Who here thinks the house bubble will keep deflating? (real estate market, foreclosures)

[Need_affordable_home]

Who here thinks the house bubble will keep deflating?


I for one do. I have read hundreds of articles on this. You can google them up. I read one article that explains why we will have not a hard landing but a crash landing! The reasons as I learned are because of greed, speculation, flippers and rising interest rate, job losses, slowing economy among other factors. The feds are going to have to cut the interest rate if they want to soften the crash landing into "just" a hard landing.


There are select areas where housing is in demand and doing well. However here in south Florida, prices are dropping across the board and no one seems to be able to sell. Prices have dropped 2-3% in the last month and $10000+ in the last week on high end houses. Between the hurricanes, homeowner insurance, property taxes and unaffordable houses, people arent buying and many are leaving Florida, including me.


How much of a bubble is in your area and why? Do any of you have an idea or prediction when prices will stabalize and even rise back up? Will house prices become unaffordable to all but the wealthy all over the USA many, many years from now?


update! I have done reserch and found some major cities and their 10 year predicted house appreciation. Using the inflation calculator at 3%, $100 today will be $134 in the year 2016. 2.5% makes it $128. Take San Diego appreciation for example. It will raise at 3.2% per year on average in the 10 year long run. Prices go up and down in cycles and it looks like 10 years from now, prices will be about back to where they were, adjusting for inflation and prices could rise faster, outpacing inflation. I read somewhere that house prices in the long term outpace inflation by 1 to 2 percent.


Washington D.C. $435,899
$450,747
3%

New York $558,853
$611,045
9%

Boston $416,911
$481,184
15%

Philadelphia $230,495
$269,818
17%

Minneapolis-St. Paul $244,186
$286,397
17%

Chicago $290,953
$360,018
24%

Los Angeles $538,477
$667,048
24%

Miami $399,348
$498,564
25%

Atlanta $172,722
$227,488
32%

St. Louis $147,359
$195,607
33%

Phoenix $284,727
$378,914
33%

San Diego $624,987
$856,067
37%

Houston $147,496
$214,370
45%

Dallas $162,461
$245,725
51%

Seattle $384,543
$612,383
59%

[Nea1]

I dont think it will burst, just a slow leak, people need to quit panicking everytime a new statistic comes out, our economy is fine, we will not have a recession, in fact retail is doing fine and showing an increase in sales, people just stop shopping for houses when they raise the rates, they will just wait till they lower them!!!

[MoMark]

Yes, there is a crash, not a soft landing, happening, and it's all around the country. I think the biggest problem is that a majority of people who bought homes in the last two years did so on ARMs, Interest-Only ARMs, put no money down, or took out primary mortgages but because they didn't have the 20% down to avoid PMI, so lenders gave them second mortgages off the bat to get around that roadblock, etc. That means that many people went into homes with mortgages at or above the purchase price with rates that will adjust upward after the teaser time-period is over. Other people took at ARM interest only loans where they can choose the amount of the payment they pay!! That means that any interest charged above their payment goes back to the principal...which means that some people have GROWING principal balances even with payments! And to top off this batch of extremely vulnerable homebuyers... many people who had fixed 30 year loans, had paid a good portion down and watched their equity grow wildly due to appreciation took out ARM interest only equity loans..>DUMB< A lot of people who would right now be fine and secure believed the lie that the equity in their homes is THEIR money and took out these loans gambling on continued price increases. But now that the housing market is stalled and falling prices in many areas or no appreciation happening, they are being squeezed because they can't meet the payments, or, they can't sell because they now owe more on the house in these exotic mortgages than they can sell the house for (underwater), or, they couldn't really afford the second mortgages added onto their primary mortgages to begin with, but figured they could drain the equity out, spend it, then sell their homes at a profit and get by for free...well, it hasn't worked out that way. About a 1/3 of Americans own their homes free and clear, but even they are affected as the values of their homes are going down to. At least they can ride it out. But we're already seeing the consequences of what this housing market is doing to employment too. Many nationwide mortgage companies have lost up to half their revenue as mortgage applications and refinances stop (and this is still an unusually low interest rate time period by historical comparison) and are laying off 10% or more of their workforces. The construction industry is laying off workers, and the business that cater to construction and home improvement are suffering from ever increasing lack of business, meaning more layoffs are coming. Then you get to the title companies who have no work now...and it goes on. So not only is housing crashing, the exposure of too many Americans to financial disaster due to bad loans and exotic mortgages they could never hope to repay is also bringing down the broader economy in stages. The Feds have not raised rates now for the last two interest rate meetings, and it may stop the bleeding...but the statistics show that the damage is already done and getting worse despite the slowdown in interest rate hikes. And, watch the dollar. The Feds can't afford to let it go into freefall, which means that interest rates will be determined ultimately by defending the dollar at the expense of the housing market if push comes to shove. It's a big mess :|

[Nea1]

I think it is a big mess because to may people listen to the government I dont think we should hang on every word they say, that just gets us into trouble.

[pkoons]

Short answer: No.

The market will not crash in areas that are attractive and have a steady job base. Examples include DC, NYC, Chicago, and SF. There will not be as many foreclosures as people think because the market is still hot enough that people will be able to sell before the foreclosure happens.

Example: If someone buys a house on a 2/1 ARM for $500K and their rate balloons after 2 years, they will be able to list and sell the house before the rate catches up to them for $480K or more. A $20K loss will be easily dealt with by anyone who qualified for a $500K house! I'd recommend anyone on a 2/1 ARM who can not handle a rate increase to list their house 18 months after purchasing it and go back to renting... we'll see how many are smart and do this...

Where did the "expected increases over 10 years" stats come from? I wouldn't expect Seattle to be the strongest market... and DC to be the weakest... those are pretty asinine predictions, and I'm not just being naive living in the DC area. There will ALWAYS be a handful of job sectors that DC has a stronghold on and will attract high net-worth individuals willing to "pay-to-play".

I think the best everyone can do is make a smart decision when buying and hope for the best. You know that they've been talking about the bubble bursting since 2002? They didn't expect the tech stocks to bottom out like they did... or house prices to increase as much as they did in the first place... usually a major market swing like these examples takes everyone by surprise rather than being a topic of conversation for 4 years before it actually happened.

[MagpiesMagpiesMagpies]

Real Estate markets are local. Some areas will deflate, some will flatten, others will continue to appreciate. Weighted together, I think nationwide real estate is going to flatline, but not drop.

Magpies

[mbmouse]

Originally Posted by MoMark

Yes, there is a crash, not a soft landing, happening, and it's all around the country. I think the biggest problem is that a majority of people who bought homes in the last two years did so on ARMs, Interest-Only ARMs, put no money down, or took out primary mortgages but because they didn't have the 20% down to avoid PMI, so lenders gave them second mortgages off the bat to get around that roadblock, etc. That means that many people went into homes with mortgages at or above the purchase price with rates that will adjust upward after the teaser time-period is over. Other people took at ARM interest only loans where they can choose the amount of the payment they pay!! That means that any interest charged above their payment goes back to the principal...which means that some people have GROWING principal balances even with payments! And to top off this batch of extremely vulnerable homebuyers... many people who had fixed 30 year loans, had paid a good portion down and watched their equity grow wildly due to appreciation took out ARM interest only equity loans..>DUMB< A lot of people who would right now be fine and secure believed the lie that the equity in their homes is THEIR money and took out these loans gambling on continued price increases. But now that the housing market is stalled and falling prices in many areas or no appreciation happening, they are being squeezed because they can't meet the payments, or, they can't sell because they now owe more on the house in these exotic mortgages than they can sell the house for (underwater), or, they couldn't really afford the second mortgages added onto their primary mortgages to begin with, but figured they could drain the equity out, spend it, then sell their homes at a profit and get by for free...well, it hasn't worked out that way. About a 1/3 of Americans own their homes free and clear, but even they are affected as the values of their homes are going down to. At least they can ride it out. But we're already seeing the consequences of what this housing market is doing to employment too. Many nationwide mortgage companies have lost up to half their revenue as mortgage applications and refinances stop (and this is still an unusually low interest rate time period by historical comparison) and are laying off 10% or more of their workforces. The construction industry is laying off workers, and the business that cater to construction and home improvement are suffering from ever increasing lack of business, meaning more layoffs are coming. Then you get to the title companies who have no work now...and it goes on. So not only is housing crashing, the exposure of too many Americans to financial disaster due to bad loans and exotic mortgages they could never hope to repay is also bringing down the broader economy in stages. The Feds have not raised rates now for the last two interest rate meetings, and it may stop the bleeding...but the statistics show that the damage is already done and getting worse despite the slowdown in interest rate hikes. And, watch the dollar. The Feds can't afford to let it go into freefall, which means that interest rates will be determined ultimately by defending the dollar at the expense of the housing market if push comes to shove. It's a big mess :|

On the highlighted parts of your post, I have to say I disagree with you. Some people, yes,this may have happened to, but if you have a GOOD loan officer, one that explains how these mortgages really work, you can use an ARM, or Interest only mortgage to your advantage. IF you use these loans to conserve, not consume, you can actually save money, earn interest on your money, then refinance just before the adjustment period is up and pay down your equity with money saved over that period, or get that 2%-5% equity increase out and invest that also, and actually come out very much ahead than if you just had a 30yr fixed, 20% down when you purchased the house. The biggest keys to these loans, are to #1. have a good mortgage broker working for you and #2, a good financial planner and stick to your financial plans and talk about your real goals with those two key people.
You can't spend a house, or put that equity in a high yield savings unless you do get it out. You can only pay interest to your mortgage holder, and only money being saved in a bank, not the walls of your house, earn you more interest for your pocket.
Yes, I am a mortgage loan officer. So please, before blaming the types of mortgages for the housing issues of the country, maybe one should do there due diligence on the type of mortgages and their loan officer to insure they do not end up in a bad financial situation in reference to there house.
Just my opinion.

[mbmouse]

Originally Posted by MagpiesMagpiesMagpies

Real Estate markets are local. Some areas will deflate, some will flatten, others will continue to appreciate. Weighted together, I think nationwide real estate is going to flatline, but not drop.

Magpies

I agree, we ares still seeing a 2%-5% equity increase here in East TN on a yearly basis. We did see a bit of slow down as to the amount of days a house is on the market, adding 30 days or so, after the feds increased the prime rate, but other than that, real estate here is still appreciating.

[MoMark]

Originally Posted by mbmouse

On the highlighted parts of your post, I have to say I disagree with you. Some people, yes,this may have happened to, but if you have a GOOD loan officer, one that explains how these mortgages really work, you can use an ARM, or Interest only mortgage to your advantage. IF you use these loans to conserve, not consume, you can actually save money, earn interest on your money, then refinance just before the adjustment period is up and pay down your equity with money saved over that period, or get that 2%-5% equity increase out and invest that also, and actually come out very much ahead than if you just had a 30yr fixed, 20% down when you purchased the house. The biggest keys to these loans, are to #1. have a good mortgage broker working for you and #2, a good financial planner and stick to your financial plans and talk about your real goals with those two key people.
You can't spend a house, or put that equity in a high yield savings unless you do get it out. You can only pay interest to your mortgage holder, and only money being saved in a bank, not the walls of your house, earn you more interest for your pocket.
Yes, I am a mortgage loan officer. So please, before blaming the types of mortgages for the housing issues of the country, maybe one should do there due diligence on the type of mortgages and their loan officer to insure they do not end up in a bad financial situation in reference to there house.
Just my opinion.

As soon as I saw the part you disagreed with, I knew instantly you're involved in mortgages...quel surprise !!! That being said, you, more than anyone, will be aware that the reason people take out ARM interest only loans is because it's easier to qualify for, they're thinking of the lowest payment possible because they can't afford a 30 year fixed or maybe not even qualify for it, and others do it thinking that by the time their ARM resets, they'll have built equity from rising house prices, which, since 2001 until late last year/this year, had a better return than the stock market, and sell their homes at a profit, thereby justifying the risks. ARMS and Interest-Only loans are also far more profitable for mortgage agents and brokers, so they are pushed over fixed. This isn't a secret. I don't question that you may be a very honorable and honest mortgage broker who explicitly makes sure your clients understand the risks of taking out such loans, that you might steer some from them to fixed based on an evaluaton of their needs when you meet with them, or that your particular geographic area is doing relatively well at this time, but can you generalize that for the nation? With foreclosures soaring around the nation though interest rates remain at historically low levels, even coming down a bit in the last six weeks and resale houses flooding the market with prices coming down in some markets, some quite steeply...can you explain that? You are probably aware that Countrywide Mortgages is laying off 10% of its workforce and it's one of the largest mortgage companies. What's causing these issues?

[shannon94]

Originally Posted by mbmouse

On the highlighted parts of your post, I have to say I disagree with you. Some people, yes,this may have happened to, but if you have a GOOD loan officer, one that explains how these mortgages really work, you can use an ARM, or Interest only mortgage to your advantage. IF you use these loans to conserve, not consume, you can actually save money, earn interest on your money, then refinance just before the adjustment period is up and pay down your equity with money saved over that period, or get that 2%-5% equity increase out and invest that also, and actually come out very much ahead than if you just had a 30yr fixed, 20% down when you purchased the house. The biggest keys to these loans, are to #1. have a good mortgage broker working for you and #2, a good financial planner and stick to your financial plans and talk about your real goals with those two key people.
You can't spend a house, or put that equity in a high yield savings unless you do get it out. You can only pay interest to your mortgage holder, and only money being saved in a bank, not the walls of your house, earn you more interest for your pocket.
Yes, I am a mortgage loan officer. So please, before blaming the types of mortgages for the housing issues of the country, maybe one should do there due diligence on the type of mortgages and their loan officer to insure they do not end up in a bad financial situation in reference to there house.
Just my opinion.

What you say is true about these types of loans, however in hot markets such as California these instruments are used as qualifying aids. With a negative national savings rate and limited household incomes, your advice is plausable, just not practical.