So... when do you think this horrible real-estate market will end? - Page 3

[savithny]

Originally Posted by lrgaul

Remember that these consumers were very well aware that their payments were going to go up in only a couple of years, and they were probably also aware that when the payments did adjust to real terms, they would no longer be able to afford their own home. Why would someone do that?

You know, this is the biggest thing I don't get about the whole thing.

All this "here, we'll get you into the house with this mortgage, and then you can refinance before the ARM resets."

WTF was supposed to happen? Interest rates were at a historic low! How was refinancing supposed to save you from having a house you couldn't afford? Sure, you might have a buttload of "equity" in three years if prices appreciated, but so what? The outstanding loan balance remains the same,r ight? It's not like you could "cash out" 200K in equity to pay off your 600K mortgage -- the only way to *truly* "cash out" equity is to sell the house! If you use your equity to pay for other things, you still owe the bank the amount of your equity! So how was this "refinance fix" going to help anyone?

[Ellien C]

Originally Posted by SleeplessMommy

• If you want to buy a house, plan on looking at lots. Don't let any realtor pressure you into making an offer. There is no hurry!
• If your first offer is accepted, you are paying too much! Consider "days on market" of each property you look at.
• Check out your area at www.zillow.com.

Some areas, like Flint Mi, have lost 10% of population in the past few decades. I do not expect these real estate prices to go up, in the foreseeable future.

List of top 500 foreclosure counties: http://money.cnn.com/2007/06/19/real...odes/index.htm

I'm not sure I understand this link. Wouldn't you need to see foreclosures as a percentage of all homes financed? This just looks like raw numbers. So more densely packed counties would have more foreclosures, no?

[boingo82]

Originally Posted by Ellien C

I'm not sure I understand this link. Wouldn't you need to see foreclosures as a percentage of all homes financed? This just looks like raw numbers. So more densely packed counties would have more foreclosures, no?

To some extent - but you don't see NYC on there, do you?

Vegas is no surprise at all to me. I used to live 2 hours away and our local RE market was inflating more than usual because people were buying there to commute to Vegas. There were articles in the paper about homes in Vegas selling in 4 hours. Many were bought up by speculators. It was not difficult *at all* to see that it was inflated.

Another easy thing to look at is are the wages in the area keeping pace with the jobs? Is it possible to afford the median home on the median income? In Vegas it was out of control. In St. George, too, where the median home costs $400,000 but the median job paid $40,000. That's just impossible. So inventory built up ..... but it was inventory at the higher prices. Lucky for poor folks like us the bottom end of the market ($125,000 range) didn't fall at all. There is always someone there to buy the cheapest house in town, especially if it's the only townhouse that's detached with a yard.
In St. George there was a literal glut of $400,000 homes - more than half the homes for sale were in the $300,000-500,000 range and relatively new construction - so those homes took it the hardest.

I feel more secure in my current area where we have a stable job market built on oil-field and natural gas mining jobs which pay well. The average income earner can afford the average home. Even though prices doubled within the last 5 years I wouldn't say the market is over-inflated like it was in Vegas or St. George. To my novice perspective it looks stable and sustainable.

[mnnice]

Originally Posted by boingo82

To some extent - but you don't see NYC on there, do you?
.

Actually, Brooklyn had three zip codes on the forclosure list.

I for one don't think a change in the administration will improve (or hurt it for that matter) real estate. I just don't think they are that closely connected.

I do think the median income and median home price ratio is important. If you market is still out of wack than things are likely to fall more. If they are in more in line with reality in the first place they where less likely to have bubbled in the first place.

[Belleweather]

Originally Posted by savithny

WTF was supposed to happen? Interest rates were at a historic low! How was refinancing supposed to save you from having a house you couldn't afford? Sure, you might have a buttload of "equity" in three years if prices appreciated, but so what? The outstanding loan balance remains the same,r ight? It's not like you could "cash out" 200K in equity to pay off your 600K mortgage -- the only way to *truly* "cash out" equity is to sell the house! If you use your equity to pay for other things, you still owe the bank the amount of your equity! So how was this "refinance fix" going to help anyone?

I think the 'theory' was some combination of the following:

1. People who had crappy credit would have a history of making their mortgage payments and/or would have paid down debt in the meantime and could refi into a better rate later.

2. People who financed 100% would have a better loan-to-value ratio, because of the buttload of equity, and would be able to refi into a better rate later.

3. I think lots of people thought they'd just refi into another ARM with a teaser rate and keep doing it forever, so they'd never have to pay the 'real' rate on their loans... or that they could keep churning the teaser rate until some magical time where they'd switch to a fixed rate just in the nick of time before rates rose again.

[normajean]

Originally Posted by Belleweather

I think the 'theory' was some combination of the following:


2. People who financed 100% would have a better loan-to-value ratio, because of the buttload of equity, and would be able to refi into a better rate later.

I know several people who went in with this train of thought. If not to qualify for better rate but for the idea of being able to refi and drop the mortgage insurance once they have 20% equity. So once they lock at a fixed rate, the payments wouldn't actually be higher because they would be able to drop the PMI and break even with no difference on the payments from when they started.

[boingo82]

Originally Posted by mnnice

Actually, Brooklyn had three zip codes on the forclosure list.

I for one don't think a change in the administration will improve (or hurt it for that matter) real estate. I just don't think they are that closely connected.

I do think the median income and median home price ratio is important. If you market is still out of wack than things are likely to fall more. If they are in more in line with reality in the first place they where less likely to have bubbled in the first place.

I saw the 3 Brooklyn zips. NYC as a whole has far more people than Vegas, and if the list truly were just showing meaningless raw numbers, you'd see NYC zips represented much more heavily than Vegas or Denver. But you don't. That's all I was getting at.

[SleeplessMommy]

Originally Posted by Ellien C

I'm not sure I understand this link. Wouldn't you need to see foreclosures as a percentage of all homes financed? This just looks like raw numbers. So more densely packed counties would have more foreclosures, no?

If you look at it as # of people drowning in a particular zip code, it makes sense. For a house to go into foreclosure, it needs to be unsellable by the owner at what they paid for it (0 to 25 years ago) ... or the owner has taken out a home equity loan based on an inflated appraisal.

To have over 700 foreclosures in a single zip code is a sign of very serious oversupply in that local real estate market. Realtor.com has 847 homes listed in the Ohio high-foreclosure zip code, 44105. Starting price is $1,500 for a single home, $2,800 for a two-unit! Building lots are $2-10,000. http://homes.realtor.com/search/sear...zp=44105&typ=F

Also, every home for sale (and not in foreclosure) in that "high foreclosure" zip code is in competition with the foreclosure homes. Would you prefer to pay "full price" for a home, or buy from a bank desperate to unload a property and willing to take 20-30% off of the "going rate"?