NY Housing Article: Any thoughts? (Wantagh: foreclosure, mortgage, refinancing)

[fyrisle]

This 40% correction is accurate if you figure that real estate should have grown on par with the rate of inflation (or even a slight premium). If you compare the prices of the metropolitan area real estate to what they were in the late 90's, you still see most areas are still double what they were which means that real estate prices grew at over 7% per year. If this had been a normal real estate market where real estate prices grew about the same as inflation, the prices should be about 30-35% higher that what they were 10 years ago, not the 100% that you now see in asking prices.

[MiddleIslander]

It's absolutely true... just have to do some basic math. If you take into account inflation for every year since 1998, and even give an extremely generous 2% over inflation appreciation rate (historically 1%), home prices should only be 65% higher than in 1998. Right now they're well over 2-3 times higher! Personal income has been flat or declining in real terms since then. As with every bubble, we should see full retrenchment and then an overshot to the downside, assuming economic fundamentals have been the same.

Here's inflation only: 1.0155*1.0219*1.0338*1.0283*1.0159*1.0227*1.0268*1 .0339*1.0324*1.0285*1.0385 = 1.341, or 34% over 1998.

And with historically generous appreciation:
1.0355*1.0419*1.0538*1.0483*1.0359*1.0427*1.0468*1 .0539*1.0524*1.0485*1.0585 = 1.658, or 65.8% over 1998.

I still see people trying to sell homes that were purchased in the year 2002 for $205,000, and trying to sell it for $500,000. What are these people smoking? I don't understand it.

One thing that's holding up home prices is federal manipulation of the credit markets. If something ever happens to interest rates, even if they go up a percent or two, home prices will crash to devastating lows. It's a dangerous situation, and I think people have forgotten how perilous this can be.

[MiddleIslander]

Originally Posted by propain

You will not see houses selling for 1,000,000 on LI selling for 600,000.
You will not see houses selling for 350,000 selling for 140,000
You will not see a 40% loss.

And the 10-20% yearly appreciation we saw during the boom wasn't ridiculous? I don't see why this is terribly far fetched.

[propain]

Originally Posted by MiddleIslander

And the 10-20% yearly appreciation we saw during the boom wasn't ridiculous? I don't see why this is terribly far fetched.

Because we have already seen a big decline in prices. Homes that were selling for 750+ are down to 550+. The prices have come back to scale. To say they will fall an additional 40% from where they are today is completely far fetched and will condemn the rest of the banks if it happens. This is why interest rates were being adjusted down to stop the deflation.

Interest rates are on the rise again. We have reached a semi bottom. I would say 5-10% more of a drop max in certain areas. People are not accounting for normal appreciation of 4% a year during the boom and there after. The bubble was when? 2003-2006? 6 years later you are talking an increase of 24% increase in housing. In 2003 before the boom my home was worth 500K. In those 3 years it went to 900K. Now its back down to 700K. A standard increase of 24% over 6 years puts my home at 620K today.

I have add a lot of money to my home bringing its value higher than that number but without me doing so 620K is where my home would be. What your saying is my home should be 372K? I don’t think so... I paid more than that 9 years ago!

Some areas have not fully depreciated. Suffolk county hasn’t. You still have homes out there selling for 700K in Holbrook and Holtsville. Those places will drop to about 550-600. I think most areas in Nassau have seen almost bottom. I think maybe about 10% more at most. The POS capes that are used to Mc Mansion will also see a drop in Nassau. Those are still selling for $475. I see those dropping about 75K or so. NOT 190K as that article says. The day I see capes in my area selling for 275K is the day the neighborhood will officially go to ****.

[workingclasshero]

yes we have had a decline, but nothing compared to the increase that we saw during the late 90's and early 00's

a house that sold for 140,000 in 1995 sold again in 2005 for 490,000....thats a 250% increase over just 10 years


the average home on long island was around 150 back in 1995....based on NORMAL increases 4-7% per years....which means the avergage house SHOULD be selling for around 250-270k.......


we need the housing market to drop anouther 40%

the AVERAGE household income for Long Island is 75k....meaning that the avergae long islander, ESPECIALLY THE WORKING class can ONLY AFFORD homes in the 200-300 range....remember that when you apply for a mortgage they look at the 29-31% rule...meaning if you only make 50k per year you only QUALIFY for a 150-170k loan

[56 Fighter]

Originally Posted by workingclasshero

yes we have had a decline, but nothing compared to the increase that we saw during the late 90's and early 00's

a house that sold for 140,000 in 1995 sold again in 2005 for 490,000....thats a 250% increase over just 10 years


the average home on long island was around 150 back in 1995....based on NORMAL increases 4-7% per years....which means the avergage houdse SHOULD be selling for around 250-270k.......


we need the housing market to drop anouther 40%

the AVERAGE household inclome for Long Island is 75k....meaning that the avergae longislander, ESPECIALLY THE WORKING class can ONLY AFFORD homes in the 200-300 range....remember that when you apply for a mortgage they look at the 29-31% rule...meaning if you only make 50k per year you only QUALIFY for a 150k loan

Sellers are starting to realize this and price their houses accordingly. Those that aren't run the risk of not selling when they must and eventually facing foreclosure.

[logan2k]

While not exempt from bubble-omics, IMO the NYC, Nassau, Suffolk areas will not be affected the same way as the rest of the nation when it comes to real estate.

I think more than anything else, mortgage rates will determine where home prices go from here. A 40% decline in prices isn't going to happen if rates stay this low.

[propain]

Originally Posted by workingclasshero

yes we have had a decline, but nothing compared to the increase that we saw during the late 90's and early 00's

a house that sold for 140,000 in 1995 sold again in 2005 for 490,000....thats a 250% increase over just 10 years


the average home on long island was around 150 back in 1995....based on NORMAL increases 4-7% per years....which means the avergage houdse SHOULD be selling for around 250-270k.......


we need the housing market to drop anouther 40%

the AVERAGE household inclome for Long Island is 75k....meaning that the avergae longislander, ESPECIALLY THE WORKING class can ONLY AFFORD homes in the 200-300 range....remember that when you apply for a mortgage they look at the 29-31% rule...meaning if you only make 50k per year you only QUALIFY for a 150k loan

Sorry, you are dreaming.

The interest rates on a 30 year mortgage in 1995 was 8-9% on average. The payment on a house selling for 140K in 1995 was $1163. Now lets say at the same interest rate you sell that home today for 270K. The payment would be $2172.

Now take todays interest rates. 5% FHA. You buy the house for 490K (An exaggerated price BTW and quite generalized because you can easily buy a home today for WAY lower than that in a good area) The payment on 490K at 5% is $2630.

Lets bring that price down to reality. A home in 1995 that was selling for 140K was not such a great home and needed work. So lets say that equivalent home today is 400K. The price of that home would be.. $2147 at 5%. Interestingly MORE affordable at 400K at todays rates than what you would value you it at the old rates with your estimate.

You cant have it both ways, you wont have low prices and low interest. Not going to happen. Take a look at the interest rate trend from 1995 to today. Down down down and prices go up up up. Its not a coincidence.


To do a full study now you need to do a median income average for 1995 and a median income average for 2009. Based on my above figured you will show people on LI make a lot more money today on the average but due to interest rates have to pay less overall for their homes.

To be complete you need to compare taxes on LI in 1995 and taxes in 2009. Now we are getting somewhere. You will find taxes in 1995 were MUCH lower compared to home value and salary than today. Today TAXES make homes unaffordable. Not the actual home prices. So write Tom a letter and tell him to lower taxes.

[MiddleIslander]

I agree, however what you said has different implications. Interest rates are at record lows, even after the 1% jump in the last two weeks. You can fully expect interest rates to go back up to 6.5-7% or more. This won't happen immediately, but it is guaranteed to occur over the next few years.

This will have a devastating effect on the housing market. People who bought won't be able sell or refinance. Home prices will fall. Foreclosures will be everywhere. People with cash will win. And all the while, people will be paying similar monthly payments for their mortgages.

The current low interest rates are a result of manipulation on the part of the government to allow home prices to fall at a more gradual rate. The Federal Reserve is printing hundreds of billions of dollars to buy mortgage backed securities and treasuries, for example. The Fed cannot continue to dilute our currency much further, or the foreign governments that sustain our massive federal budget deficits will decide we're not the best place for their money. With the downturn of securitization, the federal government has become the reluctant counterparty to nearly all mortgages originating today. Very little of it is private funding anymore. This again, is not sustainable.

Low interest rates will not last. Home prices will fall. Our fate is already sealed.

If you buy today and find a good deal, you should be prepared to stay at least 7 years before breaking even. Or you can buy next year and get even more house for the money.

[propain]

Originally Posted by MiddleIslander

I agree, however what you said has different implications. Interest rates are at record lows, even after the 1% jump in the last two weeks. You can fully expect interest rates to go back up to 6.5-7% or more. This won't happen immediately, but it is guaranteed to occur over the next few years.

This will have a devastating effect on the housing market. People who bought won't be able to refinance. Home prices will fall. Foreclosures will be everywhere. People with cash will win. And all the while, people will be paying similar monthly payments for their mortgages.

The current low interest rates are a result of manipulation on the part of the government to allow home prices to fall at a more gradual rate. The Federal Reserve is printing hundreds of billions of dollars to buy mortgage backed securities and treasuries, for example. The Fed cannot continue to dilute our currency much further, or the foreign governments that sustain our massive federal budget deficits will decide we're not the best place for their money. With the downturn of securitization, the federal government has become the reluctant counterparty to nearly all mortgages originating today. Very little of it is private funding anymore. This again, is not sustainable.

Low interest rates will not last. Home prices will fall. Our fate is already sealed.

If you buy today and find a good deal, you should be prepared to stay at least 7 years before breaking even. Or you can buy next year and get even more house for the money.

The points are already down ½ since last week. We are in a state of flux right now. We will go higher though you are right. Let me address your points.

"People who bought won't be able to refinance"

So? If your on a variable rate or locked in a high interest rate that’s the cards you delt yourself. you act as if refinance is a good thing. Its not. Refinance is a new thing based on the last 10 year of low interest rates and has cost more bad than good. It’s the reason we are where we are today. If you have a decent rate 5.75 + 1 point you have no reason to spend 20K getting a lower interest rate. If you cant afford your home at your current interest rate you have no business buying it. Counting on lower interest rates to sustain your home is a bad decision and you will most likely go under.

Higher rates statistically freeze housing prices. Not make them fall.

Foreclosures will be everywhere.

They are now. You just don’t see them because the banks are selling them to home flippers. We are at the peak if not close to peak of foreclosures right now.

Low interest rates will not last. Home prices will fall. Our fate is already sealed.

A bit doom and gloom. Low interest rates will not last. This is why im saying if you cant afford a home today you most certainly cant afford a home next year. Our fate is not sealed. We will see frozen house prices or very slow gains over the next couple of years. People who cant afford homes will move out of NY and go to NC or other areas that are more affordable. This is the way LI has been since the late 80's. You either can make it on LI or you move. That’s the way its been, that’s the way it will always be. Don’t forget we have a huge money making city right next door. This alone keeps the money on LI the closer to the city the more expensive the home prices.

My advice is buy now. If you cant good luck next year. Interest rates will be about 1 point higher buy prices will stay the same or very little movement down.