Housing Crash #2 Under Way?

Thump553 · May 31, 2011

DCal430 said:
It is mostly the lower and medium income areas that are lowering in value. The higher end areas here have been growing in value for over a year. At least that is how it is has been here, the farther away from the afulent areas the more the prices have dropped. Affluent areas have seen almost no price drop here, and many are higher than they have ever been.

Not here in CT. Fairfield County (think Dave Letterman, Wall Street bankers, etc) has been declining much more than the rest of CT. Us low and middle value areas are propping up Fairfield County.

As others have hinted in this thread, condos and co-ops are really a completely different market than single family homes. A lot of real estate speculators bought multiple condo units as investments before the crash. The market is still working through that glut and that "investor" demand is pretty much gone (except bottom feeders in FL and Las Vegas). I feel sorry for the young couples still locked into their starter condo, especially with growing families.

As to buying now I think Spidey pretty much has it right. IF your credit is peachy clean and IF it is your dream house or close to it, go for it now. Interest rates are insanely cheap if you can meet the rigorous underwriting. Interest rates are bound to go up in the future-if for no reason than there is next to no room for them to decline more.

theeedude · May 31, 2011

Silicon valley, there is a split between areas where upper middle class tech workers live and lower middle class areas like Santa Clara and San Jose. Tech areas have held up reasonably well. Immigrants are generally paranoid about their kids attending lower ranked high schools, so they are paying good money to live in Cupertino and other nice areas. In lower income areas, there has pretty much been a price over correction with lots of short sales. Houses that went for 700K during the bubble are going for 400K now. As a value shopper I am tempted to buy in one of those areas where the collapse already happened, instead of spending twice as much in areas where recession hasn't really hit that hard yet, and which could drop if there is one.

Zebo · May 31, 2011

DCal430 said:
It is mostly the lower and medium income areas that are lowering in value. The higher end areas here have been growing in value for over a year. At least that is how it is has been here, the farther away from the afulent areas the more the prices have dropped. Affluent areas have seen almost no price drop here, and many are higher than they have ever been.

I got a friend that used to have a 2M house in FL worth about $650K now. Depends it's all about jobs, where bubbles were due and where nations income is being distributed.. I bet NYC & around govt facilities in VA is rockin.

WhipperSnapper · May 31, 2011

ProfJohn said:
The really strange thing is that we may end up with a housing shortage when this is all said and done.

The problem isn't so much that there are too many houses on the market, but that there isn't enough buyers and money chasing after those houses. On top of that too few new houses are being built right now, again lack of demand.

So when the economy does recover and we enter a real recovery we could be in a situation where there aren't enough houses for those who want to buy them.

It's ironic that the nation's population is growing but the housing market is in the dumps. The problem is not that people don't need housing, but simply that an inordinate amount of people simply can't afford to purchase a house. In another thread I posted an alleged stat that our nation lost about 10% of its middle class jobs over the past ten years. It's hard for people earning $9/hour without benefits to buy a house, especially if they have student loan debt.

I don't think this housing crisis will clear up until prices drop to where people who earn $10/hour and people who have large amounts of student loan debt can finally afford to purchase houses and condos.

Also, the high gas prices and increasing food prices aren't helping matters.

WhipperSnapper · May 31, 2011

Delete (oops duplicate post).

WhipperSnapper · May 31, 2011

Saint Nick said:
I am wanting to buy a house within the next year or so...will the market still be in "good" condition to buy?

If the prices keep dropping, it might be an even better buyers' market a year from now.

Zebo · May 31, 2011

Houses (in general) will tumble after end of this year. 10-15% or more.

"If we do not see a meaningful recovery in home prices by the end of the year, we may need to contemplate impairment charges on first liens owned by banks and wholesale write-downs of second lien exposures. This implies solvency issues for BAC [BAC 11.675 -0.015 (-0.13%) ] , WFC [WFC 28.19 0.05 (+0.18%) ] , JPM [JPM 42.91 0.12 (+0.28%) ] and C [C 41.11 0.14 (+0.34%) ] , and big losses for the U.S. government and private investors," says Chris Whalen of Institutional Risk Analytics. "
http://www.cnbc.com/id/43224167
-----------------
That means they are fixin to dump houses on the market. Can't hide loses forever.

Zebo · May 31, 2011

JockoJohnson said:
That's a BIG fucking bunch of bullshit. I am not affected...or actually, I am affected in a good way. I own my SMALL home free and clear. Why? Because I bought less than I could afford so I would be comfortable. I didn't buy more than I needed. I also bought in 2003 when prices were stupid but I found a good deal. I realized prices were high and remained determined to find a good deal.

Now I have a shit ton of money saved and am going to put down more than 20% on one of these homes that some jackass can no longer afford to live in because they overpaid. I am by no means rich. My wife and I combined make around 90k but we SAVE. Imagine that...somebody saving money and not buying every little thing that they don't need.

I am not a good person for the economy because I hoard my money but will soon spend a good bit once I get my new home and look to get all the fancy shit I have been holding off.

And by the way, who do you think lives in and around Beverly Hills, etc? A bunch of rich Republicans or elitist actors who mostly align with Democrats?

Just be smart and don't max your credit cards out. I do feel bad for those that got caught in lay-offs, unfortunate events, etc. but it sure as hell isn't representative of the whole country. Most people in a bad situation are just plain financially retarded.

David thinks everything wrong in the world is republicans fault, including Bermuda triangle disappearances, you'll learn that.

dullard · May 31, 2011

WhipperSnapper said:
It's ironic that the nation's population is growing but the housing market is in the dumps.

We have ~130 million houses in the US and ~118 million households (groups of people living together, typically families). Thus, there are 12 million more homes than households. True, some households have multiple homes but still there is room for every household to have a house if they wanted and could afford it. But, we aren't really even close to a nationwide shortage of homes. Locally there may be a shortage, but not nationwide.

The population growth rate is a bit under 0.9%, and lets just assume the need for new homes after disasters and similar events brings it up to 1%. But only 67% of people have houses, so the total increase in homes needed is 0.67%. Thus, each year, we'd need 0.67% * 130 million houses = 871,000. For the benefit of the doubt, I'll round that up to 1 million homes. We built more than 1M single-family homes each year from 1992 to 2007. Thus, each year we built more and more homes than were necessary for population growth. In total during that prolonged boom, we built 4.5 million more homes than would be needed for population growth.

From 2008 onwards, we've been shorting ourselves about a half million houses per year. Even so, that 4.5 million buffer is still massive. Population growth isn't going to fill that void any time soon. Only sustained lack of building combined with population growth will fix this problem quickly.

Irony not found.

dullard · May 31, 2011

WhipperSnapper said:
If the prices keep dropping, it might be an even better buyers' market a year from now.

I suspect prices will stay low for the rest of this year (and probably well past that). But, interest rates will start rising. The fed has until the end of this year to do so. The fed ties its hands before each presidential election. Thus, they can't raise rates in 2012 (not until November at least). If they want to raise rates, they have to do it in 2011. They claimed they won't do it early 2011. But, that leaves room for rate increases at the end of 2011. The ideal combination of low prices and low interest rates may be around this September. After that the interest rate rises may likely outpace the home price drops. Waiting until this time next year, might be waiting 6 months too long.

Craig234 · May 31, 2011

If someone wanted to buy an inexpensive rental or vacation income property somewhere in the US, how would you go about picking a good market for it?

dullard · May 31, 2011

Craig234 said:
If someone wanted to buy an inexpensive rental or vacation income property somewhere in the US, how would you go about picking a good market for it?

First rule of rental property: If you can't regularly see it, you'll regularly be miserable. You'd be wise to start with propertly within easy driving distance.

Zebo · May 31, 2011

Craig234 said:
If someone wanted to buy an inexpensive rental or vacation income property somewhere in the US, how would you go about picking a good market for it?

http://www.hiexpress.com/hotels/us/en/reservation

blackangst1 · May 31, 2011

WhipperSnapper said:
It's ironic that the nation's population is growing but the housing market is in the dumps. The problem is not that people don't need housing, but simply that an inordinate amount of people simply can't afford to purchase a house. In another thread I posted an alleged stat that our nation lost about 10% of its middle class jobs over the past ten years. It's hard for people earning $9/hour without benefits to buy a house, especially if they have student loan debt.

I don't think this housing crisis will clear up until prices drop to where people who earn $10/hour and people who have large amounts of student loan debt can finally afford to purchase houses and condos.

Also, the high gas prices and increasing food prices aren't helping matters.

Im going to disagree with you, to a point. Its not that an inordinate amount of people cant afford houses, its that an inordinate amount of people cant manage their money. JockoJohnson got it right when he said

Just be smart and don't max your credit cards out. I do feel bad for those that got caught in lay-offs, unfortunate events, etc. but it sure as hell isn't representative of the whole country. Most people in a bad situation are just plain financially retarded.

The fact is, not everyone will be ABLE to afford a house. I dont think mortgage lender's requirement of mortgage+ins+PMI (if applicable) exceeding 40-50% of monthly gross is too strict. Take someone making $9/hr. Thats $1387/mo, which would put that requirement at $693, which would be about a $120,000 mortgage (with 0 down). Problem is, most people making $9/hr dont know how to budget or live within their means (not thats its an easy thing to do, and I recognize that). So when you say "
I don't think this housing crisis will clear up until prices drop to where people who earn $10/hour and people who have large amounts of student loan debt can finally afford to purchase houses and condos.", the fact is, there already IS housing available. *IF* your credit is in line.

Doppel · May 31, 2011

WhipperSnapper said:
I don't think this housing crisis will clear up until prices drop to where people who earn $10/hour and people who have large amounts of student loan debt can finally afford to purchase houses and condos.

Until houses can be built cheaper like with robots that can't happen. the price of a house in a general sense represents a level of productivity, the materials put into it and time of laborers. A person with student debt and $10/hour income simply cannot produce enough to really earn such a thing.

Housing prices will likely keep falling. Where interest goes who knows. Even if rates go up as Dullard said a couple of posts up all that's going to do is depress house prices further. I've heard, and agree with, that people shop houses on monthly payments. If you can buy 200k at 5% interest and it goes to 6% maybe your payment is the same on a 165k house (I didn't run the numbers). So it may not really matter either way. The important macro factors are that many people don't have savings and many people don't have jobs. That isn't going to change overnight, so nor should home afford ability.

And of course the time to buy is when others are scared. But, if you're sane, perhaps you'll be scared, too (or maybe not, that's the fun in it). I bought my first two cars in this recession. I have great credit, and combined with a veritable crash in new car sales I got a couple of great deals in the past year.

Craig234 · May 31, 2011

dullard said:
First rule of rental property: If you can't regularly see it, you'll regularly be miserable. You'd be wise to start with propertly within easy driving distance.

If there's a property management service for it.

Slew Foot · May 31, 2011

DCal430 said:
It is mostly the lower and medium income areas that are lowering in value. The higher end areas here have been growing in value for over a year. At least that is how it is has been here, the farther away from the afulent areas the more the prices have dropped. Affluent areas have seen almost no price drop here, and many are higher than they have ever been.

Same thing here in the Bay Area of CA. Nice neighborhoods never go down, you can always find an Asian family to pay out the nose for good schools, or some teck geek who got rich on options to pay cash for whatever youve got.

Acanthus · May 31, 2011

dullard said:
So the things that cost almost nothing are going up (oh no my sugar bill has trippled to $3 a year) and the big ticket items are down (I save $10000 / year on housing)? Other big ticket items: computers are down, cars are flat, medical expenses actually are fairly flat (slightly up, but the price increase was far less than normal years). You have to keep scale in mind and not just focus on the little items.

By the way, piped gas service (a utility bill) costs are down 1.5% from this time last year. Your examples don't really match reality.

Year over year cost changes from BLS.gov. (and these are politely massaged figures)

Meats +7.6%
Dairy and Related +6.3%
Water / Sewer / Trash Collection +5.3%
Motor Fuel +33.2%
Public Transit +9.3%
Education +3.8%

These are not costs that can be reduced or eliminated by the average family easily. They directly take away disposable income.

The only things that have stayed flat or fallen are housing prices, apparel, and electronics. (these should fall in a period of inflation, because the demand for them falls as people scramble to pay for the critical things, Mazlow's Hierarchy of needs and all that.)

The general consensus among economists is that a QE3 would once again ease the falling housing prices, but again drive up commodities and further weaken the dollar.

Acanthus · May 31, 2011

umbrella39 · Jun 1, 2011

The solution is clearly to give tax cuts to big business so they can start hiring. We are doing it here in Michigan and it's working out great! Trickle down always works! Once people are back to work they can buy/keep their homes again.

Doppel · Jun 1, 2011

dullard said:
So the things that cost almost nothing are going up (oh no my sugar bill has trippled to $3 a year) and the big ticket items are down (I save $10000 / year on housing)? Other big ticket items: computers are down, cars are flat, medical expenses actually are fairly flat (slightly up, but the price increase was far less than normal years). You have to keep scale in mind and not just focus on the little items.

By the way, piped gas service (a utility bill) costs are down 1.5% from this time last year. Your examples don't really match reality.

Everyone I know has a mortgage and we're not saving $10k/year on housing. If we refied our payments are down a bit but our property taxes keep creeping up. Basically everything I pay on a monthly basis is stagnant or up. Tuitions are up, so I need to save more for my kids. Airline tickets are up, so more there. Certain food items up, the big one of course being fuel, though. Whether it's inflation or a one eyed despot in a mountain fortress manipulating prices, the average US family spent $369/month on gas in April this year, up about $150 from the year before. Considering the average family is probably only netting about $3k or $3500 to begin with that's pretty damn significant to them. The inflation numbers are skewed; you can buy a house cheaper now and a new car much cheaper, but other items are much higher.

Greenman · Jun 1, 2011

Jaepheth said:
What? You mean building cheap houses in bulk using the lowest bidder for the last several decades resulting in a huge boost in supply, but reducing the average build quality of a home yet still having the gall to increase prices year after year and then giving credit to people who anyone with half a brain knew couldn't pay back their lenders came back to bite us!? Say it ain't so!

Seriously, a lot of new houses have more problems that need fixing than a house built 50 years ago. They're not to code, and only get put on the market due to corruption or over-worked inspectors.

I've been in the trades for over thirty years, and while I've seen some poorly built homes, I've never seen what you're describing.

When buying a home, the cutoff date is 1980.

Zebo · Jun 1, 2011

Yeah he's just wrong, maybe on wham bam thank you maam track houses but most home are better than 30 years ago.

Better insulation all around.
2-3 pane vinyl windows instead of one pane aluminum.
Pex instead of eroding copper pipe
ABS plumbing instaed of rotting steel pipe.
2x6 instead of 2x4 construction
Glue lams instead of warping 2x12s
granite instead of formica or tile
40 year or 100 year ceramics vs shake

etc etc etc

Man just thinking about this makes me recall how much I loved building houses. Wish it would come back.

Acanthus · Jun 1, 2011

Market sinks after manufacturing "unexpectedly" slows.

http://finance.yahoo.com/

Exterous · Jun 1, 2011

dullard said:
We have ~130 million houses in the US and ~118 million households (groups of people living together, typically families). Thus, there are 12 million more homes than households. True, some households have multiple homes but still there is room for every household to have a house if they wanted and could afford it. But, we aren't really even close to a nationwide shortage of homes. Locally there may be a shortage, but not nationwide.

The population growth rate is a bit under 0.9%, and lets just assume the need for new homes after disasters and similar events brings it up to 1%. But only 67% of people have houses, so the total increase in homes needed is 0.67%. Thus, each year, we'd need 0.67% * 130 million houses = 871,000. For the benefit of the doubt, I'll round that up to 1 million homes. We built more than 1M single-family homes each year from 1992 to 2007. Thus, each year we built more and more homes than were necessary for population growth. In total during that prolonged boom, we built 4.5 million more homes than would be needed for population growth.

From 2008 onwards, we've been shorting ourselves about a half million houses per year. Even so, that 4.5 million buffer is still massive. Population growth isn't going to fill that void any time soon. Only sustained lack of building combined with population growth will fix this problem quickly.

Irony not found.

What about immigration? (Or is that considered in your population growth?) I believe we get something like 1.5-2 million every year

Housing Crash #2 Under Way?

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