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I agree beachme, I don't care either. He sounds like he is bitter against the housing market, probably from losing lots of money. Truth is that we have been looking for over 2 years now, mostly around DC, so we definitly know the state of the housing market.
His prediction of a 30% decline from now is absurd. Maybe from the 2005/2006 high, but not from now. You can group people in three bins 1) people who bought pre-2002 with large equity gains, 2) people who bought 2002-2005 with little equity, 3) people who bought 2002-2005 with large equity. It looks like to me, most of the people in 1 own the older houses...ones we do not want anyway. People in group 2 are the majority. Assuming the 30% Mr FallingKnife is shouting, these people will have two options if they want to sell...1) bring 100K+ to the table at closing or 2) shortsale or foreclose. Most people do not have 100K, thus most people can not drop their price even if they wanted to....unless they want to foreclose (even if they can pay the monthly payment).
I can see a maybe 10% decline from now, but that is something to negotiate during settlement. Hyperinflation is much more likely than 30% further declines.
I agree beachme, I don't care either. He sounds like he is bitter against the housing market, probably from losing lots of money. Truth is that we have been looking for over 2 years now, mostly around DC, so we definitly know the state of the housing market.
His prediction of a 30% decline from now is absurd. Maybe from the 2005/2006 high, but not from now. You can group people in three bins 1) people who bought pre-2002 with large equity gains, 2) people who bought 2002-2005 with little equity, 3) people who bought 2002-2005 with large equity. It looks like to me, most of the people in 1 own the older houses...ones we do not want anyway. People in group 2 are the majority. Assuming the 30% Mr FallingKnife is shouting, these people will have two options if they want to sell...1) bring 100K+ to the table at closing or 2) shortsale or foreclose. Most people do not have 100K, thus most people can not drop their price even if they wanted to....unless they want to foreclose (even if they can pay the monthly payment).
I can see a maybe 10% decline from now, but that is something to negotiate during settlement. Hyperinflation is much more likely than 30% further declines.
The DC area may not be the same as the Charleston market.
The problem is that most folks around here are listing their homes for 10% plus the purchase price in 2005/2006. Most sellers around here are out of touch with the market, but many probably cannot afford to sell for a loss because they are upside down. So, we will wait for more shortsales and foreclosures. It will probably take another year for the economy to turn around (and longer than a year for the housing market).
We have been renting for six months and have been looking for the last nine months. We may be purchasing late in 2009, but I feel that may be too early. Prices still have not come down on most houses in the area (Mt Pleasant/Daniel Island) even though homes have been listed for 6-9 months. Those that do lower are at 5-10% of original listing. There is still a long way to go for correction. Prices have gone up 50-60% in some areas in the last 6 years. I don't see a 30% reduction as absurd.
Perhaps you can negotiate a deal - but most (delusional) sellers will probably be offended with 20-30% discounted offers.
Unless you are going to be in the same home for 10-15 years, it really makes sense to rent right now. You avoid property taxes and insurance (which can be substantial) that probably offsets any tax deduction from home ownership.
The other benefit of renting is that you get to "try out" the neighborhood (to see if it really ideal for your family) and scope out other neighborhoods in the meantime. But, of course it is a hassle to move twice.
Gutta, how do you avoid property taxes and insurance, Rental property has higher taxes and insurance than personal property, you don't think the owner is going to pay that do you, he passes those higher rates on to you. The Tax deductions for home ownership are substantial, especially when you itemize.
Noone should buy a house unless they plan on being in it for more than five years min. or it cost more for closing costs and selling costs than you will ever make on the house in most markets.
The DC area may not be the same as the Charleston market.
The problem is that most folks around here are listing their homes for 10% plus the purchase price in 2005/2006. Most sellers around here are out of touch with the market, but many probably cannot afford to sell for a loss because they are upside down. So, we will wait for more shortsales and foreclosures. It will probably take another year for the economy to turn around (and longer than a year for the housing market).
We have been renting for six months and have been looking for the last nine months. We may be purchasing late in 2009, but I feel that may be too early. Prices still have not come down on most houses in the area (Mt Pleasant/Daniel Island) even though homes have been listed for 6-9 months. Those that do lower are at 5-10% of original listing. There is still a long way to go for correction. Prices have gone up 50-60% in some areas in the last 6 years. I don't see a 30% reduction as absurd.
Perhaps you can negotiate a deal - but most (delusional) sellers will probably be offended with 20-30% discounted offers.
Unless you are going to be in the same home for 10-15 years, it really makes sense to rent right now. You avoid property taxes and insurance (which can be substantial) that probably offsets any tax deduction from home ownership.
The other benefit of renting is that you get to "try out" the neighborhood (to see if it really ideal for your family) and scope out other neighborhoods in the meantime. But, of course it is a hassle to move twice.
best of luck..
I'm done giving advice to financial illiterates with even less sense than money. Great post Gutta! And for the record to zpduda, we sold a house, made some scratch and are now sitting tight. I haven't lost a dollar in this (or any other) housing market. But IF you buy now, you surely will. I tried to help you, but you clearly don't want to be helped.
Stupid is as stupid does...knock yourself out cowboy. LMAO.
"Assuming the 30% Mr FallingKnife is shouting, these people will have two options if they want to sell...1) bring 100K+ to the table at closing or 2) shortsale or foreclose. Most people do not have 100K, thus most people can not drop their price even if they wanted to....unless they want to foreclose (even if they can pay the monthly payment)."
Do you really believe the above has anything to do with the decline in housing prices? If so, you are so financially illiterate that I'm surprised you can use an ATM. The fact is, many people will not have choices - they will be forced into a distressed situation because they cannot pay their mortgage (which reset in 2009 like many ARMs will) and their house is worth $100k less than they paid for it. This situation is ALREADY playing out all over the Low Country. Each time this happens, it puts downward pressure on ALL the prices in the neighborhood. Even those who don't have to sell will still find their homes worth far less than they thought and that value isn't coming back any time soon. You act as if foreclosure is a decision.
This is a brave new world and those who don't realize it will pay dearly with their financial lives. Go ahead and make the worst decision of your life - doesn't bother me. Just don't say you weren't warned.
Last edited by Global Friend; 01-26-2009 at 07:20 AM..
"Assuming the 30% Mr FallingKnife is shouting, these people will have two options if they want to sell...1) bring 100K+ to the table at closing or 2) shortsale or foreclose. Most people do not have 100K, thus most people can not drop their price even if they wanted to....unless they want to foreclose (even if they can pay the monthly payment)."
Do you really believe the above has anything to do with the decline in housing prices? If so, you are so financially illiterate that I'm surprised you can use an ATM. The fact is, many people will not have choices - they will be forced into a distressed situation because they cannot pay their mortgage (which reset in 2009 like many ARMs will) and their house is worth $100k less than they paid for it. This situation is ALREADY playing out all over the Low Country. Each time this happens, it puts downward pressure on ALL the prices in the neighborhood. Even those who don't have to sell will still find their homes worth far less than they thought and that value isn't coming back any time soon. You act as if foreclosure is a decision. LMAO. I swear the level of ignorance out there is stunning.
This is a brave new world and those who don't realize it will pay dearly with their financial lives. Go ahead and make the worst decision of your life - doesn't bother me. Just don't say you weren't warned.
It is amazing how you blast everyones "ignorance". I would appreciate it if we can keep this conversation normal with no name calling.
Foreclosure is a decision if the house is worth less and they can not cover the cost at closing. For example, Bob bought a house for $400 in 2005 with 0% down and now got relocated and has to sell his house. He is very able to pay his payments so foreclosure has never been an issue. According to your logic (30% decline), he would have to come up with ~$120K at closing to cover the difference. His two options are renting or foreclose. Most people in this situation hold, thus you get a stagnate situation which, according the trends you say I have not researched, seems to be what you are in now.
Yes, foreclosures have driven home prices down, but so has fear mongering. In my opinion, the overbuilding of homes is equal to or more of a cause of the home price decline. If you look at all the new sub-divisions in MP, Park West, Hamlin, Ion, Rivertowne, etc, the market is flooded. I bet most of these people are able to pay their mortgages, but can not sell due to my cause above. A reduction of $100K is very plausible in the more expensive homes, i.e $600K+. That much of a drop in homes prices less than $400K, in my opinion, will not happen. You can always find examples of homes dropping 30-40% and foreclosures, but most of these homes are unlivable. It is almost like you have to pay a premium for a livable house!
Something else to consider is that, from what I have been told, a lot of transplants from the more expensive areas, NY, DC, LA, etc are settling in MP. If this is the case, then these home prices may not seem that far out of place. $350K for a 4 bedroom house near the beach may seem a lot to a Charlestonite, but to these other people, it's an amazing price and definitely affordable.
Even another thing to consider is that home prices may not be a primary driving factor in selling anymore. The massive drop in homes being sold may be due in large part to the fact that 1) People can not sell their existing home to buy the new one, not because it is too expensive, but because the person whom is to buy their home can not sell their home either....this is downward spiral of sorts, 2) Peoples down payments got wiped out in the stock crash, 3) Due to the recession, people are afraid of finding new jobs and relocating...4) new lending standards. Obviously, lowering the home price may help, but it will not solve the issue.
I am sure you are going to come back calling me stupid, ignorant, bla, bla. If so, please do not. I would like to keep this civil.
Obviously there hasn't been enough downward pressure. The next six months will be interesting. We are back into the 'season' for buying and selling real estate. The recent drop in interest rates has sparked a flurry of refinancing. That may cut the number of desperate sellers. We'll see.
Fallingknife -- can you please not resort to name calling. It is not necessary and unpleasant. Thank you. Please don't tell me anyone deserves it because they don't agree with you. Let's assume you are right -- so what...that does not give you the right to be rude and ignorant to others. It gives you the right to say -- I was right-- that is it.
Right now we are all speculating on what may or may not happen. None of us no for sure. Even the experts say that when people ask them what is going to happen -- the only honest answer is "I don't know.".
Yes, foreclosures have driven home prices down, but so has fear mongering.
If you read about what is happening at the macroeconomic level, it is a wonder that people are as optimistic as they are. You're supposed to be greedy when others are fearful, and fearful when others are greedy. Right now there are still greedy expectations in the housing market, and people are still expecting real estate to provide a far more lucrative return than it has historically.
(btw I don't mean to make this a moral issue. In the context of investing, I think the point is for everyone to be greedy.)
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Something else to consider is that, from what I have been told, a lot of transplants from the more expensive areas, NY, DC, LA, etc are settling in MP. If this is the case, then these home prices may not seem that far out of place. $350K for a 4 bedroom house near the beach may seem a lot to a Charlestonite, but to these other people, it's an amazing price and definitely affordable.
I agree, but the question is: Wasn't this factor already priced into Charleston real estate by the 1990's? It certainly explains why Charleston is more expensive than Orangeburg, but it doesn't explain why prices were so much higher in '07-'08 than in 2000-2001.
You also have to consider that NY, DC, and LA, etc. are seeing bigger declines in home values than Charleston, and it stands to reason that this will eventually have a ripple effect on Charleston.
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Even another thing to consider is that home prices may not be a primary driving factor in selling anymore. The massive drop in homes being sold may be due in large part to the fact that 1) People can not sell their existing home to buy the new one, not because it is too expensive, but because the person whom is to buy their home can not sell their home either....this is downward spiral of sorts, 2) Peoples down payments got wiped out in the stock crash, 3) Due to the recession, people are afraid of finding new jobs and relocating...4) new lending standards. Obviously, lowering the home price may help, but it will not solve the issue.
Even if we didn't have a recession/potential depression on our hands, don't you think the change in lending standards alone will force a significant correction in housing prices?
Hey..I wanted to avoid this board today. I don't feel the need to be attacked by someone who does not even know me or how I work my business. Instead I choose to ignore those who are constantly negative, name callers and have axes to grind. I am here for information and support thats it.
However, since you'all were asking about home prices and how they are falling I saw this map today in the P & C and wanted to share it for those of you who are considering buying.
map (http://tinyurl.com/aovrbh - broken link)
Also..Check this out..I take more stock in what Forbes says than anyone on this site..
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