Not many new listings (Charleston: foreclosure, rent, mortgage)

[Irwin75]

How can you say that nothing is amiss in Mount Pleasant when the median home price exceeds the median income by a factor of more than seven? Don't you find this to be a little out of whack? My guess is that the median income in MP has barely increased since 2000, while the median home price has more than doubled. It's simply staggering that people in your profession know so very little about what they're actually doing. No wonder the public doesn't trust Realtors. Why should they? Even when you folks are proven spectacularly wrong, time and time again, you still refuse to admit the obvious. Just how do you see this playing out? Are you hoping for some miraculous resolution where inventories are reduced and the market stabilizes without significant further price declines? If so, you are delusional.

Based on your statistics, the median home price in MP should be about $250-300k. If you keep your median home price in place, the median income should be between $150-$190k. Since median incomes are not likely to rise for several years, just how do you think this market will find equilibrium? I'll tell you how - price declines. Significant, deep, lasting price declines. There is no other rational conclusion.

FWIW, I make north of $150k and still find MP to be unaffordable by and large. Thankfully, we have rented since we relocated to MP and we will continue to rent until home prices return to sanity. It isn't a matter of "if", it is a matter of "when".

[Irwin75]

Great post Flat. You obviously understand the dynamics at play. Inventories over the next 12-18 months will RISE, not fall, as most of the option ARM's won't reset until mid-2009. Prices have nowhere to go but down and it's hard to imagine what is going to put a floor in at this point. It is a once-in-a-century perfect storm and most homeowners/sellers have no clue what's really going on out there. Sellers who do not aggressively reduce their prices will lose far more in the long run than they would if they take their medicine now. We are no longer in "theory" or "conjecture" mode - we are in the midst of the worst housing decline of the modern era. Many in Charleston think they are immune, but they are wrong...fabulously wrong.

[Sportygal21]

Ties in to this topic
The Mortgage Meltdown

Scott Pelley reports on the mortgage crisis that's far from over, with a second wave of expected defaults on the way that could deepen the bottom of the U.S. recession.


A Second Mortgage Disaster On The Horizon?, New Wave Of Mortgage Rate Adjustments Could Force More Homeowners To Default - CBS News

[charlottePA]

Originally Posted by Irwin75

Great post Flat. You obviously understand the dynamics at play. Inventories over the next 12-18 months will RISE, not fall, as most of the option ARM's won't reset until mid-2009. Prices have nowhere to go but down and it's hard to imagine what is going to put a floor in at this point. It is a once-in-a-century perfect storm and most homeowners/sellers have no clue what's really going on out there. Sellers who do not aggressively reduce their prices will lose far more in the long run than they would if they take their medicine now. We are no longer in "theory" or "conjecture" mode - we are in the midst of the worst housing decline of the modern era. Many in Charleston think they are immune, but they are wrong...fabulously wrong.

I'm more with USCJoe on this one. For one, I don't see new inventory on the market. I see the same old houses that have been there for several months. Granted I haven't looked at all areas, just where I visit and drive by. Two, perhaps a lot of people that would move up in house are holding tight and not selling--and can afford not to sell.

I was visiting this weekend and spoke with a friend that's a builder. He put a bid on a house in Hibben that wasn't even finished and was in short-sale. (the builder must be bankrupt) for 30% off list. The builder AND THE BANK rejected the offer. So if things are so desperate, why would a bank reject the 30% off offer??? Either they are plum stupid and in denial, or they are more confident that the bottom isn't going to drop out like you predict...

[USCJoe]

Quote:
"A 30% downward price adjustment to counter the same price appreciation this area experienced during the run up to the 'bubble' has not taken place yet. Once that happens, RE prices will adjust to where they should have been in an average marketplace. Once this occurs, then take another downward price adjustment of at least 25% to reflect the current economic crisis. It is not far fetched to see those Park West homes drop another 30% in the next 18 months because of the huge supply we have now. This inventory will continue to grow over the next 18 months. Even worse will be those homes >$750K range where the % drop will be more significant."

Are you saying that homes listed for $750,000 + will drop more than 55% ? That would put the price of the $750,000 home selling for significantly less than $412,500 or your $150,000 condo currently on the market selling for $82,500. As I have mentioned many times before, I am unable to guess with a high degree of confidence the extent to which home prices will fall, if so, in the next year or two. I wish that I was as confident as you in my ability to predict the future.

[USCJoe]

Originally Posted by Irwin75

How can you say that nothing is amiss in Mount Pleasant when the median home price exceeds the median income by a factor of more than seven? Don't you find this to be a little out of whack? My guess is that the median income in MP has barely increased since 2000, while the median home price has more than doubled. It's simply staggering that people in your profession know so very little about what they're actually doing. No wonder the public doesn't trust Realtors. Why should they? Even when you folks are proven spectacularly wrong, time and time again, you still refuse to admit the obvious. Just how do you see this playing out? Are you hoping for some miraculous resolution where inventories are reduced and the market stabilizes without significant further price declines? If so, you are delusional.

Based on your statistics, the median home price in MP should be about $250-300k. If you keep your median home price in place, the median income should be between $150-$190k. Since median incomes are not likely to rise for several years, just how do you think this market will find equilibrium? I'll tell you how - price declines. Significant, deep, lasting price declines. There is no other rational conclusion.

FWIW, I make north of $150k and still find MP to be unaffordable by and large. Thankfully, we have rented since we relocated to MP and we will continue to rent until home prices return to sanity. It isn't a matter of "if", it is a matter of "when".

I wonder why you appear to find it necessary to "bash" Realtors rather than using objectivity and statistics to support your argument. As a Realtor, I have represented hundreds of buyers or potential buyers over the past 14 years and am not aware of any of my past clients who purchased a home being unable to afford their current mortgage. Aside from looking at one's income to determine the affordability of a home, you need to look at the mortgage they are carrying rather than the value of the home they own or may purchase. Having direct knowledge of the average out of town buyer purchasing a home in Mt. Pleasant, I am aware that a vast percentage of them have substantial funds to put down on their home in order to keep their mortgage payments to a reasonable figure if they so wish. You mentioned that you feel that a buyer needs an income of $150,000 to $190,000 to afford a home in the $250,000 to $300,000 range. I have sold many homes in the $250,000 to $300,000 range and I can assure you that the buyers were not making that kind of money and can afford their monthly mortgage payments. If you make north of $150,000 and find Mt. Pleasant unaffordable I would have to assume that you have no plans to purchase a home in Mt. Pleasant unless prices drop substantially or your income increases.

[Flat2MT]

Originally Posted by USCJoe

Quote:
"A 30% downward price adjustment to counter the same price appreciation this area experienced during the run up to the 'bubble' has not taken place yet. Once that happens, RE prices will adjust to where they should have been in an average marketplace. Once this occurs, then take another downward price adjustment of at least 25% to reflect the current economic crisis. It is not far fetched to see those Park West homes drop another 30% in the next 18 months because of the huge supply we have now. This inventory will continue to grow over the next 18 months. Even worse will be those homes >$750K range where the % drop will be more significant."

Are you saying that homes listed for $750,000 + will drop more than 55% ? That would put the price of the $750,000 home selling for significantly less than $412,500 or your $150,000 condo currently on the market selling for $82,500. As I have mentioned many times before, I am unable to guess with a high degree of confidence the extent to which home prices will fall, if so, in the next year or two. I wish that I was as confident as you in my ability to predict the future.

Yes but I don't portend to predict anything but I do base my postings on empirical evidence.

Take out the artificial appreciation and factor in what's happening now and what is projected to occur in the near term and this type of price adjustment is reasonable.

[Flat2MT]

Originally Posted by USCJoe

I wonder why you appear to find it necessary to "bash" Realtors rather than using objectivity and statistics to support your argument. As a Realtor, I have represented hundreds of buyers or potential buyers over the past 14 years and am not aware of any of my past clients who purchased a home being unable to afford their current mortgage. Aside from looking at one's income to determine the affordability of a home, you need to look at the mortgage they are carrying rather than the value of the home they own or may purchase. Having direct knowledge of the average out of town buyer purchasing a home in Mt. Pleasant, I am aware that a vast percentage of them have substantial funds to put down on their home in order to keep their mortgage payments to a reasonable figure if they so wish. You mentioned that you feel that a buyer needs an income of $150,000 to $190,000 to afford a home in the $250,000 to $300,000 range. I have sold many homes in the $250,000 to $300,000 range and I can assure you that the buyers were not making that kind of money and can afford their monthly mortgage payments. If you make north of $150,000 and find Mt. Pleasant unaffordable I would have to assume that you have no plans to purchase a home in Mt. Pleasant unless prices drop substantially or your income increases.

Actually, empirical evidence is used.
I know many a realtor who pushed and prodded homebuyers, who had no business buying a home, to take on Interest only or ARM loans because in a couple of years....

1) Your credit score will improve so you can qualify for a fixed rate,
2) You will get a raise at work so you don't have to eat beans and rice forever just to pay your house payment,
3) Your home will increase in value and you can use the equity as a DP for your fixed rate loan and,
4) Your low 'teaser' rate affords you the opportunity to buy all those things you have ever desired on your credit card and you can pay it back with cheaper dollars.

If people choose to live beyond their means and want to keep up with the 'Joneses' go right ahead but don't whine to the govt that you now need the Federal Govt's help to get you out of your situation.

[Flat2MT]

Originally Posted by charlottePA

I'm more with USCJoe on this one. For one, I don't see new inventory on the market. I see the same old houses that have been there for several months. Granted I haven't looked at all areas, just where I visit and drive by. Two, perhaps a lot of people that would move up in house are holding tight and not selling--and can afford not to sell...

If you ever driven thru Dunes West, you'd think that nothing is for sale because you don't see any FS signs. That's because FS signs are prohibited by covenant. There are probably other neighborhoods where this is also prohibited.

The piece on 60 Minutes last night could not have been more timelier. This second wave of resets will be greater and move devastating than what we are going thru right now. We don't make this stuff up just to stir the pot on this forum. Experts who do this for a living, albeit they are mostly incorrect, this time have empirical evidence to support their positions. Click on that link provided previously and then post how you would interpret those numbers.

Those others you describe obviously don't have a requirement to 'buy up' right now or they would have their homes for sale. So that's nothing but a red herring.

What happens when 'a lot' of these people decide they now want to move up? I doubt they are going to keep their present home so now the market place has an influx of homes, and if the homes currently on the market are NOT selling and you add this influx...and add all those NEW homes currently being built in those same neighborhoods (why buy used when I can buy new for about the same price?)....and guess what? Prices WILL come down significantly. Basic supply and demand economics.

Just look at gas prices over the last 5 months. Supply is much greater than demand....

[USCJoe]

[quote=Flat2MT;6568383]

Originally Posted by charlottePA

I'm more with USCJoe on this one. For one, I don't see new inventory on the market. I see the same old houses that have been there for several months. Granted I haven't looked at all areas, just where I visit and drive by. Two, perhaps a lot of people that would move up in house are holding tight and not selling--and can afford not to sell.quote]

If you ever driven thru Dunes West, you'd think that nothing is for sale because you don't see any FS signs. That's because FS signs are prohibited by covenant. There are probably other neighborhoods where this is also prohibited.

The piece on 60 Minutes last night could not have been more timelier. This second wave of resets will be greater and move devastating than what we are going thru right now. We don't make this stuff up just to stir the pot on this forum. Experts who do this for a living, albeit they are mostly incorrect, this time have empirical evidence to support their positions. Click on that link provided previously and then post how you would interpret those numbers.

Those others you describe obviously don't have a requirement to 'buy up' right now or they would have their homes for sale. So that's nothing but a red herring.

What happens when 'a lot' of these people decide they now want to move up? I doubt they are going to keep their present home so now the market place has an influx of homes, and if the homes currently on the market are NOT selling and you add this influx...and add all those NEW homes currently being built in those same neighborhoods (why buy used when I can buy new for about the same price?)....and guess what? Prices WILL come down significantly. Basic supply and demand economics.

Just look at gas prices over the last 5 months. Supply is much greater than demand....

I don't know how many outsiders drive through the gated section of Dunes West unless they live in or are friends with Dunes West residents. It is true that for sale signs are prohibited in the gated section of Dunes West and there are quite a few homes for sale in that community. To my knowledge, there are not other Mt. Pleasant communities that prohibit signage, although most condos would prohibit a sign on common property. I find the comment that "most experts that do this for a living are mostly incorrect but this time they have empirical evidence to support their positions" amusing. As the word empirical denotes information gained by means of observation, experience, or experiment, does this mean that these experts do not normally take experience, observation or an experiment into consideration when taking or asserting a position? I am not aware of anyone who has a requirement to "move up." Maybe a desire, but not necessarily a requirement. It is interesting to note that many, in my opinion, overly pessimistic evaluations of the real estate market in the short as well as long term, are being made by those who are renting and who certainly have a vested interest in the perception of the real estate market in the Charleston area.