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I know it's not good news to everyone, but it's huge to me and many in the Real Estate forums, and anyone looking to buy or refinance. The Federal Funds rate is likely to remain unchanged (well?) into 2016. Even when they do, the impact of an uptick will be more psychological - - 25 basis points won't push many out of the market as far as qualification (and will be countered by expanding guidelines), but it will certainly induce waffling, with consumers engaging in a futile wait for rates to go back down. It's gotta happen sometime.
Mortgage applications hurting big time - was reading big drop in numbers... probably should worry about that more than insane ZIRP from the Fed. People are not applying for mortgages like they were recently.
This is all a repeat of exactly what happened in '08 - nothing has been fixed. People buying houses now will live to regret it just like the people who bought in '07. Especially the likes of those putting 3.5% down. Except this time there's no Keynesian way to reinflate the bubble again. Printing money and making the richest of the rich richer is not an answer.
Housing and stocks have to take a very, very hard correction. This is completely unsustainable.
Housing and stocks have to take a very, very hard correction. This is completely unsustainable.
The national stock market has certainly re-inflated, & has surpassed the highs of the previous cycle. I would agree that it's at risk of a big correction, affecting the entire nation.
However, housing is localized, & housing has not mirrored the same trajectory as the stock market, so far.
While higher priced areas (like San Francisco) may again be in bubble territory, that certainly isn't the case across the board, nationally.
Here in Orlando FL, housing prices are still well below the highs of 2006.
New construction communities that previously sold for $200-300 per square ft are still only pulling roughly 60-65% of their former sales prices.
There are many areas across the country where there is still quite a ways to go before housing appreciates back to 2006 levels.
I do not share your extreme pessimism in regards to housing, at this time.
Let's revisit this next year...& we'll see who was right.
Mortgage applications hurting big time - was reading big drop in numbers... probably should worry about that more than insane ZIRP from the Fed. People are not applying for mortgages like they were recently.
This is all a repeat of exactly what happened in '08 - nothing has been fixed. People buying houses now will live to regret it just like the people who bought in '07. Especially the likes of those putting 3.5% down. Except this time there's no Keynesian way to reinflate the bubble again. Printing money and making the richest of the rich richer is not an answer.
Housing and stocks have to take a very, very hard correction. This is completely unsustainable.
Mortgage applications hurting big time - was reading big drop in numbers... probably should worry about that more than insane ZIRP from the Fed. People are not applying for mortgages like they were recently.
This is all a repeat of exactly what happened in '08 - nothing has been fixed. People buying houses now will live to regret it just like the people who bought in '07. Especially the likes of those putting 3.5% down. Except this time there's no Keynesian way to reinflate the bubble again. Printing money and making the richest of the rich richer is not an answer.
Housing and stocks have to take a very, very hard correction. This is completely unsustainable.
The housing marking will not have a "sharp" correction because by keeping the interest rates low the Fed is increasing the amount of money in the economy and anything that is a hard asset is naturally growing in value. The population is growing. Everyone who is not a homeowner should be buying a home NOW. We will see property values increase A LOT in the coming years and yes, then they might crash, but now is a good time to buy if you care about your family's net worth. If you're not investing into your own business you should be buying property, bottom line. And I'm not just sitting here speculating- I'm buying real estate in my city.
Of course, you have to know what you're doing so hire a GOOD real estate professional to help you (I am not an agent).
The national stock market has certainly re-inflated, & has surpassed the highs of the previous cycle. I would agree that it's at risk of a big correction, affecting the entire nation.
However, housing is localized, & housing has not mirrored the same trajectory as the stock market, so far.
While higher priced areas (like San Francisco) may again be in bubble territory, that certainly isn't the case across the board, nationally.
Here in Orlando FL, housing prices are still well below the highs of 2006.
New construction communities that previously sold for $200-300 per square ft are still only pulling roughly 60-65% of their former sales prices.
There are many areas across the country where there is still quite a ways to go before housing appreciates back to 2006 levels.
I do not share your extreme pessimism in regards to housing, at this time.
Let's revisit this next year...& we'll see who was right.
Quote:
Originally Posted by schoolofhardknocks
The housing marking will not have a "sharp" correction because by keeping the interest rates low the Fed is increasing the amount of money in the economy and anything that is a hard asset is naturally growing in value. The population is growing. Everyone who is not a homeowner should be buying a home NOW. We will see property values increase A LOT in the coming years and yes, then they might crash, but now is a good time to buy if you care about your family's net worth. If you're not investing into your own business you should be buying property, bottom line. And I'm not just sitting here speculating- I'm buying real estate in my city.
Of course, you have to know what you're doing so hire a GOOD real estate professional to help you (I am not an agent).
When we're talking about the Fed fund rate in respect to mortgages and mortgage interest rates, we are having a national discussion. Although I will concede some micro-markets in RE will always be off trend, you have to be joking when you state that housing at a national level isn't back in bubble territory. Case Shiller has the national index right back in 2005/2006 territory. Of course, some areas won't reach back to that level, but the charts are very easy to read.
The economy is a complete facade right now. You can choose to ignore this and its pending impact on the housing market, that's fine. But what the Fed is doing is borderline criminal. Increasing the money supply for this long with ZIRP has many consequences and "hard asset is naturally growing" is not one of them. It's completely manufactured and anything but natural.
P.S. I will always "own" my home and I'm happy that I bought when I did. Buying makes sense on so many levels, especially when rents are skyrocketing. But, I'm not going to sit here and pretend all the equity I have in my house right now is real. It's as made up as the current stock prices. The current national trends in housing and stocks are not sustainable. I'm calling the top right now - many deals to be had a year from now.
EDIT: P. P. S. - You want a good investment? Invest in WATER.
I do not believe the national housing market is poised for another collapse at this time.
If you do, maybe you should sell.
Investing in water might be good if you know a way to beat out the major purveyors in CA. I haven't figured that one out yet.
But I do prefer investing in good condition working class rental homes, of which I currently have 5, plus my principle residence, all mortgage free.
They spin off a very decent return, & I'm able to offer appreciative tenants below market rates that tends to hold them in place, while beating out leveraged competition that has to charge more.
I think no matter where the markets go, there will always be someone seeking the most affordable roof over their head.
I look forward to our revisiting this thread next year to see if indeed, the sky did collapse.
Mortgage applications hurting big time - was reading big drop in numbers... probably should worry about that more than insane ZIRP from the Fed. People are not applying for mortgages like they were recently.
This is all a repeat of exactly what happened in '08 - nothing has been fixed. People buying houses now will live to regret it just like the people who bought in '07. Especially the likes of those putting 3.5% down. Except this time there's no Keynesian way to reinflate the bubble again. Printing money and making the richest of the rich richer is not an answer.
Housing and stocks have to take a very, very hard correction. This is completely unsustainable.
mortgage applications have been heavy all year. your "big drop" was over a very short time. this is nothing like a repeat of '08. the mortgage products and requirements are 'apples to dogs'.
I do not believe the national housing market is poised for another collapse at this time.
If you do, maybe you should sell.
Investing in water might be good if you know a way to beat out the major purveyors in CA. I haven't figured that one out yet.
But I do prefer investing in good condition working class rental homes, of which I currently have 5, plus my principle residence, all mortgage free.
They spin off a very decent return, & I'm able to offer appreciative tenants below market rates that tends to hold them in place, while beating out leveraged competition that has to charge more.
I think no matter where the markets go, there will always be someone seeking the most affordable roof over their head.
I look forward to our revisiting this thread next year to see if indeed, the sky did collapse.
I say hard correction, you say "collapse". I won't argue the semantics, but I'm not insinuating homes are going to become worthless, beans, bullets, and the zombie apocalypse. On topic to the OP, what the Fed is doing is hurting 99% of us and the chickens will come home to roost. These are macro economic concepts. Have you noticed what is happening on a global scale? Much of the RE run-up was driven by foreign investors, who now are drying up.
For those of us locked into a good rate with solid equity, it doesn't really matter what happens to prices. I have no desire to sell, I'm good. Based on your description, you're good, too. But I'm not talking about us. I'm talking about those "leveraged" people, as you call them... I'm not sure you would argue that there's a ton of them.
Happy to revisit, been posting here consistently since 2007. You're rather new, so I hope you stick around. Let's wrap some numbers around this - the S&P Case Shiller Home Index Nationally was 173.85 in June 2015 (as you probably know this indicator lags 3-4 months). In June 2005 it was 172.02... 10 years ago most blissfully thought everything was unicorns shooting rainbows out of their arses - what could possibly go wrong? One giant "bust" and 10 years later the prices not only retraced the losses, they're higher. You say "collapse" again - was what happened in 2008 a collapse?
I'm going to jump in here. I will say I am seeing signs that could trend in BrokerHarry's favor. There's another subset of homeowners that are on the verge of collapse, another set that is not saving, they have not saved and now want 100% financing at 500K to 600K. When you ask how much money they have in their 401, it's 0. They may have great incomes, but they've started collecting the debt to match. While DC and Virginia see fewer homes upside down, for whatever reason, the Maryland market has stalled due to lack of equity. I'm just going to say, it's very precarious.
The problem we currently are experiencing comes down to wages not increasing, while consumers are taking on more and more debt. (Don't get me going on student loans, our next financial crisis). With every other economic crisis, housing has led the way out. But wait, you may say, it did here, too. No, our tax dollars financed our future with real estate, as well as, debt forgiveness. If we hadn't done either, I'm betting our deficit would look a whole lot better. This is the only recovery housing has not led the charge, so believe it's a faux recovery. We will need to wrestle that debt gorilla in the very near future. So, while we have propped up real estate, I cannot say it's recovered. And the brakes have been applied to banks (and I don't disagree some were needed), and some of those brakes completely stopped traffic.
There's a reason the Fed didn't raise rates and it is not only because EU begged us not to.....we are not showing the signs of growth that warrant an increase in rates. And the reason we don't warrant that increase is the economy is not growing. Just because someone says it's so, doesn't make it reality. Everyday, for each person desiring home ownership where I can offer them financing, there are twice as many I cannot help (and that includes those that I could not refer to other lenders and I refer as many out as I bring in). Agents, how many homes do you see priced where they are, just to break even?
This mess is far from over. What do you think will happen when those $100 credit card bills jump to $250? And while I agree with the point those of us that have locked in solid rates and have a decent housing payment, it doesn't matter to us what happens, we aren't moving. But doesn't our financial health depend upon what other debt we have acquired?
An actual case from yesterday - Borrower has an ARM on a former residence turned rental. They finally (barely) have the equity to refinance into a fixed payment. Rate would jump 1.625% - giving them a difference in payment of $1100. Many households could not absorb that kind of increase in debt. The equity would not support the refi costs, almost all would come out of their pockets (or go higher in rate). I advised them to see if they could handle the additional $1100, put that in the bank for 6 months. If they found it wasn't as bad as it sounds, then they just saved the additional funds for their refi. If it was awful, they could sell without going short. I see cases like this every single day.
In the biz since the 1980's.
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