If the housing market bubble is bursting then...

[Deeko]

Originally posted by: Gibson486
the price of places in the city do not dictate how the market is doing.

ah, they do if you're looking to buy a condo in the city.

 

[Demon-Xanth]

Originally posted by: LegendKiller

Originally posted by: Demon-Xanth

Originally posted by: Modular
Realistically, it's not going to get as bad as some people are predicting. Once prices drop to a certain point, all the people looking for a bargain will start to buy. Once enough people start purchasing homes again the prices will begin to rise and the market will recover to some extent.

Prices here really aren't dropping very much anymore. They took a huge dive and are leveling out. The places listed for a given price range now are about the same as when I put an offer in three months ago. They've gone down a little, but not much at all. All I can say, is that I'm glad I chose to rent and not buy two years ago 🙂

Both you, and the guy above, need to take a look at the Shiller Index. It shows a nice parabola for most major MSAs and a strong downward trend for the whole country. CA is getting hammered in all cities.

It's wishful thinking that this is going to reverse anytime soon. There is not *one* positive indicator to show this is going to end up leveling out soon.

As has been stated in previous real estate threads, "my area" (sacramento) has been far from normal, and was one of the top 10 overvalued areas in the nation. When I say house prices dropped, we're talking about between 2/07 and 9/07 $300k houses became $200k houses. Since then, $200k houses have become $185k houses. $190k townhouses became $100k townhouses (there's even one listed for $75k now). The market here fell fast and hard. There's still a lot of bank-repo'ed places to be had though. So the upturn is far away. It's just not dropping as fast as it was.

 

[LegendKiller]

Originally posted by: bsobel

Where will they get the loans?

Loans are opening back up. For example most of the 2nd and 3rd quarter it was impossible to get low doc or no doc investment home loans. In the 4th quarter those started showing up again.

The rules got adjusted, and all of these lendors need to make loans to make money, so they will continue to open the flood gates this year albeit not (at the end) as wide as they did last time.

Bill

In the next two months you are going to be shocked. When earnings season starts you're going to see everything come to a halt. People really have no idea what the financial markets are like right now, I work inside them and it's not pretty.

Citi is talking about cutting 30k jobs. CFC is probably going to be bankrupt before the end of the year. Credit card companies will get hammered. Houses are only the beginning.

 

[Special K]

Originally posted by: LegendKiller

Originally posted by: bsobel

Where will they get the loans?

Loans are opening back up. For example most of the 2nd and 3rd quarter it was impossible to get low doc or no doc investment home loans. In the 4th quarter those started showing up again.

The rules got adjusted, and all of these lendors need to make loans to make money, so they will continue to open the flood gates this year albeit not (at the end) as wide as they did last time.

Bill

In the next two months you are going to be shocked. When earnings season starts you're going to see everything come to a halt. People really have no idea what the financial markets are like right now, I work inside them and it's not pretty.

Citi is talking about cutting 30k jobs. CFC is probably going to be bankrupt before the end of the year. Credit card companies will get hammered. Houses are only the beginning.

Didn't BOA extend CFC a massive loan earlier this year to keep them afloat? I take it that wasn't enough to help them?

 

[SarcasticDwarf]

Originally posted by: LegendKiller

Originally posted by: bsobel

Where will they get the loans?

Loans are opening back up. For example most of the 2nd and 3rd quarter it was impossible to get low doc or no doc investment home loans. In the 4th quarter those started showing up again.

The rules got adjusted, and all of these lendors need to make loans to make money, so they will continue to open the flood gates this year albeit not (at the end) as wide as they did last time.

Bill

In the next two months you are going to be shocked. When earnings season starts you're going to see everything come to a halt. People really have no idea what the financial markets are like right now, I work inside them and it's not pretty.

Citi is talking about cutting 30k jobs. CFC is probably going to be bankrupt before the end of the year. Credit card companies will get hammered. Houses are only the beginning.

I am not sure I agree with your statement (I don't have enough information to make a guess), but you do point out something important: The housing market is not an isolated part of the economy. You have to take into considering the lending industry, the federal government and rates, the general financial market, stock market, etc.

 

[SarcasticDwarf]

Originally posted by: Special K

Originally posted by: LegendKiller

Originally posted by: bsobel

Where will they get the loans?

Loans are opening back up. For example most of the 2nd and 3rd quarter it was impossible to get low doc or no doc investment home loans. In the 4th quarter those started showing up again.

The rules got adjusted, and all of these lendors need to make loans to make money, so they will continue to open the flood gates this year albeit not (at the end) as wide as they did last time.

Bill

In the next two months you are going to be shocked. When earnings season starts you're going to see everything come to a halt. People really have no idea what the financial markets are like right now, I work inside them and it's not pretty.

Citi is talking about cutting 30k jobs. CFC is probably going to be bankrupt before the end of the year. Credit card companies will get hammered. Houses are only the beginning.

Didn't BOA extend CFC a massive loan earlier this year to keep them afloat? I take it that wasn't enough to help them?

My undersanding is that CFC is built on the mortgage industry (and the Wikipedia article seems to support this). If that is the case then the company is almost sure to collapse. Companies simply can not absorb large losses over a short period of time.

 

[LegendKiller]

Originally posted by: Special K

Originally posted by: LegendKiller

Originally posted by: bsobel

Where will they get the loans?

Loans are opening back up. For example most of the 2nd and 3rd quarter it was impossible to get low doc or no doc investment home loans. In the 4th quarter those started showing up again.

The rules got adjusted, and all of these lendors need to make loans to make money, so they will continue to open the flood gates this year albeit not (at the end) as wide as they did last time.

Bill

In the next two months you are going to be shocked. When earnings season starts you're going to see everything come to a halt. People really have no idea what the financial markets are like right now, I work inside them and it's not pretty.

Citi is talking about cutting 30k jobs. CFC is probably going to be bankrupt before the end of the year. Credit card companies will get hammered. Houses are only the beginning.

Didn't BOA extend CFC a massive loan earlier this year to keep them afloat? I take it that wasn't enough to help them?

Yeah, BoA lent CFC $2bn in convertable debt with an $18 strike price, at the time CFC stock was at ~$20. Too bad they closed at 5.47 today. Whoever struck that deal at BoA needs to be shit canned. CFC is going to be BK by the end of the year and even if they emerge, will not hit $18 for probably 5-10 years, if not longer.

Right now, I think CFC's credit lines are all tapped out, I haven't looked at a 10Q lately.

 

[ITJunkie]

Originally posted by: LegendKiller
The prices are adjusting, it's just that houses are less liquid than stocks and cannot correct quickly. Give it another year or two and you'll see a dramatically different environment.

Check out the S&P Case/Shiller index, according to it prices are down in most major cities and the downturn is accelerating.

I would agree with this. Here in Seattle, the median home price in August of 07 was about $501,000. In December it dropped to about $456,000. Pretty big drop for only 4 months. Here's a link to the article.

 

[Svnla]

Down here, southern areas (Texas, Arkansas, Louisiana), the prices are stable or up a bit. No double digits gains or losses.

 

[HeroOfPellinor]

Originally posted by: Demon-Xanth

Originally posted by: LegendKiller

Originally posted by: Demon-Xanth

Originally posted by: Modular
Realistically, it's not going to get as bad as some people are predicting. Once prices drop to a certain point, all the people looking for a bargain will start to buy. Once enough people start purchasing homes again the prices will begin to rise and the market will recover to some extent.

Prices here really aren't dropping very much anymore. They took a huge dive and are leveling out. The places listed for a given price range now are about the same as when I put an offer in three months ago. They've gone down a little, but not much at all. All I can say, is that I'm glad I chose to rent and not buy two years ago 🙂

Both you, and the guy above, need to take a look at the Shiller Index. It shows a nice parabola for most major MSAs and a strong downward trend for the whole country. CA is getting hammered in all cities.

It's wishful thinking that this is going to reverse anytime soon. There is not *one* positive indicator to show this is going to end up leveling out soon.

As has been stated in previous real estate threads, "my area" (sacramento) has been far from normal, and was one of the top 10 overvalued areas in the nation. When I say house prices dropped, we're talking about between 2/07 and 9/07 $300k houses became $200k houses. Since then, $200k houses have become $185k houses. $190k townhouses became $100k townhouses (there's even one listed for $75k now). The market here fell fast and hard. There's still a lot of bank-repo'ed places to be had though. So the upturn is far away. It's just not dropping as fast as it was.

Placerville is not Sacramento. Vacaville is as close to Sacramento as Placerville is.

Here in Fair Oaks, home prices are about 50% higher than they were in 2002 and holding. Once lenders start loosening up and the foreclosure deals dry up, prices have a little room to go up more.

 

[Demon-Xanth]

Originally posted by: HeroOfPellinor

Originally posted by: Demon-Xanth

Originally posted by: LegendKiller

Originally posted by: Demon-Xanth

Originally posted by: Modular
Realistically, it's not going to get as bad as some people are predicting. Once prices drop to a certain point, all the people looking for a bargain will start to buy. Once enough people start purchasing homes again the prices will begin to rise and the market will recover to some extent.

Prices here really aren't dropping very much anymore. They took a huge dive and are leveling out. The places listed for a given price range now are about the same as when I put an offer in three months ago. They've gone down a little, but not much at all. All I can say, is that I'm glad I chose to rent and not buy two years ago 🙂

Both you, and the guy above, need to take a look at the Shiller Index. It shows a nice parabola for most major MSAs and a strong downward trend for the whole country. CA is getting hammered in all cities.

It's wishful thinking that this is going to reverse anytime soon. There is not *one* positive indicator to show this is going to end up leveling out soon.

As has been stated in previous real estate threads, "my area" (sacramento) has been far from normal, and was one of the top 10 overvalued areas in the nation. When I say house prices dropped, we're talking about between 2/07 and 9/07 $300k houses became $200k houses. Since then, $200k houses have become $185k houses. $190k townhouses became $100k townhouses (there's even one listed for $75k now). The market here fell fast and hard. There's still a lot of bank-repo'ed places to be had though. So the upturn is far away. It's just not dropping as fast as it was.

Placerville is not Sacramento. Vacaville is as close to Sacramento as Placerville is.

Here in Fair Oaks, home prices are about 50% higher than they were in 2002 and holding. Once lenders start loosening up and the foreclosure deals dry up, prices have a little room to go up more.

I haven't been able to change my profile since long before I moved. The new system doesn't like the dash. I'm much closer to Fair Oaks than Placerville 🙂

 

[SSSnail]

Originally posted by: ITJunkie

Originally posted by: LegendKiller
The prices are adjusting, it's just that houses are less liquid than stocks and cannot correct quickly. Give it another year or two and you'll see a dramatically different environment.

Check out the S&P Case/Shiller index, according to it prices are down in most major cities and the downturn is accelerating.

I would agree with this. Here in Seattle, the median home price in August of 07 was about $501,000. In December it dropped to about $456,000. Pretty big drop for only 4 months. Here's a link to the article.

Yes, and then look at median household income and you get the picture. It's ridiculous that I cannot afford a house.

 

[ITJunkie]

Originally posted by: SSSnail

Originally posted by: ITJunkie

Originally posted by: LegendKiller
The prices are adjusting, it's just that houses are less liquid than stocks and cannot correct quickly. Give it another year or two and you'll see a dramatically different environment.

Check out the S&P Case/Shiller index, according to it prices are down in most major cities and the downturn is accelerating.

I would agree with this. Here in Seattle, the median home price in August of 07 was about $501,000. In December it dropped to about $456,000. Pretty big drop for only 4 months. Here's a link to the article.

Yes, and then look at median household income and you get the picture. It's ridiculous that I cannot afford a house.

Again, I absolutely agree with you. I was lucky enough to buy back in 98 before everything went insane. There is no way I would be able to live where I do now if I was buying today.

 

[Rudee]

Originally posted by: Alphathree33
I should note that I live in Canada and for whatever reason, the housing market is going absolutely red hot here... prices just keep going up.

I can't tell if it's just a delayed reaction or if we're living in completely separate economic circumstances.

We SHOULD feel the pinch of any looming U.S. recession/housing troubles/dollar troubles, but we're not... and it's very odd... since we're used to feeling the side effects of American troubles.

I'm looking to buy my first home and I can afford some of the higher prices, but I'm also not dumb and am thinking about renting for another few years to see what happens.

It depends on where you are in Canada whether things are hot or not. Things were red hot here in Calgary from 2005 to the summer of 2006, now things are cooling off considerably due to the excess inventory of home on the market.

 

[Rudee]

Originally posted by: SSSnail
Anyways you look at it, the housing market is still too high relative to incomes in most areas, it will go down still.

A lot of buyers are doing 40 year mortgages here in Calgary, where the prices of homes have increased 50% to 100% in the last 3 years. Most are barely qualifying for mortgages now on traditional houses, so many are going for smaller condos instead, which are still expensive here.

 

[Greenman]

You all have forgotten the three most important criteria in relation to real estate prices, location, location, and you guessed it, location. All the areas where prices went through the roof and have since spiraled down are still popular areas to live, people still want to live there and are willing to pay a lot for the privilege. When the panic ends (and it will end), those areas are still going to be popular, a lot of people are still going to want to live there, and those homes will still be valuable.
When housing died back in 91 I heard all the same grim news, the sky was falling, homes were soon to be worthless, the crash was going to ripple through the economy and lay waste to the American dream. This round might be worse, but the reality is that it has to have a lower limit, and it will go back up.

 

[SSSnail]

Originally posted by: Greenman
You all have forgotten the three most important criteria in relation to real estate prices, location, location, and you guessed it, location. All the areas where prices went through the roof and have since spiraled down are still popular areas to live, people still want to live there and are willing to pay a lot for the privilege. When the panic ends (and it will end), those areas are still going to be popular, a lot of people are still going to want to live there, and those homes will still be valuable.
When housing died back in 91 I heard all the same grim news, the sky was falling, homes were soon to be worthless, the crash was going to ripple through the economy and lay waste to the American dream. This round might be worse, but the reality is that it has to have a lower limit, and it will go back up.

Yes, houses did go back up after the Great Depression too...

 

[kranky]

Yes, location is important. Yet in many areas - even the really nice areas - the homes will continue to drop until they are affordable. If 10,000 people want to live in an area, and 10,000 homes are available, prices can't stay high if only 5,000 people can afford to buy them.

The lending games are what enabled prices to keep rising, rising, rising, far past the point of affordability by the average area income. Now those games are over. No more can someone with a 600 FICO get a NINJA (no income, no job or assets) loan at 100% financing for a home. The pool of able buyers is much smaller. With the decline of the "investors", the pool of willing buyers is also much smaller.

Let's also not forget how low rents are in many of the "desirable" areas. Who wants to buy a house that may be stagnant in value for years, when you can rent the same home for half the monthly cost? That's also an important stat to know when prices may be done falling. As long as prices were going up, it made sense to buy because you'd rake in the profits. Now, not so much. Renting for a fraction of the cost just makes too much sense in some areas.

 

[LegendKiller]

Originally posted by: Greenman
You all have forgotten the three most important criteria in relation to real estate prices, location, location, and you guessed it, location. All the areas where prices went through the roof and have since spiraled down are still popular areas to live, people still want to live there and are willing to pay a lot for the privilege. When the panic ends (and it will end), those areas are still going to be popular, a lot of people are still going to want to live there, and those homes will still be valuable.
When housing died back in 91 I heard all the same grim news, the sky was falling, homes were soon to be worthless, the crash was going to ripple through the economy and lay waste to the American dream. This round might be worse, but the reality is that it has to have a lower limit, and it will go back up.

This is a common misconception. People often try to conceptualize the present with the past, attempting to fit the current situation into the same algorithm. This is an incorrect assumption.

1. 1991 was a pure speculative asset bubble driven by indigenous wealth and new money entering into the area.

2. 1991 was largely held to CA and a few other areas, it was definitely not nationwide.

3. 1991 was not fueled by credit, since most of the money used was not as highly levered since option arms were not given out like candy.

Unlike 1991, the current market is fueled by the credit bubble. It was sustained by ever higher assessments on the same property, allowing higher equity values, bigger mortgages, which was countered by smaller present payments given through ARM, Option ARM, 0-down, NINJA loans. This was done on a nation-wide scale. By way of comparison, in 2001 the *total* US mortgage debt was somewhere around $3Tr, by the end of 2006 that figure was north of $9Tr, about 40% of it which was variable. 20% of it was sub-prime. Almost all of subprime was variable.

Yeah, this was all "local". Sorry, it was *international*, it already brought down a German bank. The effects of this will continue to reverberate through the world for the next year or two. Housing, nationwide, will not recover for probably 10 years.

People think it's bad now, we haven't even hit "bad" yet.

 

[SampSon]

Forclosures are good for me.

 

[Greenman]

Originally posted by: LegendKiller

Originally posted by: Greenman
You all have forgotten the three most important criteria in relation to real estate prices, location, location, and you guessed it, location. All the areas where prices went through the roof and have since spiraled down are still popular areas to live, people still want to live there and are willing to pay a lot for the privilege. When the panic ends (and it will end), those areas are still going to be popular, a lot of people are still going to want to live there, and those homes will still be valuable.
When housing died back in 91 I heard all the same grim news, the sky was falling, homes were soon to be worthless, the crash was going to ripple through the economy and lay waste to the American dream. This round might be worse, but the reality is that it has to have a lower limit, and it will go back up.

This is a common misconception. People often try to conceptualize the present with the past, attempting to fit the current situation into the same algorithm. This is an incorrect assumption.

1. 1991 was a pure speculative asset bubble driven by indigenous wealth and new money entering into the area.

2. 1991 was largely held to CA and a few other areas, it was definitely not nationwide.

3. 1991 was not fueled by credit, since most of the money used was not as highly levered since option arms were not given out like candy.

Unlike 1991, the current market is fueled by the credit bubble. It was sustained by ever higher assessments on the same property, allowing higher equity values, bigger mortgages, which was countered by smaller present payments given through ARM, Option ARM, 0-down, NINJA loans. This was done on a nation-wide scale. By way of comparison, in 2001 the *total* US mortgage debt was somewhere around $3Tr, by the end of 2006 that figure was north of $9Tr, about 40% of it which was variable. 20% of it was sub-prime. Almost all of subprime was variable.

Yeah, this was all "local". Sorry, it was *international*, it already brought down a German bank. The effects of this will continue to reverberate through the world for the next year or two. Housing, nationwide, will not recover for probably 10 years.

People think it's bad now, we haven't even hit "bad" yet.

I'd be willing to bet a few banks are going to sink, that doesn't change my bottom up view, everyone needs a place to live, most are able to pay for it. So yes, the housing market will have to adjust downward, but what were seeing now is panic, not a reasonable adjustment. People are lemmings, when they see someone jump off a cliff they fight over who gets to jump next. Soon enough most people will realize that the four horsemen of the apocalypse haven't arrived just yet, and thats when the market will start to firm up.
The housing market has been in a feeding frenzy for years, it had to end, and the stupidity that allowed people to borrow money that they didn't have the means to pay back had to end as well.

 

[her209]

[Monty Burns] Excellent.

 

[Slew Foot]

The bubble took 5 years to build, it will take that long to burst.

Sacramento is a great housing market, prices are jumping like mad!
http://flippersintrouble.blogspot.com/

 

[alkemyst]

Another thing is many people still have their properties listed for insane amounts. If you check those listings you will see many have listed over a year. Those people are looking to win the lottery, not really sell.

One guy here is still asking $450k because he has a fking ficus 'fence'. It's a $225k property at best and his would be likely to sell at $175-185k. He paid $75k for it or so about 7 years ago.

 

[Rudee]

My mothers 2bdrm condo which she bought new in 2001 here in Calgary, AB for $89k sold this afternoon for $269k. That's a $180k return for about 6 and a half years she lived there.