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New Home prices drop big time!!!

It won't be bad for the economy. It will make it better for buyers though. New home prices have been out of control lately, so this is really a good thing.
 
jnevin said:
It won't be bad for the economy. It will make it better for buyers though. New home prices have been out of control lately, so this is really a good thing.
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I agree that new prices have been out of control.
I agree this will be good for buyers.

But I also think it will be a disaster for the economy. Many people bought 2-3 places as investments that are not turing out so profitable. Others leveraged themselves with short term ARMs and incentive interest rates. Once people hit their threshold for losses you will see a ripple effect throughout the entire economy. Less spending, higher debt levels. It wont be pretty.
 
What the hell do they think is going to happen when they build houses starting the low 700,000.....who can afford that kinda shit
 
Lestat said:
I agree that new prices have been out of control.
I agree this will be good for buyers.

But I also think it will be a disaster for the economy. Many people bought 2-3 places as investments that are not turing out so profitable. Others leveraged themselves with short term ARMs and incentive interest rates. Once people hit their threshold for losses you will see a ripple effect throughout the entire economy. Less spending, higher debt levels. It wont be pretty.
Click to expand...


What is an "incentive interest rate"? I've been in the lending industry for quite a while now, and am not familiar with that.

The thing is, people may have ARM's that can adjust, but fixed rates and ARM's are pretty much the same as they were a year ago, and will probably be around the same now. People that got Option ARM's that always make the neg am payment option will still be ok because to break even LTV wise, you need to be in a market that only appreciates at 2%. If people are buying homes that they want to rent out with the dreams of being real estate moguls, but don't invest their earnings wisely, they are foolish and will not be in the best situation. People that have been buying these homes to flip them have been a big reason for the jump in prices. Now, they're trying to sell them at a huge profit and the market is saturated. It'll slow down for a bit, but the market will recover. This also doesn't mean that you automatically take 10% off the top of every house, it just means that builders in some areas are going to have to start prices a little lower. It's really no big deal.
 
jnevin said:
What is an "incentive interest rate"? I've been in the lending industry for quite a while now, and am not familiar with that.

The thing is, people may have ARM's that can adjust, but fixed rates and ARM's are pretty much the same as they were a year ago, and will probably be around the same now. People that got Option ARM's that always make the neg am payment option will still be ok because to break even LTV wise, you need to be in a market that only appreciates at 2%. If people are buying homes that they want to rent out with the dreams of being real estate moguls, but don't invest their earnings wisely, they are foolish and will not be in the best situation. People that have been buying these homes to flip them have been a big reason for the jump in prices. Now, they're trying to sell them at a huge profit and the market is saturated. It'll slow down for a bit, but the market will recover. This also doesn't mean that you automatically take 10% off the top of every house, it just means that builders in some areas are going to have to start prices a little lower. It's really no big deal.
Click to expand...
by "incentive" rates, I was referring to the negative amoritization schemes, basically giving people an "incentive" to buy something they can't really afford.
 
a return to rationality is always good for the economy. decidedly bad for the people who are going to end up with negative equity, but good for everyone else imo
 
Lestat said:
by "incentive" rates, I was referring to the negative amoritization schemes, basically giving people an "incentive" to buy something they can't really afford.
Click to expand...


Ok. I know builders usually offer incentives to use their preferred lender, so I thought you might have had that mixed up with something else.

When people qualify for those loans, they need to qualify at the rate the loan is written at. So, with a minimum payment rate of 1.25% the loan will be qualified at say, 7.8%. The problem with that is, you have people lying about their income to qualify for that payment. L.O.'s lying about what people make is just as common. People know what they're getting into. They're just quick to point the finger when things don't work out the way they were hoping.
 
Prices went down but sales were up. It does SEEM like we won't get a crash like the 80's but who knows what will happen. Sales up, people buying houses and want tio furnish them, fix them up, paint them, etc... Someone's winning when sales are UP. Increased sales might just be a knee jerk reaction to prices dropping and may not last that long either.


Jnevin, what do you think about people renting out their single family homes? I was MAYBE thinking of doing that, but with a single family, it's not that great an idea. My house will be paid off in 12 years or so. that's a long time, but why should i sell and lose all that, is my thinking. I may not hold it for 12 years, but you never know. Thinking of renting and buying another house to live in elsewhere.
 
jnevin said:
Ok. I know builders usually offer incentives to use their preferred lender, so I thought you might have had that mixed up with something else.

When people qualify for those loans, they need to qualify at the rate the loan is written at. So, with a minimum payment rate of 1.25% the loan will be qualified at say, 7.8%. The problem with that is, you have people lying about their income to qualify for that payment. L.O.'s lying about what people make is just as common. People know what they're getting into. They're just quick to point the finger when things don't work out the way they were hoping.
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yeah, I have a couple realtor friends, and they will qualify people for anything by using "stated income" I'm not an agent or broken, but what I understand is someone who makes like 50K a year will buy a home that is say, 500K and has 4 bedrooms, way out of their price range, but they use some stated income worksheet to assume rental income from 3 of the 4 bedrooms. This allows them to qualify for a much bigger loan because they assume they are getting $1500-$2000 per month in rental income that is hardly guarenteed.
 
gonelifting said:
Prices went down but sales were up. It does SEEM like we won't get a crash like the 80's but who knows what will happen. Sales up, people buying houses and want tio furnish them, fix them up, paint them, etc... Someone's winning when sales are UP. Increased sales might just be a knee jerk reaction to prices dropping and may not last that long either.
Click to expand...
i read a report someplace that this phenomenon is fuelled by little pockets of pent up legitimate demand and people doing funky stuff with tax. the pattern is price softening > demand spike > flattening out of the market in that area
 
A lot of these homes are second homes. So it's not really the lower income people buying their first homes.
 
gonelifting said:
Prices went down but sales were up. It does SEEM like we won't get a crash like the 80's but who knows what will happen. Sales up, people buying houses and want tio furnish them, fix them up, paint them, etc... Someone's winning when sales are UP. Increased sales might just be a knee jerk reaction to prices dropping and may not last that long either.


Jnevin, what do you think about people renting out their single family homes? I was MAYBE thinking of doing that, but with a single family, it's not that great an idea. My house will be paid off in 12 years or so. that's a long time, but why should i sell and lose all that, is my thinking. I may not hold it for 12 years, but you never know. Thinking of renting and buying another house to live in elsewhere.
Click to expand...


I'd hold on to it. If rates do end up jumping up in a few years, the rental market will be better for property owners. Not to mention, decent areas of Jersey will keep appreciating at close to 10%.
 
TADHealth said:
Dont buy yet. Wait it out.

When the interest rates seriously drop, then buy.
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uhh, i don't see rates dropping significantly anytime soon
 
If the housing market goes down, rates will drop.
 
California and Massachusetts are getting slaughtered, careful just jumping in because it can go down for longer than you thing...ala late 80s.
 
i'm more than confident about my last investment.
 
Rates will not drop much if any until 2009.....Why? because stocks will take a shit(happens every time the president changes) and the gov will drop them in order to offset the huge losses.

Kaz
 
mkazzbmf said:
Rates will not drop much if any until 2009.....Why? because stocks will take a shit(happens every time the president changes) and the gov will drop them in order to offset the huge losses.

Kaz
Click to expand...


The government doesn't control mortgage rates.
 
Lestat said:
are they not closely correlated?
Click to expand...


Bran can get in here with spread sheets and all kinds of bullshit that will say what does what and where and when, but rates won't fly up any time soon. If they did, it would be a disaster.

They won't be going down much either. the lowest I saw them was 4.875 for a 30 year fixed, and that was only for a couple of days.
 
morons everywhere buy houses they can't afford, under 'guise' of investment

and now that 'investment' is making them LOSE money.

losers. this was coming, and places like la, nyc, etc. folsk are going to be hit hard.
 
Razorguns said:
morons everywhere buy houses they can't afford, under 'guise' of investment

and now that 'investment' is making them LOSE money.

losers. this was coming, and places like la, nyc, etc. folsk are going to be hit hard.
Click to expand...


Those places will always recover though. More people are buying in NYC again because of cost of transportation. It's surrounding areas that will be affected for longer. The cities will grow and people will need homes. It will get better, probably in around 3 years. MD, VA, and FL are having a hard time right now. A lot of people in FL bought houses to flip and can't get rid of them because of hurricanes, taxes have doubled, and insurance is unreal there. A $500K home in a costal area in FL can have $1,500/ mo. in escrow payments alone.
 
Razorguns said:
morons everywhere buy houses they can't afford, under 'guise' of investment

and now that 'investment' is making them LOSE money.

losers. this was coming, and places like la, nyc, etc. folsk are going to be hit hard.
Click to expand...

i just made a FORTUNE in one of those places a few months ago, and probably will again in the next few months.
the first one wasn't purchased for an investment, but it ended up being one.
 
stilleto said:
lol
thanks.
why was your penis walking on the keyboard without shoes?
Click to expand...


I don't know. I was just here doing kiegel exercises with a semi, tapping the space bar, and next thing you know, BANG!!

I'm as surprised as anyone.
 
stilleto said:
i just made a FORTUNE in one of those places a few months ago, and probably will again in the next few months.
the first one wasn't purchased for an investment, but it ended up being one.
Click to expand...

people who buy homes in certain cities, are are purchased to be their primary home - will have overpriced houses, and inflated mortgages forever - but they'll survive. Tho they'll hate driving by, and seeing houses like theirs, going for 25% less than what they bought 2 years ago.

Those who bought more than 1, or just to buy & flip - will be fucked. This is known as 'market correction', and few realized 'people can afford only so much' so there's always a limit on how much people can afford.

Homes for $900,000 in la for ex, in a city where the avg person is hispanic and makes less than $40k - can someone say impending disaster? Some houses are still sitting there unsold for months.

People WITH money, are moving out - and using their $900k to live in another icty where it can get them a mansion. People adapt as well. Look at the nv, az boom. They can't build them fast enuff in the burbs and rural areas.

for a corresponding thread - read 'shrinking middle class' thread.

r
 
jnevin said:
I don't know. I was just here doing kiegel exercises with a semi, tapping the space bar, and next thing you know, BANG!!

I'm as surprised as anyone.
Click to expand...

you do kegels with a tractor trailer? damn impressive.
 
Razorguns said:
people who buy homes in certain cities, are are purchased to be their primary home - will have overpriced houses, and inflated mortgages forever - but they'll survive. Tho they'll hate driving by, and seeing houses like theirs, going for 25% less than what they bought 2 years ago.

Those who bought more than 1, or just to buy & flip - will be fucked. This is known as 'market correction', and few realized 'people can afford only so much' so there's always a limit on how much people can afford.

Homes for $900,000 in la for ex, in a city where the avg person is hispanic and makes less than $40k - can someone say impending disaster? Some houses are still sitting there unsold for months.

People WITH money, are moving out - and using their $900k to live in another icty where it can get them a mansion. People adapt as well. Look at the nv, az boom. They can't build them fast enuff in the burbs and rural areas.

for a corresponding thread - read 'shrinking middle class' thread.

r
Click to expand...
I saw that first hand. The house I just bought was the result of a business owner downsizing and moving out to the country. I think he wanted to get his equity out of the house and *then* take advantage of house prices falling over the next few months.

At least here in Knoxville, homes in my segment are fairly "bubble proof". They have crazy hold times (usually one year or more) but their values hold up.
 
Razorguns said:
people who buy homes in certain cities, are are purchased to be their primary home - will have overpriced houses, and inflated mortgages forever - but they'll survive. Tho they'll hate driving by, and seeing houses like theirs, going for 25% less than what they bought 2 years ago.

Those who bought more than 1, or just to buy & flip - will be fucked. This is known as 'market correction', and few realized 'people can afford only so much' so there's always a limit on how much people can afford.

Homes for $900,000 in la for ex, in a city where the avg person is hispanic and makes less than $40k - can someone say impending disaster? Some houses are still sitting there unsold for months.

People WITH money, are moving out - and using their $900k to live in another icty where it can get them a mansion. People adapt as well. Look at the nv, az boom. They can't build them fast enuff in the burbs and rural areas.

for a corresponding thread - read 'shrinking middle class' thread.

r
Click to expand...


That's been happening here. People are coming here from Cali and are putting $300K down on a $600K home, getting half the payment and twice the house in a better area. People trying to flip investors here are getting burned a little, but it's still working out for them.
 
Razorguns said:
people who buy homes in certain cities, are are purchased to be their primary home - will have overpriced houses, and inflated mortgages forever - but they'll survive. Tho they'll hate driving by, and seeing houses like theirs, going for 25% less than what they bought 2 years ago.

Those who bought more than 1, or just to buy & flip - will be fucked. This is known as 'market correction', and few realized 'people can afford only so much' so there's always a limit on how much people can afford.

Homes for $900,000 in la for ex, in a city where the avg person is hispanic and makes less than $40k - can someone say impending disaster? Some houses are still sitting there unsold for months.

People WITH money, are moving out - and using their $900k to live in another icty where it can get them a mansion. People adapt as well. Look at the nv, az boom. They can't build them fast enuff in the burbs and rural areas.

for a corresponding thread - read 'shrinking middle class' thread.

r
Click to expand...


you're probably right- for myself... i bought a house for 158, sold it for over 600.
just bought another for 300, will probably sell it for around 500 3 months later, after putting an estimated 50k into it.
i too, moved to another "city", although its not really a city, more like.. "a mountain".
 
Lestat said:
uhh, i don't see rates dropping significantly anytime soon
Click to expand...

Then dont buy anytime soon.

Since someone asked about rates...

Firstly housing prices drop 9.7% from 09/05 to 09/06 acorss the board. Even higher in some areas that had been out of control the past 3 years.


The reason I said to wait is this...

Example: at $2400 a month to spend on mortage... heres what you could afford.

5% Fixed - $450,000
6% Fixed - $400,000 today.
7% Fixed - $360,000
8% Fixed - $325,000



As long as the housing prices are dropping, I would wait.

Im not a realtor, but the moment they start to rise, you may want to reconsider. But with the market as it is, let it drop until the rates get lowered.

If you time it well (doesnt have to be perfect timing, just prepared)... and the rates get dropped and the house prices continue to drop up until that point... (450k houses have dropped about 40k+ in my area in past 6 months and get lower every week)... you might be able to save your self 100-150k over the next year (maybe double for 2) all totaled. But you will also be paying rent (?) until that happens and that is 1500 x12 or x24 until that happens. So it would cost you 18k to 36k during that time. Which has to be considered.

I guess it really depends on what you think will happen with houses, the market and the rates. I, for one, think houses prices are going to tumble for a good while (maybe some slight bumps at times) until the rate gets adjusted.
 
mrplunkey said:
I saw that first hand. The house I just bought was the result of a business owner downsizing and moving out to the country. I think he wanted to get his equity out of the house and *then* take advantage of house prices falling over the next few months.

At least here in Knoxville, homes in my segment are fairly "bubble proof". They have crazy hold times (usually one year or more) but their values hold up.
Click to expand...

Was there a bubble in the midwest? Housing prices here have seemed to remain steady for the last decade in Indiana, we didn't get a bubble. I thought it was mostly east/west coast large cities that had the housing bubble.
 
Lao Tzu said:
Was there a bubble in the midwest? Housing prices here have seemed to remain steady for the last decade in Indiana, we didn't get a bubble. I thought it was mostly east/west coast large cities that had the housing bubble.
Click to expand...
I think be bubble is in most metropolitan areas among mid-range houses (not the lower and upper cost ones). Houses in the 50k-200k range are largely unaffected I think. Also, houses in the $3M+ range are largely unaffected. Unless I'm mistaken, the "bubble" is in the $250k-$1.25M range.
 
That would explain it then. WHere I grew up there weren't any houses more than 400k. Even the 6 bedroom 5000 sq ft houses were 300-400k.
 
Lao Tzu said:
That would explain it then. WHere I grew up there weren't any houses more than 400k. Even the 6 bedroom 5000 sq ft houses were 300-400k.
Click to expand...
Knoxville is sort of like that... with the bubble there are a fair number of ~1M homes on the market, but if you look at $2.5+ you'll see only about 4-5 at any given time.
 
one good thing of rising house prices is....

more people get married. The days of single people buying houses like in the 80/90s is over. Now, everyone has to get married and have 2 incomes to buy a house.

ever wondere why there's so many 30+ single people, yet so many 20-somehtings are already married and have kids!

r
 
GoldenDelicious said:
because the 30+ ones already got divorced
Click to expand...
That's what I was thinking too, actually.

But I will *never* remarry :) Fuck that.
 
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