Housing bubble still popping

[piasabird]

Just build smaller houses! Most American Houses are 3 times as big as in the 50's. Some people have a garage larger than my living space, well maybe not quite! One thing interesting is that some houses even though they are larger, cost less to cool than some older houses due to improved building techniques. People dont really need yards. In many places in the world they build mostly apartment buildings between 10 and 50 or more stories high. Makes it easier to grow crops.

 

[Texashiker]

Unfortunately the housing market represented enough wealth for enough people, and it dropped so rapidly, that settling at a new low (which may happen) could do REALLY long term damage to our economy. The ability for some people to buy houses cheaper isn't, I don't think, going to make up for that.

People that bought into a bloated market are just going to have to bite the bullet and suck it up.

If someone was dumb enough to buy a home they could not afford, or if they bought into a bloated market, too bad for them. We can not make excuses for a segment of society that feeds off stupidity.

My wife watches are lot of shows about buying homes, rental property, first time home buyers,,,. When you see a couple in their 20s looking at homes costing in the $500k range, are they stupid or something? How can someone fresh out of college, has only been in the workforce a couple of years afford a house note in the $2k a month range?

What people need is affordable housing. If the banks lose massive amounts of money because they bought into a bloated market, too bad. Nobody bails me out when I get behind on my bills. When I lose money, nobody cares. But for some reason we are supposed to prevent banks from losing money? Na, let them lose money, maybe next time the banks will not be so reckless.

Just build smaller houses! Most American Houses are 3 times as big as in the 50's.

My home is around 1,500 square feet. It is far from being a mcmassion, but its affordable.

 

[momeNt]

People that bought into a bloated market are just going to have to bite the bullet and suck it up.

If someone was dumb enough to buy a home they could not afford, or if they bought into a bloated market, too bad for them. We can not make excuses for a segment of society that feeds off stupidity.

My wife watches are lot of shows about buying homes, rental property, first time home buyers,,,. When you see a couple in their 20s looking at homes costing in the $500k range, are they stupid or something? How can someone fresh out of college, has only been in the workforce a couple of years afford a house note in the $2k a month range?

What people need is affordable housing. If the banks lose massive amounts of money because they bought into a bloated market, too bad. Nobody bails me out when I get behind on my bills. When I lose money, nobody cares. But for some reason we are supposed to prevent banks from losing money? Na, let them lose money, maybe next time the banks will not be so reckless.



My home is around 1,500 square feet. It is far from being a mcmassion, but its affordable.

Fairly sure the politicians and the boomers that vote for them will try with all their might to not let this happen, they'll enslave the next generation into an even further devalued currency, high unemployment, larger personal debt burdens, and an eroding middle class leaving every which direction just to pump enough money into the economy in order to try and re-inflate the housing bubble just in time to sell and ride off into the sunset.

 

[spidey07]

They did, briefly, thanks to teh ebil stimuhlus and first time buyers credits...

It's called a suckers' rally...

http://seattlebubble.com/blog/2011/11/29/case-shiller-seattle-home-prices-fall-into-fall/

I was talking recently, the last few months. It looks like there was a dip after they had risen.

 

[Capt Caveman]

My wife watches are lot of shows about buying homes, rental property, first time home buyers,,,. When you see a couple in their 20s looking at homes costing in the $500k range, are they stupid or something? How can someone fresh out of college, has only been in the workforce a couple of years afford a house note in the $2k a month range?

Only $2k/month? That's cheaper than renting here. If the couple is making $100k+ combined, seems quite doable to me.

 

[randomrogue]

Where I live the prices dropped 2% for the year but 3-5% in the last 3 months. Other counties near me lost as much as 16% for the year. It's a matter of who has more and better jobs.

Simple math will tell you that prices will continue to drop. Some places more than others. If you live on the beach you might take that 3% drop and if you live in the boondocks where there are no jobs than you'll see that 16% adjustment.

The problem is that home prices need to drop a TON to get back within normal ranges.

 

[Texashiker]

Only $2k/month? That's cheaper than renting here.

There is no way I would pay that, even if I could afford it, I still would not pay it.

My wife and I would relocate to a place where the cost of living is affordable.

 

[randomrogue]

There is no way I would pay that, even if I could afford it, I still would not pay it.

My wife and I would relocate to a place where the cost of living is affordable.

You have to look at it as a percentage. Not a flat number.

The issue is that if you make $100K a year and your take home is like $5.5k a month then at $2K for housing you're at 36%. Add in the other expenses associated with home ownership and suddenly your cost of housing is at 50%. That's terrible. The only reason people did that is because they thought they could get rich on real estate.

 

[Darwin333]

The problem is that this only helps first time home buyers or people who bought a longish time ago. People who bought in the rather long upswing in the market aren't going to want to sell (or buy a new house), which isn't going to help the overall market recovery. Unfortunately the housing market represented enough wealth for enough people, and it dropped so rapidly, that settling at a new low (which may happen) could do REALLY long term damage to our economy. The ability for some people to buy houses cheaper isn't, I don't think, going to make up for that.

Unfortunately I think that is necessity. The fact is that unless the average person/couple who would normally be purchasing a home can afford the average home we have only 2 real options.

1. Allow home prices to continue to fall until an equilibrium is reached.

2. Get fancy with loans again so that people can at least initially afford the payments (almost all houses are bought based on payment and NOT actual price) and potentially create a new bubble.

 

[Darwin333]

People that bought into a bloated market are just going to have to bite the bullet and suck it up.

If someone was dumb enough to buy a home they could not afford, or if they bought into a bloated market, too bad for them. We can not make excuses for a segment of society that feeds off stupidity.

My wife watches are lot of shows about buying homes, rental property, first time home buyers,,,. When you see a couple in their 20s looking at homes costing in the $500k range, are they stupid or something? How can someone fresh out of college, has only been in the workforce a couple of years afford a house note in the $2k a month range?

What people need is affordable housing. If the banks lose massive amounts of money because they bought into a bloated market, too bad. Nobody bails me out when I get behind on my bills. When I lose money, nobody cares. But for some reason we are supposed to prevent banks from losing money? Na, let them lose money, maybe next time the banks will not be so reckless.



My home is around 1,500 square feet. It is far from being a mcmassion, but its affordable.

I agree completely with letting people/entities who made stupid decisions eat their mistakes. Stupid is supposed to hurt.

The big problem that I have with it right now is that we are only making one side of the agreement take a hit. Two sides made bad decisions and both should be forced to eat their mistakes.

 

[Texashiker]

The issue is that if you make $100K a year and your take home is like $5.5k a month then at $2K for housing you're at 36%. Add in the other expenses associated with home ownership and suddenly your cost of housing is at 50%. That's terrible. The only reason people did that is because they thought they could get rich on real estate.

My wifes sister lived in LA county, her and her husband bought a house there in the early 1980s. The cost of the house back then was somewhere in the $75,000 price range.

Fast forward to 2008 or 2009, the house appraised in the $500,000 range.

This is a simple 3 bedroom, 2 bath, around 1,400 square feet with no backyard. From the backdoor to the fence is maybe 30 feet.

I doubt wages have gone up 6 - 7 fold from the early 1980s to 2008. For wages to keep pace with the price of housing, someone making $10 an hour in the early 80s would have to be making almost $70 an hour now.

Here in southeast Texas, the price of housing almost doubled between the early 1990s - early 2000s. But wages did not double. In fact, wages have stagnated over the past decade.

Lets say wages have doubled between the early 1980s and now. This means the price of housing needs to be adjusted to roughly twice the price of the early 1980s, or even the early 1990s.

 

[randomrogue]

They need to stop subsidizing stupidity. Raise the minimum down payment needed, increase credit requirements, increase income requirements, and let people foreclose who can't pay the bill.

Not letting all these homes foreclose is delaying any possible recovery. If they simply let them all go into foreclosure you'd have a huge price drop but intelligent people would buy these houses and then the market could go back to it's normal historical appreciation rate.

Something would probably have to be done with places like Detroit and Stockton but I'm starting to lean towards a simple bulldozer solution.

 

[Capt Caveman]

There is no way I would pay that, even if I could afford it, I still would not pay it.

My wife and I would relocate to a place where the cost of living is affordable.

And that's your choice. But people here want to be able to be close to jobs, schools, doctors and entertainment. A single parking spot can go for $100k.

 

[Texashiker]

They need to stop subsidizing stupidity. Raise the minimum down payment needed, increase credit requirements, increase income requirements, and let people foreclose who can't pay the bill.

Lets add - stop the banks from using flexible mortgage rates.

What caused a lot of this housing problem, was the banks raising the house note to where people could not afford to pay it.

Banks being able to raise the interest rate at will is outrageous.

And that's your choice. But people here want to be able to close to jobs, schools, doctors and entertainment. A single parking spot can go for $100k.

I will take my rural lifestyle any day over that rat race.

The last traffic jam I sat in was at the boat launch. My son and I were coming in from fishing just before sun down, and there were 4 boats ahead of us. Took us almost 30 minutes to get out of the water.

 

[randomrogue]

My wifes sister lived in LA county, her and her husband bought a house there in the early 1980s. The cost of the house back then was somewhere in the $75,000 price range.

Fast forward to 2008 or 2009, the house appraised in the $500,000 range.

This is a simple 3 bedroom, 2 bath, around 1,400 square feet with no backyard. From the backdoor to the fence is maybe 30 feet.

I doubt wages have gone up 6 - 7 fold from the early 1980s to 2008. For wages to keep pace with the price of housing, someone making $10 an hour in the early 80s would have to be making almost $70 an hour now.

Here in southeast Texas, the price of housing almost doubled between the early 1990s - early 2000s. But wages did not double. In fact, wages have stagnated over the past decade.

Lets say wages have doubled between the early 1980s and now. This means the price of housing needs to be adjusted to roughly twice the price of the early 1980s, or even the early 1990s.

I grew up in LA and my parents bought a house in a nice part of West LA in 1978 for $270,000. They sold it in 1989 for over $500,000 to a young guy with no sense. My parents thought it was nuts. The house dropped down to $300K something when he sold it at a loss. The problem is that today that house is worth $1,200,000 according to Zillow. So basically it went like this:

1978: $270,000
1989: $540,000
1993: $300,000
1998: $475,000
2012: $1,200,000 estimated cost

So the question is does that make sense. This isn't a mansion. It's a 3BD house from 1936 that has a pool in a decent part of town but does it warrant a $4,500 mortgage? I don't think so. I think of what I could do with $1,200,000 in the midwest and it's just laughable that someone would pay that kind of money for that house in Los Angeles. Salaries aren't that much higher than the rest of the country.

If suddenly the market had all these foreclosures on it it would drive these dumb prices down to sensible rates. That $540,000 price in 1989 made no sense and at $1.2M it's just a joke.

 

[Capt Caveman]

I will take my rural lifestyle any day over that rat race.

The last traffic jam I sat in was at the boat launch. My son and I were coming in from fishing just before sun down, and there were 4 boats ahead of us. Took us almost 30 minutes to get out of the water.

Different strokes for different folks. I like having an eight minute walk to work. If I decide to change jobs, I have 100s-1000s of companies a walk/bike/subway away. Same for doctors, restaurants, schools, etc.

There's been hardly any bubble here and it's b/c of demand and people that want to live here for work, school, etc...

 

[IceBergSLiM]

They need to stop subsidizing stupidity. Raise the minimum down payment needed, increase credit requirements, increase income requirements, and let people foreclose who can't pay the bill.

Not letting all these homes foreclose is delaying any possible recovery. If they simply let them all go into foreclosure you'd have a huge price drop but intelligent people would buy these houses and then the market could go back to it's normal historical appreciation rate.

Something would probably have to be done with places like Detroit and Stockton but I'm starting to lean towards a simple bulldozer solution.

isn't that a double edged sword though? If all these homes forclose then the inventory of houses increases and prices fall further. More people underwater walk away = more foreclosures = rinse and repeat.

Coupled with increased standards for buying and you have tons of inventory and nobody qualified to buy. What and where is the end game of this scenario?

Here is a chart of my home value:

http://www.freeimagehosting.net/d893e

If this trend continues much longer I don't know why I should continue paying. It will make more sense to walk away even though I can afford the payments and have never missed the payments. Why am I paying for a property completely upside down that I'll likely never recover from?

If I stop paying today and bank my mortgage payments I can have 20% down on a newer property in the same area by the time the foreclosure goes through, granted the note won't be able to go in my name but I can do it.

Now I'm not even in trouble financially and I'm considering this...whats stopping everyone who is in trouble and everyone else like me?

This is a real bleak picture.

 

[Texashiker]

If this trend continues much longer I don't know why I should continue paying. It will make more sense to walk away even though I can afford the payments and have never missed the payments. Why am I paying for a property completely upside down that I'll likely never recover from?

When did a home become nothing more then an investment?

 

[the DRIZZLE]

My wifes sister lived in LA county, her and her husband bought a house there in the early 1980s. The cost of the house back then was somewhere in the $75,000 price range.

Fast forward to 2008 or 2009, the house appraised in the $500,000 range.

This is a simple 3 bedroom, 2 bath, around 1,400 square feet with no backyard. From the backdoor to the fence is maybe 30 feet.

I doubt wages have gone up 6 - 7 fold from the early 1980s to 2008. For wages to keep pace with the price of housing, someone making $10 an hour in the early 80s would have to be making almost $70 an hour now.

Here in southeast Texas, the price of housing almost doubled between the early 1990s - early 2000s. But wages did not double. In fact, wages have stagnated over the past decade.

Lets say wages have doubled between the early 1980s and now. This means the price of housing needs to be adjusted to roughly twice the price of the early 1980s, or even the early 1990s.

http://www.zillow.com/blog/research...paring-price-to-income-ratios-across-markets/

There's a tool there that lets you compare historical price to income ratios by metro area.

 

[IceBergSLiM]

When did a home become nothing more then an investment?

forget investment, its a depreciating asset at this point, you do understand whats going on right? People like me can't even hope to get back what they paid for it. When you factor in taxes and interest(forget about maintenance) its the worst financial decision anyone could make. Good luck selling a house ever again with the notion that its just like a New car.

 

[PricklyPete]

If this trend continues much longer I don't know why I should continue paying. It will make more sense to walk away even though I can afford the payments and have never missed the payments. Why am I paying for a property completely upside down that I'll likely never recover from?

If I stop paying today and bank my mortgage payments I can have 20% down on a newer property in the same area by the time the foreclosure goes through, granted the note won't be able to go in my name but I can do it.

Now I'm not even in trouble financially and I'm considering this...whats stopping everyone who is in trouble and everyone else like me?

What should be stopping you is your integrity. You made the decision to take the chance and buy the property. From an investment standpoint your risk did not work out and now you are paying the price. Suck it up and follow through with your obligations.

 

[IceBergSLiM]

What should be stopping you is your integrity. You made the decision to take the chance and buy the property. From an investment standpoint your risk did not work out and now you are paying the price. Suck it up and follow through with your obligations.

Sorry I didn't destroy the economy I have no obligation to pay for the crimes of others. Thats stupidity not integrity.

 

[Texashiker]

forget investment, its a depreciating asset at this point, you do understand whats going on right? People like me can't even hope to get back what they paid for it. When you factor in taxes and interest(forget about maintenance) its the worst financial decision anyone could make. Good luck selling a house ever again with the notion that its just like a New car.

Do you treat your car, truck, kids, computer, cell phone and wife like that?

I will never get the money back I spent on my kids. Maybe I should have abandoned them at a police department or fire station under the Moses law?

A home is more then an investment, it provides security and stability to the family. How much is a place you can call your own worth?

I probably lost $12,000 on my Toyota T100 truck. After interest I paid close to $16,000 for it. Blue book right now is only about $4,000. But you want to know something, that truck is mine. Even though I pay to have it registered with the state, yearly inspection, maintenance, gas, oil, tires,,,, its mine and nobody can take it away.

My kids cost me close to $50,000 in child support over the course of 14 years. That is money I will never get back. Maybe I should have just signed over my rights and walked away? I dont know about you, but to me $50,000 is a lot of money. Just think of the money I could have saved by abandoning my children, being selfish and walking away.

 

[randomrogue]

isn't that a double edged sword though? If all these homes forclose then the inventory of houses increases and prices fall further. More people underwater walk away = more foreclosures = rinse and repeat.

Coupled with increased standards for buying and you have tons of inventory and nobody qualified to buy. What and where is the end game of this scenario?

Here is a chart of my home value:

http://www.freeimagehosting.net/d893e

If this trend continues much longer I don't know why I should continue paying. It will make more sense to walk away even though I can afford the payments and have never missed the payments. Why am I paying for a property completely upside down that I'll likely never recover from?

If I stop paying today and bank my mortgage payments I can have 20% down on a newer property in the same area by the time the foreclosure goes through, granted the note won't be able to go in my name but I can do it.

Now I'm not even in trouble financially and I'm considering this...whats stopping everyone who is in trouble and everyone else like me?

This is a real bleak picture.

First off they shouldn't let someone walk away from a home and buy another one. That's just stupid. You're also assuming that everyone needs to sell a home. If someone goes underwater but lives in the home until they pay it off then who cares? That's no different than you buying a TV at Best Buy for $200 more than I did on Amazon. We both end up with a TV if we pay it off.

Housing is not supposed to be a get rich scheme. If you buy a home it should be a place to live. Historically I think housing has gone up about 6-8% a year so it's not a bad investment plus you get write offs. People that bought homes though expecting these 20%+ yearly increases really have no business being lent money. If you walk away you can buy your next home in cash as far as I'm concerned. The only reason these home prices are so high is because banks lent money to people who couldn't afford a home. Home prices are artificially inflated and not based on fiscal reality.

So who's going to buy all these homes? Well if I use myself as an example you're looking at someone sitting on tons of cash, no mortgage, and perfect credit. So basically I'd pick one up once they make sense. I'd probably pick up two to be honest although that's debatable since I'm currently buying a home overseas. My siblings are equally intelligent and aren't sitting on inflated mortgages. I have a brother waiting to buy. My parents are retiring and want to sell their current home and buy two smaller ones so they can live in two different climates year round. I have a cousin who bought a foreclosed home recently at a crazy steal and I have another cousin who will be in the market to buy a home in a few years. So how many houses is that? As it stands none of us are going to buy these dumb super inflated homes. So if someone with zero financial sense leaves the market someone else will jump in once prices drop to historical norms.

Prices right now are too high to rent. That's a big problem. Once real estate prices drop down to normal levels then all the idiots who lose their homes will be forced to rent from the smart people. Historically lots of people made decent money by buying property, renting it, and watching their real estate go up at normal rates on top of that. You can't do that now. Once you can you'll see people buy more than one house. As long as loans aren't just given away things should stay in check.

I just don't believe in catering to the lowest common denominator. The market is filled with stupid people and they deserve to lose their homes so that others with more sense can get buy one.

 

[IceBergSLiM]

First off they shouldn't let someone walk away from a home and buy another one. That's just stupid. You're also assuming that everyone needs to sell a home. If someone goes underwater but lives in the home until they pay it off then who cares? That's no different than you buying a TV at Best Buy for $200 more than I did on Amazon. We both end up with a TV if we pay it off.

Housing is not supposed to be a get rich scheme. If you buy a home it should be a place to live. Historically I think housing has gone up about 6-8% a year so it's not a bad investment plus you get write offs. People that bought homes though expecting these 20%+ yearly increases really have no business being lent money. If you walk away you can buy your next home in cash as far as I'm concerned. The only reason these home prices are so high is because banks lent money to people who couldn't afford a home. Home prices are artificially inflated and not based on fiscal reality.

So who's going to buy all these homes? Well if I use myself as an example you're looking at someone sitting on tons of cash, no mortgage, and perfect credit. So basically I'd pick one up once they make sense. I'd probably pick up two to be honest although that's debatable since I'm currently buying a home overseas. My siblings are equally intelligent and aren't sitting on inflated mortgages. I have a brother waiting to buy. My parents are retiring and want to sell their current home and buy two smaller ones so they can live in two different climates year round. I have a cousin who bought a foreclosed home recently at a crazy steal and I have another cousin who will be in the market to buy a home in a few years. So how many houses is that? As it stands none of us are going to buy these dumb super inflated homes. So if someone with zero financial sense leaves the market someone else will jump in once prices drop to historical norms.

Prices right now are too high to rent. That's a big problem. Once real estate prices drop down to normal levels then all the idiots who lose their homes will be forced to rent from the smart people. Historically lots of people made decent money by buying property, renting it, and watching their real estate go up at normal rates on top of that. You can't do that now. Once you can you'll see people buy more than one house. As long as loans aren't just given away things should stay in check.

I just don't believe in catering to the lowest common denominator. The market is filled with stupid people and they deserve to lose their homes so that others with more sense can get buy one.

I don't think i disagree with anything you've written. Where and when is the bottom was the question? and Why should people like me stay?