Housing Crash #2 Under Way?

[JockoJohnson]

All I know is (from my own personal obervation) housing prices in the Southern part of the US (TX, LA, AR) are steady and not falling down at all.

Of course, those prices have not been going up in the double digits such as places in FL, CA (southern), NV (Las Vegas), AZ (Phoenix area), etc.

<<---has been looking for a house for a few years and about to buy one soon.

Phew, at least I see I am not the only one who has spent several years looking for a house. My wife and I have been looking for 3+ years and will hopefully have one soon. Good luck to you in your search.

 

[alkemyst]

today they only want to lend to people who don't need a loan.

Lending guidelines are still some of the most liberal ever combined with very favorable rates. Most of those that say the above have proven they can't come up with 3-4% to put down nor have employment/credit to back the payment up.

 

[Doppel]

Housing prices are generally set up by the local job market. There's no evidence of wage increases or even meaningful employment increases. It seems like there's a lot of downward room for housing.

Yep. No reason at all to think it won't keep dropping, particularly in some areas that are still overvalued or carrying a great deal of momentum downward. More than a few cities now literally more than 50% median values off the highs. Unemployment blows goats and incomes do, too, no reason to think things will get better any time soon.

 

[Jhhnn]

Lending guidelines are still some of the most liberal ever combined with very favorable rates. Most of those that say the above have proven they can't come up with 3-4% to put down nor have employment/credit to back the payment up.

I did exaggerate - I think that should have been obvious. Lots of young families, first time buyers, are caught in a catch-22 situation.

First off, the notions about buying a "starter home" & trading up in a few years went out the window with negative equity & flat to declining prices. Anybody buying a house needs to realize that they may need to keep it for many years. That influences young families to look upscale from 2br/ 1ba scenarios to at least 3br/ 2ba homes, with a corresponding price jump. Schools & commutes figure strongly as well.

So they need more up front, along with the ability to make bigger payments, and they probably need to come up with closing costs, too. So they're saving money, not borrowing it, which means their FICO score suffers... Not to mention that in many areas prices are still being artificially inflated to the point where they're bumping up against reasonable earnings/ payment ratios.

Housing is the one place where all this talk of uncertainty figures in, as well, at least wrt pending financial requirements for lenders. The current Repub sponsored impasse as to the final form of such isn't helping at all. Being cautious today doesn't mean that mortgage originators want to be prevented from raking it in somewhere down the road if another bubble can be conjured up... say, ten years from today.

 

[wirednuts]

you know i still see people buying houses they can barely afford, and they justify it saying "a house never depreciates in value"

that is the absolute biggest crock ever. even if you do wait long enough for the property to be inflated, the house has deteriorated to shit unless youve put tens of thousands into maintenance and by then you lost your profits anyway.

houses are a symbol of wealth, not a means to make it. leave that to the niche slum companies.

 

[alkemyst]

you know i still see people buying houses they can barely afford, and they justify it saying "a house never depreciates in value"

that is the absolute biggest crock ever. even if you do wait long enough for the property to be inflated, the house has deteriorated to shit unless youve put tens of thousands into maintenance and by then you lost your profits anyway.

houses are a symbol of wealth, not a means to make it. leave that to the niche slum companies.

A house historically has always been an investment and historically has always risen in value for the majority of cases. I don't think you understand what you are talking about except in terms of the last few years.

Most homes do require maintenance, but hardly equal to their appreciation over time.

Property is a limited resource and whether you rent it or own it it will be in demand.

The mid 2000's created an over build and put places on land that should never have been built on and put levels of homes in areas that simply don't have a draw at those values.

We are heading for a housing shortage at the pace we are at. Once that happens it will trigger an upswing in property values in those places worth living in.

Foreign investors and vacation home seekers are beginning to target S. Florida heavily now. Property near the ocean/intercoastal always has a value and much of it is at a steal right now.

In the end you can't expect to get rich with just a single home, but you should be able to see a steady growth in value somewhere between basic savings and aggressive stocks that allows one to build equity and upgrade or downgrade and cash out as some point.

 

[alkemyst]

I did exaggerate - I think that should have been obvious. Lots of young families, first time buyers, are caught in a catch-22 situation.

First off, the notions about buying a "starter home" & trading up in a few years went out the window with negative equity & flat to declining prices. Anybody buying a house needs to realize that they may need to keep it for many years. That influences young families to look upscale from 2br/ 1ba scenarios to at least 3br/ 2ba homes, with a corresponding price jump. Schools & commutes figure strongly as well.

Typically this was always about 5-7 years. To me that's more than a few. If you buy today in the right neighborhood (read as middle class and above), you should see an appreciation of the property over the next 7 years. Maybe a bit of a dip here and there. Many of the prime areas have already gotten back on track. The news is mostly spinning Joe Mullet living in a neighborhood where most cars are up on blocks than down on their tires or those that bought the 'McMansions' with liar loans and dreams of a quick flip.

So they need more up front, along with the ability to make bigger payments, and they probably need to come up with closing costs, too. So they're saving money, not borrowing it, which means their FICO score suffers... Not to mention that in many areas prices are still being artificially inflated to the point where they're bumping up against reasonable earnings/ payment ratios.

There are plenty of homes today at $125-150k, traditionally at 2.5x a family income added to lower rates than historically; that median household pulling in $50k a year should be able to get a home with a paltry $4500 down. I haven't seen too many people in 20 years of banking that messed up their credit by saving instead of borrowing. There should be no reason why those looking to buy a home don't have 2-3 credit lines though with higher available balances and a history of taking on some larger balances and paying them off properly.

There still is a large population that believes they should be entitled to live where they dream of though. Many that work in Silicon Valley or NYC have to huff it to work each day or live closer in subpar accommodations. For every guy in NYC that has a $10000 a month studio, there are probably 100 paying a fraction of that in something most college dorms make look bad.

Housing is the one place where all this talk of uncertainty figures in, as well, at least wrt pending financial requirements for lenders. The current Repub sponsored impasse as to the final form of such isn't helping at all. Being cautious today doesn't mean that mortgage originators want to be prevented from raking it in somewhere down the road if another bubble can be conjured up... say, ten years from today.

There is a lot to be said in owning property now and holding it for that rainy day. Banks and investors are indeed being selective in a lot of this. Most of the work-arounds/modifications people are getting are on properties the banks do not want back. The more premium pickings banks are doing less for. Especially those that have paid a lot. People don't do the math so well, but on even a modest $200k home with a typical interest rate of 6&#37;...over the course of 5 years you have paid the bank $60k in interest roughly and $12k in principal, the bank has gotten about 1/3 of what they lent you already that early on.

Those same people now may have lost work totally or now are underemployed...they go south on their payments 6 months or so, rack up $10-20k in past due interest and late fees. The bank offers to lower their payment through a rate reduction and tagging on all the fees to the loan. That $10-20k seems like nothing to most since they are paying less...however that extends the loan out another 30 years and that $10-20k is $30-60k usually if the loan goes full term.

Much of the time they end up with a higher principal than they financed originally.

The thing people miss because they are so desperate to live somewhere is they lost all credit for that original $70k+ they already paid. The banks are really only helping themselves.

Sadly this is why those with good incomes and money in the bank are able to tell the bank to stick it and take the credit hit. However, this is causing animosity with those that cannot and changing a lot of the rules. In the past on a default the bank took your home/car/boat and you lost any money you paid. Today they clipped the bankruptcy laws and allow deficiency judgments in some places...these are all things that make our capitalistic nation less capitalistic and more an oligarchy. This is also why quite a few financial writers are discussing how the middle to lower upper classes are being squeezed out.

The poor love this and the more they gain majority the more they try to vote to help that thinking it's going to help their plight. In the end if the lower upper class becomes low, it's going to paint a terrible picture for those making a fraction of their incomes.

 

[Jhhnn]

We are heading for a housing shortage at the pace we are at. Once that happens it will trigger an upswing in property values in those places worth living in.

I htink you're promulgating industry fluffery-

http://www.dsnews.com/articles/inventory-overhang-means-65m-new-households-needed-2011-06-16

The situation in Florida is nuts, with extremely high delinquency rates, enormous unsold inventory, and U3 at 12&#37;, U6 considerably higher. Anybody buying real estate in Florida better not need a job to go with it... and probably won't want to leave it unoccupied part of the year unless it's in a secured community...

 

[alkemyst]

I htink you're promulgating industry fluffery-

http://www.dsnews.com/articles/inventory-overhang-means-65m-new-households-needed-2011-06-16

The situation in Florida is nuts, with extremely high delinquency rates, enormous unsold inventory, and U3 at 12%, U6 considerably higher. Anybody buying real estate in Florida better not need a job to go with it... and probably won't want to leave it unoccupied part of the year unless it's in a secured community...

I live in Florida. There is a lot of property (especially condos and rentals that were turned into them) that have major issues. Our coastal areas are thriving. Palm Beach and Jupiter Islands are more or less unaffected. Many of the historical prime areas are back to their old levels.

Places that were once dumps and McMansions put on them now, not so hot. Places that were built in the middle of a ghetto, not so hot.

Palm Beach reported 26% more sales this past month and the state as a whole is steadily moving up. However, much of Florida no one would want to live; yet it was built up.

One trend is clear, home builders have never built so little homes since even 30 years ago. As soon as the economy improves and people stop co-habiting (kids moving back home, adults taking on roommates), there is going to be a shortage in the prime areas.

 

[Zorkorist]

Yeah, people are going to bury themselves in debt, again.

-John

 

[Zorkorist]

Face it. Real Estate is done, until Americans start making money on the margin.

Since our Government is sucking up all available money, there is nothing left for the American Dream.

-John

 

[Zorkorist]

You could go beg a Government Official for a HUD home.

-John

 

[Capt Caveman]

Not happening in my neck of the woods.

Cambridge prices defy market downturn

 

[alkemyst]

Yeah, people are going to bury themselves in debt, again.

-John

People haven't stopped burying themselves in debt. Now instead of owning a home they are renting and maxing out those same cards then skipping payments here and there.

That's why these same people cannot qualify for a mortgage when they finally find something right-priced.

 

[Doppel]

A house historically has always been an investment and historically has always risen in value for the majority of cases.

Barely. The absolute reality, that nobody seems to state regularly, is that even before the crash houses were a terrible investment. They barely appreciated faster than inflation--as one would expect (or else they'd all end up too many multiples of income after enough years such that nobody entering the work force could buy one).

The above doesn't even speak to their maintenance costs. Houses are now and have always been a weak investment (though obviously worse in the past few years).

The fact that a lot of people have a huge portion of their wealth in the house is only because the mortgage forced them to pay principal year after year.

Most homes do require maintenance, but hardly equal to their appreciation over time.

Actually, yes it is. If you plot home values to incomes to inflation to maintenance over decades you find they are a sh*ty investment. A home is somewhere to live and/or raise a family, nothing more.

You can see here that a home was a terrible investment (because this doesn't even include maintenance of the home) until around the mid late 80's and then, probably even with home maintenance, housing outpaced inflation. But so did the DOW; paying less than one's mortgage in a rental property and using the left over money in the stock market would have paid better dividends.

 

[Jhhnn]

You can see here that a home was a terrible investment (because this doesn't even include maintenance of the home) until around the mid late 80's and then, probably even with home maintenance, housing outpaced inflation. But so did the DOW; paying less than one's mortgage in a rental property and using the left over money in the stock market would have paid better dividends.

You ignore rent inflation, the fact that rent on the same place goes up over time while house payments don't. You also ignore the fact that rent is forever while mortgages can be (and often are) paid off.

Low overhead is a key ingredient to comfortable retirement, and real estate inheritance is often a source of relative prosperity across generations.

The organized top down looting of the Bush years, aka "the ownership society" has damaged the middle class in ways that we have yet to comprehend or appreciate.

By the time that the perps finish manipulating public consciousness, however, it'll be perceived by many to be Obama's fault- everything. It has to be for the Trickledown Faithful to preserve their defective world view.

 

[IceBergSLiM]

Double Dip is official for me according to zillow:

http://freehostpicture.com/images/50426986340583359598.jpg

 

[Trianon]

Double Dip is official for me according to zillow:

http://freehostpicture.com/images/50426986340583359598.jpg

well, My place can be had for 15K less now then it was back in 2002, when dollar was 60% stronger. Ouch!

 

[IceBergSLiM]

well, My place can be had for 15K less now then it was back in 2002, when dollar was 60% stronger. Ouch!

Sad thing is, outside of fairfield county, the farmington valley is probably the most desirable locations in CT...I'd hate to see the numbers if I bought somewhere else.

 

[Trianon]

One trend is clear, home builders have never built so little homes since even 30 years ago. As soon as the economy improves and people stop co-habiting (kids moving back home, adults taking on roommates), there is going to be a shortage in the prime areas.

And what would be the driving force for that to happen? Millions without decent job? Financial innovation?

 

[Doppel]

You ignore rent inflation, the fact that rent on the same place goes up over time while house payments don't. You also ignore the fact that rent is forever while mortgages can be (and often are) paid off.

Already addressed them being paid off via forced principal pay down. And rent inflation is not relevant because rent is obviously not a good investment, either. However, if your mortgage is $1500/month and your rent is $1000/month, say, and you invest that $500/month somewhere else after 30 years you could buy that same house anyway. I live in a house, it beats an apartment, but I'm under no illusions that it's an investment, it's not, it's a very expensive roof over my head.

Low overhead is a key ingredient to comfortable retirement, and real estate inheritance is often a source of relative prosperity across generations.

And a person could if they wanted buy a house with money otherwise saved or they could continue to rent with money they have theoretically saved by not living a live of home ownership. Again this is not for me. I have a house because I want a house, not because it's a good investment.

The organized top down looting of the Bush years, aka "the ownership society" has damaged the middle class in ways that we have yet to comprehend or appreciate.

By the time that the perps finish manipulating public consciousness, however, it'll be perceived by many to be Obama's fault- everything. It has to be for the Trickledown Faithful to preserve their defective world view.

No argument here, trickledown has been a bit screw job. It's a miracle that people still believe in it.

 

[blackangst1]

I did exaggerate - I think that should have been obvious. Lots of young families, first time buyers, are caught in a catch-22 situation.

First off, the notions about buying a "starter home" & trading up in a few years went out the window with negative equity & flat to declining prices. Anybody buying a house needs to realize that they may need to keep it for many years. That influences young families to look upscale from 2br/ 1ba scenarios to at least 3br/ 2ba homes, with a corresponding price jump. Schools & commutes figure strongly as well.

So they need more up front, along with the ability to make bigger payments, and they probably need to come up with closing costs, too. So they're saving money, not borrowing it, which means their FICO score suffers... Not to mention that in many areas prices are still being artificially inflated to the point where they're bumping up against reasonable earnings/ payment ratios.

Housing is the one place where all this talk of uncertainty figures in, as well, at least wrt pending financial requirements for lenders. The current Repub sponsored impasse as to the final form of such isn't helping at all. Being cautious today doesn't mean that mortgage originators want to be prevented from raking it in somewhere down the road if another bubble can be conjured up... say, ten years from today.

Your paragraph #3 is a bit incorrect. When you say they need more upfront...not really true. Many lenders still have 0 down options...USDA and VA are 0 down...FHA is 3.5% down...Home Path is 3% down...unless you meant something else?

and interest rates are the lowest theyve ever been.

 

[Trianon]

Your paragraph #3 is a bit incorrect. When you say they need more upfront...not really true. Many lenders still have 0 down options...USDA and VA are 0 down...FHA is 3.5% down...Home Path is 3% down...unless you meant something else?

and interest rates are the lowest theyve ever been.

You would think by now FHA would cut off those 3% loans, considering FM^2 is $200 billion in the red and counting. But that would be too much to ask, I guess

 

[blackangst1]

You would think by now FHA would cut off those 3% loans, considering FM^2 is $200 billion in the red and counting. But that would be too much to ask, I guess

FHA is 3.5% Its Home Path thats 3. At least FHA requires closing costs be paid. whereas Home Path has no closing costs.

 

[matt0611]

Why do we not look at the other side of this?
Aren't low house prices great for Americans that want to buy?
People are living in hard times right now, I think we're better off that people can more easily afford places to live.