall economy too much.

The house of borrowing cards the Repubs set up?

Of course the crash will all be the Dems fault since they are in control now.

You are a moron. The trend in rising home values has been ongoing in most markets since interest rates began to fall from double digits in the early '90s.

Originally posted by: ntdz

Originally posted by: dmcowen674

Originally posted by: ntdz
It's really about time that the housing prices started to fall back down to earth, hopefully the fall is slow and relatively painless. This correction was sorely needed, I'm just hoping it doesn't hurt the overall economy too much.

The house of borrowing cards the Repubs set up?

Of course the crash will all be the Dems fault since they are in control now.

It's not either party's fault. If you want to blame it on someone, blame the fed for putting interest rates at 1%. I'm not sure this crash is going to hurt the economy all that much though.

Yes, we know I am a moron but that doesn't change the fact it was Republican policy to give away money only to place a call on it later.

 

[Vic]

Originally posted by: dmcowen674

Originally posted by: Vic

Originally posted by: dmcowen674

Originally posted by: ntdz
It's really about time that the housing prices started to fall back down to earth, hopefully the fall is slow and relatively painless. This correction was sorely needed, I'm just hoping it doesn't hurt the overall economy too much.

The house of borrowing cards the Repubs set up?

Of course the crash will all be the Dems fault since they are in control now.

You are a moron. The trend in rising home values has been ongoing in most markets since interest rates began to fall from double digits in the early '90s.

Originally posted by: ntdz

Originally posted by: dmcowen674

Originally posted by: ntdz
It's really about time that the housing prices started to fall back down to earth, hopefully the fall is slow and relatively painless. This correction was sorely needed, I'm just hoping it doesn't hurt the overall economy too much.

The house of borrowing cards the Repubs set up?

Of course the crash will all be the Dems fault since they are in control now.

It's not either party's fault. If you want to blame it on someone, blame the fed for putting interest rates at 1%. I'm not sure this crash is going to hurt the economy all that much though.

Yes, we know I am a moron but that doesn't change the fact it was Republican policy to give away money only to place a call on it later.

The need for conspiracy theories and scapegoats is the sign of a weak mind. The issue is far more complicated than your pretty little picture of evil nebulous partisan hackery.

 

[Slew Foot]

Originally posted by: Vic
If rents are $1500 and the mortgages $3000, then no. But... don't expect rents to come down. They're not. Quite the opposite, they're going up and will likely continue to do so.

The house I rented last year for $1500 would require about $4000/mo if I bought it. You ought to come down to CA sometime and see the carnage about to take place. The major industry the last few years was building homes and flipping them. Oh yeah, and all the flippers who cant selling are trying to rent their units out now, so I renegotiated my rent to $1400.

Not to mention all the losers who are getting foreclosed on, they're probably out of the housing market for a while.

I dont read about it on the internet, this is a part of my daily life.

 

[Slew Foot]

So I took a 15 minute walk and came up with these:

The two on the left areforeclosures from some Russian scam, the two on the right came on the last couple weeks

Another trio of fun, missed one though

No bubble here, only one house for sale on this street

The two on the right have been on sale for months, they change agents every couple months, the one on the left is a rental.

The one on the left was sold earlier but the buyer backed out

The one on the right is a foreclosure


Yup Buy now or be priced out forever!!!! A-holes....