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Interesting article mystree66! I love how "forecasters" that were denying the bubble 3 months ago are now saying "it may last" into 2007.
Those forecasters should cruise my neighborhood and talk to the homeowners that have had their homes on the market since last year. While we've been eyeballing one property, 4 more have come online. There are homes that have had hurricane shutters or been unoccupied since I moved in. At first there was no telling if they were seasonal onwers or not, now I know they're flops languishing on the market.
For a hood of about 40 houses, I see about five people regularly. And I'm a dog walker, so I see everything and everybody at all hours.
I know I was thinking the same thing as I was reading that article.
It really has finally become acknowledged by the "It's just a correction to a more normal housing market" crowd. Even here, in Southwest Missouri where our homes are considered undervalued by 6% and there never was a true bubble, homes aren't selling. The local MLS here is open to the public to browse and there are homes on it that had been on the market already six months to a year when I first began looking at homes last June...and they still haven't sold. Springfield has some older areas that have really cool old houses built of brick and stone, or traditional wood siding from the early part of the century and they often run under $120K, a lot of charm here. A new 3 bed/2 bath house about 1700 sq. ft. with a two car garage can be had in the area for about $140K. Even so, people aren't buying much.
An interesting site I visit is RealestateDeclinedotcom. It compiles articles from around the nation and different media on a daily basis about the housing market and conditions around the country, including inventories, average prices, mortgage news, foreclosure rates, etc. I don't know who runs the site, but ignore the 9/11 Conspiracy thingie to the bottom lefthand side... I noticed that even Ben Bernanke is saying he doesn't know now how this will shake out (housing market). That's saying something.
There are corrections and then there are the details
There is a lot more going on than just houses, prices and all the prattle. In fact it has been happening in many ways.
Take before I left Boston coming on two years ago. The so called "Housing Boom" was peaking. Folks who bought anywhere in that time frame to several years before got totally blown out. Basically they plugged a huge portion of their disposable income into a house believing it could not miss as a money maker.
They were able to get in and survive for a short while, but most probably could not survive for anything like a normal mortgage period over years. They needed the game to continue as was, so they could essentially keep borrowing even more money against the house to attempt some sort of survival strategy. It was a bit of a Ponzie Game and they were the last folks in.
It was not just about houses. Many of the old neighbors had died or bailed out as the neighborhood was changing. Anybody like me who bought for peanuts way back when was unaffected. My general living cost was low and well within my income. I had lots of disposal income above my basic living needs. The newcomers did not.
Wasn't just money, an entire social change happened. The Newies needed money to pay that bulldog every month. It was get anything from anybody, cut my grass, fix my house, lend me your car. Basically they all turned into real pests, there was no helping, it was just going to be the same thing next month. Reason 679 for leaving MA. They were zero fun, everything always wound down to me paying all the bills for everything that you might do. Everything revolved around them finding enough extra money to survive by any means, it was in every conservations, every activity, you got to where you didn't even want to talk or deal with them at all.
All the Newies were in some sort of frantic mode. Two jobs, even three jobs and always on the make for a "Helping Hand". I just got home, I'm tired, shovel my snow. The more you did for them, the worse it got. Those so called house prices had a horrible side effect. High house prices are only good when you sell. They are a killer to a normal life.
Another example is one of my brothers. Retired from the military, good job, good income. Moves up in status and buys a fancy new house out of town can see cornfields, loves it, "Solves His Former Problems". No sweat he can afford the move up.
A few years go by, cornfield all gone, houses all round. Taxes start to gallop up, every tax bill is going up $500 - $1000 more. His nice income isn't holding up, fuel bills are more than he figured. In a lot of them places the taxman is never going to be satisfied. An entire different mentality is in place. They act like their budget is open ended and spend like it is.
So this idea of Boom - Bust does not address a lot of the issues. Bring back another Boom cycle and you will have the same problems all over only in spades. Each time you ratchet up the playing level, fewer and fewer people will be able to even get in the game. Plus a lot of potential buyers probably know, have seen, have experienced some of the consequences of house prices far above a prudent level for their incomes. Tempers their desire to rush in.
So many trapped from the last cycle are bemoaning the lack of new buyers with wads of cash to bail them out of what may be an over priced house. Even just the cry, "I want just to get even" without really understanding how they got there.
The better view is to ask what does that house really cost, sitting there bare bones without all the excess profits, payments to middlemen, non-producer types. You take the land costs, building materials costs, paper work costs, labor, something like a reasonable profit for the builder. Many houses are far above what it actually cost to build a replacement. Lots of ways of seeing the same problem.
What those desiring a way out of the present situation have as a problem is to dream up a mechanism to start and sustain another Boom Cycle without generating all the problems of the last. If you start from a basic overvalued point, how do you go anywhere for long????? It will be extremely tough to own a million dollar house in the conventional way on a middle class income and live anything like a normal life. It ain't just the houses, a lot of it is about the people that will live in them and how they must change to survive. It ain't worth killing yourself over, lot of people probably will come to that realization over the next few years. Do you want to be around a bunch of Zingoes, totally frantic over finding the next dime to pay for their "Dream Mansion"??? I sure don't. Been there, Done That.
I wish I could have coffee with the people on this thread!! lol.....I remember when I first started posting about the housing bubble....I got so bashed!! Glad to see there are others out there with good ol common sense!! What goes up must come down...
What those desiring a way out of the present situation have as a problem is to dream up a mechanism to start and sustain another Boom Cycle without generating all the problems of the last. If you start from a basic overvalued point, how do you go anywhere for long????? It will be extremely tough to own a million dollar house in the conventional way on a middle class income and live anything like a normal life. It ain't just the houses, a lot of it is about the people that will live in them and how they must change to survive. It ain't worth killing yourself over, lot of people probably will come to that realization over the next few years. Do you want to be around a bunch of Zingoes, totally frantic over finding the next dime to pay for their "Dream Mansion"??? I sure don't. Been there, Done That.
So true!! My husband and I have talked many times about these people who may lose everything they have been busting their a** to pay for...we worry that the suicide rate may increase or just people "snapping" in general. I have some friends in California that refused to listen when my hubby tried to tell them not to buy yet (he's worked in finance with numbers all his life)..they are not happy at all right now. They live in beautiful San Diego and can't afford to do anything because they are so house strapped. I miss SD very much , but glad I'm not in the middle of all that right now. Scary!!
So true!! My husband and I have talked many times about these people who may lose everything they have been busting their a** to pay for...we worry that the suicide rate may increase or just people "snapping" in general. I have some friends in California that refused to listen when my hubby tried to tell them not to buy yet (he's worked in finance with numbers all his life)..they are not happy at all right now. They live in beautiful San Diego and can't afford to do anything because they are so house strapped. I miss SD very much , but glad I'm not in the middle of all that right now. Scary!!
What few people address also is that for those who've made themselves house-poor and finagled homes through Option ARM interest only loans and exotic loans with no money down, is that on top of the fact that they're vulnerable to any loss in home value and rate increases, they also have usually auto loans or high price leases, 3-10 credit cards usually maxed along with Sears credit lines, etc. and carry anywhere from $5000 to $30,000 plus in other credit debt with high interest rates and make minimum payments. So like the Stanley Johnson commercial where the man brags about his 4 bed. house, pool, golf membership, new car, etc....his next comment is: "And how do I do this? I'm in debt up to my eyeballs". Who could sleep at night knowing nothing is truly yours and the surface material wealth is really all show with no substance? Even when my credit card debt was $3000, it ate at me. When I charged something on a bankcard, I recognized I didn't actually own it yet, but that the use of that card symbolized my having taken out a high interest loan to purchase it that must be paid back. Even having a car loan bothered me, though I didn't have a choice when I bought my truck in 98. So, I paid off my cards first- relatively easy to do thank goodness and stopped using them. Then I paid off my truck loan by 2001. I had my mortgage left. I knew that wouldn't be paid until I sold eventually, but I made extra payments against my 30 yr. fixed no-pre-payment penalty loan. I had purchased the house in Nov. 00 with $43,000 down and carried a loan for $162,000 as the house purchase price had been $205K. I used my commissions and bonuses to make extra payments against that loan. When I sold in June of 05, I owed about $145,000 on the house. That left me with a big heap of dough when I sold which enabled me to pay cash for my current home. Discipline is essential and curbing spending and use of credit cards and buying or leasing fancy cars which then carry high insurance rates is crucial. Too many people live on the edge with a mirage of success. That just eats away at one internally and is probably one of the highest causes of stress. Being in such a position means knowing that any mishap or change of fortune can result in complete ruin.
Real Estate is still the best place to be. Even when prices come down, people with homes still have equity.
If the market has fallen 5%, but went up 30% in the past four years, you're still ahead 25%
Falling markets only affect people who were not smart enough to realize they were purchasing a home on the cusp of a fall in the market, therby not given a chance to build equity.
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I noticed that even Ben Bernanke is saying he doesn't know now how this will shake out (housing market). That's saying something.
There are corrections and then there are the details
