The Crisis Of Credit - Great Video Explaining Why Home Prices Will Continue To Plummet (for sale, real estate)

[PD517]

The Crisis of Credit Visualized


Came across this, been seeing it posted everywhere. Great "laymans" explanation of the mess this housing and credit market is in now and for the future. And yes, this effects NJ also, unlike those with vested interests saying that home values here will go up up up, stay the same, or fall only slightly. Get ready for the drop back to realistic housing prices. We're only delaying the inevitable with the passing of all this "stimulus".

[lets_hope_for_newbruns]

Great video. But how do you deduce home prices will fall further?
The home supply is more out there. If new home owners continues to purchase new homes, then prices will be maintained. in some towns, new home owners are continuing to purchase ignoring the tsunami we are caught in.

[Lusitan]

Excellent video, provides a clear illustration of how we got into this mess, and why house prices are going nowhere but down.

Lets_hope_for_newbruns ... it's inevitable that house prices will continue to fall, because most of those foreclosed houses (and houses in the process of foreclosing) haven't even hit the market yet. When they do, the flood of inventory will drive down prices even further ...

... which will cause values to fall, which will cause even people who can afford their mortgage to look around and question why they are paying off 300K in debt on a house that's worth 90K ... so they walk away, which increases inventory ...

... which causes house prices to fall further, which drives down the value of the CDOs held by the banks, causing more to fall into bankruptcy, more people lose their jobs, more people unable to pay the mortgage, more foreclosures, more inventory, lower prices ...

It's inevitable. What goes up, must come down. We saw unprecedented home price increases during the bubble, increases that were based on nothing more than smoke and mirrors. We will now see a fall of the same unprecedented magnitude, not matter how many trillions our govt flushes down the toilet.

[JG183]

nothing in that video even remotely talks to the future (down or up) of home prices.


I wonder about the people who are shouting from the rooftops (no pun intended) not to buy a house... perhaps they are eagerly waiting to buy, and are aiming to discourage their competition from beating them to it.

[Lusitan]

Originally Posted by JG183

nothing in that video even remotely talks to the future (down or up) of home prices.

The part at the end, where it talks about things going into a "cycle", is your hint about the future.

I wonder about the people who are shouting from the rooftops (no pun intended) not to buy a house... perhaps they are eagerly waiting to buy, and are aiming to discourage their competition from beating them to it.

LOL

Competition? Do you have any idea of the flood of inventory that's sitting, unsold, on the market in NJ right now?

Maybe this article from the NY Times can put it into perspective for you:

http://www.nytimes.com/2009/02/22/ny...usesnj.html?em

"As of January, [NJ] had a 17-month supply of houses on the market, according to Otteau Group figures. That means that even if no other houses were put up for sale, it would still take 17 months to sell those already available, under current market conditions."

Buyers worried about competition?

I am more worried when I think how much of my money, my children's money, my future grandchildren's money (repeat on down the line a few more generations) is being wasted to bail out people who stretched beyond their means to buy overpriced homes.

The housing bubble is driving this country's future into the ground as we borrow trillions and fail to even stem the tide. It's an effing financial catastrophe. People have been sold a bill of goods, and nobody wants to talk about the old-fashioned responsible ways we used to do things in this country:

- don't buy a house that costs more than 3x - 4x your gross income

- put 20% down payment toward the purchase

- don't buy until you have a separate fund of 6 months of emergency savings saved in FDIC insured accounts to see you and your family through an financial emergency

Those rules aren't sexy, but they work!

We got into this mess by ignoring the rules about living within our means, and we stopped saving for a rainy day. Now it's pouring rain, and everyone is getting soaked. For all but a tiny percentage of people out there, it's simply not possible to buy a house under the old-fashioned wisdom (hint: that's the problem with the median home price being so far above the median income!). Therefore, for all but a tiny percentage of people out there, IT IS A BAD IDEA TO BUY A HOUSE RIGHT NOW.

Yeah ... I'm worried about competition for buying a house.

I wonder about all the people trying to pretend everything is fine and encouraging people to buy homes right now. The used house salesmen are at least up front about their motivations. Perhaps the rest are bagholders stuck with real estate they paid way too much for, and are hoping that a sucker will come along and buy it off of them for a still-inflated price so that someone else is left holding the stinky mess.

[tahiti]

this was an excellent video - i certainly learned something. i *kinda* knew what it was all about, but this was "credit crisis for dummies", LOL, and does a good job of putting all the pieces together.

[bababua]

Simple reason houses will continue to fall. Unemployment is predicted to hit 10% by 2010. If that happens I dont care what Washigton does to bail people out, house will fall. Not to mention houses have continued to plummet the entire year and things are just getting worse. I dont see any light at the end of the tunnel. I am betting my money houses fall another 10 to 20%. Not to mention honestly things are still expensive.

[davenj08]

some people still continue to buy at inflated prices which makes no sense to me. recently i offered 15% below the 2005/6 peak price on a sfh but someone came in and bought the house at 10% below the peak price. how weird is that?!?!

[davenj08]

i hope prices fall because buying at the current prices seems just too difficult.

just imagine a first time buyer who wants to buy a 3br unit for around 400k. at 20% down, he would need 80k in cash. on top add another 5k for moving, home furnishings, setup, etc. also, buying a house would mean having ample reserves. in the current market that would be at least 9 times monthly expense in cash (assuiming a single earner). at a minimum of $4500 per month in expenses (mortgage+taxes+utility+grocery+commute+healthcare +insurance, etc) that would be 40k required in reserve.

how many first time buyers have 125k in cash in this market???

[todd72173]

No video here. All I get in firefox is
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