Housing bust coming soon?
- Thread starter Ferocious
- Start date
Anyone who thinks there isn't going to be a burst in the housing bubble with huge losses for many recent buyers is living with their head in the sand. All of the economic factors point to it happening it is just a matter of when. Idiot financing schemes are going to come back to haunt a lot of people.
Forbes recently compiled a list of the places most likely to pop in the near future. Basically it consisted of major cites on the East and West coasts, like L.A., New York, et cetera.
kranky
Elite Member
- Oct 9, 1999
- 21,019
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Just think of the risk that people take with an interest-only mortgage, especially with expensive homes. Buy a $500K house and it drops 20%, you're $100,000 in the hole.
And if that mortgage is an adjustable rate job.... and rates go up... they're trapped. Can't sell without coming up with the $100,000, and can't stay because the payment is now too high.
And if that mortgage is an adjustable rate job.... and rates go up... they're trapped. Can't sell without coming up with the $100,000, and can't stay because the payment is now too high.
You sure bout that? Little 1,000 sq ft shacks down here in the bayou's of New Orleans that used to go for $70,000 last year are now going for $300,000
Sphexi
Diamond Member
- Feb 22, 2005
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CNN did a special on this, and a fe of the realtors they interviewed said that they were renting until prices dropped, so hell, even when the person selling you the house is renting because it's obvious the bubble will burst, why would you still go through with it?
Oh, I realize it is going to be regional but don't count out the possibility of a price readjustment in places you do not think will happen. All housing, regardless of location, has been inflated artificially over the last few years due to stupidly and unrealistically low interest rates. Many people sitting on variable rate mortgages will loose their ass. If foreclosure rates go up then the glut on the market sends prices down even in areas without high prices. My house is not worth what they say it is....but we have been here 16 years, but people on my street have recently paid WAY too much for the house they were buying.
You would be surprised. There won't be a burst here but there will eventually be some price readjusting if interest rates get back to where they need to be. A lot of people have bought houses in the last five years that really couldn't afford one but money was basically free so they jumped in the market. These people are at risk and the lower priced homes are the ones that are truly overvalued.
Yes, but if there is a general bust, nobody will have the money to buy them, and interest rates would go through the roof.
kranky
Elite Member
- Oct 9, 1999
- 21,019
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They think they are smart because home prices are skyrocketing. Here are a few anecdotes from a recent article in Money magazine, about the market in San Diego.
A lady bought a $580K house last August. It's only 1000 yards from the airport and her home is on the flight path. She thinks it's already worth $200K more because of what a smaller home sold for across the street recently. She's going to borrow more and invest in a condo. "Where else can you turn a huge profit in eight months? The possibilities in San Diego are unreal," she said.
A guy bought a $150K house in 1998. In 2003 they sold it for $320K and bought another for $533K. Now they are told it's worth $800K. He's planning to sell and buy a $875K home.
A guy bought a $576K house four years ago. Two years later it sold for $800 and they bought another for $1.35 million, and put $850K MORE into it in upgrades. They are told it could sell for $2.8 million. "You got to get onto the ride. One house parlays into the next," he said.
A guy bought a home last May for $396K. They plan to put $100K into renovations and sell for $750K. "There's just so much money to be made in this market, it's hard to pass up," he said.
A guy asking $1.3 million for his house didn't get any offers for a week, then got one for $1.2 million. A neighbor told him not to take less than the asking price because she's only going to be there for two years, and she doesn't want him to screw up the comparables. "She's not being cruel - everyone who lives here is in it for the investment."
In San Diego, 66% of the mortgages are interest-only. 40% of all new jobs last year were in real estate and construction. If that's not a prescription for a disaster, I don't know what is. People don't believe the rise in prices will end. It's like a game of musical chairs, and a lot of people are going to be very sad when the music stops.
I think Californians would prefer to just sit back with the attitude "everything here is beautiful, everything here will always work itself out". Too bad no one seems to want to face the long term impact of companies leaving California to escape the whacko state government and taking a lot of the REAL jobs with them. How can people buy homes without real jobs? It can't sustain itself for much longer as soon there will not be incomes to sustain mortgages and the whole house of cards comes crashing down. I read somewhere that the average income in Sacramento is $40K and the average mortgage is $400K.....anyone see a big problem with this?
Yeah some good stuff there Kranky.
I know someone in Florida who sold there house for 80% more than what they paid for it...just THREE years later.
There are new properties in Florida being bougt, sold, and re-sold.....before construction has even started!!!
Sorta reminds me of circa late 90's....when many people thought about quiting their jobs and just living off the stock market.
I know someone in Florida who sold there house for 80% more than what they paid for it...just THREE years later.
There are new properties in Florida being bougt, sold, and re-sold.....before construction has even started!!!
Sorta reminds me of circa late 90's....when many people thought about quiting their jobs and just living off the stock market.
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