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alstry (35.99)

Homes 50% OFF everywhere-Don't be a "chump"

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June 14, 2008 – Comments (4)

Be careful of the crap Wall Street is peddling right now!!!!!!! 

 Right now, homes are selling for 50% off peak all over America.  We are getting to the point where many Americans can no longer afford a home because of rising expenses. 

Homes will only sell for a price that people can afford to pay.

For example, take a two income two car family earning $70K per year.  If they had $15K allocated for PITI in 2000 initially obtained a $200K mortgage.  Seven years later, its Food, Fuel, Insurance, Property Tax, and Interest Expenses have increased $15K but income has remained stagnant...that family can no longer afford its house.  Imagine if one of the family members got released from their job?

In my opinion, based on the rise of non housing related expenses, and factoring in job insecurity, fewer and fewer Americans can afford to buy any house.  As a result, even with the current 50% price reductions in many areas....we are likely to see AT LEAST another 50% reduction before this baby bottoms out.  Maybe more if interest rates keep rising and inflation goes unchecked while incomes are constrained by economic pressures.

That's right, homes that were selling for $1 million dollars at the peak will likely be able to be purchased for sub $250K.

Builders will likely be losing money for many years to come if they continue to build.  There is so much inventory right now, if builders shut down for two years, we would still likely have too much.  We are experiencing NEGATIVE absorbtion in many areas.  NEGATIVE absorbtion!!!!!!

 

 

“Josefa Ramirez and her husband, Juan Carlos, both 43, spent 10 years moving in and out of San Francisco apartments before buying their two-bedroom, one-bath Antioch home in 2006 for $375,000.”

“Paying $2,700 a month for their ‘fixer’ required a new roof, wiring and landscaping. Their loan adjusted in June to more than $3,200 a month.”

“Ramirez, a hair stylist, said business has been slow and Juan Carlos was laid off from his construction job with a local contractor. Recent houses in their north Antioch neighborhood are now selling for around $150,000. They stopped paying in February.”

http://origin.insidebayarea.com/sanmateocountytimes/ci_9567181

“‘I had a property that was purchased in January 2007 at $706,000 in Silver Spring. Now it’s being sold at $363,080. That is just phenomenal,’ Perez said.”

http://www.gazette.net/stories/061108/wheanew201917_32373.shtml

“‘People don’t want to buy a $250,000 house and, a few months later, see a similar house in their neighborhood sell for $150,000 in foreclosure,’ he said. ‘You feel like a chump. Until we get that chump factor out of the market, things won’t improve.’”

http://www.theday.com/re.aspx?re=62b31739-5a03-48d0-aef0-60b2c23f910a

“The average asking price for homes in The Retreat plunged 46 percent from an estimated $1.3 million in June 2006 to $705,000 today, according to data recorded with a MLS. Six resale transactions in the community this year averaged $675,916 on houses that sold for an average $1,123,000 at their peak, a decline of 40 percent.”

“And prices continue to drop, with about seven homes currently listed between $475,000 and $500,000, said Pat Patton, an agent who has listings at The Retreat.”

http://www.pe.com/localnews/inland/stories/PE_News_Local_S_retreat13.40e4da7.html

 

The above articles were obtained from thehousingbubbleblog.com

 

4 Comments – Post Your Own

#1) On June 14, 2008 at 4:50 PM, alstry (35.99) wrote:

TOO MANY BOUGHT TOO MUCH!!!!

In Orange County, ... the rate at which you are accelerating is reason for concern. I think that is probably a function of the number of adjustable-rate loans that were made in Orange County in the 2005 to 2006 time frame. Some of those have reset (the interest rate has increased) to the point where occupants can’t afford the payments.
...
I think it is mostly due to the price of homes in California. There were a lot more ARMs used so people could afford to get into a home. For a lot of people the only way they could get into a home was with an ARM.

This is not a subprime problem. The reason the delinquency rate is rising rapidly in Orange County is because homes are very expensive, and a large number of recent home buyers used ARMs, especially Option ARMs, as affordability products.

Now that the interest rate is increasing - and in some cases the loans are hitting the maximum allowed principal ceiling - these loans are no longer affordable. Since these same homeowners have negative equity, selling the home is not an alternative.

The important point here is that delinquencies are starting to increase rapidly in middle to upper middle class neighborhoods where buyers used "affordability products" to buy more house than they could really afford.

http://calculatedrisk.blogspot.com/2008/06/arms-next-wave-of-delinquencies.html

It is absolute BS that people say the credit crisis is almost over.  It has just started.  The first wave was subprime...the weakest borrowers....now the second part and most destructive part of the storm is about to hit.

Then there are those that say the government is going to intervene?  What a joke.  House values have to return to prices people can afford without resorting to toxic loans that must be sliced up to be sold.

As interest rates keep rising and food and fuel follow suit, housing affordibility will continue to drop.  If layoffs kick in, we could see some amazing price drops.

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#2) On June 14, 2008 at 9:17 PM, jesusfreakinco (28.96) wrote:

WCI filing...???

WCI forms board unit to weigh options

http://www.reuters.com/article/marketsNews/idINN1342986620080613?rpc=44

 

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#3) On June 14, 2008 at 9:25 PM, jesusfreakinco (28.96) wrote:

Al,

I am not sure if you get Mauldin's weekly email which said "Separately, a Credit Suisse report from this spring predicted that 6.5 million loans will fall into foreclosure over the next five years, reaching more than 8 percent of all US homes. (AP) That is going to keep pressure on housing prices for several years at the least."

8 percent of homes in the next 5 years.  8 percent...  shocking.  You are spot on that housing is in its early stages of declines which means financials still in their early stages of declines.  Housing certainly is or soon to be in depression.  The question is, what will the impact be on the rest of the economy... 

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#4) On June 15, 2008 at 12:43 AM, jegr5347 (< 20) wrote:

I am a practicing CPA in Florida and Texas. I have a client that bought 4 condos within a complex in Broward county, FL in the boom times for +/-$240k/ea. Had them as rental. A tenant left a few weeks ago. My client went to the condo to clean up for next tenant. Condo next to it was for sale. Called to find LISTING PRICE (forget what it will sell for)....$140k. Nuff said!!!

Now attorneys are going around promoting a "deed in lieu of foreclosure" transaction instead of a short-sale to avoid realtor commission and somehow save people's credit. 

 

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