Has the real estate bubble burst yet?

[kranky]

It's going to get a lot worse as the ARMs reset this year and next.

Read a story somewhere on the net yesterday. A guy selling a house in Long Beach, CA. Bought it in 2004 for $355K, now wants to sell at $509K. Has to sell before February when the ARM resets because he won't be able to afford the payments. Why won't he lower the asking price? He can only cut the price $5,000 before he ends up LOSING money on the house!

How can that be? Watch.

Bought in 2004 with a 30 year fixed mortgage. When his equity soared, he refi'd with an ARM and took $60K cash out. A while later, got a HELOC and used that to buy a new truck and car. Current payment: $3700, which he can barely make. Estimated payment in February: $4400.

You'd think those people who have huge gains would be safe from a drop in home prices but it seems many of them already spent the money via doing refi's and pulling out cash.

 

[PlatinumGold]

Originally posted by: AmpedSilence
I think this totally depends on the market. I a looking at a 4/1.5 house outside of King of Prussia, PA for 165k. Looking at what the price up the river have done in the past four years; i have a strong sense that the trend will continue. I relize that using the past fours years to judge is not the best thing but, i need a place to stay and i have to have a little faith.

Well, only time will tell. So many factors its realy hard.

i just bought in yardley, pa, the other side of philly from you.

bucks county is still booming mostly due to NJ.

NY/NJ/CT is going crazy and there is no relief in sight.

imagine this for a second, imagine that the city you live within 100 miles of is getting, 2 new MLB stadiums, 1 new NFL Football stadium, 1 new NBA Arena, 1 new NHL Arena, 1 new mall the as big as any of the above mentioned projects AND a new Twin Tower replacement structure.

each of those projects are over 1 billion dollars. all within the next 5 yrs.

there is no possibility that we will see housing ease up in this area for at least the next decade.

 

[lokiju]

A real estate crash is a bad thing, it will level out to reflect people average income in the place that it's bloated but I hope that it doesn't crash/pop/burst, that would be bad for most of us.

 

[lokiju]

foreclosure -- the legal process by which the lender reposseses the house because the owner has defaulted on payments -- is the only way out.

:laugh:

Like that's the only option! These news people are sooo damn funny with their dooms day theories!

How about the owner requesting a Short Sale from the lender?

There are always other options, there isn't always educated home owners.

 

[I Saw OJ]

I for one hope they start coming down soon. I'll be in the position to buy a house in about 3 years, and I hope I will be able to afford something other than a ghetto POS.

 

[vi edit]

Market already re-adjusted a bit in Omaha. Our house lost about 3% in value from a year ago. We were lucky and sold in 5 days, but we were *very* competively priced and offered a very desireable lot.

Houses that listed in April are still for sale. Very, very few "sold" signs sitting in yards. Construction has really slowed down as well. A year ago the model home sales offices were elbow deep with people buying, right now I can probably count on one hand the number of people that stop by them.

Developers over built and have an excess inventory. New homes were the same price as used and killed the secondary market.

It's not that fun.

 

[edro]

House sales have slowed down which have resulted in dropped prices.

That is the situation (as I see it) in Columbus, Ohio.

 

[vi edit]

Originally posted by: edro
House sales have slowed down which have resulted in dropped prices.

That is the situation (as I see it) in Columbus, Ohio.

Well, 1.5%(+) higher interest rates don't help either. That's around $250 a month difference on a $250,000 home. People simply can't be as wild with their purchases. It costs you much more for every dollar that you buy now than it did 2-3 years ago.

 

[GrammatonJP]

Similar in NY, we used to see houses in 850-950k.. now only new construction are that high.. the 850k fallen to around 750k.. still high.. but eventually it'll fall more.. i hope

 

[DurocShark]

Originally posted by: Gooberlx2
Doesn't it really just depend on where you live? Out here, in Denver, I see sooo many new housing developers, offering new houses with newer, cooler, better, amenities for as low as most of the pre-owned houses being put on the market. Seems like a lot of people would rather just buy new at the same price. So a lot of pre-owned houses are sitting on the market for quite a long time.

I doubt the same could be said of places already totally built up, or rural areas.

I'm noticing that too. I've found duplexes for $115! Nobody wants to buy a 20 year old house for 300k here when for 325k they can have a new place in Parker or wherever.

I'm waiting for reality to hit, and my job situation to stabilize.

 

[DaShen]

It may drop for a while, but unless human population growth shrinks or declines, land and homes will always be marketable. The more the population grows the more valuable land will be. Look at Tokyo (land there is freaking expensive).

Of course, it looks like the market is going to drop slightly, but that is partly due to interest rates spiking.

 

[Demon-Xanth]

It hasn't burst, but prices are dropping.

<-- watched some town houses in his area go from $190k to $170k in about 4 months.

 

[WolverineGator]

Depends on where you are. Sarasota, FL? Small downard trend. Jacksonville, FL? Stable. Me? Projected to go up 10% this year.

 

[kranky]

Originally posted by: lokiju

foreclosure -- the legal process by which the lender reposseses the house because the owner has defaulted on payments -- is the only way out.

:laugh:

Like that's the only option! These news people are sooo damn funny with their dooms day theories!

How about the owner requesting a Short Sale from the lender?

There are always other options, there isn't always educated home owners.

Unfortunately, most of the homeowners get their advice from the same group of people who stuck them with an unaffordable mortgage in the first place. The same lenders who let them buy a home with a exotic no-doc zero down loan because they couldn't qualify otherwise. So I'm not that hopeful that lenders will suddenly become altruistic in their recommendations to homeowners who are screwed.

 

[dullard]

Since many of you don't go into P&N, here is a useful thread. I put all the important statistics in one place there for people to draw their own conclusions on the housing situation.

[*]Existing home sales: Now 6.76M annual rate, last year was in the 7.1-7.3M range.
[*]New home sales: Now 1.20M annual rate, last year was in the 1.2-1.4M range.
[*]New home starts: Now 1.96M annual rate, last year was in the 2.0-2.1M range.
[*]Home builder sentiment at 11 year low - probably because new permit applications are at 3 year low.
[*]Mortgage rates up 1% in just over a year.
[*]Nationwide 1st quarter 2006 prices DOWN 3.3%. 2005 price increase was smaller than 2004 price increase.
[*]In the latest report for the first time, a few states had statewide price declines.

To me, not one of those things is pointing towards a growing housing market. In fact, they all signal a slowing down of the housing market growth. Maybe, it'll slow down so far that it'll go in reverse. Maybe not.

Edit: New picture format. Using revised data if available (latest data point on graph is always preliminary data). Excel least squares linear fit is overlayed.

 

[rudder]

Thanks to Nissan HQ moving within 20 miles of my house the bubble will not burst near me for the foreseeable future.

 

[Vic]

I wouldn't bet on a bubble bursting. More likely a slowdown and a long levelling-off over the next few years. Not every market went Option ARM gangbusters like CA, and so not every market is so exposed. Many markets are still very affordable even and will likely keep going up.

And rates going up 1% in a year's time is not that big of a deal. CA's last real estate bubble, in the early 90's, was partially triggered when rates went up more than 2% in less than 6 months.

While the Fed is likely to raise rates a quarter this month and perhaps 1 more time in the near future, I expect them to stop after that and for 30-fixed mortgage rates to level out in the mid-to-high 6's, still a historically low level.

 

[AmpedSilence]

Originally posted by: PlatinumGold

Originally posted by: AmpedSilence
I think this totally depends on the market. I a looking at a 4/1.5 house outside of King of Prussia, PA for 165k. Looking at what the price up the river have done in the past four years; i have a strong sense that the trend will continue. I relize that using the past fours years to judge is not the best thing but, i need a place to stay and i have to have a little faith.

Well, only time will tell. So many factors its realy hard.

i just bought in yardley, pa, the other side of philly from you.

bucks county is still booming mostly due to NJ.

NY/NJ/CT is going crazy and there is no relief in sight.

imagine this for a second, imagine that the city you live within 100 miles of is getting, 2 new MLB stadiums, 1 new NFL Football stadium, 1 new NBA Arena, 1 new NHL Arena, 1 new mall the as big as any of the above mentioned projects AND a new Twin Tower replacement structure.

each of those projects are over 1 billion dollars. all within the next 5 yrs.

there is no possibility that we will see housing ease up in this area for at least the next decade.

I know, one of the reasons that i want to buy now; but alas, the house i was going to buy looks like is going to fall through and now i have a limited budget as to what i can buy...

::sigh::