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I read a Wall Street Journal article yesterday that talked about how 54% of the houses in this one working class community in Ga were upside down.
This one person's story was told where at the peak of the last bubble their house was valued at $350k or about that. They owed $172k and the house was recently appraised at $50k it was originally bought at $80k before the bubble.
The article said that wages hadn't come up and that house prices weren't going to recover any time soon each foreclosure put more downwards pressure on house prices the poor working class people weren't good credit risks and the wages weren't there to pay for the houses.
If you want to push the values of houses above the peak of the last bubble and have them stay there then you need the wages to pay for them. A $30 an hr minimum wage would do that. There are a lot of houses that are in bad shape out there. A big jump in the minimum wage even spread out over time would be disruptive to the economy but the alternative would be worse.
These are called legacy loans. They're leftover from the OG bubble and simply haven't recouped if they ever do. Some areas will probably never see those prices again. About the only thing to do is take the credit hit and walk or keep paying. If the rent in the area is on par with you paying the mortgage pay the mortgage. At least it's still your house your rules and rent won't go up (unless you got a adjustable rate)
If the area gets a average wage of $20 the housing in the area weather rent or buy can't go past that wage cap because you don't have any buyers.
Sure rising wages pushes affordability but makes everything more expensive too because it costs everyone more to support those wages.
Another way to push the "values" up is to lower the borrowing percentage and extend mortgage term.
To lower payment on same rate simply extend term.
If you want to push the values of houses above the peak of the last bubble and have them stay there then you need the wages to pay for them. A $30 an hr minimum wage would do that.
This goes well beyond the issue of minimum wage. That doesn't even factor into it.
The 2008 crash lowered the values of stocks as well as housing. The Fed's money-printing (QE) and zero interest rate policy (ZIRP) have both contributed to the rebound in stocks and housing...except, not all housing has recovered. Lenders now know better than to give mortgages to anyone who can fog a mirror, and that has kept prices from rising skyward everywhere.
But you are correct in that so many houses selling for $150K and more around the year 2000, are now worth only $70-80K. I call it "scrap" value. Those houses, often purchased as fixer-uppers to flip in a "can't lose" market, never got fixed properly due to lack of funding, and there they are today, either bank REOs or cheap flips by cash investors. It's going to take a good long while for those to come back.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Quote:
Originally Posted by Linda_d
Where exactly are these areas with large numbers of houses that were priced at $150+k in 2000 selling for $70-80k in 2015?
There may be some places without good jobs fitting that. In Detroit the current median home price is $40k, and was over $50k in 2000. At the bottom it was $31k, but that was not until 2012. It's actually coming up but still thrown off by the $500 house that they can't give away.
We are now above the bubble peak, but have good high tech salaries, making the median household income above $130k, and the demand for more homes very high as more people are hired.
Where exactly are these areas with large numbers of houses that were priced at $150+k in 2000 selling for $70-80k in 2015?
You can find a lot of them in the southern New Engalnd area...RI, some parts of CT, and even MA. They are not bargains, though, even at that price. Often they have sat empty over 3-4 years, which is not very good for a house. Better bring some $$$ to the table, as you'll need it to get them fixed correctly.
I read a Wall Street Journal article yesterday that talked about how 54% of the houses in this one working class community in Ga were upside down.
This one person's story was told where at the peak of the last bubble their house was valued at $350k or about that. They owed $172k and the house was recently appraised at $50k it was originally bought at $80k before the bubble.
The article said that wages hadn't come up and that house prices weren't going to recover any time soon each foreclosure put more downwards pressure on house prices the poor working class people weren't good credit risks and the wages weren't there to pay for the houses.
If you want to push the values of houses above the peak of the last bubble and have them stay there then you need the wages to pay for them. A $30 an hr minimum wage would do that. There are a lot of houses that are in bad shape out there. A big jump in the minimum wage even spread out over time would be disruptive to the economy but the alternative would be worse.
Just something to think about.
Can you post a link to the house with a 350k house in08 and now appraising for 50k I'd be interested to see what damage the house has sustained over the last 7 years
Can you post a link to the house with a 350k house in08 and now appraising for 50k I'd be interested to see what damage the house has sustained over the last 7 years
There are instances of that in Las Vegas, in the central valley in California, and in Florida, but in my opinion the number of those cases are way overstated. Honestly though, it is somewhat difficult to locate them because they have been resold at a loss and have come up in value, or they have been demolished, or they are being held off market (mostly due to legal issues), or might have been the only house built in the subdivision, or the owner has been through some federal assistance program and aren't looking to sell. So you would need the MLS and price history to see them. They ain't sitting out there with a 'for sale' sign in the front yard.
Across the country though it is not difficult to find houses that have dropped by $50k-$100k in value. I'm sure you can find plenty in nearly every city. My own personal house's highest appraised value was just under $200k, and I got it for $50k less in a short sale.
Back to the main topic though, I think the bubble is way overstated, and that there is a disconnect in housing prices -the thought is that the median income should be able to afford the median home price - and in most cities, that is incorrect. The median person rents, and home ownership is only available to those above the median. That may be due to local housing policy, to past NIMBYs shooting down new single family, or due to deteriorating job prospects on the lower end.
In many cities that are posters for the bubble, (LA, SF, Seattle, Vancouver, etc) the majority rent, and more single families are being demolished for multifamily, pushing single family prices up even more.
We also saw that big corporate rental companies (Blackrock I think is one) swooped in an bought up many that were sitting for sale, and are managing them, which shuts out individuals waiting on bubble popping deals.
So those expecting the bubble to pop will be waiting for a while.
Also 95% or so of new cars spend a portion of their loan life 'upside down', so it's not unheard of that low down payment homes can suffer the same fate as prices fluctuate, and that's probably always been true, we just have more public ways of tracking and reporting that data today.
Last edited by TheOverdog; 06-25-2015 at 03:33 PM..
You can find a lot of them in the southern New Engalnd area...RI, some parts of CT, and even MA. They are not bargains, though, even at that price. Often they have sat empty over 3-4 years, which is not very good for a house. Better bring some $$$ to the table, as you'll need it to get them fixed correctly.
And who would put 30k to 50k into a house that wouldn't sell for that much to begin with?
It's a real mystery to me. what becomes of these properties in undesirable locales, when there are no jobs and no wages and no population growth. To me, it just doesn't make sense to ever take the risk of owning a home again, once I sell my current one, in an area of birmingham that hasn't had home appreciation in a decade or more.
what becomes of these properties in undesirable locales, when there are no jobs and no wages and no population growth.
Visit any small town or drive down I40 to see what happens when no jobs/no wages becomes no people. There's a long (depending on the weather really) sad decline back into nature and dust. That's what happens.
I have a few relatives who own Colorado flatland dirt, bought at prices that make it essentially unsellable until I guess the entire world is filled with people and therefore their land will have value. But that'll be a while.
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